U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-30270
CK Witco Corporation
(Exact name of registrant as specified in its charter)
Delaware 52-2183153
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One American Lane
Greenwich, Connecticut 06831-2559
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(203) 552-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant, computed as of February 25, 2000,
was $1,118,770,776.
The number of shares of Common Stock of the registrant
outstanding as of February 25, 2000, was 114,004,574.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year ended
December 31, 1999 ........ Parts I, II and IV
Proxy Statement for Annual Meeting of Stockholders
on April 25, 2000 ........ Part III
INDEX
Page
PART I
Item 1. Business 1
Polymer Products 3
Specialty Products 7
Item 2. Properties 16
Legal Proceedings 19
Submission of Matters to a Vote of
Security Holders 21
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 21
Item 6. Selected Financial Data 22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk 22
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
PART III
Item 10. Directors and Executive Officers of the
Registrant 22
Item 11. Executive Compensation 25
Item 12. Security Ownership of Certain Beneficial Owners
and Management 25
Item 13. Certain Relationships and Related Transactions 25
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 25
PART I
ITEM 1. BUSINESS
(a) General Development of Business
CK Witco Corporation (together with its consolidated
subsidiaries, the "Corporation" or "Registrant") was incorporated
in Delaware in 1999 in connection with the merger of Crompton &
Knowles Corporation and Witco Corporation on September 1, 1999
(the "Merger"). The terms of the Merger provided that Crompton &
Knowles Corporation merge with and into the Corporation and
immediately thereafter, Witco Corporation merge with and into the
Corporation, so that the Corporation was the surviving
corporation. At the time of the Merger, each share of Crompton &
Knowles Corporation's common stock was automatically converted
into one share of the Corporation's common stock, and each share
of Witco Corporation's common stock was exchanged for 0.9242
shares of the Corporation's common stock. The Merger was
accounted for as a purchase and accordingly, the results of
operations of Witco Corporation have been included in the
consolidated financial statements from the date of acquisition.
Crompton & Knowles Corporation ("Crompton & Knowles") was
incorporated in Massachusetts in 1900. Crompton & Knowles had
engaged in the manufacture and sale of specialty chemicals since
1954 and, since 1961, in the manufacture and sale of polymer
processing equipment. Crompton & Knowles had substantially
expanded both its specialty chemical and its polymer processing
equipment businesses through a number of acquisitions in both the
United States and Europe, including the acquisition in 1996 of
Uniroyal Chemical Company, Inc. ("Uniroyal"), a multinational
manufacturer of performance chemicals, including rubber
chemicals and additives for plastics and lubricants, crop
protection chemicals, and polymers, which include Royalene(R)
EPDM rubber, Paracril(R) nitrile rubber and
Adiprene(R)/Vibrathane(R) urethane prepolymers.
Witco Corporation ("Witco") was incorporated in Delaware in
1958 as Witco Chemical Company, Inc., at which time it succeeded
by merger to the business of Witco Chemical Company, an Illinois
corporation formed in 1920. Witco was a global manufacturer and
marketer of specialty chemical products for use in a wide variety
of industrial and consumer applications. In 1995, Witco acquired
Osi Specialties Holding Company, an entity engaged in the
manufacture of silicone surfactants, organofunctional silanes,
specialty fluids and amine catalysts with manufacturing and
blending facilities throughout the world. Witco sold its Battery
Parts and Carbon Black operations in 1995 and in 1997 completed
the divestiture of its Lubricants Group. In 1996, Witco
announced a major restructuring plan to be implemented over a
three year period (1997-1999). Elements of the plan included
reducing fixed and variable costs, undertaking a $600 million
three-year capital spending plan for new capacity, modernizing
facilities, upgrading environmental and safety compliance and
information systems capabilities and reducing the number of its
manufacturing facilities, while consolidating related
distribution, research and development and administrative
centers. In 1998, Witco acquired Ciba Specialty Chemicals Inc.'s
("Ciba") worldwide polyvinyl chloride heat stabilizers business
and related assets and Ciba acquired Witco's global epoxy systems
and adhesives business and related assets. Prior to the Merger,
Witco's operations were divided into four business groups: the
Polymer Chemicals Group, the OrganoSilicones Group, the
Performance Chemicals Group and the Oleochemicals and Derivatives
Group. The Oleochemicals and Derivatives business was sold on
August 31, 1999, in a transaction described below.
In January 1999, Crompton & Knowles sold its specialty
ingredients business, Ingredient Technology Corporation ("ITC"),
to Chr. Hansen, Inc. for approximately $103 million. In August
1999, Witco completed the sale of its Oleochemicals and
Derivatives business to Goldschmidt AG for approximately $249
million. In December 1999, the Corporation completed the sale of
its global textile colors business and most of its non-United
States industrial colors business to Yorkshire Group PLC, a
producer of textile dyestuffs headquartered in Leeds, United
Kingdom. The consideration received from the Yorkshire
transaction was approximately $86.5 million; $78 million in cash
proceeds and a 12.4 percent equity interest in Yorkshire then
valued at approximately $8.5 million. In early 2000, the
Corporation's joint venture with GIRSA S.A. de C.V. ("GIRSA"), a
subsidiary of DESC, S.A. de C.V., a Mexican corporation,
commenced operation of a new 40,000 metric ton nitrile rubber
plant in Altamira, Mexico, to produce Paracril(R) oil-resistant
nitrile rubber products. The facility is the largest dedicated
nitrile rubber plant in the world producing a wide range of
general purpose and specialty polymers.
(b) Financial Information About Industry Segments
Information as to the sales, operating profit, depreciation
and amortization, assets and capital expenditures attributable to
each of the Corporation's business segments during each of its
last three fiscal years is set forth in the Notes to Consolidated
Financial Statements on pages 51-52 of the Corporation's 1999
Annual Report to Stockholders, and such information is
incorporated herein by reference.
The Corporation's businesses are grouped into two units,
"Polymer Products" and "Specialty Products." Polymer Products
consists of separate reporting segments for Polymer Additives
(plastic additives, rubber chemicals and urethane chemicals),
Polymers (EPDM, urethanes and nitrile joint venture) and Polymer
Processing Equipment (Davis-Standard). Specialty Products
consists of separate reporting segments for OrganoSilicones
(silanes and specialty silicones), Crop Protection (specialty
actives, industrial surfactants and Gustafson Joint Venture) and
Other (petroleum additives, refined products, colors and
glycerine/fatty acids).
(c) Narrative Description of Business
Products and Services
The Corporation manufactures and markets a wide variety of
polymer and specialty products. Most of the Corporation's
products are sold to industrial customers for use as
additives, ingredients or intermediates that impart particular
characteristics to the customers' end products. The Corporation's
products are currently marketed in more than 120 countries and
serve a wide variety of end use markets including tires,
agriculture, automobiles, textiles, plastics, lubricants,
petrochemicals, leather, construction, recreation, mining, paper,
packaging, home furnishings, personal care and appliances. The
principal products and services offered by the Corporation are
described below.
POLYMER PRODUCTS
Polymer Additives
The Polymer Additives business supplies a number of
specialty chemicals to the plastics, rubber and
coatings/adhesives industries. The Polymer Additives business
had net sales for fiscal 1999 of $620.2 million.
Plastic Additives
The Corporation is a global leader in supplying additives
and catalysts for the polymer industry. The Corporation
manufactures and markets a broad line of additives for plastics
and lubricants, including antioxidants, lubricant additives,
chemical foaming agents, synthetic fluids, chemical
intermediates, polymerization inhibitors, curatives, dispersants
and polymer modifiers. These products are used in the
manufacture of numerous plastic and petroleum related products
which in turn have diverse end uses, including plastic products,
petrochemicals, adhesives, aerospace equipment, athletic
equipment, automotive components, construction materials,
electronics, food packaging, vinyl flooring, wire and cable and
automotive and industrial oils and lubricants. These chemicals
are often specially developed for a customer's specific
manufacturing requirements. The Corporation also manufactures
stabilizers, lubricants, plasticizers, and peroxide catalysts,
and markets UV stabilizers and antistats, which products are used
in the manufacture of PVC compounds and resins for such
applications as pipes, fittings, siding and packaging materials.
In addition, the Corporation is a supplier of lubricants,
antioxidants, catalysts and polymerization initiators to the
polyolefin/polystyrene industry for use in the manufacture of
resins that are employed in a broad spectrum of applications
used in packaging, automobiles, furniture and appliances. The
Corporation also produces organotin compounds for the production
of PVC stabilizers and biocides for marine paints.
Net sales of plastic additives during fiscal 1999, 1998 and
1997 were 14.2%, 7.1% and 6.9% of the Corporation's net sales,
respectively.
Rubber Chemicals
This product line of the Polymer Additives business contains
over 100 different chemicals for use in processing rubber. These
products include accelerators, antioxidants, antiozonants,
chemical foaming agents and waxes. Accelerators are used for
curing natural and synthetic rubber, and have a wide range of
activation temperatures, curing ranges and use forms.
Antiozonants protect rubber compounds from flex cracking and
ozone, oxygen and heat degradation. Antioxidants provide rubber
compounds with protection against oxygen, light and heat.
Foaming agents produce gas by thermal decomposition or via a
chemical reaction with other components of a polymer system and
are mixed with rubber to produce sponge rubber products. Waxes
inhibit static atmospheric ozone cracking in rubber. Tire
manufacturers accounted for approximately 60% of the
Corporation's rubber chemical sales in fiscal 1999, with the
balance of such sales going to the industrial rubber market which
includes numerous manufacturers of hoses, belting, sponge and a
wide variety of other engineered rubber products. The
Corporation believes it is one of the three largest suppliers of
rubber chemicals in the world.
Net sales of rubber chemicals during fiscal 1999, 1998 and
1997 were 12.7%, 14.7% and 15.6% of the Corporation's net sales,
respectively.
Urethane Chemicals
The Urethane Chemicals business is comprised of three
product groupings that offer technologically advanced materials
to a diverse and global customer base: Fomrez(R) saturated
polyester polyols, Witcobond(R) polyurethane dispersions, and
Witcothane(R) polyurethane systems. Polyester polyols are
employed in industrial applications such as flexible foam for
seating, thermoplastic urethanes for structural parts, adhesives
and coatings. The polyurethane dispersions are sold to a larger
and more diverse customer base primarily for coating applications
such as flooring, fiberglass sizing and textiles. Polyurethane
systems are used primarily by the shoe sole industry, and is a
highly service intensive business.
Baxenden Chemicals Limited, the Corporation's 53.5% owned
subsidiary (Croda Inc. owns 46.5%), is engaged in the manufacture
and marketing of isocyanate derivatives, polyester polyols and
specialty polymer systems used in a wide range of applications.
The major markets served by Baxenden are automotive,
construction, surface coatings, leather and textile finishing.
Sub-markets include coatings, adhesives, sealants, elastomers and
insulation for the above markets. Baxenden is focused on
specialty polymer and resin chemistry and novel curing mechanisms
for such polymers. The core technology is urethane and acrylic
chemistry but includes novel polyesters and esterification
processes.
Polymer additives are sold through a specialized sales
force, including technical service professionals who address
customer inquiries and problems. The technical service
professionals generally have degrees in chemistry and/or chemical
engineering and are knowledgeable in specific product application
fields. The sales and technical service professionals identify
and focus on customers' growth opportunities, working not only
with the customers' headquarters staff, but also with their
research and development and manufacturing personnel on a
worldwide basis.
Polymers
The Polymers business, which had net sales for fiscal 1999
of $316.3 million, has three principal product lines: Royalene(R)
EPDM rubber, Adiprene(R)/Vibrathane(R) urethane prepolymers and
Paracril(R) nitrile rubber.
EPDM
Ethylene-propylene-diene rubber ("EPDM") is commonly known
as "crackless rubber" because of its ability to withstand
sunlight and ozone without cracking. EPDM's application end uses
include various automobile components, single-ply roofing, hoses,
electrical insulation, tire sidewalls, mechanical seals and
gaskets, oil additives and plastic modifiers. The Corporation
produces and markets approximately 30 different EPDM polymer
variations.
The Corporation believes it is one of the three largest
suppliers of EPDM polymers in the world, and the largest domestic
manufacturer of EPDM polymers in the United States. The
Corporation's success in this business has been due to several
factors, including product performance, low cost manufacturing,
and outstanding technical and customer service, which have earned
the Corporation a reputation for excellence and strong customer
loyalty.
Urethanes
The Corporation believes that it is the leading manufacturer
of high performance liquid castable urethane prepolymers in the
world. Among the most common applications using these prepolymers
are solid industrial tires, printing rollers, industrial rolls,
abrasion-resistant mining products such as chutes, hoppers and
slurry transport systems, mechanical goods and a variety of
sports equipment and other consumer items. The Corporation
effectively competes in this business by providing efficient
customer service and technical assistance through a highly
regarded technical service staff and a proven ability to develop
new products and technologies for its customers. Over 150 grades
of urethane prepolymers are commercially available from the
Corporation.
Adiprene(R)/Vibrathane(R) urethane prepolymers are sold
directly by a dedicated sales force in the United States, Canada
and Australia and by direct sales and through distributorships in
Europe, Latin America and the Far East.
Adiprene(R)/Vibrathane(R) customers are serviced worldwide by a
dedicated technical staff. Technical service personnel support
field sales, while a research and development staff is dedicated
to support new product and process development to meet rapidly
changing customer needs. Technical support is a critical
component of the product offering.
Nitrile Joint Venture
In early 2000, ParaTec S.A. de C.V., a joint venture
between the Corporation's subsidiary, Uniroyal, and GIRSA,
commenced operation of a 40,000 metric ton nitrile rubber plant
in Altamira, Mexico, to produce Paracril(R) oil-resistant nitrile
rubber products. It is the largest dedicated nitrile rubber
plant in the world producing a wide range of general purpose and
specialty polymers. The products are marketed in the United
States by ParaTec Elastomers L.L.C. under the Paracril(R)
trademark. The Corporation's nitrile rubber production facility
in Painesville, Ohio closed in June 1999.
Nitrile rubber polymers are resistant to most types of oils.
Paracril(R) nitrile rubber is produced in 31 different variations
to meet specific end use requirements in automotive hoses, seals,
rings, printing rolls, insulation and many other products exposed
to oil.
The sale of Royalene(R) and Paracril(R) products is
supported by a highly qualified staff of technical service
specialists with extensive field and rubber processing
experience. Strong customer relations and market knowledge
result from this sales effort. In certain geographic areas, the
Royalene(R) and Paracril(R) products are sold through
distributors.
Polymer Processing Equipment
The Corporation's wholly owned subsidiary, Davis-Standard
Corporation, manufactures and sells polymer processing
equipment, which includes extruders, electronic controls, and
integrated extrusion systems, and offers specialized service and
modernization programs for in-place polymer processing systems.
The polymer processing equipment business had net sales in the
1999 fiscal year of $300.0 million.
Integrated polymer processing systems, which include
extruders in combination with controls and other equipment, are
used to process polymers into various products such as plastic
sheet and profiles used in appliances, automobiles, home
construction, sports equipment, and furniture; extruded shapes
used as house siding, furniture trim, and substitutes for wood
molding; and cast and blown film used to package many consumer
products. Integrated extrusion systems are also used to compound
engineered polymers, to recycle and reclaim plastics, to coat
paper, cardboard and other materials used as packaging, and to
apply plastic or rubber insulation to high voltage power cable
for electrical utilities and to wire for the communications,
construction, automotive, and appliance industries. Industrial
blow molding equipment produced by the Corporation is sold to
manufacturers of non-disposable plastic items such as tool cases
and beverage coolers.
The Corporation is a leading producer of polymer processing
equipment for the polymers industry and competes with domestic
and foreign producers of such products. The expansion of its
Pawcatuck, Connecticut facility and a strong performance at its
German subsidiary, ER-WE-PA Davis-Standard GmbH, have enabled
shipments to keep pace with customers' demand for extruders. The
Corporation is one of a number of producers of other types of
polymer processing machinery.
In the United States, most of the Corporation's sales of
polymer processing equipment are made by its own dedicated sales
force. In other parts of the world, and for export sales from
the United States, the Corporation's sales of such equipment are
made largely through agents.
SPECIALTY PRODUCTS
OrganoSilicones
The OrganoSilicones business manufactures and sells over 500
silicone-based chemical intermediate products to manufacturers of
fiberglass, reinforced plastics, polyurethane foam, textiles,
coatings, automotive components, adhesives, rubber,
pharmaceuticals, thermoplastics, sealants and electrical products
throughout the world. The OrganoSilicones business had net sales
for fiscal 1999 of $158.9 million.
Regardless of form, most silicones share a combination of
properties, including electrical resistance, ability to maintain
performance across a broad range of temperatures, resistance to
aging, water repellence, lubricating characteristics and relative
chemical and physiological inertness. The versatility of
silicone-based intermediates has led to a wide variety of
applications across a broad spectrum of industries in all major
countries.
Silanes
The Corporation is the world's largest producer of
organofunctional silanes. Depending on their major
organofunctional group (amino, epoxy, methacryl, sulfur, vinyl,
etc.), silanes can act as coupling agents or cross-linkers. As a
coupling agent, they have the unique ability to bond organic
materials to inorganic materials and are used in a variety of end
use products, including fiberglass, rubber and adhesive sealants.
As cross-linkers, silanes have become the standard in the
manufacture of thermoplastics where they promote the cross-
linking of polyolefins in applications such as wire and cable.
There is a developing opportunity for silanes in the tire
industry, especially in Europe where there has been a growing
demand for sulfur-functional silanes, which are necessary when
silica is used in place of carbon black, in tire tread. Silica-
tires, or "greentyres", provide improved handling, safety and
other environmental benefits by lowering fuel consumption.
Specialty Silicones
Silicone fluids have several distinctive properties, which
include chemical and physical inertness, good low-temperature
performance, high compressibility, low-surface tension, stable
viscosity with a change in the temperature or rate of shear, and
thermal and oxidative stability. In addition to allowing these
products to bond with various materials, these properties also
offer improved antistatic, lubricity, and water-repellency
performance. With these distinctive properties, silicone fluids
serve a variety of end markets including the textile market where
silicone fluids serve as textile softeners and wetting modifiers;
the personal care market for hair care products and
antiperspirants; the pharmaceutical market where they serve as a
protective barrier in creams and lotions; the paper and pulp
industry where they act as antifoams, surfactants, or release
agents; and the automotive and furniture industries where
silicone fluids are used in polishes and coatings because of
their low-surface tension, lubricating properties, and water
repellency.
In the early 1950's the OrganoSilicones business (while part
of Union Carbide Corporation) invented the use of silicone
surfactants in the manufacture of urethane foam. This
fundamental technological advance facilitated a lower-cost,
continuous manufacturing method, resulting in accelerated growth
in the urethane foam industry. The largest end markets for
urethane additives are flexible, molded and rigid polyurethane
foams in which urethane additives are used to control cell size
and stabilize the foam.
The Corporation markets its OrganoSilicone products
worldwide primarily directly through its own sales force.
Crop Protection
The Crop Protection business manufactures and markets a wide
variety of agricultural chemicals for many major food crops,
including grains, fruits, nuts and vegetables, and many non-food
crops, such as tobacco, cotton, turf, flax and ornamental plants.
The business focuses its efforts mainly on products used on high
value cash crops, such as ornamentals, nuts, citrus and tree and
vine fruits as opposed to commodity crops such as soybeans and
corn. The Crop Protection business had net sales for fiscal 1999
of $294.8 million.
Specialty Actives
The Specialty Actives business offers four major crop
protection chemical product lines: fungicides; miticides and
insecticides; growth regulants; and herbicides. Each product
line is composed of numerous formulations for specific crops and
geographic regions.
The Corporation has a substantial presence in its targeted
segments of the agrichemicals market due to its strategy of
focusing research, product development, and sales and marketing
on highly profitable market niches which are less sensitive to
competitive pricing pressures than commodity segments of the
market. While the products of the Specialty Actives business
represent a relatively small percentage of the grower's overall
costs, these products are often critical to the success or
failure of the crops being treated. In addition, product line
extensions, attention to application effectiveness and customer
service are important factors in developing strong customer
loyalty.
In Australia, the Corporation's subsidiary, Hannaford
Seedmaster Services Pty. Ltd., provides seed treatment chemicals
and treating services to the local market.
The Crop Protection business, under the Uniroyal name,
promotes seed treatment chemicals in all regions of the world
other than North America and Australia and enjoys a substantial
position in the international seed treatment market. The
Corporation anticipates continuing growth in seed treatment,
which is environmentally attractive because it involves very
localized use of agricultural chemicals and very low use rates
compared to broad foliar or soil treatment.
The Crop Protection business markets its products in North
America through a direct sales force selling to a distribution
network consisting of more than one hundred distributors and
direct customers. In the international market, the Crop
Protection business' direct sales force services over 300
distributors, dealers and agents.
Net sales of specialty actives during fiscal 1999, 1998 and
1997 were 11.9%, 15.0% and 15.0% of the Corporation's net sales,
respectively.
Industrial Surfactants
The Corporation's Industrial Surfactants business
manufactures and sells a broad line of non-ionic and anionic
surfactants to a range of industries, primarily agriculture, oil
field, emulsion (water based) polymers, paints and coatings; and,
to a smaller extent, to personal care, soap and detergent, and
textile markets. Surfactants change the surface tension
(spreadability) of liquids. In agricultural applications,
surfactants separate pesticides into small particles, thereby
increasing their efficiency via dispersion and penetration; in
the oil field, surfactants are used as demulsifiers that aid in
the clean separation of oil from water.
Gustafson Joint Venture
The Corporation is a leading producer and marketer of seed
treatment chemicals. In November 1998, the Corporation formed
joint ventures with Bayer Corporation to serve the agricultural
seed treatment markets in North America based on Gustafson, Inc.
("Gustafson"), formerly a wholly owned subsidiary, which is a
leading producer of seed treatment formulations and equipment.
Bayer acquired a 50 percent interest in the Gustafson seed
treatment business. As a result of this transaction, the
operating results of Gustafson were deconsolidated in December
1998.
Gustafson has a leading share of the North American
commercial seed treatment formulation market and is recognized as
a technological leader in this market. Gustafson is engaged
directly and through cooperative ventures in developing and
formulating seed treatment systems, offering a broad line of
chemical formulations which contain fungicides, insecticides and
seed conditioning aids in addition to commercial seed treating
equipment. Gustafson's expertise enables it to develop and
produce formulations consisting of multiple components to obtain
optimum efficacy against seed and soil disease pathogens and
insects.
For the last several years, Gustafson has maintained a major
developmental program in the field of naturally occurring
biological control agents targeted for disease. Gustafson has
focused its efforts on naturally occurring organisms as opposed
to genetically engineered organisms. Gustafson received
regulatory approval from the United States Environmental
Protection Agency ("EPA") in 1992 for the first of a series of
new biological formulations.
Other
The Other business, which had net sales for fiscal 1999 of
$405.6 million, has four principal product lines: Petroleum
Additives, Refined Products, Colors and Glycerine/Fatty Acids.
Petroleum Additives
The Corporation is a global manufacturer and marketer of
performance additive components used in transport and industrial
lubricant applications. The component product line includes
Hybase(R) overbased calcium sulfonates and Lobase(R) neutral
calcium sulfonates used in motor oils and marine lubricants.
These sulfonates are oil soluble surfactants and their properties
include detergency to help lubricants keep car, truck and ship
engines clean with minimal wear. Also in the product line are
barium and sodium sulfonates which provide corrosion protection
and emulsification in metalworking fluids. Other key products
are the Naugalube(R) antioxidants widely used by the
Corporation's customers in engine oils, gear oils, industrial
oils and greases; Synton(R) high viscosity poly alpha olefins
(PAO) used in the production of synthetic lubricants for
automotive, aviation and industrial applications (e.g. compressor
oils and gear oils); and Trilene(R) for use as a viscosity index
improver/viscosity modifier in both industrial and automotive
gear oils, automatic transmission fluids, hydraulic fluids and
greases where cost-effective, shear-stable fluids with good low
temperature properties are required.
Refined Products
The Refined Products business is engaged in the manufacture
and marketing of a wide range of high purity hydrocarbon
products, including white oils and ink oils, petrolatums,
microcrystalline waxes, cable compounds, and refrigeration oils
and compression lubricants, serving numerous global markets
predominantly requiring food grade quality. The business'
products serve as lubricants, emollients, moisture barriers,
plasticizers and carriers and are characterized by their chemical
inertness and high quality. Refined Products are used in five
major market segments: polystyrene, polymers (including
polyolefin, thermoplastic elastomers and PVC applications),
personal care, refrigeration oils and telecommunication cables,
as well as additional minor markets.
In 1998, Petro-Canada Lubricants of Mississauga, Ontario,
Canada, became Refined Products' supplier for most grades of
paraffinic white oils used in certain applications and Refined
Products became Petro-Canada's exclusive distributor of these
white oils in North America, Latin America and Asia Pacific. The
Refined Products sales, marketing and distribution organization
services Refined Products' and Petro-Canada's paraffinic white
mineral oil customers for a variety of applications.
Colors
In December 1999, the Corporation completed the sale of its
global textile colors business and most of its non-United States
industrial colors business to Yorkshire Group PLC, a producer of
textile dyestuffs headquartered in Leeds, United Kingdom. The
business sold generated annual revenues of approximately $150
million, and included four manufacturing facilities located in
Lowell, North Carolina; Greenville, South Carolina; Tertre,
Belgium; and Oissel, France.
The Corporation will continue to own and operate its
industrial colors business in the Americas, including four
manufacturing facilities located in Pennsylvania and New Jersey.
This business produces and markets dyes used in specialty papers,
inks and coatings, leather and plastic parts and films for
customers in North and South America. In addition, the
Corporation supplies unique dyes for metal coating applications
and ink-jet printers.
Domestically, the Corporation sells dyes predominantly
through its own dedicated sales force. The Corporation's
position as a leading industrial dyes supplier in the United
States has been maintained by satisfying the market's needs with
quick customer response, efficient production, customized quality
products and strong technical service.
Glycerine/Fatty Acids
The Corporation is a producer of glycerine and fatty acids.
These products modify surfaces either as direct lubricants or
emulsifiers or as intermediates for ingredients that modify
surfaces. Natural glycerines are by-products from the production
of soaps, fatty acids, fatty acid methyl esters, and fatty
alkanolamides that use animal fats and vegetable oils as
feedstock. Pharmaceuticals and personal care products are the
largest end markets for glycerines. In medical and
pharmaceutical preparations, glycerine is used to improve
smoothness, provide lubrication, or maintain moisture in
suppositories, cough syrups, elixirs and expectorants. Glycerine
is also used as a lubricant and solvent in personal care products
including toothpastes, products for hair and skin care, soaps and
mouthwashes. Fatty acids are carboxylic acids derived from or
contained in animal fat or vegetable oil. Examples of diverse
applications of fatty acids include their use as lubricants in
plastics; their use as components of personal care products such
as soaps, creams and lotions; and their use as release agents or
components of curing systems for rubber.
The Corporation markets its petroleum additives, refined
products and gylcerine/fatty acids worldwide primarily directly
through its own sales force.
* * *
Sources of Raw Materials
Chemicals, steel, castings, parts, machine components and
other raw materials required in the manufacture of the
Corporation's products are generally available from a number of
sources, some of which are foreign. The Corporation also uses
significant amounts of petrochemical feedstocks in many of its
chemical manufacturing processes. Large increases in the cost of
these petrochemical feedstocks could adversely affect the
Corporation's operating margins. While temporary shortages of
raw materials may occur occasionally, raw materials are currently
readily available. However, their continuing availability and
price are subject to domestic and world market and political
conditions and regulations. Major requirements for key raw
materials are typically purchased pursuant to multi-year
contracts. The Corporation is not dependent on any one supplier
for a material amount of its raw material requirements;
however, the OrganoSilicones business purchases, in the
aggregate, approximately 40% of its raw materials from Dow
Corning Corporation and Union Carbide Corporation under various
long-term agreements, which expire at various times through 2010.
The Corporation holds a 50% interest in Rubicon Inc.
("Rubicon"), a manufacturing joint venture between Uniroyal and
Huntsman Corporation, located in Geismar, Louisiana, which
supplies both Huntsman and the Corporation with aniline, and the
Corporation with diphenylamine ("DPA"). The Corporation believes
that its aniline and DPA needs in the foreseeable future will be
met by production from Rubicon and the Corporation's DPA facility
located in Huddersfield, England.
Patents and Licenses
The Corporation has over 3,500 United States and foreign
patents and pending applications and has trademark protection for
approximately 700 product names. Patents, trade names,
trademarks, know-how, trade secrets, formulae, and manufacturing
techniques assist in maintaining the competitive position of
certain of the Corporation's products. Patents, formulae, and
know-how are of particular importance in the manufacture of a
number of specialty chemicals manufactured and sold by the
Corporation, and patents and know-how are also significant in the
manufacture of certain wire insulating and polymer processing
machinery product lines. The Corporation is licensed to use
certain patents and technology owned by other companies,
including some foreign companies, to manufacture products
complementary to its own products, for which it pays royalties in
amounts not considered material to the consolidated results of
the enterprise. Products to which the Corporation has such
rights include certain crop protection chemicals, dyes, and
polymer processing machinery.
While the existence of a patent is prima facie evidence of
its validity, the Corporation cannot assure that any of its
patents will not be challenged nor can it predict the outcome of
any such challenge. The Corporation believes that no single
patent, trademark, or other individual right is of such
importance, however, that expiration or termination thereof would
materially affect its business.
Seasonal Business
With the exception of the Crop Protection business which has
approximately 17% of its annual sales occurring in the fourth
calendar quarter, no material portion of any segment of the
business of the Corporation is seasonal.
Customers
The Corporation does not consider any segment of its
business dependent on a single customer or a few customers, the
loss of any one or more of whom would have a material adverse
effect on the segment. No one customer's business accounts for
more than ten percent of the Corporation's gross revenues nor
more than ten percent of its earnings before taxes.
Backlog
Because machinery production schedules range from about 60
days to 10 months, backlog is significant to the Corporation's
polymer processing equipment business. Firm backlog of
customers' orders for this business at the end of 1999 totalled
approximately $113 million compared with $118 million at the end
of 1998. It is expected that most of the 1999 backlog will be
shipped during 2000. Orders for specialty chemicals and polymers
are generally filled from inventory stocks and thus are excluded
from backlog.
Competitive Conditions
The Corporation is a major manufacturer of polymer products
and specialty products. Competition varies by product and by
geographic region, except that in rubber chemicals the market is
fairly concentrated. In that market, the Corporation and its two
principal competitors together account for approximately 46% of
total worldwide sales. In addition, the EPDM market is fairly
concentrated. The Corporation and its two principal competitors
together account for approximately 67% of sales within the United
States and approximately 51% worldwide.
Product performance, quality, customer service, and price
are all important factors in competing in the polymer product and
specialty product businesses.
Two new EPDM technologies are being developed and
commercialized by competitors. The first technology has been
commercialized and is based on a metallocene catalyst system.
This technology may expand the application areas of EPDM and is
also being developed by the Corporation. The second technology
is a gas phase process that has not been fully commercialized by
any company and cannot be fully assessed at this time.
Research and Development
The Corporation conducts research and development on a
worldwide basis at a number of facilities, including field
stations that are used for crop protection research and
development activities. Research and development expenditures
by the Corporation totalled $68.0 million for the year 1999,
$52.8 million for the year 1998, and $53.6 million for the year
1997.
Environmental Matters
Chemical companies are subject to extensive environmental
laws and regulations concerning, among other things, emissions to
the air, discharges to land, surface, subsurface strata and water
and the generation, handling, storage, transportation, treatment
and disposal of waste and other materials and are also subject to
other federal, state and local laws and regulations regarding
health and safety matters.
Environmental Regulation. The Corporation believes that its
business, operations and facilities have been and are being
operated in substantial compliance in all material respects with
applicable environmental and health and safety laws and
regulations, many of which provide for substantial fines and
criminal sanctions for violations. The ongoing operations of
chemical manufacturing plants, however, entail risks in these
areas and there can be no assurance that material costs or
liabilities will not be incurred. In addition, future
developments, such as increasingly strict requirements of
environmental and health and safety laws and regulations and
enforcement policies thereunder, could bring into question the
handling, manufacture, use, emission or disposal of substances or
pollutants at facilities owned, used or controlled by the
Corporation or the manufacture, use or disposal of certain
products or wastes by the Corporation and could involve
potentially significant expenditures. To meet changing
permitting and regulatory standards, the Corporation may be
required to make significant site or operational modifications,
potentially involving substantial expenditures and reduction or
suspension of certain operations. The Corporation incurred
$19.5 million of costs for capital projects and $39.4 million for
operating and maintenance costs related to environmental
compliance at its facilities during fiscal 1999. In fiscal 2000,
the Corporation expects to incur approximately $34.7 million of
costs for capital projects and $58.5 million for operating and
maintenance costs related to environmental compliance at its
facilities. During fiscal 1999, the Corporation spent $23.1
million to clean up previously utilized waste disposal sites and
to remediate current and past facilities. The Corporation
expects to spend approximately $42.0 million during fiscal 2000
to clean up such waste disposal sites and current and past
facilities.
Pesticide Regulation. The Corporation's Crop Protection
business is subject to regulation under various federal, state,
and foreign laws and regulations relating to the manufacture,
sales and use of pesticide products.
In August, 1996, Congress enacted significant changes to the
Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"),
governing U.S. sale and use of pesticide products, and the
Federal Food, Drug, and Cosmetic Act ("FFDCA"), which limits
pesticide residues on food with the Food Quality Protection Act
of 1996 ("FQPA"). Under FIFRA, the law will facilitate
registrations and reregistrations of pesticides for special (so
called "minor") uses and authorize collection of maintenance fees
to support pesticide reregistrations. Coordination of
regulations implementing FIFRA and FFDCA will be required. Food
safety provisions will establish a single standard of safety for
pesticide residue on raw and processed foods; provide
information through large food retail stores to consumers about
the health risks of pesticide residues and how to avoid them;
preempt state and local food safety laws if they are based on
concentrations of pesticide residues below recently established
federal residue limits (called "tolerances"); and ensure that
tolerances protect the health of infants and children.
FFDCA, as amended by FQPA, authorizes EPA to set a tolerance
for a pesticide in or on food at a level which poses "a
reasonable certainty of no harm" to consumers. The EPA is
required to review all tolerances for all pesticide products
within 10 years. It is not known when and to what extent the
Corporation's products will be reviewed and/or restricted under
this standard.
In April, 1996, the Corporation announced that it had
voluntarily canceled registered uses of its propargite miticide
on certain crops in the United States. The action was taken to
reduce dietary exposure as requested by the EPA, using the EPA's
current risk assessment model. Tests to confirm that propargite
does not pose a dietary risk are continuing under EPA approved
protocols. Propargite will be reviewed under the new FQPA
standard discussed above.
The European Commission ("EC") has established procedures
whereby all existing active ingredient pesticides will be
reviewed. This EC regulation became effective in 1993 and will
result in a review of all commercial products. The initial round
of reviews covered ninety products, four of which are the
Corporation's products. Other of the Corporation's products will
be reviewed in subsequent years and all data from the Corporation
pertaining to its products must be submitted for review by mid-
2003. The process may lead to full reregistration in member
states of the EC or may lead to some restrictions, if adverse
data is discovered.
Employees
The Corporation had approximately 8,600 employees on
December 31, 1999.
Geographic Information
The information with respect to sales and property, plant
and equipment attributable to each of the major geographic areas
served by the Corporation for each of the Corporation's last
three fiscal years, set forth in the Notes to Consolidated
Financial Statements on page 52 of the Corporation's 1999 Annual
Report to Stockholders, is incorporated herein by reference.
The Corporation considers that the risks relating to
operations of its foreign subsidiaries are comparable to those of
other U.S. companies which operate subsidiaries in developed
countries. All of the Corporation's international operations are
subject to fluctuations in the relative values of the currencies
in the various countries in which its activities are conducted.
ITEM 2. PROPERTIES
The following table sets forth information as to the
principal operating properties and other significant properties
of the Corporation and its subsidiaries. All properties are
owned in fee except where otherwise indicated:
Location Facility Products/Businesses
UNITED STATES
Alabama
Bay Minette Plant Polymer Additives
Connecticut
Bethany Research Center Crop Protection
Greenwich Corporate Offices* Corporate Headquarters
Middlebury Corporate Offices and Crop Protection,
Research Center* Polymer Additives,
Polymers and Other
Naugatuck Plant, Research Center Crop Protection and
Polymer Additives,
Pawcatuck Office, Plant, Polymer Processing
Laboratory, Machine Equipment
Shop and Tech Center
Illinois
Mapleton Plant Polymer Additives
Louisiana
Geismar Plant Crop Protection,
Polymer Additives,
Polymers and Other
Taft Plant Polymer Additives
Gretna Plant Other
Harahan Plant Crop Protection
New Jersey
Edison Office and Polymer Processing
Plant* Equipment
Newark Plant Other
Nutley Office, Laboratory Other
and Plant
Perth Amboy Plant Polymer Additives and
Other
Somerville Office, Plant and Polymer Processing
Machine Shop Equipment
New York
Tarrytown Research Center* Polymer Additives,
OrganoSilicones and
Other
North Carolina
Gastonia Plant Crop Protection,
Polymer Additives
and Polymers
Ohio
Dublin Research Center Crop Protection and
Other
Pennsylvania
Gibraltar Office, Laboratory Other
and Plant
Petrolia Plant Other
Reading Plant Other
Tennessee
Memphis Plant Polymer Additives and
Other
Texas
Fort Worth Plant Crop Protection
Houston Plant Crop Protection,
Polymer Additives and
Other
Marshall Plant Polymer Additives
West Virginia
Sistersville Plant OrganoSilicones
South
Charleston Administrative, OrganoSilicones
Research and
Sales Office*
INTERNATIONAL
Australia
South Australia
Regency Park,
S.A. Office and Crop Protection
Machine Shop*
New South Wales
Seven Hills Office and Laboratory* Polymers
Bahamas
Freeport Plant Polymer Additives,
Polymers and Other
Belgium
Antwerp Plant* OrganoSilicones
Brussels Office* Crop Protection,
Polymer Additives,
Polymers and Other
Brazil
Itatiba Plant OrganoSilicones
Rio Claro Plant Crop Protection,
Polymer Additives
and Polymers
Canada
Ontario
Elmira Plant Crop Protection,
Polymer Additives,
Polymers and Other
Guelph Research Center Crop Protection,
Polymer Additives,
Polymers and Other
Scarborough Plant* Other
West Hill Plant Other
Denmark
Soro Plant** Polymer Additives
France
Dannemarie Office and Machine Shop Polymer Processing
Equipment
Germany
Bergkamen Plant* Polymer Additives
Erkrath Office, Plant, Polymer Processing
Machine Shop Equipment
and Laboratory
Haan Office and Polymer Processing
Machine Shop Equipment
Lampertheim Plant Polymer Additives
Italy
Latina Plant Crop Protection,
Polymer Additives,
Polymers and Other
Termoli Plant OrganoSilicones
Korea
Kyungki-do Plant Polymer Additives
Mexico
Altamira Plant*** Polymers
Cuatitlan Plant Polymer Additives
Tampico Plant Polymer Additives
The Netherlands
Amsterdam Plant Crop Protection
Amsterdam Plant Other
Haarlem Plant Other
Koog aan de
Zaan Plant Other
Republic of China
(Taiwan)
Kaohsiung Plant+ Polymer Additives and
Other
Singapore Plant Crop Protection
Singapore Administrative, Crop Protection,
Research Polymer Additives,
and Sales Office* Polymers,
OrganoSilicones and
Other
Switzerland
Meyrin Administrative, Crop Protection,
Research Polymer Additives,
and Sales Office* OrganoSilicones and
Other
Thailand
Bangkok Plant Polymer Additives
United Kingdom
Accrington Plant** Polymer Additives
Droitwich Plant** Polymer Additives
Evesham Research Center Crop Protection
Huddersfield Plant# Polymer Additives and
Other
Langley Office* Crop Protection,
Polymer Additives,
Polymers and Other
Luton Office and Machine Shop Polymer Processing
Equipment
____________________________
* Facility leased by the Corporation.
** Facility owned by Baxenden Chemicals Limited, which is
53.5% owned by the Corporation.
*** Facility located on property owned by a subsidiary of
GIRSA, the joint venture partner. Uniroyal holds a 49%
interest in ParaTec S.A. de C.V. which owns certain of the
facility's equipment and buildings used for the production
of nitrile rubber.
+ Facility owned by Uniroyal Chemical Taiwan Ltd., which is
80% owned by Uniroyal.
# Land leased by and facility owned by Uniroyal.
All facilities are considered to be in good operating condition,
well maintained, and suitable for the Corporation's requirements.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in claims, litigation,
administrative proceedings and investigations of various types in
a number of jurisdictions. A number of such matters involve
claims for a material amount of damages and relate to or allege
environmental liabilities, including clean-up costs associated
with hazardous waste disposal sites, natural resource damages,
property damage and personal injury.
Environmental Liabilities. Each quarter, the Corporation
evaluates and reviews estimates for future remediation and other
costs to determine appropriate environmental reserve amounts.
For each site, a determination is made of the specific measures
that are believed to be required to remediate the site, the
estimated total cost to carry out the remediation plan, the
portion of the total remediation costs to be borne by the
Corporation and the anticipated time frame over which payments
toward the remediation plan will occur. The total amount accrued
for such environmental liabilities at December 31, 1999, was $198
million. The Corporation estimates the potential liabilities to
range from $181 million to $222 million at December 31, 1999. It
is reasonably possible that the Corporation's estimates for
environmental remediation liabilities may change in the future
should additional sites be identified, further remediation
measures be required or undertaken, the interpretation of current
laws and regulations be modified or additional environmental laws
and regulations be enacted.
The Corporation and some of its subsidiaries have been
identified by federal, state or local governmental agencies, and
by other potentially responsible parties (a "PRP") under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, or comparable state statutes, as a PRP
with respect to costs associated with waste disposal sites at
various locations in the United States. Because these
regulations have been construed to authorize joint and several
liability, the EPA could seek to recover all costs involving a
waste disposal site from any one of the PRP's for such site,
including the Corporation, despite the involvement of other PRPs.
In many cases, the Corporation is one of several hundred PRPs so
identified. In a few instances, the Corporation is one of only a
handful of PRPs. In certain instances, a number of other
financially responsible PRPs are also involved, and the
Corporation expects that any ultimate liability resulting from
such matters will be apportioned between the Corporation and such
other parties. In addition, the Corporation is involved with
environmental remediation and compliance activities at some of
its current and former sites in the United States and abroad.
The more significant of these matters are described below.
. Beacon Heights and Laurel Park - Uniroyal is a member of
the Beacon Heights Coalition, a group of entities engaged in
remedial work at the Beacon Heights site in the State of
Connecticut pursuant to a Consent Decree entered in 1987. The
actions required by this Consent Decree have been essentially
completed. There is a continuing requirement for operation and
maintenance at the site.
Over many years, Uniroyal has entered into and performed
activities pursuant to a series of Administrative Orders with
respect to the Laurel Park site located in the State of
Connecticut. The EPA, the State of Connecticut, and the Laurel
Park Coalition (consisting of Uniroyal and a number of other
parties) have entered into a Consent Decree governing the design
and implementation of the selected remedy. Remedial construction
began at the Laurel Park site in July 1996, and was completed in
1998. Operation and maintenance activities at the site are
ongoing.
Consolidated litigation brought by the Beacon Heights and
Laurel Park Coalitions seeking contribution to the costs from the
owner/operators of the site and later from other identified
generator parties has resulted in substantial recoveries from a
number of parties. Hearings on the remaining claims have been
completed before a Special Master appointed by the Court. The
Special Master has issued a Report and Recommendations to the
Court denying recovery to the Coalitions. On September 22, 1999,
the United States District Court for the District of Connecticut
set aside the Report and Recommendations of the Special Master
and issued an order allowing recovery against various
municipalities by the Beacon Heights Coalition in the amount of
approximately $3,955,000 and the Laurel Park Coalition in the
amount of approximately $1,000,000. Motions to Alter and Amend
and for Reconsideration and Rehearing on the ruling have been
filed by various parties to the litigation.
. Polybutylene Resin Manufacturing Business - The Corporation
is a defendant in two similar actions arising out of the
Corporation's involvement in the polybutylene resin manufacturing
business in the 1970's. The following cases are currently
pending in California state courts: Alameda County Water District
v. Mobil Oil Corporation, et al, filed in April 1996 and Marin
Municipal Water District v. Shell Oil Company, et al., filed in
May 1996, both pending in Superior Court for the County of San
Mateo. The actions generally allege that the Corporation and
several other defendants negligently misrepresented the
performance of polybutylene pipe and fittings installed in water
distribution systems. Other allegations include breach of the
California Unfair Practices Act, breach of warranty, fraud and
strict liability. It is possible that the Corporation may be
named as a defendant in future actions arising out of its past
involvement in the polybutylene manufacturing business.
. Vertac - Uniroyal and its Canadian subsidiary, Uniroyal
Chemical Co./Cie. (formerly known as Uniroyal Chemical Ltd./Ltee)
were joined with others as defendants in consolidated civil
actions brought in the United States District Court, Eastern
District of Arkansas, Western Division by the United States of
America, the State of Arkansas and Hercules Incorporated
("Hercules") relating to a Vertac Chemical Corporation site in
Jacksonville, Arkansas. Uniroyal has been dismissed from the
litigation. On May 21, 1997, the Court entered an order finding
that Uniroyal Chemical Co./Cie. is jointly and severally liable
to the United States, and finding that Hercules and Uniroyal
Chemical Co./Cie. are liable to each other in contribution. On
October 23, 1998, the Court entered an order granting the United
States' motion for summary judgment against Uniroyal Chemical
Co,/Cie. and Hercules as to the amount of its claimed removal and
remediation costs of $102.9 million at the Vertac site. Trial on
the allocation of these costs as between Uniroyal Chemical
Co./Cie. and Hercules was concluded on November 6, 1998, and on
February 3, 2000, the Court entered an Order finding Uniroyal
Chemical Co./Cie liable to the United States for approximately
$2,300,000 and liable to Hercules in contribution for
approximately $700,000. Uniroyal Chemical Co./Cie and Hercules
have each appealed to the United States Court of Appeals for the
Eighth Circuit.
The Corporation intends to assert all meritorious legal
defenses and all other equitable factors which are available to
it with respect to the above matters. The Corporation believes
that the resolution of these matters will not have a material
adverse effect on its consolidated financial position. While the
Corporation believes it is unlikely, the resolution of these
matters could have a material adverse effect on its consolidated
results of operations in any given year if a significant number
of these matters are resolved unfavorably.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information concerning the range of market prices for
the Corporation's Common Stock on the New York Stock Exchange and
the amount of dividends per share paid thereon during the past
two years, set forth in the Notes to Consolidated Financial
Statements on page 52 of the Corporation's 1999 Annual Report to
Stockholders, is incorporated herein by reference.
The number of registered holders of Common Stock of the
Corporation on December 31, 1999, was 6,815.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the Corporation for each of
its last five fiscal years, set forth under the heading "Five
Year Selected Financial Data" on page 54 of the Corporation's
1999 Annual Report to Stockholders, is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of the Corporation's
financial condition and results of operations, set forth under
the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 26 through 33 of
the Corporation's 1999 Annual Report to Stockholders, is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market risk and risk management policy is summarized under
the heading "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" on pages 27 through 29 of
the Corporation's 1999 Annual Report to Stockholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Corporation, notes thereto,
and supplementary data, appearing on pages 34 through 54 of the
Corporation's 1999 Annual Report to Stockholders, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by this item concerning directors of
the Corporation is included in the definitive proxy statement for
the Corporation's Annual Meeting of Stockholders to be held on
April 25, 2000, which is to be filed with the Commission pursuant
to Regulation 14A of the Securities Exchange Act of 1934, and
such information is incorporated herein by reference.
The executive officers of the Corporation are as follows:
Vincent A. Calarco, age 57, has served as Chairman, President and
Chief Executive Officer of the Registrant since 1999. Mr.
Calarco served as President and Chief Executive Officer of
Crompton & Knowles from1985 to 1999, and Chairman of the Board
from 1986 to 1999. Mr. Calarco has been a member of the Board of
Directors of the Registrant since 1999 and was a member of the
Board of Directors of Crompton & Knowles from 1985 to 1999.
Robert W. Ackley, age 58, has served as Executive Vice President,
Polymer Processing Equipment of the Registrant since 1999. Mr.
Ackley served as Vice President, Polymer Processing Equipment, of
Crompton & Knowles from 1998 to 1999 and as President of Davis-
Standard Corporation (prior to 1995, Davis-Standard Division)
since 1983.
Peter Barna, age 56, has served as Senior Vice President and
Chief Financial Officer of the Registrant since 1999. Mr. Barna
served as Senior Vice President and Chief Financial Officer of
Crompton & Knowles in 1999 and as Vice President-Finance of
Crompton & Knowles from 1996 to 1999. Mr. Barna was the
Principal Accounting Officer of Crompton & Knowles from 1986 to
1999 and its Treasurer from 1980 to 1996.
James J. Conway, age 56, has served as Executive Vice President,
Performance Chemicals and Elastomers, of the Registrant since
1999. Mr. Conway served as Vice President, Colors, of Crompton &
Knowles from 1998 to 1999 and President of Crompton & Knowles
Colors Incorporated since 1997. Mr. Conway was Senior Vice
President and General Manager of International Specialty
Products, Inc. from 1992 to 1997.
Brian J. Dick, age 43, has served as Vice President, Finance of
the Registrant since 1999. Mr. Dick served as Vice President,
Finance and Controller of Witco in 1999 and as Vice President and
Controller from 1997 to 1999. Mr. Dick served as Assistant
Controller from 1995 to 1997.
Joseph B. Eisenberg, Ph.D., age 57, has served as Executive Vice
President, Polymer Additives, of the Registrant since 1999. Mr.
Eisenberg served as Vice President, Rubber Chemicals, EPDM and
Nitrile Rubber, of Crompton & Knowles from 1998 to 1999 and as
Executive Vice President, Chemicals & Polymers, of Uniroyal since
1994.
John T. Ferguson II, age 53, has served as Senior Vice President,
General Counsel and Secretary of the Registrant since 1999. Mr.
Ferguson served as Vice President of Crompton & Knowles from 1996
to 1999, and General Counsel and Secretary of Crompton & Knowles
from 1989 to 1999. Mr. Ferguson served as a member of the Board
of Directors of the Registrant in 1999.
Gerald H. Fickenscher, age 56, has served as Regional Vice
President, Europe, Africa & Middle East of the Registrant since
1999. Mr. Fickenscher served as President, Dyes & Chemicals
International Operations, of Crompton & Knowles from 1994 to
1999.
Mary L. Gum, PhD., age 52, has served as Executive Vice
President, OSi, of the Registrant since 1999. Ms. Gum served as
Vice President of Silanes, OSi, from 1997 to 1999 and as Vice
President of Specialty Fluids, OSi, from 1995 to 1997.
Marvin H. Happel, age 60, has served as Senior Vice President,
Organization & Administration of the Registrant since 1999. Mr.
Happel served as Vice President-Organization and Administration
of Crompton & Knowles from 1996 to 1999 and Vice President-
Organization from 1986 to 1996.
Alfred F. Ingulli, age 58, has served as Executive Vice
President, Crop Protection, of the Registrant from 1999. Mr.
Ingulli served as Vice President, Crop Protection, of Crompton &
Knowles from 1998 to 1999 and as Executive Vice President, Crop
Protection of Uniroyal since 1994.
John R. Jepsen, age 44, has served as Vice President and
Treasurer of the Registrant since 1999. Mr. Jepsen served as
Treasurer of Crompton & Knowles from 1998 to 1999. Mr. Jepsen
served with the International Paper Company as Assistant
Treasurer, International from 1996 to 1998 and, prior to that, as
Director of Corporate Finance from 1986 to 1996.
Charles J. Marsden, age 59, has served as Senior Vice President,
Strategy & Development of the Registrant since 1999. Mr. Marsden
served as Senior Vice President, Strategy & Development of
Crompton & Knowles in 1999; Senior Vice President and Chief
Financial Officer from 1996 to 1999; and Vice President-Finance
and Chief Financial Officer from 1985 to 1996. Mr. Marsden
served as a member of the Board of Directors of the Registrant in
1999 and as a Director of Crompton & Knowles from 1985 to 1999.
Walter K. Ruck, age 57, has served as Senior Vice President,
Operations, of the Registrant since 1999. Mr. Ruck has served as
Vice President, Operations, of Uniroyal since 1998; and served as
Vice President, Manufacturing, of Uniroyal from 1997 to 1998. He
served as Regional Vice President, Americas of Uniroyal from 1995
to 1997 and Regional Vice President of Uniroyal from 1994 to
1995.
William A. Stephenson, age 52, has served as Executive Vice
President, Urethanes and Petroleum Additives, of the Registrant
since 1999. Mr. Stephenson served as Vice President, Specialty
Additives and Urethanes, of Crompton & Knowles from 1998 to 1999
and has served as Executive Vice President, Specialties of
Uniroyal since 1994.
Michael F. Vagnini, age 43, has served as Corporate Controller of
the Registrant since 1999 and as Corporate Controller of Crompton
& Knowles from 1998 to 1999. Mr. Vagnini has served as Corporate
Controller of Uniroyal since 1995.
The term of office of each of the above-named executive
officers is until the first meeting of the Board of Directors
following the next annual meeting of stockholders and until the
election and qualification of his or her successor.
There is no family relationship between any of such
officers, and there is no arrangement or understanding between
any of them and any other person pursuant to which any such
officer was selected as an officer.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this item is included in the
definitive proxy statement for the Corporation's Annual Meeting
of Stockholders to be held on April 25, 2000, which is to be
filed with the Commission pursuant to Regulation 14A, and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information called for by this item is included in the
definitive proxy statement for the Corporation's Annual Meeting
of Stockholders to be held on April 25, 2000, which is to be
filed with the Commission pursuant to Regulation 14A, and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by this item is included in the
definitive proxy statement for the Corporation's Annual Meeting
of Stockholders to be held on April 25, 2000, which is to be
filed with the Commission pursuant to Regulation 14A, and such
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements and Independent Auditors' Report,
as required by Item 8 of this form, which appear on
pages 34 through 53 of the Corporation's 1999 Annual
Report to Stockholders and are incorporated herein by
reference:
(i) Consolidated Statements of Operations for the
fiscal years ended 1999, 1998, and 1997;
(ii) Consolidated Balance Sheets for the fiscal
years ended 1999 and 1998;
(iii) Consolidated Statements of Cash Flows for the
fiscal years ended 1999, 1998, and 1997;
(iv) Consolidated Statements of Stockholders' Equity
[Deficit] for the fiscal years ended 1999, 1998
and 1997;
(v) Notes to Consolidated Financial Statements; and
(vi) Independent Auditors' Report of KPMG LLP.
2. Independent Auditors' Report and Consent, and Financial
Statement Schedule II, Valuation and Qualifying
Accounts, required by Regulation S-X. Pages S-1 and S-2
hereof.
3. The following exhibits are either filed herewith or
incorporated herein by reference to the respective
reports and registration statements identified in the
parenthetical clause following the description of the
exhibit:
Exhibit No. Description
2.0 Agreement and Plan of Reorganization dated as of May 31,
1999, by and among Crompton & Knowles Corporation, Park
Merger Co. and Witco Corporation (incorporated by
reference to Appendix A to the Joint Proxy Statement-
Prospectus dated July 28, 1999, as part of the
Registrant's Registration Statement on Form S-4,
Registration No. 333-83901, dated July 28, 1999 ("Joint
Proxy Statement-Prospectus S-4 Registration Statement")).
2.1 Amendment No. 1 to Agreement and Plan of Reorganization
dated as of July 27, 1999, by and among Crompton &
Knowles Corporation, CK Witco Corporation (formerly known
as Park Merger Co.) and Witco Corporation (incorporated
by reference to Appendix A-1 to the Joint Proxy
Statement-Prospectus S-4 Registration Statement).
2.2 Agreement and Plan of Merger dated April 30, 1996, by and
among Crompton & Knowles, Tiger Merger Corp. and Uniroyal
Chemical Corporation ("UCC") (incorporated by reference
to Exhibit 2 to the Crompton & Knowles Form 10-Q for the
period ended March 31, 1996).
2.3 Acquisition Agreement dated November 29, 1999, by and
among Yorkshire Group PLC, Yorkshire Americas, Inc., as
Purchasers and CK Witco Corporation, Crompton & Knowles
Europe S.P.R.L., Uniroyal Chemical European Holdings B.V.
and Crompton & Knowles Colors Incorporated, as Sellers
(filed herewith*).
2.4 Limited Liability Company Agreement by and between
Gustafson, Inc. and Trace Chemicals, Inc., effective as
of September 23, 1998, (incorporated by reference to
Exhibit 2.1 to the Crompton & Knowles Form 8-K/A dated
January 21, 1999 ("Form 8-K/A")).
2.5 First Amendment to Limited Liability Company Agreement by
and among GT Seed Treatment Inc. (f/k/a Gustafson, Inc.),
Ecart Inc. (f/k/a Trace Chemicals, Inc.) and
BayerCorporation, dated as of November 20, 1998,
(incorporated by reference to Exhibit 2.2 to Form 8-K/A).
2.6 Purchase Agreement by and among the Crompton & Knowles,
Uniroyal, Trace Chemicals, Inc. and Gustafson, Inc. as
Sellers, and Bayer Corporation, as Purchaser, and
Gustafson LLC, as the Company, dated as of November 20,
1998, (incorporated by reference to Exhibit 2.3 to Form
8-K/A).
2.7 Purchase Agreement by and between Uniroyal Chemical
Co./Cie and Bayer Inc., effective as of November 20,
1998, (incorporated by reference to Exhibit 2.4 to Form
8-K/A).
2.8 Partnership Agreement of Gustafson Partnership by and
between Uniroyal Chemical Co./Cie and Bayer Inc.,
effective as of November 20, 1998, (incorporated by
reference to Exhibit 2.5 to Form 8-K/A).
2.9 Joint Venture Agreement and Shareholders Agreement dated
September 18, 1998, by and between Uniroyal and GIRSA
S.A. de C.V. (incorporated by reference to Exhibit 2.6
to the Crompton & Knowles Form 10-K for the fiscal year
ended December 26, 1998 ("1998 Form 10-K")).
2.10 Stock Purchase Agreement dated as of December 8, 1998, by
and among Crompton & Knowles and Ingredient Technology
Corporation, as Sellers, and Chr. Hansen Inc., as
Purchaser (incorporated by reference to Exhibit 2.7 to
the 1998 Form 10-K).
3(i) Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Appendix H to the Joint
Proxy Statement-Prospectus S-4 Registration Statement).
3(ii) By-laws of the Registrant (incorporated by reference to
Exhibit 3.02 to the Joint Proxy Statement-Prospectus S-4
Registration Statement).
4.1 Rights Agreement dated as of September 2, 1999, by and
between the Registrant and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent (incorporated by
reference to Form 8-A dated September 28, 1999).
4.2 Form of Indenture, dated as of February 8, 1993, among
Uniroyal and State Street Bank and Trust Company, as
Trustee, relating to the 10 1/2% Notes, including form of
securities (incorporated by reference to Exhibit 4.1 to
the Registration Statement on UCC Form S-1, Registration
No. 33-45296 and 33-45295 ("UCC Form S-1, Registration
No. 33-45296/45295")).
4.3 Form of First Supplemental Indenture, dated as of
December 9, 1998, among UCC, as Issuer, Uniroyal, as
successor to the Issuer, and State Street Bank and Trust
Company, as Trustee, relating to the 10 1/2% Senior Notes
due 2002 (incorporated by reference to Exhibit 4.4 to
Form 10-K for the fiscal year ended December 26, 1998).
4.4 Form of Indenture, dated as of September 1, 1993, among
Uniroyal and State Street Bank and Trust Company, as
Trustee, relating to $270 million of 9% Notes, including
the form of securities (incorporated by reference to
Exhibit 4.2 to UCC Form S-1, Registration No. 33-66740).
4.5 Form of $600 Million 364-Day Credit Agreement dated as of
October 28, 1999, by and among the Registrant, certain
subsidiaries of the Registrant, various banks, The Chase
Manhattan Bank, as Syndication Agent, Citibank, N.A., as
Administrative Agent and Bank of America, N.A. and
Deutsche Bank Securities Inc., as Co-Documentation Agents
(incorporated by reference to Exhibit 4.1 to the 10-Q for
the quarter ended September 30, 1999 ("September 30, 1999
10-Q")).
4.6 Form of $400 Million Five-Year Credit Agreement dated as
of October 28, 1999, by and among the Registrant, certain
subsidiaries of the Registrant, various banks, The Chase
Manhattan Bank, as Syndication Agent, Citibank, N.A., as
Administrative Agent and Bank of America, N.A. and
Deutsche Bank Securities Inc., as Co-Documentation Agents
(incorporated by reference to Exhibit 4.2 to the
September 30, 1999 10-Q).
4.7 Form of $600 Million Third Amended and Restated Credit
Agreement dated as of March 31, 1998, by and among
Crompton & Knowles and certain of its subsidiaries, as
Borrowers, and various lenders, Citicorp USA, Inc., as
Agent and The Chase Manhattan Bank, Corestates Bank, N.A.
and First Union National Bank, as Managing Agents
(incorporated by reference to Exhibit 4 to the Crompton &
Knowles Form 10-Q for the quarter ended June 27, 1998).
4.8 Form of $50 Million Credit Agreement dated as of December
23, 1999, by and among the Registrant, various banks and
Merrill Lynch Capital Corporation, as Administrative
Agent (filed herewith*).
4.9 Offering Memorandum, dated March 2, 2000, relating to $25
Million Floating Rate Notes due 2001(filed herewith*).
4.10 Form of Indenture, dated as of March 1, 2000, by and
between the Registrant and Citibank, N.A., relating to
$25 Million Floating Rate Notes due 2001, including as
Annex A thereto, Form of Floating Rate Note Pledge
Agreement by and among the Registrant, certain foreign
subsidiaries of the Registrant, and Citibank, N.A., as
Collateral Agent (filed herewith*).
4.11 Form of Purchase Agreement, dated as of March 2, 2000, by
and between the Registrant, as Seller, and Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as
Purchaser, relating to $25 Million Floating Rate Notes
due 2001 (filed herewith*).
4.12 Offering Memorandum, dated March 2, 2000, relating to
$600 Million of 8 1/2% Senior Notes due 2005 (filed
herewith*).
4.13 Form of Indenture, dated as of March 1, 2000, by and
between the Registrant and Citibank, N.A., relating to
$600 Million of 8 1/2% Senior Notes due 2005, including
as Annex A thereto, Form of Senior Note Pledge Agreement
by and among the Registrant, certain foreign subsidiaries
of the Registrant, and Citibank, N.A., as Collateral
Agent (filed herewith*).
4.14 Form of Purchase Agreement, dated as of March 2, 2000, by
and among the Registrant, as Seller, and Merrill Lynch,
ABN AMRO Incorporated, Banc of America Securities LLC,
Chase Securities Inc., Deutsche Bank Securities Inc.,
Goldman, Sachs & Co. and Salomon Smith Barney Inc.
(together, the "Initial Purchasers"), relating $600
Million of 8 1/2% Senior Notes due 2005 (filed
herewith*).
4.15 Form of Indenture, dated as of February 1, 1993, by and
between Witco and the Chase Manhattan Bank, N.A., as
Trustee, relating to Witco's 6.60% Notes due 2003, 7.75%
Debentures due 2023, 6 1/8% Notes due 2006 and 6 7/8%
Debentures due 2026, including form of securities
(incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement on Form S-3,
Registration No. 33-58066, filed March 19, 1993).
4.16 Form of First Supplemental Indenture, dated February 1,
1996, by and among Witco, Chase Manhattan Bank, N.A., the
Initial Trustee, and Fleet National Bank of Connecticut,
the Note Trustee, relating to Witco's 6 1/8% Notes due
2006 and 6 7/8% Notes due 2026 (incorporated by reference
to Registration Statement on Form S-3, Registration
Number 33-65203, filed January 25, 1996).
4.17 Form of Registration Rights Agreement, dated as of March
7, 2000, by and among the Registrant and the Initial
Purchasers, relating to $600 Million of 8 1/2% Senior
Notes due 2005 (filed herewith*).
4.18 Form of Second Supplemental Indenture, dated as of
December 6, 1999, among UCC, as Issuer, Uniroyal, as
successor to the Issuer, and State Street Bank & Trust
Company, as Trustee, relating to the 10 1/2% Senior Notes
due 2002 (filed herewith*).
4.19 Form of First Supplemental Indenture, dated as of
December 6, 1999, by and between Uniroyal, as Issuer, and
State Street Bank & Trust Company, as Trustee, relating
to the 9% Senior Notes due 2000 (filed herewith*).
10.1 + Summary of the Management Incentive Bonus Plan for
selected key management personnel (incorporated by
reference to Exhibit 10(m) to the Crompton & Knowles Form
10-K for the fiscal year ended December 27, 1980).
10.2+ Supplemental Medical Reimbursement Plan (incorporated by
reference to Exhibit 10(n) to the Crompton & Knowles Form
10-K for the fiscal year ended December 27, 1980).
10.3+ Supplemental Dental Reimbursement Plan (incorporated by
reference to Exhibit 10(o) to the Crompton & Knowles Form
10-K for the fiscal year ended December 27, 1980).
10.4+ Employment Agreement dated February 22, 1988, between
Crompton & Knowles and Vincent A. Calarco (incorporated
by reference to Exhibit 10(j) to the Crompton & Knowles
Form 10-K for the fiscal year ended December 26, 1987).
10.5+ Form of Employment Agreement entered into in 1988, 1989,
1992, 1994, 1996 and 1998 between Crompton & Knowles or
one of its subsidiaries and ten of the executive officers
of Crompton & Knowles (incorporated by reference to
Exhibit 10(k) to the Crompton & Knowles Form 10-K for the
fiscal year ended December 26, 1987).
10.6+ Form of Employment Agreement dated as of August 21, 1996,
between a subsidiary of the Registrant and three
executive officers of the Registrant (incorporated by
reference to Exhibit 10.28 to the UCC/Uniroyal Form 10-K
for the fiscal year ended September 28, 1996).
10.7+ Amended Supplemental Retirement Agreement dated October
18, 1995, between Crompton & Knowles and Vincent A.
Calarco (incorporated by reference to Exhibit 10(i) to
the Crompton & Knowles Form 10-K for the fiscal year
ended December 30, 1995).
10.8+ Form of Amended Supplemental Retirement Agreement dated
October 18, 1995, between Crompton & Knowles and three of
its executive officers (incorporated by reference to
Exhibit 10(j) to the Crompton & Knowles Form 10-K for the
fiscal year ended December 30, 1995).
10.9+ Form of Supplemental Retirement Agreement dated October
18, 1995, between Crompton & Knowles and five of its
executive officers (incorporated by reference to Exhibit
10(k) to the Crompton & Knowles Form 10-K for the fiscal
year ended December 30, 1995).
10.10+ Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the Registrant
and two executive officers of the Registrant
(incorporated by reference to Exhibit 10.29 to the
UCC/Uniroyal Form 10-K for the fiscal year ended
September 28, 1996).
10.11+ Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the Registrant
and two executive officers of the Registrant
(incorporated by reference to Exhibit 10.30 to the
UCC/Uniroyal Form 10-K for the fiscal year ended
September 28, 1996).
10.12+ Supplemental Retirement Agreement Trust Agreement dated
October 20, 1993, between Crompton & Knowles and Shawmut
Bank, N.A. (incorporated by reference to Exhibit 10(l)
to the Crompton & Knowles Form 10-K for the fiscal year
ended December 25, 1993).
10.13+ Amended Benefit Equalization Plan dated October 20, 1993
(incorporated by reference to Exhibit 10(m) to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 25, 1993).
10.14+ Amended Benefit Equalization Plan Trust Agreement dated
October 20, 1993, between Crompton & Knowles and Shawmut
Bank, N.A. (incorporated by reference to Exhibit 10(n)
to the Crompton & Knowles Form 10-K for the fiscal year
ended December 25, 1993).
10.15+ Amended 1988 Long Term Incentive Plan (incorporated by
reference to Exhibit 10(o) to the Crompton & Knowles Form
10-K for the fiscal year ended December 25, 1993).
10.151+ Amendment No. 4 to 1988 Long Term Incentive Plan
(incorporated by reference to Exhibit 10.171 to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 28, 1996).
10.16 Trust Agreement dated as of May 15, 1989, between
Crompton & Knowles and Shawmut Worcester County Bank,
N.A. and First Amendment thereto dated as of February 8,
1990 (incorporated by reference to Exhibit 10(w) to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 30, 1989).
10.17+ Form of 1992 - 1994 Long Term Performance Award Agreement
(incorporated by reference to Exhibit 10(y) to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 28, 1991).
10.18+ Restricted Stock Plan for Directors of Crompton & Knowles
approved by the stockholders on April 9, 1991
(incorporated by reference to Exhibit 10(z) to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 28, 1991).
10.19+ Amended 1993 Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.21 to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 26, 1998).
10.20+ UCC Purchase Right Plan, as amended and restated as of
March 16, 1995 (incorporated by reference to Exhibit
10.1 to the UCC Form 10-Q for the period ended April 2,
1995 ("UCC April 1995 Form 10-Q")).
10.21+ UCC 1993 Stock Option Plan (incorporated by reference to
Exhibit 28.1 to UCC's Registration Statement No. 33-62030
on Form S-8, filed on May 4, 1993).
10.22+ Form of Amendment No. 2 to the UCC 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the UCC
April 1995 Form 10-Q).
10.23+ Form of Executive Stock Option Agreement, dated as of
November 15, 1993 (incorporated by reference to Exhibit
10.22 to the UCC 1994 Form 10-K).
10.24+ Form of Amended and Restated 1996 - 1998 Long Term
Performance Award Agreement entered into in 1996 between
Crompton & Knowles or one of its subsidiaries and
thirteen of the executive officers of Crompton & Knowles
(incorporated by reference to Exhibit 10.27 to the
Crompton & Knowles Form 10-K for the fiscal year ended
December 27, 1997).
10.25 Second Amended and Restated Lease Agreement between the
Middlebury Partnership, as Lessor, and Uniroyal, as
Lessee, dated as of August 28, 1997 (incorporated by
reference to Exhibit 10 to the UCC/Uniroyal 10-Q for the
quarter ended September 27, 1997) .
10.261 Form of Receivables Sale Agreement, dated as of December
11, 1998, by and among Crompton & Knowles, as Initial
Collection Agent, Crompton & Knowles Receivables
Corporation, ABN AMRO Bank N.V., as the Agent, the
Enhancer, and the Liquidity Provider, and Windmill
Funding Corporation (incorporated by reference to
Exhibit 10.291 to the Crompton & Knowles Form 10-K for
the fiscal year ended December 26, 1998).
10.262 Form of Receivables Purchase Agreement, dated as of
December 11, 1998, by and among Crompton & Knowles, as
Initial Collection Agent, and certain of its
subsidiaries, as Sellers, and Crompton & Knowles
Receivables Corporation, as Buyer (incorporated by
reference to Exhibit 10.292 to the Crompton & Knowles
Form 10-K for the fiscal year ended December 26, 1998).
10.263 Form of Receivables Purchase Agreement, dated as of June
10, 1999, by and among Witco Funding Corporation, as
Seller, CIESCO L.P., as Investor, Citibank, N.A., as the
Initial Bank, Citicorp North America, Inc., as Agent, and
Witco, as Collection Agent and Originator (filed
herewith*).
10.264 Purchase and Contribution Agreement, dated as of June 10,
1999, by and between Witco, as Seller, and Witco Funding
Corporation, as Purchaser (filed herewith*).
10.27+ Crompton & Knowles Corporation (n/k/a CK Witco
Corporation) 1998 Long Term Incentive Plan (incorporated
by reference to Exhibit 10.2 to the Crompton & Knowles
Form 10-Q for the quarter ended June 26, 1999)
10.28+ Amendment to the Crompton & Knowles (n/k/a CK Witco
Corporation) 1998 Long Term Incentive Plan (incorporated
by reference to page 12 of the Joint Proxy-Statement
Prospectus S-4 Registration Statement).
10.29+ Amended and Restated Employment Agreement by and between
Crompton & Knowles and Vincent A. Calarco dated May 31,
1999 (incorporated by reference to Exhibit 10.1 to the
Crompton & Knowles Form 10-Q for the quarter ended June
26, 1999).
10.30+ Supplemental Retirement Agreement dated March 22, 1999,
by and between Crompton & Knowles and Vincent A. Calarco
(incorporated by reference to Exhibit 10.1 to the
Crompton & Knowles Form 10-Q for the quarter ended March
27, 1999).
10.31+ Form of Supplemental Retirement Agreement dated as of
March 22, 1999, by and between Crompton & Knowles and six
of its executive officers (incorporated by reference to
Exhibit 10.2 to the Crompton & Knowles Form 10-Q for the
quarter ended March 27, 1999).
10.32+ Form of Merger Synergy Restrict Stock Agreement, dated as
of October 19, 1999, by and between the Registrant and
various of its executive officers (filed herewith*).
10.33+ Form of 1999-2001 Long Term Performance Award Agreement,
dated as of February 1, 1999, by and between the
Registrant and various of its executive officers (filed
herewith*).
10.34+ Form of 2000-2002 Long Term Performance Award Agreement,
dated as of February 24, 2000, by and between the
Registrant and various of its executive officers (filed
herewith*).
10.35+ Form of Supplemental Retirement Agreement, dated as of
October 21, 1999, by and between the Registrant and
various of its executive officers (filed herewith*).
13 1999 Annual Report to Stockholders of the Registrant.
(Not to be deemed filed with the Securities and Exchange
Commission except those portions expressly incorporated
by reference into this report on Form 10-K.) (filed
herewith*).
21 Subsidiaries of the Registrant (filed herewith*).
23 Consent of independent auditors. (See Item 14(a)2
herein.) (filed herewith*).
24 Power of attorney from directors and executive officers
of the Registrant authorizing signature of this report.
(Original on file at principal executive offices of
Registrant.) (filed herewith*).
27 Financial data schedule for the fiscal year ended
December 31, 1999 (filed herewith*).
* Copies of these Exhibits are annexed to this report on Form
10-K provided to the Securities and Exchange Commission and the
New York Stock Exchange.
+ This Exhibit is a compensatory plan, contract or arrangement
in which one or more directors or executive officers of the
Registrant participate.
(b) Reports on Form 8-K filed in fourth quarter 1999
During the fiscal fourth quarter of 1999, the Registrant
filed a Current Report on Form 8-K dated October 18, 1999,
reporting on Item 5, Other Events and Item 7, Financial
Statements and Exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CK WITCO CORPORATION
(Registrant)
Date: March 29, 2000
By: /s/Peter Barna
Peter Barna
Senior Vice President &
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the date indicated.
Name Title
Vincent A. Calarco* Chairman of the Board, President,
and Director (Principal Executive
Officer)
Peter Barna* Senior Vice President
(Chief Financial Officer)
Brian J. Dick* Vice President - Finance
(Principal Accounting Officer)
James A. Bitonti* Director
Simeon Brinberg* Director
Robert A. Fox* Director
Roger L. Headrick* Director
Leo I. Higdon, Jr.* Director
Harry G. Hohn* Director
Nicholas Pappas* Director
C. A. Piccolo* Director
Bruce F. Wesson* Director
Patricia K. Woolf* Director
Date: March 29, 2000 *By:/s/Peter Barna
Peter Barna
as attorney-in-fact
Independent Auditors' Report and Consent
The Board of Directors and Stockholders
CK Witco Corporation:
Under date of January 31, 2000, except for the private placement
information described in the note captioned "Credit Facilities"
as to which the date is March 7, 2000, we reported on the
consolidated balance sheets of CK Witco Corporation and
subsidiaries (the Company) as of December 31, 1999 and December
26, 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the
years in the three-year period ended December 31,1999, which are
incorporated by reference in this Form 10 K. In connection with
our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial
statement schedule included in this Form 10 K. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We consent to the incorporation by reference in the registration
statements (Nos. 33-21246, 33-42280, 33-67600, 333-62429 and 333-
87035) on Form S-8 of CK Witco Corporation of our report, dated
January 31, 2000, except for the private placement information
described in the note captioned "Credit Facilities" as to which
the date is March 7, 2000, relating to the consolidated balance
sheets of CK Witco Corporation and subsidiaries as of December
31, 1999 and December 26, 1998, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash
flows for each of the years in the three-year period ended
December 31, 1999, which report is incorporated by reference in
the December 31, 1999 Annual Report on Form 10-K of CK Witco
Corporation.
Stamford, Connecticut
March 29, 2000
S-1
Schedule II
CK WITCO CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands of dollars)
Additions
Balance at charged to Balance
beginning costs and Adjustments at end
of year expenses Recurring Other of year
Fiscal Year ended December 31, 1999:
Allowance for doubtful accounts
$ 9,768 $ 3,937 $ (5,206)(1) $ 14,857(5) $ 23,356
Accumulated amortization of cost in
excess of acquired net assets
44,647 12,382 (939)(2) (6,687)(4) 49,403
Accumulated amortization of other
intangible assets
120,860 15,078 (232)(2) (167)(4) 135,539
Fiscal Year ended December 26, 1998:
Allowance for doubtful accounts
$ 8,708 $ 5,209 $ (3,742)(1) $ (407)(3) $ 9,768
Accumulated amortization of cost in
excess of acquired net assets
42,243 7,222 (572)(2) (4,046)(3) 44,647
Accumulated amortization of other
intangible assets
123,262 14,122 743 (2) (17,267)(3) 120,860
Fiscal Year ended December 27, 1997:
Allowance for doubtful accounts
$ 7,299 $ 2,230 $ (821)(1) $ 0 $ 8,708
Accumulated amortization of cost in
excess of acquired net assets
36,616 5,751 (67)(2) (57)(4) 42,243
Accumulated amortization of other
intangible assets
108,163 15,413 (314)(2) 0 123,262
(1) Represents accounts written off as uncollectible (net of
recoveries), and the translation effect of accounts
denominated in foreign currencies.
(2) Represents the translation effect of intangible assets
denominated in foreign currencies.
(3) Represents primarily disposition of the Gustafson seed
treatment business.
(4) Represents intangible asset retirements.
(5) Represents primarily the acquisition of Witco Corporation.
S - 2
ACQUISITION AGREEMENT
by and among
YORKSHIRE GROUP PLC
YORKSHIRE AMERICAS, INC.
CK WITCO CORPORATION
CROMPTON & KNOWLES EUROPE S.P.R.L.
UNIROYAL CHEMICAL EUROPEAN HOLDINGS B.V.
and
CROMPTON & KNOWLES COLORS INCORPORATED
November 29, 1999
Addleshaw Booth & Co
Sovereign House
Leeds LS1 1HQ
Kilpatrick Stockton LLP
1100 Peachtree Street
Atlanta, Georgia 30309
ACQUISITION AGREEMENT
Table Of Contents*
1. THE ACQUISITION 2
1.1 Purchase and Sale 2
1.2 Excluded Assets 6
1.3 Purchase Price 9
1.4 Adjustments to Purchase Price 9
1.5 Assumption of Certain Liabilities 11
1.6 Obligations Not Assumed; Payment Obligations 11
1.7 Sales Taxes and Stamp Duties 12
1.8 Proration; Customer Rebates 13
1.9 Allocation 13
1.10 Closing 13
1.11 Transactions and Documents at Closing 14
2. ADDITIONAL COVENANTS 16
2.1 Access and Inspection 16
2.2 Cooperation 16
2.3 Expenses 16
2.4 Brokers 17
2.5 Publicity 17
2.6 Certain Governmental Filings 17
2.7 Confidentiality 17
2.8 Covenant Not to Compete 18
2.9 No Solicitation of Third Party Interest 20
2.10 Business Employees and Employee Benefit Matters21
2.11 Compliance with ERISA, Etc. 26
2.12 Admission of Ordinary Shares 27
2.13 Extraordinary General Meeting 28
2.14 Cooperation by Management of CK Witco 28
2.15 Certain Transactions 28
2.16 Certain Relocation Matters and Costs 28
2.17 Limited Use of CK Witco Name 28
2.18 Distributable Profits and Voting with Respect
to Europe 29
2.19 Mail Received after Closing 29
2.20 Notices to Customers; Collection of Receivables29
2.21 Payments for CK Witco European Liabilities 29
2.22 Certain IP Registration Costs 30
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK WITCO, COLORS,
HOLDINGS AND EUROPE 30
3.1 Existence 31
3.2 Subsidiaries 32
3.3 Authority; Inconsistent Obligations 32
3.4 No Violation; Compliance with Laws 33
3.5 Consents 34
3.6 Possession of Licenses, Etc. 34
3.7 Sufficiency of Assets 34
3.8 Grants and Allowances 35
3.9 Year 2000 Compliance 35
3.10 Financial Statements 35
3.11 Euro-Affected Products and Services 36
3.12 Liabilities 36
3.13 Title to Properties 36
3.14 Receivables 36
3.15 Inventories 36
3.16 Movable Property 37
3.17 Immovable Property 37
3.18 Environmental Matters 38
3.19 Intellectual Property Rights 39
3.20 Contracts 40
3.21 Insurance 41
3.22 Litigation; Contingencies 41
3.23 Taxes 42
3.24 Employment and Labor Matters 42
3.25 Compliance with ERISA, etc. 43
3.26 Other Benefits Plans 46
3.27 Absence of Certain Business Practices 47
3.28 Books and Records 48
3.29 Agreements and Transactions with Related
Parties 48
3.30 No Agreement in Anticipation of Sale 48
3.31 Government Reports 49
3.32 Banking Relationships 49
3.33 Customers and Suppliers 49
3.34 Absence of Changes 49
3.35 Insolvency 50
3.36 Information Warranty 51
3.37 Indebtedness as of 15 October 1999 52
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK WITCO RELATING
TO THE CONSIDERATION SECURITIES 52
4.1 Investment Intentions 52
4.2 Standstill; Sale of Consideration Securities 52
4.3 Listing Particulars 53
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF YORKSHIRE,
AMERICAS 53
5.1 Organization 53
5.2 Authorization; No Inconsistent Agreements 53
5.3 Dividends in relation to Consideration
Securities 54
5.4 Financing 54
5.5 No Violation; Compliance with Laws 54
5.6 Consents 54
5.7 Financial Statements 54
5.8 Litigation; Contingencies 54
6. CONDUCT OF BUSINESS PENDING CLOSING 55
6.1 Business in the Ordinary Course 55
6.2 No Material Changes 57
6.3 Compensation 57
6.4 Employee Benefit Plans 57
7. CONDITIONS TO OBLIGATIONS OF YORKSHIRE AND THE
YORKSHIRE ENTITIES 57
7.1 Representations and Warranties 57
7.2 Compliance with Covenants and Conditions 58
7.3 Closing Certificates 58
7.4 Consents 58
7.5 Passage of Resolutions 58
7.6 Admission to Official List 58
7.7 No Inconsistent Requirements 58
7.8 No Injunction 58
7.9 Additional Agreements and Closing Documents 59
7.10 Related Party Matters 59
7.11 Adverse Conditions 59
8. CONDITIONS TO OBLIGATIONS OF THE CK WITCO
ENTITIES 59
8.1 Representations and Warranties 59
8.2 Compliance with Covenants and Conditions 59
8.3 Closing Certificates 59
8.4 Consents 60
8.5 Passage of Resolutions 60
8.6 No Inconsistent Requirements 60
8.7 No Injunction 60
8.8 Admission to Official List 60
8.9 Additional Agreements and Closing Documents 60
8.10 Adverse Conditions 60
9. INDEMNITIES 60
9.1 General Indemnification of the Yorkshire
Entities 60
9.2 Payment 61
9.3 Defense of Claims 62
9.4 Indemnification of the CK Witco Entities by Yorkshire and
Americas 63
9.5 Environmental Indemnity 64
9.6 Taxation Schedule Indemnity 76
9.7 No Contribution by Europe or any Acquired Entity76
9.8 Minimum Losses 77
9.9 Maximum Indemnification 77
9.10 Subrogation 78
9.11 Adjustments to Indemnification 78
9.12 Smith Road Indemnity 78
9.13 BCC Indemnity 79
9.14 Dusseldorf Indemnity 79
9.15 Exclusive Remedy 79
9.16 Duty to Mitigate 79
9.17 After-Tax Payments 79
9.18 Pensions Indemnity 81
10. SURVIVAL 81
10.1 Survival 81
11. TERMINATION 82
11.1 Termination for Certain Causes. 82
11.2 Procedure on and Effect of Termination 83
12. MISCELLANEOUS 83
12.1 Notices 83
12.2 Counterparts 85
12.3 Entire Agreement 85
12.4 Governing Law, Dispute Resolution 85
12.5 Successors and Assigns 85
12.6 Partial Invalidity and Severability 85
12.7 Waiver 86
12.8 Headings 86
12.9 Number and Gender 86
12.10 Construction 86
12.11 Time of Performance 86
13. CERTAIN DEFINITIONS; INDEX OF DEFINITIONS 86
13.1 Certain Definitions 86
13.2 Index to Definitions 91
*This Table of Contents does not constitute a part of this
Agreement.
SCHEDULE OF EXHIBITS*
Exhibit Reference Exhibit Name
Exhibit A-1 Lowell Land
Exhibit A-2 Charlotte Land
Exhibit A-3 Greenville Land
Exhibit A-4 Dalton Land
Exhibit B Leased Real Property
Exhibit C BCC Tangible Personal Property
Exhibit D Registered Trademarks and Service
Marks
Exhibit D-1 Excluded Registered Marks
Exhibit E Gibraltar Facility Assets
Exhibit F Americas IPD Business Registered
Marks
Exhibit G Excluded Americas IPD Business
Information
Exhibit H Other Excluded Americas IPD Business
Intellectual Property Rights
Exhibit I Assets Used Exclusively in Monitoring
of Groundwater
Exhibit J Other Excluded Assets and Properties
Exhibit K Balance Sheet Principles
Exhibit L Assumed Liabilities
Exhibit M European Retained Liabilities
Exhibit N Closing Documents
Exhibits O-1 and O-2 CK Witco Supply Contracts
Exhibits P-1 and P-2 Yorkshire Supply Contracts
Exhibit Q Transition Services Agreement
Exhibit R Charlotte Lease Agreement
Exhibit S Gibraltar Lease Agreement
Exhibit T Trademark License Agreement (CK Witco
to Yorkshire)
Exhibit U Trademark License Agreement
(Yorkshire to CK Witco)
Exhibit V Non-European Patent and Technology
License Agreement (CK Witco to
Yorkshire)
Exhibit W European Patent and Technology
License Agreement (CK Witco to
Yorkshire)
Exhibit X Non-European Patent and Technology
License Agreement (Yorkshire to CK
Witco)
Exhibit Y European Patent and Technology
License Agreement (Yorkshire to CK
Witco)
Exhibit Z Groundwater Monitoring Agreement
Exhibit AA Gibraltar Employees
Exhibit BB BCC Reorganization Matters
Exhibit CC Excluded Liability Fund Matters
Exhibit DD IP Registration Costs
Exhibit EE Special Purpose Statement
Exhibit FF Oissel, France Land
Exhibit GG Due Diligence Requests
Exhibit HH Indebtedness as of October 15, 1999
Exhibit II Reviewed Pages - Listing Particulars
Exhibit II-1 Listing Particulars
Exhibit JJ Covered Properties
Exhibit KK Certain Environmental Matters
Exhibit LL Specific Indemnity Issues
Exhibit MM Dispute Resolution Procedures
Exhibit NN Americas IPD Business Territory
*This Schedule of Exhibits does not constitute a part of this
Agreement.
<PAGE>
ACQUISITION AGREEMENT
THIS AGREEMENT is made and entered into as of the 29 day of
November, 1999, by and among:
(1) YORKSHIRE GROUP PLC, a public company limited by
shares organized and existing under the laws of England and Wales
("Yorkshire");
(2) YORKSHIRE AMERICAS, INC., a South Carolina
corporation ("Americas");
(3) CK WITCO CORPORATION, a Delaware corporation ("CK
Witco");
(4) CROMPTON & KNOWLES EUROPE S.P.R.L., a private
company with limited liability incorporated under the laws of
Belgium ("Europe");
(5) UNIROYAL CHEMICAL EUROPEAN HOLDINGS B.V., a private
company with limited liability incorporated under the laws of The
Netherlands ("Holdings"); and
(6) CROMPTON & KNOWLES COLORS INCORPORATED, a Delaware
corporation ("Colors").
BACKGROUND STATEMENTS
WHEREAS, CK Witco, directly and through its subsidiaries and
Affiliates, is engaged worldwide in the Textile Dyes Business;
and
WHEREAS, CK Witco, directly and through its subsidiaries and
Affiliates, is engaged worldwide in the IPD Business; and
WHEREAS, CK Witco desires to sell, and Yorkshire desires to
acquire, (i) the whole of the Textile Dyes Business and (ii) so
much of the IPD Business as is conducted throughout the world
other than for that IPD Business conducted within the Americas
IPD Business Territory (the acquired portion of the IPD Business
being referred to in this Agreement as the "Acquired IPD
Business"; and together with the Textile Dyes Business, the
"Acquired Businesses"); provided, however, the Acquired
Businesses shall not include that portion of the IPD Business
relating to the development, manufacture, distribution and sale
of goods exclusively within the IPD Business product line for
their own consumption and application as is conducted throughout
the world with the customers Technicolor, Lexmark, Video Jet
Systems International Inc. and ICI Imagedata, and their
respective Affiliates; and
WHEREAS, CK Witco is indirectly the record and beneficial
owner of all of the issued and outstanding capital stock of
Colors; and
WHEREAS, Holdings is the record and beneficial owner of all
of the issued and outstanding capital stock of Europe; and
WHEREAS, the IPD Business that will be retained by CK Witco
and not acquired by Yorkshire hereunder is sometimes referred to
in this Agreement as the "Americas IPD Business", and each Person
(other than Colors, Holdings and Europe) controlled by CK Witco,
Holdings, Colors or Europe that is engaged principally in an
Acquired Business and is not an Excluded Asset is referred to
herein collectively as the "Acquired Entities" and individually
as an "Acquired Entity";
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements in this Agreement contained,
and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties to this
Agreement agree as follows:
1. THE ACQUISITION
1.1 Purchase and Sale. At the Closing (this term and
other capitalized terms used in this Agreement being defined in
either Paragraph 13.1 of this Agreement or in those parts of this
Agreement identified in Paragraph 13.2), CK Witco, Holdings and
Colors shall, and CK Witco shall cause such other Affiliates of
CK Witco (excluding Europe and the Acquired Entities) as have
ownership, possession or control of, or exercise dominion or
control over, any of the Transferred Assets (collectively with CK
Witco, Holdings and Colors, but only if not (i) Europe or (ii)
otherwise an Acquired Entity, the "CK Witco Entities") to, sell,
transfer, convey and assign to Yorkshire and, except for the
Europe Capital Stock (which shall be sold, transferred, conveyed
and assigned to Yorkshire) such of its Affiliates as Yorkshire
shall designate (collectively with Yorkshire, the "Yorkshire
Entities"), and in reliance on and subject to the terms contained
in this Agreement, the Yorkshire Entities shall purchase and
acquire from the CK Witco Entities, all of their respective
right, title and interest in and to all of the assets and
properties of the CK Witco Entities which are related to the
Acquired Businesses, other than the Excluded Assets (all of such
acquired assets and properties being referred to collectively as
the "Transferred Assets"), which, except to the extent excluded
in Paragraph 1.2, include the following:
(a) all of the following parcels of real estate and
improvements thereon, which are collectively referred to in this
Agreement as the "Owned Real Property":
(i) All that certain lot, tract or parcel of improved
real estate more particularly described on Exhibit A-1 attached
to this Agreement, together with all rights, ways and easements
appurtenant thereto, including all of Color's right, title and
interest in and to the land underlying and the air space
overlying any public or private ways or streets crossing or
abutting such real estate ("Lowell Land"); and all buildings,
structures and other improvements of any and every nature located
on the Lowell Land and all fixtures attached or affixed, actually
or constructively, to the Lowell Land or to any such buildings,
structures or other improvements (the "Lowell Improvements"); and
(ii) All that certain lot, tract or parcel of improved
real estate more particularly described on Exhibit A-2 attached
to this Agreement, together with all rights, ways and easements
appurtenant thereto, including all of Color's right, title and
interest in and to the land underlying and the air space
overlying any public or private ways or streets crossing or
abutting such real estate ("Charlotte Land"); and all buildings,
structures and other improvements of any and every nature located
on the Charlotte Land and all fixtures attached or affixed,
actually or constructively, to the Charlotte Land or to any such
buildings, structures or other improvements (the "Charlotte
Improvements"); and
(iii) All that certain lot, tract or parcel of improved
real estate more particularly described on Exhibit A-3 attached
to this Agreement, together with all rights, ways and easements
appurtenant thereto, including all of Color's right, title and
interest in and to the land underlying and the air space
overlying any public or private ways or streets crossing or
abutting such real estate ("Greenville Land"); and all buildings,
structures and other improvements of any and every nature located
on the Greenville Land and all fixtures attached or affixed,
actually or constructively, to the Greenville Land or to any such
buildings, structures or other improvements (the "Greenville
Improvements"); and
(iv) All that certain lot, tract or parcel of improved
real estate more particularly described on Exhibit A-4 attached
to this Agreement, together with all rights, ways and easements
appurtenant thereto, including all of Color's right, title and
interest in and to the land underlying and the air space
overlying any public or private ways or streets crossing or
abutting such real estate ("Dalton Land"; and together with the
Lowell Land, the Charlotte Land and the Greenville Land, the
"Land"); and all buildings, structures and other improvements of
any and every nature located on the Dalton Land and all fixtures
attached or affixed, actually or constructively, to the Dalton
Land or to any such buildings, structures or other improvements
(the "Dalton Improvements"; and together with the Lowell
Improvements, the Charlotte Improvements and the Greenville
Improvements, the "Improvements"); and
(b) all leasehold or similar interests in real
property leased from third parties or otherwise used by a CK
Witco Entity in the conduct or operation of an Acquired Business
(subject, in each case, to lessor approval) identified on Exhibit
B attached to this Agreement, and all of the CK Witco Entities'
right, title and interest in and to all improvements thereon,
together with all easements, rights of way, licenses and other
interest therein (collectively, the "Leased Real Property"; and
together with the Owned Real Property, the "Acquired
Properties");
(c) all machinery, equipment, tools, furniture,
office equipment, computer hardware, supplies, materials, spare
parts, vehicles and other items of tangible personal property
(other than Inventories) owned or leased by a CK Witco Entity
(wherever located and whether or not carried on a CK Witco
Entity's books) and related to an Acquired Business, including
(i) all research and development equipment and the associated
chemical stocks in laboratories and stock rooms in the Gibraltar
Facility, (ii) such items of tangible personal property relating
to the Belgian Co-Ordination Centre and also known as C&K
Services SPRL (the "BCC") as is set forth on Exhibit C attached
to this Agreement, and (iii) such items as are listed on the
Fixed Asset Registers, in all cases, together with any express or
implied warranty by the manufacturers, sellers or lessors of any
item or component part thereof and all maintenance records and
other documents relating thereto;
(d) (i) all inventories of all types outside the
Americas IPD Business Territory relating to an Acquired Business
and (ii) within the Americas IPD Business Territory, those
inventories relating to an Acquired Business consisting of (A)
that amount of each finished good wherever located having a value
equal to the product of (I) the total value of that finished good
wherever located and (II) a number equal to a quotient (rounded
to the nearest one-thousandth), the numerator of which is the
revenue generated from the sale of that finished good with
respect to the Textile Dyes Business in the Americas IPD Business
Territory during the period from December 27, 1998 through
September 26, 1999, inclusive (the "Measuring Period") and the
denominator of which is the total revenue generated from the sale
of that finished good in the Americas IPD Business Territory
during the Measuring Period; (B) that work in process (other than
Crude Stocks) and those raw materials located at an Acquired
Property, (iii) those intermediates to be used or consumed solely
in the production of finished goods to be sold in an Acquired
Business and in existence at the Effective Date and Time; (iv)
that amount of each intermediate in the Americas IPD Business
Territory to be used or consumed by a CK Witco Entity in the
production of finished goods to be sold or saleable in an
Acquired Business and in existence at the Effective Date and Time
and equal to the product of (I) the total amount of that
intermediate in the Americas IPD Business Territory and (II) a
number equal to a quotient (rounded to the nearest one-
thousandth), the numerator of which is the total amount of that
intermediate consumed in the production of finished goods with
respect to the Textile Dyes Business in the Americas IPD Business
Territory during the Measuring Period, and the denominator of
which is the total amount of that same intermediate consumed in
the America IPD Business Territory during the Measuring Period;
and (iv) all Crude Stocks located at an Acquired Property
(collectively, the "Inventories").
(e) all notes receivable and accounts receivable of
an Acquired Business in existence at the Effective Date and Time,
other than for intercompany accounts (which shall be an Excluded
Asset) (collectively, the "Receivables");
(f) all (i) trademarks, service marks, trade names,
trade dress, symbols, and logos, all registrations and pending
applications therefor, and all goodwill associated therewith,
relating to an Acquired Business, including the registered marks
(and applications therefor) set forth on Exhibit D attached to
this Agreement, but specifically excluding the name "Crompton &
Knowles", "CK Witco", "Crompton & Knowles Colors Incorporated"
and "CK Colors", and those registered marks (and applications
therefor) set forth on Exhibit D-1 attached to this Agreement
(all of which shall be Excluded Assets), (ii) business,
proprietary and confidential information, including: trade
secrets, technical information, know-how, ideas, designs,
processes, procedures, algorithms, discoveries, inventions,
computer programs (including documentation and related object and
source code), patents, patent applications, and copyrights, and
all improvements thereof and all registrations and applications
for the foregoing, relating to an Acquired Business, including
the registered patents and product registrations (and
applications therefor) set forth on such Exhibit D, (iii) data,
documents, files, books (including the Research and Development
Library) and records, tax records (excluding generally income tax
records, and only to the extent principally relating to the other
Transferred Assets or an Acquired Business), sales records,
customer information and lists, and order information relating to
an Acquired Business, and (iv) all other information and
Intellectual Property Rights to the extent relating to the
operation of the other Transferred Assets or an Acquired
Business, in each case whether owned outright by a CK Witco
Entity or as to which the relevant Person has rights as a
licensee or otherwise.
(g) all right, title and interest in, to and under
all contracts, leases, non-compete agreements, licenses,
indemnities, agreements, commitments, arrangements, and purchase
and sale orders which relate to an Acquired Business or the
Transferred Assets to which a CK Witco Entity is a party, in
existence on the date of this Agreement, as well as those entered
into after the date hereof in the ordinary and regular course of
an Acquired Business pursuant to Paragraph 6.1, excluding this
Agreement and the Additional Agreements (collectively, the
"Assigned Contracts");
(h) all right, title and interest in and to all
prepaid expenses, advances, deposits, promotional discounts,
rebates, refunds and all similar rights and claims relating to an
Acquired Business or the Acquired Properties;
(i) all warranties and guaranties by, and rights,
choses in action, and claims, known or unknown, matured or
unmatured, accrued or contingent against, third parties,
including rights in and to insurance and indemnity claims
relating to the Transferred Assets or an Acquired Business;
(j) all of those assets described on Exhibit E
attached to this Agreement relating to the research and
development facilities and physically located at the Gibraltar
Facility;
(k) all of the issued and outstanding capital stock
of Europe (the "Europe Capital Stock");
(l) to the extent transferable, all franchises,
certificates, licenses, permits, orders, approvals and other
authorizations from any Government or self-regulatory
organization relating to an Acquired Business;
(m) telephone and facsimile numbers, post office
boxes, forms, labels, shipping material, supplies, catalogs,
brochures, art work, photographs and advertising and promotional
materials relating to an Acquired Business or otherwise
physically located at an Acquired Property;
(n) that value equal to (i) the sum of (A) that
value of raw materials equal to the product of (1) the total
amount of raw materials in the Americas IPD Business Territory
wherever located and (2) a number equal to a quotient (rounded to
the nearest one-thousandth), the numerator of which is the
revenue (the "1999 Americas Textile Dyes Revenue") generated from
the sale of finished goods with respect to the Textile Dyes
Business in the Americas IPD Business Territory during the
Measuring Period and the denominator of which is a number equal
to the sum of (I) the 1999 Americas Textile Dyes Revenue and (II)
the revenue generated from the sale of finished goods with
respect to the Americas IPD Business in the Americas IPD Business
Territory during the Measuring Period, and (B) that value of work
in process (other than Crude Stocks) equal to the sum of the
values of the work in process for each individual finished good
which is produced in the Americas IPD Business Territory, with
each such value equal to the product of (1) the total amount of
the value of the work in process for that finished good in the
Americas IPD Business Territory and (2) a number equal to a
quotient (rounded to the nearest one-thousandth), the numerator
of which is the revenue generated from the sale of that finished
good with respect to the Textile Dyes Business in the Americas
IPD Business Territory during the Measuring Period and the
denominator of which is the total revenue generated from the sale
of that finished good in the Americas IPD Business Territory
during the Measuring Period, minus (ii) the value of the work in
process (other than Crude Stocks) and raw materials included as
Transferred Assets pursuant to Paragraph 1.1(d)(ii)(B) (the
credits referred to in this Paragraph 1.1(n) will be given to
Yorkshire in 6 equal monthly installments over the 6-month period
following the Effective Date and Time); and
(o) all other assets and rights, of every kind and
nature relating to the Transferred Assets or an Acquired
Business.
1.2 Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the Transferred Assets shall not
include those assets and properties (i) principally related to
the Americas IPD Business, (ii) those assets and properties
specifically identified elsewhere in this Agreement as being
Excluded Assets, (iii) those assets and properties licensed by CK
Witco to Yorkshire pursuant to an Additional Agreement, and (iv)
the following excluded assets and properties (collectively, the
"Excluded Assets"):
(a) all of the following parcels of real estate and
improvements thereon owned or leased by Colors that is not an
Acquired Property (collectively, the "Excluded Properties");
(i) All that land underlying and the air space overlying
CK Witco's facility in Newark, New Jersey, and all buildings,
structures and other improvements of any and every nature located
thereon (the "Newark Facility");
(ii) All that land underlying and the air space
overlying CK Witco's facility in Nutley, New Jersey, and all
buildings, structures and other improvements of any and every
nature located thereon (the "Nutley Facility");
(iii) All that land underlying and the air space
overlying CK Witco's facility in Reading, Pennsylvania, and all
buildings, structures and other improvements of any and every
nature located thereon (the "Reading Facility");
(iv) Except as otherwise expressly set forth in this
Agreement, all that land underlying and the air space overlying
CK Witco's Facility in Gibraltar, Pennsylvania; and all
buildings, structures and other improvements of any and every
nature located on the Gibraltar Land and all fixtures attached or
affixed, actually or constructively, to the Gibraltar Land or to
any such buildings, structures or other improvements (the
"Gibraltar Facility");
(v) Each parcel of Leased Real Property to the extent
any relevant lessor does not consent to the assignment thereof to
Yorkshire;
(b) those (i) trademarks, service marks, trade
names, trade dress, symbols, and logos, all registrations and
pending applications therefor, and all goodwill associated
therewith that are either registered in any of the countries,
territories or possessions in the Americas IPD Business Territory
and principally related to the Americas IPD Business, or those
registrations and pending applications listed on Exhibit F
attached to this Agreement; (ii) patents, patent applications,
and copyrights, and all improvements thereof and all
registrations and applications in connection therewith either
registered in the Americas IPD Business Territory and principally
related to the Americas IPD Business, or those registrations and
pending applications listed on Exhibit F attached to this
Agreement; (iii) business, proprietary and confidential
information, including: trade secrets, technical information,
know-how, ideas, designs, processes, procedures, algorithms,
discoveries, inventions, notebooks (including the notebooks in
the Research and Development Library, laboratory research notes
and files, computer programs (including documentation and related
object and source code), and all improvements thereof and all
registrations and applications therefore, principally related to
the Americas IPD Business and including the information listed on
Exhibit G attached to this Agreement; (iv) the Dyebath Monitoring
System; and (v) all other information and Intellectual Property
Rights principally related to the Americas IPD Business,
including the information listed on the attached Exhibit H, in
each case whether owned by a CK Witco Entity or as to which a CK
Witco Entity has rights as a licensee or otherwise;
(c) any right, title and interest in, to and under
(i) a Royalty and Licensing Agreement by and between Crompton &
Knowles Corporation and Dyes and Chemicals, Inc. n/k/a Colors,
dated as of January 1, 1995; (ii) Royalty and Licensing Agreement
by and between Crompton & Knowles Corporation and CK Colors
Incorporated, dated as of January 1, 1998; (iii) License by and
between Crompton & Knowles (Hong Kong) Ltd., dated as of January
1, 1995; and (iv) License by and between Crompton & Knowles
Colors Incorporated and Crompton & Knowles Europe S.P.R.L, dated
as of ____________________ (collectively, the "Colors
Contracts"); provided, however, that the Proprietary Rights being
conveyed or licensed to Yorkshire pursuant to this Agreement or
any Additional Agreement will be conveyed, or as the case may be,
licensed, free and clear of all of the Colors Contracts, and
further CK Witco shall procure that all rights of any parties in
such agreements (notwithstanding express rights to the contrary
contained in the Colors Contracts including provisions to the
effect that such licenses are irrevocable or will continue after
termination) shall terminate at Closing.
(d) (i) any machinery, equipment, tools, furniture
and office equipment, computer hardware, supplies, materials, or
other items of tangible personal property in the customer service
laboratory of the Charlotte Improvements used principally in the
operation of the Americas IPD Business and (ii) equipment and
furniture for the office and cubicle spaces in the Charlotte
Improvements used principally in the operation of the Americas
IPD Business;
(e) the IPD bagger equipment located on the
Greenville Land and within the Greenville Improvements (the "IPD
Bagger");
(f) [INTENTIONALLY OMITTED]
(g) the machinery and equipment owned by Colors,
physically located on the Lowell Land and used exclusively in the
monitoring of groundwater at the Lowell Land pursuant to the
Groundwater Monitoring Agreement, all of which is listed on
Exhibit I attached to this Agreement;
(h) the shares of the capital stock of the BCC
owned of record by Europe on the date of this Agreement;
(i) three (3) uninstalled liquid dye storage tanks
physically located at the date of this Agreement on the Lowell
Land (collectively, the "Liquid Dye Storage Tanks"); and
(j) those assets and properties, if any, identified
on Exhibit J attached to this Agreement.
1.3 Purchase Price. Subject to adjustment as provided
in Paragraph 1.4, the aggregate consideration payable (i) for the
Transferred Assets other than the Europe Capital Stock shall be
an amount of cash equal to US$64,000,000, and (ii) for the Europe
Capital Stock, the Consideration Securities (having an agreed
value of US$8,500,000) and an amount of cash equal to
US$14,000,000 (as may be adjusted pursuant to Paragraph 1.4, the
aggregate amount payable or to be given pursuant to this
Paragraph 1.3 is referred to in this Agreement as the "Purchase
Price"). The Purchase Price will be paid at the Closing as
provided in Paragraph 1.11.
1.4 Adjustments to Purchase Price.
(a) Within one hundred twenty (120) days of the
Effective Date and Time, Yorkshire shall prepare a closing
special purpose statement, in accordance with the accounting
principles (the "Balance Sheet Principles"), and in the format
set out in Exhibit K attached to this Agreement, including a
calculation of the closing statement of net assets in the English
language for the Acquired Businesses as of the Effective Date and
Time applying the Balance Sheet Principles (as so prepared or
determined pursuant to the further provisions of this Paragraph
1.4, the "Closing Special Purpose Statement", including the
"Closing Net Assets") and cause a copy of the same to be
delivered to CK Witco. Together with the Closing Special Purpose
Statement, Yorkshire will deliver to CK Witco its calculation of
the Closing Net Assets as of the Effective Date and Time
(collectively, the "Computations"). Subject to the further
provisions of this Paragraph 1.4, the Computations will be final
and binding on the parties for purposes of calculating the
adjustments as provided for in this Paragraph 1.4.
(b) If within sixty (60) days following delivery of
the Closing Balance Sheet and the Computations, CK Witco has not
given Yorkshire written notice of objection to any or all of the
Closing Special Purpose Statement and the Computations (which
notice must contain a statement in reasonable detail, with
supporting documentation if applicable, of CK Witco's
objections), then the Closing Special Purpose Statement and the
Computations shall be final and binding on all parties for
purposes of calculating the adjustments as provided for in this
Paragraph 1.4. If CK Witco gives such notice of objection, then
Yorkshire and CK Witco shall in good faith attempt to resolve the
issues raised in the notice between themselves. If they are
unable to reach a resolution within thirty (30) days of such
notice, the issues in dispute will be promptly submitted first to
PriceWaterhouseCoopers, and if they are unable to act, then to
Deloitte & Touche, and if they are unable to act, finally to
Arthur Andersen (the "Accountants") for resolution, which
disputes shall not be further subject to the dispute resolution
procedures as provided in Paragraph 12.4. The parties agree to
cooperate in approaching, engaging and instructing the
Accountants with regard to the matters addressed in the preceding
sentence. If the issues in dispute are submitted to the
Accountants for resolution: (i) each party will furnish to the
Accountants such work papers and other documents and information
relating to the disputed issues as the Accountants may request
and are available to the party (or its independent public
accountants), and will be afforded the opportunity to present to
the Accountants any material relating to the relevant Closing
Special Purpose Statement and the Computations and to discuss the
same with the Accountants, (ii) the determination by the
Accountants as set forth in a written notice delivered to
Yorkshire and CK Witco by the Accountants will be binding and
conclusive on all parties, and (iii) Yorkshire and CK Witco will
each bear one-half of the fees and expenses of the Accountants in
resolving the issues in dispute. The Accountants will deliver
their written notice of determination within thirty (30) days of
the disputes having been referred to them.
(c) If the Closing Net Assets are less than
US$94,150,000, then CK Witco shall pay over to Yorkshire (or such
other entity that Yorkshire may designate) by way of a pro rata
refund (as between the Europe Capital Stock and the other
Transferred Assets) of a part of the Purchase Price in United
States dollars to such account as Yorkshire may designate the
difference between US$94,150,000 and the Closing Net Assets (as
finally determined in accordance with this Paragraph 1.4) within
five (5) Business Days after a final determination of the Closing
Special Purpose Statement, the Closing Net Assets and the
Computations. There shall be no payment by Yorkshire to CK Witco
if the Closing Net Assets are equal to or greater than
US$94,150,000.
(d) If the provision referred to in Section 1.22 of
the Balance Sheet Principles has not been utilized in full by
December 31, 2001, then such provision will be released in full
and on such date Yorkshire will make a payment to Holdings by way
of additional consideration for the Europe Capital Stock of
US$1,350,000.
(e) On the Closing Date, or on such other date
Prior to the Closing Date as Yorkshire and CK Witco shall
mutually agree, Representatives of Yorkshire and CK Witco shall
jointly conduct and complete a physical inventory to determine a
count for all the Inventories, which physical inventory shall be
summarized in a listing signed by Representatives of Yorkshire
and CK Witco on the Closing Date. Yorkshire and CK Witco shall
thereafter determine the value of the Inventories, based upon the
physical counts from the physical inventory described in this
Paragraph 1.4(e) and valued at the lower of cost and fair market
value in accordance with GAAP. The calculation of the values of
the Inventories as determined by Yorkshire shall be compiled and
delivered to CK Witco as part of the Computations in accordance
with Paragraph 1.4(a).
1.5 Assumption of Certain Liabilities.
(a) On the Closing Date, but effective as of the
Effective Date and Time, the appropriate Yorkshire Entity shall
assume and agree to pay or perform, as appropriate, only the
following specifically enumerated obligations and liabilities of
the CK Witco Entities (the "Assumed Liabilities"): (i)
obligations and liabilities arising on and after the Effective
Date and Time under Assigned Contracts to which a CK Witco Entity
is a party relating to the Textile Dyes Business; and (ii) those
Assumed Liabilities identified on Exhibit L attached to this
Agreement;
(b) Nothing contained in this Paragraph 1.5 or in
any instrument of assumption executed by a Yorkshire Entity at
the Closing shall be deemed to release or relieve any CK Witco
Entity from its representations, warranties, covenants,
agreements and indemnities contained in this Agreement or any
certificate, schedule, instrument or document executed pursuant
to this Agreement or in connection with this Agreement.
1.6 Obligations Not Assumed; Payment Obligations. (a) Except
for the Assumed Liabilities (which shall not include any
obligation or liability arising from any default, breach,
misfeasance, malfeasance or nonfeasance by a CK Witco Entity), no
Yorkshire Entity shall assume any other Liability of any kind,
including: (i) any Liability of a CK Witco Entity related to the
Textile Dyes Business; or (ii) any Liability of any CK Witco
Entity related to the Americas IPD Business, and the relevant CK
Witco Entity shall pay, satisfy and perform all of its
Liabilities (other than the Assumed Liabilities), which may
affect in any way the Transferred Assets or the operation of an
Acquired Business (collectively, the "Excluded Liabilities"). CK
Witco's obligations and responsibilities pursuant to this
Paragraph 1.6 shall not be subject to the monetary or temporal
limitations set forth in Article 9.
(b) Following Closing, and following receipt of
written notice from the relevant Yorkshire Entity and in any
case, only when due, CK Witco shall pay to the relevant creditor
or to the relevant Yorkshire Entity, or cause to be so paid, (i)
all Excluded Liabilities (only when due) and (ii) all Liabilities
(only when due) of Europe and each Acquired Entity that are not
European Retained Liabilities (such Liabilities being referred to
in this Agreement as the "CK Witco European Liabilities", which
shall include (i) any outstanding payments due under a certain
Sale of Business Agreement, dated 18 October 1999, between Europe
and Croda Chemicals International Limited and (ii) US$1,250,000
relating to Pre-Closing Employment Liabilities (as defined in
Exhibit M attached to this Agreement)). Yorkshire on behalf of
itself and each Yorkshire Entity covenants and agrees to give CK
Witco prompt written notice of each Excluded Liability or CK
Witco European Liability assessed against or sought to be
collected from a Yorkshire Entity, Europe or an Acquired Entity
for which CK Witco has responsibility pursuant to this Paragraph
1.6, it being understood that any failure to give such notice or
any delay in giving such notice shall not relieve CK Witco of its
obligations under this Paragraph 1.6. With effect from and after
the Effective Date and Time, Yorkshire shall procure that Europe
or the relevant Acquired Entity shall pay or perform, as
appropriate, all obligations and liabilities arising on and after
the Effective Date and Time under the Contracts, as well as those
arising under or pursuant to those agreements that would
constitute Contracts entered into after the date hereof in the
ordinary and regular course of an Acquired Business pursuant to
Paragraph 6.1, excluding this Agreement and the Additional
Agreements. For purposes of this Agreement, "European Retained
Liabilities" means those Liabilities of Europe and the Acquired
Entities identified as such on Exhibit M attached to this
Agreement.
(c) Notwithstanding any other provision of this
Agreement, the obligations of CK Witco, each other CK Witco
Entity and each Yorkshire Entity pursuant to this Paragraph 1.6
shall survive the Closing and the transactions contemplated by
this Agreement. The party causing any delay in payment of any
debt or obligation covered by this Paragraph 1.6 shall bear the
responsibility for any late fees or interest accruing on or
charged in respect of the underlying debt.
(d) Within 45 days of the Effective Date and Time,
in respect of each of those contracts, leases, non-compete
agreements, licenses, indemnities, agreements, commitments,
arrangements, and purchase and sale orders (i) which relate to an
Acquired Business, and (ii) to which either Europe or an Acquired
Entity is a party, and (iii) which do not otherwise constitute a
Contract (collectively, the "Reviewed Contracts"), Yorkshire
shall review the Reviewed Contracts. Within such 45-day period,
Yorkshire shall assess whether in its commercially reasonable
view (and not considering any of its restructuring plans) it
wishes to treat such Reviewed Contracts as European Retained
Liabilities. If Yorkshire determines not to treat any Reviewed
Contract as a European Retained Liability, then Yorkshire shall
provide written notice to CK Witco that Yorkshire desires to
transfer and assign, or procure the transfer and assignment of,
responsibility for performance of each such Reviewed Contract
(not to be treated as a European Retained Liability) to CK Witco,
and CK Witco shall be obliged to accept such transfer and
assignment (whether or not the counterparty thereto accepts or
consents to such transfer and assignment) and responsibility for
each such Reviewed Contract and the same shall be treated
thereafter for all purposes as a CK Witco European Liability.
With respect to each Reviewed Contract, if Yorkshire does not
provide such notice within such 45-day period, then Yorkshire
shall be deemed to have agreed to treat such Reviewed Contract as
a European Retained Liability. During such 45-day period (or
such shorter period as is from the Effective Date and Time until
the requisite notice is given by Yorkshire) such Reviewed
Contract shall be treated as a European Retained Liability. To
the extent that the counterparty to any Reviewed Contract
transferred or assigned to CK Witco has a consent right in
respect thereof and does not so consent, Yorkshire shall make
available to CK Witco the benefits of such Reviewed Contract to
the extent practicable and such Reviewed Contract shall
thereafter be treated for all purposes as a CK Witco European
Liability.
1.7 Sales Taxes and Stamp Duties. CK Witco and Yorkshire
shall equally share responsibility for the payment of all sales,
use, excise, transfer, value added taxes and stamp or tax duties,
imposed by any Government on the purchase and sale of the
Transferred Assets pursuant to this Agreement or instrument
transferring any title or right to the Transferred Assets to any
Yorkshire Entity, but not Taxes payable in respect of any profit
or gain on the sale or disposal of any Transferred Asset pursuant
to this Agreement.
1.8 Proration; Customer Rebates. (a) There shall be
prorated as of the Effective Date and Time the following accrued
or prepaid items relating to Colors and the Transferred Assets
held by it: (i) ad valorem, real or personal property and
similar taxes, (ii) rents, royalties and other payments due under
the Assigned Contracts, (iii) charges for utilities serving
Acquired Properties, (iv) license fees related to transferable
licenses and Permits, and (v) assessments of any Government and
charges for services.
(b) Without prejudice to the generality of
Paragraph 1.8(a), any customer rebates relating to the Acquired
Businesses will be prorated as of the Effective Date and Time,
and such proration will include the amortized effect of any
ratchet or other adjustment mechanism relating to such rebates
where such mechanism operates by reference to periods both before
and after the Effective Date and Time.
(c) CK Witco, Colors and Holdings will jointly and
severally indemnify Yorkshire, each Yorkshire Entity, Yorkshire's
Affiliates, each Acquired Entity and Europe in respect of all
costs, claims, liabilities and expenses incurred by them in
relation to Paragraphs 1.8(a) and (b) above which arise in
relation to periods prior to the Effective Date and Time,
including for these purposes the effect of any such ratchet or
other adjustment mechanism as is referred to in Paragraph 1.8(b).
(d) Any payments required to be made by CK Witco, Colors
or Holdings to Yorkshire, any Yorkshire Entity, any of
Yorkshire's Affiliates, any Acquired Entity or Europe pursuant to
this Paragraph 1.8 will be made in accordance with the provisions
of Paragraph 1.6(b).
1.9 Allocation. The Purchase Price, other than insofar as it
relates to the Europe Capital Stock, shall be allocated among the
Transferred Assets in accordance with Section 1060(b) of the Code
and the regulations promulgated thereunder. After the Closing
Date, any adjustments required to such allocations shall be made
in accordance with Section 1060 of the Code and the regulations
thereunder, and Yorkshire and CK Witco agree to cooperate in
filing all information required by Section 1060(b) of the Code
and the regulations thereunder, and to take no position on any
income tax return, report or filing inconsistent with such
allocation.
1.10 Closing. The consummation of the transactions
contemplated in this Agreement (the "Closing") shall take place
at the offices of Kilpatrick Stockton LLP, 1100 Peachtree Street,
Suite 2800, Atlanta, Georgia (or at such other place as the
parties may mutually agree), at 13:00 p.m. G.M.T., on the
Business Day on which all conditions to Closing contained in
Articles 7 and 8 have been satisfied or waived in writing, other
than conditions which by their terms are to be satisfied at the
Closing (the "Closing Date"). The Closing shall be effective as
of the actual time of consummation of the transactions the
subject of this Agreement (the "Effective Date and Time").
1.11 Transactions and Documents at Closing.
(a) At the Closing: (i) Holdings shall convey,
transfer and assign the Europe Capital Stock to Yorkshire free
and clear of any and all Liens, and (ii) subject thereto, each
relevant CK Witco Entity shall convey to a designated Yorkshire
Entity all of the other Transferred Assets, free and clear of any
and all Liens, and in furtherance thereof shall deliver those
deeds, bills of sale, assignments, consents, certificates of
title, share certificates, powers of attorney, documents and
other instruments of transfer and conveyance listed and described
on Exhibit N (collectively, the "Closing Documents"); and (iii)
against delivery by Holdings of the Europe Capital Stock (and the
share certificates evidencing the same) to Yorkshire, Yorkshire
shall pay and deliver, or cause to be paid and delivered, to
Holdings (x) either from Yorkshire's own bank account or from
Addleshaw Booth & Co's client account, the sum of US$14,000,000
by wire transfer of immediately available funds to a U.S. bank
account designated by CK Witco not less than three (3) Business
Days prior to the Closing Date (the "Bank Account"), (y) share
certificates representing the Consideration Securities allotted
to Holdings, and (z) against delivery of all of the other
Transferred Assets, Yorkshire shall pay and deliver, or cause to
be paid and delivered, to CK Witco (if appropriate, such sum to
be paid directly from Yorkshire's lenders) the sum of
US$64,000,000 by wire transfer of immediately available funds to
the Bank Account.
(b) At the Closing, the relevant Persons shall, in
addition to the other documents, agreements, papers and
instruments required to be executed and delivered under or
pursuant to this Agreement, execute and deliver the following
documents, agreements, instruments and papers (all of which are
collectively referred to herein as the "Additional Agreements"
and individually as an "Additional Agreement"):
(i) Supply Contracts (CK Witco to Yorkshire) in the
agreed forms attached to this Agreement as Exhibits O-1 and O-2
(each, a "CK Witco Supply Contract");
(ii) Supply Contracts (Yorkshire to CK Witco) in the
agreed forms attached to this Agreement as Exhibit P-1 and P-2
(each, a "Yorkshire Supply Contract");
(iii) a Transition Services Agreement in the agreed form
attached to this Agreement as Exhibit Q;
(iv) a Lease Agreement (relating to the Charlotte
facility) in the agreed form attached to this Agreement as
Exhibit R;
(v) a Lease Agreement (relating to the Gibraltar
facility) in the agreed form attached to this Agreement as
Exhibit S;
(vi) a Trademark License Agreement (CK Witco to
Yorkshire) in the agreed form attached to this Agreement as
Exhibit T;
(vii) a Trademark License Agreement (Yorkshire to CK
Witco) in the agreed form attached to this Agreement as Exhibit
U;
(viii) a Non-European Patent and Technology License
Agreement (CK Witco to Yorkshire) in the agreed form attached to
this Agreement as Exhibit V;
(ix) a European Patent and Technology License Agreement
(CK Witco to Yorkshire) in the agreed form attached to this
Agreement as Exhibit W;
(x) a Non-European Patent and Technology License
Agreement (Yorkshire to CK Witco) in the agreed form attached to
this Agreement as Exhibit X;
(xi) a European Patent and Technology License Agreement
(Yorkshire to CK Witco) in the agreed Form attached to this
Agreement as Exhibit Y; and
(xii) a Groundwater Monitoring Agreement in the agreed
form attached to this Agreement as Exhibit Z.
(c) All deliveries, payments and other transactions
and documents relating to the Closing shall be interdependent and
none shall be effective unless and until all are effective
(except to the extent that the party entitled to the benefit
thereof has waived satisfaction or performance thereof as a
condition precedent to Closing). All conveyances and transfers
of registered trademarks and patents shall be effected only by
the execution and delivery of the relevant Closing Documents
related thereto, it being understood and agreed that this
Agreement imposes only an obligation to so transfer and convey
and that no transfer or conveyance is effected by this Agreement.
(d) From time to time and at any time, at
Yorkshire's reasonable request, whether on or after the Closing
Date, and without further consideration, Holdings and each
relevant CK Witco Entity shall, and CK Witco shall ensure that
Holdings and each such CK Witco Entity shall, at its expense,
execute and deliver such further documents and instruments of
conveyance, assignment, and transfer and shall take such further
reasonable actions as may be necessary or reasonably desirable,
in the reasonable opinion of Yorkshire, to transfer and convey to
Yorkshire and the other Yorkshire Entities all right, title and
interest in and to the Transferred Assets, free and clear of any
and all Liens (subject to any exclusions set forth in the CK
Witco Disclosure Memorandum), or as may otherwise be necessary or
reasonably desirable to carry out the intent of this Agreement.
2. ADDITIONAL COVENANTS
2.1 Access and Inspection. CK Witco will provide, and CK
Witco will cause each CK Witco Entity to provide, Yorkshire, the
other Yorkshire Entities and their respective Representatives
reasonable access during normal business hours from and after the
date of this Agreement until the Closing, to all of the
Representatives, personnel, books and records of Holdings,
Europe, each Acquired Entity and each CK Witco Entity (including
the right to make copies, extracts and translations) and will
furnish such information concerning each Acquired Business as
Yorkshire and its Representatives may reasonably request, in each
case for the purpose of making a continuing investigation of each
CK Witco Entity (as it relates to the Acquired Business), Europe,
the Acquired Entities, and the Acquired Businesses. CK Witco
shall not, and CK Witco shall ensure that no other CK Witco
Entity, Europe, or Acquired Entity will, provide any other Person
with similar access or information between the date of this
Agreement and any termination or expiration of this Agreement.
No investigation made before or after the date of this Agreement
by or on behalf of any Yorkshire Entity will limit or affect in
any way the representations, warranties, covenants, agreements
and indemnities of any CK Witco Entity or Europe under or
pursuant to this Agreement or any Additional Agreement, each of
which will survive any investigation and the Closing. CK Witco
and its Representatives shall have full access to all relevant
books and records and employees of the Acquired Businesses and
the auditors and their non-proprietary workpapers to the extent
required to perform its review of the Special Purpose Statements,
Closing Special Purpose Statements, Closing Net Assets and the
Computations.
2.2 Cooperation. The parties will cooperate fully with each
other and with their respective Representatives in connection
with any steps required to be taken as part of their respective
obligations under this Agreement, and all parties will use their
best efforts to consummate the transactions contemplated by this
Agreement and to fulfill their obligations under this Agreement,
including causing to be fulfilled at the earliest practical date
the conditions precedent to the obligations of the parties to
consummate the transactions contemplated by this Agreement.
Without the prior written consent of the other parties, no party
to this Agreement may take any intentional actions, or omit to
take any actions, that would cause the conditions precedent to
the obligations of the parties to this Agreement not to be
fulfilled, including, taking or causing to be taken any action
which would cause the representations and warranties made by a
party in this Agreement not to be true, correct and complete as
of the Closing.
2.3 Expenses. Subject to Paragraph 1.7 and except as
otherwise expressly set forth in this Agreement, all expenses
incurred by any Yorkshire Entity in connection with the
authorization, preparation, execution and performance of this
Agreement and the transactions contemplated by this Agreement,
including all fees and expenses of its Representatives, will be
paid by Yorkshire. Subject to Paragraph 1.7 and except as
otherwise expressly set forth in this Agreement, all expenses
incurred by Europe, any CK Witco Entity or any Acquired Entity in
connection with the authorization, preparation, execution and
performance of this Agreement and the transactions contemplated
by this Agreement and the Additional Agreements, including all
fees and expenses of their Representatives, will be borne by CK
Witco without any contribution by or Liability to either Acquired
Business, Europe or any Acquired Entity or the payment out of the
Transferred Assets or any assets of any Acquired Entity or
Europe.
2.4 Brokers. CK Witco represents and warrants to
Yorkshire that no broker or finder has acted on behalf of any CK
Witco Entity in connection with this Agreement or the
transactions contemplated in this Agreement, and CK Witco agrees
to indemnify each Yorkshire Entity and hold it harmless from and
against any and all claims or demands for commissions or other
compensation by any broker, finder or similar agent claiming to
have been employed by or on behalf of them. Yorkshire represents
and warrants that no broker or finder other than N M Rothschild &
Sons has acted on behalf of any Yorkshire Entity in connection
with this Agreement or the transactions contemplated in this
Agreement and agrees to indemnify each CK Witco Entity and hold
it harmless from and against any and all claims or demands for
commissions or other compensation by N M Rothschild & Sons or any
other broker, finder or similar agent claiming to have been
employed by or on behalf of any Yorkshire Entity.
2.5 Publicity. Except to the extent required by
applicable Law, the listing requirements of any stock exchange or
the requirements of any other regulatory authority, all press
releases and other public announcements respecting the subject
matter of this Agreement or any Additional Agreement will be made
only with the mutual agreement of CK Witco and Yorkshire, which
agreement will not be unreasonably withheld, delayed or
conditioned.
2.6 Certain Governmental Filings. The parties will
make, or cause to be made, all filings and submissions required
to be made to any Government in connection with the transactions
contemplated by or resulting from this Agreement, including the
filing of Notification and Report Forms under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, with the
United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice (the "HSR Filing").
Each of the parties will furnish to the other parties any and all
necessary information and reasonable assistance as another party
may reasonably request in connection with its preparation of
necessary filings or submissions to any Government. Yorkshire
shall pay all filing fees required to be paid in connection with
the HSR Filing.
2.7 Confidentiality. On and after the Closing Date and
with effect from the Effective Date and Time, CK Witco on behalf
of itself, each CK Witco Entity and any other Person Affiliated
with CK Witco, agrees that it shall not use or disclose or reveal
to any other Person any trade secrets or other confidential
business information related to any Acquired Business (whether or
not constituting a Transferred Asset and whether or not the
subject of any Additional Agreement), provided that the foregoing
obligations shall not apply to (i) any information which is
generally known in the industry, (ii) any information which
becomes generally known in the industry through no fault of CK
Witco, any CK Witco Entity or any other Person Affiliated with CK
Witco, or (iii) commencing three (3) years after the Effective
Date and Time, any information which does not constitute a trade
secret under applicable Law.
2.8 Covenant Not to Compete.
(a) In order to induce Yorkshire and Americas to
enter into and perform this Agreement, Colors, Holdings, and CK
Witco on behalf of itself and each CK Witco Entity and each Person
Affiliated with CK Witco, agrees that, for a period of five (5)
years beginning on the Closing Date, and effective as of the
Effective Date and Time (the "CK Witco Restricted Period"), it
shall not, without the prior written consent of Yorkshire, for its
own account or jointly or in combination with another Person,
directly or indirectly, for or on behalf of any Person, as
principal, agent or otherwise: (i) engage in, consult with, or
own, control, manage or otherwise participate in the ownership,
control or management of a business competitive with an Acquired
Business, except as an agent or otherwise for and on behalf of any
Yorkshire Entity or otherwise pursuant to the CK Witco Supply
Contracts and then only in strict accordance with their terms; (ii)
solicit, call upon, or attempt to solicit the patronage of any
Person within the CK Witco Service Areas and to whom an Acquired
Business provided products, goods or services during the 12-month
period immediately preceding the Effective Date and Time, for the
purpose of obtaining the patronage of any such Person for the
purchase of any products, goods or services competitive with those
of the relevant Acquired Business, except as an agent and on behalf
of a Yorkshire Entity or pursuant to the CK Witco Supply Contracts
and then only in strict accordance with their terms; or (iii)
solicit or induce, or in any manner attempt to solicit or induce,
any individual who is employed in an Acquired Business at the
Effective Date and Time to leave such employment, whether or not
such employment is pursuant to a written contract or otherwise. In
respect of employees of the Acquired Businesses resident outside of
the United States, neither CK Witco nor any Person Affiliated with
CK Witco shall employ any such individual for a period of two years
following the Effective Date and Time.
(b) Notwithstanding anything herein to the contrary:
(i) it shall not be a breach of the covenants contained in
Paragraph 2.8(a) for CK Witco to own, of record or beneficially,
the Consideration Securities or not more than, in the case of a
Person that has any class of its equity securities quoted or
listed, five percent (5.00%), and in the case of any other Person,
seven and one-half percent (7.50%), of the capital stock or other
equity interest of any Person; (ii) the covenants described in
Paragraph 2.8(a) shall apply only if the transactions contemplated
by this Agreement are consummated; and (iii) it shall not be a
breach of the covenants contained in this Paragraph 2.8 for CK
Witco to supply the products to be supplied by Colors pursuant to
the terms of the Supply Agreement, dated January 15, 1999, by and
between Ingredient Technology Corporation and Colors, as modified
through the date of this Agreement.
(c) Notwithstanding anything herein to the contrary
but subject to the further provisions of this Paragraph 2.8(c), in
the event CK Witco or any of its Affiliates agrees to acquire any
other Person or business, or is acquired by any other Person or
business, whether in the form of a merger, stock purchase, purchase
and assumption, collection of a loan or otherwise, CK Witco or its
Affiliate (or any acquiring entity or its Affiliates, if
applicable) shall be entitled to consummate such transaction,
continue to operate any lines of business in which such Person or
its subsidiaries were engaged at the time of such acquisition, and
expand such Person. If, during the CK Witco Restricted Period, CK
Witco or any of its Affiliates acquires any other Person or
business competitive with an Acquired Business (the competitive
part of such Person or business being referred to herein as the
"Target Competitive Business") and the Target Competitive Business
has annual revenues or turnover in excess of US$10,000,000 (or its
reasonable equivalent in any other currency) for the fiscal year
(whether or not measured or accounted for separately) immediately
preceding the date of acquisition, then CK Witco (or its Affiliate)
shall dispose of such Target Competitive Business within eighteen
(18) months from the closing date of such acquisition (the
"Disposal Period"). If CK Witco and its Affiliates shall not have
disposed of the Target Competitive Business within the Disposal
Period, CK Witco shall pay to Yorkshire as liquidated damages and
not a penalty the sum of ten thousand United States dollars (US$
10,000) for each day after the conclusion of the Disposal Period
for which CK Witco has not disposed of or closed the Target
Competitive Business. CK Witco and Yorkshire each acknowledge and
agree that monetary damages are not readily ascertainable and that
this provision for liquidated damages represents the best estimate
of such damages and that they believe such liquidated damages are a
reasonable estimate of such damages. In addition, if CK Witco or
its Affiliates makes an acquisition of a Person or business that
does not constitute a Target Competitive Business but such Person
or business (together with any other acquired Person or business)
grows during the CK Witco Restricted Period, either through organic
growth or by acquisition, to such a size that if it were then
acquired by CK Witco or its Affiliates it would constitute a Target
Competitive Business, then CK Witco and its Affiliates shall be
bound to the foregoing provisions of this Paragraph 2.8(c) in
respect of such Person or business.
(d) Notwithstanding anything herein to the contrary
and subject to the further provisions of this Paragraph 2.8(d) it
shall not be a breach of the covenants contained in this
Paragraph 2.8 for CK Witco to continue to operate the Americas
IPD Business and to expand the Americas IPD Business within the
Americas IPD Business Territory. If at any time during the CK
Witco Restricted Period CK Witco or its Affiliates dispose of all
or substantially all of the Americas IPD Business to an
unaffiliated Person through a merger, stock purchase, share
exchange or similar transaction, then the restrictions on Colors
and such unaffiliated Person with respect to the Acquired IPD
Business set forth in Paragraph 2.8(a) shall immediately be of no
further force or effect.
(e) Subject to the further provisions of this
Paragraph 2.8(e), in order to induce CK Witco, Europe and
Holdings to enter into and perform this Agreement, Yorkshire and
Americas on behalf of itself and each Person Affiliated with
Yorkshire, agrees that, for a period of five (5) years beginning
on the Closing Date, and effective as of the Effective Date and
Time (the "Yorkshire Restricted Period"), it shall not, without
the prior written consent of CK Witco, for its own account or
jointly or in combination with another Person, directly or
indirectly, for or on behalf of any Person, as principal, agent
or otherwise; (i) engage in, consult with, or own, control,
manage or otherwise participate in the ownership, control or
management of a business engaged in the Americas IPD Business,
except as an agent or otherwise for and on behalf of any CK Witco
Entity or otherwise pursuant to the Yorkshire Supply Contract and
then only in strict accordance with its terms; (ii) solicit, call
upon, or attempt to solicit the patronage of any Person within
the Americas IPD Business Territory and to whom the Americas IPD
Business provided products, goods or services during the 12-month
period immediately preceding the Closing Date, for the purpose of
obtaining the patronage of any such Person for the purchase of
any products, goods or services competitive with those of the
Americas IPD Business except as an agent or otherwise for and on
behalf of CK Witco or any of its Affiliates or otherwise pursuant
to the Yorkshire Supply Contract and only in strict accordance
with its terms; or (iii) solicit or induce, or in any manner
attempt to solicit or induce, any individual who is employed in
the Americas IPD Business at the Effective Date and Time to leave
such employment, whether or not such employment is pursuant to a
written contract or otherwise. In respect of employees of the
Americas IPD Business resident outside of the United States,
neither Yorkshire nor any Person Affiliated with Yorkshire shall
employ any such individual for a period of two years following
the Effective Date and Time. If at any time during the Yorkshire
Restricted Period CK Witco or its Affiliates dispose of all or
substantially all of the Americas IPD Business, whether in the
form of a merger, stock purchase, asset purchase, purchase and
assumption, collection of a loan or otherwise, then the
restrictions set forth in this Paragraph 2.8(e) shall immediately
be of no further force or effect.
(f) Notwithstanding anything herein to the
contrary, it shall not be a breach of the covenants contained in
this Paragraph 2.8 for Yorkshire to continue to sell Yorkshire's
current category of goods throughout the world to each of Coates
Ink, Keystone and Seller Ink, and their respective Affiliates.
2.9 No Solicitation of Third Party Interest. CK Witco,
on behalf of itself and all CK Witco Entities, Europe and the
Acquired Entities, agrees that none of them nor any of their
respective directors, officers, employees or agents, will (a)
negotiate or discuss with any other Person this Agreement or any
Additional Agreement, or the terms contained in this Agreement or
any Additional Agreement, (b) negotiate or discuss with any other
Person any other transaction involving a sale of all or any of
the capital stock of any CK Witco Entity, Europe, or any Acquired
Entity or the sale of any assets of any CK Witco Entity, Europe,
or any Acquired Entity related to the Acquired Businesses (other
than for sales of inventory in the ordinary course and disposal
of items of tangible personal property in the ordinary course
which is not material to the conduct of the Acquired Businesses)
or any other business combination involving Colors, Europe, any
other CK Witco Entity or any Acquired Entity related to the
Acquired Businesses, (c) reveal the terms of this Agreement or
any Additional Agreement to any Person except for the express
purpose of carrying out the transactions contemplated in this
Agreement or any Additional Agreement, or (d) solicit, encourage,
consider, entertain or accept any offer, bid or proposal from any
other Person respecting any transaction involving, whether
directly or indirectly, a sale of any of the capital of any of
Colors, Holdings, Europe, any other CK Witco Entity or any
Acquired Entity related to the Acquired Businesses, or the sale
of any assets of any of CK Witco or any other business
combination involving Colors, Europe or the Acquired Businesses.
If any proposal of the kind described in the preceding clause (d)
is received prior to the date of the Closing, then CK Witco will
immediately notify Yorkshire of the receipt of a proposal and
will promptly provide Yorkshire with a copy of the proposal (or
if the proposal is not in writing, a written summary of its
terms).
2.10 Business Employees and Employee Benefit Matters.
(a) Business Employees. For purposes of this
Paragraph 2.10, "Business Employees" are hereby defined as
follows: (i) all persons employed by CK Witco or any of its
Affiliates in an U.S. Asset Acquired Business immediately before
the Effective Date and Time; (ii) all employees of CK Witco or
any of its Affiliates who are absent from work with the Acquired
Businesses on account of sickness or leave of absence on the
Effective Date and Time and who are reasonably expected to return
to active employment within 90 days following the date such
employee was first absent from employment, or for whom an
obligation to rehire exists under a collective bargaining
agreement assumed by Yorkshire (as described in Paragraph
2.10(e)); (iii) all employees of CK Witco or any of its
Affiliates who are not employed in the Acquired Businesses
immediately before the Effective Date and Time but who, in the
ordinary course of business become employees of Yorkshire within
60 days after the Effective Date and Time; and (iv) those full-
time, active employees at the Gibraltar Facility listed on
Exhibit AA attached to this Agreement. All Business Employees
described in Paragraph 2.10(a) shall be identified on a schedule
that is made part of the CK Witco Disclosure Memorandum.
(b) Business Employees' Employment and Employee
Benefits. (i) Yorkshire shall offer employment, effective on
the Effective Date and Time (or, in the case of any Business
Employee specified in Paragraph 2.10(a)(iii), effective as of the
date of hiring), to each of the Business Employees described in
Paragraphs 2.10(a) at compensation rates that are equal to those
provided by CK Witco and any of its Affiliates immediately before
the Effective Date and Time.
(ii) Yorkshire shall treat service of each Business
Employee with CK Witco, any of its Affiliates and their
predecessor companies before the Effective Date and Time as if
such service had been with Yorkshire for purposes of determining
eligibility to participate, eligibility for benefits, benefit
calculations, benefit forms and vesting (but not for benefit
accruals under any defined benefit pension plan) under
Yorkshire's employee benefit plans (within the meaning of Section
3(3) of ERISA).
(iii) For a period of not less than one year from and
after the Effective Date and Time, Yorkshire shall provide to
Business Employees employee benefits that are, in the aggregate,
no less favorable than those provided to them immediately prior
to the Effective Date and Time; provided that with respect to
Business Employees who are covered under the Assumed Collective
Bargaining Agreements (as hereinafter defined), Yorkshire shall
provide such compensation and benefits as are from time to time
required by such collective bargaining agreements.
(c) Severance Benefits. (i) From and after the
Effective Date and Time, Business Employees shall be eligible for
benefits in accordance with the terms of the applicable Yorkshire
severance or separation pay policies or plans or the Assumed
Collective Bargaining Agreements, as applicable. Yorkshire shall
recognize the service of each such Business Employee with CK
Witco and its Affiliates for eligibility, vesting, and benefit
determinations under the applicable severance or separation pay
policy or plan on the same basis as such service was recognized
by CK Witco and any of its Affiliates.
(ii) If CK Witco or any of its Affiliates is required to
pay severance benefits or similar payments to a Business Employee
as a result of the Business Employee's failure to accept
employment with Yorkshire where the employment offered by
Yorkshire requires relocation more than 35 miles from the
Business Employee's primary work location immediately prior to
the Effective Date and Time or, as a result of Yorkshire's
failure to offer employment to such Business Employee in
accordance with the requirements of Paragraphs 2.10 (b),
Yorkshire shall reimburse CK Witco for such benefits and payments
in an amount not to exceed fifteen times the weekly salary or
regular weekly compensation of such Business Employee immediately
prior to Effective Date and Time of the severance benefits or
similar payments that are payable to such Business Employee and
if such Business Employee is hired by Yorkshire during the
twelve-month period ending on the first anniversary of the
Effective Date and Time, Yorkshire shall reimburse CK Witco for
the entire amount of the severance benefits or similar payments
that are payable by CK Witco to such Business Employee.
Yorkshire shall make such reimbursement within 10 days of receipt
of notice of payment by CK Witco.
(d) Assumption of Liabilities. Except as
specifically provided otherwise in this Paragraph 2.10, on the
Effective Date and Time, Yorkshire shall assume all employee-
related liabilities and obligations with respect to Business
Employees and their beneficiaries and dependents that accrue or
are incurred or arise on or after the Effective Date and Time.
As of the Effective Date and Time, CK Witco shall not be
responsible for wages, salaries and other employee benefits for
Business Employees for service of such Business Employees with
Yorkshire that accrue or are incurred or arise on or after the
Effective Date and Time. The active participation of all
employees of the Acquired Businesses in each Employee Benefit
Plan shall cease on the Effective Date and Time.
(e) Collective Bargaining Agreements. As of the
Effective Date and Time, Yorkshire shall adopt and assume the
collective bargaining agreements listed on the Disclosure
Memorandum (the "Assumed Collective Bargaining Agreements"). On
and after the Effective Date and Time, any obligations or
liabilities that may be payable under the Assumed Collective
Bargaining Agreements, with respect to hourly Business Employees,
that relate to services performed on or after the Effective Date
and Time, shall be the sole responsibility of Yorkshire.
(f) CK Witco Qualified Defined Contribution Plans.
As of the Effective Date and Time, CK Witco shall, to the extent
permitted by applicable law (i) fully vest the account balances
of each Business Employee participating in the CK Witco
Individual Account Retirement Plan (the "CK Witco 401(k) Plan")
and the CK Witco Employee Stock Ownership Plan (the "CK Witco
ESOP"), and (ii) permit the Business Employees to elect to
receive a lump sum cash distribution of their vested account
balances from the CK Witco 401(k) Plan and CK Witco ESOP in
accordance with provisions of Code Section 401(k)(10)(A)(ii).
Yorkshire agrees to permit Business Employees to directly roll
over distributions from the CK Witco 401(k) Plan and CK Witco
ESOP into a defined contribution plan maintained by Yorkshire
(the "Yorkshire 401(k) Plan"), which plan shall be qualified
under Section 401 and 501 of the Code. The Yorkshire 401(k) Plan
shall provide that each Business Employee shall be given credit
for purposes of determining eligibility to participate,
eligibility for benefits, benefit calculations, benefit forms and
vesting, for the Business Employee's service with CK Witco, any
of its Affiliates and their predecessor companies, to the extent
that the CK Witco 401(k) Plan gave credit for such service.
Business Employees shall not accrue additional benefits on or
after the effective date and time under the CK Witco 401(k) Plan
or CK Witco ESOP. CK Witco shall file as soon as reasonably
practicable following the date hereof a private letter ruling
request with the U.S. Internal Revenue Service seeking a ruling
that the Business Employees may elect to receive a lump-sum cash
distribution of their vested account balances from the CK Witco
401(K) Plan and the CK Witco ESOP following the Effective Date
and Time, and shall diligently pursue the same.
(g) Worker's Compensation. On and after the
Effective Date and Time, Yorkshire shall assume liability under
workers' compensation laws for claims incurred on or after the
Effective Date and Time with respect to Business Employees. CK
Witco shall remain liable for all workers' compensation claims
incurred prior to the Effective Date and Time. A claim for
worker's compensation benefits shall be deemed to be incurred
upon the occurrence of the event giving rise to such claim.
(h) Welfare Benefit Plans. (i) Yorkshire shall
provide Business Employees with credit during the current plan
year under Yorkshire's health benefit plans for payments made by
Business Employees under CK Witco's health benefit plans for
purposes of determining deductibles and out-of-pocket expenses
under Yorkshire's health benefit plans. Buyer shall not impose
on Business Employees pre-existing condition provisions, proof of
insurability requirements, or any similar conditions or
requirements that would delay commencement of Business Employees'
participation in, or limit Business Employees' level of coverage
under, any of Yorkshire's welfare benefit plans (within the
meaning of Section 3(l) of ERISA).
(ii) From and after the Effective Date and Time,
Yorkshire shall pay, discharge, and be responsible for all claims
and liabilities for the welfare benefits of the Business
Employees incurred on or after the Effective Date and Time. For
purposes of this Agreement, the following claims and liabilities
shall be deemed to be incurred as follows: (A) life, accidental
death and dismemberment and business travel accident insurance
benefits, upon the death, disability or accident giving rise to
such benefits; (B) long-term disability, upon the event or
commencement of the condition resulting in the disability giving
rise to such benefit; (C) hospital-provided health, dental,
prescription drug or other benefits, which become payable with
respect to any hospital confinement, upon commencement of such
confinement; and (D) health, dental and/or prescription drug
benefits, upon provision of such services, materials or supplies.
(iii) Yorkshire shall be responsible for health care
continuation obligations under Section 4980B of the Code and
Section 601 through 608 of ERISA ("COBRA") for those Business
Employees who actually become employees of Yorkshire. CK Witco
shall remain responsible for health care continuation obligations
under COBRA for those Business Employees who never become
employees of Yorkshire. CK Witco agrees that it shall retain the
obligation to comply with the certification requirements under
the Health Insurance Portability and Accountability Act of 1996
with respect to all individuals covered under any health or
medical plan sponsored by CK Witco or any CK Witco Entity who
lost coverage at any time prior to the Effective Date and Time.
(i) Vacation Pay. Yorkshire shall assume liability
for all unpaid vacation pay banked or accrued by any Business
Employee prior to the Effective Date and Time, provided such
liability has been accrued by CK Witco and reflected on CK
Witco's balance sheet.
(j) WARN Act. Yorkshire shall be responsible for,
and indemnify and hold harmless CK Witco, with respect to
compliance with and liability under the Worker Adjustment and
Retraining Notification Act of 1988 (the "WARN Act") and any
other similar law, including any requirement to provide any
notifications or pay in lieu of notice, in respect of Business
Employees who are terminated on or after the Effective Date and
Time.
(k) CK Witco Nonqualified Equalization Plan and
Stock Options. As soon as practicable following the Effective
Date and Time, CK Witco shall distribute to Business Employees
the full account balances of such employees under the CK Witco
Nonqualified Equalization Plan in accordance with the terms
thereunder. To the extent options granted under the CK Witco
1998 Long-Term Incentive Plan to Business Employees are not fully
vested, CK Witco shall cause such options to be fully vested and
immediately exercisable for a period of not less than three (3)
years following the employee's cessation of service with CK Witco
or any CK Witco Entity upon the Effective Date and Time.
(l) 1999 Annual Bonuses and Outstanding
Commissions. With respect to the payment of the annual bonuses
and any commissions earned by Business Employees in respect of
the 1999 fiscal year (the "1999 Annual Bonus and Commissions"),
CK Witco shall pay and be solely responsible for the
proportionate share of the 1999 Annual Bonus and Commissions, in
accordance with and on the same basis as the annual bonus and
commission plans and policies of CK Witco as in effect on the
Effective Date and Time, for the period commencing on December
27, 1998 and ending on the Effective Date and Time, and Yorkshire
shall pay and be solely responsible for the proportionate share
of the 1999 Annual Bonus and Commission for the period commencing
on the Effective Date and Time and ending on the last day of CK
Witco's 1999 fiscal year. For purposes hereof, Yorkshire's
proportionate share of the 1999 Annual Bonus and Commissions
shall be equal to the product of the (x) 1999 Annual Bonus and
Commissions and (y) a fraction, the numerator of which is the
number of days from and including the Effective Date and Time
until December 31, 1999 and the denominator of which is 365.
(m) Administration. Yorkshire and CK Witco shall
each make its appropriate employees and data regarding employee
benefit coverage available to the other at such reasonable times
as may be necessary for the proper administration by the other of
any and all matters relating to employee benefits and worker's
compensation claims affecting, its employees.
(n) Transition Agreement. (i) CK Witco shall
provide, or cause to be provided, certain benefits,
administration and payroll services relating to the provision of
benefits during the transition of the Business Employees from
employment with CK Witco to employment with Yorkshire as
described below:
(A) Yorkshire will be unable to provide payroll services
with respect to the Business Employees until it has collected
necessary payroll and employment-related data relating to the
Business Employees. Until Yorkshire is able to process payroll
with respect to the Business Employees (but in no event later
than 30 days following the Effective Date and Time), CK Witco
will continue to administer the payroll with respect to the
Business Employees, including the withholding of employee
contributions under the health benefit plan as provided herein.
CK Witco agrees to transfer directly to Yorkshire (or a
designated service provider) such payroll and employment-related
data as soon as practicable following the Effective Date and
Time.
(B) Yorkshire intends to establish a replacement health
benefit plan for the Business Employees as soon as practicable
following the Effective Date and Time. Until such plan is
operational (but in no event later than 60 days following the
Effective Date and Time), CK Witco will continue to cover the
Business Employees under the CK Witco Health Benefit Plan, and
provide administration services with respect to such plan.
(ii) The cost of providing the transition services and
any benefits described in this Paragraph 2.10(n) shall be
determined based on the actual cost of the service, including
overhead, incurred by CK Witco in providing the service and/or
the actual cost of the benefit provided by CK Witco. CK Witco
will invoice Yorkshire for the cost of such services and benefits
and Yorkshire shall remit payment within 7 days of receipt of
such invoice. Yorkshire agrees to indemnify CK Witco against all
loss, liability, costs and expenses incurred by CK Witco in
connection with transition services performed pursuant to this
Paragraph 2.10(n).
2.11 Compliance with ERISA, Etc. (a) The CK Witco
Disclosure Memorandum lists all plans, programs, and similar
arrangements, commitments or agreements maintained by or on
behalf of CK Witco, any CK Witco Entity or any other party that
provides benefits or compensation to, or for the benefit of,
current or former employees of an U.S. Asset Acquired Business,
including, but not limited to, pension, retirement, deferred
compensation, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, group
insurance, severance, and other benefit plans, contracts and
agreements (collectively, the "Employee Benefit Plans"). The CK
Witco Disclosure Memorandum identifies each Employee Benefit Plan
in which Business Employees were eligible to participate prior to
the Effective Date and Time. With respect to each Employee
Benefit Plan, to the extent applicable, CK Witco has supplied
Yorkshire a true and correct copy of (i) the plan document,
including amendments thereto, (ii) the annual report on the
applicable Form 5500 series filed with the IRS for the most
recent three plan years, (iii) each trust agreement, insurance
contract or other funding arrangement relating to such Employee
Benefit Plan, including amendments thereto, (iv) the most recent
Summary Plan Description and material employee communications for
such Employee Benefit Plan, (v) the most recent actuarial report
or valuation, and (vi) the most recent IRS determination letter.
(b) Each of the Employee Benefit Plans (i) is in
substantial compliance with all applicable provisions of ERISA,
the Code, and all other applicable laws, (ii) has been
administered, operated and managed in accordance with its
governing documents, and (iii) has timely filed or distributed
all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or
beneficiaries (including annual reports, summary annual reports
(Form 5500s), summary plan descriptions, actuarial reports, PBGC-
1 Forms, or returns).
(c) All Employee Benefit Plans that are intended to
be qualified under Section 401(a) of the Code are so qualified
and have received a favorable determination letter from the IRS,
and CK Witco is not aware of any circumstances likely to result
in the revocation of any such favorable determination letter.
(d) No Employee Benefit Plan is a "defined benefit
pension plan" (as defined in Section 3(35) of ERISA) or a "multi-
employer plan" (as defined in Section 3(37) of ERISA, subject to
Title IV of ERISA.
(e) With respect to each Employee Benefit Plan,
neither such plan, or any trustee, administrator, fiduciary,
agent or employee thereof, nor CK Witco or any CK Witco Entity
has engaged in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code). With respect
to each Employee Benefit Plan, no act, omission or transaction
has occurred which would result in the imposition of (i) breach
of fiduciary duty liability damages under Section 409 of ERISA,
(ii) a civil penalty assessed pursuant to subsection (c), (i) or
(l) of Section 502 of ERISA, or (iii) any excise tax under
applicable provisions of the Code. With respect to each Employee
Benefit Plan, there have been no terminations, partial
terminations or discontinuances of contributions without a
determination by the IRS that such action does not adversely
affect the tax-qualified status of that plan.
(f) No liability has been incurred by or is
reasonably expected to be incurred by CK Witco or any entity,
trade or business that is a member of a group described in
Sections 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes CK Witco, which could subject
Yorkshire to liability under Title IV of ERISA, Section 301 of
ERISA, Sections 412 or 4971 of the Code or the continuation
coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code.
(g) No litigation or claims (other than routine
claims for benefits) are pending or, to the knowledge of CK
Witco, threatened against, or with respect to, any of the
Employee Benefit Plans or with respect to any fiduciary,
administrator, sponsor (in their capacities as such), or any
party-in-interest thereof.
(h) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will
not result in any payment or series of payments by the Acquired
Businesses to any person which is an "excess parachute payment"
(as defined in Section 280G of the Code), increase or secure (by
way of a trust or other vehicle) any benefits payable under any
Employee Benefit Plan, or accelerate time of payment or vesting
of any such benefit.
(i) With respect to each Employee Benefit Plan
qualifying as a "group health plan" under Section 4980B of the
Code or Section 607(l) or 609 of ERISA and related regulations
(relating to the benefit continuation rights imposed by COBRA or
qualified medical child support orders), CK Witco and each CK
Witco Entity has complied in all material respects with all
reporting, disclosure, notice, election and other benefit
continuation and coverage requirements imposed thereunder as and
when applicable to those plans, and has not incurred any direct
or indirect liability or is not subject to any loss, assessment,
excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or
indirect failure at any time to comply with any such federal or
state benefit continuation of coverage requirement.
2.12 Admission of Ordinary Shares. Yorkshire agrees
that not later than two (2) Business Days following the date of
execution of this Agreement, it shall file the Application with
the London Stock Exchange and shall use its reasonable efforts to
ensure that the application is approved by the London Stock
Exchange. In the circular concerning the transaction the subject
of this Agreement, the Board of Directors of Yorkshire will
unanimously recommend that the Yorkshire members approve this
Agreement and declare this Agreement to be in the best interests
of Yorkshire.
2.13 Extraordinary General Meeting. Yorkshire agrees to
promptly call and hold the Extraordinary General Meeting no later
than 15 December, 1999 (subject to any proper adjournment
thereof) and in accordance with applicable Law and to perform any
and all acts and to do all things as shall be necessary in
accordance with applicable Law to so call and hold the
Extraordinary General Meeting and to put the Resolutions to vote
at that meeting.
2.14 Cooperation by Management of CK Witco. CK Witco
hereby undertakes with Yorkshire to provide, and to use its
reasonable best efforts to procure that the senior management of
CK Witco shall provide, all information known to them or which on
reasonable inquiry ought to be known to them and relating to the
Acquired Businesses or otherwise as Yorkshire may reasonably
require for the purpose of complying with any applicable Law or
the requirements of the London Stock Exchange.
2.15 Certain Transactions. CK Witco agrees to execute
and complete the transactions set forth on Exhibit BB attached
hereto on or before the Closing, including the execution of and
performance under those agreements, documents and instruments
annexed to Exhibit BB. CK Witco agrees not to make any material
changes to the terms of the draft agreements appended to such
Exhibit BB without the prior consent of Yorkshire, which consent
shall not be unreasonably withheld or delayed.
2.16 Certain Relocation Matters and Costs. Within one
(1) year of the Closing Date, CK Witco shall (a) cause the IPD
Bagger to be disassembled and removed from the Greenville Land
and (b) cause the liquid dye storage tanks to be disassembled and
removed from the Lowell Improvements and the Lowell Land, in each
case, at CK Witco's sole cost and expense. Such disassemblies
and removals shall be done in a workmanlike manner and so as to
cause as little disruption as is practicable of the operations
being conducted on the Greenville Land and the Lowell
Improvements and the Lowell Land, as applicable. CK Witco shall
be liable for, and shall indemnify Yorkshire in respect of, all
loss, cost, damage and expenses suffered or incurred by any
Yorkshire Entity related to or arising in connection with such
disassemblies and removals.
2.17 Limited Use of CK Witco Name. For a period of one
hundred eighty (180) days following the Effective Date and Time,
the Yorkshire Entities, Europe and the Acquired Entities shall
have the right to use the CK Witco name for the limited purpose
of depleting and disposing of letterhead, product brochures and
information, and the like, except (i) in the case of Inventories
and product packaging for which the relevant period shall be one
(1) year following the Effective Date and Time and (ii) for the
last one hundred twenty (120) days of the foregoing 180-day
period, all of such letterhead, product brochures and
information, and the like, such items shall also include the
"Yorkshire" name with equal size and prominence as the "CK Witco"
name. Other than as permitted in this Paragraph 2.17, from and
after the Effective Date and Time no Yorkshire Entity, Europe or
any Acquired Entity shall use the name "CK Witco" in any fashion.
Yorkshire shall have a reasonable period of time (not to exceed
forty five (45) days) following the Closing Date to change the
legal name of Europe and each Acquired Entity so as not to
include the "CK Witco" name.
2.18 Distributable Profits and Voting with Respect to Europe.
Yorkshire confirms it is aware of CK Witco's intent to procure
that Europe's Shareholders' Meeting will distribute an interim
dividend in an amount not to exceed the Belgian Francs equivalent
of US$25,000,000 (to the extent lawfully possible) between the
date of this Agreement and the Closing Date. Yorkshire
undertakes, on behalf of itself and Europe, that between the
Closing Date and 1 January 2000 it will not carry out any act
outside the scope of the ordinary daily management of Europe
intended to reduce the distributable profits of Europe (within
the meaning of Article 77bis of the Belgian Company Laws) shown
in Europe's annual accounts for the business year closed on
December 31, 1999, below the amount referred to above.
2.19 Mail Received after Closing. Following the Closing,
Yorkshire may receive and open all mail addressed to CK Witco and
deal with the contents thereof in its discretion to the extent that
such mail and the contents thereof relate to an Acquired Business,
Europe, an Acquired Entity or the Transferred Assets, or any of the
Assumed Liabilities or any European Retained Liabilities. All
other mail received by Yorkshire shall be promptly forwarded to CK
Witco. Following the Closing, CK Witco shall promptly forward, or
cause to be promptly forwarded, to Yorkshire all mail received by
it that relate to an Acquired Business, Europe, an Acquired Entity
or the Transferred Assets, or any of the Assumed Liabilities or any
European Retained Liabilities.
2.20 Notices to Customers; Collection of Receivables. (a)
Between the date hereof and the Closing Date, CK Witco, in
consultation and cooperation with Yorkshire, shall by written
notice direct all customers of the Acquired Businesses to make
payment of amounts owed by such customers to CK Witco and its
Affiliates in respect of an Acquired Business to such bank
account(s) as shall be mutually acceptable to CK Witco and
Yorkshire.
(b) Commencing with the Business Day that immediately
follows the Effective Date and Time, CK Witco hereby grants to
Yorkshire, the Yorkshire Entities and their Affiliates the power,
right and authority, coupled with an interest, to receive, endorse,
cash, deposit, and otherwise deal with, in the name of the
appropriate CK Witco Entity and in a manner consistent with this
Paragraph 2.20, any checks, drafts, documents, and instruments
evidencing payment of Receivables which are payable to, payable to
the order of, or endorsed in favor of, that CK Witco Entity.
2.21 Payments for CK Witco European Liabilities.
Between the date hereof and the Closing Date, CK Witco, in
consultation with Yorkshire, shall establish such bank account(s)
with such level of funds (the "Excluded Liability Fund") as shall
be mutually acceptable to CK Witco and Yorkshire. The purpose of
the Excluded Liability Fund shall be to enable Yorkshire to make
payments to certain specified creditors with respect to certain
CK Witco European Liabilities due soon after the Closing Date.
Commencing with the Business Day that immediately follows the
Effective Date and Time, only when due, and in consultation with
CK Witco, the relevant Yorkshire Entity shall draw from the
Excluded Liability Fund to make payments to relevant creditors on
relevant dates as determined pursuant to Exhibit CC attached to
this Agreement.
2.22 Certain IP Registration Costs.
(a) CK Witco shall reimburse Yorkshire and each
Yorkshire Affiliate for all Duty Costs reasonably required to be
incurred by an Agency and that are paid by Yorkshire or a
Yorkshire Affiliate in order to register title with such Agency
of ownership of those Proprietary Rights listed on Exhibit DD
attached to this Agreement in the name of either CK Witco or
Europe or an Acquired Entity (as the case may be) in so far as
the foregoing is not already the case.
(b) If in so far as at Closing any of the registered
trademarks and patents are not assigned to Yorkshire (or its
designates) pursuant to this Agreement, then, in such case, from
the Closing until the date of such assignment, CK Witco shall not
(and shall ensure that its Affiliates shall not) use, assign,
exploit or create any third party rights in such registered
trademarks and patents other than as envisaged under any of the
Additional Agreements (and any such use or exploitation will
comply with the terms of the relevant Additional Agreement). CK
Witco will, until such registered patents or trademarks are
assigned to Yorkshire (or its designates), forward promptly to
Yorkshire any correspondence that it may receive from the
relevant registry or any third party that relates to such
registered trademarks and patents. CK Witco and Yorkshire shall
use their reasonable commercial efforts to file the assignments
for the registered trademarks and patents to Yorkshire (or its
designates) within thirty (30) days from the Effective Date and
Time. To the extent there is a conflict between the terms of any
relevant trademark assignment or patent assignment and this
Agreement, the terms of this Agreement shall control.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK
WITCO, COLORS, HOLDINGS AND EUROPE
CK Witco has prepared and delivered to Yorkshire a
disclosure memorandum (the "CK Witco Disclosure Memorandum")
setting forth any and all exceptions or supplemental information
to the representations, warranties and covenants contained in
Articles 3, 4 and 6 of this Agreement, and has delivered to
Yorkshire documents and materials pursuant to or in connection
with this Agreement, and any and all modifications or amendments
to the documents and materials have been or will be delivered to
Yorkshire with the CK Witco Disclosure Memorandum. The
disclosures set forth in the CK Witco Disclosure Memorandum
qualify or supplement only those representations, warranties and
covenants specifically referenced and referred to in the CK Witco
Disclosure Memorandum, and a disclosure or supplement related to
any particular representation, warranty or covenant shall not
qualify or supplement any other representation, warranty or
covenant unless evident by its context or unless expressly
stated. Nothing in the CK Witco Disclosure Memorandum or in any
documents or materials delivered to Yorkshire shall operate to
limit or exclude the liability of CK Witco and Holdings under or
in respect of Part B of the Taxation Schedule or to qualify or
supplement any of the covenants set out in the Taxation Schedule,
it being understood and agreed that the representations,
warranties and covenants set forth in the Taxation Schedule shall
be the exclusive representations, warranties and covenants made
in respect of the matters covered thereby. To induce Yorkshire
to enter into this Agreement and to consummate the transactions
contemplated by this Agreement, subject to the qualifications set
forth in the CK Witco Disclosure Memorandum, CK Witco, Colors,
Holdings and Europe, jointly and severally, represent and warrant
to Yorkshire, Americas, each other Yorkshire Entity, and each
Affiliate of Yorkshire, and covenants and agrees, as of the date
hereof and again as of the Closing Date, as follows:
3.1 Existence.
(a) Each of CK Witco and Colors is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and is
entitled to own or lease its assets and properties and to carry
on its business as and in the places where its business is
conducted and its assets and properties are owned or leased.
Holdings is a private company with limited liability incorporated
under the laws of The Netherlands and Europe is a private company
with limited liability incorporated under the laws of Belgium.
Each of Europe and Holdings has full corporate power and is
entitled to own or lease its assets and properties and to carry
on its business as and in the places where its business is
conducted and its assets and properties are owned or leased.
Each of CK Witco, Colors, Holdings and Europe is authorized,
licensed or qualified in those jurisdictions identified in the CK
Witco Disclosure Memorandum and is not otherwise required to be
authorized, licensed, qualified or domesticated as a foreign
Person in any other jurisdiction. CK Witco has delivered to
Yorkshire true, correct and complete copies of the Certificate of
Incorporation and Bylaws or equivalent organizational documents
and agreements of each of Holdings and Europe, as amended to
date. CK Witco has delivered to Yorkshire the minute book and
statutory records of Holdings and Europe, which in each instance
contains all records of meetings and actions taken by its
respective shareholders and directors, to the extent required by
applicable law, and shows all corporate actions taken by its
respective shareholders and board of directors (and any
committees thereof). Europe's authorized, issued and outstanding
capital is as described in the CK Witco Disclosure Memorandum and
is wholly-owned by those Persons identified in the CK Witco
Disclosure Memorandum. No Person has any option or right to
acquire any of the equity or share capital of Europe. The equity
and share capital of Europe is free and clear of any and all
Liens.
(b) Each CK Witco Entity is identified in the CK
Witco Disclosure Memorandum. Each such CK Witco Entity is an
entity of the type described in the CK Witco Disclosure
Memorandum, in each case having full entity power and authority,
and duly organized, registered and validly existing under the
laws of the jurisdiction of its organization as so identified in
the CK Witco Disclosure Memorandum and is entitled to own or
lease its assets and properties and to carry on its business as
and in the places where its business is conducted and its assets
and properties are owned or leased.
(c) Each Acquired Entity is duly organized,
registered and validly existing under the laws of the
jurisdiction of its organization and has full entity power and is
entitled to own or lease its assets and properties and to carry
on its business as and in the places where its business is
conducted and its assets and properties are owned or leased.
Each Acquired Entity is duly authorized, licensed, qualified or
domesticated as a foreign Person in those jurisdictions outside
of its jurisdiction of organization as listed in the CK Witco
Disclosure Memorandum and is not otherwise required to be
authorized, licensed, qualified or domesticated as a foreign
Person in any other jurisdiction. CK Witco has previously
furnished Yorkshire with true, correct and complete copies of the
organizational documents, as amended to the date hereof, of each
Acquired Entity. CK Witco has delivered to Yorkshire true,
correct and complete copies of the minutes and other similar
records of meetings and actions by the equity holders and
directors (or their equivalent under any applicable Law) of each
Acquired Entity.
(d) The CK Witco Disclosure Memorandum lists: (i)
all locations where Colors, Europe and each Acquired Entity
currently owns or leases real property, has an office or place of
business; (ii) all locations of real or immovable property owned
or leased by any CK Witco Entity, Europe or an Acquired Entity
and used in an Acquired Business by such CK Witco Entity, Europe
or Acquired Entity; and (iii) all trading names under which any
CK Witco Entity, Europe or Acquired Entity or its respective
predecessors has operated, if different from its present legal
name, at any time since December 31, 1995.
(e) The jurisdiction of organization, type of
entity, capitalization and record and beneficial holders of all
share capital of each Acquired Entity is as set forth in the CK
Witco Disclosure Memorandum. No Person has any option or right
to acquire any of the equity or share capital of any Acquired
Entity. The equity and share capital of each Acquired Entity is
free and clear of any and all Liens.
3.2 Subsidiaries. Other than for the Acquired Entities,
neither Colors, Holdings nor Europe, nor any Acquired Entity,
owns, either directly or indirectly, any interest in any Person,
nor does it possess any right, option or commitment to purchase
or otherwise acquire any interest (whether direct or indirect),
in any Person other than for Europe and the Acquired Entities,
and none of CK Witco, any CK Witco Entity, Europe or any Acquired
Entity has any legal responsibility, duty, obligation or
liability in respect of any such Person, nor do any of the
Transferred Assets or the revenues or profits of an Acquired
Business, Colors, Europe or any Acquired Entity stand for any
duty, obligation or liability of any such Person.
3.3 Authority; Inconsistent Obligations.
(a) Each of CK Witco, Colors, Holdings and Europe
has the full right, power and authority to execute and deliver
and to perform and comply with this Agreement and the Additional
Agreements to which any of them is or will be a party. All
proceedings and actions required to be taken by any of CK Witco,
Colors, Europe and Holdings to authorize the execution, delivery
and performance of this Agreement and the Additional Agreements
have been taken. This Agreement and each Additional Agreement to
which any of them is or will be a party, have been, or in the
case of any Additional Agreement will be at the Closing, duly and
validly executed and delivered by each of them, as appropriate,
by its duly authorized officers or representatives. This
Agreement constitutes, and each Additional Agreement when
executed and delivered will constitute, the valid and legally
binding obligation, subject to general equity principles, of each
of CK Witco, Colors, Holdings and Europe, as appropriate,
enforceable in accordance with its respective terms.
(b) Neither the execution and delivery of this
Agreement or of the Additional Agreements by CK Witco, Colors,
Holdings or Europe, nor the consummation of the transactions
contemplated by this Agreement or by any Additional Agreement,
will (i) result in a violation of the Certificate or Articles of
Incorporation and By-Laws or other organizational or foundation
documents of any of them or any CK Witco Entity or Acquired Entity,
(ii) violate any Law or Order applicable to any of CK Witco,
Colors, Europe, the other CK Witco Entities (as it relates to the
Acquired Business) or any Acquired Entity, or (iii) result in a
breach of, conflict with or default under, any term or provision of
any material indenture, note, mortgage, bond, security agreement,
loan agreement, guaranty, pledge, or other instrument, contract,
agreement or commitment to which any of CK Witco, Colors, Europe,
Holdings, any CK Witco Entity (as it relates to the Acquired
Business) or any Acquired Entity is or will be upon consummation of
the transactions contemplated by this Agreement be a party or by
which any of them or any of their respective assets, properties, or
businesses is subject or bound; nor will these actions result in
(x) the creation of any Lien on any of the Transferred Assets or
the share capital, assets, properties, businesses, revenues or
profits of Europe or any Acquired Entity, (y) the acceleration or
creation of any obligation of Colors, Europe, Holdings or any
Acquired Entity, or (z) the forfeiture of any material right or
privilege of an Acquired Business, Colors, Europe or any Acquired
Entity that may affect its ability to perform under this Agreement
or any Additional Agreement or to carry on its business.
3.4 No Violation; Compliance with Laws. None of CK
Witco, Colors, Holdings, Europe or any Acquired Entity is in
default under or in violation of (a) its Certificate or Articles
of Incorporation or By-Laws, or other organizational and
foundation documents, as appropriate, or (b) any Order, and the
operations of each Acquired Business and CK Witco, Colors,
Holdings, Europe and each Acquired Entity have since December 31,
1995, been conducted, in all material respects, in accordance
with, and are in compliance in all material respects with, all
applicable Laws. Since December 31, 1995, none of Colors (in
respect of an Acquired Business), Europe, Holdings or any
Acquired Entity has received any written notification of any
asserted present or past failure by any of them to comply with
any Order or Laws.
3.5 Consents. The execution and delivery by CK Witco,
Colors, Holdings and Europe of this Agreement and the Additional
Agreements to which any of them is to be a party on the Closing
Date, the consummation of the transactions contemplated in this
Agreement or the Additional Agreements, the conduct of the
Acquired Businesses on and after the Effective Date and Time, and
the performance by CK Witco, Colors, Europe, Holdings, the other
CK Witco Entities or any Acquired Entity of its obligations under
or pursuant to this Agreement or any Additional Agreement, as
appropriate, do not (a) require the consent or approval of, or any
filing with or notice to, any Government or other Person, other
than for the HSR Filing, (b) require the consent or approval of CK
Witco's shareholders, or (c) impose any other material term,
condition or restriction on the Acquired Businesses, the
Transferred Assets, Colors, Holdings, Europe, the other CK Witco
Entities or any Acquired Entity pursuant to any Order or Law.
3.6 Possession of Licenses, Etc. Colors, Europe and
each Acquired Entity possesses all material certificates,
licenses, permits and other authorizations from Governments
(collectively, the "Permits") that are necessary for the
ownership, maintenance and operation of the Transferred Assets
and the Acquired Businesses, and none of CK Witco, Colors,
Holdings, Europe, the other CK Witco Entities or any Acquired
Entity is or has been since December 31, 1995, in violation of
any such Permits. All Permits held by each of Colors, Europe,
the other CK Witco Entities or any Acquired Entity in connection
with the Acquired Businesses, are in full force and effect, and
neither the validity nor continuance of which will be adversely
affected by the consummation of the transactions contemplated by
this Agreement.
3.7 Sufficiency of Assets.
(a) The assets of each Acquired Entity and Europe,
and assets the benefit of which is conferred upon the Acquired
Entities or Europe pursuant to an Additional Agreement,
constitute to the knowledge of CK Witco and Holdings and except
for the services of any current employees of any of the CK Witco
Entities, the Acquired Entities or Europe, the assets necessary
to operate the Acquired Businesses outside the Americas IPD
Business Territory substantially in the manner presently operated
by the CK Witco Entities, the Acquired Entities and Europe as of
the Closing Date.
(b) The Transferred Assets constitute, to the
knowledge of CK Witco or Holdings and except for (i) services of
any current employees of the CK Witco Entities or Colors
necessary to operate the U.S. Asset Acquired Businesses and (ii)
any assets the benefit of which may be conferred pursuant to an
Additional Agreement, the assets necessary to operate the U.S.
Asset Acquired Businesses substantially in the manner presently
operated by the CK Witco Entities as of the Closing Date.
3.8 Grants and Allowances. Since December 31, 1995,
there have been no grants, allowances, subsidies or other like
sums paid or pledged to Europe or any Acquired Entity by any
supranational, national or local authority or government agency.
3.9 Year 2000 Compliance.
(a) All of the equipment, Software and computer
hardware, owned or used by a CK Witco Entity, Europe or an
Acquired Entity or to the knowledge of CK Witco or Holdings, used
and operated by third parties on behalf of a CK Witco Entity,
Europe or an Acquired Entity, which performs or is or may be
required to perform functions involving dates or the computation
of dates, or containing date related data, has the programming,
design and performance capabilities to ensure that: it will not
suffer any material Malfunction; and it will not, as a result of
the date change at the end of the twentieth century or the input,
processing, storage or use of dates up to and including December
31, 2000, (i) be adversely affected, (ii) require changes in
inputting or operating practices, (iii) produce materially
invalid or incorrect output or results, (iv) cause any materially
abnormal ending scenario, or (v) suffer any material diminution
in functionality or performance.
(b) All of the equipment, Software and computer
hardware, owned or used by a CK Witco Entity, Europe or an
Acquired Entity or, to the knowledge of CK Witco or Holdings,
used and operated by third parties on behalf of a CK Witco Entity
(as it relates to the Acquired Business), Europe or an Acquired
Entity, includes an indication of century in all date related
user interfaces and data interfaces.
(c) All date related data stored electronically by
or on behalf of a CK Witco Entity (as it relates to the Acquired
Business), Europe or an Acquired Entity is in such form that its
input, processing, storage or use by or on behalf of a CK Witco
Entity, Europe or an Acquired Entity will not, directly or
indirectly, cause any material Malfunction in any of the
equipment, Software or computer hardware.
(d) Attached to the CK Witco Disclosure Memorandum
are true, correct and complete copies of all Year 2000 readiness
and remediation plans related to an Acquired Business.
3.10 Financial Statements. Prior to the date of this
Agreement, CK Witco has delivered to Yorkshire copies of the
Special Purpose Statements of the Acquired Businesses as of and
for the periods ended December 28, 1996, December 27, 1997,
December 26, 1998, and June 26, 1999, together with the report
thereon of KPMG LLP, including a Special Purpose Combined
Statements of Net Assets, Special Purpose Combined Statements of
Revenues and Expenses and Comprehensive Income (Loss), and
Special Purpose Combined Statements of Cash Flows (collectively,
the "Special Purpose Statements"), all of which are attached to
this Agreement as Exhibit EE. The Special Purpose Statements
have been prepared from the books and records of the Acquired
Businesses and have been prepared in accordance with GAAP
consistently applied and present fairly the financial condition
of the Acquired Businesses as at the respective dates of the
Special Purpose Statements and the revenues, expenses and
comprehensive income (loss), net assets and cash flows for the
respective periods then ended.
3.11 Euro-Affected Products and Services. To the extent
that CK Witco's software, hardware, systems, products and
services receive, recognize, use or process financial information
from any one of the Participating Member States planning to
change their currencies to the Euro (collectively, the "Euro-
Affected Products and Services"), and to the knowledge of CK
Witco or Holdings, all of CK Witco's Euro-Affected Products and
Services included within the Transferred Assets or relating to
any other CK Witco Entity, Europe or an Acquired Entity will (i)
operate without material errors, problems, delays or the need for
any further modifications as a result of the introduction of the
Euro in whole or in part as a European currency or currency unit
and (ii) continue to receive, recognize, use and process both
national currency units and Euro units (and permit conversions
from national currency units to Euro units and vice-versa)
without errors, problems, delays or the need for any further
modifications before, during and after the period beginning
January 1, 1999.
3.12 Liabilities. Neither Europe nor any Acquired
Entity has any debt, borrowings, Liability or obligation of any
kind, whether accrued, absolute, contingent or otherwise, except
the European Retained Liabilities.
3.13 Title to Properties. All of the Transferred Assets
and the assets and properties of Europe and each Acquired Entity,
whether personal or movable or immovable or real, tangible or
intangible, are owned exclusively by the relevant CK Witco
Entity, Europe or an Acquired Entity (including the land at
Oissel, France shown hatched on Exhibit FF attached to this
Agreement) free and clear of any and all Liens.
3.14 Receivables. The reserve with respect to
Receivables set forth in the relevant Special Purpose Statement
is adequate in accordance with GAAP consistently applied. All of
the Receivables were, are and will be, valid and, to the
knowledge of CK Witco or Holdings, collectible obligations of the
respective makers or the relevant account debtors and were not,
and are not, subject to any offset, counterclaim or recoupment,
except to the extent reflected in the customer claim account as
shown on the relevant Special Purpose Statement.
3.15 Inventories. Subject to any applicable reserve set
forth in the relevant Special Purpose Statement and to the
knowledge of CK Witco or Holdings, the Inventories less than two
(2) years old are saleable and useable in the ordinary and
regular course of the Acquired Businesses. The Inventories
reflected on the relevant Special Purpose Statement have been
valued at the lower of cost and net realizable value.
3.16 Movable Property
(a) All of the machinery, equipment, vehicles, and other
items of movable or personal property which are included within
the Transferred Assets or owned or leased by Europe or any
Acquired Entity are in good condition and repair in all material
respects, subject to normal wear and tear, suited for the use
intended, and are and have been operated in all material respects
in conformity with all applicable insurance requirements,
manufacturer's operating manuals, manufacturer's warranties, and
applicable Orders and Laws. CK Witco has previously delivered to
Yorkshire the Fixed Assets Registers, which together constitute a
true, correct and substantially complete list of all movable
property owned by Europe or any Acquired Entity or included
within the Transferred Assets. To the best of CK Witco's or
Holdings' knowledge, there are no defects or conditions which
would cause the movable property to be or become inoperable or
unsafe.
(b) To the best of CK Witco's or Holdings' knowledge,
all lessors of any machinery, equipment or other movable property
included with the Transferred Assets or leased by Europe or an
Acquired Entity have in all material respects performed and
satisfied their respective duties and obligations under the
leases, and neither Europe nor any Acquired Entity has brought or
threatened any Action against any relevant lessor for failure to
perform and satisfy its duties and obligations under the relevant
lease.
3.17 Immovable Property.
(a) Neither Europe nor any Acquired Entity owns
any real or immovable property except as listed in the CK Witco
Disclosure Memorandum. The relevant CK Witco Entity is lawfully
occupying and using the Leased Real Property. Europe and each
Acquired Entity is lawfully occupying and using each parcel of
real or immovable property used in its business (each such parcel
of real or immovable property together with the Leased Real
Property being sometimes referred to herein as the "Immovable
Property").
(b) All material agreements with respect to leases,
easements, rights of way, licenses or other interests in
Immovable Property granted to Colors, Europe or any Acquired
Entity or included among the Transferred Assets (collectively,
the "Property Leases") are listed in the CK Witco Disclosure
Memorandum. Each of the Property Leases is freely assignable.
The interest of Colors, Europe and each Acquired Entity, as
applicable, in and under each of the Property Leases is free and
clear of any material defects, claims or Liens and subject to no
present Action or threatened Action.
(c) There is lawfully available to all the Immovable
Property and the Land and Improvements, through private easements
and facilities or properly dedicated public easements and
facilities, all of the water, gas, sewer, electricity and
telephone services which are now being utilized and sufficient to
allow Europe, the CK Witco Entities and the Acquired Entities, as
applicable, to continue to conduct the Acquired Businesses as
presently conducted by them. All of the Immovable Property and
Land has reasonably suitable ingress and egress and each parcel
of Immovable Property and Land has reasonably suitable access to
the existing paved roads and other public rights of way, which
access is not limited or restricted, except as provided in the
Property Leases.
(d) The present use, occupancy and operation of the
Immovable Property, and all aspects of the improvements on and to
the Immovable Property, and the Land and Improvements, are in
compliance in all material respects with all Laws and with all
private restrictive covenants of record, and neither CK Witco nor
Holdings has any knowledge of any proposed change to the
applicable Laws or the private restrictive covenants of record
that would affect any of the Immovable Property or Land, or its
use, occupancy or operation. There exist no conflicts or
disputes with any Government or Person relating to any Immovable
Property or Land or the activities on the Immovable Property or
Land. All Improvements are in good condition and repair,
ordinary wear and tear excepted, suited for the operation of the
Acquired Businesses, as applicable.
3.18 Environmental Matters.
(a) In respect of environmental matters:
(i) The Acquired Businesses comply and have since
December 31, 1995 complied in all material respects with all
applicable Environmental Laws and the conditions of all
Environmental Licenses.
(ii) All Environmental Licences necessary for the operation
of the Acquired Businesses are in full force and effect and there
are no circumstances entitling any such Environmental Licences to
be revoked, suspended, amended, varied, or withdrawn.
(b) In respect of the Oissel Facility:
(i) The purchase price paid under the ICI Agreement was
US$26,000,000.
(ii) The total value of all claims made by any of Holdings,
Europe, or any Acquired Entity under the ICI Agreement as at
today's date is no more than US$250,000.
(iii) To the best of CK Witco's and Holdings' knowledge and
belief, no act, omission, operation or transaction of any CK
Witco Entity, Holdings, Europe or any Acquired Entity, or any of
their respective Affiliates, has affected or compromised the
ability of Europe to make a claim under the ICI Agreement. The
representation and warranty set out in this Paragraph
3.18(b)(iii) shall be of no further force and effect after the
fifth anniversary of the Effective Date and Time.
3.19 Intellectual Property Rights.
(a) A CK Witco Entity, Europe or an Acquired
Entity, as applicable, owns the entire right, title and interest
in and to the following, whether or not registered (all of the
following collectively, the "Proprietary Rights") and such
Proprietary Rights are in full force and effect and not subject
to any application for cancellation or amendment or to the best
of any CK Witco Entity's or Holdings' knowledge not subject to a
license of right or compulsory license: (i) all patents, patent
applications and registrations, trademarks, trademark
applications and registrations, copyright applications and
registrations, trade names and industrial designs, service marks
and service mark applications, used by any CK Witco Entity,
Europe or an Acquired Entity in the operation of an Acquired
Business including those to be licensed to Yorkshire and its
Affiliates pursuant to an Additional Agreement, (ii) all trade
secrets, know-how, inventions and other Intellectual Property
Rights owned or used by Europe, a CK Witco Entity or an Acquired
Entity in the operation of an Acquired Business including those
to be licensed to Yorkshire and its Affiliates pursuant to an
Additional Agreement, and (iii) all computer systems and
application software, including all documentation relating to the
computer systems and application software, and the latest
revisions of all related object and source codes therefor, used
by Europe, a CK Witco Entity or an Acquired Entity in the
operation of an Acquired Business. A CK Witco Entity, Europe or
an Acquired Entity, as applicable, owns the entire right, title
and interest in and to all of the Proprietary Rights, free and
clear of any and all Liens and none of them has granted any
license to any third party with relation to any of the
Proprietary Rights. The CK Witco Disclosure Memorandum sets
forth a list of (y) all patents, patent applications and
registrations, trademarks, trademark applications and
registrations, copyright applications and registrations, trade
names and industrial designs and service marks and service mark
applications owned or used by Europe, any CK Witco Entity or
Acquired Entity in the operation of an Acquired Business, and (z)
all material computer systems and application software, used by
Europe, a CK Witco Entity or an Acquired Entity in the operation
of an Acquired Business. All of the Proprietary Rights are
included among the Transferred Assets or are licensed to
Yorkshire or its Affiliates pursuant to the relevant Additional
Agreement, (iv) no CK Witco Entity, Europe or Acquired Entity has
granted or is obliged to grant any licenses under any Proprietary
Rights owned by it or licensed to it or furnish know-how to any
person, (v) no CK Witco Entity, Europe or Acquired Entity has
been granted any license or right under or in respect of any
Intellectual Property Rights of a third party and has not
manufactured, sold, supplied or developed anything which is the
subject of any such Intellectual Property Rights, whether
presently existing or (to the knowledge of any CK Witco Entity or
Holdings) applied for and by carrying on the Acquired Businesses
in the ordinary course no CK Witco Entity, Europe or Acquired
Entity is or will become liable to pay any royalty or like fee,
(vi) to the best of each of the CK Witco Entities' or Holdings'
knowledge no act, omission or event has occurred which would
entitle any authority or person to cancel, forfeit or modify any
Proprietary Rights and so far as each CK Witco Entity and
Holdings is aware the Proprietary Rights are valid, (vii) to the
best of each of the CK Witco Entities' or Holdings' knowledge
there exists no actual or threatened infringement (including
misuse of confidential information) or any event likely to
constitute an infringement or breach by any third party of any of
the Proprietary Rights, (viii) all application, renewal and other
official statutory and regulatory fees rendered to and received
by any CK Witco Entity, Europe or Acquired Entity prior to the
date hereof relating to the administration and maintenance of the
Proprietary Rights or for the protection or enforcement thereof
have been duly paid and all commercially reasonable steps have
been taken for their maintenance and protection, (ix) all
inventions made by any employees of any of the CK Witco Entities,
Europe and Acquired Entities and used or enjoyed by the CK Witco
Entities, Europe or Acquired Entities were made in the course of
the normal duties of the employee concerned and no claim for
compensation under section 40 Patents Act 1977 (United Kingdom)
or similar law under any other jurisdiction or otherwise has been
made against any of the CK Witco Entities, Europe or Acquired
Entities nor to the best of the knowledge, information and belief
of each of the CK Witco Entities or Holdings is any such claim
likely to be made, or (x) CK Witco has the right to grant the
licenses set out in the Trade Mark License Agreement and the
Patent and Technology License Agreement and neither the granting
of the same nor use or exploitation of the licensed rights by
Yorkshire and its Affiliates (or its sub-licensees) shall
infringe the Intellectual Property Rights of any third party.
(b) There is no existing or, to the best knowledge
of CK Witco or Holdings, threatened, challenge to the use by
Europe, any CK Witco Entity or any Acquired Entity in connection
with an Acquired Business of any of the Proprietary Rights, and,
to the best knowledge of CK Witco or Holdings, the use of the
Proprietary Rights and the Intellectual Property Rights relating
to the Acquired Businesses does not infringe on the rights of any
third party. Except as and to the extent reflected in the
Special Purpose Statements, no royalty or other fee is required
to be paid by Europe, any CK Witco Entity or any Acquired Entity
to any Person in respect of the use of any of the Proprietary
Rights.
(c) No CK Witco Entity, any Acquired Entity or
Europe has received any notice, complaint, threat or claim
alleging infringement of, any patent, trademark, trade name,
copyright, industrial design, trade secret or any other
intellectual property or proprietary right of any Person. To the
best knowledge of CK Witco or Holdings, the conduct of each
Acquired Business and the use of the Proprietary Rights do not
infringe on any patent, trademark, trade name, copyright,
industrial design, trade secret or any other Intellectual
Property Right or Proprietary Right of any Person.
(d) To the best knowledge of CK Witco or Holdings,
there are no rights of third parties with respect to any patent,
patent application, invention, copyrights, trademark, service
mark, trade secret, trade name, device or other Intellectual
Property Rights which would have an adverse effect on the
operations or prospects of either Acquired Business, the
Transferred Assets, Europe or any Acquired Entity.
3.20 Contracts. The CK Witco Disclosure Memorandum
contains a true, correct and complete list of all Contracts and
Assigned Contracts. CK Witco has, prior to the date of this
Agreement, delivered to Yorkshire a true, correct and complete
copy of each Assigned Contract and each material written and each
material oral agreement, commitment and arrangement to which
Europe or any Acquired Entity is a party or under which Europe or
any Acquired Entity has any rights or obligations (collectively,
the "Contracts") or, in the case of an oral Contract, provided a
true and correct summary. None of the Assigned Contracts or
Contracts, individually or together, constitute an unlawful
restraint of trade under any applicable Law. All obligations to
be performed by any CK Witco Entity (relating to an Acquired
Business), Europe or any Acquired Entity as of the date of this
Agreement under any Assigned Contract or any Contract to which
any of them is a party have been performed in all material
respects in accordance with their terms and no claim exists in
respect of the Assigned Contracts or the Contracts. Neither any
CK Witco Entity, Europe nor any Acquired Entity is a party to any
agreement or commitment relating to an Acquired Business which
was likely to, at the time it was entered into, result in a loss
upon completion of performance. All of the Assigned Contracts
and the Contracts are valid, binding and enforceable in
accordance with their terms, and are in full force and effect,
subject to the effects of bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights
generally and to general equitable principles; no event has
occurred which would constitute a material default (whether with
or without notice, lapse of time or the happening or occurrence
of any event) under any Assigned Contract or any Contract; all
parties to any Assigned Contract or any Contract have consented
(where any relevant consent is necessary) to the consummation of
the transactions contemplated by this Agreement without requiring
modification in the rights or obligations thereunder; and
consummation of the transactions contemplated by this Agreement,
to the knowledge of CK Witco or Holdings, will not result in any
other party thereto having the right to terminate any such
Assigned Contract or Contract or to accelerate performance
thereunder.
3.21 Insurance. Europe and the Acquired Entities are
the sole owners of their insurance policies, which policies
insure their assets, properties and businesses against the types
of risks and in the amounts as are prudent and customary in the
geographies in which they conduct their respective businesses,
and all relevant policies are in full force and effect. All
premiums due on any relevant policies have been paid, and no CK
Witco Entity or Acquired Entity has received any notice of
cancellation or non-renewal with respect to any insurance policy.
There is no material Liability for premiums or retrospective
premium adjustments for any period prior to the date of this
Agreement in respect of any such insurance policies.
3.22 Litigation; Contingencies. There are no Actions
existing or, to the knowledge of CK Witco or Holdings, threatened
against, by or affecting the Transferred Assets, any CK Witco
Entity (insofar as relates to an Acquired Business), Europe or
any Acquired Entity or any of its property, business, revenues or
assets, in any Forum. No CK Witco Entity (insofar as relates to
an Acquired Business), Europe or any Acquired Entity has been
charged with, or is under investigation with respect to, any
charge concerning any violation of any provision of any Law.
3.23 Taxes. Each U.S. Asset Acquired Business has filed
all Tax Returns that it was required to file, and has paid all
Taxes shown thereon as owing, except where the failure to file
Tax Returns or to pay Taxes would not have a material adverse
effect on the financial condition of the U.S. Asset Acquired
Businesses taken as a whole or would result in a Lien on any of
the Transferred Assets. There have been no material United
States Governmental Tax audits or examinations conducted on, nor
are any material tax audits presently being conducted with
respect to, any U.S. Asset Acquired Business at any time during
the 5-year period immediately preceding the date of this
Agreement. There are no currently effective waivers of the
applicable statutory period of limitation for any Taxes for any
taxable period. No U.S. Asset Acquired Business is a party to
any Tax sharing or Tax allocation agreement, understanding,
arrangement or commitment. Representations relating to taxes of
other than the U.S Asset Acquired Businesses (which are dealt
with exclusively in this Paragraph 3.23) are exclusively as set
out in the Taxation Schedule.
3.24 Employment and Labor Matters.
(a) In respect of U.S. Employees: Except as set
forth in the CK Witco Disclosure Memorandum, Colors is not a
party to any collective bargaining agreement or agreement of any
kind with any union or labor organization, and no union or other
collective bargaining unit has been certified or recognized by
Colors as representing any employee, nor, to the knowledge of CK
Witco or Holdings, is a union or other collective bargaining unit
seeking recognition for such purpose. There are no controversies
pending, or to the knowledge of CK Witco or Holdings' threatened,
between Colors and any labor union or collective bargaining unit
representing, or seeking to represent, any of its employees.
There has been no attempt by any union or other labor
organization to organize any of Color's employees at any time in
the past five years. Colors has complied with all applicable
Laws relating to wages, hours, health and safety, payment of
social security, withholding and other taxes, maintenance of
worker's compensation insurance, labor and employment relations,
and employment discrimination, including the Americans with
Disabilities Act.
(b) In respect of non-U.S. based employees:
(i) The names of the employees of Europe and each
Acquired Entity on the date immediately preceding the date of
this Agreement earning a basic rate of pay of US$50,000 (or its
reasonable equivalent in any other currency) per annum or more
are set out in the list annexed to the CK Witco Disclosure
Memorandum ("European/Asian Employees").
(ii) On the day immediately preceding the date of this
Agreement, no European/Asian Employee has given, or has been
given notice of termination of his employment.
(iii) The principal terms of employment of each
European/Asian Employee are annexed to the CK Witco Disclosure
Memorandum. The rate of each such European/Asian Employee's
emoluments as at April 1999 is stated in that annex and since
that date no change has been made, promised or indicated in the
rate of such emoluments.
(iv) Each of Europe and each Acquired Entity maintain
accurate records in respect of all European/Asian Employees which
comply in all material respects with the legal requirements of
the jurisdiction in which such Employees work.
(v) Within a period of one year preceding the date of this
Agreement, none of Europe or any Acquired Entity has:
(A) made any redundancies; or
(B) been a party to any transfer which has triggered transfer
of undertaking obligations under relevant legislation and none of
Europe or any Acquired Entity has failed to any material extent
to inform and consult any independent trade union and/or Works
council.
(vi) On the date immediately preceding the date of this
Agreement, there is no existing, material dispute between any of
Europe or any Acquired Entity and any material number or category
of its employees, or any trade union or employee representative
body or other organization formed for a similar purpose and there
are no circumstances (other than Closing) which are likely to
give rise to any such dispute.
3.25 Compliance with ERISA, etc.
(a) The CK Witco Disclosure Memorandum lists all
plans, programs, and similar arrangements, commitments or
agreements maintained by or on behalf of CK Witco, any CK Witco
Entity or any other party that provides benefits or compensation
to, or for the benefit of, current or former employees of an U.S
Asset Acquired Business, including, but not limited to, pension,
retirement, deferred compensation, stock option, stock purchase,
stock ownership, savings, stock appreciation right, profit sharing,
group insurance, severance, and other benefit plans, contracts and
agreements (collectively, the "Employee Benefit Plans"). With
respect to each Employee Benefit Plan, to the extent applicable, CK
Witco has supplied Yorkshire a true and correct copy of (i) the
plan document, including amendments thereto, (ii) the annual report
on the applicable Form 5500 series filed with the IRS for the most
recent three plan years, (iii) each trust agreement, insurance
contract or other funding arrangement relating to such Employee
Benefit Plan, including amendments thereto, (iv) the most recent
Summary Plan Description and material employee communications for
such Employee Benefit Plan, (v) the most recent actuarial report or
valuation, and (vi) the most recent IRS determination letter.
(b) Each of the Employee Benefit Plans (i) is in
substantial compliance with all applicable provisions of ERISA, the
Code, and all other applicable laws, (ii) has been administered,
operated and managed in accordance with its governing documents,
and (iii) has timely filed or distributed all reports and other
documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including annual
reports, summary annual reports (Form 5500s), summary plan
descriptions, actuarial reports, PBGC-1 Forms, or returns).
(c) All Employee Benefit Plans that are intended to
be qualified under Section 401(a) of the Code are so qualified and
have received a favorable determination letter from the IRS, and
neither CK Witco nor Holdings is aware of any circumstances likely
to result in the revocation of any such favorable determination
letter.
(d) Neither CK Witco nor any CK Witco Entity
maintains, or within the past 6 years has maintained, for the
benefit of current or former employees of the Acquired Businesses,
a "defined benefit plan" subject to Title IV of ERISA. To the
extent CK Witco or any CK Witco Entity maintains a defined benefit
plan for the benefit of current or former employees of CK Witco
other than those employed in the Acquired Businesses: (i) the fair
market value of the assets of each such defined benefit plan
exceeds the present value of the "benefits liabilities" (as defined
in Section 4001(a)(16) of ERISA) under such plan as of the end of
the most recent plan year, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such
plan; (ii) neither CK Witco nor any CK Witco Entity has incurred,
or reasonably expects to incur within the 12 month period following
the Effective Date and Time, liability to the Pension Benefit
Guaranty Corporation or otherwise with respect to any such defined
benefit plan; and (iii) neither CK Witco nor any CK Witco Entity
anticipates terminating any such defined benefit plan within the 12
month period following the Effective Date and Time.
(e) With respect to each Employee Benefit Plan,
neither such plan, or any trustee, administrator, fiduciary, agent
or employee thereof, nor CK Witco or any CK Witco Entity has
engaged in any "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code). With respect to any
Employee Benefit Plan, no act, omission or transaction has occurred
which would result in the imposition of (i) breach of fiduciary
duty liability damages under Section 409 of ERISA, (ii) a civil
penalty assessed pursuant to subsection (c), (i) or (l) of Section
502 of ERISA, or (iii) any excise tax under applicable provisions
of the Code. With respect to each Employee Benefit Plan (i) all
minimum funding standards required by law with respect to funding
of benefits payable or to be payable under such plan have been met;
(ii) there is no accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(a) of ERISA; and (iii)
there have been no terminations, partial terminations, or
discontinuances of contributions without a determination by the IRS
that such action does not adversely affect the tax-qualified status
of that plan.
(f) With respect to Employee Benefit Plans qualifying
as "group health plans" under Section 4980B of the Code or Section
607(l) or 609 of ERISA and related regulations (relating to the
benefit continuation rights imposed by "COBRA" or qualified medical
child support orders), CK Witco and each CK Witco Entity has
complied in all material respects with all reporting, disclosure,
notice, election and other benefit continuation and coverage
requirements imposed thereunder as and when applicable to those
plans, and has not incurred any direct or indirect liability or is
not subject to any loss, assessment, excise tax penalty, loss of
federal income tax deduction or other sanction, arising on account
of or in respect of any direct or indirect failure at any time to
comply with any such federal or state benefit continuation of
coverage requirement.
(g) CK Witco has made, and as of the Effective Date
and Time will have made or accrued, all payments and contributions
required, or reasonably expected to be required, to be made under
the provisions of each Employee Benefit Plan, or required to be
made under applicable laws, rules and regulations, with respect to
any period prior to the Effective Date and Time, such amounts to be
determined using the ongoing actuarial and funding assumptions of
such plan. CK Witco's financial statements reflect the approximate
total pension, medical and other benefit liability for all Employee
Benefit Plans, and no material funding changes or irregularities
are reflected thereon which would cause such statements to be not
representative of prior periods.
(h) Neither CK Witco nor any other entity considered
to be one employer with CK Witco under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA Affiliate") is, or at any time
during the six-year period ended on the date hereof was, obligated
to contribute to a multiemployer plan, as defined in Section 3(37)
of ERISA.
(i) No litigation or claims (other than routine
claims for benefits) are pending or, to the knowledge of CK Witco
or Holdings, threatened against, or with respect to, any of the
Employee Benefit Plans or with respect to any fiduciary,
administrator, sponsor (in their capacities as such), or any party-
in-interest thereof.
(j) CK Witco has the right to amend, modify, or
terminate any Employee Benefit Plan without incurring any liability
thereunder, except as to any benefits accrued prior to such
amendment, modification, or termination. CK Witco does not have
any obligations for post-retirement or post-employment benefits
under any employee benefit plan that cannot be amended or
terminated upon sixty (60) days advance notice, except as required
by Section 601 of ERISA and Section 4980(b) of the Code. Prior to
the Effective Date and Time, CK Witco agrees not to amend or modify
any Employee Benefit Plan or take any other action which results in
an increase in liability under such Employee Benefit Plan . To the
extent Yorkshire adopts or continues any Employee Benefit Plan,
nothing contained in this Agreement limits or restricts Yorkshire's
right to amend, modify, or terminate any of such plans in such
manner as Yorkshire deems appropriate.
(k) Except as specifically identified in the CK Witco
Disclosure Memorandum, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will
not result in any payment or series of payments by the Acquired
Businesses to any person which is an "excess parachute payment" (as
defined in Section 280G of the Code), increase or secure (by way of
a trust or other vehicle) any benefits payable under any Employee
Benefit Plan, or accelerate time of payment or vesting of any such
benefit.
3.26 Other Benefits Plans. (a) For the purpose of this
Paragraph 3.26 "Disclosed Schemes" means:
(i) In the UK: Uniroyal Chemical Limited Group Personal
Pension Plan provided through Scottish Widows Company personal
pension builder plan (the "UK Scheme");
(ii) In the Netherlands, a pension assurance agreement dated
1st January 1977 between Althouse Tertre B.V. and Belgische
Maatschappij van Algemene Verzekeringen "Level" N.V. and attached
rules (pensioenreglement).
(iii) In Belgium: Contrat d Assurances Groupe no 4,997 and
5,138 with A.G. de 1824 and its addenda including:
(A) plan Soins de Sante (4997);
(B) plan Pension Salary Invest for workers signed on 25.6.98;
(C) plan Vie et deces signed on 31.5.95 (officers and
employees).
and Group Personnel Accident Insurance with AXA ending on 31.12.99.
(iv) In France: Mandatory pension plans provided by AGIRC
and ARRCO; nonmandatory pension plans provided through CMAV, AXIVA
and IREC; and a defined benefit scheme known as SAD 4000 and the
collective bargaining agreement applicable to chemical industries
(Convention Collective des Industries Chimiques du 30 Decembre 1952
modifee brochure JO: 3108).
(v) In Luxembourg: La Convention d Assurance de Groupe No.
5127/01 and Plan de Pension Extra-Legale Societe Crompton and
Knowles Luxembourg.
(b) Except for the Disclosed Schemes there is not,
and has not in the past been, in operation any agreement (and no
proposal has been announced to enter into or establish any
agreement) for the provision of pension or lump sum benefits
payable to an employee on or in connection with his reaching
retirement age, or earlier, or on his death, or sickness or
disability benefits for any person employed (or previously
employed) by any of Europe or any of the Acquired Entities. None
of Europe or any of the Acquired Entities have contributed and are
not under any obligation to contribute to any such agreement either
now or in the future and have not given any assurance about the
continuance of any of the Disclosed Schemes.
(c) All material details relating to the Disclosed
Schemes have been supplied and, in particular, details of the rates
at which each of Europe and the Acquired Entities and the members
contribute to each of the Disclosed Schemes and make payments in
respect of the expenses of administration, and management of the
Disclosed Schemes.
(d) All amounts that have become due to be paid to
the Disclosed Schemes have been paid and no amounts are paid to the
Disclosed Schemes in arrears.
(e) So far as CK Witco or Holdings are aware, the
Disclosed Schemes comply and have always complied with all relevant
tax and other regulatory provisions imposed by any national and
European laws, or collective bargaining agreements or Article 119
of the Treaty of Rome now re-numbered Article 141 by the Treaty of
Amsterdam or any decision of the European Court of Justice.
(f) So far as CK Witco or Holdings are aware, each of
Europe and the Acquired Entities has complied with all and any
requirements of national and European laws and legislation
concerning mandatory social security payments, including making any
such payments within any specified time limits and for the correct
amounts.
(g) All benefits payable under each of the Disclosed
Schemes on the death of a member are fully insured under a policy
effected with an insurance company and all premiums due under that
policy have been paid.
(h) No person has made or threatened any claim or
complaint against any of Europe or any of the Acquired Entities or
against any administrator of the Disclosed Schemes (excluding the
administrator of the UK Scheme) in respect of any matter arising
out of or in connection with the Disclosed Schemes.
(i) All benefits accrued up to the Closing under any
of the Disclosed Schemes (except the collective bargaining
agreement applicable to chemical industries in France) have been
properly funded or provision has been made in the Special Purpose
Statements for the full amount of the benefits due to any Person
accrued up to Closing to be paid under the Disclosed Schemes and CK
Witco or Holdings have not received any advice that the funding of
the Disclosed Schemes is inadequate.
3.27 Absence of Certain Business Practices. To the extent
prohibited by applicable law, none of Europe, the CK Witco Entities
nor any Acquired Entity, or any of their respective officers,
directors, employees, agents or Affiliates, nor any other Person
acting on any of their behalf has, directly or indirectly, within
the past five years given or agreed to give any gift or similar
benefit to any Government employee or other Person who is or may be
in a position to help or hinder an Acquired Business (or to assist
any of them in connection with any actual or proposed transaction)
which might subject any Yorkshire Entity or any of Yorkshire's
Affiliates, or any of Yorkshire's or its Affiliates, directors,
officers, employees or agents, to any damage or penalty in any
civil, criminal or Governmental Action.
3.28 Books and Records. The books, records and accounts
of Europe, the Acquired Entities and the Acquired Businesses (i)
have been maintained in accordance with good business practices on
a basis consistent with prior years, (ii) are stated in reasonable
detail and accurately and fairly reflect the transactions related
to the Acquired Businesses, and (iii) accurately and fairly reflect
the basis for the Special Purpose Statements. CK Witco, Europe and
the Acquired Entities have devised and maintained systems of
internal accounting controls sufficient to provide reasonable
assurances that (y) transactions are executed in accordance with
management's general or specific authorization, and (z)
transactions are recorded as necessary (A) to permit preparation of
financial statements in conformity with GAAP and (B) to maintain
accountability for assets.
3.29 Agreements and Transactions with Related Parties. No
CK Witco Entity (insofar as relates to any Transferred Asset or an
Acquired Business), Europe or any Acquired Entity is, directly or
indirectly, a party to any contract, agreement, or lease with, or
any other arrangement with or commitment to, in each case whether
oral or written, any Related Party. No Related Party, directly or
indirectly, owns or controls any assets or properties which are or
have been used in the Acquired Businesses, and no Related Party,
directly or indirectly, engages in or has any significant interest
in or in connection with any business (x) which is or which within
the last three years has been a material competitor, customer or
supplier of the Acquired Businesses or has done a material amount
of business with the Acquired Businesses, or (y) which as of the
date of this Agreement sells or distributes products or services
which are similar or materially related to the products or services
of the Acquired Businesses. As used in this Agreement, the term
"Related Parties" means, collectively, (a) CK Witco, each CK Witco
Entity, any Person owning, or formerly owning, beneficially or of
record, directly or indirectly, at least five percent (5.0%) of any
of the shares in CK Witco, (b) any director or executive officer of
CK Witco, (c) any Person in which any of the foregoing Persons has,
directly or indirectly, at least a ten percent (10.0%) beneficial
interest in the capital or other type of equity interests of that
Person, or (d) any partnership in which CK Witco is a partner.
3.30 No Agreement in Anticipation of Sale. No CK Witco
Entity, Europe nor any Acquired Entity has, directly or indirectly,
taken any action or actions or entered into any agreements in
anticipation of this Agreement. The consummation of the
transactions contemplated by this Agreement will not entitle any
employee of the Acquired Businesses to severance pay nor will it
accelerate the time of payment, vesting or increase the amount of
any compensation or benefits due to any employee of the Acquired
Businesses.
3.31 Government Reports. CK Witco has prior to the date
of this Agreement delivered or made available to Yorkshire, true,
correct and complete copies of, all Tax returns and all material
reports relating to any Employee Benefit Plan, finance and monetary
transactions, employees and employment conditions, compliance with
or violation of Law, and other matters material to the Acquired
Businesses filed with any Government or issued by any Government to
or in respect of, the Acquired Businesses during the past five
years.
3.32 Banking Relationships. The CK Witco Disclosure
Memorandum sets forth a complete and accurate description of all
material arrangements that Europe or any Acquired Entity has with
any banks or other financial institutions providing for accounts,
safe deposit boxes, borrowing arrangements, and certificates of
deposit or otherwise, indicating in each case account numbers, if
applicable, and the person or persons authorized to act or sign on
behalf of them in respect of any of the foregoing.
3.33 Customers and Suppliers. Neither CK Witco nor
Holdings is aware of (i) any supplier or customer of the Acquired
Businesses which intends to discontinue or substantially diminish
or change its relationship with the Acquired Businesses or the
terms of its relationship with the Acquired Businesses, (ii) any
supplier of the Acquired Businesses which intends to materially
increase prices or charges for goods or services presently
supplied, or (iii) of any material supplier to the Acquired
Businesses which is likely to become unable to continue its
relationship with the Acquired Businesses, or supply the goods or
services which it presently supplies to the Acquired Businesses,
without significant change in the terms and conditions of any
relevant relationship or supply arrangement. Other than in the
ordinary course of business, there are no returns or consignment
sales pending.
3.34 Absence of Changes. Except as expressly provided for
in this Agreement, since June 26, 1999 (the "Reference Date"):
(a) there has been no change in the business, assets,
properties, debts, borrowings, Liabilities, affairs, results of
operations condition (financial or otherwise), or cash flows of the
Acquired Businesses, Europe and the Acquired Entities or in their
respective relationships with suppliers, customers, employees,
lessors or others, other than changes in the ordinary course of
business, none of which have had or will have a material adverse
effect;
(b) there has been no damage, destruction or loss to
any of the Transferred Assets or the assets, properties, or
business of Europe or any Acquired Entity, whether or not covered
by insurance;
(c) the Acquired Businesses have been operated in the
ordinary course and consistent with prior practices;
(d) there has been no declaration, setting aside or
payment of any dividend or other distribution on or in respect of
the capital of Europe or any Acquired Entity, nor has there been
any direct or indirect redemption, retirement, purchase or other
acquisition of any of the capital of Europe or any Acquired Entity;
(e) no debt, borrowing or Liability of Europe or any
Acquired Entity has been discharged or satisfied, other than in the
ordinary course of business and consistent with prior practice;
(f) no Acquired Business has discontinued or
determined to discontinue the sale of any material products or
services previously sold;
(g) there has been no sale, transfer, lease or other
disposition of any material asset or assets of an Acquired
Business, except in the ordinary course of business, and no
material debt to, or claim or right of, an Acquired Business has
been canceled, compromised, waived or released;
(h) no Acquired Business has entered into any
agreement, contract, lease or license outside the ordinary course
of business; and
(i) no Acquired Business has delayed or postponed the
payment of any accounts payable and other debts, borrowings or
Liabilities outside the ordinary course of business, and all notes
and accounts receivable relating to the Acquired Businesses have
been collected in the ordinary course of business.
3.35 Insolvency. (a) In relation to Europe and each
Acquired Entity:
(i) no resolution has been passed (and no meeting has been
convened, and no written resolution has been circulated with a view
to any resolution), no petition has been presented and no order has
been made for administration or winding up or for the appointment
of a receiver or provisional liquidator or any equivalent or
comparable proceeding;
(ii) no procedure has been commenced by any Person, with a
view to striking off under relevant legislation;
(iii) no receiver or equivalent has been appointed, no
encumbrance has been enforced, and no floating charge has
crystallized on or over any of its assets, and no event has
occurred or will occur by virtue of the execution and performance
of this Agreement which would cause, or entitle any person to
cause, any of these things to happen;
(iv) it has not stopped paying its creditors, is not insolvent,
and is not unable to pay its debts for the purposes of relevant
legislation;
(v) no distress, execution or other process has been levied
against any of its assets;
(vi) no meeting of its creditors, or any class of them, has
been held or summoned and no proposal has been made for a
moratorium, composition or arrangement in relation to any of its
debts; and
(vii) no event analogous to any of the above has occurred in
any jurisdiction.
(b) In relation to Holdings;
(i) no resolution has been passed, no petition has been
presented and no order has been made for administration or winding
up or for the appointment of a receiver or provisional liquidator;
(ii) no receiver has been appointed, no encumbrance has been
enforced, no floating charge has crystallized and no distress,
execution or other process has been levied, on or over any of the
stock of Europe; and
(iii) no event analogous to any of the above has occurred in
any jurisdiction.
3.36 Information Warranty.
Copies of all agreements or other binding arrangements
between Europe or any Acquired Entity and either trade unions or
relevant state authorities which relate to or impact on the
following areas have been disclosed to Yorkshire in the Index of
Documents or the Written Responses: (i) employee terms of
employment; (ii) employee working conditions; (iii) redundancies;
(iv) the structure of the workforce within the Acquired Businesses.
For the purposes of this Paragraph 3.36:
"Due Diligence Request" means the due diligence request
dated 6 August 1999 sent by Kilpatrick Stockton LLP to John T.
Ferguson II of CK Witco and attached as Exhibit GG.
"Index of Documents" means the index of documents
denominated as such and attached to the CK Witco Disclosure
memorandum.
"Written Responses" means those responses referred to in
Section L1-5 in the Index of Documents.
3.37 Indebtedness as of 15 October 1999. Exhibit HH is a
complete list of all bank accounts relating to the Acquired
Business as at 15 October 1999 and the balances on such accounts as
at such date were as set out in Exhibit HH. As at such date
neither Europe, nor any Acquired Entity, nor any CK Witco Entity
in relation to the Acquired Businesses had any borrowings, other
than as set out in Exhibit HH or trade creditors arising in the
ordinary course of business.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK WITCO
RELATING TO THE CONSIDERATION SECURITIES
To induce Yorkshire to enter into this Agreement and to issue
the Consideration Securities as contemplated by this Agreement, CK
Witco, represents and warrants to Yorkshire, and covenants and
agrees, as of the date hereof and again as of the Closing Date, as
follows:
4.1 Investment Intentions. CK Witco (i) will be acquiring
the Consideration Securities solely for its account, for investment
purposes only and with no current intention or plan to distribute,
sell, or otherwise dispose of any of the Consideration Securities;
(ii) is not a party to any agreement or other arrangement for the
disposition of any of the Consideration Securities; (iii) is an
"accredited investor" as defined in Securities Act Rule 501(a)
promulgated pursuant to the United States Securities Act of 1933,
as amended; (iv) (A) is able to bear the economic risks of an
investment in the Consideration Securities, (B) can afford to
sustain a total loss of that investment, (C) has such knowledge and
experience in financial and business matters that CK Witco is
capable of evaluating the merits and risks of the proposed
investment in the Consideration Securities, (D) has had an adequate
opportunity to ask questions and receive answers from the officers
of Yorkshire concerning any and all matters relating to the
transactions contemplated hereby, Yorkshire and the Consideration
Securities, including, the plans for the operations of the business
of Yorkshire, the business, operations, and financial condition of
Yorkshire, and any plans of Yorkshire, and (E) has asked all
questions of the nature described in preceding clause (D), and all
those questions have been answered to CK Witco's satisfaction.
4.2 Standstill; Sale of Consideration Securities. CK
Witco agrees that it shall not at any time prior to the first
anniversary of the Effective Date and Time without the prior
written consent of Yorkshire (i) purchase or acquire, either
directly or indirectly, any equity securities, debt securities, any
other instrument convertible into or exchangeable for equity or
debt securities, or any other instrument, option or right to
acquire any of the equity securities or debt securities of
Yorkshire or (ii) sell, convey, transfer, assign or otherwise
dispose of, or hedge or swap its risk in respect of, the
Consideration Securities. For a period of one (1) year after the
first anniversary of the Effective Date and Time, CK Witco agrees
that it shall dispose of the Consideration Securities only after
consultation with Yorkshire's then retained broker with a view to
ensuring an orderly marketing and liquidation of the Consideration
Securities.
4.3 Listing Particulars. CK Witco hereby acknowledges
that it has had a proper opportunity to consider and to comment on
the pages of the Listing Particulars attached to this Agreement as
Exhibit II and the factual information marked "Reviewed" thereon is
true and accurate in all material respects and not misleading
because of any omission or ambiguity and the activities of CK
Witco, Colors, Holdings, Europe, the Acquired Businesses, and the
Acquired Entities are fairly and accurately described in each such
document. Attached to this Agreement as Exhibit II-1 are the
"Listing Particulars".
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF YORKSHIRE,
AMERICAS
As an inducement to CK Witco, Colors, Holdings and Europe to
enter into this Agreement, and to consummate the transactions
contemplated by this Agreement, subject to the qualifications set
forth in the Yorkshire Disclosure Memorandum, Yorkshire and
Americas, jointly and severally, represent, warrant and covenant,
as of the date hereof and again as of the Closing Date, as follows:
5.1 Organization. Yorkshire: (a) is a public company
limited by shares organized and existing under the laws of England
and Wales and (b) is entitled to own or lease, or will own or
lease, its assets and properties and to carry on its business as
and in places where the business is conducted and the properties
are owned or leased. Americas: (a) is a corporation duly
organized, validly existing and in good standing under the laws of
the State of South Carolina, United States of America and (b) is
entitled to own or lease, or will own or lease, its assets and
properties and to carry on its business as and in places where the
business is conducted and the properties are owned or leased.
5.2 Authorization; No Inconsistent Agreements. Each of
Yorkshire and Americas has full corporate power and authority to
make, execute and perform this Agreement and the Additional
Agreements and the transactions contemplated by this Agreement and
the Additional Agreements. This Agreement has been duly and
validly authorized and approved by all necessary corporate action
on the part of Yorkshire (except for the passing of the
Resolutions) and Americas on or prior to the date of this
Agreement. All transactions required under this Agreement to be
performed by each of Yorkshire and Americas will be duly and
validly authorized and approved by all necessary corporate action
on their part prior to the Closing Date. Subject to satisfaction
of the conditions set forth elsewhere in this Agreement, this
Agreement has been duly and validly executed and delivered on
behalf of each of Yorkshire and Americas by its duly authorized
officers, and this Agreement constitutes the valid and legally
binding obligation of each of them, enforceable, subject to general
equity principles, in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally. Neither the execution and delivery of this Agreement or
any Additional Agreement, nor the consummation of the transactions
contemplated by this Agreement or any Additional Agreement, will
constitute a violation or breach of the memorandum and articles of
association or certificate of incorporation or By-Laws of either of
them.
5.3 Dividends in relation to Consideration Securities.
The Consideration Securities will rank pari passu in all respects
with the Ordinary Shares of Yorkshire in issue at the Effective
Date and Time. With respect to the Consideration Securities,
Holdings hereby irrevocably waives any dividend or other
distribution declared, paid or made in respect of the financial
year of Yorkshire ending on 31st December 1999.
5.4 Financing. Yorkshire has no reason to believe that at
the Effective Date and Time it will not have available all funds
necessary to perform its obligations under this Agreement,
including consummating the transactions contemplated by this
Agreement, on the terms contemplated hereby and the payment of all
fees and expenses relating to such transactions. Yorkshire has
obtained commitments from financial institutions with respect to
obtaining of all such funds as are necessary to pay the Purchase
Price.
5.5 No Violation; Compliance with Laws. None of
Yorkshire nor its controlled subsidiaries is in default under or
in violation of (a) its memorandum and articles of association or
other organizational and foundation documents, as appropriate, or
(b) any Order or Law, and their respective operations have been
conducted, in all material respects, in accordance with, and are
in compliance with, all applicable Laws. None of Yorkshire nor
its controlled subsidiaries has received any notification of any
asserted present or past failure by any of them to comply with
any Order or Laws.
5.6 Consents. The execution and delivery by Yorkshire
and Americas of this Agreement and the Additional Agreements to
which any of them is to be a party on the Closing Date, the
consummation of the transactions contemplated in this Agreement
or the Additional Agreements, and their performance under or
pursuant to this Agreement or any Additional Agreement, as
appropriate, do not require the consent, approval or action of,
or any filing with or notice to, any Government or other Person,
other than for the HSR Filing and the approval of the members of
Yorkshire.
5.7 Financial Statements. The financial statements and
accounts of Yorkshire included within the Listing Particulars
have been prepared from the books and records of Yorkshire and
have been prepared in accordance with United Kingdom GAAP
consistently applied and present fairly the financial condition
of Yorkshire as at their respective dates and the results of
operations, shareholders equity and financial position for the
periods then ended.
5.8 Litigation; Contingencies. There are no Actions
existing or, to the knowledge of Yorkshire, threatened against,
by or affecting Yorkshire or any of its controlled subsidiaries
that if determined adversely to them would have a material
adverse effect on the financial condition of Yorkshire taken as a
whole.
6. CONDUCT OF BUSINESS PENDING CLOSING
CK Witco covenants and agrees that, except as may otherwise
be provided or permitted in this Agreement or set forth in the CK
Witco Disclosure Memorandum, without the prior written consent of
Yorkshire, between the date of this Agreement and the Closing
Date:
6.1 Business in the Ordinary Course. The Acquired
Businesses will be conducted only in the ordinary and usual
course and consistent with prior practices, without the creation
of any indebtedness for borrowed money or the creation or
sufferance of any Lien on any of the Transferred Assets, the
Acquired Businesses, or the share capital of any of Colors,
Holdings, Europe or any Acquired Entity. Without limiting the
generality of the foregoing, CK Witco covenants, agrees and
undertakes, on behalf of itself and on behalf of Colors,
Holdings, Europe, and each Acquired Entity, as follows:
(a) their business shall be carried out in the
ordinary course, in a manner consistent with past practices and
professional usage applicable to such business, including but not
limited to (i) keeping Holdings, Europe, Colors and each Acquired
Entity intact, (ii) using reasonable best efforts to keep
available the services of the present employees of each of them,
and (iii) using best efforts to maintain the goodwill associated
with each of them, including but not limited to preserving the
relationships of customers, suppliers and others having business
dealings with each of them,
(b) Yorkshire will be kept fully and regularly
informed of the progress of the business of each of the Acquired
Businesses,
(c) it will not take any significant action or
decision affecting or likely to affect any Acquired Business or
any of Holdings or Europe or any Acquired Entity in a material
manner shall be taken without Yorkshire's prior approval (with
such prior approval not to be unreasonably withheld),
(d) it will not transfer title or use of any of the
Transferred Assets except as required by law or pursuant to
contracts in place as of the date hereof (copies of which are
attached to the CK Witco Disclosure Memorandum (other than those
relating to sales of finished goods in the ordinary course), and
sales of obsolete equipment having an aggregate value of less
than US$150,000 (or its reasonable equivalent in another
currency),
(e) it will maintain the Transferred Assets in good
condition, and except for sales of products in the ordinary
course of business, will not move any material Transferred Asset
to any property not currently owned,
(f) it will not create or permit to be created any
Lien on any of its Transferred Assets nor allow to be created a
situation pursuant to which the above is likely to occur,
(g) it will not incur any liability or obligation
(absolute, accrued, contingent or otherwise) or assume,
guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, other than
in the ordinary course of business,
(h) it will not vary the material terms or
conditions of any material agreement included within, or relating
to other of, the Transferred Assets nor default or remain in
default in the performance thereof,
(i) it will not authorize or issue any additional
equity securities,
(j) it will not change its usual accounting methods
or practices, in particular, as to depreciation and amortization,
except as required by GAAP or applicable law,
(k) it will not exercise puts and calls with
respect to any futures contract, derivative or similar financial
product and more generally modify its current portfolio thereof
except in the usual course or without prior notice to and written
approval of Yorkshire,
(l) it will not take any action which constitutes
or may constitute a default or omit to take such action as may be
required to prevent a default under any relevant agreement,
document or instrument,
(m) it will not change the duties and powers of any
senior executives of Europe or any Acquired Entity, except as
required by law or contract,
(n) it will maintain its books, accounts and
records, or
(o) it will maintain in full force and effect all
its insurance currently in effect.
(p) it will collect from debtors and pay creditors
in the to ordinary course of business consistent with past
practice.
(q) it will not incur any borrowings of any kind
other than normal trade credit;
(r) it will not pay dividends, levy or pay any
management charges or take any other action which will reduce the
Closing Net Assets below the figure referred to Paragraph 1.4(c).
6.2 No Material Changes. Except as may be expressly
permitted by this Agreement, no action will be taken which will
materially alter the organization, capitalization, or financial
structure, practices or operations of the Acquired Businesses,
Colors, Holdings, Europe or any Acquired Entity.
6.3 Compensation. No increase will be made in the
compensation payable or to become payable to any director,
officer, employee or agent of the Acquired Businesses, Colors,
Europe or any Acquired Entity and no bonus or profit sharing
payment or other arrangement (whether current or deferred) will
be made to or with that director, officer, employee or agent
except normal individual increases in compensation to directors,
officers, employees or agents consistent with past practice, or
as required by law or contract. No officer, director or employee
will be hired, and no consultant or agent will be retained, at a
salary or fee in excess of US$50,000 (or its reasonable
equivalent in any other currency).
6.4 Employee Benefit Plans. In respect of employees of U.S.
Asset Acquired Businesses: CK Witco shall take such actions with
respect to the Employee Benefit Plans, and refrain from such
actions, as are necessary to maintain the qualification of each
such plan under Section 401(a) of the Code, and the exemption of
the trust maintained for each such plan under Section 501(a) of
the Code. CK Witco shall timely make all contributions and other
payments to the Employee Benefit Plans which it is obligated to
make as of the date hereof. Other than contributions or payments
declared, required or obligated to be paid to the Employee
Benefit Plans as of the date hereof, no contribution shall be
declared for or paid to any such plan. Except as required by
Applicable Law or contractual commitment existing as of the date
hereof, no amendment or change to the provisions of any Employee
Benefit Plan shall be made or adopted prior to the Effective Date
and Time, and each of such plans shall be continued in accordance
with its terms.
7. CONDITIONS TO OBLIGATIONS OF YORKSHIRE AND THE YORKSHIRE
ENTITIES
The obligations of Yorkshire and the Yorkshire Entities
under this Agreement to acquire the Transferred Assets, Acquired
Businesses, Europe and the Acquired Entities and consummate the
transactions contemplated by this Agreement are subject to the
fulfillment and satisfaction of each and every one of the
following conditions on or prior to the Closing, any or all of
which may be waived in writing in whole or in part by Yorkshire:
7.1 Representations and Warranties. Subject to the
exceptions and supplemental information set forth in the CK Witco
Disclosure Memorandum, the representations and warranties of CK
Witco contained in this Agreement, the Additional Agreements and
in any certificate, instrument, schedule, agreement or other
writing delivered by or on behalf of, or in respect of, the
Transferred Assets, the Acquired Businesses, CK Witco, the other
CK Witco Entities, Europe and the Acquired Entities in connection
with the transactions contemplated by this Agreement or the
Additional Agreements will be true and correct in all material
respects as of the date when made and will be deemed to be made
again at and as of the Closing Date and will be true and correct
in all material respects at and as of the Closing Date.
7.2 Compliance with Covenants and Conditions. CK Witco,
Colors, Europe and each other CK Witco Entity and the Acquired
Entities shall have performed and complied in all material
respects with all covenants, agreements and conditions required
by this Agreement to be performed or complied with by them prior
to or on the Closing Date.
7.3 Closing Certificates. CK Witco, Colors, Europe,
Holdings, the other CK Witco Entities, and the Acquired Entities
will have delivered to Yorkshire certificates, executed by their
appropriate officers or other Representative, dated as of the
Closing, certifying in such detail as Yorkshire may request as to
the fulfillment and satisfaction of the conditions specified in
Paragraphs 7.2 and 7.3.
7.4 Consents. All registrations, permits, filings,
applications, notices, consents, approvals, orders,
qualifications, waivers and waiting periods listed in Paragraph
7.4 of the CK Witco Disclosure Memorandum and indicated therein
as being a condition to the Closing for Yorkshire shall, as
applicable, have been filed, made or obtained, or shall have
expired, and the same shall continue to be in full force and
effect and rescission thereof or other challenge thereto shall
not have been threatened or initiated.
7.5 Passage of Resolutions. The Resolutions shall have
been passed at the Extraordinary General Meeting.
7.6 Admission to Official List. The London Stock Exchange
shall have admitted to the Official List the issued Ordinary
Share capital of Yorkshire (as enlarged by the issue of the
Consideration Securities), subject only to allotment (and such
admission shall have become effective by the announcement by the
London Stock Exchange of its decision to admit such shares for
listing in accordance with the listing rules of the London Stock
Exchange and the London Stock Exchange shall not have withdrawn
such grant before such announcement.)
7.7 No Inconsistent Requirements. No Action will have
been commenced by any Government or Person seeking to enjoin or
prohibit the transactions contemplated by this Agreement or any
Additional Agreement.
7.8 No Injunction. No temporary restraining order,
preliminary or permanent injunction or other order by any court
of competent jurisdiction which prohibits the consummation of the
transactions contemplated in this Agreement will have been issued
and remain in effect on the Closing Date; provided, however, that
Yorkshire will use all reasonable efforts to have each and every
relevant order or injunction vacated or reversed prior to the
Closing Date.
7.9 Additional Agreements and Closing Documents. Yorkshire
will have received duly executed and delivered execution
counterparts of each Additional Agreement and Closing Document,
in each case, signed by each relevant Person.
7.10 Related Party Matters. All agreements and commitments
of any kind between Colors, Holdings, Europe, the CK Witco
Entities, any Acquired Entity, and any other Person Affiliated
with CK Witco, on the one hand, and any Related Party on the
other, will have been terminated to the satisfaction of Yorkshire
without Liability.
7.11 Adverse Conditions. There shall not have been any
material adverse change in the assets, business or financial
condition of the Acquired Businesses.
8. CONDITIONS TO OBLIGATIONS OF THE CK WITCO ENTITIES
The obligations of CK Witco, Colors, Europe, Holdings,
and the other CK Witco Entities under this Agreement to sell the
Transferred Assets, Acquired Businesses, Europe and the Acquired
Entities and consummate the transactions contemplated by this
Agreement are subject to the fulfillment and satisfaction of each
and every one of the following conditions on or prior to the
Closing, any or all of which may be waived in writing in whole or
in part by CK Witco:
8.1 Representations and Warranties. Subject to the
exceptions and supplemental information set forth in the
Yorkshire Disclosure Memorandum, the representations and
warranties of Yorkshire contained in this Agreement, the
Additional Agreements and in any certificate, instrument,
schedule, agreement or other writing delivered by or on behalf
of, any Yorkshire Entity in connection with the transactions
contemplated by this Agreement or the Additional Agreements will
be true and correct in all material respects as of the date when
made and will be deemed to be made again at and as of the Closing
Date and will be true and correct in all material respects at and
as of the Closing Date.
8.2 Compliance with Covenants and Conditions. Each
Yorkshire Entity shall have performed and complied in all
material respects with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by
them prior to or on the Closing Date.
8.3 Closing Certificates. Each Yorkshire Entity will
have delivered to CK Witco certificates, executed by their
appropriate officers or other Representative, dated as of the
Closing, certifying in such detail as CK Witco may request as to
the fulfillment and satisfaction of the conditions specified in
Paragraphs 8.2 and 8.3.
8.4 Consents. All registrations, fillings,
applications, notices, consents, approvals, orders,
qualifications, waivers and waiting periods listed in Paragraph
8.4 of the Yorkshire Disclosure Memorandum and indicated therein
as being a condition to the Closing for CK Witco shall, as
applicable, have been filed, made or obtained, or shall have
expired.
8.5 Passage of Resolutions. The Resolutions shall have
been passed at the Extraordinary General Meeting.
8.6 No Inconsistent Requirements. No Action will have
been commenced by any Government or Person seeking to enjoin or
prohibit the transactions contemplated by this Agreement or any
Additional Agreement.
8.7 No Injunction. No temporary restraining order,
preliminary or permanent injunction or other order by any court
of competent jurisdiction which prohibits the consummation of the
transactions contemplated in this Agreement will have been issued
and remain in effect on the Closing Date; provided, however, that
CK Witco will use all reasonable efforts to have each and every
relevant order or injunction vacated or reversed prior to the
Closing Date.
8.8 Admission to Official List. The London Stock Exchange
shall have admitted to the Official List the issued Ordinary
Share capital of Yorkshire (as enlarged by the issue of the
Consideration Securities), subject only to allotment (and such
admission shall have become effective by the announcement by the
London Stock Exchange of its decision to admit such shares for
listing in accordance with the listing rules of the London Stock
Exchange and the London Stock Exchange shall not have withdrawn
such grant before such announcement.)
8.9 Additional Agreements and Closing Documents. CK
Witco will have received duly executed and delivered execution
counterparts of each Additional Agreement and Closing Document,
in each case signed by each relevant Person.
8.10 Adverse Conditions. There shall not have been any
material adverse change in the assets, business or financial
condition of Yorkshire.
9. INDEMNITIES
9.1 General Indemnification of the Yorkshire Entities.
In accordance with and subject to the further provisions of this
Article 9, CK Witco, Colors and Holdings (each, an "Indemnitor")
will, jointly and severally, indemnify and hold harmless the
Yorkshire Entities, Europe, the Acquired Entities and their
Affiliates, and their respective officers, directors, agents and
employees (collectively, "Indemnitees"), from and against and in
respect of any and all loss, damage, Liability, cost and expense,
including reasonable attorneys' fees and amounts paid in
settlement (collectively, the "Indemnified Losses"), suffered or
incurred by any one or more of the Indemnitees by reason of, or
arising out of:
(a) any misrepresentation, breach of warranty or breach
or nonfulfillment of any agreement of CK Witco, Colors, Holdings,
Europe, any other CK Witco Entity or any Acquired Entity
contained in this Agreement (other than the Taxation Schedule),
any Additional Agreement, or in any Closing Document;
(b) all liabilities and obligations of, or claims,
demands or actions against, Europe, the Acquired Entities, the
Acquired Businesses, or the Transferred Assets, whether known or
unknown, accrued, absolute, contingent or otherwise, existing (i)
as of the date of this Agreement or (ii) at any time hereafter
with respect to periods on or prior to the Effective Date and
Time (without regard as to whether the same also relates to or is
in respect of a period after the Effective Date and Time), to the
extent not an Assumed Liability or a European Retained Liability,
after any adjustment pursuant to Paragraph 1.4;
(c) the ownership, operation or conduct of the Excluded
Properties, the other Excluded Assets and the Americas IPD
Business;
(d) any and all Actions, suits, proceedings, claims, demands,
assessments, judgments, fees and expenses, incident to any of the
foregoing or incurred in investigating or attempting to avoid any
Actions, suits, proceedings, claims, demands, assessments,
judgments, fees and expenses or to oppose the imposition of any
Actions, suits, proceedings, claims, demands, assessments,
judgments, fees and expenses, or in enforcing this Agreement,
including the provisions of this Article 9;
provided that, no Indemnitor shall be obligated to indemnify any
Indemnitee under this Paragraph 9.1 with respect to any
Indemnified Losses under clause (a) of this Paragraph 9.1 (x) to
the extent any such inaccuracy, breach, nonperformance or
violation was disclosed by CK Witco in any written supplement to
the CK Witco Disclosure Memorandum delivered to Yorkshire prior
to the Closing and (y) such inaccuracy, breach, nonperformance or
violation, together with all other inaccuracies, breaches,
failures to perform or violations described in such written
statement would have caused any of the conditions set forth in
either of Paragraphs 7.1 and 7.2 not to be satisfied as of the
Closing Date (without giving effect to any waiver thereof or any
supplement to the CK Witco Disclosure Memorandum).
9.2 Payment. Subject to the provisions of Paragraph
1.6(b) and Paragraph 9.3, (i) after a final, non-appealable
judgment has been rendered or a settlement has been reached in
respect of a third party claim or Action, or (ii) in the case of
a claim for Indemnified Losses arising other than pursuant to a
third party claim or Action, after any award or judgment has been
issued or a settlement has been reached, Indemnitor shall
reimburse the Indemnitees within 30 days of written demand on the
Indemnitor for any amounts to which Indemnitees are entitled to
indemnification pursuant to this Article 9.
9.3 Defense of Claims.
(a) Except as provided in Paragraph 9.3(b) and 9.6, if
any Action by a third party arises after the date of this
Agreement for which Indemnitor may be liable under the terms of
this Agreement (other than under the Taxation Schedule to which
the provisions of that Schedule shall apply in place of the
provisions of this Paragraph 9.3), then the Indemnitees will
notify Indemnitor in accordance with the provisions of this
Article 9, and will give Indemnitor a reasonable opportunity:
(i) to conduct any proceedings or negotiations in
connection with the Action and necessary or appropriate to defend
the Indemnitees;
(ii) to take all other required steps or proceedings to
settle or defend any Action; and
(iii) to employ counsel reasonably acceptable to Indemnitees
to contest any Action in the name of the Indemnitees or
otherwise.
Subject to Paragraph 9.3(b), the expenses of all proceedings,
contests or lawsuits with respect to the Actions will be borne by
Indemnitor.
(b) Notwithstanding Paragraph 9.3(a), if (i) an
Indemnitee determines in good faith that there is a reasonable
probability that such an Action may adversely affect Yorkshire
and its Affiliates other than as a result of monetary damages for
which it would be entitled to indemnification hereunder, or (ii)
the Action seeks injunctive or similar relief, or (iii) it is an
Action brought or initiated by a Government, an Indemnitee may,
by notice to the Indemnitor, assume the exclusive right to
defend, compromise or settle such Action. The Indemnitor shall
be obligated to reimburse the legal fees, costs and expenses of
that defense.
(c) If Indemnitor does not assume the defense of, or if
after so assuming the Indemnitor fails to defend, any such
Action, then the Indemnitees may defend against any claim or
Action in the manner they may deem appropriate and the
Indemnitees may settle any claim or Action on the terms they deem
appropriate, and Indemnitor will promptly reimburse the
Indemnitees for the amount of all expenses, legal and otherwise,
reasonably and necessarily incurred by the Indemnitees in
connection with the defense against and settlement of any claim
or Action. If no settlement of any claim or Action is made,
Indemnitor will satisfy any judgment rendered with respect to any
claim or in any Action, before the Indemnitees are required to do
so, and pay all expenses, legal or otherwise, reasonably and
necessarily incurred by the Indemnitees in the defense of any
claim or Action.
(d) If a judgment is rendered against any of the
Indemnitees in any Action covered by the indemnification under
this Agreement, or any Lien in respect of any judgment attaches
to any of the assets of any of the Indemnitees, Indemnitor will
immediately upon any entry or attachment pay the relevant
judgment in full or discharge the relevant Lien unless, at the
expense and direction of Indemnitor, an appeal is taken under
which the execution of the judgment or satisfaction of the Lien
is stayed. If and when a final judgment is rendered in any
action, Indemnitor will forthwith pay any judgment or discharge
any Lien before any of the Indemnitees is compelled to do so.
(e) Any notice required to be given to Indemnitor
pursuant to Paragraph 9.3(a) shall be given no later than the
latter of: (i) the end of the first half of the term within which
an answer or other response to the Action is required to be made
(the "Answer Period") and (ii) two Business Days after receipt by
an Indemnitee of notice of the Action. Indemnitor shall assume
the defense of any Action, if at all, by notice to Indemnitees
no later than the earlier of: (i) the end of the second third of
the Answer Period and (ii) three Business Days prior to the date
by which an answer or other response to the Action is required to
be made. Indemnitor's failure to notify Indemnitees within the
specified time shall be conclusively deemed an election by
Indemnitor not to assume such defense. Any failure by
Indemnitees to give the requisite notice within the time
specified in this Paragraph 9.3(e) will not relieve Indemnitor of
the obligation to indemnify Indemnitees pursuant to this Article
9 except to the extent that the defense of any Action is
materially prejudiced by the delay.
(f) The Indemnitor or the Indemnitee, as
appropriate, shall have the right to participate in the defense
of any Action related to an Indemnified Loss at its sole cost and
expense and the cost and expense of that participation shall not
be an Indemnified Loss.
9.4 Indemnification of the CK Witco Entities by
Yorkshire and Americas. Yorkshire and Americas, jointly and
severally, will indemnify and hold harmless the CK Witco Entities
from and against and in respect of any and all loss, damage,
Liability, cost and expense, including reasonable attorneys' fees
and amounts paid in settlement, suffered or incurred by any one
or more of them by reason of, or arising out of: (i) any
misrepresentation, breach of warranty or breach or nonfulfillment
of any agreement of a Yorkshire Entity contained in this
Agreement or in any Additional Agreement or Closing Document; and
(ii) any and all Actions, suits, proceedings, claims, demands,
assessments, judgments, fees and expenses, incident to any of the
foregoing or incurred in investigating or attempting to avoid any
Actions, suits, proceedings, claims, demands, assessments,
judgments, fees and expenses or to oppose the imposition of any
Actions, suits, proceedings, claims, demands, assessments,
judgments, fees and expenses, or in enforcing this Agreement,
including the provisions of this Paragraph 9.4 including, any
Action, suit, proceeding, claim, demand, assessment, judgment,
fee or expense related to any breach by Yorkshire after the
Closing Date of any distributorship and sales representative
agreements included as an Assigned Contract or a Contract;
provided, however, that Yorkshire shall not be obligated to
indemnify any Person under this Paragraph 9.4 with respect to any
losses to the extent any such inaccuracy, breach, nonperformance
or violation was disclosed by Yorkshire in any written supplement
to the Yorkshire Disclosure Memorandum delivered to CK Witco
prior to the Closing and such inaccuracy, breach or
nonperformance, together with all other inaccuracies, breaches
and failures to perform, would have caused any of the conditions
set forth in Paragraph 8.1 or 8.2 not to be satisfied as of the
Closing Date (without giving effect to any waiver thereof or any
supplement to the Yorkshire Disclosure Memorandum).
9.5 Environmental Indemnity.
9.5.1 Definitions
9.5.1.1 As used in this Agreement:
"Environmental Law" means any and all laws, decrets,
statutes, rules, regulations, treaties, directives, directions,
codes of practice, orders (including consent orders or decrees),
arretes, notices, demands or decisions of the courts or of any
governmental authority or agency or any regulatory body having
jurisdiction, including, but not limited to, the European Union,
whether or not in force as of the Effective Date and Time,
relating to pollution, protection or conservation of the
environment, including, but not limited to, damage to realty,
personalty, natural resources or human health. The term
"Environmental Law" also includes any common law theory of
recovery for Environmental Damage, whether codified or judge
made, including, but not limited to nuisance, trespass,
ultrahazardous activity or res ipsa loquitur.
"Environmental Damage" means any condition of pollution or
contamination of the environment, damage to realty, personalty or
natural resources or harm to human health resulting from the
release, discharge, emission, entry, introduction, storage,
labeling, handling, treatment, management, manufacture,
processing, transportation, disposal or deposit of any Hazardous
Substance or any waste, pollutants or contaminants, that at the
Effective Date and Time is in contravention of any Environmental
Law, whether or not such condition was a violation of any
Environmental Law at the time the condition was created.
"Environmental License" means any material permit, license,
authorization, consent or other approval required as of the
Effective Date and Time by Yorkshire pursuant to any applicable
Environmental Law so as to enable Yorkshire to carry on the
Acquired Businesses at the Acquired Properties in the same manner
and to the same extent as did CK Witco as of the Effective Date
and Time.
"Environmental Losses" means all and any liabilities,
obligations, commitments, losses, fines, penalties, sanctions,
costs and expenses (including reasonable legal, engineering and
other professional fees) of any kind whatsoever (including any
costs and expenses incurred in defending or resolving any suits,
actions or claims, whether administrative, civil or criminal, or
in appealing against any judgment, notice or award made in
relation thereto), interest, deficiencies, damages or Remedial
Works (but excluding any consequential liability, obligation,
commitment, loss, cost, expense or damage, including without
limitation any such liability, obligation, commitment, loss,
cost, expense or damage attributable to the disruption of the
operations of any business or use or value of any property)
resulting from Environmental Damage, whether incurred alone or
jointly with any other person. Environmental Losses includes,
but is not limited to, all such suits, actions, claims, fines,
penalties and sanctions, regardless of their merits, brought,
asserted or levied by any Environmental Regulator or other third
party.
"Environmental Regulator" means any governmental agency
charged with the enforcement or application of any applicable
Environmental Law.
"Environmental Reports" means those reports prepared on
behalf of Yorkshire in agreed form.
"Hazardous Substance" includes (i) any "hazardous material,"
"hazardous substance," "hazardous waste," "oil," "regulated
substance," "toxic substance," "restricted hazardous waste,"
"special waste" or words of similar import as defined under any
Environmental Law; (ii) polychlorinated biphenyls; (iii) any
substance, the generation, storage, transportation, utilization,
disposal, management, release or location of which, on, under or
from the Covered Properties is prohibited or otherwise regulated
pursuant to any Environmental Law and (iv) asbestos in any form
except asbestos that is wholly contained within the structure and
fixtures of buildings and plants or equipment at the Acquired
Properties.
"Covered Properties" means those parcels of land more
particularly described in Exhibit JJ attached to this Agreement
"Remedial Works" means:
(a) the carrying out of any works or activities required
pursuant to the provisions of this Paragraph 9.5 or under any
Environmental Law; or
(b) any decontamination, clean-up, restoration, modification,
improvement or other work required under the provisions of this
Paragraph 9.5 or in respect of or to avoid or mitigate any
breach of any Environmental Law (which includes, but is not
limited to, the payment of any costs and expenses as is required
by an Environmental Regulator) with respect to the Covered
Properties or any adjoining or third party land.
9.5.1.2 Terms not defined in this Paragraph 9.5.1 will
have the same meaning as elsewhere in this Agreement and the
provisions of Paragraph 9.5 will apply in relation to the
definitions used in and the interpretation of this Paragraph 9.5
except as otherwise specifically provided in this Paragraph
9.5.1.
9.5.2 General Environmental Liability
9.5.2.1 CK Witco, Colors and Holdings will defend,
indemnify and hold harmless Yorkshire, the Yorkshire Entities,
the Acquired Entities and Europe for any Environmental Loss
suffered or incurred by Yorkshire, the Yorkshire Entities,
Affiliates of Yorkshire, the Acquired Entities or Europe after
the Effective Date and Time provided the Environmental Damage
existed as of the Effective Date and Time and is resulting from:
(a) operations or acts or omissions carried out at the
Covered Properties by any person, whether or not controlled by CK
Witco, prior to the Effective Date and Time;
(b) any pollution, contamination on, under or at other
properties or migration of Hazardous Substances onto other
properties which is caused, or alleged by a third party or
Environmental Regulator to be caused, by operations or activities
carried out by any person, whether or not controlled by CK Witco,
at the Covered Properties prior to the Effective Date and Time;
(c) the operation of the Acquired Businesses by CK Witco
prior to the Effective Date and Time.
9.5.2.2 CK Witco will have the right, at its sole
discretion, and at its sole cost, to conduct, or cause to be
conducted, Remedial Works to comply with this Paragraph 9.5.2.
(a) Initial Notification.
(1) Upon Yorkshire's actual knowledge of any
Environmental Damage subject to indemnification under this
Agreement, Yorkshire will, with all reasonable haste, and prior
to incurring costs with respect to such Environmental Damage,
notify CK Witco of such Environmental Damage.
(2) Notwithstanding any other provision of this
Paragraph 9.5.2.2(a), Yorkshire may, without prior notification
to CK Witco, incur costs otherwise reimbursable by CK Witco
without compromising its rights under this Agreement in cases of
emergency, including, but not limited to immediate responses to
demands by Environmental Regulators and immediate threats to
human health or the environment posed by such Environmental
Damage. In such cases of emergency or immediate threats to human
health or the environment, Yorkshire shall notify CK Witco of any
Environmental Damage as soon as practicable but not more than 3
business days after incurring costs associated with such
Environmental Damage.
(b) Notice, Documents. CK Witco will provide Yorkshire
with reasonable and timely written notice prior to the
undertaking of any Remedial Works to satisfy the requirements of
this Paragraph 9.5.2. CK Witco will provide Yorkshire with
written information regarding the nature, scope and schedule of
the planned Remedial Works within a reasonable period of time
under the circumstances after it has received notice from
Yorkshire. Further, CK Witco will also provide Yorkshire with
one copy of any maps, drawings, plans, engineering documents or
work plans relating to any such Remedial Works at the time of
such notice or as soon as practicable after such documents are
available to CK Witco.
(c) Information, Approval of Reports. CK Witco will
provide Yorkshire with copies of all material correspondence
related to the Remedial Works or claim among itself, its
Contractors, third party claimants and Environmental Regulators,
as soon as practicable, including, but not limited to, all
reports, data, drawings, schedules, tables, work plans,
specifications, notices of deficiency and approvals. CK Witco
will allow Yorkshire, upon reasonable request and at Yorkshire's
cost, the opportunity to be present during the conduct of
Remedial Works and to split samples during any sampling or
assessment. CK Witco will submit to Yorkshire, prior to
submission to Environmental Regulators and third party claimants,
all reports, data and other correspondence for review. CK Witco
will not submit such reports, data and other correspondence to
Environmental Regulators without giving Yorkshire reasonable
opportunity to review and comment, unless required to do so under
applicable Environmental Law or other applicable requirement of
law. Yorkshire will review and comment on such correspondence,
reports and data in a timely manner, so as not to delay the
Remedial Work.
(d) Approval, Disruption of Operations, Access and
Compensation
(1) If CK Witco reasonably believes that the proposed
Remedial Works will cause substantial disruption to the
operations of Yorkshire, CK Witco will so advise Yorkshire in
writing, and include the nature, scope and duration of the
disruption. CK Witco will use reasonable efforts to design and
implement proposed Remedial Works to minimize any disruption,
including coordinating with Yorkshire so as to minimize
disruption. CK Witco will not indemnify Yorkshire for any losses
or damages resulting from changes in Yorkshire's operational
procedures required by the Remedial Works or required to comply
with any Environmental Laws or orders of any Environmental
Regulators as a result of such claims.
(2) Yorkshire will cooperate with CK Witco and will not
unreasonably interfere with the conduct of Remedial Works by CK
Witco. Yorkshire will grant to CK Witco reasonable access to the
Acquired Properties for the purposes of designing, implementing,
overseeing and conducting the Remedial Works. Further, Yorkshire
will provide CK Witco with any documents, information,
correspondence or communications related to the Remedial Works as
soon as practicable and via the most expeditious means (i.e.,
facsimile, overnight courier, electronic mail) practicable.
(e) Standards, Damage, Insurance.
(1) Yorkshire will cooperate with CK Witco to minimize
the cost of the Remedial Works, including assisting with
appropriate land use or other environmental restrictions which
may make Remedial Works unnecessary or more feasible or cost
effective, provided, that CK Witco will not seek to unreasonably
impair the reasonable use of the Acquired Properties.
(2) CK Witco will conduct all Remedial Work in a
competent and professional manner, and in compliance with all
material and applicable laws and regulations, including but not
limited to Environmental Laws. Further, CK Witco with obtain all
required licenses, permits and approvals required by
Environmental Regulators and any applicable laws, whether
Environmental Laws or otherwise. If the Remedial Work is
required by an order or directive from an Environmental
Regulator, CK Witco will conduct such Remedial Works to the
satisfaction of such Environmental Regulator, provided, that CK
Witco reserves all right to take administrative, judicial or
other applicable appeals, requests for reconsideration or the
like. CK Witco will provide Yorkshire with evidence of such
satisfaction as soon as practicable after receipt of such
evidence.
(3) For each separate Remedial Work, CK Witco will keep,
at its sole cost, in full force and effect, with insurance
companies licensed to do business in the jurisdiction of the
applicable Remedial Work, commercial general liability and
property damage insurance with a combined single limit of
coverage of no less than US$1,000,000 (or its reasonable
equivalent in another currency). CK Witco will, at its sole
cost, comply with any other insurance statutes or laws arising
from its status as an employer and entity licensed to do business
in the jurisdiction of the Remedial Work, including, but not
limited to carrying sufficient Automobile Liability and Worker's
Compensation Insurance to comply with applicable regulations. CK
Witco will provide Yorkshire with certificates of insurance on
all required policies and name Yorkshire as an additional named
insured on all required policies.
(f) Other Obligations of CK Witco. Election by CK Witco
to conduct Remedial Work under this Paragraph 9.5.2.2 does not
relieve CK Witco of its obligations under Paragraphs 9.5.2 and
9.5.3 to defend, indemnify and hold harmless Yorkshire from
Environmental Losses that can not be addressed by Remedial Work
alone, including, but not limited to fines, penalties and damages,
whether claimed by Environmental Regulators or third parties.
However, Yorkshire will notify CK Witco of any such Environmental
Losses and CK Witco shall have a right to provide a defense at its
sole cost and expense.
(g) Contractors CK Witco may, at its sole discretion and
sole cost, employ contractors and subcontractors ("Contractors") to
conduct Remedial Works required under Paragraphs 9.5.2 and 9.5.3.
CK Witco will notify Yorkshire of its decision to employ a
Contractor as soon as practicable after the decision is made. Any
Contractor employed by CK Witco will be professional and competent
in all skills required in the environmental consulting and
engineering professions. Further such Contractors will be skilled
and competent in any tasks required for the Remedial Works. The
Contractors will have all required licenses, permits and approvals
required by Environmental Regulators and any applicable laws,
whether Environmental Laws or otherwise. The Contractor will carry
insurance policies at such levels as are reasonably satisfactory to
Yorkshire, will provide certificates of insurance acceptable to
Yorkshire and will designate Yorkshire as additional named insured
on all such policies. CK Witco will continue to be bound by all
requirements of Paragraph 9.5.2, including but not limited to
notice requirements, in the event CK Witco chooses to engage a
Contractor to conduct Remedial Works.
(h) Confidentiality
(1) After notice to CK Witco of Environmental Damage and
acknowledgment by CK Witco of its obligations under this Agreement
regarding such Environmental Damage, Yorkshire will not communicate
with any third party regarding such Environmental Damage without
the written consent of CK Witco. Notwithstanding the previous
sentence, Yorkshire may communicate with any third party regarding
such Remedial Work if such communications are required by
Environmental Laws or other applicable laws, including but not
limited to disclosures based on securities laws. If practicable,
Yorkshire will advise CK Witco its intent to engage in
communications covered by this Paragraph 9.5.2.2(h)(1) and permit
CK Witco to review and comment on the nature of the communication
or disclosure or to make such disclosure itself.
(2) CK Witco will not communicate with any third parties,
including Environmental Regulators, regarding any confidential
business, processes or operations of Yorkshire at any time, unless
such communications are required by Environmental Laws or other
applicable laws, including but not limited to disclosures based on
securities laws.
(i) Equipment
(1) All equipment, machinery, devices or implements
purchased for use in the Remedial Works that are to be permanently
affixed or installed at the Acquired Properties and relate or
appertain to the operations and processes of Yorkshire will be
purchased by and at sole cost to CK Witco in the name of Yorkshire
so that all manufacturer's or seller's warranties, express or
implied, general or limited, will inure to the benefit of Yorkshire
as though Yorkshire had purchased the equipment.
(2) All other such equipment purchased for the Remedial
Work, but not related to or appertaining to the operations and
processes of Yorkshire will be purchased by and at sole cost to CK
Witco in CK Witco's name. CK Witco will be responsible for the
repair, maintenance and upkeep of this equipment, whether before or
after the termination of the 5 year period described in Paragraph
9.5.2.6. Such repair and maintenance will be considered part of
the Remedial Work.
(j) Coordination of Remedial Work and Business
Interference
(1) Notwithstanding any other provision of this Agreement,
if CK Witco elects to perform Remedial Work as provided in this
Paragraph 9.5.2.2 to satisfy its obligations under Paragraphs 9.5.2
or 9.5.3, CK Witco will not be responsible for any loss of profits
and business by Yorkshire resulting from the disruption of
Yorkshire's operations due to any Remedial Works conducted by CK
Witco, except that CK Witco will indemnify and hold harmless
Yorkshire for:
(i) the reasonable costs incurred by Yorkshire to purchase,
from reputable suppliers or manufacturers, product equivalent in
function, application and quality to that of Yorkshire, to meet its
obligations under supply contracts existing as of the time of
notification from CK Witco to Yorkshire of the Remedial Work, but
only to the extent that such costs exceed all costs that would have
been incurred by Yorkshire to meet such obligations in the absence
of such Remedial Work;
(ii) the reasonable direct labor costs, including but not
limited to "overtime," incurred by Yorkshire to accelerate
production prior to or after the Remedial Work to meet its
obligations under supply contracts existing as of the time of
notification from CK Witco to Yorkshire of the Remedial Work; or
(iii) a combination of (i) and (ii) when purchasing
replacement product or accelerating production alone will not allow
Yorkshire to satisfy its existing supply contracts or when such
combination will result in lower total costs that are the subject
of the indemnity provided to Yorkshire by CK Witco under this
Paragraph 9.5.2.2(j) than purchasing replacement product or
accelerating production alone.
(2) Yorkshire will notify CK Witco of all supply contracts
that it reasonably believes will be affected by each Remedial Work
within 5 Business Days of notification by CK Witco that it plans to
undertake a Remedial Work. CK Witco will be responsible for only
those supply Contracts with respect to which it has received such
notice from Yorkshire.
9.5.2.3 Notwithstanding any other provision of this
Agreement, CK Witco will not be liable to Yorkshire for any
Environmental Damage, Hazardous Substance, breach of Environmental
Law, or Environmental Losses to the extent that such Environmental
Damage, Hazardous Substance, breach of Environmental Law or
Environmental Losses arise out of or are related to an act or
omission of Yorkshire, its employees or agents or any third party,
after the Effective Date and Time. CK Witco will not be liable to
Yorkshire for Environmental Losses arising from the modification or
alteration of processes or the expansion of operations. Provided,
however, that "the modification or alteration of processes" or "the
expansion of operations" will not be interpreted to include
discovery of unrelated Environmental Damage during any construction
or other activities undertaken in connection with any modification
or alteration of processes or the expansion of operations. This
Paragraph 9.5.2.3 will not apply to any such breach, act or
omission to the extent:
(a) carried out at the specific written request or with
the written permission of CK Witco; or
(b) carried out in order to operate the business in
compliance with applicable laws, including Environmental Laws.
9.5.2.4 Yorkshire will have the right to conduct or
cause or voluntarily permit any person to carry out any
environmental investigations, audits, surveys, testing, sampling or
other actions reasonably necessary in order to continue to operate
and run the Acquired Businesses from the Acquired Properties in
accordance with good business practice after the Effective Date and
Time. However, Yorkshire will not undertake any environmental
investigations, audits, surveys, testing, sampling or other actions
for the purpose of or directed at accelerating or increasing the
likelihood, complexity or amount of a claim, liability, task or
cost associated with or in any way related to an Environmental
Damage or Environmental Loss, unless it is required by applicable
law to do so. In that event and when allowed by applicable law,
Yorkshire will first communicate its intent to take such action,
correspond or communicate with a third party to CK Witco and
permit CK Witco to undertake such action, correspondence or
communication. Yorkshire will take no action that compromises the
rights or obligations of Yorkshire or CK Witco under the ICI
Agreement unless it is required by applicable law to do so.
9.5.2.5 CK Witco will not be liable to Yorkshire, the
Yorkshire Entities, the Acquired Entities and Europe for the first
US$ 750,000 of aggregate Environmental Losses claimed under
Paragraph 9.5.2.1 or, to the extent CK Witco elects to conduct
Remedial Works to meet its obligations under this Paragraph 9.5.2,
of costs incurred by CK Witco in conducting Remedial Works.
Yorkshire shall promptly reimburse CK Witco for any such costs
incurred by CK Witco until such time as Environmental Losses
claimed under Paragraph 9.5.2.1 and the costs of such Remedial Work
equal US$750,000 (or its reasonable equivalent in another currency)
Yorkshire will provide CK Witco with an accounting of all expenses
claimed to be incurred against the US$750,000 (or its reasonable
equivalent in another currency) aggregate amount commencing on the
first anniversary of the Effective Date and Time and on each
succeeding anniversary ending on the fifth anniversary. CK Witco
will provide written notice to Yorkshire within 90 days of receipt
of this yearly accounting of any item or sums challenged as invalid
or excessive under this Agreement. Yorkshire shall promptly
provide any additional background materials, including but not
limited to scopes of work, draft documents, reports, bills,
invoices, correspondence and will permit CK Witco to interview any
persons conducting such work. All costs not challenged and
contained within the yearly accounting will be considered valid and
will reduce the US$750,000 (or its reasonable equivalent in another
currency) aggregate accordingly after 90 days. Notwithstanding the
yearly accounting requirements of this Paragraph 9.5.2.5, Yorkshire
will provide an accounting of costs to CK Witco at any time upon
reasonable request by CK Witco. Claims made under Paragraphs 9.5.3
and 9.5.4 will not apply to the $750,000 aggregate limitation of
this Paragraph 9.5.2.5. CK Witco and Yorkshire will work in good
faith to resolve the challenges made under this Paragraph 9.5.2.5,
and may invoke the alternative dispute resolution procedures of
Exhibit MM if no resolution can be reached within 30 days after
termination of the 90 day period.
9.5.2.6 Save in respect of Environmental Losses
arising in connection with those matters addressed in Paragraph
9.5.3 (which shall survive indefinitely unless otherwise specified
in Paragraph 9.5.3), all claims for Environmental Losses must:
(a) be made by or on behalf of Yorkshire, the Yorkshire
Entities, the Acquired Entities and Europe to CK Witco in writing;
(b) be made within five years after the Effective Date and
Time;
(c) specifically identify the contaminant, its
concentration and the related operation, to the extent that
Yorkshire has actual knowledge of such facts; and
(d) arise or be related to an Environmental Loss suffered
or cost incurred within five years after the Effective Date and
Time.
9.5.2.7 Yorkshire acknowledges receiving a US$500,000
credit for those matters which are referred to in Exhibit KK to
this Agreement and which are excluded for the purposes of making a
claim under Paragraph 9.5.2.1. Expenditures for these matters will
not be included for the purposes of the US$750,000 (or its
reasonable equivalent in another currency) aggregate provided in
Paragraph 9.5.2.5.
9.5.2.8 Certain specific instances of Environmental
Damage are set out in Exhibit LL ("Specific Indemnity Issues").
These Specific Indemnity Issues are the subject of separate
indemnities set out in Paragraph 9.5.3 below. Other specific
instances of Environmental Damage are set out in Exhibit KK and are
not the subject of specific indemnities ("Other Identified
Issues"). No claim shall be made by Yorkshire with respect to such
Specific Indemnity Issues and Other Identified Issues under this
Paragraph 9.5.2.
9.5.2.9 CK Witco will provide Yorkshire with all
reasonable assistance in obtaining transfers or name changes of any
Environmental Licenses necessary for the operation of the Acquired
Businesses at the Acquired Properties in a manner substantially
similar to the operation of the Acquired Businesses at the Acquired
Properties by CK Witco. CK Witco will respond as promptly as
practical to all reasonable requests by Yorkshire for documents or
other assistance related to Environmental Licenses. CK Witco will
cooperate fully with Yorkshire in Yorkshire's dealings with
Environmental Regulators.
9.5.3 Specific Indemnity Issues
9.5.3.1 Subject to the provisions of this Paragraph
9.5.3 CK Witco, Colors and Holdings will defend, indemnify and hold
harmless Yorkshire, the Yorkshire Entities, the Acquired Entities
and Europe for any Environmental Loss (or, where appropriate and in
accordance with terms and conditions to be reasonably agreed by CK
Witco and Yorkshire, undertake Remedial Work with respect thereto)
suffered or incurred by Yorkshire, the Yorkshire Entities, the
Acquired Entities or Europe after the Effective Date and Time
provided the Environmental Damage existed as of the Effective Date
and Time and is resulting from:
(a) The items numbered 1 and 8 in Exhibit LL, save that no
claim may be made with respect to these items unless written notice
thereof will have been given by or on behalf of Yorkshire to CK
Witco within seven years after the Effective Date.
(b) The items numbered 2, 3 and 5 in Exhibit LL;
(c) The items numbered 7 and 9 in Exhibit LL, save that
with respect to these items, "Environmental Losses" shall mean only
fines, costs (including appeal costs) or penalties suffered or
incurred by Yorkshire arising out of a claim by a third party or an
Environmental Regulator.
(d) The item numbered 4 in Exhibit LL, save that with
respect to this item, "Environmental Losses" shall mean only those
costs suffered or incurred by Yorkshire associated with the repairs
and improvements to the effluent holding tank recommended by the
relevant Environmental Report.
(e) The item numbered 6 in Exhibit LL, save that with
respect to this item, "Environmental Losses" shall mean only such
liabilities, obligations, losses, fines, or penalties that arise as
a result of clean closure of the underground storage tank not
having been effected in accordance with Environmental Law.
9.5.3.2 Effluent Pipeline at Tertre Complex.
Pursuant to regulatory requirements relating to the Tertre
Complex, the construction of an effluent pipeline may be required
as more particularly identified and described on page 13 of the
Environmental Report relating to the Tertre Complex. CK Witco
will reimburse Yorkshire for the reasonable cost of construction
of the pipeline if, in the reasonable judgment of Yorkshire, it
must be constructed to meet applicable regulatory requirements,
provided, that, if the additional consideration referred to in
Paragraph 1.4(d) becomes payable by Yorkshire, Yorkshire agrees
to promptly refund to CK Witco all amounts paid by CK Witco to
Yorkshire for the construction of such pipeline.
9.5.4 Additional Environmental Indemnity relating to the Oissel
Facility only
9.5.4.1 For the purposes of the provisions contained
in this Paragraph 9.5.4 only, any capitalized terms will bear the
same meaning as set out in the Share Purchase Agreement between
Crompton & Knowles S.A. and Imperial Chemical Industries PLC dated
as of April 30 1992 (the "ICI Agreement") but if any capitalized
terms in this Paragraph 9.5.4 are not set out in the ICI Agreement,
they will bear the same meaning as set out in this Agreement.
9.5.4.2 Yorkshire shall cooperate with CK Witco regarding
the enforcement of the ICI Agreement through the fifth (5th)
anniversary of the Effective Date and Time, including but not
limited to permitting CK Witco and its attorneys, at their sole
cost, expense and risk, to pursue claims or to prosecute one or
more legal actions on behalf of Yorkshire with respect to any
matter pertaining to the ICI Agreement. All costs and expenses and
any losses, liability or damages of Yorkshire related to or arising
out of such cooperation shall be born by CK Witco.
CK Witco shall have no obligation to Yorkshire under this
Agreement with respect to the ICI Agreement as of the fifth (5th)
anniversary of the Effective Date and Time except that it will
cooperate with Yorkshire regarding Yorkshire's reasonable requests
to pursue indemnification in accordance with the terms and
conditions of the ICI Agreement. Such cooperation shall only be
required if Yorkshire cannot pursue the indemnification without CK
Witco. All costs and expenses and any losses, liability or damages
of CK Witco related to or arising out of such cooperation shall be
born by Yorkshire.
After Yorkshire has notified CK Witco and the parties
have pursued claims consistent with the terms of the ICI Agreement,
nothing in this Paragraph 9.5.4 will preclude Yorkshire from making
a claim relating to the Oissel site under Paragraphs 9.5.2 or 9.5.3
of this Agreement if they believe a claim under one of those
provisions exists.
9.5.4.3 Subject to all the conditions contained in
the ICI Agreement and except as otherwise limited by this Paragraph
9.5.4, CK Witco, Colors and Holdings hereby agree to indemnify and
hold harmless, at all times after the Effective Date and Time,
Yorkshire and its respective officers, directors, employees,
agents, successors and any controlling persons thereof, from any
and all liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including attorneys',
consultants', engineers', drillers', contractors', laboratories'
fees and other costs and expenses) actually suffered or incurred by
it (hereinafter, a "Purchaser Loss") to the extent arising out of
or resulting from:
(a) Liabilities arising out of events occurring before
30th April 1992, whether such Liabilities arise before or after
30th April 1992, and which were not expressly assumed by CK Witco
under the ICI Agreement, including, without limitation, Liabilities
arising from or relating to:
(i) the handling, generation, release, treatment, storage,
transportation or disposal on or off-site of all mercury-containing
materials, wastes, sludges or other substances existing at the
Oissel Complex prior to 30th April 1992;
(ii) the discharge, emission, or release of any mercury-
containing materials, wastes, liquids, sludges, particles, dust or
other substances through the sewer system, the wastewater treatment
system or in any way from the Oissel Complex, provided that
Yorkshire does not at any time after the Effective Date and Time
use, produce or manufacture mercury-containing materials, wastes,
liquids, sludges, particles or other substances at the Company
Site; or
(iii) the discharge, emission, or release of any PCB-containing
materials, wastes, liquids, sludges, particles, dust or other
substances through the sewer system, the wastewater treatment
system or in any way from the Oissel Complex, provided that
Yorkshire does not at any time after the Effective Date and Time
use, produce or manufacture PCB-containing materials, wastes,
liquids, sludges, particles or other substances at the Company
Site;
(b) the investigation, removal or remediation of any
Hazardous Materials in the soils at or beneath the Company Site on
or after the 30th April 1992 or in the soils at or beneath the
Excluded Site on or after the 30th April 1992 (the "Soils
Indemnity"), or in the groundwater at or beneath the Company Site
on or (except to the extent caused by Yorkshire or where Seller
shall not have completed its obligations pursuant to Item 4 of
Exhibit L to the ICI Agreement, or originating off the Oissel
Complex) after the 30th April 1992 (the "Groundwater Indemnity"),
if such investigation, removal or remediation is (i) required by a
Governmental Authority, (ii) reasonably necessary to avoid or
remove material interference with the operation by Yorkshire of the
Business, or any material legal or operational constraints on the
use, ownership, or occupancy of the Facilities, or (iii)
reasonably necessary to protect the safety or health or employees
at the Facilities.
9.5.4.4 Notwithstanding any other limitation set out in
this Agreement:
(a) the Groundwater Indemnity will continue in effect for a
period of five years after the Effective Date and Time;
(b) the Soils Indemnity will continue in effect for a
period of five years after the Effective Date and Time with respect
to Hazardous Materials which (i) are not used or produced by
Yorkshire in its operation of the Business or (ii) are the source
of contamination of the groundwater at or beneath the Company Site;
and
(c) the Soils Indemnity will continue in effect from the
Effective Date and Time with respect to Hazardous Materials used or
produced by Yorkshire in its operation of the Business with the
indemnity extending to thirty-three percent of covered Purchaser
Losses for the period ending on 30th April 2002 and for twenty-five
percent for the period commencing 1st May 2002 until 30th April
2004. From the day following 30th April 2004 CK Witco will have no
liability under this Paragraph 9.5.4.4(c).
9.5.5 Joint and Several Liability
9.5.5.1 No provision of this Agreement will be
interpreted to require Yorkshire to exhaust any other remedies,
sources of funding or to bring claims against any other person
prior to seeking indemnification from CK Witco for Environmental
Losses covered by this Agreement. Yorkshire will provide CK Witco
with reasonable cooperation in pursuit of legal action against any
third party, except that Yorkshire will not be required to pay any
fees, fines, penalties or incur other costs associated with any
such legal action.
9.5.6 Limitations On Claims
9.5.6.1 For the avoidance of doubt, no limitations on
claims included elsewhere in this Agreement will apply to claims
made under Paragraphs 9.5.2, 9.5.3 and 9.5.4 unless otherwise
expressly provided in Paragraphs 9.5.2, 9.5.3 and 9.5.4.
9.6 Taxation Schedule Indemnity. Yorkshire and its
Affiliates shall be entitled to indemnification as set forth in the
Taxation Schedule to this Agreement, which shall be the exclusive
source of indemnification for the matters covered thereby and which
shall exclusively govern claims thereunder and third party claims
with respect thereto. The provisions of Paragraphs 9.3, 9.8, 9.9,
9.10, 9.11, 9.13 and 9.16 shall be inapplicable with respect
thereto and save as expressly stated by express reference to the
Taxation Schedule or in the Taxation Schedule itself, nothing in
this Agreement, any Additional Agreement, any Closing Document or
the CK Witco Disclosure Memorandum shall operate to limit or
exclude the liability of CK Witco in respect of any Claim under the
Taxation Schedule.
9.7 No Contribution by Europe or any Acquired Entity.
None of Europe or any Acquired Entity will have any Liability to
any CK Witco Entity, nor will any CK Witco Entity have a right of
indemnification or contribution against any of them or any of their
officers or employees, as a result of any misrepresentation or
breach of representation or warranty by it contained in this
Agreement, any Additional Agreement or any certificate, schedule,
instrument, agreement or other writing delivered by or on behalf
of, or in respect of, it pursuant to or in connection with this
Agreement, any Additional Agreement or in connection with the
transactions contemplated by this Agreement or any Additional
Agreement, or the breach of any of its covenants or agreements
contained in this Agreement, any Additional Agreement, Closing
Document or the CK Witco Disclosure Memorandum or any certificate,
schedule, instrument, agreement or other writing by or on behalf
of, or in respect of, it pursuant to or in connection with the
terms of this Agreement or any Additional Agreement or in
connection with the transactions contemplated by this Agreement or
any Additional Agreement.
9.8 Minimum Losses. The parties shall have the right to
obtain indemnification under this Agreement as follows:
(a) with respect to Yorkshire:
(i) and in respect of such Indemnified Losses, once
aggregate Indemnified Losses relating to the Acquired Businesses
and arising from North America, Central America and South America
for which Yorkshire and its Affiliates, and the successors and
assigns of Yorkshire and its Affiliates, are otherwise entitled to
indemnification under this Article 9 exceed US$750,000 (or its
reasonable equivalent in another currency), after which time only
the aggregate amount of such Indemnified Losses in excess of
US$750,000 (or its reasonable equivalent in another currency) shall
be recoverable in accordance with the terms hereof, or
(ii) and in respect of such Indemnified Losses, once
aggregate Indemnified Losses relating to Europe and the Acquired
Entities arising from Europe and Asia for which Yorkshire and its
Affiliates, and the successors and assigns of Yorkshire and its
Affiliates, are otherwise entitled to indemnification under this
Article 9 exceed US$500,000 (or its reasonable equivalent in
another currency), after which time only the aggregate amount of
such Indemnified Losses in excess of US$250,000 (or its reasonable
equivalent in another currency) shall be recoverable in accordance
with the terms hereof, except that this Paragraph 9.8(a)(ii) shall
not apply to liabilities arising out of Paragraph 3.26(ii) relating
to Disclosed Schemes in the Netherlands (listed under Paragraph
3.26(a)(ii)) and Disclosed Schemes in France (listed under
Paragraph 3.26(a)(iv)) provided through AXIVA and IREC and a
defined benefit scheme known as SAD 4000; and
(b) with respect to CK Witco, once aggregate losses for
which CK Witco and its Affiliates, and the successors and assigns
of CK Witco and its Affiliates, are otherwise entitled to
indemnification under this Article 9 exceed US$1,250,000 (or its
reasonable equivalent in another currency), after which time only
the aggregate amount of such losses in excess of US$1,000,000 (or
its reasonable equivalent in another currency) shall be recoverable
in accordance with the terms hereof.
(c) Notwithstanding the provisions of Paragraph 9.8(a),
the foregoing limitations shall not apply to Indemnified Losses in
respect of title to assets, litigation, Taxes, environmental
matters (including claims arising pursuant to Paragraphs 3.18 and
9.5), Liabilities which are neither Assumed Liabilities nor
European Retained Liabilities, or claims arising pursuant to any of
Paragraphs 9.12, 9.13, 9.14 or 9.18.
9.9 Maximum Indemnification. No party shall have any
right to obtain an indemnification payment under this Agreement to
the extent the aggregate of the amounts received by such party and
its Affiliates, and the successors and assigns of such party and
its Affiliates, as indemnification payments hereunder exceeds an
amount equal to (i) US$30,000,000 for Yorkshire or (ii)
US$17,500,000 for CK Witco; provided, however, that the foregoing
limitation shall not apply to Yorkshire and its Affiliates in
respect of Indemnified Losses in respect of title to assets,
litigation, Taxes, environmental matters (including claims arising
pursuant to Paragraphs 3.18 and 9.5), Liabilities which are neither
Assumed Liabilities nor European Retained Liabilities, or claims
arising pursuant to any of Paragraphs 9.12, 9.13, 9.14 or 9.18.
9.10 Subrogation. Any Indemnifying Party shall be
subrogated to any right of action which the Indemnified Party may
have against any other Person with respect to any matter giving
rise to a claim for indemnification hereunder.
9.11 Adjustments to Indemnification. (a) All indemnity
payments made under this Article 9 (excluding payments pursuant to
Paragraph 9.1(b)) shall be treated for accounting purposes as
adjustments to the Purchase Price. All computations of indemnity
payments due under this Article 9 shall reflect the actual present
cash cost of the obligation with respect to which the indemnity
payment relates. If any Indemnified Party receives a Tax benefit
by virtue of having paid or accrued an amount for which an
indemnity payment is provided, the amount of such Tax benefit will
be refunded to the Indemnifying Party making such indemnity payment
when, as and if such Indemnified Party realizes a cash Tax savings
from such Tax benefit.
(b) The amount which any Indemnifying Party is or may be
required to pay any Indemnified Party pursuant to this Article 9
shall be reduced (including retroactively) by any insurance
proceeds or other amounts actually recovered by or on behalf of
such Indemnified Party in reduction of the related Losses. If an
Indemnified Party shall have received the payment required by this
Agreement from an Indemnifying Party in respect of a Loss and shall
subsequently actually receive insurance proceeds or other amounts
in respect of such Loss, then such Indemnified Party shall pay to
such Indemnifying Party a sum equal to the amount of such insurance
proceeds or other amounts actually received (net of any expenses in
obtaining the same).
9.12 Smith Road Indemnity. CK Witco and Yorkshire expressly
acknowledge that the lease dated 24th April 1997 between Foden
Investments Ltd (1), CK Witco (UK) Limited (2) and Europe (3)
relating to offices at Waterside Industrial Park, Smith Road,
Bolton, UK (the "Lease") is not intended to be assumed by Yorkshire
pursuant to the transaction the subject of this Agreement and CK
Witco, Colors and Holdings jointly and severally agree to indemnify
Yorkshire, each Yorkshire Entity, each Yorkshire Affiliate, each
Acquired Entity and Europe in respect of all costs, claims,
liabilities and expenses (including for the avoidance of doubt,
rent) relating to the Lease, provided that this indemnity shall not
apply to the extent CK Witco (UK) Limited and Europe fail to comply
with their obligations under the Lease (save for their obligations
to pay for rent, service charges and other monetary amounts).
9.13 BCC Indemnity. CK Witco, Colors and Holdings jointly and
severally agree to indemnify Yorkshire, each Yorkshire Affiliate,
each Yorkshire Entity, each Acquired Entity and Europe in respect
of all costs, claims, liabilities and expenses relating to the
transactions referred to in Paragraph 2.15.
9.14 Dusseldorf Indemnity. CK Witco, Colors and Holdings
jointly and severally agree to indemnify Yorkshire, each Yorkshire
Entity, each Yorkshire Affiliate, each Acquired Entity and Europe
in respect of all costs, claims, liabilities and expenses relating
to the closure of the office previously occupied by the relevant
Acquired Entity in Dusseldorf, Germany.
9.15 Exclusive Remedy. Subject to Paragraph 9.6, the right to
indemnification, if any, with respect to breaches of
representations, warranties and covenants pursuant to this
Article 9 shall constitute the sole and exclusive remedy with
respect thereto, shall preclude any other monetary award (whether
at law or in equity), and shall preclude assertion by any party
hereto of any right to any such monetary award from the
Indemnifying Party, other than in the case of fraud or intentional
misconduct, in which case each Person shall have all such remedies
as may be available at law, in equity or otherwise. Nothing in
this Article 9 shall limit the remedies available to an Indemnified
Party to enforce its right to indemnification or to injunctive
relief.
9.16 Duty to Mitigate. Each indemnified party shall
cooperate with each indemnifying party with respect to resolving
any actual or potential Losses arising out of, attributable to, or
resulting from any inaccuracy in or breach of any of the
representations, warranties, covenants or agreements of the other
relevant parties hereto, including by making such commercially
reasonable efforts to mitigate any or all such Losses as the
indemnified party would reasonably use in mitigating its own losses
(assuming it were not indemnified hereunder). In the event that
any indemnified party shall fail to make such efforts as are
described in the preceding sentence, then, notwithstanding anything
else to the contrary contained in this Agreement, the indemnifying
party shall not be required to indemnify any Person to the extent
of any or all of the Losses that could reasonably have been avoided
if the indemnified party had made such efforts, but only to that
extent.
9.17 After-Tax Payments.
9.17.1 All sums payable by CK Witco, Colors,
Holdings or any other CK Witco Entity (each, a "CK Witco Party") to
Yorkshire or Americas or any Acquired Entity or Europe or any
Yorkshire Affiliate (each, a "Yorkshire Party") under this
Agreement (other than Paragraph 1.4) or by a Yorkshire Party to a
CK Witco Party under Paragraph 9.4 or Article 5 shall be paid free
and clear of all deductions or withholdings whatsoever, save only
as may be required by law.
9.17.2 If any deductions or withholdings, not
being in respect of payments of interest in respect of late payment
of sums referred to in Paragraph 9.17.1, are required by law to be
made from any sum payable as mentioned in Paragraph 9.17.1, then
the payor shall pay to the payee, on payment of the relevant sum,
such additional sum as will, after the deduction or withholding has
been made, leave the payee with the same amount as it would have
been entitled to receive in the absence of any such requirement to
make a deduction or withholding.
9.17.3 If any sum payable as mentioned in
Paragraph 9.17.1, not being in respect of payments of interest in
respect of late payment of sums referred to in Paragraph 9.17.1,
shall be subject to Taxes in the hands of the payee (ignoring the
availability of any Relief (as defined in the Taxation Schedule)
not arising from the Underlying Loss (as defined herein)), then the
payor shall pay to the payee an additional sum equal to the amount
of such Taxes which are payable by the payee (or would be payable
in the absence of any such Relief) such additional sum to be paid
within five (5) Business Days of written demand therefor by the
payee.
9.17.4 If any sum payable as mentioned in
Paragraph 9.17.1 is payable with respect to an Indemnified Loss,
Environmental Loss or other loss, damage, liability, cost or
expense, including reasonable attorneys' fees and amounts paid in
settlement (an "Underlying Loss"), and the payee receives a
insurance payment or Tax Benefit with respect to the Underlying
Loss, the amounts otherwise payable under this Paragraph 9.17 shall
be reduced by such insurance payment or Tax Benefit. In the event
that the insurance payment or Tax Benefit is received by the payee
after the payment is made under this Paragraph 9.17, the payee
shall refund to the payor an amount equal to the insurance payment
or Tax Benefit within five (5) Business Days of receipt of such
insurance payment or Tax Benefit.
9.17.5 As used in this Paragraph 9.17, "Tax
Benefit" shall mean the benefit actually realized, through a
reduction in Taxes otherwise due, from any item of deduction, loss
or credit. It shall be assumed for this purpose that all Post-
Closing Reliefs (as defined in the Taxation Schedule) and all other
deductions, losses or credits that are not with respect to
Underlying Losses are used in priority to any deduction, loss or
credit with respect to the Underlying Loss.
9.17.6 For purposes of Paragraph 9.17.3, a sum
payable as mentioned in Paragraph 9.17.1 by a CK Witco Party to a
Yorkshire Party shall not be treated as subject to Taxes merely
because the receipt of such payment results in a reduction in
Yorkshire's tax basis in the Europe Capital Stock or any Yorkshire
Entity's tax basis in other Transferred Assets.
9.17.7 To the extent permitted by applicable
law, but without in any way limiting the obligations of any party
to make any payment, the parties to this Agreement shall treat any
payment paid or received pursuant to this Article 9 as an
adjustment to the Purchase Price for all Tax purposes.
9.17.8 The provisions of this Paragraph 9.17
(including Paragraph 9.17.4)
(i) shall not apply to any amounts payable pursuant to the
Taxation Schedule (to which the corresponding provisions of that
schedule shall apply); and
(ii) with respect to payments by a CK Witco Party to a
Yorkshire Party, shall apply only with respect to sums payable in
relation to Europe or any Acquired Entity.
9.18 Pensions Indemnity. CK Witco, Colors and Holdings
hereby jointly and severally indemnify and hold harmless the
Yorkshire Entities, Yorkshire's Affiliates, Europe and the Acquired
Entities against all and any losses, claims, expenses, damages,
costs and all other liabilities (including, for the avoidance of
doubt, the whole amount of any funding deficit relating to benefits
accrued before Closing which is revealed by the first actuarial
valuation carried out after Closing) relating to and arising from
the Crompton & Knowles (UK) Limited Retirement Benefits Scheme (the
"Scheme") (being the scheme mentioned in the 1997 report and
accounts of Crompton & Knowles (UK) Limited). CK Witco will
procure and Yorkshire will co-operate to ensure that Crompton &
Knowles (UK) Limited will be replaced as the principal employer of
the Scheme with effect from the Closing.
10. SURVIVAL
10.1 Survival. The representations, warranties,
covenants, agreements and indemnities of the parties contained in
this Agreement or any Additional Agreement, or in any writing
delivered pursuant to the provisions of this Agreement or any
Additional Agreement, will survive any investigation prior, on or
subsequent to the date of this Agreement made by any party or its
Representatives and the consummation of the transactions
contemplated in this Agreement, any Additional Agreement or in any
writing delivered pursuant to the provisions of this Agreement or
any Additional Agreement and will continue in full force and effect
for the periods specified below (the "Survival Period"):
(a) representations, warranties, covenants, agreements and
indemnities relating to undisclosed and contingent Liabilities,
title to assets, title to Transferred Assets, employee welfare and
benefits, the reporting or payment of or Liability for Taxes (other
than for Taxes covered by the Taxation Schedule), compliance with
laws, fraud or willful misrepresentation, and fraudulent or willful
incompleteness of disclosure will survive until expiration of any
applicable statute or period of limitations, and any extensions of
the applicable statute or period of limitations;
(b) representations, warranties, covenants, agreements and
indemnities set forth in the Taxation Schedule shall survive as set
forth in the Taxation Schedule; and
(c) all other representations, warranties, covenants,
agreements and indemnities for which no survival period or
termination date is set forth elsewhere in this Agreement, will be
of no further force and effect after June 30, 2001;
provided, however, that the Survival Period will be extended
automatically to include any time period necessary to resolve a
claim for indemnification which arises out of any written notice to
Indemnitor advising Indemnitor of the facts or circumstances that
may give rise to a claim for indemnification, provided notice was
delivered before expiration of the Survival Period. Liability for
any item will continue until the claim will have been finally
settled, decided or adjudicated.
11. TERMINATION
11.1 Termination for Certain Causes.
This Agreement may be terminated at any time prior to or on
the Closing Date by Yorkshire or CK Witco, upon written notice to
the other as follows:
(a) By Yorkshire, if a material adverse change in the business,
properties, financial condition of the Acquired Businesses will
have occurred.
(b) By Yorkshire, if a material adverse change in the business,
properties or financial condition of Yorkshire or the Acquired
Businesses occurs prior to Closing, or there are other factors
outside Yorkshire's reasonable control which in either case cause
Yorkshire's lenders to terminate their obligation to lend to
Yorkshire under its facility agreement of today's date with HSBC
Bank and the other signatories thereto.
(c) By Yorkshire, if the terms, covenants or conditions of this
Agreement to be complied with or performed by any CK Witco Entity,
Europe or any Acquired Entity at or before the Closing Date will
not have been complied with or performed in all material respects
or any other conditions to the obligations of Yorkshire to
consummate the transactions contemplated by this Agreement required
to be satisfied at or before the Closing Date will not have been
complied with or satisfied in all material respects, and any such
material noncompliance or nonperformance will not have been waived
writing by Yorkshire.
(d) By CK Witco, if the terms, covenants or conditions of this
Agreement to be complied with or performed by any Yorkshire Entity
at or before the Closing Date will not have been complied with or
performed in all material respects or any other conditions to the
obligations of CK Witco to consummate the transactions contemplated
by this Agreement required to be satisfied at or before the Closing
Date will not have been complied with or satisfied in all material
respects, and any such material noncompliance or nonperformance
will not have been waived in writing by CK Witco.
(e) By CK Witco or Yorkshire, if any Action will have been
instituted against any party to this Agreement to restrain or
prohibit, or to obtain substantial damages in respect of, this
Agreement or the consummation of the transactions contemplated in
this Agreement, which, in the reasonable and good faith opinion of
any party and upon the written advice of outside counsel, makes
consummation of the transactions contemplated in this Agreement
inadvisable.
(f) By CK Witco or Yorkshire, if the Closing has not occurred
on or before December 31, 1999.
(g) By CK Witco and Yorkshire, by written consent.
11.2 Procedure on and Effect of Termination.
(a) Pursuant to Paragraph 11.1 of this Agreement, written
notice of termination will be given to all other parties by the
party electing to terminate, and this Agreement will terminate upon
the giving of notice, without further action by any of the parties
to this Agreement, with the consequence and effect set forth in
this Paragraph 11.2.
(b) If for any reason on the Closing Date there has been
nonfulfillment of an undertaking by or condition precedent for
Yorkshire on the one hand and CK Witco on the other not waived in
writing by or on behalf of the party in whose favor the
undertaking or condition or undertaking runs, the party in whose
favor the undertaking or condition runs, in addition to any other
right or remedy available to it for breach or non-performance of
this Agreement or any Additional Agreement, may refuse to
consummate the transactions contemplated by this Agreement
without Liability or obligation on its part whatsoever.
Notwithstanding the foregoing, the obligations of the parties
pursuant to Paragraphs 2.3, 2.4, 2.5, 2.7, 10.1, 11.1, 11.2,
12.1, 12.3 and 12.4 will survive any termination.
12. MISCELLANEOUS
12.1 Notices.
(a) All notices, demands or other communications
required or permitted to be given or made under this Agreement
will be in writing and (i) delivered personally, or (ii) sent by
an internationally recognized express courier service to the
intended recipient of the notice, demand or other communication
at its address set forth below. Any notice, demand or
communication will be deemed to have been duly given (x)
immediately if personally delivered, or (y) on the fourth
Business Day after delivery to an international express courier
service, and in proving the giving of any notice, demand or other
communication, it will be sufficient to show that the envelope
containing the notice, demand or other communication was duly
addressed (as evidenced by the courier receipt). The addresses
of the parties for purposes of this Agreement are:
(i) If to any CK Witco Entity, and before Closing, to Europe
or any Acquired Entity: CK Witco Corporation
One American Lane
Greenwich, Connecticut 06831
USA
Attn:Charles L. Marsden, Senior Vice
President - Strategy and Development
with copies to (which shall not constitute notice):
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
USA
Attn: Edward D. Herlihy
(ii) If to any Yorkshire Entity, and after Closing,
additionally to Europe or any Acquired Entity:
Yorkshire Group plc
Kirkstall Road
Leeds LS3 1LL
England
Attn: Group Finance Director
with copies to (which shall not constitute notice):
Addleshaw Booth & Co
Sovereign House
Leeds LS1 1HQ
England
Attn: Ian McIntosh
Andrew Kay
Kilpatrick Stockton LLP
1100 Peachtree Street
Atlanta, Georgia 30309
USA
Attn: Gregory K. Cinnamon
(b) Any party may change the address to which notices,
requests, demands or other communications to the relevant party
will be delivered or mailed by giving notice of the address
change to the other parties to this Agreement in the manner
provided in this Agreement.
12.2 Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be deemed an
original, and all of which will constitute one and the same
instrument.
12.3 Entire Agreement. This Agreement and the
Additional Agreements, together supersede all prior discussions
and agreements between the parties with respect to the subject
matter of this Agreement and the Additional Agreements, including
a certain Letter of Intent, dated 30 July, 1999, as amended and
modified to the date of this Agreement, and this Agreement and
the Additional Agreements contains the sole and entire agreement
among the parties with respect to the matters covered by this
Agreement and the Additional Agreements. This Agreement will not
be altered or amended except by an instrument in writing signed
by or on behalf of the party entitled to the benefit of the
provision against whom enforcement is sought.
12.4 Governing Law; Dispute Resolution. This Agreement
shall be governed by and construed, interpreted and enforced in
accordance with the laws of the State of New York (without
application of its conflicts of laws rules), except that the
choice of law set forth in the Taxation Schedule shall govern
with respect to the matters governed by the Taxation Schedule.
Any and all disputes (each, a "Disputed Matter") arising out of
or in connection with the execution, interpretation, performance
or nonperformance of this Agreement will be resolved by the
procedures set forth on Exhibit MM attached to this Agreement.
12.5 Successors and Assigns. This Agreement will be
binding upon and will inure to the benefit of the parties to this
Agreement and their respective heirs, executors, legal
representatives, successors and assigns, but may not be assigned
by any party without the written consent of all other parties,
except to an Affiliate; provided however Yorkshire shall be
entitled to assign the full benefit of this Agreement and the
Additional Agreements to its lenders from time to time and their
successors in title.
12.6 Partial Invalidity and Severability. All rights
and restrictions contained in this Agreement may be exercised and
will be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to
the extent necessary to render this Agreement legal, valid and
enforceable. If any term of this Agreement, or part of this
Agreement, not essential to the commercial purpose of this
Agreement will be held to be illegal, invalid or unenforceable by
a court of competent jurisdiction, it is the intention of the
parties that the remaining terms of this Agreement, or part of
this Agreement, will constitute their agreement with respect to
the subject matter of this Agreement and all remaining terms, or
parts of this Agreement, will remain in full force and effect.
To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement will be replaced by a
valid provision which will implement the commercial purpose of
the illegal, invalid or unenforceable provision.
12.7 Waiver. Any term or condition of this Agreement
may be waived at any time by the party which is entitled to the
benefit of the term, but only if the waiver is evidenced by a
writing signed by the relevant party. No failure on the part of
any party to this Agreement to exercise, and no delay in
exercising any right, power or remedy created under this
Agreement, will operate as a waiver thereof, nor will any single
or partial exercise of any right, power or remedy by any party
preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. No waiver by any party to this
Agreement or any breach of or default in any term or condition of
this Agreement will constitute a waiver of or assent to any
succeeding breach of or default in the same or any other term or
condition of this Agreement.
12.8 Headings. The headings of particular provisions of
this Agreement are inserted for convenience only and will not be
construed as a part of this Agreement or serve as a limitation or
expansion on the scope of any term or provision of this
Agreement.
12.9 Number and Gender. Where the context requires, the
use of the singular form in this Agreement will include the
plural, the use of the plural will include the singular, and the
use of any gender will include any and all genders.
12.10 Construction. The word "including" (and, with
correlative meaning, the word "include") means that the
generality of any description preceding such word is not limited,
and the words "shall" and "will" are used interchangeably and
have the same meaning.
12.11 Time of Performance. Time is of the essence.
13. CERTAIN DEFINITIONS; INDEX OF DEFINITIONS
13.1 Certain Definitions. For purposes of this
Agreement, the following capitalized terms will have the meanings
specified below (all terms used in this Agreement which are not
defined in this Paragraph 13.1 but defined elsewhere in this
Agreement, will have for purposes of this Agreement the meanings
set forth elsewhere in this Agreement):
"Action" means any action, suit, complaint, counter-claim,
claim, petition, set-off or administrative proceeding, whether at
law, in equity or otherwise, and whether conducted by or before
any Government or other Person.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by, or under direct or
indirect common control with the former Person from time to time.
A Person will be deemed to control another Person if that Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of the other Person,
whether through the ownership of voting securities, by contract
or otherwise.
"agreed form" means in the form produced to the parties on the
date of this Agreement and initialled by or on behalf of each of
Yorkshire and CK Witco for the purposes of identification.
"Americas IPD Business Territory" means the countries,
territories and possessions listed on the attached Exhibit NN
attached to this Agreement.
"Application" means the application to be made by Yorkshire to
the London Stock Exchange for the admission of its issued
Ordinary Share capital (as enlarged by the issue of the
Consideration Securities) to the Official List subject only to
allotment.
"Article" and "Paragraph" and like references are to this
Agreement unless otherwise specified, and all "Exhibits" are
references to those attached to this Agreement and incorporated
in this Agreement by this reference, unless otherwise specified.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which commercial banks in either New York or London
are required or authorized to be closed.
"CK Witco Service Areas" means those geographies in which CK
Witco conducted an Acquired Business during the 12-month period
immediately preceding the Effective Date and Time.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and all final and temporary regulations promulgated
pursuant thereto.
"Consideration Securities" means a number of new Ordinary Shares
of Section 0.25p each of Yorkshire (not exceeding 15,274,072 in
total and rounded down to the nearest whole share) equal to the
quotient derived by dividing (A) US$8,500,000 by (B) the Average
Share Price. For purposes of this definition of Consideration
Securities, "Average Share Price" will be determined as follows:
(i) the average mid-market price (the "Average Sterling
Share Price") of Yorkshire's Ordinary Shares ("Ordinary Shares")
on the London Stock Exchange for the 10 Business Days ending two
(2) days before the Closing Date as quoted for each such Business
Day in the London Financial Times shall be determined;
(ii) if the Average Sterling Share Price is below 70p per
Ordinary Share, then the Average Sterling Share Price for the
purposes of this Agreement shall be deemed to be 70p per Ordinary
Share, and if the Average Sterling Share Price is above 130p per
Ordinary Share, then the Average Sterling Share Price for the
purposes of this Agreement shall be deemed to be 130p per
Ordinary Share;
(iii) the Average sterling/US$ exchange rate (the "Average
Exchange Rate") for each of the 10 Business Days ending two (2)
days before the Closing Date shall be determined by reference to
the closing mid-point of the buy-sell range as quoted for each
such Business Day (or, if applicable, for those Business Days
during such 10-day period for which the London Financial Times is
published) in the following day's London Financial Times;
(iv) the Average Sterling Share Price will be converted into
US$ by reference to the Average Exchange Rate to produce the
Average Share Price.
"Crude Stocks" means dyes or other products, which have
completed their synthesis process, but are not finished goods or
"work-in-process" (as defined by CK Witco's financial accounting
system at the time of sale).
"Duty Costs" means all duty and filing costs (including
stamp duty and filing costs but excluding attorneys', agent or
advisors costs and fees reasonably required by an Agency,
"Agency" means the United States Patent and Trademark Office, the
United States Copyright Office, or any other federal, state,
local, provincial or other governmental or regulatory agency in
the world which now regulates or may in the future regulate, the
protection, use, or registration of Intellectual Property Rights.
"Extraordinary General Meeting" means the Extraordinary General
Meeting of Yorkshire to be convened for December 15, 1999 (or any
adjournment thereof) to consider (inter alia) the Resolutions.
"Fixed Asset Registers" means those documents
denominated and designated as such by CK Witco and Yorkshire, as
evidenced by their signatures thereon on today's date.
"Forum" means any national, provincial, municipal, local or
foreign court, governmental agency, administrative body or
agency, tribunal, private alternative dispute resolution system,
or arbitration panel.
"GAAP" means United States generally accepted accounting
principles, consistently applied, as in effect from time to time.
"Government" means any national, provincial, state,
municipal, local or foreign government or any ministry,
department, commission, board, bureau, agency, authority,
instrumentality, unit, or taxing authority thereof.
"Intellectual Property Rights" means all patents, registered
designs, trademarks and service marks (whether or not registered
or registerable), copyright, design right and all similar
property rights (whether or not registered or registerable),
including those existing (in any part of the world) in
inventions, design, drawings, computer programmes, confidential
information, business or brand names goodwill or the style of
presentation of goods and services and in any applications for
protection thereof.
"Industrial Dyes" means those dyes (1) combined with or
manufactured in whole or part using Intellectual Property Rights;
and (2) intended to be combined with or applied to any Industrial
Product.
"Industrial Product" or "Industrial Products" means any of the
following products, materials or items other than Textile Dyes,
and specifically including without limitation all of the
following products, materials or items: (a) paper, leather,
wood, wood stains, plastics, resins, paints and printing inks
(including without limitation, inkjet inks for graphic arts,
paper, leather, wood, plastics and resins, but excluding inkjet
inks for other than graphic arts, paper, leather, wood, plastics
and resins; and including without limitation, printing inks for
heat or other transfer or gravure); (b) decorative coatings for
metallic foils and polymeric films, petroleum Dyes and water
tracing; and (c) mass dyeing of molten polymers and other molten
synthetic materials used to form fibers, filaments or yarns.
"IPD Business" means those Persons engaged in (1) the
distribution, use or sale of Industrial Dyes and/or (2) the
manufacture, distribution, or sale of Industrial Products which
contain or incorporate Industrial Dyes.
"Law" means all national, provincial, regional, state,
municipal, local or foreign constitutions, statutes, decrets,
rules, regulations, ordinances, acts, codes, legislation,
treaties, conventions and similar laws and legal requirements, as
in effect from time to time.
"Liability" means any liability or obligation whether known
or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated and whether due
or to become due.
"Lien" means any claim, mortgage, pledge, hypothecation,
security interest, encumbrance, lien or charge of any kind, or
any rights of others, however evidenced or created (including any
agreement to give any of the foregoing, any conditional sale or
other title retention agreement, or any lease having a similar
effect or result).
"London Stock Exchange" means London Stock Exchange Limited.
"Malfunction" means any failure to: (a) accurately recognize
dates falling before, on or after the Year 2000; or (b)
accurately record, store, retrieve and process data input and
date information.
"Notice of EGM" means the notice in the form set out in the
Listing Particulars.
"Orders" means all orders, writs, judgments, decrees,
rulings and awards of any Forum or Government.
"Person" means and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated
organization, any legal or juridical entity, the equivalent of
any of the foregoing under any Law, and any Government.
"Representative" of a party means that party's directors,
officers, partners, employees, agents, accountants, lenders,
lawyers, investment bankers, merchant bankers, and other
financial or professional advisors or consultants.
"Research and Development Library" means the research and
development laboratory maintained at the Gibraltar Facility at
today's date and all Proprietary Rights arising with respect
thereto.
"Resolution" means the Resolution set out in the Notice of EGM.
"Software" means all computer software and subsequent versions
thereof, including but not limited to, source code, object code,
objects, comments, screens, user interfaces, report formats,
templates, menus, buttons and icons, and all files, data,
materials, manuals, design notes and other items and
documentation related thereto or associated therewith.
"Taxation Schedule" means the Schedule attached to and
forming a part of this Agreement and denominated as such.
"Taxes" means (other than in the Taxation Schedule) any past,
present or future taxes, levies, imposts or duties of whatever
nature, including income, gross receipts, excise, property,
sales, transfer, license, payroll, withholding, social security,
and franchise taxes, now or hereafter imposed or levied by any
federal, state, local or foreign Government or by any department,
agency or other political subdivision or taxing authority thereof
or therein and all interests, penalties, additions to tax, and
other similar liabilities with respect to the Taxes.
"Textile Dyes" means those dyes (1) combined with or
manufactured in whole or part using Intellectual Property; and
(2) intended to be combined with or applied to any Textile
Product.
"Textile Dyes Business" means those Persons engaged in (1) the
distribution, use or sale of Textile Dyes and/or (2) the
manufacture, distribution, or sale of Textile Products which
contain or incorporate Textile Dyes.
"Textile Product" or "Textile Products" means any of the
following products, materials or items:
(1) woven textiles;
(2) non-woven textiles other than wet-laid or
dry-laid cellulosic non-woven textiles;
(3) knitted textiles;
(4) pre-formed loose fibers, filaments or yarns
(including without limitation pre-formed tufted yarns used to
manufacture carpet); or
(5) inkjet inks for other than graphic arts,
paper, leather, wood, plastic or resin.
"U.S. Asset Acquired Businesses" means those Acquired
Businesses that have their primary operations in the United
States and that are being purchased pursuant to this Agreement by
means of the acquisition of assets rather than of shares.
"US Employees" means full-time, active employees of an Acquired
Business whose principal residence is in the United States.
"Year 2000" means the calendar year 2000 A.D.
"Yorkshire Disclosure Memorandum" means the letter denominated as
such, dated today's date, and executed by Yorkshire in favor of
CK Witco.
13.2 Index to Definitions. The definitions for the
following defined terms used in this Agreement can be found as
follows:
Defined Term Reference
Accountants 1.4(b)
Acquired Businesses Recitals
Acquired Entity(ies) Recitals
Acquired IPD Business (es) Recitals
Acquired Properties 1.1(b)
Additional Agreement(s) 1.11(b)
Americas Preamble
Americas IPD Business Recitals
Answer Period 9.3(e)
Assigned Contracts 1.1(g)
Assumed Collective Bargaining Agreements 2.10(e)
Assumed Liabilities 1.5(a)
Balance Sheet Principles 1.4(a)
Bank Account 1.11(a)
BCC 1.1(c)
Business Employees 2.10(a)
Charlotte Improvements 1.1(a)(ii)
Charlotte Land 1.1(a)(ii)
CK Witco Preamble
CK Witco Disclosure Memorandum Article 3
CK Witco Entities 1.1
CK Witco ESOP 2.10(f)
CK Witco Party 9.17.1
CK Witco Restricted Period 2.8
CK Witco Service Areas 13.1
CK Witco Supply Contract 1.11(b)
CK Witco 401(k) 2.10(f)
Closing 1.10
Closing Date 1.10
Closing Documents 1.11(a)
Closing Net Assets 1.4(a)
Closing Special Purpose Statement 1.4(a)
COBRA 2.10(h)(iii)
Colors Preamble
Colors Contracts 1.2(c)
Computations 1.4(a)
Contracts 3.20
Contractors 9.5.2.2(g)
Covered Properties 9.5.1.1
Dalton Improvements 1.1(a)(iv)
Dalton Land 1.1(a)(iv)
Disclosed Schemes 3.26(a)
Disposal Period 2.8(c)
Disputed Matter 12.4(a)
Due Diligence Request 3.36
Effective Date and Time 1.10
Employee Benefit Plans 3.25(a)
Environmental Damage 9.5.1.1
Environmental Law 9.5.1.1
Environmental License 9.5.1.1
Environmental Losses 9.5.1.1
Environmental Regulator 9.5.1.1
Environmental Reports 9.5.1.1
Euro-Affected Products and Services 3.10
ERISA Affiliate 3.25(h)
Europe Preamble
Europe Capital Stock 1.1(m)
European /Asian Employees 3.24(b)(i)
European Retained Liabilities 1.6(b)
Excluded Assets 1.2
Excluded Liabilities 1.6(b)
Excluded Liability Fund 2.21
Excluded Properties 1.2(a)
Gibraltar Facility 1.2(a)(iv)
Greenville Improvements 1.1(a)(iii)
Greenville Land 1.1(a)(iii)
Groundwater Indemnity 9.5.4.3(b)
Hazardous Substance 9.5.1.1
Holdings Preamble
HSR Filing 2.6
Immovable Property 3.17(a)
Improvements 1.1(a)(iv)
Indemnified Losses 9.1
Indemnitees 9.1
Indemnitors 9.1
Index of Documents 3.36
Inventories 1.1(d)
IPD Bagger 1.2(e)
Land 1.1(a)(iv)
Lease 9.12
Leased Real Property 1.1(b)
Listing Particulars 4.3
Lowell Improvements 1.1(a)(i)
Lowell Land 1.1(a)(i)
Measuring Period 1.1(d)
Newark Facility 1.2(a)(i)
Nutley Facility 1.2(a)(ii)
Other Identified Issues 9.5.2.8
Owned Real Property 1.1(a)
Participants 2.11(a)(i)
Permits 3.6
Property Leases 3.17(b)
Proprietary Rights 3.19(a)
Purchase Price 1.3
Purchaser Loss 9.5.4.4
Reading Facility 1.2(a)(iii)
Receivables 1.1(e)
Reference Date 3.34
Related Parties 3.29
Remedial Works 9.5.1.1
Reviewed Contracts 1.6(b)
Scheme 9.18
Soils Indemnity 9.5.4.3(b)
Specific Indemnity Issues 9.5.2.8
Special Purpose Statements 3.10
Survival Period 10.1
Target Competitive Business 2.8(c)
Tax Benefit 9.17.5
Transferred Assets 1.1
Underlying Loss 9.17.4
UK Scheme 3.25(a)
WARN Act 2.10(j)
Written Responses 3.36
Yorkshire Preamble
Yorkshire Entities 1.1
Yorkshire Party 9.17.1
Yorkshire Restricted Period 2.8(e)
Yorkshire Supply Contract 1.11(b)(ii)
Yorkshire 401(k) Plan 2.10(j)
1999 Americas Textile Dyes Revenues 1.1(d)
1999 Annual Bonus and Commissions 2.10(l)
[Signatures Appear on Following Page]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
Yorkshire Group plc
By:
Print Name:
Title:
Yorkshire Americas, Inc.
By:
Print Name:
Title:
CK Witco Corporation
By:
Print Name:
Title:
Crompton & Knowles Europe S.P.R.L.
By:
Print Name:
Title:
Uniroyal Chemical European Holdings B.V.
By:
Print Name:
Title:
Crompton & Knowles Colors Incorporated
By:
Print Name:
Title:
TAXATION SCHEDULE
Part A - General
1. Interpretation
1.1 In this schedule (unless the context otherwise requires):
"Accounts" means in relation to each Company, the audited balance
sheet as at and the profit and loss account and financial
statements for the period ended on the Accounts Date.
"Accounts Date" means 19th December, 1998 or 31st December, 1998
being the date in December 1998 as at which the relevant Company
made up its Accounts.
"Actual Taxation Liability" means a liability, or an increase in
a liability, to make an actual payment of or of an amount in
respect of Taxation whether or not such Taxation is also or
alternatively, directly or indirectly, chargeable against or
attributable to any other person and whether or not any amount in
respect thereof is recoverable from any other person and whether
or not such liability or increased liability is discharged prior
to Closing.
"Auditors" means the auditors for the time being of the Company.
"CK Witco's Group" means CK Witco, Holdings and any company, not
being a Company, which is the holding company from time to time
of CK Witco and any subsidiary from time to time of such holding
company or CK Witco and references to a "member of CK Witco's
Group" shall be construed accordingly and the expressions
"holding company" and "subsidiary" shall have the meanings
ascribed thereto in section 736 of the Companies Act 1985 of the
United Kingdom.
"Claim" means any assessment, notice, demand or other document
issued or action taken by or on behalf of any Taxation Authority
or any form of return, computation or self-assessment required by
law from which it appears that the Company is subject to, or is
sought to be made subject to, or will or might become subject to,
any Taxation Liability.
"Deemed Taxation Liability" means the setting off of a Post-
Closing Relief against any Actual Taxation Liability of the
Company in respect of which CK Witco would have been liable under
paragraph 1.1 of Part B or (as the case may be) against Profits
which would have given rise to such an Actual Taxation Liability,
in which event the amount of the Deemed Taxation Liability is in
the former case the amount of the Actual Taxation Liability
eliminated by such setting off and in the latter case the amount
of the Actual Taxation Liability which would have arisen but for
such setting off.
"Event" means any event, occurrence, transaction, circumstance,
act or omission whatsoever (and any event, occurrence,
transaction, circumstance, act or omission deemed or treated or
regarded for any Taxation purpose as having occurred) including
being, or ceasing to be, a member of a group or under the control
of, associated with or related to any person for the purposes of
any Taxation, being or ceasing to be resident in any jurisdiction
for the purposes of any Taxation, the entry into of any agreement
(whether conditional or not) and the execution of this Agreement
and Closing and references to an Event occurring on or before a
particular time or date shall include any Event deemed to have
occurred on or before that time or date for any Taxation purpose.
"Post-Closing Relief" means any Relief which arises in
consequence of or by reference to or is attributable to an Event
occurring or deemed to occur after Closing including any losses
attributable to any Event occurring after Closing or in respect
of or attributable to a period commencing after Closing or which
are apportioned to the Later Period, as defined at paragraph 5.6
of this Part A of the Schedule, in accordance with that
paragraph.
"Pre-Closing Relief" means a Relief arising to a Company which is
not a Post-Closing Relief and which does not arise as a result of
any Event occurring after Closing.
"Relief" means any loss, allowance, exemption, set-off,
deduction, credit or other relief in respect of or against any
Taxation or in computing Profits for the purposes of any Taxation
or otherwise from or relating to any Taxation and any right to a
repayment of Taxation.
"Reorganisation" means the intra-group reorganisations described
in Exhibit BB to the Agreement.
"Taxation" means:
(a) any form of tax, levy, duty, rate, contribution,
charge, impost, hypothecation, deduction, or withholding having
the character of taxation whether governmental, statutory, state,
provincial, local governmental, federal, cantonal or municipal
whenever created or imposed and of whatever jurisdiction or part
of a jurisdiction in the world and, in so far as not covered by
the above:
(i) taxes on gross or net Profits including any income tax,
corporation tax, corporate income tax and capital gains tax;
(ii) any taxes, rates, levies or contributions on receipts,
sales, use, licence, lease, service use, occupation, franchise or
real property;
(iii) stamp duty and other documentary duties or taxes and
any registration fees or duties;
(iv) any value added tax, goods and service tax, purchase
tax, sales tax, wholesale tax, any turnover tax, added value tax
and any investment tax;
(v) environmental taxes, duties or levies, any fuel tax and
any tax on the construction of any building or structure and any
tax relating to any landfill;
(vi) any customs or excise duties or taxes and import taxes;
(vii) any taxes, levies, social security contributions,
national insurance contributions or similar taxes, levies or
contributions payable on or in respect of any employees or
payroll;
(viii) any withholdings (including, without limitation, taxes
parafiscales and redevances) or deductions of or on account of
any tax;
(ix) real estate transfer taxes, real estate and property
taxes;
(x) any capital duty or other tax, duty or levy in respect of
the allotment or issue of any shares or securities or the raising
of any capital;
(xi) insurance taxes;
(xii) any tax in respect of any dividend or distribution or
any deemed or constructive dividend or distribution;
(xiii) any capital transfer tax, wealth tax, net wealth tax,
gift tax or capital appreciation tax and any taxes levied on or
by reference to any asset value; and
(xiv) any other taxes, levies, duties, rates contributions,
charges, imposts, deductions, or withholdings similar to,
corresponding with, or replacing or replaced by any of the
foregoing; and
(b) all charges, surcharge, additions to tax, interest,
penalties, fines and other similar liabilities and costs,
incidental or relating to, or relating to any obligation in
respect of, any Taxation falling within paragraph (a) of this
definition.
"Taxation Authority" means any authority, court, tribunal, body,
institution, person or official in any part of the world
competent to impose, assess, collect or administer any Taxation
or make any decision or ruling on any matter relating to any
Taxation.
"Taxation Benefit" means any Relief or other benefit or advantage
available in the computation or ascertainment of any Taxation
Liability.
"Taxation Liability" means any Actual Taxation Liability and any
Deemed Taxation Liability.
"Taxation Warranties" means the warranties and representations
set out in Part C of this schedule.
"VAT" means value added tax or its equivalent in any jurisdiction
other than the United Kingdom.
"Yorkshire's Group" means Yorkshire and any company, not being a
Company, which is the holding company from time to time of
Yorkshire and any subsidiary from time to time of such holding
company or Yorkshire and references to a "member of Yorkshire's
Group" shall be construed accordingly and the expressions
"holding company" and "subsidiary" shall have the meanings
ascribed thereto in section 736 of the Companies Act 1985 of the
United Kingdom.
1.2 In this schedule (unless the context otherwise requires):
(a) references to "the Company", or "a Company", whether
express or implied, shall be read and construed as references to
Europe and each Acquired Entity (as these terms are defined in
the Agreement) individually and as if the provisions of this
schedule were set out in full in respect of each such company;
(b) references to "persons" include an individual,
corporation, partnership, unincorporated association or body or
persons and any state or any agency thereof;
(c) the words and phrases "other", "including" and "in
particular" shall not limit the generality of any preceding words
or be construed as being limited to the same class as the
preceding words where a wider construction is possible;
(d) references to "Profits" shall include any standard or
measure for the purposes of determining any liability for the
purposes of any Taxation and shall include any income, profits or
gains (including capital gains) of any description and from any
source and references to "Profits earned, accrued or received"
shall include Profits which are deemed to have been or treated as
earned, accrued or received for the purposes of any Taxation and
references to Profits earned, accrued or received on or before a
particular date or time or in respect of a particular period
shall include Profits deemed to have been earned, accrued or
received on or before that time or in respect of that period for
any Taxation purpose; and
(e) references to "Parts" are references to Parts of this
schedule and a reference in any Part to a paragraph shall, unless
otherwise stated, be to the paragraph of that Part.
1.3 Notwithstanding any other provision of this Agreement the
liability of CK Witco under this Schedule or Part B or Part C
shall not be excluded, limited or restricted nor increased or
extended in any way by any provision of this Agreement save to
the extent that the provision is expressly stated to apply to
this Schedule or Part B or Part C (as the case may be) and
references in any provision to "this Agreement", "hereunder" or
any similar expression shall be deemed not to be such an express
statement.
1.4 Any payments made pursuant to this schedule shall, so far
as possible, be treated as an adjustment to the consideration
paid by Yorkshire for the Europe Capital Stock under this
Agreement, provided that this paragraph 1.4 shall not operate in
any way to limit the liability of CK Witco under this schedule.
2. Limitations
2.1 CK Witco shall not be liable under Part B or Part C in
respect of any Taxation Liability to the extent (but only to the
extent) that:
(a) such Taxation Liability would not have arisen or
would have been reduced but for:
(i) any voluntary act or omission of the Company or
Yorkshire after Closing otherwise than in the ordinary course of
the business of the Company as carried on at Closing and
otherwise than:
(aa) pursuant to any of the provisions of this Agreement or
any Additional Agreements or any of the Closing Documents;
(bb) pursuant to a legally binding obligation of the
Company in existence at Closing;
(cc) pursuant to any agreement or arrangement (in either
case whether conditional or not) or option entered into by the
Company on or before Closing;
(dd) at the request or with the consent of CK Witco or
any member of CK Witco's Group or any of their duly authorised
representatives where such request is made or such consent is
given pursuant to the provisions of this Agreement or the
Additional Agreements or any of the Closing Documents;
(ee) anything done by CK Witco or any member of CK Witco's
Group on behalf of or in the name of the Company pursuant to an
exercise or purported exercise of any of its rights under this
Schedule or the Agreement or any Additional Agreements or the
Closing Documents;
(ff) anything done by or on behalf of the Company to give
effect to the Reorganisation or any Event or transaction which
forms part of the Reorganisation; or
(gg) anything done or omitted to be done in accordance with
paragraph 2.18 of the Agreement.
Provided that this paragraph 2.1(a) shall not apply to any claim
by Yorkshire under paragraphs 1.1(g), (h), (i) or (j) of Part B
or for a breach of the Taxation Warranties in each of sub-
paragraphs (a) or (b) of paragraph 5 of Part C of this Schedule
and Provided Further that for the purposes of this paragraph
2.1(a) the failure or omission by the Company to make any claim
(including any supplementary claim) for Relief, appeal or further
appeal against any assessment or Claim, application for the
postponement of, or the payment by instalments of, any Taxation,
disclaimer or postponement of Relief shall not be regarded as a
voluntary act or omission of the Company or Yorkshire where the
time limit for the making or doing of such thing expired within
six months after Closing unless CK Witco shall have given written
notice of the requirement or necessity for the making or doing of
such thing to Yorkshire at least 20 Business Days before the
expiry of such time limit.
(ii) any change after Closing in:
(aa) the accounting bases upon which the Company values
its assets;
(bb) the date to which the company makes up its accounts,
save, in any such case, where such change is made to comply with
any law or standard accounting practice in force at the date of
Closing in the jurisdiction in which that Company is
incorporated.
(iii) a failure by Yorkshire to comply with its
obligations under paragraphs 4 and/or 5 of Part A.
(b) such Taxation Liability is an Actual Taxation Liability
of the Company which has been paid or discharged by the Company
on or before Closing;
(c) such Taxation Liability:
(i) arises on payment of a liability included in the Closing
Special Purpose Statement where the Taxation Liability is a
liability to account to a Taxation Authority for any Taxation
which the Company is entitled or required to withhold or deduct
from the amount of the liability on payment; or
(ii) is a liability to pay an amount in respect of Taxation
to a person other than a Taxation Authority and such Taxation
forms part of a liability included in the Closing Special Purpose
Statement;
(d) such Taxation Liability is a liability of the Company to
pay any Taxation Authority any VAT in respect of any VAT period
current at Closing, but only to the extent that such VAT is taken
into account in the Closing Special Purpose Statement;
(e) such Taxation Liability is a liability in respect of any
Taxation (being payroll taxes, national insurance or social
security or similar taxes) which is payable by the Company in
respect of wages, salaries or other remuneration, bonuses or
vacation pay for which an accrual is made in the Closing Special
Purpose Statement ("Payroll Taxes") to the extent that such
Taxation is included in the Closing Special Purpose Statement.
2.2 Each of the sub-paragraphs of paragraph 1.1 of Part B of
this schedule are separate and independent covenants but CK Witco
shall not be liable to pay an amount in respect of a Taxation
Liability pursuant to any sub-paragraph of paragraph 1.1 of Part
B if and to the extent that CK Witco has made a payment to
Yorkshire of an amount in respect of such Taxation Liability
under any other sub-paragraph of paragraph 1.1 of Part B of this
Schedule or to the extent that CK Witco has made a payment to
Yorkshire in respect of such Taxation Liability in respect of a
breach of any of the Taxation Warranties. CK Witco shall not be
liable to make any payment in respect of a Taxation Liability as
a result of a breach of any of the Taxation Warranties to the
extent that CK Witco has made payment to Yorkshire pursuant to
any of the other Taxation Warranties or pursuant to paragraph 1.1
of Part B in respect of such Taxation Liability.
2.3 CK Witco shall not be liable in respect of a claim under
the Taxation Warranties or under Part B of this schedule unless
notice of such claim (specifying, in such detail as shall be
reasonable at the date of the notice, the nature of the claim)
has been given by or on behalf of Yorkshire to CK Witco on or
before the later of:
(a) the tenth anniversary of the date of Closing; and
(b) the date of expiration of the relevant statute of
limitations or other time limit for the making or giving of any
Claim in respect of the Taxation Liability or other matter the
subject of the Claim in the relevant jurisdiction;
provided that where the relevant statute of limitations in a
jurisdiction is extended beyond the tenth anniversary of the date
of Closing solely as a result of any voluntary action taken by
Yorkshire (other than at the request of CK Witco), CK Witco's
liability shall cease on the tenth anniversary of the date of
Closing or, if later, the date on which the relevant statute of
limitations or other time limit would have expired in the absence
of such action by Yorkshire save in respect of any claim made
before such tenth anniversary or (as the case may be) such later
date.
3. Reliefs and Recoveries from Third Parties
3.1 Yorkshire shall at the request of CK Witco require the
Auditors to determine (as experts and not as arbitrators and at
the expense of CK Witco) whether any Taxation Liability (or the
Event giving rise to such Taxation Liability or the discharge of
it) which has resulted in any sum having been paid or becoming
payable by CK Witco under this schedule has given rise to a
Relief which is not a Post-Closing Relief and would not otherwise
have arisen, and to determine whether:
(a) a liability of the Company or Yorkshire to make an
actual payment or increased payment of Taxation has been
satisfied or avoided in whole or in part by the use of that
Relief; or
(b) a right to repayment of Taxation has arisen as a
result of the use of that Relief;
and, if the Auditors so determine, the amount by which that
liability has been satisfied or avoided (as so determined by the
Auditors) or an amount equal to the amount of that repayment as
so determined by the Auditors (as the case may be) shall be dealt
with in accordance with paragraph 3.2 Provided that nothing in
this paragraph 3 shall oblige Yorkshire or any Company to utilise
any Pre-Closing Relief in priority to any Post-Closing Relief or
shall operate to treat Yorkshire or any Company as having
utilised or being required to utilise any Pre-Closing Relief in
priority to any Post-Closing Relief and it shall be assumed that
all available Post-Closing Reliefs are used in priority to any
Pre-Closing Reliefs.
3.2 Where it is provided under paragraph 3.1 that any
amount is to be dealt with in accordance with this paragraph 3.2:
(a) the amount shall first be set off against any
payment then due from CK Witco under this schedule;
(b) to the extent there is an excess, a refund shall be
made to CK Witco of any previous payment made by CK Witco under
this schedule and not previously refunded under this paragraph
3.2 or any other provision of this schedule or the Agreement up
to the amount of such excess; and
(c) to the extent that the excess referred to in
paragraph 3.2(b) is not exhausted thereunder, the remainder of
that excess shall be carried forward and set off against any
future payment which becomes due from CK Witco under this
schedule.
3.3 Where such determination by the Auditors as is
mentioned in paragraph 3.1 has been made, CK Witco or Yorkshire
may request the Auditors to review such determination (as experts
and not as arbitrators and at the expense of the person making
the request) in the light of all relevant circumstances,
including any facts which have become known only since such
determination, and to determine whether such determination
remains correct or whether, in the light of those circumstances,
the amount that was the subject of such determination should be
amended.
3.4 If the Auditors determine under paragraph 3.3 that
an amount previously determined should be amended, that amended
amount shall be substituted for the purposes of paragraph 3.1 in
place of the amount originally determined and such adjusting
payment (if any) as may be required by virtue of such
substitution shall forthwith be made by CK Witco to Yorkshire or,
as the case may be, by Yorkshire to CK Witco.
3.5 If the Company or Yorkshire is entitled to recover from
any third party (including any Taxation Authority but excluding
any Company, Yorkshire, CK Witco or any member of CK Witco's
Group) any sum which it would not have been able to recover but
for any Taxation Liability in respect of which any amount has
been paid or become payable by CK Witco under this schedule
(other than the utilisation of a Relief referred to in Paragraph
3.1 or the utilisation of a Post-Closing Relief) then Yorkshire
shall:
(a) notify CK Witco in writing of such entitlement within 14
days of Yorkshire becoming aware of such entitlement;
(b) subject to Yorkshire and the Company being
indemnified by CK Witco to the reasonable satisfaction of
Yorkshire against all losses, costs (including the cost of
management time of Yorkshire and the Company which shall be
deemed to be incurred or suffered by them for the purposes of
this paragraph 3.5), damages and expenses which may be incurred
or suffered by Yorkshire or the Company in so doing, at the
written request of CK Witco take and procure that the Company
takes such reasonable and appropriate action as CK Witco may
reasonably so request to recover such sum; and
(c) keep CK Witco informed at CK Witco's expense of the
progress of any such action;
and if Yorkshire or the Company shall so recover any such sum
then Yorkshire shall repay to CK Witco a sum equal to the lesser
of:
(i) the amount of any sum so recovered (including any
interest or repayment supplement), after deduction therefrom of
an amount equal to any costs, fees and expenses in obtaining it
(so far as not previously paid by CK Witco) and any Taxation
Liability incurred in respect of it; and
(ii) the amount paid by CK Witco under this schedule in
respect of the Taxation Liability in question, less any part of
such amount previously repaid to CK Witco pursuant to this
provision or any other provision of this schedule or the
Agreement,
within two (2) Business Days after the date the relevant sum
(being cleared funds) is received by Yorkshire or, as the case
may be, the Company, provided that if at the date that the
relevant sum is received by Yorkshire or, as the case may be, the
Company, the due date for payment (determined in accordance with
paragraph 2 of Part B) by CK Witco of an amount equal to the
Taxation Liability in question pursuant to paragraph 1.1 of Part
B has not passed then an amount equal to the amount referred to
in sub-paragraph (i) above shall be set-off against the liability
of CK Witco to pay to Yorkshire the amount which would, but for
such set-off, have become payable by CK Witco on such due date in
respect of such Taxation liability.
3.6 Yorkshire shall at the request and expense of CK
Witco require the Auditors to determine (as experts and not as
arbitrators) whether the Company is entitled to receive from any
Taxation Authority a repayment or credit in respect of Taxation
relating to any period ended on or before Closing (not being a
credit or repayment in respect of VAT in respect of any VAT
period current at Closing and other than in respect of Payroll
Taxes which are included in the Closing Special Purpose
Statement) where such credit or repayment does not arise as the
result of the utilisation of any Post-Closing Relief or any Event
occurring after Closing or as the result of the utilisation of
any Relief referred to in paragraph 3.1 and if the Auditors
determine that the Company has such an entitlement then:
(a) Yorkshire shall give CK Witco details of the entitlement
as soon as reasonably practicable after Yorkshire becomes aware
of the entitlement and in any event within 14 days of Yorkshire
becoming aware of such entitlement; and
(b) subject to Yorkshire and the Company being
indemnified by CK Witco to the reasonable satisfaction of
Yorkshire against all losses, costs, damages and expenses which
may be incurred or suffered by Yorkshire or the Company in so
doing (including the cost of management time of Yorkshire and the
Company which shall be deemed to have been so incurred),
Yorkshire shall at the request and expense of CK Witco take all
reasonable and appropriate steps to procure that the repayment or
credit is obtained, keeping CK Witco fully informed of the
progress of any action taken; and
an amount equal to the amount of the repayment or credit
(including any repayment supplement or interest) as so determined
by the Auditors which is received by the Company shall first be
set off against any amount then due from CK Witco to Yorkshire
under this schedule and any balance shall be paid to CK Witco
within two (2) Business Days after the date the relevant sum
(being cleared funds) is received by the Company or, in the case
of a credit, within two (2) Business Days after the credit gives
rise to any cash saving to the Company. The provisions of
paragraphs 3.3 and 3.4 shall apply to a determination by the
Auditors under this paragraph 3.6 in the same way as they apply
to a determination by the Auditors under paragraph 3.1.
3.7 CK Witco shall pay to Yorkshire any reasonable costs
incurred or suffered by Yorkshire or the Company (including the
cost of time of the management of Yorkshire and the Company which
shall be deemed to have been incurred or suffered for the
purposes of this paragraph 3.7) in connection with any matter
referred to in this paragraph 3.
4. Conduct of Claims
4.1 If Yorkshire or, after Closing, the Company shall
become aware of any Claim which will or may give rise to a
liability of CK Witco under Part B or Part C of this schedule
("Relevant Claim") Yorkshire shall, but not as a conditions
precedent to the liability of CK Witco under this schedule, give
notice thereof or procure that notice thereof is given as soon as
reasonably practicable to CK Witco and in any event within 14
days of Yorkshire and 21 days of the Company becoming aware of
the Relevant Claim.
4.2 Subject to paragraphs 4.5, 4.6 and 4.7, Yorkshire
shall, and shall procure that the Company shall, take such action
to appeal, protest against, mitigate, reduce, avoid, dispute,
resist or compromise the Relevant claim and make available such
documents, information and assistance in connection with the
Relevant Claim as CK Witco may by written notice request provided
that CK Witco shall indemnify and secure Yorkshire and the
Company against all reasonable costs and expenses (including any
Taxation or additional Taxation and including the cost of time of
the management of Yorkshire or the Company which shall be deemed
to have been incurred, or suffered for the purposes of this
paragraph 4) which Yorkshire or the Company incurs as a result of
taking such action or providing such information and assistance,
such reasonable costs and expenses to be paid in cleared,
immediately available funds on or before the date five (5)
Business Days after the date of written notice from Yorkshire of
the amount which CK Witco is required to pay or, if later, on the
last Business Day before the date on which such reasonable costs
and expenses are due for payment. If Yorkshire shall have served
a written notice on CK Witco requesting CK Witco to provide such
indemnity or security and CK Witco shall fail to provide the same
within 30 days thereafter then CK Witco's rights under this
paragraph 4 shall cease and Yorkshire and the Company shall be
entitled to deal with the Relevant Claim on such terms as they
shall in their absolute discretion think fit without prejudice to
their rights and remedies under this schedule.
4.3 Subject to paragraphs 4.5, 4.6 and 4.7 CK Witco may elect
to have any action referred to in paragraph 4.2 conducted by CK
Witco acting in the name of the Company but reporting to
Yorkshire in which event the provisions of paragraph 4.4 shall
apply.
4.4 CK Witco hereby undertakes to Yorkshire to:
(a) keep Yorkshire fully and promptly informed of all
matters relating to the action and deliver to Yorkshire copies of
all correspondence relating to the action;
(b) obtain the prior written approval of Yorkshire to
the settlement or compromise of the action or the agreement of
any matter in the conduct of the action which involves the
utilisation of any Post-Closing Relief;
(c) obtain the prior written approval of Yorkshire (not
to be unreasonably withheld or delayed) to the content and
sending of any written communications relating to the action to a
Taxation Authority;
(d) without prejudice to (b) above, obtain the prior
written approval of Yorkshire (not to be unreasonably withheld or
delayed) to:
(i) the settlement or compromise of the Relevant Claim
which is the subject of the action; and
(ii) the agreement of any matter in the conduct of the
action which is likely to affect the amount of the Relevant
Claim;
(e) deal with all matters relating to the Relevant Claim in a
prompt and diligent manner and within any applicable time limit.
4.5 Yorkshire shall not be obliged to procure that the
Company take any action under this paragraph 4 which involves the
utilisation of any Post-Closing Relief.
4.6 Paragraph 4.3 shall not apply (and no request by CK Witco
pursuant to paragraph 4.2 shall be deemed to be reasonable if it
is a request by CK Witco to have any action referred to in
paragraph 4.2 conducted by CK Witco in the name of the Company)
in circumstances where any fraudulent conduct or fraud or wilful
default or conduct involving dishonesty or any criminal offence
has been committed by CK Witco (whether acting on its own behalf
or in the name of any Company pursuant to paragraph 4.3) in
relation to the Taxation affairs of any Company.
4.7 Any request made by CK Witco pursuant to paragraph
4.2 shall be made within a reasonable time of any notice given by
Yorkshire to CK Witco in accordance with paragraph 4.1 and if:
(a) on the expiry of a period of 14 days commencing on
the date of such notice, CK Witco shall not have given to
Yorkshire notice of CK Witco's intentions in respect of the
Relevant Claim, or
(b) at any time after CK Witco has given notice to
Yorkshire indicating its intention to dispute, resist, appeal
against, compromise or defend the Relevant Claim, CK Witco has
failed promptly and diligently to request action to that effect
under paragraph 4.2 or to progress any action under paragraph
4.3,
Yorkshire and the Company shall be entitled to deal with the
Relevant Claim on such terms as they shall in their absolute
discretion think fit without prejudice to their rights and
remedies under this schedule.
5. Taxation Computations
5.1 Subject to complying with the provisions of
paragraph 5.2 below, CK Witco or its duly authorised agents shall
have the right and obligation, at the cost and expense of CK
Witco and including the cost of time of the management of
Yorkshire or the Company which shall be deemed to have been
incurred or suffered for the purposes of this paragraph 5, to
prepare the Taxation returns and computations of each Company for
all accounting periods or other periods in respect of which the
Company is required to make a return or payment of Taxation to a
Taxation Authority (other than a payment on account of or as an
instalment of any Taxation for or in respect of a period ending
after Closing) ending on or prior to Closing (each a "Relevant
Period") to the extent that the same shall not have been prepared
before Closing (each such Taxation return or computation is
referred to in this paragraph 5 as a "Relevant Return"). CK Witco
or its duly authorised agents shall (subject to paragraph 4 which
shall override all of the provisions of this paragraph 5 in the
event of any conflict between the provisions of this paragraph 5
and paragraph 4) have the right, at the cost and expense of CK
Witco, to prepare all documentation and deal with all matters
(including correspondence and the utilisation of any Pre-Closing
Relief against any Taxation Liability in respect of which it
would otherwise be liable under this Schedule but excluding the
use of any Post-Closing Relief) relating to any Relevant Return
to the extent that the same have not been prepared or dealt with
prior to Closing.
5.2 CK Witco covenants with Yorkshire:
(a) that all Relevant Returns will be prepared (so far
as legally possible) on a basis consistent with past practice and
the assumptions made for the purposes of calculating the
provisions for Taxation in the Accounts and no claim shall be
made in any such Relevant Returns to utilise a Post-Closing
Relief;
(b) to keep Yorkshire and its duly authorised agents and
the Company fully informed of all matters relating to the
submission, negotiation and agreement of each Relevant Return;
(c) that no Relevant Return and no correspondence or
documentation or communication pertaining to the negotiations or
agreement of any Relevant Return shall be made or transmitted to
any Taxation Authority without first being submitted to Yorkshire
and the Company for Yorkshire's approval and shall only finally
be submitted or transmitted on the receipt of the written
approval of Yorkshire or its duly authorised agent, such approval
not to be unreasonably withheld or delayed; and
(d) to deal with all such matters diligently and
promptly and within any applicable time limit.
5.3 In the event that the provisions of paragraph 5.2
have been complied with by CK Witco, Yorkshire shall procure that
the Company shall cause any Relevant Return approved by Yorkshire
under 5.2(c) (which shall incorporate all claims, elections,
disclaimers, surrenders and consents notified by CK Witco to
Yorkshire) to be authorised, signed and submitted to the
appropriate Taxation Authority and generally do all such things
as may be necessary to give effect to such returns, claims,
elections, disclaimers, surrenders or consents provided that the
Company shall not be obliged to sign any Relevant Return which it
considers not to be full, true and accurate in all material
respects.
5.4 Yorkshire shall (if requested in writing by CK
Witco) procure that the Company promptly makes or gives such
Relevant Returns and any such claims, elections, disclaimers,
surrenders and consents as are mentioned in paragraph 5.3 and
generally does all such things as CK Witco shall reasonably
request in writing and which may be necessary to give effect to
such Relevant Returns or any such claims, elections, surrenders
or consents.
5.5 Yorkshire shall procure that there shall be prepared
all Taxation returns and computations for each Company for any
period which begins before Closing and ends after Closing (each
such period being referred to as a "Current Period" and any such
returns and computations being referred to as "Current Returns")
and shall provide CK Witco with copies of all Current Returns and
shall not submit any Current Return or any correspondence
relating to a Current Return to any Taxation Authority or agree
any Current Return with any Taxation Authority without CK Witco's
approval, such approval not to be unreasonably withheld or
delayed. In the case of any return in respect of corporation
tax, corporate income tax or income tax (and any similar tax)
Yorkshire shall provide CK Witco with a copy of the relevant
Current Return at least 30 days before the time limit for
submission of that Current Return to the relevant Taxation
Authority. Yorkshire shall procure that any reasonably requested
amendments to a Current Return (including amendments which
involve the utilisation of a Pre-Closing Relief but not including
amendments which involve the utilisation of a Post-Closing
Relief) are incorporated in the relevant Current Return.
5.6 Each of CK Witco and Yorkshire shall co-operate with
each other to agree as between themselves in relation to any
Current Period the Profits and/or the Reliefs which, in
accordance with the provisions of this paragraph, are
attributable to:
(a) that part of the Current Period which falls on or
before Closing (the "Earlier Period"); and
(b) that part of that Current Period which falls after
Closing (the "Later Period").
CK Witco and Yorkshire hereby agree that any such allocation of
Profits and/or Reliefs shall be made on the following basis:
(i) Income, expenditure, Profits and Reliefs which arise
solely as a result of any Event occurring on or before Closing
and not as a result of any Event occurring after Closing shall be
attributable to the Earlier Period;
(ii) Income, expenditure, Profits and Reliefs which
arise as a result of an Event occurring after Closing shall be
attributable to the Later Period; and
(iii) Income, expenditure, Profits and Reliefs which are
only available in respect of the total period comprised within
the relevant Current Period and not in respect of any particular
part of the Current Period shall be apportioned between the
Earlier Period and the Later Period on a time basis, having
regard to the number of days in the Earlier Period and Later
Period and the Current Period;
It is further agreed by CK Witco and Yorkshire that any Relief
apportioned or allocated to the Later Period in accordance with
this paragraph 5.6 shall for all purposes of this Taxation
Schedule be treated as if it were a Post-Completion Relief.
5.7 Yorkshire shall provide, and shall procure that the
Company provides, CK Witco at the expense of CK Witco and CK
Witco shall provide Yorkshire at (save as otherwise provided in
this schedule) at the expense of Yorkshire with such documents,
information and assistance (including, without limitation, access
to books, accounts, records and personnel) as CK Witco or, as the
case may be, Yorkshire, may reasonably require in connection with
its conduct of the Company's Taxation affairs pursuant to this
paragraph 5 or in relation to the exercise by CK Witco of its
rights under paragraph 4.
6. Gross Up
6.1 All sums payable by CK Witco to Yorkshire under this
schedule and any amount payable by Yorkshire to CK Witco pursuant
to paragraph 3 of Part B shall be paid free and clear of all
deductions or withholdings whatsoever, save only as may be
required by law.
6.2 If any deductions or withholdings, not being in
respect of payments of interest payable pursuant to paragraph 2.3
of Part B, are required by law to be made from any of the sums
payable as mentioned in sub-paragraph 6.1 by CK Witco or
Yorkshire (as the case may be) (the "Paying Party"), the Paying
Party shall be obliged to pay to the other party (the "Receiving
Party") such sum as will, after the deduction or withholding has
been made, leave the Receiving Party with the same amount as it
would have been entitled to receive in the absence of any such
requirement to make a deduction or withholding.
6.3 If any sum, not being in respect of payments of interest
payable as mentioned in paragraph 6.1, shall be subject to
Taxation in the hands of the Receiving Party, the Paying Party
shall be under the same obligation to make an increased payment
so as to ensure that the amount retained by the Receiving Party
after taking into account such Taxation, is equal to the full
amount which would have been received and retained but for such
Taxation.
6.4 Where the Paying Party is required to make any such
deduction or withholding as is referred to in paragraph 6.2 and
to account for that deduction or withholding to any authority or
person, the Paying Party shall:
(a) make such deduction or withholding;
(b) pay the full amount deducted or withheld to the relevant
authority or person in accordance with applicable law; and
(c) forthwith furnish to the Receiving Party the original, or
a certified copy, of a receipt evidencing payment thereof.
7. Consents
CK Witco undertakes to Yorkshire that CK Witco shall ensure that
all necessary notifications, consents, certificates,
authorisations and clearances required to be made in respect of
the Reorganisation will be obtained on or before Closing and will
notify Yorkshire of all notifications, claims for relief and
returns required to be filed after Closing with any Taxation
Authority in respect of any of the Events effected or proposed to
be effected as part of the Reorganisation at least thirty (30)
days before the expiry of the time limit for such filings and
shall procure that Europe shall comply with all Belgian Taxation
laws and regulations in relation to any payment made by Europe to
the BCC for any asset to be transferred to Europe as mentioned in
Exhibit BB to the Agreement.
8. General
8.1 If at any time any provision or part of a provision of
this Schedule shall be or become, or be found by any court of
competent jurisdiction to be illegal, invalid or unenforceable in
any respect under the law of any jurisdiction such illegality,
invalidity or unenforceability shall not in any way affect or
impair the legality, validity or enforceability:
(a) of any other provision or parts of such provision of this
schedule in that jurisdiction all of which shall remain in full
force and effect in such jurisdiction; or
(b) of that provision (or part of a provision) or any other
provision of this schedule in any other jurisdiction all of which
shall remain in full force and effect in every other
jurisdiction.
8.2 Each of the covenants on the part of CK Witco in this
schedule shall be construed separately and none of such covenants
shall limit or govern the extent, application or construction of
any other of them and notwithstanding that any such covenant may
prove to be illegal, invalid or unenforceable the remaining such
covenants shall continue in full force and effect.
8.3 All of the provisions of this Schedule shall survive
Closing and continue in full force and effect after Closing.
8.4 The provisions of this schedule shall be governed and
construed in accordance with the laws of England.
Part B - Taxation Covenants
1. Covenant by CK Witco
1.1 Subject only to the provisions of paragraph 2 of
Part A of this Schedule, CK Witco hereby covenants with
Yorkshire to pay to Yorkshire or such other person as Yorkshire
may direct on the due date for payment ascertained in accordance
with Paragraph 2 of this Part B an amount equal to:
(a) any Actual Taxation Liability of the Company
arising as a result of or, in respect of:
(i) an Event occurring on or before Closing; or
(ii) any Profits earned, accrued or received on or before
Closing or in respect of any period (or part of a period) ended
on or before Closing; or
(iii) insofar as not covered within (i) or (ii) above,
net wealth, asset values, turnover or added value for a period
(or part of a period) ended on or before Closing; or
(iv) any liability to Taxation arising before Closing;
(b) any Deemed Taxation Liability;
(c) any Taxation Liability of the Company (including, for the
avoidance of doubt, any Taxation Liability (not within sub-
paragraph (a) of this paragraph 1.1) for which the Company
becomes jointly and severally liable) which arises as the result
of that Company having been treated as, or having ceased to be, a
member of any group, group registration, organschaft or fiscal
unity (in each case as defined for any Taxation purpose) at any
time prior to Closing or as the result of the filing of any
consolidated return in relation to Taxation in respect of that
Company and any other person relating to any period commencing
prior to Closing (other than a person who is a member of a group
of which the Company becomes a member on or after Closing) or as
a result of any tax sharing arrangements affecting the Company on
or before Closing;
(d) any Taxation Liability for which the Company is or
becomes liable or accountable in consequence of the failure to
pay or discharge any Taxation within a specified time or
otherwise by:
(i) any company (other than a Company):
(aa) which has at any time (before or after Closing) been or
ceased to be a member of a group, group registration,
organschaft, fiscal unity or consolidated return (in each case as
defined for any Taxation purpose) of which the Company has at any
time prior to Closing been a member; or
(bb) from which the Company has received or is deemed to have
received or has or is deemed to have become entitled to receive
on or before Closing any asset or any dividend or other
distribution from or in respect of shares in that other company;
(ii) any other person not being a member of Yorkshire's Group
but only insofar as the Taxation in question relates to any
Profits earned, accrued or received on or before Closing or to
any Event occurring on or before Closing;
(e) any Taxation for which any member of Yorkshire's Group
becomes liable or accountable and for which any Company would
have been liable or accountable but for the merger or
amalgamation after Closing of such Company or its business with
another member of Yorkshire's Group or the dissolution or
liquidation after Closing of such Company and in respect of which
and to the extent only that but for such merger, amalgamation,
liquidation or dissolution Yorkshire could have made a claim
under any of the other provisions of this Part B in respect of
the Company;
(f) any liability of the Company to make any payment for or
in respect of, or to repay in whole or in part any payment
received for or in respect of, or the making available (whether
by surrender or otherwise) of any Tax Benefit pursuant to an
arrangement or agreement entered into by the Company on or before
Closing;
(g) any Taxation Liability of or affecting the Company
or any member of Yorkshire's Group in respect of or arising from
any Event or Events occurring on or before Closing outside the
ordinary course of business of the Company as carried on at any
time on or before Closing or by any member of the CK Witco Group
on or before Closing and which forms part of any combination or
series of Events which include any Event or Events occurring
after Closing which are in the ordinary course of business of the
Company as carried on at any time on or before Closing or which
are effected pursuant to a legally binding obligation or
arrangement (in either case whether conditional or not) entered
into or incurred on or before Closing or which are carried out
pursuant to any request in writing by CK Witco or any member of
the CK Witco Group or their respective representatives pursuant
to any other provision of this Agreement or any Additional
Agreement or any Closing Document or otherwise;
(h) any Taxation Liability of or affecting the Company
or Yorkshire or any member of Yorkshire's Group which arises
(whether before or after Closing) as a result of or in respect of
anything done or failed to be done by Yorkshire or which
Yorkshire procures the Company or any other Company to do or fail
to do pursuant to its obligations under paragraph 2.18 of the
Agreement;
(i) any Taxation Liability of the Company or Yorkshire
or any member of Yorkshire's Group which arises (whether before
or after Closing) as a result of or in respect of anything done
or omitted to be done by or on behalf of the Company to give
effect to the Reorganisation or any Event or transaction which
forms part of the Reorganisation;
(j) any liability to Taxation of the Company (whether
arising before or after Closing) as a result of the holding of,
or the assignment or surrender of, the lease of the property at
Waterside Industrial Park, Smiths Road, Bolton between Foden
Investments Limited, C&K (UK) Limited and Europe
(k) any costs, fees and expenses reasonably incurred by
Yorkshire or the Company in connection with any such liability or
amount as is referred to in any of paragraphs 1.1(a) to (j)
inclusive or with any Claim in respect thereof or in taking or
defending any action under this schedule.
2. Payment
2.1 If CK Witco is or becomes liable to make a payment under
this Part B in respect of an Actual Taxation Liability, CK Witco
shall pay such amount in cleared, immediately available funds on
or before the date five (5) Business Days after the date of
written notice from Yorkshire of the amount which CK Witco is
required to pay or, if later, on the last Business Day before the
date on which the Actual Taxation Liability in question is due
for payment.
2.2 If CK Witco is or becomes liable to make a payment under
this Part B in respect of a Deemed Taxation Liability, CK Witco
shall pay the relevant amount on or before the date five (5)
Business Days after the date of written notice from Yorkshire of
the amount which CK Witco is required to pay or, if later, on the
date which would have been the due date for payment of the
Taxation which would have been payable (assuming taxable profits)
but for the setting off.
2.3 Any sum payable by CK Witco or by Yorkshire under this
Schedule shall bear interest which shall accrue from day to day
at four per cent (4%) above the base rate from time to time of
HSBC Bank plc (or, in the absence of such base rate, such similar
rate as the person entitled to the payment shall specify) from
the date following the specified or due date up to and including
the day of actual payment of such sums (or the next business day
if such day of actual payment is not a business day) compounded
monthly.
2.4 If any Taxation Liability or other matter which gives
rise to a claim under this schedule relates to, or is payable in,
or was incurred in a currency other than United States Dollars
then CK Witco shall make any payment due from it under this
schedule in respect of such Taxation Liability or other matter in
the currency in which it is payable or was incurred.
3. Yorkshire's Covenant
3.1 Yorkshire covenants with CK Witco to pay to CK
Witco an amount equal to any Actual Taxation Liability of CK
Witco or of any company which is a member of CK Witco's Group
(and any reasonable costs and expenses incurred by CK Witco or
that company in relation to such Actual Taxation Liability) where
such Actual Taxation Liability:
(a) arises as a result of the failure by the Company to
discharge after Completion an Actual Taxation Liability for which
the Company is primarily liable and which does not give rise to a
liability of CK Witco under paragraph 1.1 of this Part B; or
(b) arises as a result of the failure by the Company to
discharge after Completion an Actual Taxation Liability for which
the Company is primarily liable and which does give rise to a
liability of CK Witco under paragraph 1.1 of Part B to the extent
that CK Witco has made a payment under paragraph 1.1 of this Part
B,
but Yorkshire shall have no liability to make any payment
under this paragraph 3.1 unless and until CK Witco and each
member of the CK Witco Group shall have delivered to Yorkshire a
duly executed document whereby CK Witco and each member of the CK
Witco Group waives all rights which it may have (whether
statutory, contractual or otherwise) against Yorkshire (other
than under this paragraph 3.1) or any Company or any member of
Yorkshire's Group to obtain an indemnity or reimbursement in
respect of or by reference to such Actual Taxation Liability.
3.2 If Yorkshire becomes liable to make a payment under
paragraph 3.1 of this Part B, Yorkshire shall pay such amount in
cleared immediately available funds on or before the later of the
last Business Day before that Actual Taxation Liability is
finally due and payable and the date five (5) Business Days after
the date of written demand on Yorkshire by CK Witco.
Part C - The Taxation Warranties
References in this Part C of this Schedule to "material" means
material in relation to the Company concerned.
In relation to any warranty in this Part C which is expressed to
be given as to matters of which CK Witco is aware or within CK
Witco's knowledge or awareness, this shall refer only to matters
directly known to the Executive Officers of CK Witco and no other
matters shall be deemed to be within the CK Witco's knowledge or
awareness. For these purposes, "Executive Officers" mean each of
Charles J. Marsden, Barry B. Dobinsky, Louis Lopez, Richard J.
Lipka, James J. Conway, Matthew R. Joyner, John T. Ferguson II,
Vincent A. Calarco, Jeans Jacques Silvestre, Dominique Balcean
and Pierre Boury.
CK Witco hereby warrants and undertakes to Yorkshire that, save
as fairly disclosed in the CK Witco Disclosure Memorandum, each
of the statements contained in the following paragraphs of this
Part C are true and correct at the date of this Agreement and
will be deemed to be made again as and at the Closing Date
(provided that CK Witco shall have no liability under this Part C
for breach of any Taxation Warranty to the extent that such
breach was disclosed by CK Witco in any written supplement to the
CK Witco Disclosure Memorandum delivered to Yorkshire prior to
the date of this Agreement and again at Closing) and CK Witco
hereby acknowledges that it has represented to Yorkshire in such
terms and CK Witco acknowledges that Yorkshire is entering into
the Agreement in reliance on such Taxation Warranties.
1. Returns and Information
(a) All registrations, returns, computations, accounts,
notices, reports and information which are or have been required
to be made or given by the Company for any Taxation purpose
(i) have been made or given within the requisite periods and on a
proper basis and are up-to-date and correct in all material
respects and (ii) were when made complete and accurate in all
material respects and (iii) none of them is, or, so far as CK
Witco is aware, is likely to be, the subject of any dispute or
disagreement with any Taxation Authority.
(b) None of the Taxation returns or other filings that
include the operations of the Company, or of any group,
organschaft or fiscal unity (as defined for any Taxation purpose)
of which the Company is or has been a member, has, within the
past 10 years been audited (other than by way of an audit which
is of a routine nature in the country in which the Company is
incorporated) or investigated by any Taxation authority and that
Company has received no notice that any such audit (other than by
way of an audit which is of a routine nature in the country in
which the Company is incorporated) or investigation is or may be
undertaken and so far as CK Witco is aware no facts exists which
would constitute grounds for any liability or assessment of any
material amount of additional Taxation by any Taxation Authority
with respect to the taxable years or periods covered in such
Taxation returns and filings.
(c) No material issues have been raised in any examination or
review by any Taxation Authority with respect to the businesses
and operations of the Company which, by application of similar
principles, reasonably could be expected to result in a proposed
adjustment to the liability for Taxation for any other taxable
period not so examined or reviewed.
(d) The Company has not within the period of three years
ending on the date of this Agreement paid or become liable to pay
any penalty, fine, surcharge, interest or similar payment of a
material amount in respect of or relating to any Taxation or any
failure to comply with any obligation relating to Taxation and,
so far as CK Witco is aware there are no facts which are likely
to cause it to become liable to any such penalty, fine,
surcharge, interest or similar amount.
(e) The Company has maintained all material information and
records which it is required to maintain for any Taxation purpose
and the Company is in possession of sufficient information to
enable it to calculate any present or, so far as possible having
regard to the facts and circumstances at the date of this
Agreement, any future liability to Taxation of the Company and
any entitlement of the Company to any Relief insofar as such
liability or Relief arises as a result of or is to be computed by
references to any Event occurring on or before Closing or any
Profits earned, accrued or received on or before Closing or any
dividend or other distribution made or deemed to have been made
on or before Closing or the acquisition of any asset on or before
Closing or the making of any loan, charge, facility or benefit to
or by the Company on or before Closing.
2. Taxation Liabilities and Reliefs
(a) Proper provision or reserve in accordance with standard
accounting practice of the jurisdiction in which it was
incorporated has been made in its Accounts for all material
liabilities for Taxation (whether actual, contingent, deferred or
disputed) for which the Company was or is liable or for which it
is or may become liable or accountable in respect of Profits
earned, accrued or received on or before, or for a period (or
part of a period) ended on or before the Accounts Date or Events
occurring on or before, or for a period (or part of a period)
ended on or before, the Accounts Date and whether incurred as
principal, agent or trustees and whether or not the Company is
primarily or secondarily liable therefor and the Company has not
incurred and will not, on or before Closing, incur any liability
to Taxation in respect of any Event occurring outside the
ordinary course of business of that Company since the Accounts
Date.
(b) Proper provision has been made in its Accounts, in
accordance with standard accounting practice in the jurisdiction
in which the Company is incorporated, for all deferred tax of a
material amount.
(c) Since the Accounts Date no material payment has been made
and no material liability (being a payment or liability on
revenue account) has been incurred by the Company other than in
the normal course of business which will not be deductible in
computing Profits (or tax allowable losses) for Taxation purposes
or in computing Taxation payable by the Company.
(d) The Company has paid all payments of or in relation to
Taxation which it has become liable to pay and which it was
required to pay on or before Closing and the Company has duly
complied with all obligations to deduct or withhold Taxation from
any payments made or treated or regarded as made by it, whether
on its own behalf or as agent or trustee, and to account for any
such Taxation to the relevant Taxation Authority.
(e) The Company has not been required to give or provide any
security or guarantee in respect of any liability of the Company
or any other person to Taxation (whether actual or contingent,
present or future).
(f) The Company is not liable for any Taxation as agent or
Taxation representative of any other person or business and does
not constitute the permanent establishment of any other person,
business or enterprise for any Taxation purpose, and the Company
is not a party to any joint venture, partnership or other
arrangement or contract which is treated as a partnership for any
Taxation purpose. The Company is not liable and so far as CK
Witco is aware there are no circumstances which would render it
liable for any Taxation as a consequence of the failure of any
other person (other than another Company) to discharge any
Taxation within a specified period.
(g) The Company is not, and will not as a result of any Event
occurring on or before Closing become, liable to pay, or to make
reimbursement or indemnity in respect of, any Taxation payable by
or chargeable on or attributable to any other person (or any
amount in respect of or corresponding to any such Taxation).
(h) So far as CK Witco is aware nothing has been done, and no
event or series of events has occurred as a result of any
contract, agreement or arrangement (in either case whether
conditional or not) entered into on or before Closing in relation
to the Company, which might, when taken together with the entry
into this Agreement or Closing or any thing done at or as part of
Closing, directly cause or contribute to the disallowance,
restriction or non-availability to the Company of any Taxation
Benefit.
(i) The CK Witco Disclosure Memorandum sets out with express
reference to this paragraph (i) full particulars of any
agreement, arrangement between the Company and any Taxation
Authority and of any concession, tolerance or abatement operated
by any Taxation Authority and the Company has not taken any
action which has had or will have, and nothing contemplated by
this Agreement will have, the effect of altering, prejudicing or
in any way disturbing any such agreement, arrangement,
concession, tolerance or abatement.
(j) The Company is not a party to and is not otherwise
subject to any arrangement having the effect of or giving rise to
the recognition of a deduction or loss in a taxable period ending
on or before Closing, and a corresponding recognition of taxable
Profits in a taxable period ending after Closing, or any other
arrangement that would have the effect of or give rise to the
recognition of taxable Profits in a taxable period ending after
Closing without the receipt of or entitlement to a corresponding
amount of cash.
(k) The Company is not liable for or subject to any material
amount of Taxation the liability for payment of which is or has
been deferred, suspended or postponed.
3. Company Residence
(a) The Company is and has always been resident for Taxation
purposes in and only in the jurisdiction stated in the CK Witco
Disclosure Memorandum with express reference to this
paragraph (a) and has never been resident anywhere else at any
time since its incorporation and will be so resident at Closing.
For the avoidance of doubt, references to residence in this
Warranty shall be construed as references to residence as
determined by the local law of the jurisdiction stated in the CK
Witco Disclosure Memorandum and not (unless required by the
relevant local law) by reference to the provisions of any
relevant double taxation agreement, treaty or convention.
(b) The Company does not have and has never had a
branch, agency or permanent establishment in, and is not liable
to any Taxation in, any jurisdiction other than that in which it
is stated in the Disclosure Memorandum to be resident for
Taxation purposes.
4. Double Tax Treaties
So far as CK Witco is aware, no relief or other Taxation Benefit
which has been claimed by the Company or which the Company is
entitled to claim under any double taxation agreement treaty or
convention entered into between the jurisdiction in which it is
resident for Taxation purposes and any other relevant
jurisdiction, will or may be disallowed or withdrawn, postponed,
restricted, clawed back or otherwise lost as a result of any
Event occurring on or before Closing.
5. Tax Base Values and Costs of Acquisition
(a) Sufficient provision for deferred tax under FAS 109
has been provided for in the Special Purpose Statement for any
timing difference between the book tax basis in the assets of the
Company and the US GAAP basis.
(b) No action has been taken by the Company or, so far as CK
Witco is aware, any company which is or has been a member of the
same group for any Taxation purpose as the Company in relation to
any asset it currently owns such that any loss on the disposal of
that asset would be restricted or reduced for Taxation purposes.
6. Transactions not at Arm's Length
(a) The Company does not own and has not within the past
three years agreed to acquire, any asset, and has not during the
past three years received or agreed to receive any services or
facilities (including, without limitation, any loan or money or
the benefit of any licences or agreements), the consideration for
the acquisition or provision of which was or will be in excess of
its market value, or otherwise than on an arm's length basis.
(b) The Company has not during the past three years,
disposed, and has not agreed to dispose, of any asset, and has
not provided or agreed to provide any services or facilities
(including, without limitation, any loan of money or the benefit
of any licences or agreements), the consideration for the
disposal or provision of which was or will be materially less
than its market value, or otherwise than on an arm's length
basis.
(c) The Company has not, within the past three years, made
or received any gift of any property or assets of any kind
whatsoever and does not own any property received by way of gift.
7. Anti-Avoidance
The Company has not been engaged in, or been a party to, any
Event or Series of Events or scheme or arrangement of which the
main purpose or one of the main purposes was the avoidance or
deferral of liability to any Taxation in circumstances where the
Company is or may become liable to any fine or penalty as a
result or consequence thereof.
8. Value Added Tax ("VAT") and Turnover Tax
The Company and any other company which has been treated as a
member of the same group of companies as the Company for the
purposes of VAT and (where relevant) turnover taxes have complied
in all material respects with all laws, statutory requirements,
orders, provisions, directions or other conditions made or
imposed thereunder relating to VAT or such turnover taxes,
including (for the avoidance of doubt) the terms of any agreement
reached with respect thereto with any appropriate Taxation
Authority.
9. Stamp Duty
All documents to which the Company is a party, or which form part
of the title to any asset owned or possessed by the Company, or
which the Company may need to enforce or produce in evidence in
any court of law have been duly stamped and (where appropriate)
adjudicated.
10. Distributions
No dividend or distribution has been made nor has anything which,
for Taxation purposes, is deemed or construed as a dividend, been
made or done by the Company during the six years ending on the
date of this Agreement, except as provided for in the audited
accounts of the Company.
11. Reorganisation and Closing
(a) None of the Events effected or proposed to be
effected as part of the Reorganisation or the Events contemplated
by this Agreement, or the entry into, becoming unconditional or
Closing of this Agreement, will give rise to any liability for
Taxation or result in any Profits accruing or being deemed to
accrue to the Company for Taxation purposes.
(b) The Company has not agreed to make and is not required
to make, any adjustment by reason of a change in accounting
methods that affects any taxable year or other taxable period
ending after Closing. No Taxation Authority has proposed to the
Company any such adjustment or change in accounting methods that
affects any taxable year or other taxable period ending after
Closing. The Company has no application pending with any
Taxation Authority requesting permission for any change in
accounting methods that relates to its business or operations and
that affects any taxable year or other taxable period ending
after Closing.
12. Tax Equalisation Payments etc.
(a) The company is not liable to make any payment for the
utilisation, surrender or other transfer of any Taxation Benefit
("Taxation Equalisation Payment"), nor is any Taxation
Equalisation Payment received by the Company liable to be
refunded.
(b) The Company is not under any obligation to surrender or
otherwise transfer any Taxation Benefit and the Company is not a
party to any Taxation sharing agreement with any company which is
not a Company.
(c) There are set out in the CK Witco Disclosure Memorandum,
with express reference to this paragraph (c), full particulars of
all surrenders or other transfer of any Taxation Benefit made or
agreed to be made (whether conditionally or otherwise) by the
Company since the Accounts Date.
13. Groups, Organschafts, Fiscal Unities etc.
Save as disclosed in the CK Witco Disclosure Memorandum, the
Company has never been treated for any Taxation purpose as a
member of a group, a consolidated tax group, a group
registration, an organschaft or fiscal unity and has never been
subject to any consolidated tax return in respect of the Company
and any other person.
EXECUTION COPY
$50,000,000
CREDIT AGREEMENT
dated as of
December 23, 1999
among
CK Witco Corporation,
Each of the financial institutions
as are or may become parties hereto as a Bank,
and
Merrill Lynch Capital Corporation,
as Administrative Agent
____________________________________________
Merrill Lynch Capital Corporation,
as Lead Arranger and Syndication Agent
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 10
SECTION 1.03. Types of Borrowings 11
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend 11
SECTION 2.02. Method of Borrowing 11
SECTION 2.03. Interest Elections 11
SECTION 2.04. Notice to Banks; Funding of Loans 12
SECTION 2.05. Notes 13
SECTION 2.06. Maturity of Loans 14
SECTION 2.07. Interest Rates 14
SECTION 2.08. Fees 16
SECTION 2.09. Optional Termination or Reduction of Commitments 17
SECTION 2.10. Mandatory Termination of Commitments 17
SECTION 2.11. Prepayments 17
SECTION 2.12. General Provisions as to Payments 18
SECTION 2.13. Funding Losses 18
SECTION 2.14. Computation of Interest and Fees 19
SECTION 2.15. Taxes 19
SECTION 2.16. Judgment Currency 20
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness 21
SECTION 3.02. Borrowings 22
i
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power 22
SECTION 4.02. Corporate and Governmental Authorization; No Contravention 22
SECTION 4.03. Binding Effect 23
SECTION 4.04. Financial Information 23
SECTION 4.05. Litigation 23
SECTION 4.06. Compliance with ERISA 23
SECTION 4.07. Environmental Matters 24
SECTION 4.08. Taxes 24
SECTION 4.09. Subsidiaries 24
SECTION 4.10. Not an Investment Company or a Public Utility Holding
Company 24
SECTION 4.11. Full Disclosure 24
SECTION 4.12. Year 2000 25
ARTICLE 5
COVENANTS
SECTION 5.01. Information 25
SECTION 5.02. Payment of Obligations 27
SECTION 5.03. Maintenance of Property; Insurance 27
SECTION 5.04. Conduct of Business and Maintenance of Existence 27
SECTION 5.05. Compliance with Laws 27
SECTION 5.06. Inspection of Property, Books and Records 28
SECTION 5.07. Financial Covenants 28
SECTION 5.08. Negative Pledge 28
SECTION 5.09. Consolidations, Mergers and Sales of Assets 29
SECTION 5.10. Use of Proceeds 29
SECTION 5.11. Additional Subsidiaries 29
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default 29
SECTION 6.02. Notice of Default 31
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. Appointment and Authorization 31
ii
<PAGE>
SECTION 7.02. Agents and Affiliates 31
SECTION 7.03. Action by Agents 32
SECTION 7.04. Consultation with Experts 32
SECTION 7.05. Liability of Agents 32
SECTION 7.06. Indemnification 32
SECTION 7.07. Credit Decision 32
SECTION 7.08. Successor Administrative Agents 33
SECTION 7.09. No Fiduciary Relationship 33
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair 33
SECTION 8.02. Illegality 34
SECTION 8.03. Increased Cost and Reduced Return 34
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans 35
ARTICLE 9
[Reserved]
ARTICLE 10
[Reserved]
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices 36
SECTION 11.02. No Waivers 36
SECTION 11.03. Expenses; Indemnification 36
SECTION 11.04. Sharing of Set-offs 37
SECTION 11.05. Amendments and Waivers 37
SECTION 11.06. Successors and Assigns 37
SECTION 11.07. Collateral 39
SECTION 11.08. Governing Law; Submission to Jurisdiction 40
SECTION 11.09. Counterparts; Integration 40
SECTION 11.10. Waiver of Jury Trial 41
SECTION 11.11. Confidentiality 41
iii
<PAGE>
PRICING SCHEDULE
EXHIBIT A Note
EXHIBIT B Opinion of John T. Ferguson, II, Esq.,
General Counsel of the Borrower
EXHIBIT C Opinion of Wachtell Lipton Rosen & Katz,
Special Counsel for the Borrower
EXHIBIT D Assignment and Assumption Agreement
EXHIBIT E Form of Subsidiary Guarantee Agreement
EXHIBIT F Form of Indemnity, Subrogation and Contribution Agreement
iv
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of December 23, 1999 among CK WITCO CORPORATION, each of
the financial institutions as are or may become parties hereto as a Bank, and
MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent.
WHEREAS, the Borrower wishes to have a term loan credit facility under
which it may on one occasion borrow funds, denominated in Dollars, from the
Banks ratably in proportion to their respective Commitments;
WHEREAS, the Banks are willing to extend said credit facility to the
Borrower on the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Administrative Agent" means Merrill Lynch Capital Corporation, in its
capacity as administrative agent for the Banks hereunder, and its successors in
such capacity.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent,
duly completed by such Bank and submitted to the Administrative Agent (with a
copy to the Borrower).
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified.
"Agents" means the Administrative Agent, the Syndication Agent and Merrill
Lynch Capital Corporation, as Lead Arranger hereunder, and "Agent" means any of
the foregoing.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Applicable Percentage" means, with respect to any Bank, the percentage of
the total Commitments and outstanding Loans represented by such Bank's
Commitment and outstanding Loans.
<PAGE>
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 11.06(c).
"Availability Period" means the period from and including the Effective
Date to and including the Termination Date.
"Bank" means each Person listed on the signature pages hereof, each
Assignee or other Person which becomes a Bank pursuant to Section 11.06(c), and
their respective successors.
"Base Rate" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.
Base Rate Loan" means a Loan to be made by a Bank as a Base Rate Loan, or
converted into or continued as a Base Rate Loan, pursuant to the applicable
Notice of Borrowing, Interest Election Request or Article 8.
"Base Rate Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
"Borrower" means CK Witco Corporation, a Delaware corporation.
"Borrower's S-4" means the Borrower's registration statement on Form S-4,
as filed on July 28, 1999 with the Securities and Exchange Commission.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Loan to be made by a Bank as a CD Loan, or converted into
or continued as a CD Loan, pursuant to the applicable Notice of Borrowing or
Interest Election Request.
"CD Reference Bank" means the financial institution acting as the
Administrative Agent.
"Closing Date" means the date on which Loans are made pursuant to Section
2.01.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount may
be reduced from time to time pursuant to Section 2.09 or 2.10 and as such amount
may be reduced or increased from time to time pursuant to assignments to or by
such Bank in accordance with Section 11.06. The initial aggregate amount of the
Commitments is $50,000,000.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements if such statements were prepared as of such
date.
2
<PAGE>
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except (a) trade accounts payable arising in the ordinary course of
business, (b) obligations incurred in the ordinary course of business in
connection with additions to property, plant or equipment which are deferred for
no more than 120 days after the later of the acquisition or completion of
installation of such additions, (c) other obligations arising in the ordinary
course of business which are deferred for no more than 120 days after the date
on which they would first be reflected as liabilities on a balance sheet of such
Person and (d) obligations in connection with the compensation for services of
officers, directors or employees of such Person, (iv) the capitalized amount of
all obligations of such Person as lessee which are capitalized in accordance
with generally accepted accounting principles, (v) all Debt of others secured by
a Lien on any asset of such Person, whether or not such Debt is assumed by such
Person, (vi) all Debt of others Guaranteed by such Person and (vii) all
obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit or letters of guaranty.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or other similar transaction (including any option with respect to any of the
foregoing transactions) or any combination of the foregoing transactions.
"Dollars" and the sign "$" mean lawful money of the United States.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its Base Rate Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b).
"Domestic Subsidiary" means each Subsidiary that is organized under a
jurisdiction which is any of the United States, any State thereof or the
District of Columbia.
3
<PAGE>
"EBITDA" means, for any period, the consolidated net income of the Borrower
and its Consolidated Subsidiaries for such period plus, to the extent deducted
in computing such consolidated net income for such period, the sum (without
duplication) of (a) income tax expense, (b) Interest Expense, (c) depreciation
and amortization expense, (d) non-recurring restructuring charges in an amount
not to exceed $65 million in any fiscal year of the Borrower, (e) extraordinary
and other non-recurring losses and (f) any other non-cash charges (including
merger-related purchase accounting adjustments in an amount not to exceed $289
million made as a result of the merger of Crompton & Knowles Corporation and
Witco Corporation), minus, to the extent added in computing such consolidated
net income for such period, (a) consolidated interest income, (b) extraordinary
and other non-recurring gains and (c) any other non-cash income. Anything
contained in this definition or elsewhere in this Agreement to the contrary
notwithstanding, in calculating EBITDA for the four fiscal-quarter periods
ending on December 31, 1999, March 31, 2000 and June 30, 2000, respectively,
EBITDA in fiscal quarters ended March 31, 1999, June 30, 1999 and September 30,
1999 shall be deemed to equal the combined EBITDA of Crompton & Knowles
Corporation and Witco Corporation for such fiscal quarters, as adjusted on a pro
forma basis to give effect to the merger of Crompton & Knowles Corporation and
Witco Corporation as if such merger had occurred on December 31, 1998.
"Effective Date" means the date the obligations of the Banks to extend
credit under this Agreement become effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" at any time means the Borrower and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated at such time as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Administrative Agent.
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"Euro-Dollar Loan" means a Loan that bears interest at a Euro-Dollar Rate,
pursuant to the applicable Notice of Borrowing or Interest Election Request.
"Euro-Dollar Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest determined pursuant to Section
2.07(c) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reference Bank" means the principal London office of the
financial institution acting as the Administrative Agent.
"Euro-Dollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreements" means (i) the Five-Year Credit Agreement dated
as of October 28, 1999, among CK Witco Corporation, the Banks party thereto, The
Chase Manhattan Bank, as Syndication Agent, Citibank, N.A., as Administrative
Agent, and Bank of America, N.A. and Deutsche Bank Securities, Inc., as
Co-Documentation Agents and (ii) the 364-Day Credit Agreement dated as of
October 28, 1999, among CK Witco Corporation, the Banks party thereto, The Chase
Manhattan Bank, as Syndication Agent, Citibank, N.A., as Administrative Agent,
and Bank of America, N.A. and Deutsche Bank Securities, Inc., as
Co-Documentation Agents.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Administrative Agent on such day on
such transactions as determined by the Administrative Agent.
"Fee Letter" means the confidential fee letter dated as of December 23,
1999, between Merrill Lynch Capital Corporation and the Borrower.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or any combination
of the foregoing.
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"Guaranty" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
Guaranty shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Indemnity, Subrogation and Contribution Agreement" means the Indemnity,
Subrogation and Contribution Agreement, substantially in the form of Exhibit F
hereto, among the Borrower, the Subsidiary Guarantors and the Administrative
Agent.
"Interest Coverage Ratio" means, on any date, the ratio of (a) EBITDA for
the period of four consecutive fiscal quarters ended on or most recently prior
to such date to (b) Interest Expense for the period of four consecutive fiscal
quarters ended on or most recently prior to such date.
"Interest Election Request" means a request by the Borrower to continue or
convert a Borrowing in accordance with Section 2.03.
"Interest Expense" means, for any period, the interest expense of the
Borrower and its Consolidated Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles,
including (i) the amortization of debt discounts to the extent included in
interest expense in accordance with generally accepted accounting principles,
(ii) the amortization of all fees (including fees with respect to interest rate
protection agreements or other interest rate hedging arrangements) payable in
connection with the incurrence of Debt to the extent included in interest
expense in accordance with generally accepted accounting principles and (iii)
the portion of any rents payable under capital leases allocable to interest
expense in accordance with generally accepted accounting principles. Anything
contained in this definition or elsewhere in this Agreement to the contrary
notwithstanding, in calculating Interest Expense for the four fiscal-quarter
periods ending on December 31, 1999, March 31, 2000 and June 30, 2000,
respectively, Interest Expense in fiscal quarters ended March 31, 1999, June 30,
1999 and September 30, 1999 shall be deemed to equal the combined Interest
Expense of Crompton & Knowles Corporation and Witco Corporation for such fiscal
quarters, as adjusted on a pro forma basis to give effect to the merger of
Crompton & Knowles Corporation and Witco Corporation as if such merger had
occurred on December 31, 1998.
"Interest Period" means: (1) with respect to each Euro-Dollar Borrowing,
the period commencing on the date of such Borrowing and ending one, two, three
or six months thereafter (or nine or twelve months thereafter if, at the time of
the relevant Borrowing, an interest period of such duration is available to all
Banks), as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
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(a) any Interest Period (except an Interest Period determined pursuant
to clause (c) below) which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day in a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day in a calendar month; and
(c) any Interest Period which begins before the Maturity Date and
would otherwise end after the Maturity Date shall end on the Maturity Date.
(2) with respect to each CD Borrowing, the period commencing on the date of such
Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Domestic Business Day shall be extended to the next succeeding
Domestic Business Day; and
(b) any Interest Period which begins before the Maturity Date and
would otherwise end after the Maturity Date shall end on the Maturity Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Domestic Business Day shall be extended to the next succeeding
Domestic Business Day; and
(b) any Interest Period which begins before the Maturity Date and
would otherwise end after the Maturity Date shall end on the Maturity Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, time deposit or otherwise.
"Leverage Ratio" means, on any date, the ratio of (a) Total Debt on such
date to (b) EBITDA for the period of four consecutive fiscal quarters ended on
or most recently prior to such date.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
security interest or encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
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"Loan" means a Domestic Loan or a Euro-Dollar Loan, and "Loans" means
Domestic Loans or Euro-Dollar Loans or any combination of the foregoing.
"Loan Documents" means this Agreement, the Subsidiary Guarantee Agreement
and the Indemnity, Subrogation and Contribution Agreement.
"Loan Parties" means the Borrower and the Subsidiary Guarantors.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Debt" means Debt (other than the obligations under this
Agreement) of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, in an aggregate principal or face
amount exceeding $25,000,000.
"Material Financial Obligations" means a principal or face amount of Debt
and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, in an aggregate amount exceeding
$25,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $25,000,000.
"Material Subsidiary" means at any time any Subsidiary, except Subsidiaries
which at such time have been designated by the Borrower (by notice to the
Administrative Agent, which may be amended from time to time) as nonmaterial,
none of which singly would meet the definition of a "significant subsidiary"
contained as of the date hereof in Regulation S-X of the Securities and Exchange
Commission and all of which, if aggregated and considered as a single
Subsidiary, would not have total assets (determined on a consolidated basis for
such Subsidiaries and their consolidated subsidiaries) in excess of 15% of the
consolidated assets of the Borrower and its Consolidated Subsidiaries at such
time.
"Maturity Date" means December 23, 2000, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group (i) is then making or accruing an obligation to make contributions
or (ii) for purposes of Section 6.01(i) only, has within the preceding five plan
years made contributions, including for purposes of this clause (ii) any Person
which ceased to be a member of the ERISA Group during such five year period.
"New York Office" means, at any time, the office of the Administrative
Agent in New York specified in or pursuant to Section 11.01 at such time.
"Notes" means promissory notes of the Borrower, substantially in the form
of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans made to it, and "Note" means any one of such promissory notes issued
hereunder.
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"Notice of Borrowing" is defined in Section 2.02.
"Parent" means, with respect to any Bank, any Person controlling such Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) for purposes of Section
6.01(i) only, has at any time within the preceding five years been maintained,
or contributed to, by any Person which was at such time a member of the ERISA
Group for employees of any Person which was at such time a member of the ERISA
Group.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means the rate of interest publicly announced by Citibank,
N.A. in New York City from time to time as its Prime Rate.
"Principal Officer" means any of the following officers of the Borrower:
the Chairman of the Board, the President, the chief executive officer, the chief
financial officer, the treasurer, the controller and the general counsel. If the
titles of the Borrower's officers are changed after the date hereof, the term
"Principal Officer" shall thereafter mean any officer performing substantially
the same functions as are presently performed by one or more of the officers
listed in the first sentence of this definition.
"Reference Bank" means the CD Reference Bank or the Euro-Dollar Reference
Bank, as the context may require.
"Refunding Borrowing" means a Borrowing which, after application of the
proceeds thereof, results in no net increase in the outstanding principal amount
of Loans made by any Bank to the Borrower.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
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"Required Banks" means at any time Banks having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, having Loans amounting to more than 50% of the aggregate unpaid
principal amount of the Loans.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Subsidiary Guarantee Agreement" means the Subsidiary Guarantee Agreement
substantially in the form of Exhibit E hereto, among the Borrower, the
Subsidiary Guarantors, and the Administrative Agent.
"Subsidiary Guarantors" means, collectively, each Domestic Subsidiary of
the Borrower that is a party to the Subsidiary Guarantee Agreement and the
Indemnity, Subrogation and Contribution Agreement as of the date hereof, and
each Domestic Subsidiary that, pursuant to Section 5.11, becomes a party to such
agreements by execution of supplements in the forms provided therein.
"Syndication Agent" means Merrill Lynch Capital Corporation, in its
capacity as syndication agent for the Banks hereunder.
"Termination Date" means the earlier of (i) December 20, 1999 and (ii) the
Closing Date.
"Total Debt" means, at any date, all Debt of the Borrower and its
Consolidated Subsidiaries at such date to the extent such Debt should be
reflected on a consolidated balance sheet of the Borrower at such date in
accordance with generally accepted accounting principles.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefit liabilities under
such Plan exceeds (ii) the fair market value of all Plan assets allocable to
such liabilities (excluding any accrued but unpaid contributions), all
determined as of the then most recent valuation date for such Plan, but only to
the extent that such excess represents a potential liability of a member of the
ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary
all of the shares of capital stock or other ownership interests of which (except
directors' qualifying shares or nominal shares of foreign entities) are at the
time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Borrower notifies the Administrative Agent
that the Borrower wishes to amend any covenant in
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Article 5 to eliminate the effect of any change in generally accepted accounting
principles on the operation of such covenant (or if the Administrative Agent
notifies the Borrower that the Required Banks wish to amend Article 5 for such
purpose), then the Borrower's compliance with such covenant shall be determined
on the basis of generally accepted accounting principles in effect immediately
before the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes an
aggregation of Loans to be made by the Banks to the Borrower pursuant to Section
2.01, or converted or continued pursuant to Section 2.03, on the same day, all
of which Loans (i) are of the same type (subject to Article 8) and (ii) have the
same initial Interest Period.
Borrowings may be classified for purposes of this Agreement by reference to
the pricing of the Loans comprising such Borrowing (e.g., a "Euro-Dollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to make term loans to the Borrower
on the Closing Date in an aggregate amount equal to the Commitment of such Bank.
The Borrowing under this Section shall be made from the several Banks ratably in
the amounts of their respective Commitments. Amounts repaid in respect of Loans
may not be reborrowed.
SECTION 2.02. Method of Borrowing. The Borrower shall give the
Administrative Agent notice (the "Notice of Borrowing") not later than 10:30
A.M. (New York City time) on the third Euro-Dollar Business Day before the
Closing Date, specifying:
(i) in the case of a Domestic Borrowing or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing,
(ii) whether the Loans comprising each Borrowing to be made on the
Closing Date are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and
(iii) in the case of each Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Interest Elections. (a) Each Borrowing initially shall be of
the type specified in the Notice of Borrowing and shall have an initial Interest
Period as specified in such Notice of Borrowing. Thereafter, the Borrower may
elect to convert such Borrowing to a different type or to continue such
Borrowing and may elect Interest Periods therefor, all as provided in this
Section. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Banks, and the Loans comprising each such portion
shall be considered a separate Borrowing.
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(b) To make an election pursuant to this Section, the Borrower shall notify
the Administrative Agent of such election by telephone by (w) the date of the
effectiveness of such election, in the case of a Borrowing converted to or
continued as a Base Rate Borrowing, (x) the second Domestic Business Day before
the effectiveness of such election, in the case of a Borrowing converted to or
continued as a CD Borrowing, and (y) the Third Euro-Dollar Business Day before
the effectiveness of such election, in the case of a Borrowing converted to or
continued as a Euro-Dollar Borrowing. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02 of this Section:
(i) the Borrowing to which such Interest Election Request applies and,
if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing
(in which case the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Euro-Dollar Business Day or a Domestic
Business Day, as applicable;
(iii) whether the resulting Borrowing is to be a Base Rate Borrowing,
a CD Borrowing or a Euro-Dollar Borrowing; and
(iv) the Interest Period to be applicable thereto after giving effect
to such election, which shall be a period contemplated by the definition of
the term "Interest Period".
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Bank of the details thereof and of such
Bank's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a Borrowing prior to the end of the Interest Period applicable
thereto, then, unless such Borrowing is repaid as provided herein, at the end of
such Interest Period such Borrowing shall be continued as a Base Rate Borrowing.
No Borrowing may be converted to or continued as a CD Borrowing or a Euro-Dollar
Borrowing if after giving effect thereto the Interest Period therefor would end
after the Maturity Date. Notwithstanding any contrary provision hereof, if an
Event of Default has occurred and is continuing and the Administrative Agent, at
the request of the Required Banks, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Euro-Dollar Borrowing and (ii) unless repaid, each Euro-Dollar
Borrowing shall be converted to a Base Rate Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of
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such Bank's share of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(b) On the date of each Borrowing, each Bank shall make available its share
of such Borrowing in Dollars not later than 12:00 Noon (New York City time), in
Federal or other funds immediately available in New York City, to the
Administrative Agent at its New York Office. Unless the Administrative Agent
determines that any applicable condition specified in Article 3 has not been
satisfied, the Administrative Agent will make the funds so received from the
Banks available to the Borrower in its bank account maintained at the
Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's share of such Borrowing, the Administrative
Agent may assume that such Bank has made such share available to the
Administrative Agent on the date of such Borrowing in accordance with subsection
(b) of this Section and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Administrative Agent, such Bank and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal
to the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the
case of such Bank, the Federal Funds Rate. If such Bank shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement. In no event shall any payment by the Administrative Agent, or
repayment by the Borrower, of any amount pursuant to this Section relieve the
Bank that failed to make available its share of the related Borrowing of its
obligations hereunder.
SECTION 2.05. Notes. (a) The Loans of each Bank to the Borrower shall, upon
request of the applicable Bank, be evidenced by a single Note of the Borrower
payable to the order of such Bank for the account of its Applicable Lending
Office in an amount equal to the aggregate unpaid principal amount of such
Bank's Loans to the Borrower.
(b) Each Bank may, by notice to the Borrower and the Administrative Agent,
request that its Loans of a particular type to the Borrower be evidenced by a
separate Note of the Borrower in an amount equal to the aggregate unpaid
principal amount of such Loans. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it evidences solely Loans of the relevant type. Each reference in this Agreement
to the "Note" of such Bank shall be deemed to refer to and include any or all of
such Notes, as the context may require.
(c) Upon receipt of each Bank's Note requested pursuant to Section 2.05(a),
the Administrative Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it to the
Borrower and the date and amount of each payment of principal made by the
Borrower with respect thereto, and may, if such Bank so elects in connection
with any transfer or enforcement of its Note, endorse on the schedule forming a
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part thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure of any
Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Notes and to attach to
and make a part of any Note a continuation of any such schedule as and when
required.
SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing shall
mature, and the principal amount thereof shall be due and payable, on the
Maturity Date.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the sum of the
Base Rate Margin for such day plus the applicable Base Rate for such day. Such
interest shall be payable for each Interest Period on the last day thereof. Any
overdue principal of or interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during the Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the applicable
Adjusted CD Rate; provided that if any CD Loan shall, as a result of clause
(2)(b) of the definition of Interest Period, have an Interest Period of less
than 30 days, such CD Loan shall bear interest during such Interest Period at
the rate applicable to Base Rate Loans during such period. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, at intervals of 90 days after the first
day thereof. Any overdue principal of or interest on any CD Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the sum of 2% plus the higher of (i) the sum of the CD Margin for such day
plus the Adjusted CD Rate applicable to such Loan and (ii) the rate applicable
to Base Rate Loans for such day.
The "Adjusted CD Rate" applicable to a day during any Interest Period means
a rate per annum determined pursuant to the following formula:
CCBR
ACDR = -------- + AR
1.00-DRP
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
____________
* The amount in brackets being rounded upward, if necessary, to the next higher
1/100 of 1%.
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
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certificate of deposit dealers of recognized standing for the purchase at face
value from the CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of the CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
"Domestic Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in Dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
Section 327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States of
America. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at a
rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the
applicable Adjusted London Interbank Offered Rate. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the first
day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period means
the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits are offered to the Euro-Dollar
Reference Bank in the London interbank market at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Euro-Dollar Loan of the Euro-Dollar Reference Bank to which such Interest Period
is to apply and for a period of time comparable to such Interest Period.
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(d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day from and including the date payment
thereof was due to but excluding the date of actual payment, at a rate per annum
equal to the sum of 2% plus the higher of (i) the sum of the Euro-Dollar Margin
for such day plus the Adjusted London Interbank Offered Rate applicable to such
Loan and (ii) the sum of the Euro-Dollar Margin for such day plus the quotient
obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by
dividing (x) the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which one day (or, if such amount
due remains unpaid more than three Euro-Dollar Business Days, then for such
other period of time not longer than one month as the Administrative Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to the Euro-Dollar Reference Bank are offered to the Euro-Dollar
Reference Bank in the London interbank market for the applicable period
determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day).
(e) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower and the participating Banks of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.
(f) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated hereby. If any Reference
Bank does not furnish a timely quotation, the provisions of Section 8.01 shall
apply.
SECTION 2.08. Fees. (a) The Borrower shall pay to the Administrative Agent
for the account of each Bank a facility fee calculated for each day at the
Facility Fee Rate for such day (determined in accordance with the Pricing
Schedule). Such facility fees shall accrue from and including the Effective Date
to but excluding the Maturity Date, on the daily aggregate amount of the
Commitments (whether used or unused) or, if the Commitments have terminated, on
the outstanding amount of the Loans. Accrued fees under this Section shall be
payable quarterly in arrears on each March 31, June 30, September 30 and
December 31 and on the date of termination of the Commitments in their entirety
(or, if later, the date the Loans shall be repaid in their entirety).
(b) For each day on or after the Closing Date until the Loans shall have
been repaid in full, the Borrower shall pay to the Administrative Agent for the
account of each Bank a utilization fee at the per annum rate indicated in the
Pricing Schedule on the aggregate amount of each Bank's outstanding Loans on
such day. Accrued and unpaid utilization fees, if any, shall be payable on the
last day of each March, June, September and December and on the date on which
all Loans shall have been repaid in full. All utilization fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent the fees payable
in the amounts and at the times separately agreed upon in the Fee Letter.
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(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution, in
the case of facility fees and utilization fees, to the Banks entitled thereto.
Fees paid shall not be refundable under any circumstances.
SECTION 2.09. Optional Termination or Reduction of Commitments. During the
Availability Period, the Borrower may, upon at least three Domestic Business
Days' notice to the Administrative Agent, terminate at any time, or
proportionately reduce from time to time by an aggregate amount of at least
$10,000,000 or any larger multiple of $1,000,000, the unused portions of the
Commitments.
SECTION 2.10. Mandatory Termination of Commitments. Unless previously
terminated, the Commitments shall terminate at 5:00 p.m., New York City time, on
the last day of the Availability Period.
SECTION 2.11. Prepayments. (a) The Borrower may, upon at least one Domestic
Business Day's notice to the Administrative Agent, prepay any Borrowing in whole
at any time, or from time to time in part in amounts aggregating $5,000,000 or
any larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment and, in the
case of any prepayment of a Fixed Rate Borrowing, any breakage costs due under
Section 2.13. Each such optional prepayment shall be applied to prepay ratably
the Loans of the several Banks included in such Borrowing.
(b) If the Borrower becomes obligated to indemnify any Bank or the
Administrative Agent for Taxes or Other Taxes pursuant to Section 2.15(c) and
actions taken pursuant to Section 2.15(f) do not or will not eliminate such
indemnity payments, then (i) the Borrower may, upon at least one Domestic
Business Day's notice to the Administrative Agent, prepay all Borrowings in
whole by paying the principal amount together with accrued interest thereon to
the date of prepayment or (ii) the Borrower may, at its sole expense and effort,
upon notice to such Bank and the Administrative Agent, require such Bank to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 11.06(c)), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Bank, if a Bank accepts such
assignment); provided that (A) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (B) such Bank shall have received payment of an amount
equal to the outstanding principal of its Loans, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder, from the assignee
(to the extent of such outstanding Principal and accrued interest and fees) or
the Borrower (in the case of all other amounts) and (C) such assignment will
result in a reduction to the indemnity payable pursuant to Section 2.15(c). A
Bank shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Bank or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to apply.
(c) In the event and on each occasion that any cash proceeds are received
by or on behalf of the Borrower or any Subsidiary in respect of any incurrence
of Debt for borrowed money by the Borrower or a Subsidiary in any offering or
placement of bonds, debentures, notes or similar securities, the Borrower shall,
immediately after such cash proceeds are received, prepay Loans
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in an aggregate amount equal to such proceeds (net of any applicable discounts
or fees received by or payable to underwriters, initial purchasers or placement
agents).
(d) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder not later than 11:00 A.M. (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its New York Office. The Administrative Agent will
promptly distribute to each Bank its ratable share of each such payment received
by the Administrative Agent for the account of the Banks. Whenever any payment
of principal of, or interest on, the Domestic Loans or of fees shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case the date for payment
thereof shall be the next preceding Euro-Dollar Business Day. If the date for
any payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time. All payments by the Borrower
shall be made without deduction for any counterclaim, defense, recoupment or
setoff.
(b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due from the Borrower to the
Banks hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article 2, 6 or 8 or
otherwise) on any day other than the last day of the Interest Period applicable
thereto, or the last day of an applicable period fixed pursuant to Section
2.07(d), or if the Borrower fails to borrow or prepay any Fixed Rate Loans after
notice has been given to any Bank in accordance with Section 2.04(a) or 2.11,
the Borrower shall reimburse each Bank within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or failure to
borrow or prepay, provided that such Bank shall have delivered to the Borrower a
certificate as to the amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error.
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SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual number of days elapsed (including the
first day but excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.15. Taxes. (a) For the purposes of this Section 2.15, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by any Loan
Party pursuant to any Loan Document or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and the Administrative
Agent, taxes imposed on its income, and franchise or similar taxes imposed on
it, by a jurisdiction (or any subdivision thereof) under the laws of which such
Bank or the Administrative Agent (as the case may be) is organized or in which
its principal executive office is located or, in the case of each Bank, in which
its Applicable Lending Office is located and (ii) in the case of each Bank, any
United States withholding tax imposed on such payments but only to the extent
that such Bank is subject to United States withholding tax at the time such Bank
first becomes a party to this Agreement or changes its Applicable Lending
Office.
"Other Taxes" means any present or future stamp or documentary taxes and
any other excise or property taxes, or similar charges or levies, which arise
from any payment made pursuant to any Loan Document or under any Note or from
the execution or delivery of, or otherwise with respect to, any Loan Document or
any Note.
(b) Any and all payments by any Loan Party to or for the account of any
Bank or the Administrative Agent under any Loan Document or under any Note shall
be made without deduction for any Taxes or Other Taxes except as required by
law; provided that, if any change in law occurring after any Bank or the
Administrative Agent first becomes a party to this Agreement requires any Loan
Party to deduct any Taxes or Other Taxes from any payments to any such Bank or
the Administrative Agent, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section) such Bank or the Administrative
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Loan Party shall make such
deductions, (iii) such Loan Party shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and (iv) such Loan Party shall furnish to the Administrative Agent, at its
address referred to in Section 11.01, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and the Administrative Agent
for the full amount of Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section because of a change in law
occurring after such Bank or the Administrative Agent first becomes a party to
this Agreement paid by such Bank or the Administrative Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto as certified in good faith to the Borrower by
each Bank or the Administrative Agent seeking indemnification pursuant to this
Section 2.15(c). This indemnification
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shall be paid within 30 days after such Bank or the Administrative Agent (as the
case may be) makes demand therefor; provided, however, that the indemnification
obligations of the Borrower under this Section 2.15 shall be reduced
appropriately to take into account any Tax deduction, credit or benefit or Other
Tax deduction, credit or benefit to which a Bank or the Administrative Agent is
entitled as a result of its payment of Taxes or Other Taxes. If a Bank or the
Administrative Agent receives a refund of indemnified Taxes or Other Taxes with
respect to which the Borrower has made payment to such Bank or the
Administrative Agent pursuant to this Section 2.15(c), such Bank or the
Administrative Agent shall pay over such refund to the Borrower within 10 Days
after receipt of such refund.
(d) Each Bank organized under the laws of a jurisdiction outside the United
States, on or prior to the date of its execution and delivery of this Agreement
in the case of each Bank listed on the signature pages hereof and on or prior to
the date on which it becomes a Bank in the case of each other Bank, from time to
time thereafter if requested in writing by the Borrower (but only so long as
such Bank remains lawfully able to do so), and at any time it changes its
Applicable Lending Office, shall provide the Borrower and the Administrative
Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which exempts the Bank from United States withholding tax or
reduces the rate of withholding tax on payments of interest for the account of
such Bank or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Bank has failed to provide the
Borrower or the Administrative Agent with the appropriate form pursuant to
Section 2.15(d) (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided), such Bank shall not be entitled to indemnification
under Section 2.15(b) or (c) with respect to Taxes imposed by the United States;
provided that if a Bank, which is otherwise exempt from or subject to a reduced
rate of withholding tax, becomes subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If any Loan Party is required to pay additional amounts to or for the
account of any Bank pursuant to this Section, then such Bank will change the
jurisdiction of its Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 2.16. Judgment Currency. If for the purpose of obtaining judgment
in any court it is necessary to convert a sum due from any Loan Party under any
Loan Document in the currency expressed to be payable herein or therein (the
"specified currency") into another currency, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures the
Administrative Agent could purchase the specified currency with such other
currency at the Administrative Agent's New York office on the Euro-Dollar
Business Day preceding that on which final judgment is given. The obligations of
each Loan Party in respect of any sum due to any Bank or the Administrative
Agent under any Loan Document or under any Note shall, not-
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withstanding any judgment in a currency other than the specified currency, be
discharged only to the extent that on the Euro-Dollar Business Day following
receipt by such Bank or the Administrative Agent (as the case may be) of any sum
adjudged to be so due in such other currency, such Bank or the Administrative
Agent (as the case may be) may in accordance with normal banking procedures
purchase the specified currency with such other currency; if the amount of the
specified currency so purchased is less than the sum originally due to such Bank
or the Administrative Agent, as the case may be, in the specified currency, the
Borrower agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Bank or the Administrative Agent, as the case may be, against such loss, and if
the amount of the specified currency so purchased exceeds (a) the sum originally
due to any Bank or the Administrative Agent, as the case may be, in the
specified currency and (b) any amounts shared with other Banks as a result of
allocations of such excess as a disproportionate payment to such Bank under
Section 11.04, such Bank or the Administrative Agent, as the case may be, agrees
to remit such excess to the Borrower.
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. The obligations of the Banks to extend credit
under this Agreement shall become effective on the date that each of the
following conditions shall have been satisfied (or waived in accordance with
Section 11.05):
(a) receipt by the Administrative Agent of counterparts hereof and of each
Loan Document signed by each of the parties hereto and thereto (or, in the case
of any party as to which an executed counterpart shall not have been received,
receipt by the Administrative Agent in form satisfactory to it of telex,
facsimile transmission or other written confirmation from such party of
execution of a counterpart hereof or thereof by such party);
(b) receipt by the Administrative Agent of an opinion of John T. Ferguson
II, Esq., General Counsel of the Borrower, substantially in the form of Exhibit
B hereto, and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(c) receipt by the Administrative Agent of an opinion of Wachtell Lipton
Rosen & Katz, special counsel for the Borrower, substantially in the form of
Exhibit C hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Administrative Agent of evidence satisfactory to it that
all fees and expenses payable for the account of the Banks and the
Administrative Agent and their affiliates on or before the Effective Date have
been paid in full in the amounts previously agreed upon on or prior to the
Effective Date; and
(e) receipt by the Administrative Agent of all documents it may reasonably
request relating to the existence of the Loan Parties, the corporate authority
for and the validity of this
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Agreement, the other Loan Documents and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Administrative
Agent;
provided that the Banks shall have no obligation to extend credit hereunder and
their commitments under this Agreement shall become null and void unless all of
the foregoing conditions are satisfied not later than January 5, 2000. The
Administrative Agent shall promptly notify the Borrower and the Banks of the
Effective Date, and such notice shall be conclusive and binding on all parties
hereto.
SECTION 3.02. Borrowings. The obligations of any Bank to make a Loan on the
occasion of the initial Borrowing are subject to the satisfaction of the
following conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the sum of the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no Default
shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true and correct on and as of the date of
such Borrowing; and
(e) the Agents shall have been paid all fees and reimbursed for all
expenses as required under the Fee Letter.
The initial Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing that the facts specified
in clauses (b), (c) and (d) of this Section are true and correct.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by each Loan Party of each Loan Document
to which such Loan Party is a party are within the corporate powers of such Loan
Party, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or Regulation or of the certificate of incorporation or by-laws
of
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any Loan Party or of any agreement, judgment, injunction, order, decree or other
instrument binding upon any Loan Party or result in the creation or imposition
of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement and each Loan Document
constitutes a valid and binding agreement of each Loan Party that is a party
thereto and each Note, when executed and delivered in accordance with this
Agreement, will constitute a valid and binding obligation of the Borrower.
SECTION 4.04. Financial Information. (a) The consolidated balance sheets of
the Borrower and its consolidated subsidiaries as of September 30, 1999
(unaudited) and December 26, 1998 and the related statements of operations and
cash flows, a copy of each of which has been delivered to the Administrative
Agent, and the unaudited pro forma combined statements of operations and the
other financial and operating information contained in the report of the
Borrower on Form 8-K filed with the Securities and Exchange Commission on
October 15, 1999, fairly present, in conformity with generally accepted
accounting principles, the consolidated financial position of the Borrower and
its consolidated subsidiaries as of such dates and their consolidated results of
operations for the applicable periods.
(b) Since September 30, 1999, there has been no material adverse change in
the business, financial position or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole.
(c) the Management Projections contained in the Confidential Information
Memorandum dated September, 1999, relating to the Existing Credit Agreements,
were prepared in good faith on the basis of assumptions believed to be
reasonable at the time such assumptions were made.
SECTION 4.05. Litigation. Except as disclosed in the Borrower's S-4, there
is no action, suit or proceeding pending against, or to the knowledge of the
Borrower threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable likelihood of an adverse decision which
would materially adversely affect the business (taken as a whole), consolidated
financial position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries or which in any manner draws into question the
validity or enforceability of any Loan Document or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
respect with the presently applicable provisions of ERISA and the Internal
Revenue Code with respect to each Plan, except for such noncompliance which
would not have a material adverse effect on the business, financial position or
results of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole. No member of the ERISA Group has (i) sought a waiver of
the minimum funding standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or payment to any Plan
or Multiemployer Plan, or made any amendment to any Plan, which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Internal Revenue Code or (iii) incurred any
liability under Ti-
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tle IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA, except in the case of clause (iii) above for such liabilities
which do not exceed $5,000,000 in the aggregate during the term of this
Agreement.
SECTION 4.07. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of this
review, the Borrower has reasonably concluded that, except as disclosed in the
Borrower's S-4, Environmental Laws are unlikely to have a material adverse
effect on the business, financial position or results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income tax returns of Crompton &
Knowles Corporation and Witco Corporation have been examined and settled through
December 31, 1997, for Crompton & Knowles Corporation, and through December 31,
1995, for Witco Corporation. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary, except for items being diligently contested in good faith and by
appropriate proceedings. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's Material Subsidiaries is
a corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 4.10. Not an Investment Company or a Public Utility Holding
Company. The Borrower is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 4.11. Full Disclosure. All information heretofore furnished by the
Borrower to the Administrative Agent or any of its Affiliates or any Bank in
writing for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Borrower to the Administrative Agent or any of its Affiliates or any Bank in
writing will be, taken as a whole, true and accurate in all material respects on
the date as of which such information is stated or certified. The Borrower has
disclosed to the Banks in writing any and all facts which materially and
adversely affect or may affect (to the extent the Borrower can now reasonably
foresee) the business, operations or financial condition of the Bor-
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rower and its Consolidated Subsidiaries, taken as a whole, or the ability of the
Borrower or any other Loan Party to perform its obligations under this Agreement
or any other Loan Document.
SECTION 4.12. Year 2000. The Borrower and its Subsidiaries are taking
commercially reasonable steps to ascertain the extent of, and to quantify and
successfully address, business and financial risks facing the Borrower and its
Subsidiaries as a result of what is commonly referred to as the "Year 2000
Problem" (i.e., the inability of certain computer applications to recognize
correctly and perform date-sensitive functions involving certain dates prior to
and after December 31, 1999), (b) the Borrower and its Subsidiaries reasonably
believe that any remedial actions required to permit the proper functioning of
any systems critical to the operations of the Borrower and its Subsidiaries,
taken as a whole, despite the Year 2000 Problem have been or will be performed
on or prior to December 31, 1999 and (c) the Borrower and its Subsidiaries
reasonably believe that the Year 2000 Problem (including any preparations or
remediations in response thereto) will not have a material adverse effect on the
business, financial position or results of operations of the Borrower and its
Consolidated Subsidiaries, taken as a whole.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder
or any Loan is outstanding:
SECTION 5.01. Information. The Borrower will deliver to the Administrative
Agent for distribution to each of the Banks:
(a) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of operations, cash flows and shareholders'
equity for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on in accordance with
generally accepted accounting principles by KPMG LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of operations
for such quarter and consolidated statements of operations and condensed cash
flows for the portion of the Borrower's fiscal year ended at the end of such
quarter, setting forth in the case of the statement of operations in comparative
form the figures for the corresponding quarter, in the case of the statements of
operations and cash flows the figures for the corresponding portion of the
Borrower's previous fiscal year and in the case of the balance sheet the figures
for the previous year end, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer, treasurer or the
controller or other chief accounting officer of the Borrower;
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(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the chief financial
officer, treasurer or the controller or other chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations required to
establish whether the Borrower was in compliance with the requirements of
Sections 5.07 to 5.08, inclusive, on the date of such financial statements and
(ii) stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action which
the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement of the firm of independent public
accountants which reported on such statements (i) whether anything has come to
their attention to cause them to believe that any Default existed on the date of
such statements relating only to Sections 5.07, 5.08(a), 5.08(c), 5.08(f),
5.08(g)(i), 5.08(g)(ii) and 5.08(h) and (ii) confirming the calculations set
forth in the officer's certificate delivered simultaneously therewith pursuant
to clause (c) above;
(e) within five Domestic Business Days after any Principal Officer of the
Borrower obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the controller or other chief
accounting officer of the Borrower setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy, statements so
mailed;
(g) promptly upon the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents)
which the Borrower shall have filed with the Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security, a
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certificate of the chief financial officer or the controller or other chief
accounting officer of the Borrower setting forth details as to such occurrence
and action, if any, which the Borrower or applicable member of the ERISA Group
is required or proposes to take; and
(i) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and discharge,
and will cause each Subsidiary to pay and discharge, at or before maturity (or,
in the case of tax liabilities, if later, before the same become subject to
penalties), all their respective obligations and liabilities (including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings) if the failure to so pay and discharge would
have a material adverse effect on the business, financial position or results of
operations of the Borrower and its Consolidated Subsidiaries considered as a
whole, and will maintain, and will maintain for each Material Subsidiary or
cause each Material Subsidiary to maintain, in accordance with generally
accepted accounting principles, appropriate reserves for the accrual of any of
the same.
SECTION 5.03. Maintenance of Property; Insurance. The Borrower will keep,
and will cause each Material Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted; will maintain, and will cause each Material Subsidiary to
maintain (either in the name of the Borrower or in such Material Subsidiary's
own name) with insurance companies which at the time such insurance is purchased
or renewed are financially sound and reputable, insurance on all their property
in at least such amounts (including self-insurance retentions) and against at
least such risks as are usually insured against (including self-insurance
retentions) in the same general area by companies of similar size engaged in the
same or a similar business; and will furnish to the Banks, upon written request
from the Administrative Agent, full information as to the insurance carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower and its Material Subsidiaries (on a consolidated basis) will continue
to engage in business of the same general types as now conducted by the Borrower
and its Material Subsidiaries, and will preserve, renew and keep in full force
and effect, and will cause each Material Subsidiary to preserve, renew and keep
in full force and effect their respective corporate existence and their
respective rights, privileges and franchises necessary or desirable in the
normal conduct of business; provided that nothing in this Section 5.04 shall
prohibit (i) the merger of a Subsidiary into the Borrower or the merger or
consolidation of a Subsidiary with or into another Person if the corporation
surviving such consolidation or merger is a Wholly-Owned Consolidated Subsidiary
and if, in each case, after giving effect thereto, no Default shall have
occurred and be continuing, (ii) the termination of the corporate existence,
rights, privileges or franchises of any Subsidiary if the Borrower in good faith
determines that such termination is in the best interest of the Borrower and is
not materially disadvantageous to the Banks or (iii) any disposition of assets
not prohibited by Section 5.09 hereof.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause
each Subsidiary to comply, in all respects with all applicable laws, ordinances,
rules, regulations, and requirements of governmental authorities (including,
without limitation, Environmental Laws
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and ERISA and the rules and regulations thereunder and all applicable laws,
ordinances, rules, regulations and requirements of governmental authorities
relating to the acquisition referred to in Section 5.10) except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where failure to comply would not materially adversely affect the
business (taken as a whole), consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Material Subsidiary to permit, representatives of any Bank at
such Bank's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all upon such reasonable
notice, at such reasonable times and as often as may reasonably be desired.
SECTION 5.07. Financial Covenants. (a) The Borrower will not permit the
Leverage Ratio at any time to exceed 3.50 to 1.00.
(b) The Borrower will not permit the Interest Coverage Ratio at any time to
be less than 3.00 to 1.00.
SECTION 5.08. Negative Pledge. Neither the Borrower nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt outstanding
on the date of this Agreement in an aggregate principal amount not exceeding
$75,000,000 (exclusive of Liens permitted by clause (h) of this Section);
(b) any Lien existing on any asset of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the purpose
of financing all or any part of the cost of acquiring, constructing or improving
such asset, provided that such Lien attaches to such asset concurrently with or
within 180 days after the acquisition thereof or completion of the construction
or improvement thereto, as the case may be;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by the
Borrower or a Subsidiary and not created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
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(g) Liens not otherwise permitted by the foregoing clauses of this Section
arising in the ordinary course of its business which (i) do not secure Debt,
(ii) do not secure obligations in an amount exceeding $100,000,000 in the
aggregate and (iii) do not materially impair the use of the assets subject
thereto in the operation of the business of the Borrower and its Subsidiaries;
or
(h) Liens not otherwise permitted by the foregoing clauses of this Section
securing Debt or interest rate and currency swaps in an aggregate principal
amount, notional principal and final exchange amount at any time outstanding not
to exceed $50,000,000.
SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Borrower and
its Subsidiaries will not (i) consolidate or merge with or into any other Person
or (ii) sell, lease or otherwise transfer, directly or indirectly, any of the
assets of the Borrower and its Subsidiaries, to any other Person; provided that
(A) the Borrower or a Subsidiary may merge with another Person if (x) the
Borrower or, in the case of a merger not involving the Borrower, a Subsidiary
Guarantor is the corporation surviving such merger and (y) immediately after
giving effect to such merger, no Default shall have occurred and be continuing,
(B) each of the Borrower and its Subsidiaries may sell, lease or otherwise
transfer any of its inventory in the ordinary course of business and any of its
assets which, in the judgment of its officers, are obsolete, excess or
unserviceable and (C) the Borrower and its Subsidiaries may sell, lease or
transfer any of their assets with a market value that does not, in the aggregate
together with all other sales, leases and transfers pursuant to this clause (C),
exceed 25% of the total assets of the Borrower and its Subsidiaries as of the
date hereof.
SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this
Agreement will be used by the Borrower for general corporate purposes. None of
such proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
SECTION 5.11. Additional Subsidiaries. The Borrower will ensure at all
times that Domestic Subsidiaries are (or become within 10 Domestic Business Days
of being formed or acquired) Subsidiary Guarantors so that (a) the total assets
of the Borrower and the Subsidiary Guarantors comprise at least 85% by book
value of the total assets of the Borrower and the Domestic Subsidiaries and (b)
the total revenues of the Borrower and the Subsidiary Guarantors, as of the most
recently ended fiscal quarter, comprise at least 85% of the total revenues of
the Borrower and the Domestic Subsidiaries for such fiscal quarter; provided,
that only Domestic Subsidiaries shall be required to become Subsidiary
Guarantors.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan, or
shall fail to pay within three Domestic Business Days of the due date thereof
any interest on any Loan, any fees or any other amount payable hereunder;
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(b) the Borrower shall fail to observe or perform any applicable covenant
contained in Sections 5.07 to 5.10, inclusive;
(c) any Loan Party shall fail to observe or perform any covenant or
agreement contained in any Loan Document (other than those covered by clause (a)
or (b) above) for 30 days after written notice thereof has been given to the
Borrower by the Administrative Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by any
Loan Party in any Loan Document or in any certificate, financial statement or
other document delivered pursuant to any Loan Document shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) a "Default" occurs under either of the Existing Credit Agreements or
the Borrower or any Subsidiary shall fail to make any payment of principal, face
amount, interest, premium, fees or any similar obligation in respect of any
Material Financial Obligations when due or within any applicable grace period;
(f) any event or condition shall occur which results in the acceleration of
the maturity of any Material Debt or enables the holder of such Debt or any
Person acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Material Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Borrower or any Material Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Material Subsidiary under
the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $25,000,000 which it shall have become liable
to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the
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PBGC would be entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of $25,000,000;
(j) a judgment or order, or judgments or orders, for the payment of money
in excess in the aggregate of $25,000,000 (in excess of available insurance
coverage) shall be rendered against the Borrower or any Material Subsidiary and
such judgment or order, or judgments or orders, shall continue unsatisfied and
unstayed for a period of 30 days; or
(k) any person or group of persons (within the meaning of Section 13 or 14
of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 35% or more of the
outstanding shares of common stock of the Borrower; or, during any period of
twelve consecutive calendar months commencing after September 1, 1999,
individuals who were directors of the Borrower on the first day of such period
shall cease to constitute a majority of the board of directors of the Borrower;
then, and in every such event, the Administrative Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments, by notice
to the Borrower terminate the Commitments and they shall thereupon terminate and
(ii) if requested by Banks holding more than 50% of the aggregate amount of the
Loans, by notice to the Borrower declare the Loans (together with accrued
interest thereon) to be, and the Loans shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; provided that in the case of
any of the Events of Default specified in clause (g) or (h) above with respect
to the Borrower, automatically, without any notice to the Borrower or any other
act by the Administrative Agent or the Banks, the Commitments shall thereupon
terminate and the Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall give notice
to the Borrower under Section 6.01(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes each Agent to take such action as its agent on its behalf and to
exercise such powers under the Loan Documents and the Notes as are delegated to
such Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Each of the Agents shall have the same
rights and powers under this Agreement as any other Bank and may exercise or
refrain from exercising the
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same as though it were not an Agent, and each of the Agents and its Affiliates
may accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
it were not an Agent hereunder or an Affiliate thereof.
SECTION 7.03. Action by Agents. The obligations of the Agents hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, none of the Agents shall be required to take any action with respect
to any Default, except as expressly provided with respect to the Administrative
Agent in Article 6.
SECTION 7.04. Consultation with Experts. Each Agent may consult with legal
counsel (who may be counsel for the Borrower), independent public accountants
and other experts selected by it and shall not be liable to any Bank for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agents. None of the Agents nor any of their
respective affiliates or any of their respective directors, officers, agents or
employees shall be liable to any Bank for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or willful misconduct. None
of the Agents nor any of their respective affiliates or any of their respective
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the
Administrative Agent; or (iv) the validity, effectiveness or genuineness of any
Loan Document, the Notes or any other instrument or writing furnished in
connection herewith. No Agent shall incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other writing (which may be
a bank wire, telex, facsimile transmission or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with
its Commitment, indemnify each Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except in the case of each indemnitee
such as result from such indemnitee's gross negligence or willful misconduct)
that such indemnitees may suffer or incur in connection with any Loan Document
or any action taken or omitted by such indemnitees hereunder or thereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
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SECTION 7.08. Successor Administrative Agents. The Administrative Agent may
resign at any time by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation, the Required Banks shall have the right to
appoint a successor Administrative Agent, which successor shall (unless an Event
of Default shall have occurred and be continuing) be reasonably acceptable to
the Borrower. If no successor Administrative Agent shall have been so appointed
by the Required Banks, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent gives notice of resignation, then the
retiring Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which successor shall (unless an Event of Default shall
have occurred and be continuing) be reasonably acceptable to the Borrower, and
which shall be a commercial bank or financial institution organized or licensed
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $50,000,000. Upon the
acceptance by a successor Administrative Agent of its appointment as
Administrative Agent hereunder, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Administrative Agent.
SECTION 7.09. No Fiduciary Relationship. Neither of the Lead Arranger nor
the Syndication Agent shall have or be deemed to have any fiduciary relationship
with any other Bank in connection herewith.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any CD Loan or
Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference Bank that deposits
in dollars (in the applicable amounts) are not being offered to the Reference
Bank in the relevant market for such Interest Period, or
(b) Banks having 50% or more of the principal amount of outstanding Loans
advise the Administrative Agent that the Adjusted CD Rate or the Adjusted London
Interbank Offered Rate, as the case may be, as determined by the Administrative
Agent will not adequately and fairly reflect the cost to such Banks of funding
their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest
Period,
(c) the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist,
the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended. Unless the Borrower notifies the Administrative
Agent at least two Domestic Business Days before the date of any Fixed Rate
Borrowing for which a Notice of Borrowing has previously been given that it
elects not to bor-
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row on such date, such Borrowing shall instead be made as a Base Rate Borrowing
in the same aggregate amount as the requested Borrowing.
SECTION 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive promulgated on or after the date hereof
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to
the Borrower and such Bank shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the
Administrative Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Euro-Dollar Loans to the
Borrower shall be suspended. Before giving any notice to the Administrative
Agent pursuant to this Section, each Bank will use reasonable efforts to
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such Bank shall determine that it may
not lawfully continue to maintain and fund any of its outstanding Euro-Dollar
Loans to the Borrower to maturity and shall so specify in such notice, the
Borrower shall immediately prepay in full the then outstanding principal amount
of each such Euro-Dollar Loan, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency made
or promulgated after the date hereof shall impose, modify or deem applicable any
reserve (including, without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding (A) with respect
to any CD Loan any such requirement included in an applicable Domestic Reserve
Percentage and (B) with respect to any Euro-Dollar Loan any such requirement
included in an applicable Euro-Dollar Reserve Percentage), special deposit,
insurance assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting its Fixed
Rate Loans or its Note or its obligation to make Fixed Rate Loans and the result
of any of the foregoing is to increase the cost to such Bank (or its Applicable
Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the
amount of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount
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<PAGE>
deemed by such Bank to be material, then, within 15 days after demand by such
Bank (with a copy to the Administrative Agent), the Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank for such
increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or Regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on capital of such Bank (or its Parent) as a
consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank (or its Parent) for such
reduction.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
use reasonable efforts to designate a different Applicable Lending Office if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans. If
(i) the obligation of any Bank to make Euro-Dollar Loans to the Borrower has
been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03(a) with respect to its CD Loans or Euro-Dollar
Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior
notice to such Bank through the Administrative Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until such
Bank notifies the Borrower that the circumstances giving rise to such suspension
or demand for compensation no longer apply:
(a) all Loans to the Borrower which would otherwise be made by such Bank as
CD Loans or Euro-Dollar Loans, as the case may be, to the Borrower shall be made
instead as Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may be,
has been repaid, all payments of principal which would otherwise be applied to
repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans
instead.
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ARTICLE 9
[Reserved]
ARTICLE 10
[Reserved]
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (a) in the
case of the Borrower, at its address, facsimile number or telex number set forth
on the signature pages hereof, (b) in the case of the Administrative Agent, at
its address, facsimile number or telex number in New York City set forth on the
signature pages hereof, (c) in the case of any Bank, at its address, facsimile
number or telex number set forth in its Administrative Questionnaire or (d) in
the case of any party, such other address, facsimile number or telex number as
such party may hereafter specify for the purpose by notice to the Administrative
Agent and the Borrower. Each such notice, request or other communication shall
be effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate answer back is received,
(ii) if given by facsimile transmission, when transmitted to the facsimile
number specified in this Section and confirmation of receipt is received, (iii)
if given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iv) if given by any
other means, when delivered at the address specified in this Section; provided
that notices under Article 2 or Article 8 shall not be effective until received.
SECTION 11.02. No Waivers. No failure or delay by the Administrative Agent
or any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 11.03. Expenses; Indemnification. (a) The Borrower shall pay (i)
all out-of-pocket expenses of the Administrative Agent and the Syndication
Agent, including reasonable fees and disbursements of special counsel for the
Administrative Agent, in connection with the preparation and administration of
the Loan Documents, any waiver or consent hereunder or thereunder or any
amendment hereof or thereof or any Default or alleged Default hereunder or
thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by any of the Administrative Agent and each Bank, including fees and
disbursements of counsel (which counsel may be an employee of such Bank or the
Administrative Agent), in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
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<PAGE>
(b) The Borrower agrees to indemnify the Administrative Agent, the
Syndication Agent and each Bank, their respective affiliates and the respective
directors, officers, agents and employees of the foregoing (each, an
"indemnitee") and hold each indemnitee harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel (which counsel may
be an employee of such indemnitee), which may be incurred by such indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of any Loan Document or any actual or
proposed use of proceeds of Loans hereunder; provided that no indemnitee shall
have the right to be indemnified hereunder for its own gross negligence or
willful misconduct or breach of its obligations under any Loan Document as
determined by a court of competent jurisdiction.
SECTION 11.04. Sharing of Set-offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to the Loans owed to it which is greater than the proportion received by any
other Bank in respect of the aggregate amount of principal and interest due with
respect to any Loans owed to such other Bank, the Bank receiving such
proportionately greater payment shall purchase participations in such Loans held
by the other Banks, and such other adjustments shall be made, as may be required
so that all such payments of principal and interest with respect to the Loans
held by the Banks shall be shared by the Banks pro rata; provided that nothing
in this Section shall impair the right of any Bank to exercise any right of
set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Loan, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 11.05. Amendments and Waivers. Any provision of this Agreement, the
other Loan Documents or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the Required
Banks (and, if the rights or duties of the Administrative Agent are affected
thereby, by the Administrative Agent); provided that no such amendment or waiver
shall, unless signed by all the Banks, (i) increase or decrease the Commitment
of any Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of or
rate of interest on any Loan or any fees hereunder, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees
hereunder or for any scheduled reduction or termination of any Commitment, or
(iv) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks which shall be required
for the Banks or any of them to take any action under this Section or any other
provision of this Agreement, or (v) release all or any substantial portion of
the Subsidiary Guarantors from their Guarantees under the Subsidiary Guarantee
Agreement, except as provided therein.
SECTION 11.06. Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and
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assigns, except that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii) or (iii) of Section 11.05 without the consent of
the Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Article
8 with respect to its participating interest. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit D hereto executed by
such Assignee and such transferor Bank, with (and subject to) the consent of the
Borrower and the Administrative Agent, such consents not to be unreasonably
withheld; provided that if an Assignee is an affiliate of a Bank or was a Bank
immediately prior to such assignment, no such consent shall be required, and if
an Event of Default has occurred and is continuing, the consent of the Borrower
shall not be required; and provided further that any assignment shall not be
less than $10,000,000, or if less, shall constitute an assignment of all of such
Bank's rights and obligations under this Agreement and the Notes. Upon execution
and delivery of such instrument and payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, such Assignee shall be a Bank party to this Agreement
and shall have all the rights and obligations of a Bank with a Commitment as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), the transferor Bank, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, new Notes are issued to the Assignee. In connection with any
such assignment, the transferor Bank shall pay to the Administrative Agent an
administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States of America
or a state thereof, it shall, prior to the first date on which interest or fees
are payable hereunder for its account, deliver to the Borrower and the
Administrative Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 2.17.
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<PAGE>
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 than such Bank
would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written consent or by
reason of the provisions of Section 8.02 or 8.03 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
(f) Notwithstanding anything to the contrary contained herein, any Bank (a
"Granting Bank") may grant to a special purpose funding vehicle (an "SPC") of
such Granting Bank, identified as such in writing from time to time by the
Granting Bank to the Administrative Agent and the Borrower, the option to
provide to the Borrower all or any part of any Loan that such Granting Bank
would otherwise be obligated to make to the Borrower pursuant to Section 2.01;
provided that (i) nothing herein shall constitute a commitment to make any Loan
by any SPC and (ii) if an SPC elects not to exercise such option or otherwise
fails to provide all or any part of such Loan, the Granting Bank shall be
obligated to make such Loan pursuant to the terms hereof. The making of a Loan
by an SPC hereunder shall utilize the Commitment of the Granting Bank to the
same extent, and as if, such Loan were made by the Granting Bank. Each party
hereto hereby agrees that no SPC shall be liable for any payment under this
Agreement for which a Bank would otherwise be liable, for so long as, and to the
extent, the related Granting Bank makes such payment. In furtherance of the
foregoing, each party hereto hereby agrees that, prior to the date that is one
year and one day after the payment in full of all outstanding senior
indebtedness of any SPC, it will not institute against, or join any other person
in instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or similar proceedings under the laws of
the United States or any State thereof. In addition, notwithstanding anything to
the contrary contained in this Section 11.06 any SPC may (i) with notice to, but
without the prior written consent of, the Borrower or the Administrative Agent
and without paying any processing fee therefor, assign all or a portion of its
interest in any Loans to its Granting Bank or to any financial institutions
providing liquidity and/or credit facilities to or for the account of such SPC
to fund the Loans made by such SPC or to support the securities (if any) issued
by such SPC to fund such Loans and (ii) disclose on a confidential basis any
non-public information relating to its Loans to any rating agency, commercial
paper dealer or provider of a surety, guarantee or credit or liquidity
enhancement to such SPC. This section may not be amended with respect to any SPC
without the written consent of such SPC's Granting Bank. Notwithstanding any
grant of rights to an SPC pursuant to this paragraph, the Granting Bank shall
retain the sole right to approve any amendment, modification or waiver of any
provision of this Agreement or the other Loan Documents; provided that the
Granting Bank may enter into and perform any agreement with the SPC as to the
manner in which it will exercise such right.
SECTION 11.07. Collateral. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
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<PAGE>
SECTION 11.08. Governing Law; Submission to Jurisdiction. (a) This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York.
(b) The Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State court sitting in New York City for purposes of all legal
proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
(c) The Borrower irrevocably designates and appoints CT Corporation System,
having an office on the date hereof at 1633 Broadway, New York, New York 10102
as the Borrower's authorized agent, to accept and acknowledge on its behalf
service of any and all process which may be served in any suit, action or
proceeding referred to in subsection (b) above in any federal or New York State
court sitting in New York City. The Borrower represents and warrants that such
agent has agreed to accept such appointment. Said designation and appointment
shall not be revocable by the Borrower until all principal, interest and other
amounts payable hereunder shall have been paid in full in accordance with the
provisions hereof. If such agent shall cease to act as agent for the Borrower,
the Borrower agrees to designate irrevocably and appoint without delay another
such agent satisfactory to the Administrative Agent.
(d) The Borrower consents to process being served in any suit, action or
proceeding referred to in subsection (b) above in any federal or New York State
court sitting in New York City by service of process upon its agent appointed as
provided in subsection (c) above; provided that, to the extent lawful and
possible, notice of said service upon such agent shall be mailed by registered
or certified air mail, postage prepaid, return receipt requested, to the
Borrower at its address specified in or pursuant to Section 11.01. The Borrower
irrevocably waives, to the fullest extent permitted by law, all claim of error
by reason of service in such manner and agrees that such service shall be deemed
in every respect effective service of process upon the Borrower in any such
suit, action or proceeding and shall, to the fullest extent permitted by law,
constitute valid and personal service upon and personal delivery to the
Borrower.
(e) Nothing in this Section shall affect the right of the Administrative
Agent or any Bank to serve process in any other manner permitted by law or limit
the right of the Administrative Agent or any Bank to bring proceedings against
the Borrower in the courts of any jurisdiction or jurisdictions.
SECTION 11.09. Counterparts; Integration. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement, the other Loan Documents and the Fee Letter constitute the
entire agreement and understanding among the parties hereto and supersedes any
and all prior agreements and understandings, oral or written, relating to the
subject matter hereof.
40
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SECTION 11.10. Waiver of Jury Trial. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 11.11. Confidentiality. Each Bank agrees to exercise all reasonable
efforts to keep any information delivered or made available by the Borrower to
it which is clearly indicated to be confidential information, confidential from
anyone other than persons employed or retained by such Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided that nothing herein shall prevent any Bank
from disclosing such information (i) to any other Bank, (ii) to its affiliates
and its and their officers, directors, employees, agents, attorneys and
accountants who have a need to know such information in accordance with
customary banking practices and who receive such information having been made
aware of the restrictions set forth in this Section, (iii) upon the order of any
court or administrative agency, (iv) upon the request or demand of any
regulatory agency or authority having jurisdiction over such Bank, (v) which has
been publicly disclosed, (vi) to the extent reasonably required in connection
with any litigation to which the Administrative Agent, any Bank, or their
respective affiliates may be a party, (vii) to the extent reasonably required in
connection with the exercise of any remedy hereunder, (viii) to such Bank's
legal counsel and independent auditors, and (ix) to any actual or proposed
participant or assignee of all or part of its rights hereunder which has agreed
in writing to be bound by the provisions of this Section.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CK WITCO CORPORATION
By______________________________________
Name: John R. Jepsen
Title: Treasurer
By______________________________________
Name: Robert Marchitello
Title: Assistant Treasurer
CK Witco Corporation
One American Lane
Greenwich, CT 06831
Attention: Treasurer
Copy to: Vice President and General
Counsel
Facsimile number: 203-552-2202
42
<PAGE>
MERRILL LYNCH CAPITAL
CORPORATION, individually and as
Administrative Agent, Syndication Agent
and Lead Arranger,
By______________________________________
Name:
Title:
Commitment: $50,000,000
250 Vesey Street
World Financial Center, 16th Floor
New York, New York 10281-1316
Attention of:
For Amendments, Financials, etc:
Cesar Apostol
Phone: 212-449-7441
Fax: 212-449-2372
or
Carol Feeley
Phone: 212-449-8414
Fax: 212-738-1649
43
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For Loan Activity and Interest:
Mark Campbell
Phone: 212-449-6996/7019
Fax: 212-738-1719
44
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PRICING SCHEDULE
Each of "FACILITY FEE RATE", "EURO-DOLLAR MARGIN", "BASE RATE MARGIN" and
"CD MARGIN" means, for any day, the rate set forth below in the row opposite
such term and in the column corresponding to the Pricing Level that applies on
such day as determined based on the ratings by Moody's and S&P:
Level I Level II Level III Level IV Level V
Pricing Level A-/A3 BBB+/Baa1 BBB/Baa2 BBB-/Baa3 <BBB-/Baa3
Facility Fee Rate .090% .110% .125% .150% .200%
Euro-Dollar Margin .335% .390% .500% .725% 1.050%
CD Margin 1.585% 1.640% 1.750% 1.975% 2.300%
Utilization Fee 0.125% 0.125% 0.125% 0.250% 0.250%
Base Rate Margin 0.000% 0.000% 0.000% 0.000% 0.050%
For purposes of this Schedule, the following terms have the following
meanings:
"MOODY'S" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt security of the Borrower shall be disregarded. The ratings in effect for
any day are those in effect at the close of business on such day. In the case of
split ratings from S&P and Moody's, the rating to be used to determine the
applicable Pricing Level is the higher of the two ratings (e.g., A-/Baa1 results
in Level I Pricing) or, if the ratings differ by more than one Level indicated
above, the rating one above the lower of the two ratings; provided that if one
of such ratings is below Level III, the Pricing Level will be based on the lower
of such ratings.
<PAGE>
EXHIBIT A
NOTE
New York, New York
, 19
For value received, CK Witco Corporation, a Delaware corporation (the
"Borrower"), promises to pay to the order of [name of Bank] (the "Bank"), for
the account of its Applicable Lending Office, the unpaid principal amount of
each Loan made by the Bank to the Borrower pursuant to the Credit Agreement
referred to below on the last day of the Interest Period relating to such Loan
or as otherwise provided in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on the dates and at
the rate or rates provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Merrill Lynch
Capital Corporation, 250 Vesey Street, World Financial Center, 16th Floor, New
York, NY 10281-1316.
All Loans made by the Bank, the respective types and maturities thereof and
all repayments of the principal thereof shall be recorded by the Bank and, if
the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof, provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated as
of December 23, 1999 among CK Witco Corporation, each of the financial
institutions as are or may become parties thereto as a bank, and Merrill Lynch
Capital Corporation, as Administrative Agent (as the same may be amended from
time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are
used herein with the same meanings. Reference is made to the Credit Agreement
for provisions for the prepayment hereof and the acceleration of the maturity
hereof.
CK WITCO CORPORATION
By _____________________________________________________________________
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Amount of
Date Amount of Type of Principal Maturity Notation
Loan Loan Repaid Date Made By
2
<PAGE>
EXHIBIT B
OPINION OF JOHN T. FERGUSON, II, ESQ.,
GENERAL COUNSEL OF THE BORROWER
December 23, 1999
To the Banks and the Administrative
Agent Referred to Below
[ ]
Dear Sirs:
I am General Counsel of CK Witco Corporation (the "Borrower"). This opinion
is being rendered to you pursuant to Section 3.01(b) of the Credit Agreement
dated as of December 23, 1999 (the "Credit Agreement") among the Borrower, each
of the financial institutions as are or may become parties thereto as a Bank and
Merrill Lynch Capital Corporation, as Administrative Agent. Terms defined in the
Credit Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise identified to
my satisfaction, of such documents, corporate records, certificates of public
officials and officers of the Borrower and its Subsidiaries and other
instruments and have conducted such other investigations of fact and law as I
have deemed necessary or advisable for purposes of this opinion. I have assumed,
with your permission, that the signatures (other than those of officers of the
Borrower and its Subsidiaries) on all the documents that I have examined are
genuine.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and has all corporate
powers required to carry on its business as now conducted. Each of the
Borrower's Subsidiaries which is a "significant subsidiary" within the meaning
of Regulation S-X of the Securities and Exchange Commission is a corporation
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers required to carry on its business as
now conducted.
2. The execution, delivery and performance by each Loan Party of the Loan
Documents to which it is a party are within such Loan Party's corporate powers,
have been duly authorized by all necessary corporate action, and require no
action by or in respect of, or filing with, any governmental agency or official.
3. The execution, delivery and performance by the Borrower of the Credit
Agreement and by the other Loan Parties of the Loan Documents to which they are
parties will not contravene, or constitute a default under, any provision of
applicable law or Regulation or of the
<PAGE>
articles of incorporation or bylaws of any Loan Party or any agreement or
instrument evidencing Debt of any Loan Party or, to the best of my knowledge,
any other agreement, judgment, injunction, order, decree or other instrument
binding upon any Loan Party or, to the best of my knowledge, result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
4. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and the other Loan Documents constitute valid and binding
agreements of the Loan Parties that are party thereto.
5. Except as disclosed in the Borrower's S-4 as filed with the Securities
and Exchange Commission on July 28, 1999, there is no action, suit or proceeding
pending against, or to the best of my knowledge threatened against or affecting,
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official, in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business or consolidated financial position of the Borrower and its Consolidated
Subsidiaries, considered as a whole, or which in any manner draws into question
the validity of the Credit Agreement, any other Loan Document or the Notes. For
the purposes hereof, I have not regarded an action, suit or proceeding to be
"threatened" against the Borrower or any of its Subsidiaries unless the
potential litigant has manifested to the management of the Borrower in writing
an intention to institute the same.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by any other person without my prior written consent.
Very truly yours,
2
<PAGE>
EXHIBIT C
OPINION OF
WACHTELL LIPTON ROSEN & KATZ,
SPECIAL COUNSEL FOR THE COMPANY
December 23, 1999
To the Banks and the Administrative Agent
Referred to Below
[ ]
[ ]
Dear Sirs:
We have acted as special counsel to CK Witco Corporation, a Delaware
corporation (the "Borrower"), in connection with the Credit Agreement (the
"Credit Agreement") dated as of December 23, 1999 among the Borrower, each of
the financial institutions as are or may become parties thereto as a Bank (the
"Banks") and Merrill Lynch Capital Corporation, as Administrative Agent. This
opinion is being delivered pursuant to Section 3.01(c) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the Credit
Agreement and its Notes are within the corporate powers of the Borrower, and
have been duly authorized by a necessary corporate action.
2. The Loan Documents constitute valid and binding agreements of the
Borrower and the Loan Parties party thereto, in each case enforceable against
the Borrower and such Loan Parties in accordance with their respective terms,
except to the extent the same may be limited by applicable bankruptcy,
moratorium, insolvency, reorganization or similar laws of general application
and by general principles of equity (whether considered in a proceeding at law
or in equity).
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the General
Corporation Law of the State of Delaware. In giving the foregoing opinion, we
express no opinion as to the effect (if any) of any law of any
<PAGE>
jurisdiction (except the State of New York) in which any Bank is located which
limits the rate of interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by or furnished to any other person without our prior written consent.
Very truly yours,
2
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _______, 19_ among [ASSIGNOR] (the "Assignor"),
[ASSIGNEE] (the "Assignee"), [CK WITCO CORPORATION (the "Borrower")] and MERRILL
LYNCH CAPITAL CORPORATION, as Administrative Agent.
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the Credit Agreement dated as of December 23, 1999 among the Borrower, the
Assignor, each of the financial institutions as are or may become party thereto
as a Bank, and the Administrative Agent (as the same may be amended or modified
from time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the
Assignor has a Commitment to make Loans in an aggregate amount at any time
outstanding not to exceed $________________;
WHEREAS, Loans made by the Assignor under the Credit Agreement in the
aggregate amount of $_____ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
[Commitment/outstanding Loans] thereunder in an amount equal to $_________ (the
"Assigned Amount"), and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Loans made by the Assignor outstanding at the date hereof. Upon the execution
and delivery hereof by the Assignor, the Assignee, [the Borrower] and the
Administrative Agent and the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with [a Commitment/outstanding Loans] in an
amount equal to the Assigned Amount, and (ii) the [Commitment/outstanding Loans]
of the Assignor shall, as of the date hereof, be reduced by a like amount and
the Assignor released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
<PAGE>
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof, in Dollars (in Federal Funds), the amount heretofore agreed between
them.1 It is understood that facility fees accrued to the date hereof are for
the account of the Assignor and such fees accruing from and including the date
hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
SECTION 4. Consent of the Borrower and the Administrative Agent. This
Agreement is conditioned upon the consent of the [Borrower] and the
Administrative Agent pursuant to Section 11.06(c) of the Credit Agreement. The
execution of this Agreement [by the Borrower] and the Administrative Agent is
evidence of this consent. Pursuant to Section 11.06(c) the Borrower agrees, if
requested by the Assignee, to execute and deliver a Note payable to the order of
the Assignee to evidence the assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of the Borrower, or the
validity and enforceability of the obligations of the Borrower in respect of the
Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
2
1 Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any up
front fee to be paid by the Assignor to the Assignee.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By____________________________
Name:
Title:
[ASSIGNEE]
By____________________________
Name:
Title:
[CK WITCO CORPORATION
By____________________________
Name:
Title: ]
MERRILL LYNCH CAPITAL
CORPORATION, as Administrative
Agent
By____________________________
Name:
Title:
3
<PAGE>
EXHIBIT E
SUBSIDIARY GUARANTEE AGREEMENT (together with instruments
executed and delivered pursuant to Section 19, this "Agreement") dated
as of December 23, 1999, among each of the subsidiaries of CK Witco
Corporation (the "Borrower") listed on Schedule I hereto (the
"Subsidiary Guarantors"), and Merrill Lynch Capital Corporation
("Merrill Lynch"), as administrative agent (in such capacity, the
"Administrative Agent") for the Banks (as defined in the Credit
Agreement referred to below).
Reference is made to the Credit Agreement dated as of December 23, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, each of the financial institutions as are or
may become parties thereto as a Bank and the Administrative Agent. Capitalized
terms used and not defined herein are used with the meanings assigned to such
terms in the Credit Agreement.
The Banks have agreed to make Loans to the Borrower pursuant to, and upon
the terms and subject to the conditions specified in, the Credit Agreement. Each
of the Subsidiary Guarantors is a Subsidiary of the Borrower and acknowledges
that it will derive substantial benefit from the making of the Loans by the
Banks to the Borrower. The obligations of the Banks to make Loans are
conditioned on, among other things, the execution and delivery by the Subsidiary
Guarantors of a Subsidiary Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Banks to make Loans, the
Subsidiary Guarantors are willing to execute this Agreement for the benefit of
the Administrative Agent, the Banks and each counterparty to a Derivatives
Obligation with the Borrower which was an Affiliate of a Bank at the time such
Derivatives Obligation was entered into (collectively, the "Lending Parties").
Accordingly, the parties hereto agree as follows:
SECTION 1. Subsidiary Guarantee. Each Subsidiary Guarantor unconditionally
guarantees, jointly with the other Subsidiary Guarantors and severally, as a
primary obligor and not merely as a surety, the due and punctual payment of (i)
the principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise and (ii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Borrower to the Lending Parties under this
Agreement, the Credit Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrower under or pursuant to this Agreement, the Credit Agreement and
the other Loan Documents, (c) the due and punctual payment and performance of
all the covenants, agreements, obligations and liabilities of each Loan Party
under or pursuant to this Agreement and the other Loan Documents, and (d) unless
otherwise agreed upon in writing by the applicable Bank party thereto, the due
and punctual payment and performance of all obligations of the Borrower,
monetary or otherwise, under each Derivatives Obligation entered into
<PAGE>
with any counterparty that was a Bank (or an Affiliate of a Bank) at the time
such Derivatives Obligation was entered into (all the monetary and other
obligations referred to in the preceding lettered clauses of this paragraph
being referred to collectively as the "Obligations"). Each Subsidiary Guarantor
waives notice of and hereby consents to any agreements or arrangements
whatsoever by the Lending Parties with any other person pertaining to the
Obligations, including agreements and arrangements for payment, extension,
renewal, subordination, composition, arrangement, discharge or release of the
whole or any part of the Obligations, or for the discharge or surrender of any
or all security, or for the compromise, whether by way of acceptance of part
payment or otherwise, and the same shall in no way impair such Subsidiary
Guarantor's liability hereunder.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Subsidiary Guarantor waives presentment to, demand of
payment from and protest to the Borrower or any other person of any of the
Obligations, and also waives notice of acceptance of its guarantee, notice of
protest for nonpayment, and all other formalities. To the fullest extent
permitted by applicable law, the obligations of each Subsidiary Guarantor
hereunder shall not be affected by (a) the failure of any Loan Party to assert
any claim or demand or to enforce or exercise any right or remedy against the
Borrower or any other Subsidiary Guarantor under the provisions of the Credit
Agreement, any other Loan Document or otherwise, (b) any extension, renewal or
increase of or in any of the Obligations, (c) any rescission, waiver, amendment
or modification of, or any release from, any of the terms or provisions of this
Agreement, the Credit Agreement, any other Loan Document, any guarantee or any
other agreement or instrument, including with respect to any other Subsidiary
Guarantor under this Agreement, (d) the release of (or the failure to perfect a
security interest in) any of the security held by or on behalf of the
Administrative Agent or any other Lending Party or (e) the failure or delay of
any Lending Party to exercise any right or remedy against any other guarantor of
the Obligations.
SECTION 3. Security. Each of the Subsidiary Guarantors authorizes the
Administrative Agent to, subject to the terms of any security agreement that may
hereafter be entered into by the Administrative Agent and any Subsidiary
Guarantor or Borrower, (a) take and hold security for the payment of this
Subsidiary Guarantee and the Obligations and exchange, enforce, waive and
release any such security, (b) apply such security and direct the order or
manner of sale thereof as it in its sole discretion may determine subject to the
terms of any other Loan Documents and (c) release or substitute any one or more
endorsees, other guarantors or other obligors.
SECTION 4. Guarantee of Payment. Each Subsidiary Guarantor further agrees
that its guarantee constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Administrative Agent or any other Lending Party to any of the security held for
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Administrative Agent or any other Lending Party in favor of the
Borrower or any other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Subsidiary Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations), including any claim of
waiver, release, surrender, alteration or compromise of any of the Obligations,
and shall not be subject to any defense (other than a defense of payment) or
setoff, coun-
2
<PAGE>
terclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of each Subsidiary Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Administrative Agent or any other Lending Party to assert any
claim or demand or to enforce any remedy under the Credit Agreement, any other
Loan Document, any guarantee or any other agreement or instrument, by any
amendment, waiver or modification of any provision of the Credit Agreement or
any other Loan Document or other agreement or instrument, by any default,
failure or delay, wilful or otherwise, in the performance of the Obligations, or
by any other act, omission or delay to do any other act that may or might in any
manner or to any extent vary the risk of such Subsidiary Guarantor or that would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law
or equity (other than the indefeasible payment in full in cash of all the
Obligations) or which would impair or eliminate any right of such Subsidiary
Guarantor to subrogation.
SECTION 6. Defenses Waived. To the fullest extent permitted by applicable
law, each of the Subsidiary Guarantors waives any defense based on or arising
out of the unenforceability of the Obligations or any part thereof from any
cause or the cessation from any cause of the liability (other than the final and
indefeasible payment in full in cash of the Obligations) of the Borrower or any
other person. The Administrative Agent and the other Lending Parties may, at
their election, foreclose on any security held by one or more of them by one or
more judicial or nonjudicial sales, accept an assignment of any such security in
lieu of foreclosure, compromise or adjust any part of the Obligations, make any
other accommodation with the Borrower or any other guarantor or exercise any
other right or remedy available to them against the Borrower or any other
guarantor, without affecting or impairing in any way the liability of any
Subsidiary Guarantor hereunder except to the extent the Obligations have been
fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each
of the Subsidiary Guarantors waives any defense arising out of any such election
even though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of
such Subsidiary Guarantor against the Borrower or any other guarantor or any
security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing
and not in limitation of any other right that the Administrative Agent or any
other Lending Party has at law or in equity against any Subsidiary Guarantor by
virtue hereof, upon the failure of the Borrower or any other Loan Party to pay
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Subsidiary Guarantor
hereby promises to and will forthwith pay, or cause to be paid, to the
Administrative Agent or such other Lending Party as designated thereby in cash
an amount equal to the unpaid principal amount of such Obligations then due,
together with accrued and unpaid interest and fees on such Obligations. Upon
payment by any Subsidiary Guarantor of any sums to the Administrative Agent or
any Lending Party as provided above, all rights of such Subsidiary Guarantor
against the Borrower arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full in cash of all the Obligations. In addition, any indebtedness of the
Borrower or any Subsidiary now or hereafter held by any Subsidiary Guarantor is
hereby subordinated in right of payment to the prior payment in full of the
Obligations. If at any time when any Obligation then due and owing has not been
paid, any amount shall be paid to any Subsidiary Guarantor on account of (i)
such subrogation, contribution, reim-
3
<PAGE>
bursement, indemnity or similar right or (ii) any such indebtedness, such amount
shall be held in trust for the benefit of the Lending Parties and shall
forthwith be paid to the Administrative Agent to be credited against the payment
of the Obligations, whether matured or unmatured, in accordance with the terms
of the Loan Documents.
SECTION 8. Information. Each of the Subsidiary Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's financial
condition and assets, all other circumstances bearing upon the risk of
nonpayment of the Obligations and the nature, scope and extent of the risks that
such Subsidiary Guarantor assumes and incurs hereunder and agrees that none of
the Administrative Agent or the other Lending Parties will have any duty to
advise any of the Subsidiary Guarantors of information known to it or any of
them regarding such circumstances or risks.
SECTION 9. Representations and Warranties. Each of the Subsidiary
Guarantors represents and warrants as to itself that all representations and
warranties relating to it contained in the Credit Agreement are true and
correct.
SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate
when (i) the principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding) on all Loans and (ii) all other obligations then due and owing, have
in each case been indefeasibly paid in full and the Banks have no further
commitment to lend under the Credit Agreement and (b) shall continue to be
effective or be reinstated, as the case may be, if at any time any payment, or
any part thereof, on any Obligation is rescinded or must otherwise be restored
by any Lending Party upon the bankruptcy or reorganization of the Borrower, or
any Subsidiary Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments; Releases.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the Subsidiary
Guarantors that are contained in this Agreement shall bind and inure to the
benefit of each party hereto and their respective successors and assigns. This
Agreement shall become effective as to any Subsidiary Guarantor when a
counterpart hereof (or a Supplement referred to in Section 19) executed on
behalf of such Subsidiary Guarantor shall have been delivered to the
Administrative Agent and a counterpart hereof (or a Supplement referred to in
Section 19) shall have been executed on behalf of the Administrative Agent, and
thereafter shall be binding upon such Subsidiary Guarantor and the
Administrative Agent and their respective successors and assigns, and shall
inure to the benefit of such Subsidiary Guarantor, the Administrative Agent and
the other Lending Parties, and their respective successors and assigns, except
that no Subsidiary Guarantor shall have the right to assign its rights or
obligations hereunder or any interest herein (and any such attempted assignment
shall be void). This Agreement shall be construed as a separate agreement with
respect to each Subsidiary Guarantor and may be amended, modified, supplemented,
waived or released with respect to any Subsidiary Guarantor without the approval
of any other Subsidiary Guarantor and without affecting the obligations of any
other Subsidiary Guarantor. The Administrative Agent is hereby expressly
authorized to, and agrees upon request of the Borrower it will, release any
Subsidiary Guarantor from its obligations hereunder in the event (i) that all
the capital stock of such Subsidiary Guarantor shall be sold,
4
<PAGE>
transferred or otherwise disposed of to a person that is not an Affiliate of the
Borrower in a transaction permitted by Section 5.09 of the Credit Agreement or
(ii) the Borrower requests such release in writing accompanied by a certificate
of a Principal Officer certifying that no Default shall have occurred and be
continuing and that the requirements of Section 5.11 of the Credit Agreement
shall be met immediately following such release.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent
hereunder and of the other Lending Parties under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to any
departure by any Subsidiary Guarantor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on any Subsidiary Guarantor in any case
shall entitle such Subsidiary Guarantor to any other or further notice or demand
in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Subsidiary Guarantors to which such waiver, amendment or modification relates
and the Administrative Agent with consent required under the Credit Agreement.
SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 11.01 of the Credit Agreement. All
communications and notices hereunder to each Subsidiary Guarantor shall be given
to it at its address set forth in Schedule I with a copy to the Borrower.
SECTION 15. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Subsidiary Guarantors
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the Administrative Agent and the other
Secured Parties and shall survive the making by the Banks of the Loans
regardless of any investigation made by the Lending Parties or on their behalf,
and shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any other fee or amount payable under this
Agreement or any other Loan Document is outstanding and unpaid.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision
5
<PAGE>
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 17. Jurisdiction; Consent to Service of Process. (a) Each
Subsidiary Guarantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent or any other Secured Party may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against any Subsidiary Guarantor or its properties in the courts
of any jurisdiction.
(b) Each Subsidiary Guarantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
by mail to the address provided in Section 14. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 18. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY,
6
<PAGE>
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 18.
SECTION 19. Additional Subsidiary Guarantors. Pursuant to 5.11 of the
Credit Agreement, the Borrower must ensure that Subsidiaries are (or become
within 10 Domestic Business Days of being formed or acquired) Subsidiary
Guarantors so that certain asset and revenue criteria are met. Upon execution
and delivery after the date hereof by the Administrative Agent and such a
Subsidiary of a Supplement in the form of Annex 1, such Subsidiary shall become
a Subsidiary Guarantor hereunder with the same force and effect as if originally
named as a Subsidiary Guarantor herein. The execution and delivery of any
Supplement adding an additional Subsidiary Guarantor as a party to this
Agreement shall not require the consent of any other Subsidiary Guarantor
hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
(other than any Subsidiary Guarantor released pursuant to Section 11 hereof)
shall remain in full force and effect notwithstanding (a) the addition of any
new Subsidiary Guarantor as a party to this Agreement or (b) the release of any
other Subsidiary Guarantor pursuant to Section 11 hereof.
SECTION 20. Right of Setoff. If an Event of Default shall have occurred and
be continuing, each Lending Party is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by such Lending Party to or
for the credit or the account of any Subsidiary Guarantor against any or all the
obligations of such Subsidiary Guarantor now or hereafter existing under this
Agreement and the other Loan Documents held by such Lending Party, irrespective
of whether or not the Administrative Agent or any Lending Party shall have made
any demand under this Agreement or any other Loan Document and although such
obligations may be unmatured. The rights of each Lending Party under this
Section 20 are in addition to other rights and remedies (including other rights
of setoff) which such Lending Party may have.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EACH OF THE SUBSIDIARIES LISTED
ON SCHEDULE I HERETO,
By_____________________________
Name:
Title:
MERRILL LYNCH CAPITAL
CORPORATION, as Administrative Agent,
By_____________________________
Name:
Title:
8
<PAGE>
Schedule I to the
Subsidiary Guarantee Agreement
Subsidiary Guarantor Address
Uniroyal Chemical Company, Inc.
World Headquarters
Benson Road
Middlebury, CT 06749
Attn: Chief Financial Officer
<PAGE>
Annex to the
Subsidiary Guarantee Agreement
SUPPLEMENT NO. dated as of , to the Subsidiary Guarantee
Agreement dated as of December 23, 1999 (the "Subsidiary Guarantee
Agreement"), among each of the subsidiaries of CK Witco Corporation
(the "Borrower") listed on Schedule I thereto (the "Subsidiary
Guarantors"), and Merrill Lynch Capital Corporation ("Merrill Lynch"),
as administrative agent (in such capacity, the "Administrative Agent")
for the Lending Parties (as defined in the Subsidiary Guarantee
Agreement).
A. Reference is made to the Credit Agreement dated as of December 23, 1999
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, each of the financial institutions as are or
may become parties thereto as a Bank and the Administrative Agent.
B. Capitalized terms used and not otherwise defined herein are used with
the meanings assigned to such terms in the Subsidiary Guarantee Agreement and
the Credit Agreement.
C. The Subsidiary Guarantors have entered into the Subsidiary Guarantee
Agreement in order to induce the Banks to make Loans. Pursuant to Section 5.11
of the Credit Agreement, the Borrower must ensure that Domestic Subsidiaries are
(or become within 10 Domestic Business Days of being formed or acquired)
Subsidiary Guarantors so that certain asset and revenue criteria are met.
Section 19 of the Subsidiary Guarantee Agreement provides that additional
Subsidiaries may become Subsidiary Guarantors under the Subsidiary Guarantee
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary of the Borrower (the "New Subsidiary
Guarantor") is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Subsidiary Guarantor under the Subsidiary
Guarantee Agreement in order to induce the Banks to make additional Loans and as
consideration for Loans previously made.
Accordingly, the Administrative Agent and the New Subsidiary Guarantor
agree as follows:
SECTION 1. In accordance with Section 19 of the Subsidiary Guarantee
Agreement, the New Subsidiary Guarantor by its signature below becomes a
Subsidiary Guarantor under the Subsidiary Guarantee Agreement with the same
force and effect as if originally named therein as a Subsidiary Guarantor and
the New Subsidiary Guarantor hereby (a) agrees to all the terms and provisions
of the Subsidiary Guarantee Agreement applicable to it as a Subsidiary Guarantor
thereunder (including its guarantee of the Obligations) and (b) represents and
warrants that the representations and warranties made by it as a Subsidiary
Guarantor thereunder are true and correct on and as of the date hereof. Each
reference to a "Subsidiary Guarantor" in the Subsidiary Guarantee Agreement
shall be deemed to include the New Subsidiary Guarantor.
SECTION 2. The New Subsidiary Guarantor represents and warrants to the
Administrative Agent and the other Lending Parties that this Supplement has been
duly authorized, executed
<PAGE>
and delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Administrative Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Subsidiary Guarantor and the
Administrative Agent. Delivery of an executed signature page to this Supplement
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Subsidiary
Guarantee Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Subsidiary Guarantee Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision hereof in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction). The
parties hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in Section 14 of the Subsidiary Guarantee Agreement. All
communications and notices hereunder to the New Subsidiary Guarantor shall be
given to it at the address set forth under its signature below, with a copy to
the Borrower.
SECTION 8. The New Subsidiary Guarantor agrees to reimburse the
Administrative Agent for its out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, disbursements and other charges of
counsel for the Administrative Agent.
2
<PAGE>
IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Administrative
Agent have duly executed this Supplement to the Subsidiary Guarantee Agreement
as of the day and year first above written.
[Name Of New Subsidiary Guarantor],
by
_______________________________
Name:
Title:
Address:_________________________
____________________________
____________________________
MERRILL LYNCH CAPITAL
CORPORATION, as Administrative
Agent,
by
_______________________________
Name:
Title:
3
<PAGE>
EXHIBIT F
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT (together with
instruments executed and delivered pursuant to Section 11, this
"Agreement") dated as of December 23, 1999, among CK WITCO
CORPORATION, a Delaware corporation (the "Borrower"), each subsidiary
of the Borrower listed on Schedule I hereto (the "Subsidiary
Guarantors") and MERRILL LYNCH CAPITAL CORPORATION, as administrative
agent (in such capacity, the "Administrative Agent") for the Lending
Parties (as defined below).
Reference is made to (a) the Credit Agreement dated as of December 23, 1999
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, each of the financial institutions as are or
may become parties thereto as a Bank and the Administrative Agent and (b) the
Subsidiary Guarantee Agreement dated as of December 23, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Subsidiary Guarantee
Agreement"), among the Subsidiary Guarantors and the Administrative Agent.
Capitalized terms used herein and not defined herein are used with the meanings
assigned to such terms in the Credit Agreement.
The Banks have agreed to make Loans to the Borrower pursuant to, and upon
the terms and subject to the conditions specified in, the Credit Agreement. The
Subsidiary Guarantors have guaranteed such Loans and the other Obligations (as
defined in the Subsidiary Guarantee Agreement) pursuant to the Subsidiary
Guarantee Agreement. The obligations of the Banks to make Loans are conditioned
on, among other things, the execution and delivery by the Borrower and the
Subsidiary Guarantors of an agreement in the form hereof.
Accordingly, the Borrower, each Subsidiary Guarantor and the Administrative
Agent agree as follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Subsidiary Guarantors may have under applicable
law (but subject to Section 3), the Borrower agrees that in the event a payment
shall be made by any Subsidiary Guarantor under the Subsidiary Guarantee
Agreement, the Borrower shall indemnify such Subsidiary Guarantor for the full
amount of such payment and, until such indemnification obligation shall have
been satisfied, such Subsidiary Guarantor shall be subrogated to the rights of
the person to whom such payment shall have been made to the extent of such
payment.
SECTION 2. Contribution and Subrogation. Each Subsidiary Guarantor (a
"Contributing Guarantor") agrees (subject to Section 3) that, in the event a
payment shall be made by any other Subsidiary Guarantor under the Subsidiary
Guarantee and such other Subsidiary Guarantor (the "Claiming Guarantor") shall
not have been fully indemnified by the Borrower as provided in Section 1, the
Contributing Guarantor shall, to the extent the Claiming Guarantor shall not
have been so indemnified by the Borrower, indemnify the Claiming Guarantor in an
amount equal to the amount of such payment multiplied by a fraction of which the
numerator shall be the net worth of the Contributing Guarantor on the date
hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto
pursuant to Section 11, the date of the Supplement hereto
<PAGE>
executed and delivered by such Subsidiary Guarantor) and the denominator shall
be the aggregate net worth of all the Subsidiary Guarantors on the date hereof
(or, in the case of any Subsidiary Guarantor becoming a party hereto pursuant to
Section 11, the date of the Supplement hereto executed and delivered by such
Subsidiary Guarantor). Any Contributing Guarantor making any payment to a
Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights
of such Claiming Guarantor under Section 1 to the extent of such payment.
SECTION 3. Subordination. Notwithstanding any provision of this Agreement
to the contrary, all rights of the Subsidiary Guarantors under Sections 1 and 2
and all other rights of indemnity, contribution or subrogation under applicable
law or otherwise shall be fully subordinated to the indefeasible payment in full
in cash of the Obligations. No failure on the part of the Borrower or any
Subsidiary Guarantor to make the payments required by Sections 1 and 2 (or any
other payments required under applicable law or otherwise) shall in any respect
limit the obligations and liabilities of any Subsidiary Guarantor with respect
to its obligations hereunder, and each Subsidiary Guarantor shall remain liable
for the full amount of the obligations of such Subsidiary Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full force
and effect so long as the Subsidiary Guarantee Agreement has not been
terminated, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of any Obligation is rescinded
or must otherwise be restored by any Lending Party upon the bankruptcy or
reorganization of the Borrower, any Subsidiary Guarantor or otherwise.
SECTION 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of the
Administrative Agent or any Subsidiary Guarantor to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Administrative Agent or any Subsidiary Guarantor preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law. None of the Administrative Agent and the Subsidiary
Guarantors shall be deemed to have waived any rights hereunder unless such
waiver shall be in writing and signed by such parties.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Borrower, the Subsidiary Guarantors and the Administrative Agent, with any
consent required under the Credit Agreement.
SECTION 7. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement or the Subsidiary
Guarantee Agreement, as applicable, and addressed as specified therein.
SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns
2
<PAGE>
of such party; and all covenants, promises and agreements by or on behalf of the
parties that are contained in this Agreement shall bind and inure to the benefit
of their respective successors and assigns. Neither the Borrower nor any
Subsidiary Guarantor may assign or transfer any of its rights or obligations
hereunder (and any such attempted assignment or transfer shall be void) without
the prior written consent of the Required Banks. Notwithstanding the foregoing,
at the time any Subsidiary Guarantor is released from its obligations under the
Subsidiary Guarantee Agreement in accordance with the Subsidiary Guarantee
Agreement and the Credit Agreement, such Subsidiary Guarantor will cease to have
any rights or obligations under this Agreement.
SECTION 9. Survival of Agreement; Severability. (a) All covenants and
agreements made by the Borrower and each Subsidiary Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement or the other Loan Documents shall be considered to have been relied
upon by the Administrative Agent, the Banks and each Subsidiary Guarantor, shall
survive the making by the Banks of the Loans and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loans or
any other fee or amount payable under the Credit Agreement, this Agreement or
any of the other Loan Documents is outstanding and unpaid or the Commitments
have not been terminated.
(b) In case any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, no party hereto
shall be required to comply with such provision for so long as such provision is
held to be invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 10. Counterparts. This Agreement may be executed in counter parts
(and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Agreement shall be effective with respect to any
Subsidiary Guarantor when a counterpart bearing the signature of such Subsidiary
Guarantor shall have been delivered to the Administrative Agent. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.
SECTION 11. Additional Subsidiary Guarantors; Release. Pursuant to Section
5.11 of the Credit Agreement, the Borrower must ensure that Domestic
Subsidiaries are (or become within 10 Domestic Business Days of being formed or
acquired) Subsidiary Guarantors so that certain asset and revenue criteria are
met. Upon execution and delivery, after the date hereof, by the Administrative
Agent and such a Subsidiary of an instrument in the form of Annex 1 hereto, such
Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and
effect as if originally named as a Subsidiary Guarantor hereunder. The execution
and delivery of any instrument adding an additional Subsidiary Guarantor as a
party to this Agreement shall not require the consent of any Subsidiary
Guarantor hereunder. The rights and obligations of each Subsidiary Guarantor
hereunder (other than any Subsidiary Guarantor released pursuant to this Section
11) shall remain in full force and effect notwithstanding (a) the addition of
any new Subsidiary Guarantor as a party to this Agreement or (b) the release of
any other Subsidiary Guarantor pursuant to Section 11 of the Subsidiary
Guarantee Agreement. Each Subsidiary Guarantor
3
<PAGE>
shall be released from its obligations under this Agreement without further
action upon its release from its obligations under the Subsidiary Guarantee
Agreement in accordance with Section 11 thereof.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.
CK WITCO CORPORATION,
By____________________________
Name:
Title:
EACH OF THE SUBSIDIARIES LISTED
ON SCHEDULE I HERETO,
By____________________________
Name:
Title:
MERRILL LYNCH CAPITAL
CORPORATION, as Administrative Agent,
By____________________________
Name:
Title:
5
<PAGE>
SCHEDULE I
to the Indemnity, Subrogation
and Contribution Agreement
Subsidiary Guarantor Address
Uniroyal Chemical Company, Inc.
World Headquarters
Benson Road
Middlebury, CT 06749
Attn: Chief Financial Officer
<PAGE>
Annex 1
to the Indemnity, Subrogation
and Contribution Agreement
SUPPLEMENT NO. (this "Supplement") dated as of [ ], to the
Indemnity, Subrogation and Contribution Agreement dated as of December
23, 1999 (as the same may be amended, supplemented or otherwise
modified from time to time, the "Indemnity, Subrogation and
Contribution Agreement"), among CK Witco Corporation, a Delaware
corporation (the "Borrower"), each subsidiary of the Borrower listed
on Schedule I thereto (the "Subsidiary Guarantors") and Merrill Lynch
Capital Corporation, as administrative agent (in such capacity, the
"Administrative Agent") for the Banks.
A. Reference is made to (a) the Credit Agreement dated as of December 23,
1999, (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among the Borrower, each of the financial institutions as
are or may become parties thereto as a Bank and the Administrative Agent and (b)
the Subsidiary Guarantee Agreement dated as of December 23, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Subsidiary Guarantee
Agreement"), among the Subsidiary Guarantors and the Administrative Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. The Borrower and the Subsidiary Guarantors have entered into the
Indemnity, Subrogation and Contribution Agreement in order to induce the Banks
to make Loans. Pursuant to Section 5.11 of the Credit Agreement, the Borrower
must ensure that Subsidiaries are (or become within 10 Domestic Business Days of
being formed or acquired) Subsidiary Guarantors so that certain asset and
revenue criteria are met. Section 11 of the Indemnity, Subrogation and
Contribution Agreement provides that additional Subsidiaries may become
Subsidiary Guarantors under the Indemnity, Subrogation and Contribution
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary (the "New Guarantor") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Subsidiary Guarantor under the Indemnity, Subrogation and Contribution
Agreement in order to induce the Banks to make additional Loans and as
consideration for Loans previously made.
Accordingly, the Administrative Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 11 of the Indemnity, Subrogation and
Contribution Agreement, the New Guarantor by its signature below becomes a
Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement
with the same force and effect as if originally named therein as a Subsidiary
Guarantor and the New Guarantor hereby agrees to all the terms and provisions of
the Indemnity, Subrogation and Contribution Agreement applicable to it as a
Subsidiary Guarantor thereunder. Each reference to a "Subsidiary Guarantor" in
the
<PAGE>
Indemnity, Subrogation and Contribution Agreement shall be deemed to include the
New Guarantor.
SECTION 2. The New Guarantor represents and warrants to the Administrative
Agent and the Banks that this Supplement has been duly authorized, executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Indemnity, Subrogation and Contribution Agreement shall not in
any way be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in Section 7 of the Indemnity, Subrogation and Contribution
Agreement. All communications and notices hereunder to the New Guarantor shall
be given to it at the address set forth under its signature.
SECTION 8. The New Guarantor agrees to reimburse the Administrative Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Administrative Agent.
<PAGE>
IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have
duly executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[Name Of New Guarantor],
by
_________________________________
Name:
Title:
MERRILL LYNCH CAPITAL
CORPORATION, as Administrative
Agent,
by
_________________________________
Name:
Title:
3
<PAGE>
OFFERING MEMORANDUM CONFIDENTIAL
$25,000,000
CKWITCO
FLOATING RATE NOTES DUE 2001
---------------------
We are offering the Floating Rate Notes due 2001 in a firm commitment
placement. We will pay interest on the Floating Rate Notes on June 7, 2000,
September 7, 2000, December 7, 2000 and at maturity. The Floating Rate Notes
will mature on March 7, 2001. This offering memorandum contains additional
information regarding the terms and conditions of the Floating Rate Notes,
including transfer restrictions. For particular terms applicable to the Floating
Rate Notes see "Terms of the Floating Rate Notes."
The Floating Rate Notes will rank senior to all our existing and future
subordinated indebtedness and will rank equally with all existing and future
senior indebtedness including our $600,000,000 8.5% Senior Notes due 2005, which
we are offering concurrently with the Floating Rate Notes.
This cover page replaces the cover on the following page with respect to
the offering by us of the Senior Notes.
INVESTING IN THE FLOATING RATE NOTES INVOLVES RISKS WHICH ARE DESCRIBED IN
THE "RISK FACTORS" SECTION BEGINNING ON PAGE 9 OF THIS OFFERING MEMORANDUM.
The Floating Rate Notes have not been registered under the Securities Act
or the securities laws of any other jurisdiction. Unless they are registered,
the Floating Rate Notes may be offered only in transactions that are exempt from
registration under the Securities Act or the securities laws of any other
jurisdiction. Accordingly, we are offering and selling the Floating Rate Notes
only to qualified institutional buyers. For further details about eligible
offerees and resale restrictions, see "Notice to Investors."
The Floating Rate Notes will be ready for delivery in book entry form
through The Depository Trust Company on or about March 7, 2000.
---------------------
MERRILL LYNCH & CO.
---------------------
The date of this offering memorandum is March 2, 2000.
CK WITCO CORPORATION
Floating Rate Notes due 2001
INDENTURE
Dated as of March 1, 2000
CITIBANK, N.A.
as Trustee
TABLE OF CONTENTS
Page
ARTICLE I Definitions and Incorporation by Reference
SECTION 1.1. Definitions 1
SECTION 1.2. Other Definitions 14
SECTION 1.3. Rules of Construction 15
ARTICLE II The Securities
SECTION 2.1. Form, Dating and Terms 15
SECTION 2.2. Execution and Authentication 21
SECTION 2.3. Registrar and Paying Agent 22
SECTION 2.4. Paying Agent To Hold Money in Trust 23
SECTION 2.5. Securityholder Lists 23
SECTION 2.6. Transfer and Exchange 23
SECTION 2.7. Form of Certificate to be Delivered in Connection
with Transfers to Institutional Accredited Investors 28
SECTION 2.8. Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S 30
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities 31
SECTION 2.10. Temporary Securities 32
SECTION 2.11. Cancellation 32
SECTION 2.12. Payment of Interest; Defaulted Interest 32
SECTION 2.13. CUSIP Numbers 34
ARTICLE III Covenants
SECTION 3.1. Payment of Securities 34
SECTION 3.2. Reports by the Company 35
SECTION 3.3. Limitation on Mortgages 35
SECTION 3.4. Limitation on Sale and Leaseback Transactions 40
SECTION 3.5. Exempted Indebtedness 40
SECTION 3.6. Limitation on Subsidiary Indebtedness 41
SECTION 3.7. Sales of Accounts Receivable 43
SECTION 3.8. Waiver of Certain Covenants 44
SECTION 3.9. Maintenance of Office or Agency 45
SECTION 3.10. Money for Security Payments to be Held in Trust 45
SECTION 3.11. Corporate Existence 47
SECTION 3.12. Compliance Certificate 47
SECTION 3.13. Maintenance of Properties 47
SECTION 3.14. Payment of Taxes and Other Claims 48
SECTION 3.15. Statement by Officers as to Default 48
ARTICLE IV Consolidation, Merger, Conveyance, Transfer or
Lease
SECTION 4.1. Company May Consolidate, Etc., Only on Certain
Terms 48
SECTION 4.2. Successor Substituted 49
ARTICLE V Defaults and Remedies
SECTION 5.1. Events of Default 50
SECTION 5.2. Acceleration 52
SECTION 5.3. Other Remedies 53
SECTION 5.4. Waiver of Past Defaults 53
SECTION 5.5. Control by Majority 53
SECTION 5.6. Limitation on Suits 54
SECTION 5.7. Rights of Holders to Receive Payment 54
SECTION 5.8. Collection Suit by Trustee 55
SECTION 5.9. Trustee May File Proofs of Claim 55
SECTION 5.10. Priorities 56
SECTION 5.11. Undertaking for Costs 56
ARTICLE VI Trustee
SECTION 6.1. Duties of Trustee 57
SECTION 6.2. Rights of Trustee 58
SECTION 6.3. Individual Rights of Trustee 59
SECTION 6.4. Trustee's Disclaimer. 59
SECTION 6.5. Notice of Defaults 59
SECTION 6.6. Reports by Trustee to Holders 60
SECTION 6.7. Compensation and Indemnity 60
SECTION 6.8. Replacement of Trustee 61
SECTION 6.9. Successor Trustee by Merger 62
SECTION 6.10. Eligibility; Disqualification 63
SECTION 6.11. Resignation and Removal; Appointment of
Successor 63
SECTION 6.12 Acceptance of Appointment by Successor 64
SECTION 6.13. Trustee's Application for Instructions from the
Company 65
ARTICLE VII Discharge of Indenture; Defeasance; Covenant
Defeasance
SECTION 7.1. Discharge of Liability on Securities; Defeasance;
Covenant Defeasance 66
SECTION 7.2. Conditions to Defeasance or Covenant Defeasance 67
SECTION 7.3. Application of Trust Money 70
SECTION 7.4. Repayment to Company 70
SECTION 7.5. Indemnity for U.S. Government Obligations 71
SECTION 7.6. Reinstatement 71
ARTICLE VIII Amendments
SECTION 8.1. Without Consent of Holders 71
SECTION 8.2. With Consent of Holders 72
SECTION 8.3. Revocation and Effect of Consents and Waivers 73
SECTION 8.4. Notation on or Exchange of Securities 73
SECTION 8.5. Trustee To Sign Amendments 74
ARTICLE IX Redemption of Securities
SECTION 9.1. Redemption 74
SECTION 9.2. Applicability of Article 74
SECTION 9.3. Election to Redeem; Notice to Trustee 74
SECTION 9.4. Selection by Trustee of Securities to be
Redeemed 75
SECTION 9.5. Notice of Redemption 75
SECTION 9.6. Deposit of Redemption Price 76
SECTION 9.7. Securities Payable on Redemption Date 77
SECTION 9.8. Securities Redeemed in Part 77
ARTICLE X Miscellaneous
SECTION 10.1. Notices 78
SECTION 10.2. Communication by Holders with other Holders 78
SECTION 10.3. Certificate and Opinion as to Conditions
Precedent 78
SECTION 10.4. Statements Required in Certificate or Opinion 79
SECTION 10.5. Rules by Trustee, Paying Agent and Registrar 79
SECTION 10.6. Legal Holidays 79
SECTION 10.7. Governing Law 79
SECTION 10.8. No Recourse Against Others 80
SECTION 10.9. Successors 80
SECTION 10.10.Multiple Originals 80
SECTION 10.11.Variable Provisions 80
SECTION 10.12.Table of Contents; Headings 80
EXHIBIT A Form of Floating Rate Note
ANNEX A Form of Pledge Agreement
INDENTURE dated as of March 1, 2000, between
CK Witco Corporation, a Delaware corporation (the "Company"), and
Citibank, N.A., a national banking association duly organized and
existing under the laws of the United States (the "Trustee").
Each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders
of the Company's Floating Rate Notes due 2001 (the "Securities").
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Accounts Receivable Subsidiary" means a Subsidiary of
the Company (i) which is formed solely for the purpose of, and
which engages in no activities other than activities in
connection with, financing accounts receivable and/or notes
receivable and related assets of the Company and/or its
Restricted Subsidiaries, (ii) which is designated by the Board of
Directors as an Accounts Receivables Subsidiary pursuant to a
resolution set forth in an Officers' Certificate and delivered to
the Trustee, (iii) that has total assets at the time of such
designation with a book value not exceeding $100,000 plus the
reasonable fees and expenses required to establish such Accounts
Receivable Subsidiary and any accounts receivable financing, (iv)
no portion of Indebtedness or any other obligation (contingent or
otherwise) of which (a) is at any time recourse to or obligates
the Company or any Restricted Subsidiary of the Company in any
way, other than pursuant to (I) representations, warranties,
covenants and indemnities entered into in the ordinary course of
business in connection with the sale of accounts receivable
and/or notes receivable to such Accounts Receivable Subsidiary or
(II) any guarantee of any such accounts receivable financing by a
Restricted Subsidiary that is permitted to be incurred pursuant
to the covenant described in Section 3.6(a), or (b) subjects any
property or asset of the Company or any Restricted Subsidiary of
the Company, directly or indirectly, contingently or otherwise,
to the satisfaction thereof, other than pursuant to (I)
representations, warranties, covenants and indemnities entered
into in the ordinary course of business in connection with sales
of accounts receivables and/or notes receivable or (II) any
guarantee of any such accounts receivable financing by a
Restricted Subsidiary that is permitted to be incurred pursuant
to Section 3.6(a), (v) with which neither the Company nor any
Restricted Subsidiary of the Company has any contract, agreement,
arrangement or understanding other than contracts, agreements,
arrangements or understandings entered into the ordinary course
of business in connection with sales of accounts receivable
and/or notes receivable in accordance with Section 3.7 and fees
payable in the ordinary course of business in connection with
servicing accounts receivable and/or notes receivable and (vi)
with respect to which neither the Company nor any Restricted
Subsidiary of the Company has any obligation (a) to subscribe for
additional shares of Capital Stock or other Equity Interests
therein or make any additional capital contribution or similar
payment or transfer thereto other than in connection with the
sale of accounts receivable and/or notes receivable to such
Accounts Receivable Subsidiary in accordance with Section 3.7 or
(b) to maintain or preserve solvency or any balance sheet item,
financial condition, level of income or results of operations
thereof.
"Acquired Indebtedness" means Subsidiary Indebtedness
(other than Permitted Subsidiary Indebtedness) of a Person:
(1) existing at the time such Person becomes a
Restricted Subsidiary, or
(2) assumed in connection with the acquisition of
assets by such Person,
in each case, other than Subsidiary Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary or such acquisition, as the case may be.
"Affiliate" of any specified Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct
the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Attributable Debt" means, as to any particular lease
relating to a sale and leaseback transaction of a Principal
Property under which any Person is at the time liable, at any
date as of which the amount thereof is to be determined, the
total net amount of rent (discounted from the respective due
dates thereof at the interest rate from time to time being used
by the Company to determine its liability in respect of
capitalized leases) required to be paid by such Person under such
lease during the remaining term thereof. The net amount of rent
required to be paid under any such lease for any such period
shall be the total amount of the rent payable by the lessee with
respect to such period, but may exclude amounts required to be
paid on account of maintenance and repairs, insurance, taxes,
assessments, utilities, operating and labor costs and similar
charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount of rent
shall also include the amount of such penalty, but no rent shall
be considered as required to be paid under such lease subsequent
to the first date upon
which it may be so terminated.
"Board of Directors" means the Board of Directors of
the Company or any committee thereof duly authorized to act on
behalf of such Board of Directors with respect to the relevant
matter.
"Business Day" means any day except a Saturday, Sunday
or a legal holiday in The City of New York on which banking
institutions are authorized or required by law, regulation or
executive order to close and that is also a London business day.
"London business day" means any day on which dealings in U.S.
dollars are transacted in the London interbank market.
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease
for financial reporting purposes in accordance with generally
accepted accounting principles, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of
such obligation determined in accordance with generally accepted
accounting principles; and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible into such equity.
"Cash Equivalents" means (i) United States dollars,
(ii) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or
instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having
maturities of not more than six months from the date of
acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of
$500 million, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described
in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poors
Corporation and in each case maturing within six months after the
date of acquisition and (vi) money market funds at least 95% of
the assets of which constitute Cash Equivalents of the kinds
described in this definition.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Company" means CK Witco Corporation until a successor
replaces it and, thereafter, means such successor.
"Consolidated Net Tangible Assets" means total
consolidated assets of the Company and its Subsidiaries, less the
following:
(1) current liabilities of the Company and its
Subsidiaries;
(2) all depreciation and valuation reserves and all
other reserves (except (a) reserves for contingencies which have
not been allocated to any particular purpose, and (b) deferred
credits, including deferred federal and foreign income taxes and
deferred investment tax credits) of the Company and its
Subsidiaries;
(3) the net book amount of all intangible assets of the
Company and its Subsidiaries, including the unamortized portions
of such items as goodwill, trademarks, trade names, patents and
debt discount and expense less debt premium; and
(4) appropriate adjustments on account of minority
interests of other Persons holding stock in Subsidiaries.
"Default" means any event or condition that is, or
after notice or passage of time or both would be, an Event of
Default.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable at the option of the holder) or upon the happening
of any event:
(1) matures or is mandatorily redeemable pursuant
to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of
the holder for Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased
upon the occurrence of certain events or otherwise, in whole or
in part;
in each case on or prior to the Stated Maturity of the
Securities.
"Depositary" means The Depository Trust Company, its
nominees and their respective successors and assigns, or such
other depository institution hereinafter appointed by the
Company.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Foreign Subsidiary" means any Subsidiary that is
formed under the laws of any jurisdiction outside of the
United States of America and its territories and possessions or
substantially all of the operating assets of which are located,
and substantially all of the business of which is carried on
outside the United States of America and its territories and
possessions, and includes any Subsidiary formed under the laws of
any State of the United States of America which is primarily
engaged in financing the operations of the Company or its
Subsidiaries, or both, outside the United States of America and
its territories and possessions.
"Guarantee" means the unconditional and unsubordinated
guarantee by the Guarantor of the due and punctual payment of
principal of and interest on the Securities when and as the same
shall become due and payable, whether at the Stated Maturity, by
acceleration, call for redemption or otherwise in accordance with
the terms of the Securities and this Indenture.
"Guarantor" means any Restricted Subsidiary, other than
Foreign Subsidiaries, that after the date of this Indenture
executes a guarantee of the Securities contemplated by Section
3.6 until a successor replaces such party pursuant to the
applicable provisions of this Indenture, or until otherwise
released in accordance with the terms of this Indenture.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect on the Issue Date,
including those set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and
computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.
"Hedging Obligations" means, with respect to any
Person, the obligations of such Person under (i) interest rate
swap agreements, interest rate cap agreements and interest rate
collar agreements or other agreements or arrangements designed to
protect such Person against fluctuations in interest rates and
(ii) foreign exchange contracts, currency swap agreements or
other similar agreements or arrangements designed to protect such
Person against fluctuations in currency exchange rates, in each
case provided that such obligations are entered into solely to
protect such Person against fluctuations in interest rates or
currency exchange rates and not for purposes of speculation.
"Holder" or "Securityholder" means the Person in whose
name a Security is registered in the Note Register.
"Indebtedness" means (i) all items of indebtedness or
liability (except capital and surplus) which in accordance with
GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet as at the date as of
which indebtedness is to be determined, (ii) indebtedness secured
by any Mortgage existing on property owned subject to such
Mortgage, whether or not the indebtedness secured thereby shall
have been assumed, provided that if such indebtedness shall not
have been assumed the amount of such obligation shall be deemed
to be the lesser of the value of such property or the amount of
the indebtedness so secured and (iii) guarantees, endorsements
(other than for purposes of collection) and other contingent
obligations in respect of, or to purchase or otherwise acquire,
indebtedness of others, unless the amount thereof is included in
indebtedness under the preceding clauses (i) or (ii).
"Indenture" means this Indenture as amended or
supplemented from time to time.
"Institutional Accredited Investor" means an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Issue Date" means the date on which the Securities are
originally issued.
"Maturity", when used with respect to any Security,
means the date on which the principal of such Security or an
installment of principal becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration
of acceleration, call for redemption or otherwise.
"Mortgage" means and includes any mortgage, pledge,
lien, security interest, conditional sale or other title
retention agreement or other similar encumbrance.
"Obligation" means any principal, interest, penalties,
fees, indemnifications, reimbursements, damages and other
liabilities and obligations payable under the documentation
governing any Indebtedness.
"Officer" means any of the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer and Principal Accounting
Officer any Vice President, the Treasurer, the Secretary or the
Controller of the Company.
"Officers' Certificate" means a certificate signed by
two or more Officers.
"Opinion of Counsel" means a written opinion from legal
counsel. The counsel may be an employee of or counsel to the
Company.
"Outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(1) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has
been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 7.1(c);
(4) Securities which have been paid pursuant to
Section 2.9 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory
to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice,
consent or waiver hereunder, (A) Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which a Trust Officer of the Trustee actually knows to
be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other
obligor.
"Permitted Subsidiary Indebtedness" means (i) any
Indebtedness existing on March 7, 2000; (ii) any Indebtedness
owed to the Company or a Restricted Subsidiary; (iii) any
Indebtedness secured by a Mortgage not prohibited by Section 3.3;
(iv) any Indebtedness incurred by any Restricted Subsidiary to
extend, refinance, renew or replace an equivalent or lesser
amount of Indebtedness of such Restricted Subsidiary referred to
in clause (i) above, including any premium, prepayment penalties
or fees or expenses incurred in connection therewith; (v)
Indebtedness incurred by an Accounts Receivables Subsidiary in
connection with a transaction pursuant to and in compliance with
Section 3.7 hereof; (vi) the guarantee by any Restricted
Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary that was permitted to be incurred by another provision
of this Indenture; (vii) the incurrence by the Restricted
Subsidiaries of Hedging Obligations incurred with respect to any
Indebtedness or Obligation that is permitted by the terms of this
Indenture to be outstanding; (viii) Indebtedness incurred by
Restricted Subsidiaries constituting reimbursement obligations
with respect to letters of credit issued in the ordinary course
of business, including letters of credit in respect of workers'
compensation claims or self-insurance, surety bonds or other
Indebtedness with respect to reimbursement type obligations
regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the incurrence of
such Indebtedness, such obligations are reimbursed within 30 days
following such drawing or incurrence; (ix) Indebtedness arising
from agreements of a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with
the disposition of any business, asset or Restricted Subsidiary,
other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such
acquisition; provided, however, that the maximum aggregate
liability of all such Indebtedness shall at no time exceed 50% of
the gross proceeds actually received in connection with such
disposition; (x) the incurrence of Indebtedness of Restricted
Subsidiaries (including letters of credit) in respect of
performance bonds, bankers' acceptances, letters of credit,
performance, bid, surety or appeal bonds or similar bonds and
completion guarantees provided by Restricted Subsidiaries in the
ordinary course of their business and consistent with past
practices and which do not secure other Indebtedness; (xi)
Indebtedness that constitutes an accrued expense or trade
payable; (xii) Indebtedness of a Restricted Subsidiary, to the
extent the net proceeds thereof are promptly deposited to defease
the Securities as described under Section 7.1; (xiii)
Indebtedness that constitutes a liability for federal, state,
local or other taxes and (xiv) Indebtedness that constitutes an
obligation to pay salary or benefits to officers, employees and
directors in the ordinary course of business.
"Person" means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 2.9 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Preferred Stock", as applied to the Capital Stock of
any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such
Person.
"Principal Property" means any manufacturing facility
located within the United States of America owned or leased by
the Company or any Subsidiary except (a) any such manufacturing
facility which the Board of Directors by resolution declares is
not of material importance to any business segment of the Company
or its Subsidiaries and (b) any such manufacturing facility that
has total assets of less than $25 million.
"QIB" means any "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act).
"Redemption Date" means the date fixed for the
redemption of any Security by or pursuant to this Indenture.
"Redemption Price" means the price at which any
Security is to be redeemed pursuant to this Indenture.
"Restricted Period" means the 40 consecutive days
beginning on and including the later of (A) the day on which the
Securities are offered to persons other than distributors (as
defined in Regulation S under the Securities Act) and (B) the
Issue Date.
"Restricted Securities Legend" has the meaning assigned
thereto in clause (A) of Section 2.1(c).
"Restricted Subsidiary" means any Subsidiary of the
Company that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Custodian" means the custodian with respect
to the Global Securities (as appointed by the Depositary), or any
successor Person thereto and shall initially be the Trustee.
"Stated Maturity", when used with respect to any
Security or any installment of principal thereof or interest
thereon, means the date specified in such Security as the fixed
date on which the principal of such Security or such installment
of principal or interest is due and payable.
"Subsidiary" means a corporation or other business
entity of which more than 50% of the outstanding voting share
capital or other voting ownership interests are owned, directly
or indirectly, by the Company or by one or more other
Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Subsidiary Indebtedness" means, with respect to any
Restricted Subsidiary on any date of determination (without
duplication):
(1) the principal in respect of (A) Indebtedness of
such Restricted Subsidiary for money borrowed and (B)
Indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Restricted
Subsidiary is responsible or liable, including, in each case, any
premium on such Indebtedness to the extent such premium has
become due and payable;
(2) all Capital Lease Obligations of such
Restricted Subsidiary and all Attributable Debt in respect of
sale and leaseback transactions entered into by such Restricted
Subsidiary;
(3) all obligations of such Restricted Subsidiary
issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Restricted Subsidiary and
all obligations of such Restricted Subsidiary under any title
retention agreement (but excluding trade accounts payable arising
in the ordinary course of business);
(4) all obligations of such Restricted Subsidiary
for the reimbursement of any obligor, other than the Company or a
Restricted Subsidiary, on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations
with respect to letters of credit securing obligations (other
than obligations described in clauses (1) through (3) above)
entered into in the ordinary course of business of the Company
and its Restricted Subsidiaries as a whole to the extent such
letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth
Business Day following payment on the letter of credit);
(5) the amount of all obligations of such
Restricted Subsidiary with respect to the redemption, repayment
or other repurchase of any Disqualified Stock or, with respect to
any Restricted Subsidiary thereof, the liquidation preference
with respect to any Preferred Stock (but excluding, in each case,
any accrued dividends);
(6) all obligations of the type referred to in
clauses (1) through (5) of other Persons (other than Restricted
Subsidiaries) and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise,
including by means of any guarantee; and
(7) all obligations of the type referred to in
clauses (1) through (6) of other Persons (other than the Company
and its Restricted Subsidiaries) secured by any Mortgage on any
property or asset of such Restricted Subsidiary (whether or not
such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured.
The amount of Subsidiary Indebtedness of any Restricted
Subsidiary at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such
date.
"TIA" or "Trust Indenture Act" means the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as
amended, as in effect on the date hereof.
"Trustee" means the party named as such in this
Indenture until a successor replaces it in accordance with the
applicable provisions of this Indenture and, thereafter, means
such successor.
"Trust Officer" any officer within the Global Agency &
Trust Services department of the Trustee, including any vice
president, assistant vice president, senior trust officer, trust
officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who
at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and who
shall have direct responsibility for the administration of this
Indenture.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time
of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Mortgage on any property of, the
Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided,
however, that the Subsidiary to be so designated has total assets
of $1,000 or less.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that
no Default shall result therefrom or shall have occurred and be
continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a
copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
SECTION 1.2. Other Definitions.
Term Defined in Section
"Agent Members" 2.1(d)
"Authenticating Agent" 2.2
"Company Order" 2.2
"Corporate Trust Office" 3.7
"Covenant Defeasance" 7.1(d)
"Defaulted Interest" 2.12
"Defeasance" 7.1(c)
"Definitive Securities" 2.1(e)
"Event of Default" 5.1
"Financier" 3.7
"Foreign Restricted Subsidiary" 3.6(a)
"Foreign Stock Pledge" 3.6(a)
"Global Securities" 2.1(a)
"IAI Global Note" 2.1(a)
"IAI Notes" 2.1(a)
"legal defeasance option" 7.1(b)
"Note Register" 2.3
"Promissory Note" 3.7
"Purchase Agreement 2.1(a)
"Registrar" 2.3
"Regulation S" 2.1(a)
"Regulation S Note" 2.1(a)
"Regulation S Global Note" 2.1(a)
"Resale Restriction Termination Date" 2.1(a)
"Rule 144A" 2.1(a)
"Securities" Preamble
"Special Record Date" 2.12(a)
"U.S. Governmental Obligations" 7.2
SECTION 1.3. Rules of Construction. Unless the
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words
in the plural include the singular; and
(6) the principal amount of any noninterest bearing or
other discount security at any date shall be the principal amount
thereof that would be shown on a balance sheet of the issuer
dated such date prepared in accordance with GAAP.
ARTICLE II
The Securities
SECTION 2.1. Form, Dating and Terms. (a) The
Securities are being offered and sold by the Company pursuant to
a Purchase Agreement, dated March 2, 2000, among the Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO
Incorporated, Banc of America Securities LLC, Chase Securities
Inc., Deutsche Bank Securities Inc., Goldman Sachs and Co., and
Salomon Smith Barney Inc. (the "Purchase Agreement").
Securities offered and sold to QIBs pursuant to Rule
144A under the Securities Act ("Rule 144A") in the United States
of America (the "Rule 144A Note") will be issued on the Issue
Date in the form of a single, permanent global Security in
definitive, fully registered book-entry form substantially in the
form of Exhibit A, which is hereby incorporated by reference and
expressly made a part of this Indenture (the "Rule 144A Global
Note"), registered in the name of a nominee of the Depositary,
deposited on behalf of the purchasers of the Securities
represented thereby with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Rule 144A Global Note may
be represented by more than one certificate, if so required by
the Depositary's rules regarding the maximum principal amount to
be represented by a single certificate. The aggregate principal
amount of the Rule 144A Global Note may from time to time be
increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Securities offered and sold outside the United States
of America (the "Regulation S Note") in reliance on Regulation S
under the Securities Act ("Regulation S") shall be issued in the
form of a single, permanent global Security in definitive, fully
registered book-entry form substantially in the form of Exhibit A
(the "Regulation S Global Note") registered in the name of Cede &
Co., as nominee of the Depositary, deposited on behalf of the
purchasers of the Securities represented thereby with the
Trustee, as custodian for the Depositary, for credit to the
respective accounts of the purchasers (or to such other accounts
as they may direct) at Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System, or
Clearstream Banking, societe anonyme, duly executed by the
Company and authenticated by the Trustee as hereinafter provided.
The Regulation S Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding
the maximum principal amount to be represented by a single
certificate. The aggregate principal amount of the Regulation S
Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Securities resold to Institutional Accredited Investors
in the United States of America (the "IAI Note") will be issued
in the form of a single, permanent global Security in definitive,
fully registered book-entry form substantially in the form of
Exhibit A (the "IAI Global Note") registered in the name of a
nominee of the Depositary deposited on behalf of the purchasers
of the Securities represented thereby with the Trustee, as
custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The IAI
Global Note may be represented by more than one certificate, if
so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate. The
aggregate principal amount of the IAI Global Note may from time
to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its
nominee, as hereinafter provided.
The Rule 144A Global Note, the Regulation S Global Note
and the IAI Global Note are sometimes collectively herein
referred to as the "Global Securities."
The principal of (premium, if any) and interest on the
Securities shall be payable at the office or agency of the
Company maintained for such purpose in The City of New York, or
at such other office or agency of the Company as may be
maintained for such purpose pursuant to Section 2.3.
The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage, in
addition to those set forth on Exhibits A. The Company and the
Trustee shall approve the forms of the Securities and any
notation, endorsement or legend on them. Each Security shall be
dated the date of its authentication. The terms of the
Securities set forth in Exhibit A are part of the terms of this
Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture,
expressly agree to be bound by such terms.
(b) Denominations. The Securities shall be issuable
only in fully registered form, without coupons, and only in
denominations of $1,000 and any integral multiple thereof.
(c) Restrictive Legends. The Securities shall bear
the following legend (the "Restricted Securities Legend") on the
face thereof:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF (I) EXCEPT IN COMPLIANCE WITH THE TERMS OF
THE INDENTURE AND (II) IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
RULE 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO
(X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME
AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT, OR ANY
SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE
LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY)
AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR", IN EITHER CASE IN A MINIMUM
PRINCIPAL AMOUNT OF SECURITIES OF $250,000 OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSE (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT."
(B) All Global Securities shall bear the following
legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF."
(d) Book-Entry Provisions. (i) This Section 2.1(d)
shall apply only to Global Securities deposited with the Trustee,
as custodian for the Depositary.
(ii) Each Global Security initially shall (x) be
registered in the name of the Depositary for such Global Security
or the nominee of such Depositary, (y) be delivered to the
Trustee as custodian for such Depositary and (z) bear legends as
set forth in Section 2.1(c).
(iii) Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Indenture with
respect to any Global Security held on their behalf by the
Depositary or by the Trustee as the custodian of the Depositary
or under such Global Security, and the Depositary may be treated
by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of the Depositary
governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(iv) In connection with any transfer of a portion of
the beneficial interest in a Global Security pursuant to clause
(e) of this Section to beneficial owners who are required to hold
Definitive Securities (as defined below), the Security Custodian
shall reflect on its books and records the date and a decrease in
the principal amount of such Global Security in an amount equal
to the principal amount of the beneficial interest in the Global
Security to be transferred, and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more
Definitive Securities of like tenor and amount.
(v) In connection with the transfer of an entire
Global Security to beneficial owners pursuant to clause (e) of
this Section, such Global Security shall be deemed to be
surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange
for its beneficial interest in such Global Security, an equal
aggregate principal amount of Definitive Securities of authorized
denominations.
(e) Definitive Securities. Except as provided below,
owners of beneficial interests in Global Securities will not be
entitled to receive certificated Securities ("Definitive
Securities"). If required to do so pursuant to any applicable
law or regulation, beneficial owners may obtain Definitive
Securities in exchange for their beneficial interests in a Global
Security upon written request in accordance with the Depositary's
and the Registrar's procedures. In addition, Definitive
Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in a Global Security if
(i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Security or the
Depositary ceases to be a "Clearing Agency" registered under the
Exchange Act, at a time when the Depositary is required to be so
registered in order to act as Depositary, and in each case a
successor depositary is not appointed by the Company within 40
days of such notice or (ii) an Event of Default has occurred and
is continuing and the Registrar has received a request from the
Depositary.
(f) Any Definitive Security delivered in exchange for
an interest in a Global Security pursuant to Section 2.1(d)(iv)
and (v) shall, except as otherwise provided by paragraph (d) of
Section 2.6, bear the applicable legend regarding transfer
restrictions applicable to the Definitive Security set forth in
Section 2.1(c) and be subject to the applicable certification
requirements set forth in this Indenture.
(g) The registered holder of a Global Security may
grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take
under this Indenture or the Securities.
SECTION 2.2. Execution and Authentication. Two
Officers shall sign the Securities for the Company by manual or
facsimile signature. If an Officer whose signature is on a
Security no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized
signatory of the Trustee manually authenticates the Security.
The signature of the Trustee on a Security shall be conclusive
evidence that such Security has been duly and validly
authenticated and issued under this Indenture.
At any time and from time to time after the execution
and delivery of this Indenture, the Trustee shall authenticate
and make available for delivery Securities for original issue in
an aggregate principal amount of $25 million upon a written order
of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company
(the "Company Order"). Such Company Order shall specify the
amount of the Securities to be authenticated and the date on
which the original issue of Securities is to be authenticated.
The aggregate principal amount of Securities Outstanding at any
time may not exceed $25 million, except as provided in
Section 2.9.
The Trustee may appoint an agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate the
Securities. Unless limited by the terms of such appointment, any
such Authenticating Agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
agent.
In case the Company, pursuant to Article IV, shall be
consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise dispose of its properties
and assets substantially as an entirety to any Person, and the
successor Person resulting from such consolidation, or surviving
such merger, or into which the Company shall have been merged, or
the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to
Article IV, any of the Securities authenticated or delivered
prior to such consolidation, merger, conveyance, transfer, lease
or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Securities executed
in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon
Company Order of the successor Person, shall authenticate and
deliver Securities as specified in such order for the purpose of
such exchange. If Securities shall at any time be authenticated
and delivered in any new name of a successor Person pursuant to
this Section 2.2 in exchange or substitution for or upon
registration of transfer of any Securities, such successor
Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such
new name.
SECTION 2.3. Registrar and Paying Agent. The Company
shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the
"Registrar") and an office or agency where Securities may be
presented for payment (the "Paying Agent"). The Company shall
cause each of the Registrar and the Paying Agent to maintain an
office or agency in the Borough of Manhattan, The City of New
York. The Registrar shall keep a register of the Securities and
of their transfer and exchange (the "Note Register"). The
Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any
additional paying agent.
The Company shall enter into an appropriate agency
agreement with any Registrar, Paying Agent or co-registrar not a
party to the Indenture. The agreement shall implement the
provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee in writing of the name and
address of each such agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant
to Section 6.7. The Company or any of its domestically
incorporated Subsidiaries may act as Paying Agent, Registrar, co-
registrar or transfer agent.
The Company initially appoints the Trustee as Registrar
and Paying Agent for the Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. At
or prior to 10:00 a.m (New York City time) on the date on which
any principal of, premium, if any, or interest on any Security is
due and payable, the Company shall deposit with the Paying Agent
a sum sufficient to pay such principal, premium, if any, or
interest when due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that such Paying
Agent shall hold in trust for the benefit of the Securityholders
or the Trustee all money held by such Paying Agent for the
payment of principal of or interest on the Securities and shall
notify the Trustee of any default by the Company in making any
such payment. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate the money held by it as Paying Agent
and hold it as a separate trust fund. The Company at any time
may require a Paying Agent (other than the Trustee) to pay all
money held by it to the Trustee and to account for any funds
disbursed by such Paying Agent. Upon complying with this
Section, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money
delivered to the Trustee. Upon any bankruptcy, reorganization or
similar proceeding with respect to the Company, the Trustee shall
serve as Paying Agent for the Securities.
SECTION 2.5. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the
names and addresses of Securityholders.
SECTION 2.6. Transfer and Exchange. (a) The transfer
and exchange of Global Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this
Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depositary
therefor.
A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with
the Depositary's procedures containing information regarding the
participant account of the Depositary to be credited with a
beneficial interest in the Global Security and such account shall
be credited in accordance with such order with a beneficial
interest in the Global Security and the account of the Person
making the transfer shall be debited by an amount equal to the
beneficial interest in the Global Security being transferred.
If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in
another Global Security, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of
the Global Security to which such interest is being transferred
in an amount equal to the principal amount of the interest to be
so transferred, and the Registrar shall reflect on its books and
records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being
transferred.
(b) The following provisions shall apply with respect
to any proposed transfer of a Rule 144A Note or an IAI Note prior
to the date which is two years after the later of the date of
original issue and the last date on which the Company or any
Affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date"):
(i) a transfer of a Rule 144A Note or an IAI Note or a
beneficial interest therein to a QIB shall be made upon the
representation of the transferee that it is purchasing the
Security for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such
account is a QIB, and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying
upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A;
(ii) a transfer of a Rule 144A Note or an IAI Note or a
beneficial interest therein to an Institutional Accredited
Investor shall be made upon receipt by the Trustee or its agent
of a certificate substantially in the form set forth in
Section 2.7 hereof from the proposed transferee and, if requested
by the Company, the delivery of an opinion of counsel,
certifications and/or other information satisfactory to each of
them; and
(iii) a transfer of a Rule 144A Note or an IAI Note or
a beneficial interest therein to a non U.S. Person shall be made
upon receipt by the Trustee or its agent of a certificate
substantially in the form set forth in Section 2.7 hereof from
the proposed transferee and, if requested by the Company, the
delivery of an opinion of counsel, certification and/or other
information satisfactory to each of them.
(c) The following provisions shall apply with respect
to any proposed transfer of a Regulation S Note prior to the
expiration of the Restricted Period:
(i) a transfer of a Regulation S Note or a beneficial
interest therein to a QIB shall be made upon the representation
of the transferee that it is purchasing the Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB,
and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A;
(ii) a transfer of a Regulation S Note or a beneficial
interest therein to an Institutional Accredited Investor shall be
made upon receipt by the Trustee or its agent of a certificate
substantially in the form set forth in Section 2.7 hereof from
the proposed transferee and, if requested by the Company, the
delivery of an opinion of counsel, certification and/or other
information satisfactory to each of them; and
(iii) a transfer of a Regulation S Note or a beneficial
interest therein to a non-U.S. Person shall be made upon receipt
by the Trustee or its agent of a certificate substantially in the
form set forth in Section 2.8 hereof from the proposed transferee
and, if requested by the Company, receipt by the Trustee or its
agent of an opinion of counsel, certification and/or other
information satisfactory to each of them.
After the expiration of the Restricted Period,
interests in a Regulation S Note may be transferred without
requiring certification set forth in Section 2.8 or any
additional certification.
(d) Restricted Securities Legend. Upon the transfer,
exchange or replacement of Securities not bearing a Restricted
Securities Legend, the Registrar shall deliver Securities that do
not bear a Restricted Securities Legend. Upon the transfer,
exchange or replacement of Securities bearing the Restricted
Securities Legend, the Registrar shall deliver only Securities
that bear such Restricted Securities Legend unless there is
delivered to the Registrar an Opinion of Counsel to the effect
that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions
of the Securities Act.
(e) The Security Registrar shall retain copies of all
letters, notices and other written communications received
pursuant to Section 2.1 or this Section 2.6. The Company shall
have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Security
Registrar.
(f) Obligations with Respect to Transfers and
Exchanges of Securities. (i) To permit registrations of
transfers and exchanges, the Company shall, subject to the other
terms and conditions of this Article II, execute and the Trustee
shall authenticate Definitive Securities and Global Securities at
the Registrar's or co-registrar's request.
(ii) No service charge shall be made to a Holder for
any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charges payable upon exchange or transfer pursuant
to Section 8.4).
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of any Security
for a period beginning (1) 15 Business Days before the mailing of
a notice of an offer to repurchase Securities and ending at the
close of business on the day of such mailing or (2) 15 Business
Days before an interest payment date and ending on such interest
payment date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the
Person in whose name a Security is registered as the absolute
owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar
or any co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture shall evidence
the same debt and shall be entitled to the same benefits under
this Indenture as the Securities surrendered upon such transfer
or exchange.
(g) No Obligation of the Trustee. (i) The Trustee
shall have no responsibility or obligation to any beneficial
owner of a Global Security, a member of, or a participant in, the
Depositary or other Person with respect to the accuracy of the
records of the Depositary or its nominee or of any participant or
member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the
Depositary) of any notice or the payment of any amount or
delivery of any Securities (or other security or property) under
or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be
made to Holders in respect of the Securities shall be given or
made only to or upon the order of the registered Holders (which
shall be the Depositary or its nominee in the case of a Global
Security). The rights of beneficial owners in any Global
Security shall be exercised only through the Depositary subject
to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in
any Security (including any transfers between or among Depositary
participants, members or beneficial owners in any Global
Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and
to do so if and when expressly required by, the terms of this
Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
SECTION 2.7. Form of Certificate to be Delivered in
Connection with Transfers to Institutional Accredited Investors.
[Date]
Citibank, N.A
111 Wall Street, 5th Floor
New York, NY 10005
Attention: Global Agency & Trust Services
Re: CK Witco Corporation
Floating Rate Notes due 2001
Ladies and Gentlemen:
This certificate is delivered to request a transfer of
$ aggregate principal amount of the Floating Rate Notes
due 2001 (the "Securities") of CK Witco Corporation (the
"Company").
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act of 1933, as amended (the "Securities Act")) purchasing for
our own account or for the account of such an institutional
"accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view
to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risk of our investment in the
Securities and we invest in or purchase securities similar to the
Securities in the normal course of our business. We and any
accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Securities have not been
registered under the Securities Act and, unless so registered,
may not be sold except as permitted in the following sentence.
We agree on our own behalf and on behalf of any investor account
for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two
years after the later of the date of original issue and the last
date on which the Company or any Affiliate of the Company was the
owner of such Securities (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the
Securities are eligible for resale pursuant to Rule 144A, to a
person we reasonably believe is a qualified institutional buyer
under Rule 144A (a "QIB") that purchases for its own account or
for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an
institutional "accredited investor," in either case in a minimum
principal amount of Securities of $250,000 or (f) pursuant to any
other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any
requirement of law that the disposition of our property or the
property of such investor account or accounts be at all times
within our or their control and in compliance with any applicable
state securities laws. The foregoing restrictions on resale will
not apply subsequent to the Resale Restriction Termination Date.
If any resale or other transfer of the Securities is proposed to
be made pursuant to clause (c), (d) or (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver
a letter from the transferee substantially in the form of this
letter to the Company and the Trustee, which shall provide, among
other things, that the transferee is an institutional "accredited
investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) and that it is acquiring such
Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges
that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Termination
Date of the Securities pursuant to clauses (d), (e) or (f) above
to require the delivery of an opinion of counsel, certifications
and/or other information satisfactory to the Company and the
Trustee.
TRANSFEREE:
BY
SECTION 2.8. Form of Certificate to be Delivered in
Connection with Transfers Pursuant to Regulation S.
[Date]
Citibank, N.A.
111 Wall Street, 5th Floor
New York, NY 10005
Attention: Global Agency & Trust Services
Re: CK Witco Corporation
Floating Rate Notes due 2001 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________
aggregate principal amount of the Securities, we confirm that
such sale has been effected pursuant to and in accordance with
Regulation S under the United States Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent
that:
(a) the offer of the Securities was not made to a
person in the United States;
(b) either (i) at the time the buy order was
originated, the transferee was outside the United States or we
and any person acting on our behalf reasonably believed that the
transferee was outside the United States or (ii) the transaction
was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged
with a buyer in the United States;
(c) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b)
or Rule 904(b) of Regulation S, as applicable; and
(d) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________ ____________________
Authorized Signature Signature Medallion
Guaranteed
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen
Securities. If a mutilated Security is surrendered to the
Registrar or if the Holder of a Security claims that the Security
has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Security
if the requirements of Section 8-405 of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the
Company, such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company and the Trustee to protect the
Company, the Trustee, the Paying Agent, the Registrar and any co-
registrar from any loss that any of them may suffer if a Security
is replaced, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the
Trustee shall authenticate and deliver, in exchange for any such
mutilated Security or in lieu of any such destroyed, lost or
stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees
and expenses of the Trustee) in connection therewith.
Every new Security issued pursuant to this Section in
lieu of any mutilated, destroyed, lost or stolen Security shall
constitute an original additional contractual obligation of the
Company and any other obligor upon the Securities, whether or not
the mutilated, destroyed, lost or stolen Security shall be at any
time enforceable by anyone, and shall be entitled to all benefits
of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 2.10. Temporary Securities. Until Definitive
Securities are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive
Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be
exchangeable for Definitive Securities upon surrender of the
temporary Securities at any office or agency maintained by the
Company for that purpose and such exchange shall be without
charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute, and the
Trustee shall authenticate and make available for delivery in
exchange therefor, one or more Definitive Securities representing
an equal principal amount of Securities. Until so exchanged, the
Holder of temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as a holder of
Definitive Securities.
SECTION 2.11. Cancellation. The Company at any time
may deliver Securities to the Trustee for cancellation. The
Registrar and the Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel
and return to the Company all Securities surrendered for
registration of transfer, exchange, payment or cancellation by
delivering a certificate of such destruction to the Company. The
Company may not issue new Securities to replace Securities it has
paid or delivered to the Trustee for cancellation.
SECTION 2.12. Payment of Interest; Defaulted Interest.
Interest on any Security which is payable, and is punctually paid
or duly provided for, on any interest payment date shall be paid
to the Person in whose name such Security (or one or more
predecessor Securities) is registered at the close of business on
the regular record date for such interest at the office or agency
of the Company maintained for such purpose pursuant to
Section 2.3.
Any interest on any Security which is payable, but is
not paid when the same becomes due and payable and such
nonpayment continues for a period of 30 days shall forthwith
cease to be payable to the Holder on the regular record date by
virtue of having been such Holder, and such defaulted interest
and (to the extent lawful) interest on such defaulted interest at
the rate borne by the Securities (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest")
shall be paid by the Company, at its election in each case, as
provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities
(or their respective predecessor Securities) are registered at
the close of business on a Special Record Date (as defined below)
for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date (not less than 30 days after such
notice) of the proposed payment (the "Special Interest Payment
Date"), and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior
to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a record date (the "Special Record Date") for
the payment of such Defaulted Interest which shall be not more
than 15 days and not less than 10 days prior to the Special
Interest Payment Date and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record
Date, and in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date and Special Interest Payment Date
therefor to be given in the manner provided for in Section 10.1,
not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the
Special Record Date and Special Interest Payment Date therefor
having been so given, such Defaulted Interest shall be paid on
the Special Interest Payment Date to the Persons in whose names
the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following
clause (b).
(b) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities
may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of
the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section,
each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
SECTION 2.13. CUSIP Numbers. The Company in issuing
the Securities may use "CUSIP" numbers (if then generally in
use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that
any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the
Securities or as contained in any notice of a redemption and
their reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the
"CUSIP" numbers.
ARTICLE III
Covenants
SECTION 3.1. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities and in
this Indenture. Principal and interest shall be considered paid
on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money sufficient to pay
all principal and interest then due and the Trustee or the Paying
Agent, as the case may be, is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms
of this Indenture.
The Company shall pay interest on overdue principal at
the rate specified therefor in the Securities, and it shall pay
interest on overdue installments of interest at the same rate to
the extent lawful.
Notwithstanding anything to the contrary contained in
this Indenture, the Company may, to the extent it is required to
do so by law, deduct or withhold income or other similar taxes
imposed by the United States of America from principal or
interest payments hereunder.
SECTION 3.2. Reports by the Company. The Company
shall file with the Trustee and the SEC and transmit to
Securityholders, such information, documents and other reports
(including annual and quarterly reports); provided that any such
information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within 15 days after the same is
so required to be filed with the SEC. Delivery of such reports,
information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained
therein, including the Company's compliance with any of its
covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates).
SECTION 3.3. Limitation on Mortgages. The Company
will not create or assume and will not permit any Restricted
Subsidiary other than a Foreign Subsidiary to create or assume
any Mortgage of or upon any of its Principal Properties now owned
or hereafter acquired, of or upon any income or profits
therefrom, without making effective provision, and the Company
covenants that in any such case it will make or cause to be made
effective provision, whereby the Securities shall be secured by
such Mortgage equally and ratably with any and all other
obligations and Indebtedness thereby secured, or shall be secured
by a senior Mortgage, so long as any such other obligations and
Indebtedness shall be so secured; provided that the foregoing
covenant shall not apply to any of the following:
(1) The creation of any Mortgage on any property
hereafter acquired by the Company or any Restricted Subsidiary,
contemporaneously with such acquisition or within 270 days
thereafter, to secure or provide for the payment of any part of
the purchase price of such property, or the assumption by the
Company or any Restricted Subsidiary of any Mortgage upon any
property hereafter acquired by the Company or any Restricted
Subsidiary existing at the time of such acquisition, provided
that the principal amount of any Indebtedness secured by any such
Mortgage created or assumed shall not exceed the cost to the
Company or Restricted Subsidiary, as the case may be, of the
property covered by such Mortgage (including, in the case of the
assumption of such Mortgage, the principal amount of the
Indebtedness secured thereby), or the fair value (if and as
determined by the Board of Directors) of such property at the
time the Mortgage is created or assumed, whichever shall be less.
(2) Any Mortgage on any property acquired by the
Company or any Restricted Subsidiary existing at the time of such
acquisition and any Mortgage executed by any corporation or other
entity acquired by the Company or any Restricted Subsidiary and
exclusively securing any Indebtedness in a principal amount
existing at the time of such acquisition, and, in each case, not
assumed by the Company or any Restricted Subsidiary.
(3) Any Mortgage executed (i) by any Restricted
Subsidiary and exclusively securing any Indebtedness incurred by
such Restricted Subsidiary to the Company or to one or more other
Restricted Subsidiaries or (ii) by the Company and exclusively
securing any Indebtedness incurred by the Company to any
Restricted Subsidiary.
(4) The creation of one or more Mortgages for the sole
purpose of extending, renewing, refinancing or refunding in whole
or in part one or more of the Mortgages referred to in
clauses (1), (2), or (3) of this Section or one or more of the
Mortgages existing on March 7, 2000 on any assets of the Company
or a Restricted Subsidiary or one or more Mortgages permitted by
this paragraph 4; provided that the aggregate principal amount of
Indebtedness secured by any such extension, renewal, refinancing
or refunding Mortgage shall not exceed the aggregate amount of
Indebtedness secured by the Mortgage or Mortgages being extended,
renewed, refinanced or refunded at the time of such extension,
renewal, refinancing or refunding and that such extending,
renewing, refinancing or refunding Mortgage shall be limited to
(A) all or any part of the same property (and improvements
thereon) which secured the Mortgage extended, renewed, refinanced
or refunded or (B) in the case of a simultaneous extension,
renewal, refinancing or refunding of one or more Mortgages on
contiguous property (and improvements thereon), all or any part
of the same contiguous property which secured the Mortgage
extended, renewed, refinanced or refunded; and provided further
that in the case of any extension, renewal, refinancing or
refunding of a Mortgage of the type referred to in clause (3) or
this clause, neither the Company nor any Restricted Subsidiary
(other than the Restricted Subsidiary whose property is subject
thereto) that has not theretofore assumed the Indebtedness
secured thereby shall assume any Indebtedness secured by such
extending, renewing, refinancing or refunding Mortgage.
(5) Liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums
not yet due or being contested in good faith.
(6) Liens in favor of the United States of America, or
any State or subdivision thereof, or any other county or
subdivision thereof where the Company or any Restricted
Subsidiary may transact any of its business, or any governmental
agency, to the extent required in the ordinary course of
business.
(7) Liens for taxes or assessments or governmental
charges or levies, if such taxes, assessments, governmental
charges or levies shall not at the time be due and payable, or if
the same thereafter can be paid without penalty, or if the same
are being contested in good faith by appropriate proceedings.
(8) Pledges or deposits to secure payment of worker's
compensation or insurance premiums, or in connection with
tenders, bids or contracts (other than contracts for the payment
of money) or leases, deposits to secure surety, appeal or
performance bonds, pledges or deposits in connection with
contracts made with or at the request of the United States of
America or any State or any agency of the United States or any
such State, and pledges or deposits for purposes similar to any
of the above in the ordinary course of business.
(9) Liens created by or resulting from any litigation
or legal or administrative proceeding which at the time is
currently being contested in good faith by appropriate
proceedings.
(10) Leases made or existing (i) on property acquired
in the ordinary course of business or (ii) on individual
properties subject to the lease having a value of less than $1
million per property or $25 million in the aggregate.
(11) Landlords' liens on property held under lease.
(12) Liens incurred in the ordinary course of business
with respect to obligations that (i) are not incurred in
connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially
detract from the value of the property or materially impair the
use thereof in the operation of business by the Company or any of
its Restricted Subsidiaries.
(13) Liens with respect to Permitted Subsidiary
Indebtedness incurred pursuant to clauses (vii), (viii) and (x)
of the definition of Permitted Subsidiary Indebtedness.
(14) Any Mortgage securing Indebtedness, the net
proceeds of which are promptly deposited to defease the
Securities as described under Section 7.1.
(15) Any Mortgage created pursuant to and in compliance
with the provisions of Section 3.7.
Notwithstanding the foregoing provisions of this
Section, the Company or any Restricted Subsidiary may grant such
easements for ingress and egress over property owned by the
Company or such Restricted Subsidiary in favor of the United
States or any State, or any department, agency, instrumentality
or political subdivision of either, as is necessary to permit the
attachment or removal of any equipment or other property designed
primarily for the purpose of pollution control, solid waste and
waste water treatment and with respect to which the Company or
any Restricted Subsidiary may have granted a lien or transferred
title to such government or governmental agency pursuant to the
foregoing provisions of this Section or of Section 3.4 in
connection with the financing of such equipment or other
property; provided that any such lien on equipment or other
property designed primarily for the purpose of pollution control
shall not apply to any other property owned by the Company or any
Restricted Subsidiary and any such transfer of title to equipment
or other property designed primarily for the purpose of pollution
control shall not include transfer of title to any other property
owned by the Company or any Restricted Subsidiary.
The sale or other transfer of oil, gas or other
minerals in place for a period of time until, or in an amount
such that, the transferee will realize therefrom a specified
amount (however determined) of money for such minerals, or the
sale or other transfer of any other interest in property of the
character commonly referred to as a production payment shall not
be deemed to create, for purposes of this Section, any Mortgage
upon the assets of the Company or any Restricted Subsidiary.
If at any time the Company or any Restricted Subsidiary
shall create or assume any Mortgage not excepted from this
Section as above provided, and not exempted under Section 3.5,
the Company will promptly deliver to the Trustee (1) an Officers'
Certificate stating that the covenant of the Company contained in
the first paragraph of this Section has been complied with, and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, such covenant has been complied with and that any
instruments executed by the Company in performance of such
covenant comply with the requirements thereof.
In the event that the Company shall hereafter secure
the Securities equally and ratably with, or senior to, any other
obligation or Indebtedness pursuant to the provisions of this
Section, the Trustee is hereby authorized to enter into an
amendment to this Indenture or agreement supplemental hereto and
to take such action, if any, as it may deem advisable to enable
it to enforce effectively the rights of the Holders of the
Securities so secured equally and ratably with such other
obligation or Indebtedness. The Trustee shall be entitled to
receive, and subject to the provisions of Section 6.1 and Section
6.2 hereof, shall be fully protected in relying upon, an Opinion
of Counsel as conclusive evidence that any amendment hereto or
action taken equally and ratably to secure the Securities
complies with the provisions of this Section. In the event that
the Company or any Restricted Subsidiary shall be entitled in
accordance with the provisions of this Indenture to a release of
any Mortgage granted to secure the Securities, the Trustee is
hereby authorized to take such action and execute and deliver
such documents and instruments as the Company or such Restricted
Subsidiary may request to implement and evidence the release of
such Mortgage.
Subject to the provisions of Section 3.4, nothing
herein contained shall be deemed to prevent the Company or any
Restricted Subsidiary from selling any property with the
intention of taking back a lease of such property.
The covenant contained in this Section 3.3 is subject
to the provision for exempted Indebtedness in Section 3.5.
SECTION 3.4. Limitation on Sale and Leaseback
Transactions. The Company will not, nor will it permit any
Restricted Subsidiary, other than a Foreign Subsidiary, to enter
into any arrangement with any person providing for the leasing by
the Company or any Restricted Subsidiary of any Principal
Property (except for temporary leases of not more than three
years and except for leases between the Company and a Subsidiary
or between Subsidiaries), which property has been or is to be
sold or transferred by the Company or such Restricted Subsidiary
to such person unless either
(a) the Company or such Restricted Subsidiary would be
entitled pursuant to Section 3.3 to incur Indebtedness secured by
a Mortgage on the property to be leased equal in amount to the
Attributable Debt with respect to such sale and lease-back
transaction without equally and ratably securing the Securities;
or
(b) the Company shall apply an amount at least equal to
the net proceeds of such sale or transfer or the fair value as
determined by the Board of Directors of such property, whichever
is greater, to the redemption or retirement, within 120 days of
the effective date of any such arrangement of Indebtedness of the
Company which is not subordinate or junior in right of payment to
the Securities; provided, however, that in lieu of applying all
or any part of such amount to such redemption or retirement of
such Indebtedness, the Company may, within 75 days after such
sale voluntarily retire Indebtedness, excluding redemption and
retirement of Indebtedness pursuant to mandatory sinking fund or
mandatory prepayment provisions or by payment at maturity, and
thereby reduce the amount of cash which the Company shall be
required to apply to the redemption or retirement of Indebtedness
under this Section by an amount equal to the aggregate of the
principal amount of the Indebtedness, as the case may be, so
redeemed or retired.
The covenant contained in this Section is subject to
the provision for exempted Indebtedness in Section 3.5.
SECTION 3.5. Exempted Indebtedness. Notwithstanding
the provisions contained in Sections 3.3 and 3.4, the Company and
its Subsidiaries may, without securing any Securities, secure
obligations or Indebtedness which would otherwise be subject to
the limitations of Section 3.3 or may, without redeeming or
retiring Indebtedness, enter into sale and lease-back
transactions which would otherwise be subject to the limitations
of Section 3.4, or there may be a combination of such
transactions, if after giving effect to any such security
arrangements and any such sale and lease-back transactions the
sum (computed without double-counting) of (1) the aggregate
amount of all such obligations and Indebtedness then outstanding
the securing of which would otherwise have been prohibited at the
time the security was granted by the limitations of Section 3.3,
and (2) the aggregate amount of all Attributable Debt then
outstanding under all then existing leases under sale and lease-
back transactions which would otherwise be or have been
prohibited by the provisions of Section 3.4, does not at any such
time exceed 10% of Consolidated Net Tangible Assets.
SECTION 3.6. Limitation on Subsidiary Indebtedness.
(a) The Company will not cause or permit any
Restricted Subsidiary that is not a Foreign Subsidiary and is not
a Guarantor of the Securities, directly or indirectly, to create,
incur, assume, guarantee or otherwise in any manner become liable
for the payment of or otherwise incur (collectively, "incur") any
Subsidiary Indebtedness, including any Acquired Indebtedness but
excluding any Permitted Subsidiary Indebtedness, unless such
Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a Guarantee of the
Securities. The Company will not cause or permit any Restricted
Subsidiary that is a Foreign Subsidiary ("Foreign Restricted
Subsidiary"), the stock of which is not already pledged to secure
the Company's obligations with respect to the Securities,
directly or indirectly to incur any Subsidiary Indebtedness,
including any Acquired Indebtedness but excluding any Permitted
Subsidiary Indebtedness, unless 100% of the nonvoting stock and
65% of the voting stock of such Foreign Restricted Subsidiary is
pledged to secure the Company's obligations with respect to the
Securities and the Company executes a pledge agreement
substantially in the form of Annex I hereto (a "Foreign Stock
Pledge"). Notwithstanding the foregoing, any Restricted
Subsidiary may incur Subsidiary Indebtedness which would
otherwise be prohibited by the restrictions hereunder if
immediately thereafter, the sum (computed without
double-counting) of (i) all outstanding Subsidiary Indebtedness
(excluding Permitted Subsidiary Indebtedness), (ii) all
outstanding obligations or Indebtedness secured by Mortgages that
would be prohibited by Section 3.3 (without taking into account
Section 3.5) and (iii) all Attributable Debt relating to all then
existing leases under sale and lease-back transactions which
would have been prohibited by the provisions of Section 3.4
(without taking into account Section 3.5), does not at the time
of incurrence thereof exceed 10% of Consolidated Net Tangible
Assets.
(b) For purposes of determining compliance with
this covenant, in the event that an item of Indebtedness meets
the criteria of more than one of the categories of Permitted
Subsidiary Indebtedness described in the definition of Permitted
Subsidiary Indebtedness, the Company shall, in its sole
discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such
clauses. Accrual of interest and the accretion of accreted value
will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant.
(c) Notwithstanding anything foregoing to the
contrary, any Guarantee by a Restricted Subsidiary or a Foreign
Stock Pledge shall provide by its terms that it, and any liens
securing the same, shall be automatically and unconditionally
released and discharged upon:
(i) any sale or transfer to, or exchange with, any
Person of all of the Company's equity interests in, or all or
substantially all the assets of, such Restricted Subsidiary,
which transaction is in compliance with the terms of this
Indenture and such Restricted Subsidiary is released from all
guarantees, if any, by it of other Subsidiary Indebtedness of the
Company or any Restricted Subsidiaries,
(ii) the payment in full of all obligations under
the Subsidiary Indebtedness the incurrence of which required the
delivery of such Guarantee or a Foreign Stock Pledge if the
Restricted Subsidiary has no other outstanding Subsidiary
Indebtedness that would require the delivery of such Guarantee or
Foreign Stock Pledge,
(iii) with respect to Subsidiary Indebtedness
constituting guarantees of Indebtedness, the release by the
holders of such Indebtedness of the guarantee by such Restricted
Subsidiary, including any deemed release upon payment in full of
all obligations under such Indebtedness, at such time as
(A) no other Indebtedness, the incurrence of which
required the delivery of a Guarantee or a Foreign Stock Pledge,
constituting Subsidiary Indebtedness has been guaranteed by such
Restricted Subsidiary, or
(B) the holders of all such other Indebtedness
constituting Subsidiary Indebtedness which is guaranteed by such
Restricted Subsidiary, the incurrence of which required the
delivery of a Guarantee or a Foreign Stock Pledge, also release
the guarantee by such Restricted Subsidiary, including any deemed
release upon payment in full of all obligations under such
Indebtedness.
(d) For purposes of this Section 3.6, any Acquired
Indebtedness shall not be deemed to have been incurred until 270
days from the date:
(A) the Person obligated on such Acquired
Indebtedness becomes a Restricted Subsidiary or
(B) the acquisition of assets in connection with
which such Acquired Indebtedness was assumed is consummated.
(e) In the event that the Company or any Subsidiary
shall be entitled in accordance with the provisions of this
Indenture to a release of any Guarantee or a Foreign Stock Pledge
granted to secure the Securities, the Trustee is hereby
authorized to take such action and execute and deliver such
documents and instruments as the Company or such Subsidiary may
request to implement and evidence the release of such Guarantee
or a Foreign Stock Pledge.
SECTION 3.7. Sales of Accounts Receivable.
The Company may, and any of its Restricted Subsidiaries
may, sell at any time and from time to time, accounts receivable
and notes receivable and related assets to an Accounts Receivable
Subsidiary; provided that (i) the aggregate consideration
received in each such sale is at least equal to the aggregate
fair market value of the receivables sold, as determined by the
Board of Directors in good faith, (ii) no less than 80% of the
consideration received in each such sale consists of either cash
or a promissory note (a "Promissory Note") which is subordinated
to no Indebtedness or obligation (except that it may be
subordinated to the financial institutions or other entities
providing the financing to the Accounts Receivable Subsidiary
with respect to such accounts receivable (the "Financier")) or an
equity interest in such Accounts Receivable Subsidiary; provided,
further that the initial sale will include all accounts
receivable of the Company and/or its Restricted Subsidiaries that
are party to such arrangements that constitute eligible
receivables under such arrangements and (iii) the Company and its
Restricted Subsidiaries will sell all accounts receivable that
constitute eligible receivables under such arrangements to the
Accounts Receivable Subsidiary no less frequently than on a
monthly basis.
The Company (i) will not permit any Accounts Receivable
Subsidiary to sell any accounts receivable purchased from the
Company or any of its Restricted Subsidiaries to any other Person
except on an arm's length basis and solely for consideration in
the form of cash or Cash Equivalents; (ii) will not permit the
Accounts Receivable Subsidiary to engage in any business or
transaction other than the purchase, financing and sale of
accounts receivable of the Company and its Restricted
Subsidiaries and activities incidental thereto, (iii) will not
permit any Accounts Receivable Subsidiary to incur Indebtedness
in an amount in excess of the book value of such Accounts
Receivable Subsidiary's total assets, as determined in accordance
with generally accepted accounting principles and (iv) will, at
least as frequently as monthly, cause the Accounts Receivable
Subsidiary to remit to the Company as payment on the outstanding
balance of the Promissory Notes, all available cash or Cash
Equivalents not held in a collection account pledged to a
Financier, to the extent not applied to pay or maintain reserves
for reasonable operating expenses of the Accounts Receivable
Subsidiary or to satisfy reasonable minimum operating capital
requirements.
SECTION 3.8. Waiver of Certain Covenants. The
Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 3.3, 3.4, 3.5 and 3.6
if before the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities,
shall, by notice to the Trustee, either waive such compliance in
such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of
the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.
SECTION 3.9. Maintenance of Office or Agency. The
Company will maintain in The City of New York an office or agency
where the Securities may be presented or surrendered for payment,
where, if applicable, the Securities may be surrendered for
registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and
this Indenture may be served. The corporate trust office of the
Trustee, which initially shall be located at 111 Wall Street, 5th
Floor New York, N.Y. 10005 Attention: Global Agency & Trust
Services (the "Corporate Trust Office") shall be such office or
agency of the Company, unless the Company shall designate and
maintain some other office or agency for one or more of such
purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies (in or outside of The City of New
York) where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind any
such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New
York for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and
any change in the location of any such other office or agency.
SECTION 3.10. Money for Security Payments to be Held
in Trust. If the Company shall at any time act as its own Paying
Agent, it will, on or before each due date of the principal of
(or premium, if any) or interest on the Securities, segregate and
hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal of (and premium, if any) or
interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee in writing of its action or failure
to so act.
Whenever the Company shall have one or more Paying
Agents for the Securities, it will, on or before each due date of
the principal of (or premium, if any) or interest on any
Securities, deposit with any Paying Agent a sum in same day funds
(or New York Clearing House funds if such deposit is made prior
to the date on which such deposit is required to be made) that
shall be available to the Trustee by 10:00 a.m. New York City
time on such due date sufficient to pay the principal (and
premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee in
writing of such action or any failure to so act.
The Company will cause each Paying Agent (other than
the Trustee) to execute and deliver to the Trustee an instrument
in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on the Securities
in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(b) give the Trustee written notice of any default by
the Company (or any other obligor upon the Securities) in the
making of any payment of principal (and premium, if any) or
interest; and
(c) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay
to the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such sums.
Subject to any applicable abandoned property law, any
money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of
(or premium, if any) or interest on any Security and remaining
unclaimed for two years after such principal, premium or interest
has become due and payable shall be paid to the Company on
Company Order, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment to the Company,
may at the expense of the Company mail to the Holders of the
Securities as to which the money to be repaid was held in trust,
as their names and addresses appear in the Security Register, a
notice that such moneys remain unclaimed and that, after a date
specified in the notice, which shall not be less than 30 days
from the date on which the notice was first mailed to the Holders
of the Securities as to which the money to be repaid was held in
trust, any unclaimed balance of such moneys then remaining will
be paid to the Company free of the trust formerly impressed upon
it.
SECTION 3.11. Corporate Existence. Subject to Article
IV, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate
existence.
SECTION 3.12. Compliance Certificate. The Company
shall deliver to the Trustee within 120 days after the end of
each fiscal year of the Company an Officers' Certificate, one of
the signers of which shall be the principal executive, principal
financial or principal accounting officer of the Company, stating
that in the course of the performance by the signers of their
duties as Officers of the Company they would normally have
knowledge of any Default or Event of Default and whether or not
the signers know of any Default or Event or Default that occurred
during such period. If they do, the certificate shall describe
the Default or Event of Default, its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 3.13. Maintenance of Properties. The Company
will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its
business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 3.14. Payment of Taxes and Other Claims. The
Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes,
assessments and governmental charges levied or imposed upon the
Company or any Subsidiary or upon the income, profits or property
of the Company or any Subsidiary, and (2) all lawful claims for
labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate
proceedings.
SECTION 3.15 Statement by Officers as to Default.
The Company shall deliver to the Trustee, as soon as possible and
in any event within five days after the Company becomes aware of
the occurrence of any Event of Default or an event which, with
notice or the lapse of time or both, would constitute an Event of
Default, an Officers' Certificate setting forth the details of
such Event of Default or default and the action which the Company
proposes to take with respect thereto.
ARTICLE IV
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 4.1. Company May Consolidate, Etc., Only on
Certain Terms. The Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, and the
Company shall not permit any Person to consolidate with or merge
into the Company or convey, transfer or lease its properties and
assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge
into another Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, the Person
formed by such consolidation or into which the Company is merged
or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as
an entirety shall be a corporation, partnership, limited
liability company or trust, shall be organized and validly
existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly
assume, by an amendment to this Indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest
on all the Securities and the performance or observance of every
covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such transaction
and treating any indebtedness which becomes an obligation of the
Company or any Subsidiary as a result of such transaction as
having been incurred by the Company or such Subsidiary at the
time of such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing;
(3) if, as a result of any such consolidation or merger
or such conveyance, transfer or lease, properties or assets of
the Company would become subject to a mortgage, pledge, lien,
security interest or other encumbrance which would not be
permitted by this Indenture, the Company or such successor
Person, as the case may be, shall take such steps as shall be
necessary effectively to secure the Securities equally and
ratably with (or prior to) all indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease
and, if an indenture supplemental hereto is required in
connection with such transaction, such amendment complies with
this Article and that all conditions precedent herein provided
for relating to such transaction have been complied with.
SECTION 4.2. Successor Substituted. Upon any
consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety
in accordance with Section 4.1, the successor Person formed by
such consolidation or into which the Company is merged or to
which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect
as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor
Person shall be relieved of all obligations and covenants under
this Indenture and the Securities.
ARTICLE V
Defaults and Remedies
SECTION 5.1. Events of Default. "Event of Default",
whenever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body):
(1) default in any payment of any interest upon any
Security when it becomes due and payable, and continuance of such
default for a period of 30 days;
(2) default in the payment of the principal of or
premium, if any, on, or the redemption price of, any Security, at
its Maturity;
(3) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other than
a covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 10% in principal amount of the
Outstanding Securities, a written notice specifying such default
or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder;
(4) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or
under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company (including this
Indenture) with a principal amount then outstanding, individually
or in the aggregate, in excess of $25,000,000, whether such
indebtedness now exists or shall hereafter be created, which
default shall have resulted in such indebtedness becoming or
being declared due and payable prior to the date on which it
would otherwise have become due and payable, or which results
from the nonpayment of such indebtedness at its stated maturity,
without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled within a period of
10 days after there shall have been given, by registered or
certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 10% in principal
amount of the Outstanding Securities, a written notice specifying
such default and requiring the Company to cause such indebtedness
to be discharged or such acceleration to be rescinded or annulled
and stating that such notice is a "Notice of Default" hereunder;
(5) the entry by a court having jurisdiction in the
premises of (A) a decree or order for a relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company under any applicable Federal or
state law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the continuance
of any such decree or order for relief or any such other decree
or order in effect for a period of 60 consecutive days; and
(6) the commencement by the Company of a voluntary case
or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state
law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to
pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action.
The foregoing will constitute Events of Default
whatever the reason for any such Event of Default and whether it
is voluntary or involuntary or is effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body.
SECTION 5.2. Acceleration. If an Event of Default
with respect to the Outstanding Securities occurs and is
continuing, then in every such case the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding
Securities may declare the principal amount of all of the
Securities to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders),
and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable.
At any time after such a declaration of acceleration
has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount
of the Outstanding Securities, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee
a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities, which have become due otherwise than by such
declaration of acceleration and any interest thereon at the rate
or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default other than the non-payment of
the principal, which has become due solely by such declaration of
acceleration, have been cured or waived as provided in
Section 5.4.
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
SECTION 5.3. Other Remedies. If an Event of Default
occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of principal of or interest on any
Securities or to enforce the performance of any provision of any
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of them
in the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 5.4. Waiver of Past Defaults. The Holders of
a majority in principal amount of the Outstanding Securities, by
notice to the Trustee, may waive an existing Default or Event of
Default and its consequences except (i) a Default or Event of
Default in the payment of the principal of or any premium or
interest on a Security, or (ii) in respect of a covenant or
provision hereof which under Article VIII cannot be modified or
amended without the consent of each Securityholder affected.
When a Default or Event of Default is waived, it is deemed cured,
but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any consequent right.
SECTION 5.5. Control by Majority. The Holders of a
majority in principal amount of the Outstanding Securities may
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or
this Indenture; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action
under this Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such
action.
SECTION 5.6. Limitation on Suits. No Holder shall
have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment
of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity acceptable to the Trustee against the costs, expenses
and liabilities (including reasonable legal fees and expenses) to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding
Securities;
it being understood and intended that no one or more of such
Holders shall have any right in any manner whatsoever by virtue
of, or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other of such Holders, or
to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all of such Holders.
SECTION 5.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal of, premium (if
any) or interest on the Securities held by such Holder, on or
after the respective Stated Maturities expressed in such
Securities, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired
or affected without the consent of such Holder.
SECTION 5.8. Collection Suit by Trustee. The Company
covenants that if
(1) default is made in the payment of any interest on
any Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of
(or premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal and any premium
and interest and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal
and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 5.9. Trustee May File Proofs of Claim. In
case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its
creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and
any custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in
the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its
counsel, and any other amounts due the Trustee under Section 6.7.
No provision of this Indenture shall be deemed to
authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 5.10. Priorities. If the Trustee collects any
money or property pursuant to this Article V, it shall pay out
the money or property in the following order:
FIRST: to the Trustee for amounts due under
Section 6.7;
SECOND: to Securityholders for amounts due and unpaid
for principal of and any premium and interest on the Securities,
in respect of which or for the benefit of which such money or
property has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on
the Securities for principal and any premium of and any premium
and interest on the Securities, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for
any payment to Securityholders pursuant to this Section. At
least 15 days before such record date, the Company shall mail to
each Securityholder and the Trustee a notice that states the
record date, the payment date and amount to be paid.
SECTION 5.11. Undertaking for Costs. In any suit for
the enforcement of any right or remedy under this Indenture or in
any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess
costs, including reasonable attorneys' fees and expenses, against
any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee,
a suit by the Company, a suit by a Holder pursuant to Section 5.7
or a suit by Holders of more than 10% in principal amount of
Outstanding Securities.
ARTICLE VI
Trustee
SECTION 6.1. Duties of Trustee. (a) If an Event of
Default has occurred and is continuing, the Trustee shall
exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of
Default:
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, in the case of
any such certificates or opinions which by any provisions hereof
are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine
whether or not they conform to the requirements of this Indenture
(but need not confirm the accuracy of mathematical calculations
or other facts stated therein).
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 5.5.
(d) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Company.
(e) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
(f) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers.
(g) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section.
SECTION 6.2. Rights of Trustee. (a) The Trustee may
conclusively rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel.
The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided, however,
that the Trustee's conduct does not constitute wilful misconduct
or negligence.
(e) The Trustee may consult with counsel of its
selection, and the advice or opinion of counsel with respect to
legal matters relating to this Indenture and the Securities shall
be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond or other paper or document; but
the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit and,
if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records
and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or
investigation.
(g) The Trustee shall not be deemed to have knowledge
of any Default or Event of Default except (i) any Event of
Default occurring pursuant to Section 5.1(1) and 5.1(2), or (ii)
any Default or Event of Default of which the Trustee shall have
received written notification or obtained "actual knowledge."
"Actual knowledge" shall mean the actual fact or statement of
knowing without independent investigation with respect thereto.
SECTION 6.3. Individual Rights of Trustee. The
Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the
Company or its Affiliates with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However,
the Trustee must comply with Sections 6.10 and 6.11.
SECTION 6.4. Trustee's Disclaimer. The Trustee shall
not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Securities, it
shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document
issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication
or for the use or application of any funds received by any Paying
Agent other than the Trustee.
SECTION 6.5. Notice of Defaults. If a Default or
Event of Default occurs and is continuing, the Trustee shall mail
to each Securityholder notice of the Default or Event of Default
within 90 days after it occurs provided that in the case of
Default or Event of Default described in Section 5.1(3) no such
notice shall be given until at least 30 days after such Default
or Event of Default occurs and provided further that except in
the case of a Default or Event of Default in payment of principal
of, premium (if any), or interest on any Security, the Trustee
may withhold the notice if and so long as its board of directors,
a committee of its board of directors or a committee of its Trust
Officers and/or a Trust Officer of the Trustee in good faith
determines that withholding the notice is in the interests of
Securityholders.
SECTION 6.6. Reports by Trustee to Holders. As
promptly as practicable after each December 31 beginning with
December 31, 2000, and in any event prior to March 1 in each
year, the Trustee shall mail to each Securityholder a brief
report dated as of such December 31 that complies with TIA
ss. 313(a).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock
exchange (if any) on which the Securities are listed. The
Company agrees to notify promptly the Trustee in writing whenever
the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 6.7. Compensation and Indemnity. The Company
shall pay to the Trustee from time to time such compensation for
its services as the parties shall agree in writing from time to
time. The Trustee's compensation shall not be limited by any law
to compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable out-
of-pocket expenses incurred or made by it, including, but not
limited to, costs of collection, costs of preparing and reviewing
reports, certificates and other documents, costs of preparation
and mailing of notices to Securityholders and reasonable costs of
counsel retained by the Trustee in connection with the delivery
of an Opinion of Counsel or otherwise, in addition to the
compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances
of the Trustee's agents, counsel, accountants and experts. The
Company shall indemnify each of the Trustee, any predecessor
Trustee and each of its officers, directors, counsel and agents,
against any and all loss, liability, claim, damage or expense
(including, but not limited to, reasonable attorneys' fees and
expenses and taxes other than taxes based on the income of the
Trustee) incurred by it in connection with the acceptance and
administration of this trust and the performance of its duties
hereunder, including the costs and expenses of enforcing this
Indenture (including this Section 6.7) and of defending itself
against any claims (whether asserted by any Securityholder, the
Company or otherwise). The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend
the claim and the Trustee may have separate counsel and the
Company shall pay the fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the
Trustee's own wilful misconduct or negligence, subject to the
exceptions contained in Section 6.1(c) hereof.
To secure the Company's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities on
all money or property held or collected by the Trustee other than
money or property held in trust to pay principal of and any
premium and interest on particular Securities. The Trustee's
right to receive payment of any amounts due under this
Section 6.7 shall not be subordinate to any other liability or
indebtedness of the Company.
The Company's payment obligations pursuant to this
Section and any lien arising hereunder shall survive the
discharge of this Indenture and the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 5.1(4), (5) or (6) with respect
to the Company, the expenses are intended to constitute expenses
of administration under any Bankruptcy Law.
SECTION 6.8. Replacement of Trustee. The Trustee may
resign at any time by so notifying the Company. The Holders of a
majority in principal amount of the Outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor Trustee. The Company shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
(2) the Trustee is adjudged a bankrupt or insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed and the Holders do
not reasonably promptly appoint a successor Trustee, or if a
vacancy exists in the office of Trustee for any reason (the
Trustee in such event being referred to herein as the retiring
Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Thereupon the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in
Section 6.7.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee or the Holders of 10% in principal amount of the
Outstanding Securities may petition at the expense of the Company
any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 6.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding the replacement of the Trustee pursuant
to this Section 6.8, the Company's obligations under Section 6.7
shall continue for the benefit of the retiring Trustee.
SECTION 6.9. Successor Trustee by Merger. If the
Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets
to, another corporation or banking association, the resulting,
surviving or transferee corporation without any further act shall
be the successor Trustee.
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall succeed
to the trusts created by this Indenture, any of the Securities
shall have been authenticated but not delivered, any such
successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the
Securities shall not have been authenticated, any successor to
the Trustee may authenticate such Securities either in the name
of any predecessor hereunder or in the name of the successor to
the Trustee; and in all such cases such certificates shall have
the full force which it is anywhere in the Securities or in this
Indenture provided that the certificate of the Trustee shall
have.
SECTION 6.10. Eligibility; Disqualification. The
Trustee shall at all times shall be a corporation organized and
doing business under the laws of the United States of America or
any State thereof, authorized under such laws to exercise
corporate trust powers. The Trustee shall have a combined
capital and surplus of at least $50 million and shall be subject
to the supervision or examination by United States Federal or
State authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 6.11. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 6.12
(b) The Trustee may resign at any time by giving
written notice thereof to the Company. If an instrument of
acceptance by a successor Trustee shall not have been delivered
to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in aggregate principal amount of the
Outstanding Securities, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall cease to be eligible under
Section 6.10 and shall fail to resign after written request
therefor by the Company or by any Securityholder, or
(2) the Trustee shall become incapable of acting, or
(3) the Trustee shall be adjudged a bankrupt or
insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may
remove the Trustee, or (ii) subject to Section 5.11, any
Securityholder who has been a bona fide Holder of a Security for
at least 6 months may, on behalf of itself and all others
similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
Trustee with respect to the Securities.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
the Trustee for any cause, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee. If, within one year
after such resignation, removal or incapacity, or the occurrence
of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in aggregate principal amount of the
Outstanding Securities delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If
no successor Trustee shall have been so appointed by the Company
or the Securityholders and accepted appointment in the manner
hereinafter provided, any Securityholder who has been a bona fide
Holder of a Security for at least six months may, on behalf of
itself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a
successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Holders of Securities
as their names and addresses appear in the Note Register. Each
notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
SECTION 6.12 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the predecessor
Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the predecessor Trustee shall
become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the predecessor Trustee; but, on
request of the Company or the successor Trustee, such predecessor
Trustee shall, upon payment of its reasonable charges, if any,
execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the predecessor
Trustee, and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such predecessor
Trustee hereunder, subject nevertheless to its lien, if any,
provided for in Section 6.7. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
In case of the appointment hereunder of a successor
Trustee, the Company, the predecessor Trustee and each successor
Trustee shall execute and deliver an indenture supplemental
hereto which shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers,
trusts and duties of the predecessor Trustee.
No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible with respect to that series under
this Article.
SECTION 6.13. Trustee's Application for Instructions
from the Company. Any application by the Trustee for written
instructions from the Company, may at the option of the Trustee,
set forth in writing any action proposed to be taken or omitted
by the Trustee under this Indenture and the date on and/or after
which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken
by, or omission of, the Trustee in accordance with a proposal
included in such application on or after the date specified in
such application (which date shall not be less than three
Business Days after the date any officer of the Company actually
receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking
any such action (or the effective date in the case of an
omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken
or omitted.
ARTICLE VII
Discharge of Indenture; Defeasance; Covenant Defeasance
SECTION 7.1. Discharge of Liability on Securities;
Defeasance; Covenant Defeasance. (a) When (i) the Company
delivers to the Trustee all Outstanding Securities (other than
Securities replaced pursuant to Section 2.9) for cancellation or
(ii) all Outstanding Securities have become due and payable at
Maturity and the Company irrevocably deposits with the Trustee
funds sufficient to pay at Maturity all such Outstanding
Securities (other than Securities replaced pursuant to
Section 2.9), including interest thereon to Maturity, and the
Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Section 7.1(c), cease to be
of further effect. The Trustee shall acknowledge satisfaction
and discharge of this Indenture on demand of the Company
(accompanied by an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent specified herein
relating to the satisfaction and discharge of this Indenture have
been complied with) and at the cost and expense of the Company.
(b) The Company may elect, at its option by resolution
of the Board of Directors at any time, to have either
Section 7.1(c) or Section 7.1(d) applied to the Outstanding
Securities upon compliance with the conditions set forth below in
this Article VII.
(c) Upon the Company's exercise of the option provided
in Section 7.1(b) to have this Section 7.1(c) applied to the
Outstanding Securities, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding
Securities as provided in this Section 7.1(c) on and after the
date the conditions set forth in Section 7.2 are satisfied
(hereinafter called "Defeasance"). For this purpose, such
Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the
Outstanding Securities and to have satisfied all its other
obligations under the Securities and this Indenture insofar as
the Securities are concerned (and the trustee, at the expense of
the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of
Holders to receive, solely from the trust fund described in
Section 7.2 and as more fully set forth in such Section, payments
in respect of the principal of and any premium and interest on
such Securities when payments are due, (2) the Company's
obligations with respect to such Securities under Sections 2.6,
2.9, 2.11, 3.9 and 3.10, (3) the rights, powers, trusts, duties
and immunities of the Trustee hereunder, (4) the Company's
obligations under Section 6.7 and (5) this Article VII. Subject
to compliance with this Article VII, the Company may exercise its
option provided in Section 7.1(b) to have this Section 7.1(c)
applied to the Outstanding Securities notwithstanding the prior
exercise of its option provided in Section 7.1(b) to have
Section 7.1(d) applied to the Outstanding Securities.
(d) Upon the Company's exercise of the option provided
in Section 7.1(b) to have this Section 7.1(d) applied to the
Outstanding Securities (1) the Company shall be released from its
obligations under Sections 3.3, 3.4, 3.5, 3.6, 3.11, 3.13 and
3.14, and Section 4.1 and (2) the occurrence of any event
specified in Section 5.1(3) (with respect to any of Sections 3.3,
3.4, 3.5, 3.6, 3.11, 3.13 and 3.14, and Section 4.1(2) and (3))
and 5.1(4) shall be deemed not to be or result in an Event of
Default, in each case with respect to the Outstanding Securities
as provided in this Section 7.1(d) on or after the date the
conditions set forth in Section 7.2 are satisfied (hereinafter
called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that the Company may omit to comply with and
shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent
so specified in the case of Section 5.1(3)), whether directly or
indirectly by reason of any reference elsewhere herein to any
such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the
remainder of this Indenture and the Security shall be unaffected
thereby. Notwithstanding any Covenant Defeasance, the Company's
obligations under section 6.7 shall survive said Covenant
Defeasance with respect to any Securities deceased hereunder.
(e) Notwithstanding the provisions of Sections 7.1(a)
and (b), the Company's obligations in Sections 2.3, 2.4, 2.5,
2.6, 2.9, 6.7, 6.8, 7.4, 7.5 and 7.6 shall survive until the
Securities have been paid in full. Thereafter, the Company's
obligations in Sections 6.7, 7.4 and 7.5 shall survive.
SECTION 7.2. Conditions to Defeasance or Covenant
Defeasance. The Company may exercise its Defeasance option or
its Covenant Defeasance option with respect to the Outstanding
Securities only if:
(1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee that
satisfies the requirements contemplated by Section 6.10 and
agrees to comply with the provisions of this Article VII
applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Securityholders
(a) money in an amount, or (b) U.S. Government Obligations that
through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in
an amount, or (c) a combination thereof, in each case sufficient,
in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or any such other qualifying trustee)
to pay and discharge, the principal of and any premium and
interest on the Securities on the respective Stated Maturities,
in accordance with the terms of this Indenture and the
Securities. As used herein, "U.S. Government Obligation" means
(x) any security that is (i) a direct obligation of the United
States of America for the payment of which full faith and credit
of the United States of America is pledged or (ii) an obligation
of a Person controlled or supervised by or acting as an agent or
instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either
case (i) or (ii), is not callable or redeemable at the option of
the issuer thereof, and (y) any depositary receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation
specified in clause (x) and held by such custodian for the
account of the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any such
U.S. Government Obligation, provided that (except as required by
law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or
interest evidenced by such depositary receipt.
(2) In the case of an election under Section 7.1(c),
the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or
(B) since the date first set forth hereinabove, there has been a
change in the applicable Federal income tax law, in either
case (A) or (B) to the effect that, and based thereon such
opinion shall confirm that, the Holders of the Outstanding
Securities, will not recognize gain or loss for Federal income
tax purposes as a result of the deposit, Defeasance and discharge
to be effected with respect to the Securities, and will be
subject to Federal income tax on the same amount, in the same
manner and at the same times as would be the case if such
deposit, Defeasance and discharge were not to occur.
(3) In the case of an election under Section 7.1(d),
the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of the Outstanding
Securities, will not recognize gain or loss for Federal income
tax purposes as a result of the deposit and Covenant Defeasance
to be effected and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be
the case if such deposit and Covenant Defeasance were not to
occur.
(4) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that the Securities, if then
listed on any securities exchange, will not be delisted as a
result of such deposit.
(5) No Event of Default or event that (after notice or
lapse of time or both) would become an Event of Default shall
have occurred and be continuing at the time of such deposit or,
with regard to any Event of Default or any such event specified
in Sections 5.1(5) and (6), at any time on or prior to the
123rd day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after
such 123rd day).
(6) Such Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest within the
meaning of the Trust Indenture Act.
(7) Such Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company is
party or by which it is bound.
(8) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent with respect to such Defeasance or
Covenant Defeasance have been complied with and the other
statements listed under Section 10.4.
(9) Such Defeasance or Covenant Defeasance shall not
result in the trust arising from such deposit constituting an
investment company within the meaning of the Investment Company
Act of 1940, as amended, unless such trust shall be qualified
under such Act or exempt from regulation thereunder.
SECTION 7.3. Application of Trust Money. Subject to
the provisions of the last paragraph of Section 3.10, all money
and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee (solely
for purposes of this Section and Section 7.6, the Trustee and any
such other trustee are referred to collectively as the "Trustee")
pursuant to Section 7.2 shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and
this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting on its own Paying
Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect
of principal and any premium and interest, but money so held in
trust need not be segregated from other funds except to the
extent required by law.
SECTION 7.4. Repayment to Company. Anything herein to
the contrary notwithstanding, the Trustee shall deliver or pay to
the Company from time to time upon Company Order any money or
U.S. Government Obligations held by it as provided in this
Article VII which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of
the amount thereof which would then be required to be deposited
to effect Defeasance or Covenant Defeasance, provided that the
Trustee shall not be required to liquidate any U.S. Government
Obligations in order to comply with the provisions of this
paragraph.
Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company Order any
money held by them for the payment of principal of or interest on
the Securities that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to
the Company for payment as unsecured general creditors.
SECTION 7.5. Indemnity for U.S. Government
Obligations. The Company shall pay and shall indemnify the
Trustee against any tax, fee or other charge imposed on or
assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government
Obligations.
SECTION 7.6. Reinstatement. If the Trustee or Paying
Agent is unable to apply any money or U.S. Government Obligations
in accordance with this Article VII by reason of any legal
proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, the obligations of the Company
under this Indenture and the Securities, shall be revived and
reinstated as though no such deposit had occurred pursuant to
this Article VII until such time as the Trustee or Paying Agent
is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VII; provided,
however, that, if the Company has made any payment of principal
of or any premium or interest on any Securities, following the
reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE VIII
Amendments
SECTION 8.1. Without Consent of Holders. The Company
and the Trustee may amend this Indenture or the Securities
without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article IV in respect of the
assumption by a successor Person to the Company of an obligation
of the Company under this Indenture;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities; provided,
however, that the uncertificated Securities are issued in
registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Securities are described in
Section 163(f)(2)(B) of the Code;
(4) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power herein
conferred upon the Company;
(5) to comply with Sections 6.8 and 6.9 in respect of
the assumption by a successor Trustee of an obligation of the
Trustee under this Indenture; or
(6) to make any change that does not adversely affect
the rights of any Securityholder.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. The failure to give such
notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 8.2. With Consent of Holders. With the
written consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities affected thereby,
the Company and the Trustee may amend this Indenture or modify in
any manner the rights of the Securityholders under this
Indenture. However, without the consent of each Securityholder
affected, an amendment may not:
(a) change the Stated Maturity of the principal of, or
any installment of principal of or any premium or interest on,
any Security, reduce the principal amount thereof or the interest
or any premium thereon, change the method of computing the amount
of principal thereof or interest thereon on any date, change any
place of payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable or impair
the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case
of redemption or repayment, on or after the redemption date or
the repayment date, as the case may be);
(b) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required
for any such modification or the consent of whose Holders is
required for any waiver of compliance with certain provisions of
this Indenture or certain Defaults hereunder and their
consequences provided for in this Indenture; or
(c) modify any of the provisions of this Section,
Section 3.6 or Section 5.4, except to increase any such
percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. The failure to give such
notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 8.3. Revocation and Effect of Consents and
Waivers. A consent to an amendment or a waiver by a
Securityholder shall bind the Holder and every subsequent Holder
of that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation
of the consent or waiver is not made on the Security. However,
any such Holder or subsequent Holder may revoke the consent or
waiver as to such Holder's Security or portion of the Security if
the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver made pursuant to Section 8.2 shall become
effective upon receipt by the Trustee of the requisite number of
written consents.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Securityholders
entitled to give their consent or take any other action described
above or required or permitted to be taken pursuant to this
Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any
such action, whether or not such Persons continue to be Holders
after such record date. No such consent shall become valid or
effective more than 120 days after such record date.
SECTION 8.4. Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the Trustee may
require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security
regarding the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or to issue a
new Security shall not affect the validity of such amendment.
SECTION 8.5. Trustee To Sign Amendments. The Trustee
shall sign any amendment authorized pursuant to this Article VIII
if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 6.1)
shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment
is authorized or permitted by this Indenture.
ARTICLE IX
Redemption of Securities
SECTION 9.1. Redemption. The Securities may or shall,
as the case may be, be redeemed, as a whole or from time to time
in part, subject to the conditions and at the Redemption Prices
specified in the form of Securities, together with accrued
interest to the Redemption Date.
SECTION 9.2. Applicability of Article. Redemption of
Securities at the election of the Company, as permitted by any
provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 9.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 9.1 shall be evidenced by a resolution of the Board of
Directors. In case of any partial redemption at the election of
the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities to be
redeemed and shall deliver to the Trustee such documentation and
records as shall enable the Trustee to select the Securities to
be redeemed pursuant to Section 9.4.
SECTION 9.4. Selection by Trustee of Securities to be
Redeemed. If less than all the Securities are to be redeemed,
selection of such Securities for redemption shall be made by the
Trustee not more than 60 days prior to the Redemption Date, from
the Securities Outstanding not previously called for redemption,
in compliance with the requirements of the principal national
securities exchange, if any, on which such Securities are listed,
or, if such Securities are not so listed, by lot or by such other
method as the Trustee shall deem fair and appropriate (and in
such manner as complies with applicable legal requirements) and
which may provide for the selection for redemption of portions of
the principal of Securities; provided, however, that no
Securities of less than $1,000 shall be redeemed in part.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of
Securities shall relate, in the case of any Security redeemed or
to be redeemed only in part, to the portion of the principal
amount of such Security which has been or is to be redeemed.
SECTION 9.5. Notice of Redemption. Notice of
redemption shall be given in the manner provided for in
Section 10.1 at least 30 but not more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed at
such Holder's registered address. The Trustee shall give notice
of redemption in the Company's name and at the Company's expense;
provided, however, that the Company shall deliver to the Trustee,
at least 30 days prior to the Redemption Date, an Officers'
Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as
provided in the following items.
All notices of redemption shall fully identify the
Securities and shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued
interest to the Redemption Date payable as provided in
Section 9.7, if any,
(3) if less than all Securities Outstanding are to be
redeemed, the identification of the particular Securities (or
portion thereof) to be redeemed, as well as the aggregate
principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be Outstanding after such
partial redemption,
(4) in case any Security is to be redeemed in part
only, the notice which relates to such Security shall state that
on and after the Redemption Date, upon surrender of such
Security, the holder will receive, without charge, a new Security
or Securities of authorized denominations for the principal
amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price
(and accrued interest, if any, to the Redemption Date payable as
provided in Section 9.7) will become due and payable upon each
such Security, or the portion thereof, to be redeemed, and,
unless the Company defaults in making the redemption payment,
that interest on Securities called for redemption (or the portion
thereof) will cease to accrue on and after said date,
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued
interest, if any,
(7) the name and address of the Paying Agent,
(8) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price,
and
(9) the CUSIP number, and that no representation is
made as to the accuracy or correctness of the CUSIP number, if
any, listed in such notice or printed on the Securities.
SECTION 9.6. Deposit of Redemption Price. At or prior
to 10:00 a.m. New York City time on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent
(or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 3.8) an amount of money
sufficient to pay the Redemption Price of, and accrued interest
on, all the Securities which are to be redeemed on that date.
SECTION 9.7. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified
(together with accrued interest, if any, to the Redemption Date),
and from and after such date (unless the Company shall default in
the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price,
together with accrued interest, if any, to the Redemption Date;
provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable
to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the
relevant regular record date or Special Record Date, as the case
may be, according to their terms and the provisions of
Section 2.12.
If any Security called for redemption shall not be so
paid upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, bear interest from the
Redemption Date at the rate borne by the Securities.
SECTION 9.8. Securities Redeemed in Part. Any
Security which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at the office or
agency of the Company maintained for such purpose pursuant to
Section 3.7 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered; provided
that each such new Security will be in a principal amount of
$1,000 or integral multiple thereof.
ARTICLE X
Miscellaneous
SECTION 10.1. Notices. Any notice or
communication shall be in writing and delivered in person or
mailed by first-class mail addressed as follows:
if to the Company:
CK Witco Corporation
One American Lane
Greenwich, CT 06831-2559
Attn: General Counsel
if to the Trustee:
Citibank, N.A.
111 Wall Street, 5th Floor
New York, N.Y. 10005
Attn: Global Agency & Trust Services
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Securityholder
shall be mailed to the Securityholder at the Securityholder's
address as it appears on the registration books of the Registrar
and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders. If a notice
or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 10.2. Communication by Holders with other
Holders. Securityholders may communicate pursuant to TIA
ss. 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
SECTION 10.3. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the
Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 10.4. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a covenant or condition provided for in this Indenture shall
include:
(1) a statement that the individual making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with;
and
(4) a statement as to whether or not, in the opinion of
such individual, such covenant or condition has been complied
with.
SECTION 10.5. Rules by Trustee, Paying Agent and
Registrar. The Trustee may make reasonable rules for action by,
or a meeting of, Securityholders. The Registrar and the Paying
Agent may make reasonable rules for their functions.
SECTION 10.6. Legal Holidays. If a payment date is
not a Business Day, payment shall be made on the next succeeding
day that is a Business Day, and no interest shall accrue for the
intervening period. If a regular record date is not a Business
Day, the record date shall not be affected.
SECTION 10.7. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect
to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be
required thereby.
SECTION 10.8. No Recourse Against Others. An
incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities
or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such
liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
SECTION 10.9. Successors. All agreements of the
Company in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 10.10. Multiple Originals. The parties may
sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 10.11. Variable Provisions. The Company
initially appoints the Trustee as Paying Agent and Registrar and
custodian with respect to any Global Securities.
SECTION 10.12. Table of Contents; Headings. The table
of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience
of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or
provisions hereof.
IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed as of the date first written above.
CK WITCO CORPORATION
By:
Name:
Title:
CITIBANK, N.A.
By:
Name:
Title:
===============================================================================
CK WITCO CORPORATION
(a Delaware corporation)
Floating Rate Notes due 2001
PURCHASE AGREEMENT
Dated: March 2, 2000
===============================================================================
<PAGE>
Table of Contents
PURCHASE AGREEMENT
SECTION 1. Representations and Warranties by the Company..................2
(a) Representations and Warranties............................2
(i) Offering Memorandum...............................2
(ii) Incorporated Documents............................2
(iii) Independent Accountants...........................3
(iv) Financial Statements..............................3
(v) No Material Adverse Change in Business............3
(vi) Good Standing of the Company......................3
(vii) Good Standing of Designated Subsidiaries..........4
(viii) Capitalization....................................4
(ix) Authorization of Agreement........................4
(x) Authorization of the Indenture....................4
(xi) Authorization of the Securities...................4
(xii) Description of the Securities and the Indenture...5
(xiii) Absence of Defaults and Conflicts.................5
(xiv) Absence of Labor Dispute..........................6
(xv) Absence of Proceedings............................6
(xvi) Possession of Intellectual Property...............6
(xvii) Absence of Further Requirements...................6
(xviii) Possession of Licenses and Permits................6
(xix) Title to Property.................................7
(xx) Environmental Laws................................7
(xxi) Investment Company Act............................8
(xxii) Similar Offerings.................................8
(xxiii) Rule 144A Eligibility.............................8
(xxiv) No General Solicitation...........................8
(xxv) No Registration Required..........................8
(xxvi) Reporting Company.................................8
(xxvii) No Directed Selling Efforts.......................8
(xxviii)Year 2000.........................................9
(b) Officer's Certificates....................................9
SECTION 2. Sale and Delivery to Initial Purchaser; Closing................9
(a) Securities................................................9
(b) Payment...................................................9
SECTION 3. Covenants of the Company......................................10
i
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(a) Offering Memorandum......................................10
(b) Notice and Effect of Material Events.....................10
(c) Amendment to Offering Memorandum and Supplements.........10
(d) Rating of Securities.....................................10
(e) DTC......................................................10
(f) Use of Proceeds..........................................11
(g) Restriction on Sale of Securities........................11
SECTION 4. Payment of Expenses...........................................11
(a) Expenses.................................................11
(b) Termination of Agreement.................................11
SECTION 5. Conditions of Initial Purchaser's Obligations.................11
(a) Opinion of Counsel for Company...........................11
(b) Opinion of Counsel for Initial Purchaser.................12
(c) Officers' Certificate....................................12
(d) Accountants' Comfort Letter..............................12
(e) Bring-down Comfort Letter................................12
(f) Maintenance of Rating....................................12
(g) Additional Documents.....................................13
(h) Termination of Agreement.................................13
SECTION 6. Subsequent Offers and Resales of the Securities...............13
(a) Offer and Sale Procedures................................13
(i) Offers and Sales only to Qualified
Institutional Buyers or Non-U.S. Persons.........13
(ii) No General Solicitation..........................13
(iii) Purchases by Non-Bank Fiduciaries................14
(iv) Subsequent Purchaser Notification................14
(v) Restrictions on Transfer.........................14
(b) Covenants of the Company.................................14
(i) Integration......................................14
(ii) Rule 144A Information............................14
(iii) Restriction on Repurchases.......................14
(c) Qualified Institutional Buyer............................15
(d) Resale Pursuant to Rule 903 of Regulation S or
Rule 144A................................................15
(e) Additional Representations and Warranties of
Initial Purchaser........................................16
SECTION 7. Indemnification...............................................17
ii
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(a) Indemnification of Initial Purchaser.....................17
(b) Indemnification of Company...............................17
(c) Actions against Parties; Notification....................18
SECTION 8. Contribution..................................................19
SECTION 9. Representations, Warranties and Agreements to
Survive Delivery..............................................20
SECTION 10. Termination of Agreement......................................20
(a) Termination; General.....................................21
(b) Liabilities..............................................21
SECTION 11. Notices.......................................................21
SECTION 12. Parties.......................................................21
SECTION 13. GOVERNING LAW AND TIME........................................21
SECTION 14. Effect of Headings............................................21
SCHEDULES
Schedule A - Pricing Information...................................Sch A-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel.......................A-1
iii
<PAGE>
CK WITCO CORPORATION
(a Delaware corporation)
$25,000,000
Floating Rate Notes due 2001
PURCHASE AGREEMENT
March 2, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
CK Witco Corporation, a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Initial Purchaser",), with respect to the issue and sale by
the Company and the purchase by the Initial Purchaser, of $25,000,000 aggregate
principal amount of the Company's Floating Rate Notes due 2001 (the
"Securities"). The Securities are to be issued pursuant to an indenture dated as
of March 1, 2000 (the "Indenture") between the Company and Citibank, N.A., as
trustee (the "Trustee"). Securities will be issued to Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated
as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among
the Company, the Trustee and DTC.
The Company understands that the Initial Purchaser proposes to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchaser may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after this Agreement has been executed and delivered.
The Securities are to be offered and sold through the Initial Purchaser without
being registered under the Securities Act of 1933, as amended (the "1933 Act"),
in reliance upon exemptions therefrom. Pursuant to the terms of the Securities
and the Indenture, investors that acquire Securities may only resell or
otherwise transfer such Securities if such Securities are hereafter registered
under the 1933 Act or if an exemption from the registration requirements of the
1933 Act is available (including the exemption afforded by Rule 144A ("Rule
144A") or Regulation S ("Regulation S") of the rules and regulations promulgated
under the 1933 Act by the Securities and Exchange Commission (the
"Commission")).
The Company has prepared and delivered to the Initial Purchaser copies of a
preliminary offering memorandum dated February 28, 2000 (the "Preliminary
Offering Memorandum") and has prepared and will deliver to the Initial
Purchaser, on the date hereof or the next succeeding
<PAGE>
day, copies of a final offering memorandum dated March 2, 2000 (the "Final
Offering Memorandum"), each for use by the Initial Purchaser in connection with
its solicitation of purchases of, or offering of, the Securities. "Offering
Memorandum" means, with respect to any date or time referred to in this
Agreement, the most recent offering memorandum (whether the Preliminary Offering
Memorandum or the Final Offering Memorandum, or any amendment or supplement to
either such document), including exhibits, amendments or supplements thereto and
any documents incorporated therein by reference, which has been prepared and
delivered by the Company to the Initial Purchaser in connection with its
solicitation of purchases of, or offering of, the Securities.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Offering
Memorandum (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
are incorporated by reference in the Offering Memorandum; and all references in
this Agreement to amendments or supplements to the Offering Memorandum shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the
Offering Memorandum.
SECTION 1. Representations and Warranties by the Company.
(a) Representations and Warranties. The Company represents and warrants to
the Initial Purchaser as of the date hereof and as of the Closing Time referred
to in Section 2(b) hereof, and agrees with the Initial Purchaser, as follows:
(i) Offering Memorandum. The Offering Memorandum does not, and at the
Closing Time will not, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that this representation, warranty and agreement shall
not apply to statements in or omissions from the Offering Memorandum made
in reliance upon and in conformity with information furnished to the
Company in writing by the Initial Purchaser expressly for use in the
Offering Memorandum.
(ii) Incorporated Documents. The Offering Memorandum as delivered from
time to time shall incorporate by reference the most recent Annual Reports
of the Company and its predecessors on Form 10-K filed with the Commission
and each Quarterly Report of the Company and its predecessors on Form 10-Q
and each Current Report of the Company and its predecessors on Form 8-K
filed with the Commission since the filing of the end of the fiscal year to
which such Annual Report relates. The documents incorporated or deemed to
be incorporated by reference in the Offering Memorandum at the time they
were or hereafter are filed with the Commission (as amended, supplemented
or superseded by any later filing made prior to the date hereof) complied
and will comply in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission thereunder (the "1934
Act Regulations"), and, when read together with the other information in
the Offering Memorandum, at the time the Offering Memorandum was issued and
at the Closing Time, did not and will not include an untrue
2
<PAGE>
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Offering
Memorandum are independent public accountants with respect to the Company
and its subsidiaries and predecessors within the meaning of Regulation S-X
under the 1933 Act.
(iv) Financial Statements. The financial statements, together with the
related schedules and notes, included in the Offering Memorandum present
fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Offering Memorandum present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included in the Offering Memorandum present fairly the information shown
therein and, where derived from audited financial statements, have been
compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum. The pro forma financial
statements of the Company and its subsidiaries and the related notes
thereto included in the Offering Memorandum have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(v) No Material Adverse Change in Business. Since the respective dates
as of which information is given in the Offering Memorandum, except as
otherwise stated therein, (A) there has been no material adverse change in
the condition, financial or otherwise, or in the earnings or business of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there have been no
dividends paid by the Company, except for regular dividends on the common
stock, par value $.01 per share, of the Company (the "Common Stock").
(vi) Good Standing of the Company. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of
the state of Delaware and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations under
this Agreement; and the Company is duly qualified as a foreign corporation
to transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of
3
<PAGE>
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Designated Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Designated Subsidiary" and, collectively, the
"Designated Subsidiaries") has been duly organized and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Offering Memorandum, all of the issued
and outstanding capital stock of each Designated Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity, except when the failure to do so would not result in a Material
Adverse Effect; none of the outstanding shares of capital stock of the
Designated Subsidiaries was issued in violation of any preemptive or
similar rights of any securityholder of such Designated Subsidiary.
(viii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Offering Memorandum under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant
to this Agreement, pursuant to reservations, agreements, employee benefit
plans referred to in the Offering Memorandum or pursuant to the exercise of
convertible securities or options referred to in the Offering Memorandum).
The shares of issued and outstanding capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock of the Company was issued
in violation of the preemptive or other similar rights of any
securityholder of the Company.
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and, when executed and delivered by the Company
and the Trustee, will constitute a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xi) Authorization of the Securities. The Securities have been duly
authorized and, at the Closing Time, will have been duly executed by the
Company and, when
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authenticated, issued and delivered in the manner provided for in the
Indenture and delivered against payment of the purchase price therefor as
provided in this Agreement, will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers) reorganization, moratorium or similar laws affecting enforcement
of creditors' rights generally and except as enforcement thereof is subject
to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits of, the Indenture.
(xii) Description of the Securities and the Indenture. The Securities
and the Indenture will conform in all material respects to the respective
statements relating thereto contained in the Offering Memorandum.
(xiii) Absence of Defaults and Conflicts. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which or any
of them may be bound, or to which any of the property or assets of the
Company or any of its subsidiaries is subject (collectively, "Agreements
and Instruments") except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance of
this Agreement, the Indenture and the Securities and any other agreement or
instrument entered into or issued or to be entered into or issued by the
Company in connection with the transactions contemplated hereby or thereby
or in the Offering Memorandum and the consummation of the transactions
contemplated herein and in the Offering Memorandum (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Offering Memorandum under the caption "Use
of Proceeds") and compliance by the Company with its obligations hereunder
have been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or default or a Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to, the Agreements and Instruments
except for such conflicts, breaches or defaults or liens, charges or
encumbrances that, singly or in the aggregate, would not result in a
Material Adverse Effect, nor will such action result in any significant
violation of the provisions of the charter or by-laws of the Company or any
of its subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their assets, properties or
operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.
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(xiv) Absence of Labor Dispute. No labor dispute with the employees of
the Company or any of its subsidiaries exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
subsidiaries' principal suppliers, manufacturers, customers or contractors,
which, in any case, may reasonably be expected to result in a Material
Adverse Effect.
(xv) Absence of Proceedings. Except as disclosed in the Offering
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company, threatened,
against or affecting the Company or any of its subsidiaries which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets of the Company and its subsidiaries as a whole or the
consummation of the transactions contemplated by this Agreement or the
performance by the Company of its obligations hereunder. No pending legal
or governmental proceeding to which the Company or any of its subsidiaries
is a party or of which any of their respective property or assets is the
subject which are not described in the Offering Memorandum, including
ordinary routine litigation incidental to the business, could reasonably be
expected to result in a Material Adverse Effect.
(xvi) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, except where the failure to do so would not have a
Material Adverse Effect, and neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement or for the due execution, delivery or
performance of the Indenture by the Company, except such as have been
already obtained.
(xviii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regu-
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latory agencies or bodies necessary to conduct the business now operated by
them, except where the failure to do so would not have a Material Adverse
Effect; the Company and its subsidiaries are in compliance with the terms
and conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force and
effect, except where the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect would
not have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xix) Title to Property. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Offering Memorandum, (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its subsidiaries or (c) could not reasonably be expected
to have a Material Adverse Effect; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as
one enterprise, are in full force and effect, and neither the Company nor
any of its subsidiaries has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company or
any of its subsidiaries under any of the leases or subleases mentioned
above, or affecting or questioning the rights of such the Company or any
subsidiary thereof to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xx) Environmental Laws. Except as described in the Offering
Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor
any of its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the
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basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or any of its subsidiaries relating to Hazardous
Materials or Environmental Laws.
(xxi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will not be, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxii) Similar Offerings. Neither the Company nor any of its
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
(each, an "Affiliate"), has, directly or indirectly, solicited any offer to
buy, sold or offered to sell or otherwise negotiated in respect of, or will
solicit any offer to buy, sell or offer to sell or otherwise negotiate in
respect of, in the United States or to any United States citizen or
resident, any security which is or would be integrated with the sale of the
Securities in a manner that would require the Securities to be registered
under the 1933 Act.
(xxiii) Rule 144A Eligibility. The Securities are eligible for resale
pursuant to Rule 144A and will not be, at the Closing Time, of the same
class as securities listed on a national securities exchange registered
under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer
quotation system.
(xxiv) No General Solicitation. None of the Company, its Affiliates or
any person acting on its or any of their behalf (other than the Initial
Purchaser, as to whom the Company makes no representation) has engaged or
will engage, in connection with the offering of the Securities, in any form
of general solicitation or general advertising within the meaning of Rule
502(c) under the 1933 Act.
(xxv) No Registration Required. Subject to compliance by the Initial
Purchaser with the agreements, procedures, representations and warranties
set forth in Section 6 hereof, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchaser and to
each Subsequent Purchaser in the manner contemplated by this Agreement and
the Offering Memorandum to register the Securities under the 1933 Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "1939 Act").
(xxvi) Reporting Company. The Company is subject to the reporting
requirements of Section 13 or Section 15(d) of the 1934 Act.
(xxvii) No Directed Selling Efforts. With respect to those Securities
sold in reliance on Regulation S, (A) none of the Company, its Affiliates
or any person acting on its or their behalf (other than the Initial
Purchaser, as to whom the Company makes no representation) has engaged or
will engage in any directed selling efforts within the meaning of
Regulation S and (B) each of the Company and its Affiliates and any person
acting on its or their behalf (other than the Initial Purchaser, as to whom
the Company makes no
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representation) has complied and will comply with the offering restrictions
requirement of Regulation S.
(xxviii) Year 2000. The Company and its subsidiaries have implemented
a comprehensive, detailed program to analyze and address the risk that the
computer hardware and software used by them may be unable to recognize and
properly execute date-sensitive functions involving certain dates prior to
and any dates after December 31, 1999 (the "Year 2000 Problem"), and has
determined that any such risk that has not been remedied will be remedied
on a timely basis without material expense and will not have a material
adverse effect upon the financial condition and results of operations of
the Company and its subsidiaries, taken as a whole; and to the Company's
best knowledge, each supplier, vendor, customer or financial service
organization used or serviced by the Company and its subsidiaries has
remedied the Year 2000 Problem, although the failure by any such supplier,
vendor, customer or financial service organization to remedy the Year 2000
Problem could have a Material Adverse Effect on the Company and its
subsidiaries, taken as a whole. The Company is in compliance with the
Commission's staff legal bulletin No. 5 dated January 12, 1998 related to
Year 2000 compliance.
(b) Officer's Certificates. Any certificate signed by any duly authorized
officer of the Company or any of its subsidiaries delivered to the Initial
Purchaser or counsel to the Initial Purchaser shall be deemed a representation
and warranty by the Company to the Initial Purchaser as to the matters covered
thereby.
SECTION 2. Sale and Delivery to Initial Purchaser; Closing.
(a) Securities. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, at the price set forth in Schedule A, $25,000,000 the
aggregate principal amount of Securities. The Company shall not be obligated to
deliver any of the Securities except upon payment for all of the Securities to
be purchased as provided herein.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Cravath, Swaine
& Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, or at
such other place as shall be agreed upon by the Initial Purchaser and the
Company, at 9:00 A.M. (eastern time) on March 7, 2000, or such other time not
later than ten business days after such date as shall be agreed upon by the
Initial Purchaser and the Company (such time and date of payment and delivery
being herein called the "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Initial Purchaser for the account of the Initial Purchaser of certificates
for the Securities to be purchased by it.
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SECTION 3. Covenants of the Company. The Company covenants with the Initial
Purchaser as follows:
(a) Offering Memorandum. The Company, as promptly as possible, will furnish
to the Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum (until the Final Offering Memorandum is
available), the Final Offering Memorandum and any amendments and supplements
thereto and documents incorporated by reference therein as the Initial Purchaser
may reasonably request.
(b) Notice and Effect of Material Events. Until the earliest to occur of
(i) the initial resale by the Initial Purchaser and (ii) 30 days from the date
hereof (the "End Date"), the Company will as promptly as practicable notify the
Initial Purchaser, and confirm such notice in writing, of (x) any filing made by
the Company of information relating to the offering of the Securities with any
securities exchange or any other regulatory body in the United States or any
other jurisdiction, and (y) prior to the End Date, any material changes in or
affecting the condition, financial or otherwise, or the earnings or business of
the Company and its subsidiaries considered as one enterprise which (i) make any
statement in the Offering Memorandum false or misleading or (ii) are not
disclosed in the Offering Memorandum. In such event or if during such time prior
to the End Date any event shall occur as a result of which it is necessary, in
the reasonable opinion of any of the Company, its counsel, the Initial Purchaser
or counsel for the Initial Purchaser, to amend or supplement the Final Offering
Memorandum in order that the Final Offering Memorandum not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in the light of the circumstances
then existing, the Company will forthwith amend or supplement the Final Offering
Memorandum by preparing and furnishing to the Initial Purchaser an amendment or
amendments of, or a supplement or supplements to, the Final Offering Memorandum
(in form and substance satisfactory in the reasonable opinion of counsel for the
Initial Purchaser) so that, as so amended or supplemented, the Final Offering
Memorandum will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a Subsequent
Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. Prior to the End
Date, the Company will advise the Initial Purchaser promptly of any proposal to
amend or supplement the Offering Memorandum. Neither the consent of the Initial
Purchaser, nor the Initial Purchaser's delivery of any such amendment or
supplement, shall constitute a waiver of any of the conditions set forth in
Section 5 hereof.
(d) Rating of Securities. The Company shall take all reasonable action
necessary to enable Standard & Poor's Ratings Services, a division of McGraw
Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("Moody's") to provide
their respective credit ratings of the Securities.
(e) DTC. The Company will cooperate with the Initial Purchaser and use its
reasonable best efforts to permit the Securities to be eligible for clearance
and settlement through the facilities of DTC.
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(f) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds".
(g) Restriction on Sale of Securities. During a period ending on the
earlier of (i) the date that the initial distribution of notes by the Initial
Purchaser is complete and (ii) 30 days from the date of the Offering Memorandum,
the Company will not, without the prior written consent of the Initial
Purchaser, directly or indirectly, issue, sell, offer or agree to sell, grant
any option for the sale of, or otherwise dispose of, any other debt securities
of the Company that are substantially similar to the Securities or securities of
the Company that are convertible into, or exchangeable for or otherwise
represent a right to acquire, the Securities or such other debt securities.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation,
printing, delivery to the Initial Purchaser and any filing of the Offering
Memorandum (including financial statements and any schedules or exhibits and any
document incorporated therein by reference) and of each amendment or supplement
thereto, (ii) the printing and delivery to the Initial Purchaser of this
Agreement, the Indenture and such other documents as may be required to be
printed in connection with the offering, purchase, sale, issuance or delivery of
the Securities, (iii) the preparation, issuance and delivery of the certificates
for the Securities to the Initial Purchaser, including any transfer taxes, any
stamp or other duties payable upon the sale, issuance and delivery of the
Securities to the Initial Purchaser and any charges of DTC in connection
therewith, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the reasonable fees and disbursements of counsel for the
Initial Purchaser in connection with the preparation of the Blue Sky Survey, and
any supplement thereto, (vi) the fees and expenses of the Trustee, including the
fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities, and (vii) any fees payable in connection with the
rating of the Securities.
(b) Termination of Agreement. If this Agreement is terminated by the
Initial Purchaser in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchaser for their
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Initial Purchaser.
SECTION 5. Conditions of Initial Purchaser's Obligations. The obligations
of the Initial Purchaser hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any of its subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Opinion of Counsel for Company. At the Closing Time, the Initial
Purchaser shall have received the favorable opinions, dated as of the Closing
Time, of the General Counsel of the Company and of Wachtell, Lipton, Rosen &
Katz, special counsel for the Company, in form and substance reasonably
satisfactory to counsel for the Initial Purchaser, substantially to the effect
set forth in Exhibit A hereto. In giving such opinion such counsel may rely, as
to all matters
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governed by the laws of jurisdictions other than the law of the State of New
York, the federal law of the United States and the General Corporation Law of
the State of Delaware, upon the opinions of counsel satisfactory to the Initial
Purchaser. Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(b) Opinion of Counsel for Initial Purchaser. At the Closing Time, the
Initial Purchaser shall have received the favorable opinion, dated as of the
Closing Time, of Cravath, Swaine & Moore, counsel for the Initial Purchaser,
with respect to the matters set forth in (i), (ii), (vi) through (ix),
inclusive, (xvi) and the penultimate paragraph of Exhibit A hereto. In giving
such opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the federal law of
the United States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to the Initial Purchaser. Such counsel may
also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and its subsidiaries and certificates of public officials.
(c) Officers' Certificate. At the Closing Time, there shall not have been
since the date hereof or since the respective dates as of which information is
given in the Final Memorandum, exclusive of any amendments or supplements
thereto after the date hereof, any Material Adverse Effect or any development
involving a prospective Material Adverse Effect, and the Initial Purchaser shall
have received a certificate of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the Company, dated as
of the Closing Time, to the effect that (i) there has been no such Material
Adverse Effect or any development involving a prospective Material Adverse
Effect, (ii) the representations and warranties in Section 1 hereof are true and
correct with the same force and effect as though expressly made at and as of the
Closing Time, and (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
the Closing Time.
(d) Accountants' Comfort Letter. At the time of the execution of this
Agreement, the Initial Purchaser shall have received from KPMG LLP a letter
dated such date, in form and substance reasonably satisfactory to the Initial
Purchaser, containing statements and information of the type ordinarily included
or as otherwise agreed in accountants' "comfort letters" to the Initial
Purchaser with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the Initial Purchaser
shall have received from KPMG LLP a letter, dated as of the Closing Time, to the
effect that it reaffirms the statements made in the letter furnished pursuant to
subsection (d) of this Section, except that the specified date referred to shall
be a date not more than three business days prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities shall be
rated at least BAA3 by Moody's and BBB by S&P, and the Company shall have
delivered to the Initial Purchaser a letter dated the Closing Time, from each
such rating agency, or other evidence satisfactory to the Initial Purchaser,
confirming that the Securities have such ratings; and since the date of this
Agreement, there shall not have occurred a downgrading in the rating assigned to
the Se-
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curities or any of the Company's other securities by any "nationally recognized
statistical rating agency", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the 1933 Act, and no such securities rating
agency shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of the Securities or any of the
Company's other securities.
(g) Additional Documents. At the Closing Time, counsel for the Initial
Purchaser shall have been furnished with such documents as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Securities as herein contemplated, or in order to evidence the accuracy of
any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Initial Purchaser
and counsel for the Initial Purchaser.
(h) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Initial Purchaser by notice to the Company at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 7, 8 and 9 shall survive any such termination and remain in
full force and effect.
SECTION 6. Subsequent Offers and Resales of the Securities.
(a) Offer and Sale Procedures. The Initial Purchaser and the Company hereby
establish and agree to observe the following procedures in connection with the
offer and sale of the Securities:
(i) Offers and Sales only to Qualified Institutional Buyers or
Non-U.S. Persons. Offers and sales of the Securities shall only be made (A)
to persons whom the offeror or seller reasonably believes to be qualified
institutional buyers, as defined in Rule 144A under the 1933 Act
("Qualified Institutional Buyers") and, if any such person is buying for
one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each
such account is a Qualified Institutional Buyer to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A and
in each case, in transactions in accordance with Rule 144A or (B) in the
case of offers or sales made outside the United States, to non-U.S. persons
outside the United States, as defined in Regulation S under the 1933 Act,
to whom the offeror or seller reasonably believes offers and sales of the
Securities may be made in reliance upon Regulation S under the 1933 Act.
The Initial Purchaser agrees that it will not offer, sell or deliver any of
the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws
thereof, and that it will take at its own expense whatever action is
required to permit its purchase and resale of the Securities in such
jurisdictions.
(ii) No General Solicitation. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be
used in the United States in connection with the offering or sale of the
Securities.
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<PAGE>
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
Subsequent Purchaser of a Security acting as a fiduciary for one or more
third parties, each third party shall, in the judgment of the Initial
Purchaser, be an Institutional Accredited Investor or a Qualified
Institutional Buyer or a non-U.S. person outside the United States.
(iv) Subsequent Purchaser Notification. The Initial Purchaser will
take reasonable steps to inform, and cause each of its U.S. Affiliates to
take reasonable steps to inform, persons acquiring Securities from the
Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
1933 Act, (B) are being sold to them without registration under the 1933
Act in reliance on Rule 144A or in accordance with another exemption from
registration under the 1933 Act, as the case may be, and (C) may not be
offered, sold or otherwise transferred except (1) to the Company, (2)
outside the United States in accordance with Regulation S, or (3) inside
the United States in accordance with (x) Rule 144A to a person whom the
seller reasonably believes is a Qualified Institutional Buyer that is
purchasing such Securities for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the offer, sale
or transfer is being made in reliance on Rule 144A or (y) pursuant to
another available exemption from registration under the 1933 Act.
(v) Restrictions on Transfer. The transfer restrictions and the other
provisions set forth in the Offering Memorandum under the heading "Notice
to Investors", including the legend required thereby, shall apply to the
Securities except as otherwise agreed by the Company and the Initial
Purchaser.
(b) Covenants of the Company. The Company covenants with the Initial
Purchaser as follows:
(i) Integration. The Company agrees that it will not and will cause
its Affiliates not to, directly or indirectly, solicit any offer to buy,
sell or make any offer or sale of, or otherwise negotiate in respect of,
securities of the Company of any class if, as a result of the doctrine of
"integration" referred to in Rule 502 under the 1933 Act, such offer or
sale would render invalid (for the purpose of (i) the sale of the
Securities by the Company to the Initial Purchaser, (ii) the resale of the
Securities by the Initial Purchaser to Subsequent Purchasers or (iii) the
resale of the Securities by such Subsequent Purchasers to others) the
exemption from the registration requirements of the 1933 Act provided by
Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or
otherwise.
(ii) Rule 144A Information. The Company agrees that, in order to
render the Securities eligible for resale pursuant to Rule 144A under the
1933 Act, while any of the Securities remain outstanding, it will make
available, upon request, to any holder of Securities or prospective
purchasers of Securities the information specified in Rule 144A(d)(4),
unless the Company furnishes information to the Commission pursuant to
Section 13 or 15(d) of the 1934 Act.
(iii) Restriction on Repurchases. Until the expiration of two years
after the original issuance of the Securities, the Company will not, and
will cause its Affiliates not
14
<PAGE>
to, resell any Securities which are "restricted securities" (as such term
is defined under Rule 144(a)(3) under the 1933 Act), whether as beneficial
owner or otherwise (except as agent acting as a securities broker on behalf
of and for the account of customers in the ordinary course of business in
unsolicited broker's transactions), except in compliance with the 1933 Act.
(c) Qualified Institutional Buyer. The Initial Purchaser represents and
warrants to, and agrees with, the Company that it is a Qualified Institutional
Buyer and an "accredited investor" within the meaning of Rule 501(a) under the
1933 Act (an "Accredited Investor").
(d) Resale Pursuant to Rule 903 of Regulation S or Rule 144A. The Initial
Purchaser understands that the Securities have not been and will not be
registered under the 1933 Act and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the 1933 Act or pursuant to an exemption from
the registration requirements of the 1933 Act. The Initial Purchaser represents,
warrants and agrees, that, except as permitted by Section 6(a) above, it has
offered and sold Securities and will offer and sell Securities (i) as part of
their distribution at any time and (ii) otherwise until forty days after the
later of the date upon which the offering of the Securities commences and the
Closing Time, only in accordance with Rule 903 of Regulation S, Rule 144A under
the 1933 Act or another applicable exemption from the registration requirements
of the 1933 Act. Accordingly, neither the Initial Purchaser, its affiliates nor
any persons acting on their behalf have engaged or will engage in any directed
selling efforts with respect to the Securities pursuant to Regulation S, and the
Initial Purchaser, its affiliates and any person acting on their behalf have
complied and will comply with the offering restriction requirements of
Regulation S. The Initial Purchaser agrees that, at or prior to confirmation of
a sale of Securities pursuant to Regulation S it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it or through it during the
restricted period a confirmation or notice to substantially the following
effect: The Initial Purchaser represents, warrants and agrees with respect to
offers and sales outside the United States that:
(i) it understands that no action has been or will be taken in any
jurisdiction by the Company that would permit a public offering of the
Securities or possession or distribution of either Memorandum or any other
offering or publicity material relating to the Securities, in any country
or jurisdiction where action for that purpose is required;
(ii) it will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or
has in its possession or distributes either Memorandum or any such other
material, in all cases at its own expense;
(iii) the Securities have not been and will not be registered under
the 1933 Act and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except in accordance with
Regulations S under the 1933 Act or pursuant to another exemption from the
registration requirements of the 1933 Act;
(iv) it has (1) not offered or sold and will not offer or sell in the
United Kingdom, by means of any document, any Securities other than to any
persons whose ordinary business it is to buy and sell shares or debentures,
whether as a principal or agent, or in
15
<PAGE>
circumstances which do not constitute an offer to the public within the
meaning of the Companies Act 1985, as amended (2) complied and will comply
with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Securities in, from or
otherwise involving the United Kingdom, and (3) only issued or passed on
and will only issue and pass onto any persons in the United Kingdom any
document received by it in connection with the issue of the Securities if
that person is of a kind described in Article 9(3) of the Financial
Services Act 1986 (Investment Advertisement) (Exemptions) Order 1988 or is
a person to whom the document may otherwise lawfully by issued or passed
on;
(v) it understands that the Securities have not been and will not be
registered under the Securities and Exchange Law of Japan, and represents
that it has not offered or sold, and agrees that it will not offer or sell,
and Securities, directly or indirectly in Japan or to or from any resident
of Japan except (i) pursuant to an exemption from the registration
requirements of the Securities and Exchange Law of Japan and (ii) in
compliance with any other applicable requirements of Japanese Law;
(vi) At or prior to confirmation of a sale of Securities pursuant to
Regulation S it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it or through it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to or for the
account or benefit of U.S. persons (i) as part of their distribution
at any time and (ii) otherwise until forty days after the later of the
date upon which the offering of the Securities commenced and the date
of closing, except in either case in accordance with Regulation S or
Rule 144A under the Securities Act. Terms used above have the meaning
given to them by Regulation S."
Terms used in the above paragraph have the meanings given to them by
Regulation S.
(e) Additional Representations and Warranties of Initial Purchaser. The
Initial Purchaser represents and agrees that it has not entered and will not
enter into any contractual arrangements with respect to the distribution of the
Securities, except with its affiliates or with the prior written consent of the
Company. The Initial Purchaser hereby agrees that, prior to or simultaneously
with the confirmation of sale by the Initial Purchaser to any purchaser of any
of the Securities purchased by the Initial Purchaser from the Company pursuant
to this Agreement, the Initial Purchaser shall deliver to all such purchasers
with addresses in the United States and, to the extent required by applicable
law, to other purchasers a copy of the Offering Memorandum (any and amendment or
supplement thereto that the Company shall have furnished to the Initial
Purchaser prior to the date of such confirmation of sale). The Initial Purchaser
further agrees that, without the prior written consent of the Company, the
Initial Purchaser will not disseminate any written materials to holders of the
Securities for or in connection with the transactions contemplated by this
Agreement other than the Offering Memorandum.
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<PAGE>
SECTION 7. Indemnification.
(a) Indemnification of Initial Purchaser. The Company agrees to indemnify
and hold harmless the Initial Purchaser and each person, if any, who controls
the Initial Purchaser within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever (at least quarterly) arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum or the Final Offering Memorandum (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever (at least quarterly) to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
7(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, (at least quarterly)
(including the reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to
any loss, liability, claim, damage or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished
to the Company by the Initial Purchaser expressly for use in the Offering
Memorandum (or any amendment thereto); provided, further, that, with
respect to any loss, liability, claim, damage or expense arising out of any
untrue statement or omission or alleged untrue statement or omission
contained in any Preliminary Offering Memorandum or the Final Offering
Memorandum (or any amendment or supplement thereto), the indemnity
contained in this Section shall not inure to the benefit of the Initial
Purchaser (or any person who controls the Initial Purchaser) if (i) a copy
of the Final Offering Memorandum or amendment or supplement thereto was to
be sent or given to such purchasers with addresses in the United States
and, to the extent required by applicable law, to other purchasers, at or
prior to the written confirmation of the sale of the applicable Securities
together with all amendments or supplements thereto available at such time
and was not sent or given and (ii) such untrue statement or omission or
alleged untrue statement or omission was corrected in the Final Offering
Memorandum or in any amendment or supplement thereto available at such
time.
(b) Indemnification of Company. The Initial Purchaser severally agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the
17
<PAGE>
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Offering Memorandum in reliance upon and in conformity with written
information furnished to the Company by the Initial Purchaser expressly for use
in the Offering Memorandum, and shall reimburse the Company for any and all
expenses reasonably incurred by the Company in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action.
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to the indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder except to the extent it is
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by the Initial Purchaser
and shall be reasonably acceptable to the Company, and, in the case of parties
indemnified pursuant to Section 7(b) above, counsel to the indemnified parties
shall be selected by the Company and shall be reasonably acceptable to the
Initial Purchaser. An indemnifying party may participate at its own expense in
the defense of any such action and, to the extent it wishes, shall be entitled
to assume the defense of any such action with counsel reasonably satisfactory to
the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that an indemnified party shall have
the right to employ its own counsel in any such action, but the fees, expenses
and other charges of such counsel for the indemnified party will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (ii)
the indemnified party has reasonably concluded (based upon advice of counsel to
the indemnified party) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (iii) a conflict or potential conflict exists (based
upon advice of counsel to the indemnified party) between the indemnified party
and the indemnifying party (in which case the indemnifying party will not have
the right to direct the defense of such action on behalf of the indemnified
party) or (iv) the indemnifying party has not in fact employed counsel
reasonably satisfactory to the indemnified party to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
In no event shall counsel to the indemnifying party (except with the consent of
the indemnified party) also be counsel to the indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Each indemnified party shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnified party seeking or otherwise eligible for
indemnification or contribution hereunder will,
18
<PAGE>
without the prior written consent of the indemnifying party (which shall not be
unreasonably withheld), settle, compromise, consent to the entry of any judgment
in or otherwise seek to terminate any action, claim, suit, investigation or
proceeding pursuant to which indemnity or contribution is or may be available
hereunder. No indemnifying party shall, without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section or Section 8
hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party. Notwithstanding, this Section 7(c), if at
any time an indemnified party shall have requested the indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, the
indemnifying party shall not be liable for any settlement of the nature
contemplated by this Section 7(c) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchaser on the other hand from the offering of the Securities pursuant
to this Agreement or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and of the Initial Purchaser on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Initial Purchaser on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company, on the one hand, and the total underwriting discount received by
the Initial Purchaser, on the other, bear to the aggregate initial offering
price of the Securities.
The relative fault of the Company on the one hand and the Initial Purchaser
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchaser and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
19
<PAGE>
The Company and the Initial Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section, the Initial Purchaser shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased and sold by it hereunder exceeds
the amount of any damages which the Initial Purchaser has otherwise been
required to pay under Section 7(b) by reason of such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls the Initial
Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Initial Purchaser,
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
Subject to the initial sentence of Section 1(a), all representations, warranties
and agreements contained in this Agreement or in certificates of officers of the
Company or any of its subsidiaries submitted pursuant hereto shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the Initial Purchaser or controlling person, or by or on behalf
of the Company, and shall survive delivery of the Securities to the Initial
Purchaser.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Initial Purchaser may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Final Offering
Memorandum exclusive of any amendment or supplement thereto after the date
hereof, any material adverse change in the condition, financial or otherwise, or
in the earnings or business affairs of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Initial Purchaser,
impracticable to market the Securities or to enforce contracts for the sale of
20
<PAGE>
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ System has been suspended or materially limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 7,
8 and 9 shall survive such termination and remain in full force and effect.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchaser shall be directed to it at North Tower, World Financial Center, New
York, New York 10281, attention of Greg Kelly, Vice President; notices to the
Company shall be directed to it at One American Lane, Greenwich, CT 06831- 2559,
attention of Senior Vice President and General Counsel; with a copy to Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, NY 10019, attention of
Steven A. Cohen, Esq.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchaser and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchaser and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 7 and 8
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Initial Purchaser and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
the Initial Purchaser shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction hereof.
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Initial Purchaser and the Company in accordance with its terms.
Very truly yours,
CK WITCO CORPORATION
By:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
Authorized Signatory
22
<PAGE>
SCHEDULE A
CK WITCO CORPORATION
$25,000,000
Floating Rate Notes due 2001
1. The purchase price to be paid by the Initial Purchasers for the Floating
Rate Notes shall be 99.85% of the principal amount thereof.
2. The interest rate on the Floating Rate Notes shall be LIBOR plus 1.00%
per annum.
Sch A-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)*
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware.1
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum (except where the failure to have such power and authority would not
have a Material Adverse Effect) and to enter into and perform its obligations
under the Purchase Agreement.1
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.2
(iv) Each Designated Subsidiary has been duly incorporated and is validly
existing as a corporation under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum.
Each Designated Subsidiary organized under the laws of a state of the United
States is in good standing under the laws of its organization and is duly
qualified as a foreign corporation to transact business and is in good standing
in each state in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; all of the issued and outstanding capital stock of each
Designated Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable and, to the best of our knowledge and information, is owned
by the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.2
(v) The Purchase Agreement has been duly authorized, executed and delivered
by the Company.1
(vi) The Indenture has been duly authorized, executed and delivered by the
Company and (assuming the due authorization, execution and delivery thereof by
the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (in-
- ----------------------
* The paragraphs followed by footnote 1 will be given both by the Company
Counsel and WLR&K; paragraphs followed by footnote 2 will be given by the
Company Counsel only; paragraphs followed by footnote 3 will be given by WLR&K
only; and paragraphs followed by footnote 4 may be divided between the Company
Counsel and WLR&K.
A - 1
<PAGE>
cluding, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).1
(vii) The Securities are in the form contemplated by the Indenture, have
been duly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in the manner provided in the Indenture (assuming
the due authorization, execution and delivery of the Indenture by the Trustee)
and issued and delivered against payment of the purchase price therefor, will
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium (including,
without limitation, all laws relating to fraudulent transfers), or other similar
laws relating to or affecting enforcement of creditor's rights generally, or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law), and will be entitled to the benefits of the
Indenture.1
(viii) The Securities and the Indenture conform in all material respects to
the descriptions thereof contained in the Offering Memorandum under "Description
of the Notes".3
(ix) The documents incorporated by reference in the Offering Memorandum
(other than the financial statements and supporting schedules therein, as to
which no opinion need be rendered), when they were filed with the Commission
complied as to form in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission thereunder.2
(x) There is not pending or, to the best of our knowledge, threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any subsidiary
thereof is subject, before or brought by any court or governmental agency or
body, which might reasonably be expected to result in a Material Adverse Effect,
or the consummation of the transactions contemplated in the Purchase Agreement
or the performance by the Company of its obligations thereunder or the
transactions contemplated by the Offering Memorandum.2
(xi) The information in the Offering Memorandum under "Summary-The
Offering" "Description of the Notes", "Certain Federal Income Tax
Considerations" and "Exchange Offer; Registration Rights," to the extent that it
constitutes summaries of legal matters or legal proceedings, or legal
conclusions, has been reviewed by us and fairly summarizes the matters described
therein.3
(xii) All descriptions in the Offering Memorandum of contracts and other
documents to which the Company or any of its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments that would be required to be described in the Offering
Memorandum that are not described or referred to in the Offering Memorandum
other than those described or referred to therein or incorporated by reference
thereto, and the descriptions thereof or references thereto are correct in all
material respects.2
A - 2
<PAGE>
(xiii) To the best of our knowledge, neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws and no default by the
Company or any of its subsidiaries exists in the due performance or observance
of any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Offering Memorandum or
incorporated by reference therein, except as would not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole.2
(xiv) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than such as may be required under the
applicable securities laws of the various jurisdictions in which the Securities
will be offered or sold, as to which we need express no opinion) by the Company
or its subsidiaries is necessary or required in connection with the due
authorization, execution and delivery of the Purchase Agreement or the due
execution, delivery or performance of the Indenture by the Company or for the
offering, issuance, sale or delivery of the Securities to the Initial Purchaser
or the resale by the Initial Purchaser in accordance with the terms of the
Purchase Agreement, provided that the foregoing is limited to the laws of the
State of New York, the general corporation law of the State of Delaware, and the
laws of the United States of America, that, in our experience, are normally
applicable to transactions of the type provided in the Purchase Agreement and
the Registration Rights Agreement.4
(xv) Assuming compliance by all parties with the terms and conditions of
the Purchase Agreement and Indenture, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchaser and to each
Subsequent Purchaser in the manner contemplated by the Purchase Agreement and
the Offering Memorandum to register the Securities under the 1933 Act or to
qualify the Indenture under the Trust Indenture Act.3
(xvi) The execution, delivery and performance of the Purchase Agreement,
the DTC Agreement, the Indenture and the Securities and the consummation of the
transactions contemplated in the Purchase Agreement and in the Offering
Memorandum (including the use of the proceeds from the sale of the Securities as
described in the Offering Memorandum under the caption "Use Of Proceeds") and
compliance by the Company with its obligations under the Purchase Agreement, the
Indenture and the Securities do not and will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a breach
of, or default or Repayment Event (as defined in Section 1(a)(xiii) of the
Purchase Agreement) under or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument,
known to us, to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any subsidiary thereof is subject (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation of (A)
the charter or by-laws of the Company or any of its subsidiaries, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its Designated
Subsidiaries or any of the respective properties, assets, or operations or (B)
the General Corporation Law of the State of Delaware, the laws of the State of
New York or the laws of the United States
A - 3
<PAGE>
of America. Such counsel need not express any opinion in this clause (xvi),
however, as to (i) the blue sky laws of any state, (ii) laws other than those
that, in our experience, are normally applicable to transactions of the type
provided for by the Purchase Agreement and the Registration Agreement and (iii)
any consent or authorization which may have become applicable to the Company as
a result of the Initial Purchaser's involvement in the Purchase Agreement or the
Registration Rights Agreement because of the Initial Purchaser's legal or
regulatory status or because of any other facts specifically pertaining to the
Initial Purchaser.4
(xvii) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.3
Nothing has come to our attention that would lead us to believe that the
Offering Memorandum or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom as to which we need make no statement and
except as to documents incorporated by reference), at the time the Offering
Memorandum was issued, at the time any such amended or supplemented Offering
Memorandum was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.1
The foregoing opinions and statements may be subject to assumptions,
qualifications and limitations customary in similar transactions.
A - 4
SUPPLEMENT TO OFFERING MEMORANDUM CONFIDENTIAL
$600,000,000
CKWITCO
8 1/2% SENIOR NOTES DUE 2005
---------------------
The offering memorandum attached hereto is hereby
supplemented by deleting the last two paragraphs on page 41 and
replacing those paragraphs with the following:
"If we are obligated, we will use our reasonable best
efforts to file a shelf registration statement, as promptly as
practicable after becoming so obligated and use our reasonable
best efforts to cause the shelf registration statement to be
declared effective by the Commission as promptly as practicable
but no later than 150 days after becoming so obligated. We will
use our reasonable best efforts to keep the shelf registration
statement continuously effective until the second anniversary of
the effective date of the shelf registration statement or such
shorter period that will terminate when all the Registrable Notes
covered by the shelf registration statement have been sold
pursuant thereto or cease to be outstanding or otherwise to be
Registrable Notes. A holder of notes that sell its notes under
the shelf registration statement generally will be required to be
named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of
the registration rights agreement that are applicable to such
holder (including certain indemnification and contribution
obligations).
If:
. the Exchange Offer Registration Statement in not filed with the
Commission on or prior to the 75th calendar day following the
date of original issue of the notes,
. the Exchange Offer Registration Statement has not been
declared effective on or prior to the 150th calendar day
following the date of original issue of the notes, or
. the Exchange Offer is not consummated on or prior to the 180th
calendar day following the date of original issue of the notes or
a shelf registration statement is not declared effective within
150 days after the obligation arises to file the shelf
registration statement.
(each such event referred to in the above clauses, a
"Registration Default"), the interest rate borne by the notes
will increase ("Additional Interest") by 0.25% per annum upon the
occurrence of each Registration Default. The rate will increase
by an additional 0.25% after each 90-day period that a
Registration Default is continuing, up to a maximum increase of
1.00% per annum. Following the cure of all Registration Defaults
Additional Interest will cease to accrue and the interest rate
will revert to the original rate."
MERRILL LYNCH & CO.
The date of this supplement to the offering memorandum is
March 2, 2000.
CK WITCO CORPORATION
8 1/2% Senior Notes due 2005
INDENTURE
Dated as of March 1, 2000
CITIBANK, N.A.
as Trustee
CROSS-REFERENCE TABLE
TIA Section Indenture Section
310(a)(1) 6.10
(a)(2) 6.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 6.8; 6.10
(b) 6.8; 6.10
(c) N.A.
311(a) 6.11
(b) 6.11
(c) N.A.
312(a) 2.5
(b) 10.3
(c) 10.3
313(a) 6.6
(b)(1) N.A.
(b)(2) 6.6
(c) 6.6
(d) 6.6
314(a) 3.2; 10.2
(b) N.A.
(c)(1) 10.4
(c)(2) 10.4
(c)(3) N.A.
(d) N.A.
(e) 10.5
(f) 3.9
315(a) 6.1
(b) 6.5; 10.2
(c) 6.1
(d) 6.1
(e) 5.11
316(a)(last sentence) 10.6
(a)(1)(A) 5.5
(a)(1)(B) 5.4
(a)(2) N.A.
(b) 5.7
317(a)(1) 5.8
(a)(2) 5.9
(b) 2.4
318(a) 10.1
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be part of the Indenture.
TABLE OF CONTENTS
Page
ARTICLE I Definitions and Incorporation by Reference
SECTION 1.1. Definitions 1
SECTION 1.2. Other Definitions 14
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act 15
SECTION 1.4. Rules of Construction 16
ARTICLE II The Securities
SECTION 2.1. Form, Dating and Terms 16
SECTION 2.2. Execution and Authentication 22
SECTION 2.3. Registrar and Paying Agent 24
SECTION 2.4. Paying Agent To Hold Money in Trust 24
SECTION 2.5. Securityholder Lists 25
SECTION 2.6. Transfer and Exchange 25
SECTION 2.7. Form of Certificate to be Delivered in Connection
with Transfers to Institutional Accredited Investors 30
SECTION 2.8. Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S 32
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen
Securities 33
SECTION 2.10. Temporary Securities 34
SECTION 2.11. Cancellation 34
SECTION 2.12. Payment of Interest; Defaulted Interest 34
SECTION 2.13. Computation of Interest 36
SECTION 2.14. CUSIP Numbers 36
ARTICLE III Covenants
SECTION 3.1. Payment of Securities 36
SECTION 3.2. Reports by the Company 37
SECTION 3.3. Limitation on Mortgages 37
SECTION 3.4. Limitation on Sale and Leaseback Transactions 42
SECTION 3.5. Exempted Indebtedness 43
SECTION 3.6. Limitation on Subsidiary Indebtedness 43
SECTION 3.7. Sales of Accounts Receivable 45
SECTION 3.8. Waiver of Certain Covenants 46
SECTION 3.9. Maintenance of Office or Agency 47
SECTION 3.10. Money for Security Payments to be Held
in Trust 47
SECTION 3.11. Corporate Existence 49
SECTION 3.12. Compliance Certificate 49
SECTION 3.13. Maintenance of Properties 50
SECTION 3.14. Payment of Taxes and Other Claims 50
SECTION 3.15. Statement by Officers as to Default 50
ARTICLE IV Consolidation, Merger, Conveyance, Transfer or
Lease
SECTION 4.1. Company May Consolidate, Etc., Only on Certain
Terms 50
SECTION 4.2. Successor Substituted 52
ARTICLE V Defaults and Remedies
SECTION 5.1. Events of Default 52
SECTION 5.2. Acceleration 54
SECTION 5.3. Other Remedies 55
SECTION 5.4. Waiver of Past Defaults 55
SECTION 5.5. Control by Majority 56
SECTION 5.6. Limitation on Suits 56
SECTION 5.7. Rights of Holders to Receive Payment 57
SECTION 5.8. Collection Suit by Trustee 57
SECTION 5.9. Trustee May File Proofs of Claim 57
SECTION 5.10. Priorities 58
SECTION 5.11. Undertaking for Costs 58
ARTICLE VI Trustee
SECTION 6.1. Duties of Trustee 59
SECTION 6.2. Rights of Trustee 60
SECTION 6.3. Individual Rights of Trustee 61
SECTION 6.4. Trustee's Disclaimer. 61
SECTION 6.5. Notice of Defaults 62
SECTION 6.6. Reports by Trustee to Holders 62
SECTION 6.7. Compensation and Indemnity 62
SECTION 6.8. Replacement of Trustee 63
SECTION 6.9. Successor Trustee by Merger 64
SECTION 6.10. Eligibility; Disqualification 65
SECTION 6.11. Preferential Collection of Claims
Against Company 65
SECTION 6.12. Trustee's Application for Instructions from the
Company 65
ARTICLE VII Discharge of Indenture; Defeasance; Covenant
Defeasance
SECTION 7.1. Discharge of Liability on Securities; Defeasance;
Covenant Defeasance 66
SECTION 7.2. Conditions to Defeasance or
Covenant Defeasance 67
SECTION 7.3. Application of Trust Money 70
SECTION 7.4. Repayment to Company 70
SECTION 7.5. Indemnity for U.S. Government Obligations 71
SECTION 7.6. Reinstatement 71
ARTICLE VIII Amendments
SECTION 8.1. Without Consent of Holders 71
SECTION 8.2. With Consent of Holders 72
SECTION 8.3. Compliance with Trust Indenture Act 73
SECTION 8.4. Revocation and Effect of Consents and Waivers 73
SECTION 8.5. Notation on or Exchange of Securities 74
SECTION 8.6. Trustee To Sign Amendments 74
ARTICLE IX Redemption of Securities
SECTION 9.1. Redemption 74
SECTION 9.2. Applicability of Article 74
SECTION 9.3. Election to Redeem; Notice to Trustee 74
SECTION 9.4. Selection by Trustee of Securities to be
Redeemed 75
SECTION 9.5. Notice of Redemption 75
SECTION 9.6. Deposit of Redemption Price 77
SECTION 9.7. Securities Payable on Redemption Date 77
SECTION 9.8. Securities Redeemed in Part 77
ARTICLE X Miscellaneous
SECTION 10.1. Trust Indenture Act Controls 78
SECTION 10.2. Notices 78
SECTION 10.3. Communication by Holders with other Holders 79
SECTION 10.4. Certificate and Opinion as to Conditions
Precedent 79
SECTION 10.5. Statements Required in Certificate or Opinion 79
SECTION 10.6. Rules by Trustee, Paying Agent and Registrar 79
SECTION 10.7. Legal Holidays 79
SECTION 10.8. Governing Law 80
SECTION 10.9. No Recourse Against Others 80
SECTION 10.10. Successors 80
SECTION 10.11. Multiple Originals 80
SECTION 10.12. Variable Provisions 80
SECTION 10.13. Qualification of Indenture 80
SECTION 10.14. Table of Contents; Headings 81
EXHIBIT A Form of the Initial Note
EXHIBIT B Form of the Exchange Note and Private Exchange
Note
INDENTURE dated as of March 1, 2000, between CK Witco
Corporation, a Delaware corporation (the "Company"), and
Citibank, N.A., a national banking association duly organized and
existing under the laws of the United States (the "Trustee").
Each party agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the
Holders of the Company's 8 1/2% Senior Notes due 2005 (the
"Initial Notes") and, if and when issued in exchange for Initial
Notes, as provided in the Registration Rights Agreement (as
hereinafter defined), the Company's 8 1/2% Senior Notes due 2005
(the "Exchange Notes"). Under certain circumstances, as
described in the Registration Rights Agreement, the Company may
issue private exchange notes in exchange for Initial Notes (the
"Private Exchange Notes"). The Initial Notes together with the
Exchange Notes and the Private Exchange Notes are hereinafter
referred to as the "Securities" or the "Notes".
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Accounts Receivable Subsidiary" means a Subsidiary of
the Company (i) which is formed solely for the purpose of, and
which engages in no activities other than activities in
connection with, financing accounts receivable and/or notes
receivable and related assets of the Company and/or its
Restricted Subsidiaries, (ii) which is designated by the Board of
Directors as an Accounts Receivables Subsidiary pursuant to a
resolution set forth in an Officers' Certificate and delivered to
the Trustee, (iii) that has total assets at the time of such
designation with a book value not exceeding $100,000 plus the
reasonable fees and expenses required to establish such Accounts
Receivable Subsidiary and any accounts receivable financing, (iv)
no portion of Indebtedness or any other obligation (contingent or
otherwise) of which (a) is at any time recourse to or obligates
the Company or any Restricted Subsidiary of the Company in any
way, other than pursuant to (I) representations, warranties,
covenants and indemnities entered into in the ordinary course of
business in connection with the sale of accounts receivable
and/or notes receivable to such Accounts Receivable Subsidiary or
(II) any guarantee of any such accounts receivable financing by a
Restricted Subsidiary that is permitted to be incurred pursuant
to the covenant described in Section 3.6(a), or (b) subjects any
property or asset of the Company or any Restricted Subsidiary of
the Company, directly or indirectly, contingently or otherwise,
to the satisfaction thereof, other than pursuant to (I)
representations, warranties, covenants and indemnities entered
into in the ordinary course of business in connection with sales
of accounts receivables and/or notes receivable or (II) any
guarantee of any such accounts receivable financing by a
Restricted Subsidiary that is permitted to be incurred pursuant
to Section 3.6(a), (v) with which neither the Company nor any
Restricted Subsidiary of the Company has any contract, agreement,
arrangement or understanding other than contracts, agreements,
arrangements or understandings entered into the ordinary course
of business in connection with sales of accounts receivable
and/or notes receivable in accordance with Section 3.7 and fees
payable in the ordinary course of business in connection with
servicing accounts receivable and/or notes receivable and (vi)
with respect to which neither the Company nor any Restricted
Subsidiary of the Company has any obligation (a) to subscribe for
additional shares of Capital Stock or other Equity Interests
therein or make any additional capital contribution or similar
payment or transfer thereto other than in connection with the
sale of accounts receivable and/or notes receivable to such
Accounts Receivable Subsidiary in accordance with Section 3.7 or
(b) to maintain or preserve solvency or any balance sheet item,
financial condition, level of income or results of operations
thereof.
"Acquired Indebtedness" means Subsidiary Indebtedness
(other than Permitted Subsidiary Indebtedness) of a Person:
(1) existing at the time such Person becomes a
Restricted Subsidiary, or
(2) assumed in connection with the acquisition of
assets by such Person,
in each case, other than Subsidiary Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary or such acquisition, as the case may be.
"Affiliate" of any specified Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct
the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Attributable Debt" means, as to any particular lease
relating to a sale and leaseback transaction of a Principal
Property under which any Person is at the time liable, at any
date as of which the amount thereof is to be determined, the
total net amount of rent (discounted from the respective due
dates thereof at the interest rate from time to time being used
by the Company to determine its liability in respect of
capitalized leases) required to be paid by such Person under such
lease during the remaining term thereof. The net amount of rent
required to be paid under any such lease for any such period
shall be the total amount of the rent payable by the lessee with
respect to such period, but may exclude amounts required to be
paid on account of maintenance and repairs, insurance, taxes,
assessments, utilities, operating and labor costs and similar
charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount of rent
shall also include the amount of such penalty, but no rent shall
be considered as required to be paid under such lease subsequent
to the first date upon
which it may be so terminated.
"Board of Directors" means the Board of Directors of
the Company or any committee thereof duly authorized to act on
behalf of such Board of Directors with respect to the relevant
matter.
"Business Day" means a day other than a Saturday,
Sunday or other day on which commercial banking institutions are
authorized or required by law to close in New York City.
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease
for financial reporting purposes in accordance with generally
accepted accounting principles, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of
such obligation determined in accordance with generally accepted
accounting principles; and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible into such equity.
"Cash Equivalents" means (i) United States dollars,
(ii) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or
instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having
maturities of not more than six months from the date of
acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of
$500 million, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described
in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poors
Corporation and in each case maturing within six months after the
date of acquisition and (vi) money market funds at least 95% of
the assets of which constitute Cash Equivalents of the kinds
described in this definition.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Company" means CK Witco Corporation until a successor
replaces it and, thereafter, means such successor.
"Consolidated Net Tangible Assets" means total
consolidated assets of the Company and its Subsidiaries, less the
following:
(1) current liabilities of the Company and its
Subsidiaries;
(2) all depreciation and valuation reserves and all
other reserves (except (a) reserves for contingencies which have
not been allocated to any particular purpose, and (b) deferred
credits, including deferred federal and foreign income taxes and
deferred investment tax credits) of the Company and its
Subsidiaries;
(3) the net book amount of all intangible assets of the
Company and its Subsidiaries, including the unamortized portions
of such items as goodwill, trademarks, trade names, patents and
debt discount and expense less debt premium; and
(4) appropriate adjustments on account of minority
interests of other Persons holding stock in Subsidiaries.
"Default" means any event or condition that is, or
after notice or passage of time or both would be, an Event of
Default.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable at the option of the holder) or upon the happening
of any event:
(1) matures or is mandatorily redeemable pursuant
to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of
the holder for Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased
upon the occurrence of certain events or otherwise, in whole or
in part;
in each case on or prior to the Stated Maturity of the
Securities.
"Depositary" means The Depository Trust Company, its
nominees and their respective successors and assigns, or such
other depository institution hereinafter appointed by the
Company.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exchange Offer" shall have the meaning set forth in
the Registration Rights Agreement.
"Foreign Subsidiary" means any Subsidiary that is
formed under the laws of any jurisdiction outside of the
United States of America and its territories and possessions or
substantially all of the operating assets of which are located,
and substantially all of the business of which is carried on
outside the United States of America and its territories and
possessions, and includes any Subsidiary formed under the laws of
any State of the United States of America which is primarily
engaged in financing the operations of the Company or its
Subsidiaries, or both, outside the United States of America and
its territories and possessions.
"Guarantee" means the unconditional and unsubordinated
guarantee by the Guarantor of the due and punctual payment of
principal of and interest on the Securities when and as the same
shall become due and payable, whether at the Stated Maturity, by
acceleration, call for redemption or otherwise in accordance with
the terms of the Securities and this Indenture.
"Guarantor" means any Restricted Subsidiary, other than
Foreign Subsidiaries, that after the date of this Indenture
executes a guarantee of the Securities contemplated by Section
3.6 until a successor replaces such party pursuant to the
applicable provisions of this Indenture, or until otherwise
released in accordance with the terms of this Indenture.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect on the Issue Date,
including those set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and
computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.
"Hedging Obligations" means, with respect to any
Person, the obligations of such Person under (i) interest rate
swap agreements, interest rate cap agreements and interest rate
collar agreements or other agreements or arrangements designed to
protect such Person against fluctuations in interest rates and
(ii) foreign exchange contracts, currency swap agreements or
other similar agreements or arrangements designed to protect such
Person against fluctuations in currency exchange rates, in each
case provided that such obligations are entered into solely to
protect such Person against fluctuations in interest rates or
currency exchange rates and not for purposes of speculation.
"Holder" or "Securityholder" means the Person in whose
name a Security is registered in the Note Register.
"Indebtedness" means (i) all items of indebtedness or
liability (except capital and surplus) which in accordance with
GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet as at the date as of
which indebtedness is to be determined, (ii) indebtedness secured
by any Mortgage existing on property owned subject to such
Mortgage, whether or not the indebtedness secured thereby shall
have been assumed, provided that if such indebtedness shall not
have been assumed the amount of such obligation shall be deemed
to be the lesser of the value of such property or the amount of
the indebtedness so secured and (iii) guarantees, endorsements
(other than for purposes of collection) and other contingent
obligations in respect of, or to purchase or otherwise acquire,
indebtedness of others, unless the amount thereof is included in
indebtedness under the preceding clauses (i) or (ii).
"Indenture" means this Indenture as amended or
supplemented from time to time.
"Institutional Accredited Investor" means an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Issue Date" means the date on which the Initial Notes
are originally issued.
"Maturity", when used with respect to any Security,
means the date on which the principal of such Security or an
installment of principal becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration
of acceleration, call for redemption or otherwise.
"Mortgage" means and includes any mortgage, pledge,
lien, security interest, conditional sale or other title
retention agreement or other similar encumbrance.
"Obligation" means any principal, interest, penalties,
fees, indemnifications, reimbursements, damages and other
liabilities and obligations payable under the documentation
governing any Indebtedness.
"Officer" means any of the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer and Principal Accounting
Officer any Vice President, the Treasurer, the Secretary or the
Controller of the Company.
"Officers' Certificate" means a certificate signed by
two or more Officers.
"Opinion of Counsel" means a written opinion from legal
counsel. The counsel may be an employee of or counsel to the
Company.
"Outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(1) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has
been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 7.1(c);
(4) Securities which have been paid pursuant to
Section 2.9 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory
to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice,
consent or waiver hereunder, (A) Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which a Trust Officer of the Trustee actually knows to
be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other
obligor.
"Permitted Subsidiary Indebtedness" means (i) any
Indebtedness existing on March 7, 2000; (ii) any Indebtedness
owed to the Company or a Restricted Subsidiary; (iii) any
Indebtedness secured by a Mortgage not prohibited by Section 3.3;
(iv) any Indebtedness incurred by any Restricted Subsidiary to
extend, refinance, renew or replace an equivalent or lesser
amount of Indebtedness of such Restricted Subsidiary referred to
in clause (i) above, including any premium, prepayment penalties
or fees or expenses incurred in connection therewith; (v)
Indebtedness incurred by an Accounts Receivables Subsidiary in
connection with a transaction pursuant to and in compliance with
Section 3.7 hereof; (vi) the guarantee by any Restricted
Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary that was permitted to be incurred by another provision
of this Indenture; (vii) the incurrence by the Restricted
Subsidiaries of Hedging Obligations incurred with respect to any
Indebtedness or Obligation that is permitted by the terms of this
Indenture to be outstanding; (viii) Indebtedness incurred by
Restricted Subsidiaries constituting reimbursement obligations
with respect to letters of credit issued in the ordinary course
of business, including letters of credit in respect of workers'
compensation claims or self-insurance, surety bonds or other
Indebtedness with respect to reimbursement type obligations
regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the incurrence of
such Indebtedness, such obligations are reimbursed within 30 days
following such drawing or incurrence; (ix) Indebtedness arising
from agreements of a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with
the disposition of any business, asset or Restricted Subsidiary,
other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such
acquisition; provided, however, that the maximum aggregate
liability of all such Indebtedness shall at no time exceed 50% of
the gross proceeds actually received in connection with such
disposition; (x) the incurrence of Indebtedness of Restricted
Subsidiaries (including letters of credit) in respect of
performance bonds, bankers' acceptances, letters of credit,
performance, bid, surety or appeal bonds or similar bonds and
completion guarantees provided by Restricted Subsidiaries in the
ordinary course of their business and consistent with past
practices and which do not secure other Indebtedness; (xi)
Indebtedness that constitutes an accrued expense or trade
payable; (xii) Indebtedness of a Restricted Subsidiary, to the
extent the net proceeds thereof are promptly deposited to defease
the Securities as described under Section 7.1; (xiii)
Indebtedness that constitutes a liability for federal, state,
local or other taxes and (xiv) Indebtedness that constitutes an
obligation to pay salary or benefits to officers, employees and
directors in the ordinary course of business.
"Person" means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 2.9 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Preferred Stock", as applied to the Capital Stock of
any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such
Person.
"Principal Property" means any manufacturing facility
located within the United States of America owned or leased by
the Company or any Subsidiary except (a) any such manufacturing
facility which the Board of Directors by resolution declares is
not of material importance to any business segment of the Company
or its Subsidiaries and (b) any such manufacturing facility that
has total assets of less than $25 million.
"QIB" means any "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act).
"Redemption Date" means the date fixed for the
redemption of any Security by or pursuant to this Indenture.
"Redemption Price" means the price at which any
Security is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the registration
rights agreement dated March 7, 2000, among the Company, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO
Incorporated, Banc of America Securities LLC, Chase Securities
Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and
Salomon Smith Barney Inc.
"Restricted Period" means the 40 consecutive days
beginning on and including the later of (A) the day on which the
Initial Notes are offered to persons other than distributors (as
defined in Regulation S under the Securities Act) and (B) the
Issue Date.
"Restricted Securities Legend" has the meaning assigned
thereto in clause (A) of Section 2.1(c).
"Restricted Subsidiary" means any Subsidiary of the
Company that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities" or "Notes" means the Securities issued
under this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Custodian" means the custodian with respect
to the Global Securities (as appointed by the Depositary), or any
successor Person thereto and shall initially be the Trustee.
"Stated Maturity", when used with respect to any
Security or any installment of principal thereof or interest
thereon, means the date specified in such Security as the fixed
date on which the principal of such Security or such installment
of principal or interest is due and payable.
"Subsidiary" means a corporation or other business
entity of which more than 50% of the outstanding voting share
capital or other voting ownership interests are owned, directly
or indirectly, by the Company or by one or more other
Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Subsidiary Indebtedness" means, with respect to any
Restricted Subsidiary on any date of determination (without
duplication):
(1) the principal in respect of (A) Indebtedness of
such Restricted Subsidiary for money borrowed and (B)
Indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Restricted
Subsidiary is responsible or liable, including, in each case, any
premium on such Indebtedness to the extent such premium has
become due and payable;
(2) all Capital Lease Obligations of such
Restricted Subsidiary and all Attributable Debt in respect of
sale and leaseback transactions entered into by such Restricted
Subsidiary;
(3) all obligations of such Restricted Subsidiary
issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Restricted Subsidiary and
all obligations of such Restricted Subsidiary under any title
retention agreement (but excluding trade accounts payable arising
in the ordinary course of business);
(4) all obligations of such Restricted Subsidiary
for the reimbursement of any obligor, other than the Company or a
Restricted Subsidiary, on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations
with respect to letters of credit securing obligations (other
than obligations described in clauses (1) through (3) above)
entered into in the ordinary course of business of the Company
and its Restricted Subsidiaries as a whole to the extent such
letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth
Business Day following payment on the letter of credit);
(5) the amount of all obligations of such
Restricted Subsidiary with respect to the redemption, repayment
or other repurchase of any Disqualified Stock or, with respect to
any Restricted Subsidiary thereof, the liquidation preference
with respect to any Preferred Stock (but excluding, in each case,
any accrued dividends);
(6) all obligations of the type referred to in
clauses (1) through (5) of other Persons (other than Restricted
Subsidiaries) and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise,
including by means of any guarantee; and
(7) all obligations of the type referred to in
clauses (1) through (6) of other Persons (other than the Company
and its Restricted Subsidiaries) secured by any Mortgage on any
property or asset of such Restricted Subsidiary (whether or not
such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured.
The amount of Subsidiary Indebtedness of any Restricted
Subsidiary at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such
date.
"TIA" or "Trust Indenture Act" means the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as
amended, as in effect on the date hereof (except as provided in
Section 8.3) until such time as this Indenture is qualified under
the TIA, and thereafter, as in effect on the date on which this
Indenture is qualified under the TIA (except as provided in
Section 8.3).
"Trustee" means the party named as such in this
Indenture until a successor replaces it in accordance with the
applicable provisions of this Indenture and, thereafter, means
such successor.
"Trust Officer" any officer within the Global Agency &
Trust Services department of the Trustee, including any vice
president, assistant vice president, senior trust officer, trust
officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who
at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and who
shall have direct responsibility for the administration of this
Indenture.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time
of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Mortgage on any property of, the
Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided,
however, that the Subsidiary to be so designated has total assets
of $1,000 or less.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that
no Default shall result therefrom or shall have occurred and be
continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a
copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
SECTION 1.2. Other Definitions.
Term Defined in Section
"Agent Members" 2.1(d)
"Authenticating Agent" 2.2
"Company Order" 2.2
"Corporate Trust Office" 3.7
"Covenant Defeasance" 7.1(d)
"Defaulted Interest" 2.12
"Defeasance" 7.1(c)
"Definitive Securities" 2.1(e)
"Event of Default" 5.1
"Exchange Global Note" 2.1(a)
"Exchange Notes" Preamble
"Financier" 3.7
"Foreign Restricted Subsidiary" 3.6(a)
"Foreign Stock Pledge" 3.6(a)
"Global Securities" 2.1(a)
"IAI Global Note" 2.1(a)
"IAI Notes" 2.1(a)
"Initial Notes" Preamble
"legal defeasance option" 7.1(b)
"Note Register" 2.3
"Promissory Note" 3.7
"Private Exchange Notes" Preamble
"Purchase Agreement 2.1(a)
"Registrar" 2.3
"Regulation S" 2.1(a)
"Regulation S Note" 2.1(a)
"Regulation S Global Note" 2.1(a)
"Resale Restriction Termination Date" 2.6
"Rule 144A" 2.1(a)
"Rule 144A Note" 2.1(a)
"Rule 144A Global Note" 2.1(a)
"Special Interest Payment Date" 2.12(a)
"Special Record Date" 2.12(a)
"U.S. Governmental Obligations" 7.2
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act. This Indenture is subject to the mandatory
provisions of the TIA, which are incorporated by reference in and
made a part of this Indenture. The following TIA terms have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Company
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by the TIA by reference to another
statute or defined by SEC rule have the meanings assigned to them
by such definitions.
SECTION 1.4. Rules of Construction. Unless the
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words
in the plural include the singular; and
(6) the principal amount of any noninterest bearing or
other discount security at any date shall be the principal amount
thereof that would be shown on a balance sheet of the issuer
dated such date prepared in accordance with GAAP.
ARTICLE II
The Securities
SECTION 2.1. Form, Dating and Terms. (a) The Initial
Notes are being offered and sold by the Company pursuant to a
Purchase Agreement, dated March 2, 2000, among the Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO
Incorporated, Banc of America Securities LLC, Chase Securities
Inc., Deutsche Bank Securities Inc., Goldman Sachs and Co., and
Salomon Smith Barney Inc. (the "Purchase Agreement").
Initial Notes offered and sold to QIBs pursuant to Rule
144A under the Securities Act ("Rule 144A") in the United States
of America (the "Rule 144A Note") will be issued on the Issue
Date in the form of a single, permanent global Security in
definitive, fully registered book-entry form substantially in the
form of Exhibit A, which is hereby incorporated by reference and
expressly made a part of this Indenture (the "Rule 144A Global
Note"), registered in the name of a nominee of the Depositary,
deposited on behalf of the purchasers of the Securities
represented thereby with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Rule 144A Global Note may
be represented by more than one certificate, if so required by
the Depositary's rules regarding the maximum principal amount to
be represented by a single certificate. The aggregate principal
amount of the Rule 144A Global Note may from time to time be
increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Initial Notes offered and sold outside the United
States of America (the "Regulation S Note") in reliance on
Regulation S under the Securities Act ("Regulation S") shall be
issued in the form of a single, permanent global Security in
definitive, fully registered book-entry form substantially in the
form of Exhibit A (the "Regulation S Global Note") registered in
the name of Cede & Co., as nominee of the Depositary, deposited
on behalf of the purchasers of the Securities represented thereby
with the Trustee, as custodian for the Depositary, for credit to
the respective accounts of the purchasers (or to such other
accounts as they may direct) at Morgan Guaranty Trust Company of
New York, Brussels office, as operator of the Euroclear System,
or Clearstream Banking, societe anonyme, duly executed by the
Company and authenticated by the Trustee as hereinafter provided.
The Regulation S Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding
the maximum principal amount to be represented by a single
certificate. The aggregate principal amount of the Regulation S
Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Initial Notes resold to Institutional Accredited
Investors in the United States of America (the "IAI Note") will
be issued in the form of a single, permanent global Security in
definitive, fully registered book-entry form substantially in the
form of Exhibit A (the "IAI Global Note") registered in the name
of a nominee of the Depositary deposited on behalf of the
purchasers of the Securities represented thereby with the
Trustee, as custodian for the Depositary, duly executed by the
Company and authenticated by the Trustee as hereinafter provided.
The IAI Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding
the maximum principal amount to be represented by a single
certificate. The aggregate principal amount of the IAI Global
Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
The Exchange Notes and Private Exchange Notes, if any,
exchanged for interests in the Rule 144A Note, Regulation S Note
and IAI Note will each be issued in the form of a permanent
global Note substantially in the form set forth in Exhibit B
hereto, which is hereby incorporated by reference and expressly
made a part of this Indenture, deposited with the Trustee as
hereinafter provided, with the applicable legend set forth in
Section 2.1(c) hereof (the "Exchange Global Note" and the
"Private Exchange Global Note", respectively). The Exchange
Global Note and the Private Exchange Global Note, as the case may
be, may be represented by more than one certificate, if so
required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate.
The Rule 144A Global Note, the Regulation S Global
Note, the IAI Global Note, the Exchange Global Note and the
Private Exchange Global Note, if any, are sometimes collectively
herein referred to as the "Global Securities."
The principal of (premium, if any) and interest on the
Securities shall be payable at the office or agency of the
Company maintained for such purpose in The City of New York, or
at such other office or agency of the Company as may be
maintained for such purpose pursuant to Section 2.3.
The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage, in
addition to those set forth on Exhibits A and B. The Company and
the Trustee shall approve the forms of the Securities and any
notation, endorsement or legend on them. Each Security shall be
dated the date of its authentication. The terms of the
Securities set forth in Exhibit A and Exhibit B are part of the
terms of this Indenture and, to the extent applicable, the
Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to be bound by such terms.
(b) Denominations. The Securities shall be issuable
only in fully registered form, without coupons, and only in
denominations of $1,000 and any integral multiple thereof.
(c) Restrictive Legends. Unless and until (i) an
Initial Note or Private Exchange Note is sold under an effective
registration statement or (ii) an Initial Note is exchanged for
an Exchange Note in connection with an effective registration
statement, in each case pursuant to the Registration Rights
Agreement, (A) such Initial Note and Private Exchange Note, as
the case may be, shall bear the following legend (the "Restricted
Securities Legend") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF (I) EXCEPT IN COMPLIANCE WITH
THE TERMS OF THE INDENTURE AND (II) IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE
TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES
THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT, OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF
THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT, THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-
U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR", IN EITHER CASE IN A MINIMUM
PRINCIPAL AMOUNT OF SECURITIES OF $250,000 OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSE (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
(B) All Global Securities shall bear the following
legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF."
(d) Book-Entry Provisions. (i) This Section 2.1(d)
shall apply only to Global Securities deposited with the Trustee,
as custodian for the Depositary.
(ii) Each Global Security initially shall (x) be
registered in the name of the Depositary for such Global Security
or the nominee of such Depositary, (y) be delivered to the
Trustee as custodian for such Depositary and (z) bear legends as
set forth in Section 2.1(c).
(iii) Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Indenture with
respect to any Global Security held on their behalf by the
Depositary or by the Trustee as the custodian of the Depositary
or under such Global Security, and the Depositary may be treated
by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of the Depositary
governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(iv) In connection with any transfer of a portion of
the beneficial interest in a Global Security pursuant to clause
(e) of this Section to beneficial owners who are required to hold
Definitive Securities (as defined below), the Security Custodian
shall reflect on its books and records the date and a decrease in
the principal amount of such Global Security in an amount equal
to the principal amount of the beneficial interest in the Global
Security to be transferred, and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more
Definitive Securities of like tenor and amount.
(v) In connection with the transfer of an entire
Global Security to beneficial owners pursuant to clause (e) of
this Section, such Global Security shall be deemed to be
surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange
for its beneficial interest in such Global Security, an equal
aggregate principal amount of Definitive Securities of authorized
denominations.
(e) Definitive Securities. Except as provided below,
owners of beneficial interests in Global Securities will not be
entitled to receive certificated Securities ("Definitive
Securities"). If required to do so pursuant to any applicable
law or regulation, beneficial owners may obtain Definitive
Securities in exchange for their beneficial interests in a Global
Security upon written request in accordance with the Depositary's
and the Registrar's procedures. In addition, Definitive
Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in a Global Security if
(i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Security or the
Depositary ceases to be a "Clearing Agency" registered under the
Exchange Act, at a time when the Depositary is required to be so
registered in order to act as Depositary, and in each case a
successor depositary is not appointed by the Company within 40
days of such notice or (ii) an Event of Default has occurred and
is continuing and the Registrar has received a request from the
Depositary.
(f) Any Definitive Security delivered in exchange for
an interest in a Global Security pursuant to Section 2.1(d)(iv)
and (v) shall, except as otherwise provided by paragraph (d) of
Section 2.6, bear the applicable legend regarding transfer
restrictions applicable to the Definitive Security set forth in
Section 2.1(c) and be subject to the applicable certification
requirements set forth in this Indenture.
(g) The registered holder of a Global Security may
grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take
under this Indenture or the Securities.
SECTION 2.2. Execution and Authentication. Two
Officers shall sign the Securities for the Company by manual or
facsimile signature. If an Officer whose signature is on a
Security no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized
signatory of the Trustee manually authenticates the Security.
The signature of the Trustee on a Security shall be conclusive
evidence that such Security has been duly and validly
authenticated and issued under this Indenture.
At any time and from time to time after the execution
and delivery of this Indenture, the Trustee shall authenticate
and make available for delivery: (1) Initial Notes for original
issue in an aggregate principal amount of $600 million and (2)
Exchange Notes and Private Exchange Notes, if any, for issue only
in an Exchange Offer pursuant to the Registration Rights
Agreement, and only in exchange for Initial Notes of an equal
principal amount, in each case upon a written order of the
Company signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of the Company (the
"Company Order"). Such Company Order shall specify the amount of
the Securities to be authenticated, the date on which the
original issue of Securities is to be authenticated and whether
the Securities are to be Initial Notes, Exchange Notes or Private
Exchange Notes. The aggregate principal amount of Securities
Outstanding at any time may not exceed $600 million, except as
provided in Section 2.9.
The Trustee may appoint an agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate the
Securities. Unless limited by the terms of such appointment, any
such Authenticating Agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
agent.
In case the Company, pursuant to Article IV, shall be
consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise dispose of its properties
and assets substantially as an entirety to any Person, and the
successor Person resulting from such consolidation, or surviving
such merger, or into which the Company shall have been merged, or
the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to
Article IV, any of the Securities authenticated or delivered
prior to such consolidation, merger, conveyance, transfer, lease
or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Securities executed
in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon
Company Order of the successor Person, shall authenticate and
deliver Securities as specified in such order for the purpose of
such exchange. If Securities shall at any time be authenticated
and delivered in any new name of a successor Person pursuant to
this Section 2.2 in exchange or substitution for or upon
registration of transfer of any Securities, such successor
Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such
new name.
SECTION 2.3. Registrar and Paying Agent. The Company
shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the
"Registrar") and an office or agency where Securities may be
presented for payment (the "Paying Agent"). The Company shall
cause each of the Registrar and the Paying Agent to maintain an
office or agency in the Borough of Manhattan, The City of New
York. The Registrar shall keep a register of the Securities and
of their transfer and exchange (the "Note Register"). The
Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any
additional paying agent.
The Company shall enter into an appropriate agency
agreement with any Registrar, Paying Agent or co-registrar not a
party to this Indenture, which shall incorporate the terms of the
TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall notify
the Trustee in writing of the name and address of each such
agent. If the Company fails to maintain a Registrar or Paying
Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 6.7. The
Company or any of its domestically incorporated Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar
and Paying Agent for the Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. At
or prior to 10:00 a.m (New York City time) on the date on which
any principal of, premium, if any, or interest on any Security is
due and payable, the Company shall deposit with the Paying Agent
a sum sufficient to pay such principal, premium, if any, or
interest when due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that such Paying
Agent shall hold in trust for the benefit of the Securityholders
or the Trustee all money held by such Paying Agent for the
payment of principal of or interest on the Securities and shall
notify the Trustee of any default by the Company in making any
such payment. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate the money held by it as Paying Agent
and hold it as a separate trust fund. The Company at any time
may require a Paying Agent (other than the Trustee) to pay all
money held by it to the Trustee and to account for any funds
disbursed by such Paying Agent. Upon complying with this
Section, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money
delivered to the Trustee. Upon any bankruptcy, reorganization or
similar proceeding with respect to the Company, the Trustee shall
serve as Paying Agent for the Securities.
SECTION 2.5. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the
names and addresses of Securityholders.
SECTION 2.6. Transfer and Exchange. (a) The transfer
and exchange of Global Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this
Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depositary
therefor.
A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with
the Depositary's procedures containing information regarding the
participant account of the Depositary to be credited with a
beneficial interest in the Global Security and such account shall
be credited in accordance with such order with a beneficial
interest in the Global Security and the account of the Person
making the transfer shall be debited by an amount equal to the
beneficial interest in the Global Security being transferred.
If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in
another Global Security, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of
the Global Security to which such interest is being transferred
in an amount equal to the principal amount of the interest to be
so transferred, and the Registrar shall reflect on its books and
records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being
transferred.
(b) The following provisions shall apply with respect
to any proposed transfer of a Rule 144A Note or an IAI Note prior
to the date which is two years after the later of the date of
original issue and the last date on which the Company or any
Affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date"):
(i) a transfer of a Rule 144A Note or an IAI Note or a
beneficial interest therein to a QIB shall be made upon the
representation of the transferee that it is purchasing the
Security for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such
account is a QIB, and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying
upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A;
(ii) a transfer of a Rule 144A Note or an IAI Note or a
beneficial interest therein to an Institutional Accredited
Investor shall be made upon receipt by the Trustee or its agent
of a certificate substantially in the form set forth in
Section 2.7 hereof from the proposed transferee and, if requested
by the Company, the delivery of an opinion of counsel,
certifications and/or other information satisfactory to each of
them; and
(iii) a transfer of a Rule 144A Note or an IAI Note or
a beneficial interest therein to a non U.S. Person shall be made
upon receipt by the Trustee or its agent of a certificate
substantially in the form set forth in Section 2.7 hereof from
the proposed transferee and, if requested by the Company, the
delivery of an opinion of counsel, certification and/or other
information satisfactory to each of them.
(c) The following provisions shall apply with respect
to any proposed transfer of a Regulation S Note prior to the
expiration of the Restricted Period:
(i) a transfer of a Regulation S Note or a beneficial
interest therein to a QIB shall be made upon the representation
of the transferee that it is purchasing the Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB,
and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A;
(ii) a transfer of a Regulation S Note or a beneficial
interest therein to an Institutional Accredited Investor shall be
made upon receipt by the Trustee or its agent of a certificate
substantially in the form set forth in Section 2.7 hereof from
the proposed transferee and, if requested by the Company, the
delivery of an opinion of counsel, certification and/or other
information satisfactory to each of them; and
(iii) a transfer of a Regulation S Note or a beneficial
interest therein to a non-U.S. Person shall be made upon receipt
by the Trustee or its agent of a certificate substantially in the
form set forth in Section 2.8 hereof from the proposed transferee
and, if requested by the Company, receipt by the Trustee or its
agent of an opinion of counsel, certification and/or other
information satisfactory to each of them.
After the expiration of the Restricted Period,
interests in a Regulation S Note may be transferred without
requiring certification set forth in Section 2.8 or any
additional certification.
(d) Restricted Securities Legend. Upon the transfer,
exchange or replacement of Securities not bearing a Restricted
Securities Legend, the Registrar shall deliver Securities that do
not bear a Restricted Securities Legend. Upon the transfer,
exchange or replacement of Securities bearing the Restricted
Securities Legend, the Registrar shall deliver only Securities
that bear such Restricted Securities Legend unless there is
delivered to the Registrar an Opinion of Counsel to the effect
that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions
of the Securities Act.
(e) The Security Registrar shall retain copies of all
letters, notices and other written communications received
pursuant to Section 2.1 or this Section 2.6. The Company shall
have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Security
Registrar.
(f) Obligations with Respect to Transfers and
Exchanges of Securities. (i) To permit registrations of
transfers and exchanges, the Company shall, subject to the other
terms and conditions of this Article II, execute and the Trustee
shall authenticate Definitive Securities and Global Securities at
the Registrar's or co-registrar's request.
(ii) No service charge shall be made to a Holder for
any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charges payable upon exchange or transfer pursuant
to Section 8.5).
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of any Security
for a period beginning (1) 15 Business Days before the mailing of
a notice of an offer to repurchase Securities and ending at the
close of business on the day of such mailing or (2) 15 Business
Days before an interest payment date and ending on such interest
payment date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the
Person in whose name a Security is registered as the absolute
owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar
or any co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture shall evidence
the same debt and shall be entitled to the same benefits under
this Indenture as the Securities surrendered upon such transfer
or exchange.
(g) No Obligation of the Trustee. (i) The Trustee
shall have no responsibility or obligation to any beneficial
owner of a Global Security, a member of, or a participant in, the
Depositary or other Person with respect to the accuracy of the
records of the Depositary or its nominee or of any participant or
member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the
Depositary) of any notice or the payment of any amount or
delivery of any Securities (or other security or property) under
or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be
made to Holders in respect of the Securities shall be given or
made only to or upon the order of the registered Holders (which
shall be the Depositary or its nominee in the case of a Global
Security). The rights of beneficial owners in any Global
Security shall be exercised only through the Depositary subject
to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in
any Security (including any transfers between or among Depositary
participants, members or beneficial owners in any Global
Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and
to do so if and when expressly required by, the terms of this
Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
SECTION 2.7. Form of Certificate to be Delivered in
Connection with Transfers to Institutional Accredited Investors.
[Date]
Citibank, N.A
111 Wall Street, 5th Floor
New York, NY 10005
Attention: Global Agency & Trust Services
Re: CK Witco Corporation
8 1/2% Senior Notes due 2005
Ladies and Gentlemen:
This certificate is delivered to request a transfer of
$ aggregate principal amount of the 8 1/2% Senior Notes due
2005 (the "Securities") of CK Witco Corporation (the "Company").
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act of 1933, as amended (the "Securities Act")) purchasing for
our own account or for the account of such an institutional
"accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view
to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risk of our investment in the
Securities and we invest in or purchase securities similar to the
Securities in the normal course of our business. We and any
accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Securities have not been
registered under the Securities Act and, unless so registered,
may not be sold except as permitted in the following sentence.
We agree on our own behalf and on behalf of any investor account
for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two
years after the later of the date of original issue and the last
date on which the Company or any Affiliate of the Company was the
owner of such Securities (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the
Securities are eligible for resale pursuant to Rule 144A, to a
person we reasonably believe is a qualified institutional buyer
under Rule 144A (a "QIB") that purchases for its own account or
for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an
institutional "accredited investor," in either case in a minimum
principal amount of Securities of $250,000 or (f) pursuant to any
other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any
requirement of law that the disposition of our property or the
property of such investor account or accounts be at all times
within our or their control and in compliance with any applicable
state securities laws. The foregoing restrictions on resale will
not apply subsequent to the Resale Restriction Termination Date.
If any resale or other transfer of the Securities is proposed to
be made pursuant to clause (c), (d) or (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver
a letter from the transferee substantially in the form of this
letter to the Company and the Trustee, which shall provide, among
other things, that the transferee is an institutional "accredited
investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) and that it is acquiring such
Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges
that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Termination
Date of the Securities pursuant to clauses (d), (e) or (f) above
to require the delivery of an opinion of counsel, certifications
and/or other information satisfactory to the Company and the
Trustee.
TRANSFEREE:
BY
SECTION 2.8. Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S.
[Date]
Citibank, N.A.
111 Wall Street, 5th Floor
New York, NY 10005
Attention: Global Agency & Trust Services
Re: CK Witco Corporation
8 1/2% Senior Notes due 2005 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________
aggregate principal amount of the Securities, we confirm that
such sale has been effected pursuant to and in accordance with
Regulation S under the United States Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent
that:
(a) the offer of the Securities was not made to a
person in the United States;
(b) either (i) at the time the buy order was
originated, the transferee was outside the United States or we
and any person acting on our behalf reasonably believed that the
transferee was outside the United States or (ii) the transaction
was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged
with a buyer in the United States;
(c) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b)
or Rule 904(b) of Regulation S, as applicable; and
(d) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________ ____________________
Authorized Signature Signature Medallion
Guaranteed
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen
Securities. If a mutilated Security is surrendered to the
Registrar or if the Holder of a Security claims that the Security
has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Security
if the requirements of Section 8-405 of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the
Company, such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company and the Trustee to protect the
Company, the Trustee, the Paying Agent, the Registrar and any co-
registrar from any loss that any of them may suffer if a Security
is replaced, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the
Trustee shall authenticate and deliver, in exchange for any such
mutilated Security or in lieu of any such destroyed, lost or
stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees
and expenses of the Trustee) in connection therewith.
Every new Security issued pursuant to this Section in
lieu of any mutilated, destroyed, lost or stolen Security shall
constitute an original additional contractual obligation of the
Company and any other obligor upon the Securities, whether or not
the mutilated, destroyed, lost or stolen Security shall be at any
time enforceable by anyone, and shall be entitled to all benefits
of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 2.10. Temporary Securities. Until Definitive
Securities are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive
Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be
exchangeable for Definitive Securities upon surrender of the
temporary Securities at any office or agency maintained by the
Company for that purpose and such exchange shall be without
charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute, and the
Trustee shall authenticate and make available for delivery in
exchange therefor, one or more Definitive Securities representing
an equal principal amount of Securities. Until so exchanged, the
Holder of temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as a holder of
Definitive Securities.
SECTION 2.11. Cancellation. The Company at any time
may deliver Securities to the Trustee for cancellation. The
Registrar and the Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel
and return to the Company all Securities surrendered for
registration of transfer, exchange, payment or cancellation by
delivering a certificate of such destruction to the Company. The
Company may not issue new Securities to replace Securities it has
paid or delivered to the Trustee for cancellation.
SECTION 2.12. Payment of Interest; Defaulted Interest.
Interest on any Security which is payable, and is punctually paid
or duly provided for, on any interest payment date shall be paid
to the Person in whose name such Security (or one or more
predecessor Securities) is registered at the close of business on
the regular record date for such interest at the office or agency
of the Company maintained for such purpose pursuant to
Section 2.3.
Any interest on any Security which is payable, but is
not paid when the same becomes due and payable and such
nonpayment continues for a period of 30 days shall forthwith
cease to be payable to the Holder on the regular record date by
virtue of having been such Holder, and such defaulted interest
and (to the extent lawful) interest on such defaulted interest at
the rate borne by the Securities (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest")
shall be paid by the Company, at its election in each case, as
provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities
(or their respective predecessor Securities) are registered at
the close of business on a Special Record Date (as defined below)
for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date (not less than 30 days after such
notice) of the proposed payment (the "Special Interest Payment
Date"), and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior
to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a record date (the "Special Record Date") for
the payment of such Defaulted Interest which shall be not more
than 15 days and not less than 10 days prior to the Special
Interest Payment Date and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record
Date, and in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date and Special Interest Payment Date
therefor to be given in the manner provided for in Section 10.2,
not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the
Special Record Date and Special Interest Payment Date therefor
having been so given, such Defaulted Interest shall be paid on
the Special Interest Payment Date to the Persons in whose names
the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following
clause (b).
(b) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities
may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of
the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section,
each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
SECTION 2.13. Computation of Interest. Interest on
the Securities shall be computed on the basis of a 360-day year
of twelve 30-day months.
SECTION 2.14. CUSIP Numbers. The Company in issuing
the Securities may use "CUSIP" numbers (if then generally in
use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that
any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the
Securities or as contained in any notice of a redemption and
their reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the
"CUSIP" numbers.
ARTICLE III
Covenants
SECTION 3.1. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities and in
this Indenture. Principal and interest shall be considered paid
on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money sufficient to pay
all principal and interest then due and the Trustee or the Paying
Agent, as the case may be, is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms
of this Indenture.
The Company shall pay interest on overdue principal at
the rate specified therefor in the Securities, and it shall pay
interest on overdue installments of interest at the same rate to
the extent lawful.
Notwithstanding anything to the contrary contained in
this Indenture, the Company may, to the extent it is required to
do so by law, deduct or withhold income or other similar taxes
imposed by the United States of America from principal or
interest payments hereunder.
SECTION 3.2. Reports by the Company. The Company
shall file with the Trustee and the SEC, and transmit to
Securityholders, such information, documents and other reports
(including annual and quarterly reports), and such summaries
thereof, as may be required pursuant to the TIA at the times and
in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with
the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be filed with the Trustee within 15 days after the same
is so required to be filed with the SEC. Delivery of such
reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information
contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to
rely exclusively on Officers' Certificates).
SECTION 3.3. Limitation on Mortgages. The Company
will not create or assume and will not permit any Restricted
Subsidiary other than a Foreign Subsidiary to create or assume
any Mortgage of or upon any of its Principal Properties now owned
or hereafter acquired, of or upon any income or profits
therefrom, without making effective provision, and the Company
covenants that in any such case it will make or cause to be made
effective provision, whereby the Securities shall be secured by
such Mortgage equally and ratably with any and all other
obligations and Indebtedness thereby secured, or shall be secured
by a senior Mortgage, so long as any such other obligations and
Indebtedness shall be so secured; provided that the foregoing
covenant shall not apply to any of the following:
(1) The creation of any Mortgage on any property
hereafter acquired by the Company or any Restricted Subsidiary,
contemporaneously with such acquisition or within 270 days
thereafter, to secure or provide for the payment of any part of
the purchase price of such property, or the assumption by the
Company or any Restricted Subsidiary of any Mortgage upon any
property hereafter acquired by the Company or any Restricted
Subsidiary existing at the time of such acquisition, provided
that the principal amount of any Indebtedness secured by any such
Mortgage created or assumed shall not exceed the cost to the
Company or Restricted Subsidiary, as the case may be, of the
property covered by such Mortgage (including, in the case of the
assumption of such Mortgage, the principal amount of the
Indebtedness secured thereby), or the fair value (if and as
determined by the Board of Directors) of such property at the
time the Mortgage is created or assumed, whichever shall be less.
(2) Any Mortgage on any property acquired by the
Company or any Restricted Subsidiary existing at the time of such
acquisition and any Mortgage executed by any corporation or other
entity acquired by the Company or any Restricted Subsidiary and
exclusively securing any Indebtedness in a principal amount
existing at the time of such acquisition, and, in each case, not
assumed by the Company or any Restricted Subsidiary.
(3) Any Mortgage executed (i) by any Restricted
Subsidiary and exclusively securing any Indebtedness incurred by
such Restricted Subsidiary to the Company or to one or more other
Restricted Subsidiaries or (ii) by the Company and exclusively
securing any Indebtedness incurred by the Company to any
Restricted Subsidiary.
(4) The creation of one or more Mortgages for the sole
purpose of extending, renewing, refinancing or refunding in whole
or in part one or more of the Mortgages referred to in
clauses (1), (2), or (3) of this Section or one or more of the
Mortgages existing on March 7, 2000 on any assets of the Company
or a Restricted Subsidiary or one or more Mortgages permitted by
this paragraph 4; provided that the aggregate principal amount of
Indebtedness secured by any such extension, renewal, refinancing
or refunding Mortgage shall not exceed the aggregate amount of
Indebtedness secured by the Mortgage or Mortgages being extended,
renewed, refinanced or refunded at the time of such extension,
renewal, refinancing or refunding and that such extending,
renewing, refinancing or refunding Mortgage shall be limited to
(A) all or any part of the same property (and improvements
thereon) which secured the Mortgage extended, renewed, refinanced
or refunded or (B) in the case of a simultaneous extension,
renewal, refinancing or refunding of one or more Mortgages on
contiguous property (and improvements thereon), all or any part
of the same contiguous property which secured the Mortgage
extended, renewed, refinanced or refunded; and provided further
that in the case of any extension, renewal, refinancing or
refunding of a Mortgage of the type referred to in clause (3) or
this clause, neither the Company nor any Restricted Subsidiary
(other than the Restricted Subsidiary whose property is subject
thereto) that has not theretofore assumed the indebtedness
secured thereby shall assume any Indebtedness secured by such
extending, renewing, refinancing or refunding Mortgage.
(5) Liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums
not yet due or being contested in good faith.
(6) Liens in favor of the United States of America, or
any State or subdivision thereof, or any other county or
subdivision thereof where the Company or any Restricted
Subsidiary may transact any of its business, or any governmental
agency, to the extent required in the ordinary course of
business.
(7) Liens for taxes or assessments or governmental
charges or levies, if such taxes, assessments, governmental
charges or levies shall not at the time be due and payable, or if
the same thereafter can be paid without penalty, or if the same
are being contested in good faith by appropriate proceedings.
(8) Pledges or deposits to secure payment of worker's
compensation or insurance premiums, or in connection with
tenders, bids or contracts (other than contracts for the payment
of money) or leases, deposits to secure surety, appeal or
performance bonds, pledges or deposits in connection with
contracts made with or at the request of the United States of
America or any State or any agency of the United States or any
such State, and pledges or deposits for purposes similar to any
of the above in the ordinary course of business.
(9) Liens created by or resulting from any litigation
or legal or administrative proceeding which at the time is
currently being contested in good faith by appropriate
proceedings.
(10) Leases made or existing (i) on property acquired
in the ordinary course of business or (ii) on individual
properties subject to the lease having a value of less than $1
million per property or $25 million in the aggregate.
(11) Landlords' liens on property held under lease.
(12) Liens incurred in the ordinary course of business
with respect to obligations that (i) are not incurred in
connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially
detract from the value of the property or materially impair the
use thereof in the operation of business by the Company or any of
its Restricted Subsidiaries.
(13) Liens with respect to Permitted Subsidiary
Indebtedness incurred pursuant to clauses (vii), (viii) and (x)
of the definition of Permitted Subsidiary Indebtedness.
(14) Any Mortgage securing Indebtedness, the net
proceeds of which are promptly deposited to defease the
Securities as described under Section 7.1.
(15) Any Mortgage created pursuant to and in compliance
with the provisions of Section 3.7.
Notwithstanding the foregoing provisions of this
Section, the Company or any Restricted Subsidiary may grant such
easements for ingress and egress over property owned by the
Company or such Restricted Subsidiary in favor of the United
States or any State, or any department, agency, instrumentality
or political subdivision of either, as is necessary to permit the
attachment or removal of any equipment or other property designed
primarily for the purpose of pollution control, solid waste and
waste water treatment and with respect to which the Company or
any Restricted Subsidiary may have granted a lien or transferred
title to such government or governmental agency pursuant to the
foregoing provisions of this Section or of Section 3.4 in
connection with the financing of such equipment or other
property; provided that any such lien on equipment or other
property designed primarily for the purpose of pollution control
shall not apply to any other property owned by the Company or any
Restricted Subsidiary and any such transfer of title to equipment
or other property designed primarily for the purpose of pollution
control shall not include transfer of title to any other property
owned by the Company or any Restricted Subsidiary.
The sale or other transfer of oil, gas or other
minerals in place for a period of time until, or in an amount
such that, the transferee will realize therefrom a specified
amount (however determined) of money for such minerals, or the
sale or other transfer of any other interest in property of the
character commonly referred to as a production payment shall not
be deemed to create, for purposes of this Section, any Mortgage
upon the assets of the Company or any Restricted Subsidiary.
If at any time the Company or any Restricted Subsidiary
shall create or assume any Mortgage not excepted from this
Section as above provided, and not exempted under Section 3.5,
the Company will promptly deliver to the Trustee (1) an Officers'
Certificate stating that the covenant of the Company contained in
the first paragraph of this Section has been complied with, and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, such covenant has been complied with and that any
instruments executed by the Company in performance of such
covenant comply with the requirements thereof.
In the event that the Company shall hereafter secure
the Securities equally and ratably with, or senior to, any other
obligation or Indebtedness pursuant to the provisions of this
Section, the Trustee is hereby authorized to enter into an
amendment to this Indenture or agreement supplemental hereto and
to take such action, if any, as it may deem advisable to enable
it to enforce effectively the rights of the Holders of the
Securities so secured equally and ratably with such other
obligation or Indebtedness. The Trustee shall be entitled to
receive, and subject to the provisions of Section 6.1 and Section
6.2 hereof, shall be fully protected in relying upon, an Opinion
of Counsel as conclusive evidence that any amendment hereto or
action taken equally and ratably to secure the Securities
complies with the provisions of this Section. In the event that
the Company or any Restricted Subsidiary shall be entitled in
accordance with the provisions of this Indenture to a release of
any Mortgage granted to secure the Securities, the Trustee is
hereby authorized to take such action and execute and deliver
such documents and instruments as the Company or such Restricted
Subsidiary may request to implement and evidence the release of
such Mortgage.
Subject to the provisions of Section 3.4, nothing
herein contained shall be deemed to prevent the Company or any
Restricted Subsidiary from selling any property with the
intention of taking back a lease of such property.
The covenant contained in this Section 3.3 is subject
to the provision for exempted Indebtedness in Section 3.5.
SECTION 3.4. Limitation on Sale and Leaseback
Transactions. The Company will not, nor will it permit any
Restricted Subsidiary, other than a Foreign Subsidiary, to enter
into any arrangement with any person providing for the leasing by
the Company or any Restricted Subsidiary of any Principal
Property (except for temporary leases of not more than three
years and except for leases between the Company and a Subsidiary
or between Subsidiaries), which property has been or is to be
sold or transferred by the Company or such Restricted Subsidiary
to such person unless either
(a) the Company or such Restricted Subsidiary would be
entitled pursuant to Section 3.3 to incur Indebtedness secured by
a Mortgage on the property to be leased equal in amount to the
Attributable Debt with respect to such sale and lease-back
transaction without equally and ratably securing the Securities;
or
(b) the Company shall apply an amount at least equal to
the net proceeds of such sale or transfer or the fair value as
determined by the Board of Directors of such property, whichever
is greater, to the redemption or retirement, within 120 days of
the effective date of any such arrangement of Indebtedness of the
Company which is not subordinate or junior in right of payment to
the Securities; provided, however, that in lieu of applying all
or any part of such amount to such redemption or retirement of
such Indebtedness, the Company may, within 75 days after such
sale voluntarily retire Indebtedness, excluding redemption and
retirement of Indebtedness pursuant to mandatory sinking fund or
mandatory prepayment provisions or by payment at maturity, and
thereby reduce the amount of cash which the Company shall be
required to apply to the redemption or retirement of Indebtedness
under this Section by an amount equal to the aggregate of the
principal amount of the Indebtedness, as the case may be, so
redeemed or retired.
The covenant contained in this Section is subject to
the provision for exempted Indebtedness in Section 3.5.
SECTION 3.5. Exempted Indebtedness. Notwithstanding
the provisions contained in Sections 3.3 and 3.4, the Company and
its Subsidiaries may, without securing any Securities, secure
obligations or Indebtedness which would otherwise be subject to
the limitations of Section 3.3 or may, without redeeming or
retiring Indebtedness, enter into sale and lease-back
transactions which would otherwise be subject to the limitations
of Section 3.4, or there may be a combination of such
transactions, if after giving effect to any such security
arrangements and any such sale and lease-back transactions the
sum (computed without double-counting) of (1) the aggregate
amount of all such obligations and Indebtedness then outstanding
the securing of which would otherwise have been prohibited at the
time the security was granted by the limitations of Section 3.3,
and (2) the aggregate amount of all Attributable Debt then
outstanding under all then existing leases under sale and lease-
back transactions which would otherwise be or have been
prohibited by the provisions of Section 3.4, does not at any such
time exceed 10% of Consolidated Net Tangible Assets.
SECTION 3.6. Limitation on Subsidiary Indebtedness.
(a) The Company will not cause or permit any
Restricted Subsidiary that is not a Foreign Subsidiary, and is
not a Guarantor of the Securities, directly or indirectly, to
create, incur, assume, guarantee or otherwise in any manner
become liable for the payment of or otherwise incur
(collectively, "incur") any Subsidiary Indebtedness, including
any Acquired Indebtedness but excluding any Permitted Subsidiary
Indebtedness, unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for a
Guarantee of the Securities. The Company will not cause or
permit any Restricted Subsidiary that is a Foreign Subsidiary
("Foreign Restricted Subsidiary"), the stock of which is not
already pledged to secure the Company's obligations with respect
to the Securities, directly or indirectly to incur any Subsidiary
Indebtedness, including any Acquired Indebtedness but excluding
any Permitted Subsidiary Indebtedness, unless 100% of the
nonvoting stock and 65% of the voting stock of such Foreign
Restricted Subsidiary is pledged to secure the Company's
obligations with respect to the Securities and the Company
executes a pledge agreement substantially in the form of Annex I
hereto (a "Foreign Stock Pledge"). Notwithstanding the
foregoing, any Restricted Subsidiary may incur Subsidiary
Indebtedness which would otherwise be prohibited by the
restrictions hereunder if immediately thereafter, the sum
(computed without double-counting) of (i) all outstanding
Subsidiary Indebtedness (excluding Permitted Subsidiary
Indebtedness), (ii) all outstanding obligations or Indebtedness
secured by Mortgages that would be prohibited by Section 3.3
(without taking into account Section 3.5) and (iii) all
Attributable Debt relating to all then existing leases under sale
and lease-back transactions which would have been prohibited by
the provisions of Section 3.4 (without taking into account
Section 3.5), does not at the time of incurrence thereof exceed
10% of Consolidated Net Tangible Assets.
(b) For purposes of determining compliance with
this covenant, in the event that an item of Indebtedness meets
the criteria of more than one of the categories of Permitted
Subsidiary Indebtedness described in the definition of Permitted
Subsidiary Indebtedness, the Company shall, in its sole
discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such
clauses. Accrual of interest and the accretion of accreted value
will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant.
(c) Notwithstanding anything foregoing to the
contrary, any Guarantee by a Restricted Subsidiary or a Foreign
Stock Pledge shall provide by its terms that it, and any liens
securing the same, shall be automatically and unconditionally
released and discharged upon:
(i) any sale or transfer to, or exchange with any
Person of all of the Company's equity interests in, or all or
substantially all the assets of, such Restricted Subsidiary,
which transaction is in compliance with the terms of this
Indenture and such Restricted Subsidiary is released from all
guarantees, if any, by it of other Subsidiary Indebtedness of the
Company or any Restricted Subsidiaries,
(ii) the payment in full of all obligations under
the Subsidiary Indebtedness the incurrence of which required the
delivery of such Guarantee or a Foreign Stock Pledge if the
Restricted Subsidiary has no other outstanding Subsidiary
Indebtedness that would require the delivery of such guarantee or
Foreign Stock Pledge,
(iii) with respect to Subsidiary Indebtedness
constituting guarantees of Indebtedness, the release by the
holders of such Indebtedness of the guarantee by such Restricted
Subsidiary, including any deemed release upon payment in full of
all obligations under such Indebtedness, at such time as
(A) no other Indebtedness, the incurrence of which
required the delivery of a Guarantee or a Foreign Stock Pledge,
constituting Subsidiary Indebtedness has been guaranteed by such
Restricted Subsidiary, or
(B) the holders of all such other Indebtedness
constituting Subsidiary Indebtedness which is guaranteed by such
Restricted Subsidiary, the incurrence of which required the
delivery of a Guarantee or a Foreign Stock Pledge, also release
the guarantee by such Restricted Subsidiary, including any deemed
release upon payment in full of all obligations under such
Indebtedness.
(d) For purposes of this Section 3.6, any Acquired
Indebtedness shall not be deemed to have been incurred until 270
days from the date:
(A) the Person obligated on such Acquired
Indebtedness becomes a Restricted Subsidiary or
(B) the acquisition of assets in connection with
which such Acquired Indebtedness was assumed is consummated.
(e) In the event that the Company or any Subsidiary
shall be entitled in accordance with the provisions of this
Indenture to a release of any Guarantee or a Foreign Stock Pledge
granted to secure the Securities, the Trustee is hereby
authorized to take such action and execute and deliver such
documents and instruments as the Company or such Subsidiary may
request to implement and evidence the release of such Guarantee
or a Foreign Stock Pledge.
SECTION 3.7. Sales of Accounts Receivable.
The Company may, and any of its Restricted Subsidiaries
may, sell at any time and from time to time, accounts receivable
and notes receivable and related assets to an Accounts Receivable
Subsidiary; provided that (i) the aggregate consideration
received in each such sale is at least equal to the aggregate
fair market value of the receivables sold, as determined by the
Board of Directors in good faith, (ii) no less than 80% of the
consideration received in each such sale consists of either cash
or a promissory note (a "Promissory Note") which is subordinated
to no Indebtedness or obligation (except that it may be
subordinated to the financial institutions or other entities
providing the financing to the Accounts Receivable Subsidiary
with respect to such accounts receivable (the "Financier")) or an
equity interest in such Accounts Receivable Subsidiary; provided,
further that the initial sale will include all accounts
receivable of the Company and/or its Restricted Subsidiaries that
are party to such arrangements that constitute eligible
receivables under such arrangements and (iii) the Company and its
Restricted Subsidiaries will sell all accounts receivable that
constitute eligible receivables under such arrangements to the
Accounts Receivable Subsidiary no less frequently than on a
monthly basis.
The Company (i) will not permit any Accounts Receivable
Subsidiary to sell any accounts receivable purchased from the
Company or any of its Restricted Subsidiaries to any other Person
except on an arm's length basis and solely for consideration in
the form of cash or Cash Equivalents; (ii) will not permit the
Accounts Receivable Subsidiary to engage in any business or
transaction other than the purchase, financing and sale of
accounts receivable of the Company and its Restricted
Subsidiaries and activities incidental thereto, (iii) will not
permit any Accounts Receivable Subsidiary to incur Indebtedness
in an amount in excess of the book value of such Accounts
Receivable Subsidiary's total assets, as determined in accordance
with generally accepted accounting principles and (iv) will, at
least as frequently as monthly, cause the Accounts Receivable
Subsidiary to remit to the Company as payment on the outstanding
balance of the Promissory Notes, all available cash or Cash
Equivalents not held in a collection account pledged to a
Financier, to the extent not applied to pay or maintain reserves
for reasonable operating expenses of the Accounts Receivable
Subsidiary or to satisfy reasonable minimum operating capital
requirements.
SECTION 3.8. Waiver of Certain Covenants. The
Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 3.3, 3.4, 3.5 and 3.6
if before the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities shall,
by notice to the Trustee, either waive such compliance in such
instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of
the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.
SECTION 3.9. Maintenance of Office or Agency. The
Company will maintain in The City of New York an office or agency
where the Securities may be presented or surrendered for payment,
where, if applicable, the Securities may be surrendered for
registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and
this Indenture may be served. The corporate trust office of the
Trustee, which initially shall be located at 111 Wall Street, 5th
Floor New York, N.Y. 10005 Attention: Global Agency & Trust
Services (the "Corporate Trust Office") shall be such office or
agency of the Company, unless the Company shall designate and
maintain some other office or agency for one or more of such
purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies (in or outside of The City of New
York) where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind any
such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New
York for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and
any change in the location of any such other office or agency.
SECTION 3.10. Money for Security Payments to be Held
in Trust. If the Company shall at any time act as its own Paying
Agent, it will, on or before each due date of the principal of
(or premium, if any) or interest on the Securities, segregate and
hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal of (and premium, if any) or
interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee in writing of its action or failure
to so act.
Whenever the Company shall have one or more Paying
Agents for the Securities, it will, on or before each due date of
the principal of (or premium, if any) or interest on any
Securities, deposit with any Paying Agent a sum in same day funds
(or New York Clearing House funds if such deposit is made prior
to the date on which such deposit is required to be made) that
shall be available to the Trustee by 10:00 a.m. New York City
time on such due date sufficient to pay the principal (and
premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee in
writing of such action or any failure to so act.
The Company will cause each Paying Agent (other than
the Trustee) to execute and deliver to the Trustee an instrument
in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on the Securities
in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(b) give the Trustee written notice of any default by
the Company (or any other obligor upon the Securities) in the
making of any payment of principal (and premium, if any) or
interest; and
(c) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay
to the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such sums.
Subject to any applicable abandoned property law, any
money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of
(or premium, if any) or interest on any Security and remaining
unclaimed for two years after such principal, premium or interest
has become due and payable shall be paid to the Company on
Company Order, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment to the Company,
may at the expense of the Company mail to the Holders of the
Securities as to which the money to be repaid was held in trust,
as their names and addresses appear in the Security Register, a
notice that such moneys remain unclaimed and that, after a date
specified in the notice, which shall not be less than 30 days
from the date on which the notice was first mailed to the Holders
of the Securities as to which the money to be repaid was held in
trust, any unclaimed balance of such moneys then remaining will
be paid to the Company free of the trust formerly impressed upon
it.
SECTION 3.11. Corporate Existence. Subject to Article
IV, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate
existence.
SECTION 3.12. Compliance Certificate. The Company
shall deliver to the Trustee within 120 days after the end of
each fiscal year of the Company an Officers' Certificate, one of
the signers of which is the principal executive, principal
financial or principal accounting officer of the Company stating,
that in the course of the performance by the signers of their
duties as Officers of the Company they would normally have
knowledge of any Default or Event of Default and whether or not
the signers know of any Default or Event or Default that occurred
during such period. If they do, the certificate shall describe
the Default or Event of Default, its status and what action the
Company is taking or proposes to take with respect thereto. The
Company also shall comply with TIA ss. 314(a)(4).
SECTION 3.13. Maintenance of Properties. The Company
will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its
business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 3.14. Payment of Taxes and Other Claims. The
Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes,
assessments and governmental charges levied or imposed upon the
Company or any Subsidiary or upon the income, profits or property
of the Company or any Subsidiary, and (2) all lawful claims for
labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate
proceedings.
SECTION 3.15 Statement by Officers as to Default.
The Company shall deliver to the Trustee, as soon as possible and
in any event within five days after the Company becomes aware of
the occurrence of any Event of Default or an event which, with
notice or the lapse of time or both, would constitute an Event of
Default, an Officers' Certificate setting forth the details of
such Event of Default or default and the action which the Company
proposes to take with respect thereto.
ARTICLE IV
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 4.1. Company May Consolidate, Etc., Only on
Certain Terms. The Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, and the
Company shall not permit any Person to consolidate with or merge
into the Company or convey, transfer or lease its properties and
assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge
into another Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, the Person
formed by such consolidation or into which the Company is merged
or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as
an entirety shall be a corporation, partnership, limited
liability company or trust, shall be organized and validly
existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly
assume, by an amendment to this Indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest
on all the Securities and the performance or observance of every
covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such transaction
and treating any indebtedness which becomes an obligation of the
Company or any Subsidiary as a result of such transaction as
having been incurred by the Company or such Subsidiary at the
time of such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing;
(3) if, as a result of any such consolidation or merger
or such conveyance, transfer or lease, properties or assets of
the Company would become subject to a mortgage, pledge, lien,
security interest or other encumbrance which would not be
permitted by this Indenture, the Company or such successor
Person, as the case may be, shall take such steps as shall be
necessary effectively to secure the Securities equally and
ratably with (or prior to) all indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease
and, if an indenture supplemental hereto is required in
connection with such transaction, such amendment complies with
this Article and that all conditions precedent herein provided
for relating to such transaction have been complied with.
SECTION 4.2. Successor Substituted. Upon any
consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety
in accordance with Section 4.1, the successor Person formed by
such consolidation or into which the Company is merged or to
which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect
as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor
Person shall be relieved of all obligations and covenants under
this Indenture and the Securities.
ARTICLE V
Defaults and Remedies
SECTION 5.1. Events of Default. "Event of Default",
whenever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body):
(1) default in any payment of any interest upon any
Security when it becomes due and payable, and continuance of such
default for a period of 30 days;
(2) default in the payment of the principal of or
premium, if any, on, or the redemption price of, any Note, at its
Maturity;
(3) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other than
a covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 10% in principal amount of the
Outstanding Securities, a written notice specifying such default
or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder;
(4) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or
under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company (including this
Indenture) with a principal amount then outstanding, individually
or in the aggregate, in excess of $25,000,000, whether such
indebtedness now exists or shall hereafter be created, which
default shall have resulted in such indebtedness becoming or
being declared due and payable prior to the date on which it
would otherwise have become due and payable, or which results
from the nonpayment of such indebtedness at its stated maturity,
without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled within a period of
10 days after there shall have been given, by registered or
certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 10% in principal
amount of the Outstanding Securities, a written notice specifying
such default and requiring the Company to cause such indebtedness
to be discharged or such acceleration to be rescinded or annulled
and stating that such notice is a "Notice of Default" hereunder;
(5) the entry by a court having jurisdiction in the
premises of (A) a decree or order for a relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company under any applicable Federal or
state law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the continuance
of any such decree or order for relief or any such other decree
or order in effect for a period of 60 consecutive days; and
(6) the commencement by the Company of a voluntary case
or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state
law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to
pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action.
The foregoing will constitute Events of Default
whatever the reason for any such Event of Default and whether it
is voluntary or involuntary or is effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body.
SECTION 5.2. Acceleration. If an Event of Default
with respect to the Outstanding Securities occurs and is
continuing, then in every such case the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding
Securities may declare the principal amount of all of the
Securities to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders),
and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable.
At any time after such a declaration of acceleration
has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount
of the Outstanding Securities, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee
a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities, which have become due otherwise than by such
declaration of acceleration and any interest thereon at the rate
or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default other than the non-payment of
the principal, which has become due solely by such declaration of
acceleration, have been cured or waived as provided in
Section 5.4.
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
SECTION 5.3. Other Remedies. If an Event of Default
occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of principal of or interest on any
Securities or to enforce the performance of any provision of any
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of them
in the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 5.4. Waiver of Past Defaults. The Holders of
a majority in principal amount of the Outstanding Securities, by
notice to the Trustee, may waive an existing Default or Event of
Default and its consequences except (i) a Default or Event of
Default in the payment of the principal of or any premium or
interest on a Note, or (ii) in respect of a covenant or
provision hereof which under Article VIII cannot be modified or
amended without the consent of each Securityholder affected.
When a Default or Event of Default is waived, it is deemed cured,
but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any consequent right.
SECTION 5.5. Control by Majority. The Holders of a
majority in principal amount of the Outstanding Securities may
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or
this Indenture; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action
under this Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such
action.
SECTION 5.6. Limitation on Suits. No Holder shall
have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment
of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity acceptable to the Trustee against the costs, expenses
and liabilities (including reasonable legal fees and expenses) to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding
Securities;
it being understood and intended that no one or more of such
Holders shall have any right in any manner whatsoever by virtue
of, or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other of such Holders, or
to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all of such Holders.
SECTION 5.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal of, premium (if
any) or interest on the Securities held by such Holder, on or
after the respective Stated Maturities expressed in such
Securities, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired
or affected without the consent of such Holder.
SECTION 5.8. Collection Suit by Trustee. The Company
covenants that if
(1) default is made in the payment of any interest on
any Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of
(or premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal and any premium
and interest and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal
and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 5.9. Trustee May File Proofs of Claim. In
case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its
creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and
any custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in
the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its
counsel, and any other amounts due the Trustee under Section 6.7.
No provision of this Indenture shall be deemed to
authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 5.10. Priorities. If the Trustee collects any
money or property pursuant to this Article V, it shall pay out
the money or property in the following order:
FIRST: to the Trustee for amounts due under
Section 6.7;
SECOND: to Securityholders for amounts due and unpaid
for principal of and any premium and interest on the Securities,
in respect of which or for the benefit of which such money or
property has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on
the Securities for principal and any premium of and any premium
and interest on the Securities, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for
any payment to Securityholders pursuant to this Section. At
least 15 days before such record date, the Company shall mail to
each Securityholder and the Trustee a notice that states the
record date, the payment date and amount to be paid.
SECTION 5.11. Undertaking for Costs. In any suit for
the enforcement of any right or remedy under this Indenture or in
any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess
costs, including reasonable attorneys' fees and expenses, against
any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee,
a suit by the Company, a suit by a Holder pursuant to Section 5.7
or a suit by Holders of more than 10% in principal amount of
Outstanding Securities.
ARTICLE VI
Trustee
SECTION 6.1. Duties of Trustee. (a) If an Event of
Default has occurred and is continuing, the Trustee shall
exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of
Default:
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, in the case of
any such certificates or opinions which by any provisions hereof
are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine
whether or not they conform to the requirements of this Indenture
(but need not confirm the accuracy of mathematical calculations
or other facts stated therein).
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 5.5.
(d) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Company.
(e) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
(f) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers.
(g) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section
and to the provisions of the TIA.
SECTION 6.2. Rights of Trustee. (a) The Trustee may
conclusively rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel.
The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided, however,
that the Trustee's conduct does not constitute wilful misconduct
or negligence.
(e) The Trustee may consult with counsel of its
selection, and the advice or opinion of counsel with respect to
legal matters relating to this Indenture and the Securities shall
be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond or other paper or document; but
the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit and,
if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records
and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or
investigation.
(g) The Trustee shall not be deemed to have knowledge
of any Default or Event of Default except (i) any Event of
Default occurring pursuant to Section 5.1(1) and 5.1(2), or (ii)
any Default or Event of Default of which the Trustee shall have
received written notification or obtained "actual knowledge."
"Actual knowledge" shall mean the actual fact or statement of
knowing without independent investigation with respect thereto.
SECTION 6.3. Individual Rights of Trustee. The
Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the
Company or its Affiliates with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However,
the Trustee must comply with Sections 6.10 and 6.11.
SECTION 6.4. Trustee's Disclaimer. The Trustee shall
not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Securities, it
shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document
issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication
or for the use or application of any funds received by any Paying
Agent other than the Trustee.
SECTION 6.5. Notice of Defaults. If a Default or
Event of Default occurs and is continuing, the Trustee shall mail
to each Securityholder notice of the Default or Event of Default
within 90 days after it occurs provided that in the case of
Default or Event of Default described in Section 5.1(3) no such
notice shall be given until at least 30 days after such Default
or Event of Default occurs and provided further that except in
the case of a Default or Event of Default in payment of principal
of, premium (if any), or interest on any Security, the Trustee
may withhold the notice if and so long as its board of directors,
a committee of its board of directors or a committee of its Trust
Officers and/or a Trust Officer of the Trustee in good faith
determines that withholding the notice is in the interests of
Securityholders.
SECTION 6.6. Reports by Trustee to Holders. As
promptly as practicable after each December 31 beginning with
December 31, 2000, and in any event prior to March 1 in each
year, the Trustee shall mail to each Securityholder a brief
report dated as of such December 31 that complies with TIA
ss. 313(a). The Trustee also shall comply with TIA ss. 313(b).
The Trustee shall also transmit by mail all reports required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock
exchange (if any) on which the Securities are listed. The
Company agrees to notify promptly the Trustee in writing whenever
the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 6.7. Compensation and Indemnity. The Company
shall pay to the Trustee from time to time such compensation for
its services as the parties shall agree in writing from time to
time. The Trustee's compensation shall not be limited by any law
to compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable out-
of-pocket expenses incurred or made by it, including, but not
limited to, costs of collection, costs of preparing and reviewing
reports, certificates and other documents, costs of preparation
and mailing of notices to Securityholders and reasonable costs of
counsel retained by the Trustee in connection with the delivery
of an Opinion of Counsel or otherwise, in addition to the
compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances
of the Trustee's agents, counsel, accountants and experts. The
Company shall indemnify each of the Trustee, any predecessor
Trustee and each of its officers, directors, counsel and agents,
against any and all loss, liability, claim, damage or expense
(including, but not limited to, reasonable attorneys' fees and
expenses and taxes other than taxes based on the income of the
Trustee) incurred by it in connection with the acceptance and
administration of this trust and the performance of its duties
hereunder, including the costs and expenses of enforcing this
Indenture (including this Section 6.7) and of defending itself
against any claims (whether asserted by any Securityholder, the
Company or otherwise). The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend
the claim and the Trustee may have separate counsel and the
Company shall pay the fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the
Trustee's own wilful misconduct or negligence, subject to the
exceptions contained in Section 6.1(c) hereof.
To secure the Company's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities on
all money or property held or collected by the Trustee other than
money or property held in trust to pay principal of and any
premium and interest on particular Securities. The Trustee's
right to receive payment of any amounts due under this
Section 6.7 shall not be subordinate to any other liability or
indebtedness of the Company.
The Company's payment obligations pursuant to this
Section and any lien arising hereunder shall survive the
discharge of this Indenture and the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 5.1(4), (5) or (6) with respect
to the Company, the expenses are intended to constitute expenses
of administration under any Bankruptcy Law.
SECTION 6.8. Replacement of Trustee. The Trustee may
resign at any time by so notifying the Company. The Holders of a
majority in principal amount of the Outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor Trustee. The Company shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
(2) the Trustee is adjudged a bankrupt or insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed and the Holders do
not reasonably promptly appoint a successor Trustee, or if a
vacancy exists in the office of Trustee for any reason (the
Trustee in such event being referred to herein as the retiring
Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Thereupon the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in
Section 6.7.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee or the Holders of 10% in principal amount of the
Outstanding Securities may petition at the expense of the Company
any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 6.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding the replacement of the Trustee pursuant
to this Section 6.8, the Company's obligations under Section 6.7
shall continue for the benefit of the retiring Trustee.
SECTION 6.9. Successor Trustee by Merger. If the
Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets
to, another corporation or banking association, the resulting,
surviving or transferee corporation without any further act shall
be the successor Trustee.
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall succeed
to the trusts created by this Indenture, any of the Securities
shall have been authenticated but not delivered, any such
successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the
Securities shall not have been authenticated, any successor to
the Trustee may authenticate such Securities either in the name
of any predecessor hereunder or in the name of the successor to
the Trustee; and in all such cases such certificates shall have
the full force which it is anywhere in the Securities or in this
Indenture provided that the certificate of the Trustee shall
have.
SECTION 6.10. Eligibility; Disqualification. The
Trustee shall at all times satisfy the requirements of TIA
ss. 310(a). The Trustee shall have a combined capital and
surplus of at least $50 million as set forth in its most recent
published annual report of condition. The Trustee shall comply
with TIA ss. 310(b).
SECTION 6.11. Preferential Collection of Claims
Against Company. The Trustee shall comply with TIA ss. 311(a),
excluding any creditor relationship listed in TIA ss. 311(b). A
Trustee who has resigned or been removed shall be subject to TIA
ss. 311(a) to the extent indicated.
SECTION 6.12. Trustee's Application for Instructions
from the Company. Any application by the Trustee for written
instructions from the Company, may at the option of the Trustee,
set forth in writing any action proposed to be taken or omitted
by the Trustee under this Indenture and the date on and/or after
which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken
by, or omission of, the Trustee in accordance with a proposal
included in such application on or after the date specified in
such application (which date shall not be less than three
Business Days after the date any officer of the Company actually
receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking
any such action (or the effective date in the case of an
omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken
or omitted.
ARTICLE VII
Discharge of Indenture; Defeasance; Covenant Defeasance
SECTION 7.1. Discharge of Liability on Securities;
Defeasance; Covenant Defeasance. (a) When (i) the Company
delivers to the Trustee all Outstanding Securities (other than
Securities replaced pursuant to Section 2.9) for cancellation or
(ii) all Outstanding Securities have become due and payable at
Maturity and the Company irrevocably deposits with the Trustee
funds sufficient to pay at Maturity all such Outstanding
Securities (other than Securities replaced pursuant to
Section 2.9), including interest thereon to Maturity, and the
Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Section 7.1(c), cease to be
of further effect. The Trustee shall acknowledge satisfaction
and discharge of this Indenture on demand of the Company
(accompanied by an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent specified herein
relating to the satisfaction and discharge of this Indenture have
been complied with) and at the cost and expense of the Company.
(b) The Company may elect, at its option by resolution
of the Board of Directors at any time, to have either
Section 7.1(c) or Section 7.1(d) applied to the Outstanding
Securities upon compliance with the conditions set forth below in
this Article VII.
(c) Upon the Company's exercise of the option provided
in Section 7.1(b) to have this Section 7.1(c) applied to the
Outstanding Securities, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding
Securities as provided in this Section 7.1(c) on and after the
date the conditions set forth in Section 7.2 are satisfied
(hereinafter called "Defeasance"). For this purpose, such
Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the
Outstanding Securities and to have satisfied all its other
obligations under the Securities and this Indenture insofar as
the Securities are concerned (and the trustee, at the expense of
the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of
Holders to receive, solely from the trust fund described in
Section 7.2 and as more fully set forth in such Section, payments
in respect of the principal of and any premium and interest on
such Securities when payments are due, (2) the Company's
obligations with respect to such Securities under Sections 2.6,
2.9, 2.11, 3.9 and 3.10, (3) the rights, powers, trusts, duties
and immunities of the Trustee hereunder, (4) the Company's
obligations under Section 6.7 and (5) this Article VII. Subject
to compliance with this Article VII, the Company may exercise its
option provided in Section 7.1(b) to have this Section 7.1(c)
applied to the Outstanding Securities notwithstanding the prior
exercise of its option provided in Section 7.1(b) to have
Section 7.1(d) applied to the Outstanding Securities.
(d) Upon the Company's exercise of the option provided
in Section 7.1(b) to have this Section 7.1(d) applied to the
Outstanding Securities (1) the Company shall be released from its
obligations under Sections 3.3, 3.4, 3.5, 3.6, 3.11, 3.13 and
3.14, and Section 4.1 and (2) the occurrence of any event
specified in Section 5.1(3) (with respect to any of Sections 3.3,
3.4, 3.5, 3.6, 3.11, 3.13 and 3.14, and Section 4.1(2) and (3))
and 5.1(4) shall be deemed not to be or result in an Event of
Default, in each case with respect to the Outstanding Securities
as provided in this Section 7.1(d) on or after the date the
conditions set forth in Section 7.2 are satisfied (hereinafter
called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that the Company may omit to comply with and
shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent
so specified in the case of Section 5.1(3)), whether directly or
indirectly by reason of any reference elsewhere herein to any
such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the
remainder of this Indenture and the Note shall be unaffected
thereby. Notwithstanding any Covenant Defeasance, the Company's
obligations under section 6.7 shall survive said Covenant
Defeasance with respect to any Securities deceased hereunder.
(e) Notwithstanding the provisions of Sections 7.1(a)
and (b), the Company's obligations in Sections 2.3, 2.4, 2.5,
2.6, 2.9, 6.7, 6.8, 7.4, 7.5 and 7.6 shall survive until the
Securities have been paid in full. Thereafter, the Company's
obligations in Sections 6.7, 7.4 and 7.5 shall survive.
SECTION 7.2. Conditions to Defeasance or Covenant
Defeasance. The Company may exercise its Defeasance option or
its Covenant Defeasance option with respect to the Outstanding
Securities only if:
(1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee that
satisfies the requirements contemplated by Section 6.10 and
agrees to comply with the provisions of this Article VII
applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Securityholders
(a) money in an amount, or (b) U.S. Government Obligations that
through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in
an amount, or (c) a combination thereof, in each case sufficient,
in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or any such other qualifying trustee)
to pay and discharge, the principal of and any premium and
interest on the Securities on the respective Stated Maturities,
in accordance with the terms of this Indenture and the
Securities. As used herein, "U.S. Government Obligation" means
(x) any security that is (i) a direct obligation of the United
States of America for the payment of which full faith and credit
of the United States of America is pledged or (ii) an obligation
of a Person controlled or supervised by or acting as an agent or
instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either
case (i) or (ii), is not callable or redeemable at the option of
the issuer thereof, and (y) any depositary receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation
specified in clause (x) and held by such custodian for the
account of the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any such
U.S. Government Obligation, provided that (except as required by
law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or
interest evidenced by such depositary receipt.
(2) In the case of an election under Section 7.1(c),
the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or
(B) since the date first set forth hereinabove, there has been a
change in the applicable Federal income tax law, in either
case (A) or (B) to the effect that, and based thereon such
opinion shall confirm that, the Holders of the Outstanding
Securities, will not recognize gain or loss for Federal income
tax purposes as a result of the deposit, Defeasance and discharge
to be effected with respect to the Securities, and will be
subject to Federal income tax on the same amount, in the same
manner and at the same times as would be the case if such
deposit, Defeasance and discharge were not to occur.
(3) In the case of an election under Section 7.1(d),
the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of the Outstanding
Securities, will not recognize gain or loss for Federal income
tax purposes as a result of the deposit and Covenant Defeasance
to be effected and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be
the case if such deposit and Covenant Defeasance were not to
occur.
(4) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that the Securities, if then
listed on any securities exchange, will not be delisted as a
result of such deposit.
(5) No Event of Default or event that (after notice or
lapse of time or both) would become an Event of Default shall
have occurred and be continuing at the time of such deposit or,
with regard to any Event of Default or any such event specified
in Sections 5.1(5) and (6), at any time on or prior to the
123rd day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after
such 123rd day).
(6) Such Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest within the
meaning of the Trust Indenture Act.
(7) Such Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company is
party or by which it is bound.
(8) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent with respect to such Defeasance or
Covenant Defeasance have been complied with and the other
statements listed under Section 10.5.
(9) Such Defeasance or Covenant Defeasance shall not
result in the trust arising from such deposit constituting an
investment company within the meaning of the Investment Company
Act of 1940, as amended, unless such trust shall be qualified
under such Act or exempt from regulation thereunder.
SECTION 7.3. Application of Trust Money. Subject to
the provisions of the last paragraph of Section 3.10, all money
and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee (solely
for purposes of this Section and Section 7.6, the Trustee and any
such other trustee are referred to collectively as the "Trustee")
pursuant to Section 7.2 shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and
this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting on its own Paying
Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect
of principal and any premium and interest, but money so held in
trust need not be segregated from other funds except to the
extent required by law.
SECTION 7.4. Repayment to Company. Anything herein to
the contrary notwithstanding, the Trustee shall deliver or pay to
the Company from time to time upon Company Order any money or
U.S. Government Obligations held by it as provided in this
Article VII which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of
the amount thereof which would then be required to be deposited
to effect Defeasance or Covenant Defeasance, provided that the
Trustee shall not be required to liquidate any U.S. Government
Obligations in order to comply with the provisions of this
paragraph.
Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company Order any
money held by them for the payment of principal of or interest on
the Securities that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to
the Company for payment as unsecured general creditors.
SECTION 7.5. Indemnity for U.S. Government
Obligations. The Company shall pay and shall indemnify the
Trustee against any tax, fee or other charge imposed on or
assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government
Obligations.
SECTION 7.6. Reinstatement. If the Trustee or Paying
Agent is unable to apply any money or U.S. Government Obligations
in accordance with this Article VII by reason of any legal
proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, the obligations of the Company
under this Indenture and the Securities, shall be revived and
reinstated as though no such deposit had occurred pursuant to
this Article VII until such time as the Trustee or Paying Agent
is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VII; provided,
however, that, if the Company has made any payment of principal
of or any premium or interest on any Securities, following the
reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE VIII
Amendments
SECTION 8.1. Without Consent of Holders. The Company
and the Trustee may amend this Indenture or the Securities
without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article IV in respect of the
assumption by a successor Person to the Company of an obligation
of the Company under this Indenture;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities; provided,
however, that the uncertificated Securities are issued in
registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Securities are described in
Section 163(f)(2)(B) of the Code;
(4) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power herein
conferred upon the Company;
(5) to comply with any requirements of the SEC in
connection with qualifying this Indenture under the TIA;
(6) to comply with Sections 6.8 and 6.9 in respect of
the assumption by a successor Trustee of an obligation of the
Trustee under this Indenture; or
(7) to make any change that does not adversely affect
the rights of any Securityholder.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. The failure to give such
notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 8.2. With Consent of Holders. With the
written consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities affected thereby,
the Company and the Trustee may amend this Indenture or modify in
any manner the rights of the Securityholders under this
Indenture. However, without the consent of each Securityholder
affected, an amendment may not:
(a) change the Stated Maturity of the principal of, or
any installment of principal of or any premium or interest on,
any Security, reduce the principal amount thereof or the interest
or any premium thereon, change the method of computing the amount
of principal thereof or interest thereon on any date, change any
place of payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable or impair
the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case
of redemption or repayment, on or after the redemption date or
the repayment date, as the case may be);
(b) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required
for any such modification or the consent of whose Holders is
required for any waiver of compliance with certain provisions of
this Indenture or certain Defaults hereunder and their
consequences provided for in this Indenture; or
(c) modify any of the provisions of this Section,
Section 3.6 or Section 5.4, except to increase any such
percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing such amendment. The failure to give such
notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 8.3. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall comply
with the TIA as then in effect.
SECTION 8.4. Revocation and Effect of Consents and
Waivers. A consent to an amendment or a waiver by a
Securityholder shall bind the Holder and every subsequent Holder
of that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation
of the consent or waiver is not made on the Security. However,
any such Holder or subsequent Holder may revoke the consent or
waiver as to such Holder's Security or portion of the Security if
the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver made pursuant to Section 8.2 shall become
effective upon receipt by the Trustee of the requisite number of
written consents.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Securityholders
entitled to give their consent or take any other action described
above or required or permitted to be taken pursuant to this
Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any
such action, whether or not such Persons continue to be Holders
after such record date. No such consent shall become valid or
effective more than 120 days after such record date.
SECTION 8.5. Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the Trustee may
require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security
regarding the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or to issue a
new Security shall not affect the validity of such amendment.
SECTION 8.6. Trustee To Sign Amendments. The Trustee
shall sign any amendment authorized pursuant to this Article VIII
if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 6.1)
shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment
is authorized or permitted by this Indenture.
ARTICLE IX
Redemption of Securities
SECTION 9.1. Redemption. The Securities may or shall,
as the case may be, be redeemed, as a whole or from time to time
in part, subject to the conditions and at the Redemption Prices
specified in the form of Securities, together with accrued
interest to the Redemption Date.
SECTION 9.2. Applicability of Article. Redemption of
Securities at the election of the Company, as permitted by any
provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 9.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 9.1 shall be evidenced by a resolution of the Board of
Directors. In case of any partial redemption at the election of
the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities to be
redeemed and shall deliver to the Trustee such documentation and
records as shall enable the Trustee to select the Securities to
be redeemed pursuant to Section 9.4.
SECTION 9.4. Selection by Trustee of Securities to be
Redeemed. If less than all the Securities are to be redeemed,
selection of such Securities for redemption shall be made by the
Trustee not more than 60 days prior to the Redemption Date, from
the Securities Outstanding not previously called for redemption,
in compliance with the requirements of the principal national
securities exchange, if any, on which such Securities are listed,
or, if such Securities are not so listed, by lot or by such other
method as the Trustee shall deem fair and appropriate (and in
such manner as complies with applicable legal requirements) and
which may provide for the selection for redemption of portions of
the principal of Securities; provided, however, that no
Securities of less than $1,000 shall be redeemed in part.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of
Securities shall relate, in the case of any Security redeemed or
to be redeemed only in part, to the portion of the principal
amount of such Security which has been or is to be redeemed.
SECTION 9.5. Notice of Redemption. Notice of
redemption shall be given in the manner provided for in
Section 10.2 at least 30 but not more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed at
such Holder's registered address. The Trustee shall give notice
of redemption in the Company's name and at the Company's expense;
provided, however, that the Company shall deliver to the Trustee,
at least 30 days prior to the Redemption Date, an Officers'
Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as
provided in the following items.
All notices of redemption shall fully identify the
Securities and shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued
interest to the Redemption Date payable as provided in
Section 9.7, if any,
(3) if less than all Securities Outstanding are to be
redeemed, the identification of the particular Securities (or
portion thereof) to be redeemed, as well as the aggregate
principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be Outstanding after such
partial redemption,
(4) in case any Security is to be redeemed in part
only, the notice which relates to such Security shall state that
on and after the Redemption Date, upon surrender of such
Security, the holder will receive, without charge, a new Security
or Securities of authorized denominations for the principal
amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price
(and accrued interest, if any, to the Redemption Date payable as
provided in Section 9.7) will become due and payable upon each
such Security, or the portion thereof, to be redeemed, and,
unless the Company defaults in making the redemption payment,
that interest on Securities called for redemption (or the portion
thereof) will cease to accrue on and after said date,
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued
interest, if any,
(7) the name and address of the Paying Agent,
(8) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price,
and
(9) the CUSIP number, and that no representation is
made as to the accuracy or correctness of the CUSIP number, if
any, listed in such notice or printed on the Securities.
SECTION 9.6. Deposit of Redemption Price. At or prior
to 10:00 a.m., New York City time on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent
(or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 3.8) an amount of money
sufficient to pay the Redemption Price of, and accrued interest
on, all the Securities which are to be redeemed on that date.
SECTION 9.7. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified
(together with accrued interest, if any, to the Redemption Date),
and from and after such date (unless the Company shall default in
the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price,
together with accrued interest, if any, to the Redemption Date;
provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable
to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the
relevant regular record date or Special Record Date, as the case
may be, according to their terms and the provisions of
Section 2.12.
If any Security called for redemption shall not be so
paid upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, bear interest from the
Redemption Date at the rate borne by the Securities.
SECTION 9.8. Securities Redeemed in Part. Any
Security which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at the office or
agency of the Company maintained for such purpose pursuant to
Section 3.7 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered; provided
that each such new Security will be in a principal amount of
$1,000 or integral multiple thereof.
ARTICLE X
Miscellaneous
SECTION 10.1. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this
Indenture by the TIA, the provision required by the TIA shall
control.
SECTION 10.2. Notices. Any notice or communication shall
be in writing and delivered in person or mailed by first-class
mail addressed as follows:
if to the Company:
CK Witco Corporation
One American Lane
Greenwich, CT 06831-2559
Attn: General Counsel
if to the Trustee:
Citibank, N.A.
111 Wall Street, 5th Floor
New York, N.Y. 10005
Attn: Global Agency & Trust Services
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Securityholder
shall be mailed to the Securityholder at the Securityholder's
address as it appears on the registration books of the Registrar
and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders. If a notice
or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 10.3. Communication by Holders with other
Holders. Securityholders may communicate pursuant to TIA
ss. 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
SECTION 10.4. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the
Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 10.5. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a covenant or condition provided for in this Indenture shall
include:
(1) a statement that the individual making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with;
and
(4) a statement as to whether or not, in the opinion of
such individual, such covenant or condition has been complied
with.
SECTION 10.6. Rules by Trustee, Paying Agent and
Registrar. The Trustee may make reasonable rules for action by,
or a meeting of, Securityholders. The Registrar and the Paying
Agent may make reasonable rules for their functions.
SECTION 10.7. Legal Holidays. If a payment date is
not a Business Day, payment shall be made on the next succeeding
day that is a Business Day, and no interest shall accrue for the
intervening period. If a regular record date is not a Business
Day, the record date shall not be affected.
SECTION 10.8. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect
to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be
required thereby.
SECTION 10.9. No Recourse Against Others. An
incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities
or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such
liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
SECTION 10.10. Successors. All agreements of the
Company in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 10.11. Multiple Originals. The parties may
sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 10.12. Variable Provisions. The Company
initially appoints the Trustee as Paying Agent and Registrar and
custodian with respect to any Global Securities.
SECTION 10.13. Qualification of Indenture. The
Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights
Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees and expenses for the Company and the
Trustee) incurred in connection therewith, including, but not
limited to, costs and expenses of qualification of the Indenture
and the Securities and printing this Indenture and the
Securities. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request in connection
with any such qualification of this Indenture under the TIA.
SECTION 10.14. Table of Contents; Headings. The table
of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience
of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or
provisions hereof.
IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed as of the date first written above.
CK WITCO CORPORATION
By:
Name:
Title:
CITIBANK, N.A.
By:
Name:
Title:
- -------------------------------------------------------------------------------
CK WITCO CORPORATION
(a Delaware corporation)
8.50% Senior Notes due 2005
PURCHASE AGREEMENT
Dated: March 2, 2000
- -------------------------------------------------------------------------------
<PAGE>
Table of Contents
PURCHASE AGREEMENT
SECTION 1. Representations and Warranties by the Company 2
(a) Representations and Warranties 2
(i) Offering Memorandum 2
(ii) Incorporated Documents 2
(iii) Independent Accountants 3
(iv) Financial Statements 3
(v) No Material Adverse Change in Business 3
(vi) Good Standing of the Company 3
(vii) Good Standing of Designated Subsidiaries 4
(viii) Capitalization 4
(ix) Authorization of Agreement 4
(x) Authorization of the Indenture 4
(xi) Authorization of the Securities 4
(xii) Description of the Securities and the Indenture 5
(xiii) Absence of Defaults and Conflicts 5
(xiv) Absence of Labor Dispute 5
(xv) Absence of Proceedings 6
(xvi) Possession of Intellectual Property 6
(xvii) Absence of Further Requirements 6
(xviii) Possession of Licenses and Permits 6
(xix) Title to Property 7
(xx) Environmental Laws 7
(xxi) Investment Company Act 7
(xxii) Similar Offerings 8
(xxiii) Rule 144A Eligibility 8
(xxiv) No General Solicitation 8
(xxv) No Registration Required 8
(xxvi) Reporting Company 8
(xxvii) No Directed Selling Efforts 8
(xxviii)Year 2000 8
(b) Officer's Certificates 9
SECTION 2. Sale and Delivery to Initial Purchasers; Closing 9
(a) Securities 9
(b) Payment 9
SECTION 3. Covenants of the Company 9
(a) Offering Memorandum 9
(b) Notice and Effect of Material Events 9
(c) Amendment to Offering Memorandum and Supplements 10
(d) Rating of Securities 10
(e) DTC 10
(f) Use of Proceeds 10
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(g) Restriction on Sale of Securities 10
SECTION 4. Payment of Expenses 11
(a) Expenses 11
(b) Termination of Agreement 11
SECTION 5. Conditions of Initial Purchasers' Obligations 11
(a) Opinion of Counsel for Company 11
(b) Opinion of Counsel for Initial Purchasers 11
(c) Officers' Certificate 12
(d) Accountants' Comfort Letter 12
(e) Bring-down Comfort Letter 12
(f) Maintenance of Rating 12
(g) Registration Rights Agreement 12
(h) Additional Documents 12
(i) Termination of Agreement 13
SECTION 6 Subsequent Offers and Resales of the Securities 13
(a) Offer and Sale Procedures 13
(i) Offers and Sales only to Qualified Institutional
Buyers or Non-U.S. Persons 13
(ii) No General Solicitation 13
(iii) Purchases by Non-Bank Fiduciaries 13
(iv) Subsequent Purchaser Notification 13
(v) Restrictions on Transfer 14
(b) Covenants of the Company 14
(i) Integration 14
(ii) Rule 144A Information 14
(iii) Restriction on Repurchases 14
(c) Qualified Institutional Buyer 14
(d) Resale Pursuant to Rule 903 of Regulation S or
Rule 144A 14
(e) Additional Representations and Warranties of Initial
Purchasers 16
SECTION 7. Indemnification 16
(a) Indemnification of Initial Purchasers 16
(b) Indemnification of Company 17
(c) Actions against Parties; Notification 17
SECTION 8. Contribution 19
SECTION 9. Representations, Warranties and Agreements to Survive Delivery 20
SECTION 10. Termination of Agreement 20
(a) Termination; General 20
(b) Liabilities 20
SECTION 11. Default by One or More of the Initial Purchasers 20
SECTION 12. Notices 21
ii
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SECTION 13. Parties 21
SECTION 14. GOVERNING LAW AND TIME 21
SECTION 15. Effect of Headings 21
iii
<PAGE>
SCHEDULES
Schedule A - List of Initial Purchasers Sch A-1
Schedule B - Pricing Information Sch B-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel A-1
<PAGE>
CK WITCO CORPORATION
(a Delaware corporation)
$600,000,000
8.50% Senior Notes due 2005
PURCHASE AGREEMENT
March 2, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated as
Representative of the several
Initial Purchasers
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
CK Witco Corporation, a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Initial Purchasers named in
Schedule A hereto (collectively, the "Initial Purchasers", which term shall also
include any initial purchaser substituted as hereinafter provided in Section 11
hereof), for whom Merrill Lynch is acting as representative (in such capacity,
the "Representative"), with respect to the issue and sale by the Company and the
purchase by the Initial Purchasers, acting severally and not jointly, of the
respective principal amounts set forth in said Schedule A of $600,000,000
aggregate principal amount of the Company's 8.50% Senior Notes due 2005 (the
"Securities"). The Securities are to be issued pursuant to an indenture dated as
of March 1, 2000 (the "Indenture") between the Company and Citibank, N.A., as
trustee (the "Trustee"). Securities will be issued to Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated
as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among
the Company, the Trustee and DTC.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after this Agreement has been executed and delivered.
The Securities are to be offered and sold through the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "1933 Act"),
in reliance upon exemptions therefrom. Pursuant to the terms of the Securities
and the Indenture, investors that acquire Securities may only resell or
otherwise transfer such Securities if such Securities are hereafter registered
under the 1933 Act or if an exemption from the registration requirements of the
1933 Act is available (including the exemption afforded by Rule 144A ("Rule
144A") or Regulation S ("Regulation S") of the rules and regulations promulgated
under the 1933 Act by the Securities and Exchange Commission (the
"Commission")).
<PAGE>
The Company has prepared and delivered to each Initial Purchaser copies of
a preliminary offering memorandum dated February 28, 2000 (the "Preliminary
Offering Memorandum") and has prepared and will deliver to each Initial
Purchaser, on the date hereof or the next succeeding day, copies of a final
offering memorandum dated March 2, 2000 (the "Final Offering Memorandum"), each
for use by such Initial Purchaser in connection with its solicitation of
purchases of, or offering of, the Securities. "Offering Memorandum" means, with
respect to any date or time referred to in this Agreement, the most recent
offering memorandum (whether the Preliminary Offering Memorandum or the Final
Offering Memorandum, or any amendment or supplement to either such document),
including exhibits, amendments or supplements thereto and any documents
incorporated therein by reference, which has been prepared and delivered by the
Company to the Initial Purchasers in connection with their solicitation of
purchases of, or offering of, the Securities.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Offering
Memorandum (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
are incorporated by reference in the Offering Memorandum; and all references in
this Agreement to amendments or supplements to the Offering Memorandum shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the
Offering Memorandum.
SECTION 1. Representations and Warranties by the Company.
(a) Representations and Warranties. The Company represents and warrants to
each Initial Purchaser as of the date hereof and as of the Closing Time referred
to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows:
(i) Offering Memorandum. The Offering Memorandum does not, and at the
Closing Time will not, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that this representation, warranty and agreement shall
not apply to statements in or omissions from the Offering Memorandum made
in reliance upon and in conformity with information furnished to the
Company in writing by any Initial Purchaser expressly for use in the
Offering Memorandum.
(ii) Incorporated Documents. The Offering Memorandum as delivered from
time to time shall incorporate by reference the most recent Annual Reports
of the Company and its predecessors on Form 10-K filed with the Commission
and each Quarterly Report of the Company and its predecessors on Form 10-Q
and each Current Report of the Company and its predecessors on Form 8-K
filed with the Commission since the filing of the end of the fiscal year to
which such Annual Report relates. The documents incorporated or deemed to
be incorporated by reference in the Offering Memorandum at the time they
were or hereafter are filed with the Commission (as amended, supplemented
or superseded by any later filing made prior to the date hereof) complied
and will comply in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission thereunder (the "1934
Act Regulations"), and, when read together with the other information in
the Offering
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Memorandum, at the time the Offering Memorandum was issued and at the
Closing Time, did not and will not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Offering
Memorandum are independent public accountants with respect to the Company
and its subsidiaries and predecessors within the meaning of Regulation S-X
under the 1933 Act.
(iv) Financial Statements. The financial statements, together with the
related schedules and notes, included in the Offering Memorandum present
fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Offering Memorandum present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included in the Offering Memorandum present fairly the information shown
therein and, where derived from audited financial statements, have been
compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum. The pro forma financial
statements of the Company and its subsidiaries and the related notes
thereto included in the Offering Memorandum have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(v) No Material Adverse Change in Business. Since the respective dates
as of which information is given in the Offering Memorandum, except as
otherwise stated therein, (A) there has been no material adverse change in
the condition, financial or otherwise, or in the earnings or business of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there have been no
dividends paid by the Company, except for regular dividends on the common
stock, par value $.01 per share, of the Company (the "Common Stock").
(vi) Good Standing of the Company. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of
the state of Delaware and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations under
this Agreement; and the Company is duly qualified as a foreign corporation
to transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
3
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(vii) Good Standing of Designated Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Designated Subsidiary" and, collectively, the
"Designated Subsidiaries") has been duly organized and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Offering Memorandum, all of the issued
and outstanding capital stock of each Designated Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity, except when the failure to do so would not result in a Material
Adverse Effect; none of the outstanding shares of capital stock of the
Designated Subsidiaries was issued in violation of any preemptive or
similar rights of any securityholder of such Designated Subsidiary.
(viii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Offering Memorandum under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant
to this Agreement, pursuant to reservations, agreements, employee benefit
plans referred to in the Offering Memorandum or pursuant to the exercise of
convertible securities or options referred to in the Offering Memorandum).
The shares of issued and outstanding capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock of the Company was issued
in violation of the preemptive or other similar rights of any
securityholder of the Company.
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and, when executed and delivered by the Company
and the Trustee, will constitute a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xi) Authorization of the Securities. The Securities have been duly
authorized and, at the Closing Time, will have been duly executed by the
Company and, when authenticated, issued and delivered in the manner
provided for in the Indenture and delivered against payment of the purchase
price therefor as provided in this Agreement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent
4
<PAGE>
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and will be
in the form contemplated by, and entitled to the benefits of, the
Indenture.
(xii) Description of the Securities and the Indenture. The Securities
and the Indenture will conform in all material respects to the respective
statements relating thereto contained in the Offering Memorandum.
(xiii) Absence of Defaults and Conflicts. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which any of
them may be bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement, the Indenture and the Securities and any other agreement or
instrument entered into or issued or to be entered into or issued by the
Company in connection with the transactions contemplated hereby or thereby
or in the Offering Memorandum and the consummation of the transactions
contemplated herein and in the Offering Memorandum (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Offering Memorandum under the caption "Use
of Proceeds") and compliance by the Company with its obligations hereunder
have been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or default or a Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to, the Agreements and Instruments
except for such conflicts, breaches or defaults or liens, charges or
encumbrances that, singly or in the aggregate, would not result in a
Material Adverse Effect, nor will such action result in any significant
violation of the provisions of the charter or by-laws of the Company or any
of its subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their assets, properties or
operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.
(xiv) Absence of Labor Dispute. No labor dispute with the employees of
the Company or any of its subsidiaries exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
subsidiaries' principal suppliers, manufacturers, customers or contractors,
which, in any case, may reasonably be expected to result in a Material
Adverse Effect.
5
<PAGE>
(xv) Absence of Proceedings. Except as disclosed in the Offering
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company, threatened,
against or affecting the Company or any of its subsidiaries which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets of the Company and its subsidiaries as a whole or the
consummation of the transactions contemplated by this Agreement or the
performance by the Company of its obligations hereunder. No pending legal
or governmental proceeding to which the Company or any of its subsidiaries
is a party or of which any of their respective property or assets is the
subject which are not described in the Offering Memorandum, including
ordinary routine litigation incidental to the business, could reasonably be
expected to result in a Material Adverse Effect.
(xvi) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, except where the failure to do so would not have a
Material Adverse Effect, and neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement or for the due execution, delivery or
performance of the Indenture by the Company, except such as have been
already obtained.
(xviii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them, except where the
failure to do so would not have a Material Adverse Effect; the Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except where
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any no-
6
<PAGE>
tice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xix) Title to Property. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Offering Memorandum, (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its subsidiaries or (c) could not reasonably be expected
to have a Material Adverse Effect; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as
one enterprise, are in full force and effect, and neither the Company nor
any of its subsidiaries has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company or
any of its subsidiaries under any of the leases or subleases mentioned
above, or affecting or questioning the rights of such the Company or any
subsidiary thereof to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xx) Environmental Laws. Except as described in the Offering
Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor
any of its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or
Environmental Laws.
(xxi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will not be, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
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(xxii) Similar Offerings. Neither the Company nor any of its
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
(each, an "Affiliate"), has, directly or indirectly, solicited any offer to
buy, sold or offered to sell or otherwise negotiated in respect of, or will
solicit any offer to buy, sell or offer to sell or otherwise negotiate in
respect of, in the United States or to any United States citizen or
resident, any security which is or would be integrated with the sale of the
Securities in a manner that would require the Securities to be registered
under the 1933 Act.
(xxiii) Rule 144A Eligibility. The Securities are eligible for resale
pursuant to Rule 144A and will not be, at the Closing Time, of the same
class as securities listed on a national securities exchange registered
under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer
quotation system.
(xxiv) No General Solicitation. None of the Company, its Affiliates or
any person acting on its or any of their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has engaged or
will engage, in connection with the offering of the Securities, in any form
of general solicitation or general advertising within the meaning of Rule
502(c) under the 1933 Act.
(xxv) No Registration Required. Subject to compliance by the Initial
Purchasers with the agreements, procedures, representations and warranties
set forth in Section 6 hereof, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchasers and to
each Subsequent Purchaser in the manner contemplated by this Agreement and
the Offering Memorandum to register the Securities under the 1933 Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "1939 Act").
(xxvi) Reporting Company. The Company is subject to the reporting
requirements of Section 13 or Section 15(d) of the 1934 Act.
(xxvii) No Directed Selling Efforts. With respect to those Securities
sold in reliance on Regulation S, (A) none of the Company, its Affiliates
or any person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has engaged or
will engage in any directed selling efforts within the meaning of
Regulation S and (B) each of the Company and its Affiliates and any person
acting on its or their behalf (other than the Initial Purchasers, as to
whom the Company makes no representation) has complied and will comply with
the offering restrictions requirement of Regulation S.
(xxviii) Year 2000. The Company and its subsidiaries have implemented
a comprehensive, detailed program to analyze and address the risk that the
computer hardware and software used by them may be unable to recognize and
properly execute date-sensitive functions involving certain dates prior to
and any dates after December 31, 1999 (the "Year 2000 Problem"), and has
determined that any such risk that has not been remedied will be remedied
on a timely basis without material expense and will not have a material
adverse effect upon the financial condition and results of operations of
the Company and its subsidiaries, taken as a whole; and to the Company's
best knowledge, each supplier, vendor, customer or financial service
organization used or serviced by the Company and its subsidiaries has
remedied the Year 2000 Problem, although the failure by any such supplier,
vendor, customer or financial service organization to remedy the Year
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2000 Problem could have a Material Adverse Effect on the Company and its
subsidiaries, taken as a whole. The Company is in compliance with the
Commission's staff legal bulletin No. 5 dated January 12, 1998 related to
Year 2000 compliance.
(b) Officer's Certificates. Any certificate signed by any duly authorized
officer of the Company or any of its subsidiaries delivered to the
Representative or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by the Company to each Initial Purchaser as to the
matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
(a) Securities. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to each Initial Purchaser, severally and not jointly, and each
Initial Purchaser, severally and not jointly, agrees to purchase from the
Company, at the price set forth in Schedule B, the aggregate principal amount of
Securities set forth in Schedule A opposite the name of such Initial Purchaser,
plus any additional principal amount of Securities which such Initial Purchaser
may become obligated to purchase pursuant to the provisions of Section 11
hereof. The Company shall not be obligated to deliver any of the Securities
except upon payment for all of the Securities to be purchased as provided
herein.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Cravath, Swaine
& Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, or at
such other place as shall be agreed upon by the Representative and the Company,
at 9:00 A.M. (eastern time) on March 7, 2000 (unless postponed in accordance
with the provisions of Section 11), or such other time not later than ten
business days after such date as shall be agreed upon by the Representative and
the Company (such time and date of payment and delivery being herein called the
"Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representative for the respective accounts of the Initial Purchasers of
certificates for the Securities to be purchased by them. It is understood that
each Initial Purchaser has authorized the Representative, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Merrill Lynch, individually and not
as representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time, but
such payment shall not relieve such Initial Purchaser from its obligations
hereunder.
SECTION 3. Covenants of the Company. The Company covenants with each
Initial Purchaser as follows:
(a) Offering Memorandum. The Company, as promptly as possible, will furnish
to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum (until the Final Offering Memorandum is
available), the Final Offering Memorandum and any amendments and supplements
thereto and documents incorporated by reference therein as such Initial
Purchaser may reasonably request.
(b) Notice and Effect of Material Events. Until the earliest to occur of
(i) the initial resale by the Initial Purchasers and (ii) 30 days from the date
hereof (the "End Date"), the Com-
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pany will as promptly as practicable notify each Initial Purchaser, and confirm
such notice in writing, of (x) any filing made by the Company of information
relating to the offering of the Securities with any securities exchange or any
other regulatory body in the United States or any other jurisdiction, and (y)
prior to the End Date, any material changes in or affecting the condition,
financial or otherwise, or the earnings or business of the Company and its
subsidiaries considered as one enterprise which (i) make any statement in the
Offering Memorandum false or misleading or (ii) are not disclosed in the
Offering Memorandum. In such event or if during such time prior to the End Date
any event shall occur as a result of which it is necessary, in the reasonable
opinion of any of the Company, its counsel, the Initial Purchasers or counsel
for the Initial Purchasers, to amend or supplement the Final Offering Memorandum
in order that the Final Offering Memorandum not include any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances then
existing, the Company will forthwith amend or supplement the Final Offering
Memorandum by preparing and furnishing to each Initial Purchaser an amendment or
amendments of, or a supplement or supplements to, the Final Offering Memorandum
(in form and substance satisfactory in the reasonable opinion of counsel for the
Initial Purchasers) so that, as so amended or supplemented, the Final Offering
Memorandum will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a Subsequent
Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. Prior to the End
Date, the Company will advise each Initial Purchaser promptly of any proposal to
amend or supplement the Offering Memorandum. Neither the consent of the Initial
Purchasers, nor the Initial Purchaser's delivery of any such amendment or
supplement, shall constitute a waiver of any of the conditions set forth in
Section 5 hereof.
(d) Rating of Securities. The Company shall take all reasonable action
necessary to enable Standard & Poor's Ratings Services, a division of McGraw
Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("Moody's") to provide
their respective credit ratings of the Securities.
(e) DTC. The Company will cooperate with the Representative and use its
reasonable best efforts to permit the Securities to be eligible for clearance
and settlement through the facilities of DTC.
(f) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds".
(g) Restriction on Sale of Securities. During a period ending on the
earlier of (i) the date that the initial distribution of notes by the Initial
Purchasers is complete and (ii) 30 days from the date of the Offering
Memorandum, the Company will not, without the prior written consent of Merrill
Lynch, directly or indirectly, issue, sell, offer or agree to sell, grant any
option for the sale of, or otherwise dispose of, any other debt securities of
the Company that are substantially similar to the Securities or securities of
the Company that are convertible into, or exchangeable for or otherwise
represent a right to acquire, the Securities or such other debt securities.
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SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation,
printing, delivery to the Initial Purchasers and any filing of the Offering
Memorandum (including financial statements and any schedules or exhibits and any
document incorporated therein by reference) and of each amendment or supplement
thereto, (ii) the printing and delivery to the Initial Purchasers of this
Agreement, any Agreement among Initial Purchasers, the Indenture and such other
documents as may be required to be printed in connection with the offering,
purchase, sale, issuance or delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the Initial
Purchasers, including any transfer taxes, any stamp or other duties payable upon
the sale, issuance and delivery of the Securities to the Initial Purchasers and
any charges of DTC in connection therewith, (iv) the fees and disbursements of
the Company's counsel, accountants and other advisors, (v) the reasonable fees
and disbursements of counsel for the Initial Purchasers in connection with the
preparation of the Blue Sky Survey, and any supplement thereto, (vi) the fees
and expenses of the Trustee, including the fees and disbursements of counsel for
the Trustee in connection with the Indenture and the Securities, and (vii) any
fees payable in connection with the rating of the Securities.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for their
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations. The obligations
of the several Initial Purchasers hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any of its subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Opinion of Counsel for Company. At the Closing Time, the Representative
shall have received the favorable opinions, dated as of the Closing Time, of the
General Counsel of the Company and of Wachtell, Lipton, Rosen & Katz, special
counsel for the Company, in form and substance reasonably satisfactory to
counsel for the Initial Purchasers, together with signed or reproduced copies of
such letter for each of the other Initial Purchasers substantially to the effect
set forth in Exhibit A hereto. In giving such opinion such counsel may rely, as
to all matters governed by the laws of jurisdictions other than the law of the
State of New York, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representative. Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(b) Opinion of Counsel for Initial Purchasers. At the Closing Time, the
Representative shall have received the favorable opinion, dated as of the
Closing Time, of Cravath, Swaine & Moore, counsel for the Initial Purchasers,
together with signed or reproduced copies of such letter for each of the other
Initial Purchasers with respect to the matters set forth in (i), (ii), (v)
through (viii), inclusive, (xv) and the penultimate paragraph of Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters governed
by the laws of jurisdictions other than
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the law of the State of New York, the federal law of the United States and the
General Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representative. Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(c) Officers' Certificate. At the Closing Time, there shall not have been
since the date hereof or since the respective dates as of which information is
given in the Final Memorandum, exclusive of any amendments or supplements
thereto after the date hereof, any Material Adverse Effect or any development
involving a prospective Material Adverse Effect, and the Representative shall
have received a certificate of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the Company, dated as
of the Closing Time, to the effect that (i) there has been no such Material
Adverse Effect or any development involving a prospective Material Adverse
Effect, (ii) the representations and warranties in Section 1 hereof are true and
correct with the same force and effect as though expressly made at and as of the
Closing Time, and (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
the Closing Time.
(d) Accountants' Comfort Letter. At the time of the execution of this
Agreement, the Representative shall have received from KPMG LLP a letter dated
such date, in form and substance reasonably satisfactory to the Representative,
together with signed or reproduced copies of such letter for each of the other
Initial Purchasers containing statements and information of the type ordinarily
included or as otherwise agreed in accountants' "comfort letters" to Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the Representative
shall have received from KPMG LLP a letter, dated as of the Closing Time, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (d) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities shall be
rated at least BAA3 by Moody's and BBB by S&P, and the Company shall have
delivered to the Representative a letter dated the Closing Time, from each such
rating agency, or other evidence satisfactory to the Representative, confirming
that the Securities have such ratings; and since the date of this Agreement,
there shall not have occurred a downgrading in the rating assigned to the
Securities or any of the Company's other securities by any "nationally
recognized statistical rating agency", as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the 1933 Act, and no such securities rating
agency shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of the Securities or any of the
Company's other securities.
(g) Registration Rights Agreement. At the Closing Time, a registration
rights agreement among the Company and the Initial Purchasers shall have been
executed.
(h) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Securities as herein contemplated, or in order to evidence the accuracy of
any of the representations or warranties, or the fulfillment of
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<PAGE>
any of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to the
Representative and counsel for the Initial Purchasers.
(i) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representative by notice to the Company at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 7, 8 and 9 shall survive any such termination and remain in
full force and effect.
SECTION 6. Subsequent Offers and Resales of the Securities.
(a) Offer and Sale Procedures. Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) Offers and Sales only to Qualified Institutional Buyers or
Non-U.S. Persons. Offers and sales of the Securities shall only be made (A)
to persons whom the offeror or seller reasonably believes to be qualified
institutional buyers, as defined in Rule 144A under the 1933 Act
("Qualified Institutional Buyers") and, if any such person is buying for
one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each
such account is a Qualified Institutional Buyer to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A and
in each case, in transactions in accordance with Rule 144A or (B) in the
case of offers or sales made outside the United States, to non-U.S. persons
outside the United States, as defined in Regulation S under the 1933 Act,
to whom the offeror or seller reasonably believes offers and sales of the
Securities may be made in reliance upon Regulation S under the 1933 Act.
Each Initial Purchaser severally agrees that it will not offer, sell or
deliver any of the Securities in any jurisdiction outside the United States
except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense whatever
action is required to permit its purchase and resale of the Securities in
such jurisdictions.
(ii) No General Solicitation. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be
used in the United States in connection with the offering or sale of the
Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
Subsequent Purchaser of a Security acting as a fiduciary for one or more
third parties, each third party shall, in the judgment of the applicable
Initial Purchaser, be an Institutional Accredited Investor or a Qualified
Institutional Buyer or a non-U.S. person outside the United States.
(iv) Subsequent Purchaser Notification. Each Initial Purchaser will
take reasonable steps to inform, and cause each of its U.S. Affiliates to
take reasonable steps to inform, persons acquiring Securities from such
Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
1933 Act, (B) are being sold to them without registration under the 1933
Act in reliance on Rule 144A or in accordance with another exemption from
registration
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under the 1933 Act, as the case may be, and (C) may not be offered, sold or
otherwise transferred except (1) to the Company, (2) outside the United
States in accordance with Regulation S, or (3) inside the United States in
accordance with (x) Rule 144A to a person whom the seller reasonably
believes is a Qualified Institutional Buyer that is purchasing such
Securities for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the offer, sale or
transfer is being made in reliance on Rule 144A or (y) pursuant to another
available exemption from registration under the 1933 Act.
(v) Restrictions on Transfer. The transfer restrictions and the other
provisions set forth in the Offering Memorandum under the heading "Notice
to Investors", including the legend required thereby, shall apply to the
Securities except as otherwise agreed by the Company and the Initial
Purchasers.
(b) Covenants of the Company. The Company covenants with each Initial
Purchaser as follows:
(i) Integration. The Company agrees that it will not and will cause
its Affiliates not to, directly or indirectly, solicit any offer to buy,
sell or make any offer or sale of, or otherwise negotiate in respect of,
securities of the Company of any class if, as a result of the doctrine of
"integration" referred to in Rule 502 under the 1933 Act, such offer or
sale would render invalid (for the purpose of (i) the sale of the
Securities by the Company to the Initial Purchasers, (ii) the resale of the
Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the
resale of the Securities by such Subsequent Purchasers to others) the
exemption from the registration requirements of the 1933 Act provided by
Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or
otherwise.
(ii) Rule 144A Information. The Company agrees that, in order to
render the Securities eligible for resale pursuant to Rule 144A under the
1933 Act, while any of the Securities remain outstanding, it will make
available, upon request, to any holder of Securities or prospective
purchasers of Securities the information specified in Rule 144A(d)(4),
unless the Company furnishes information to the Commission pursuant to
Section 13 or 15(d) of the 1934 Act.
(iii) Restriction on Repurchases. Until the expiration of two years
after the original issuance of the Securities, the Company will not, and
will cause its Affiliates not to, resell any Securities which are
"restricted securities" (as such term is defined under Rule 144(a)(3) under
the 1933 Act), whether as beneficial owner or otherwise (except as agent
acting as a securities broker on behalf of and for the account of customers
in the ordinary course of business in unsolicited broker's transactions),
except in compliance with the 1933 Act.
(c) Qualified Institutional Buyer. Each Initial Purchaser severally and not
jointly represents and warrants to, and agrees with, the Company that it is a
Qualified Institutional Buyer and an "accredited investor" within the meaning of
Rule 501(a) under the 1933 Act (an "Accredited Investor").
(d) Resale Pursuant to Rule 903 of Regulation S or Rule 144A. Each Initial
Purchaser understands that the Securities have not been and will not be
registered under the 1933 Act and may not be offered or sold within the United
States or to, or for the account or benefit of,
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U.S. persons except in accordance with Regulation S under the 1933 Act or
pursuant to an exemption from the registration requirements of the 1933 Act.
Each Initial Purchaser severally represents, warrants and agrees, that, except
as permitted by Section 6(a) above, it has offered and sold Securities and will
offer and sell Securities (i) as part of their distribution at any time and (ii)
otherwise until forty days after the later of the date upon which the offering
of the Securities commences and the Closing Time, only in accordance with Rule
903 of Regulation S, Rule 144A under the 1933 Act or another applicable
exemption from the registration requirements of the 1933 Act. Accordingly,
neither the Initial Purchasers, their affiliates nor any persons acting on their
behalf have engaged or will engage in any directed selling efforts with respect
to the Securities pursuant to Regulation S, and the Initial Purchasers, their
affiliates and any person acting on their behalf have complied and will comply
with the offering restriction requirements of Regulation S. Each Initial
Purchaser severally agrees that, at or prior to confirmation of a sale of
Securities pursuant to Regulation S it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases Securities from it or through it during the restricted period a
confirmation or notice to substantially the following effect: Each Initial
Purchaser, severally and not jointly, represents, warrants and agrees with
respect to offers and sales outside the United States that:
(i) it understands that no action has been or will be taken in any
jurisdiction by the Company that would permit a public offering of the
Securities or possession or distribution of either Memorandum or any other
offering or publicity material relating to the Securities, in any country
or jurisdiction where action for that purpose is required;
(ii) it will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or
has in its possession or distributes either Memorandum or any such other
material, in all cases at its own expense;
(iii) the Securities have not been and will not be registered under
the 1933 Act and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except in accordance with
Regulations S under the 1933 Act or pursuant to another exemption from the
registration requirements of the 1933 Act;
(iv) it has (1) not offered or sold and will not offer or sell in the
United Kingdom, by means of any document, any Securities other than to any
persons whose ordinary business it is to buy and sell shares or debentures,
whether as a principal or agent, or in circumstances which do not
constitute an offer to the public within the meaning of the Companies Act
1985, as amended (2) complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done
by it in relation to the Securities in, from or otherwise involving the
United Kingdom, and (3) only issued or passed on and will only issue and
pass onto any persons in the United Kingdom any document received by it in
connection with the issue of the Securities if that person is of a kind
described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisement) (Exemptions) Order 1988 or is a person to whom the document
may otherwise lawfully by issued or passed on;
(v) it understands that the Securities have not been and will not be
registered under the Securities and Exchange Law of Japan, and represents
that it has not offered or sold, and agrees that it will not offer or sell,
and Securities, directly or indirectly in Japan or to or from any resident
of Japan except (i) pursuant to an exemption from the registra-
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tion requirements of the Securities and Exchange Law of Japan and (ii) in
compliance with any other applicable requirements of Japanese Law;
(vi) At or prior to confirmation of a sale of Securities pursuant to
Regulation S it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it or through it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to or for the
account or benefit of U.S. persons (i) as part of their distribution
at any time and (ii) otherwise until forty days after the later of the
date upon which the offering of the Securities commenced and the date
of closing, except in either case in accordance with Regulation S or
Rule 144A under the Securities Act. Terms used above have the meaning
given to them by Regulation S."
Terms used in the above paragraph have the meanings given to them by
Regulation S.
(e) Additional Representations and Warranties of Initial Purchasers. Each
Initial Purchaser severally represents and agrees that it has not entered and
will not enter into any contractual arrangements with respect to the
distribution of the Securities, except with its affiliates or with the prior
written consent of the Company. Each Initial Purchaser hereby agrees that, prior
to or simultaneously with the confirmation of sale by such Initial Purchaser to
any purchaser of any of the Securities purchased by such Initial Purchaser from
the Company pursuant to this Agreement, such Initial Purchaser shall deliver to
all such purchasers with addresses in the United States and, to the extent
required by applicable law, to other purchasers a copy of the Offering
Memorandum (any and amendment or supplement thereto that the Company shall have
furnished to such Initial Purchaser prior to the date of such confirmation of
sale). Each Initial Purchaser further agrees that, without the prior written
consent of the Company, such Initial Purchaser will not disseminate any written
materials to holders of the Securities for or in connection with the
transactions contemplated by this Agreement other than the Offering Memorandum.
SECTION 7. Indemnification.
(a) Indemnification of Initial Purchasers. The Company agrees to indemnify
and hold harmless each Initial Purchaser and each person, if any, who controls
any Initial Purchaser within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever (at least quarterly) arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum or the Final Offering Memorandum (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever (at least quarterly) to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to
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Section 7(d) below) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expense whatsoever, (at least quarterly)
(including the reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Initial Purchaser expressly for use in the Offering Memorandum
(or any amendment thereto); provided, further, that, with respect to any loss,
liability, claim, damage or expense arising out of any untrue statement or
omission or alleged untrue statement or omission contained in any Preliminary
Offering Memorandum or the Final Offering Memorandum (or any amendment or
supplement thereto), the indemnity contained in this Section shall not inure to
the benefit of any Initial Purchaser (or any person who controls such Initial
Purchaser) if (i) a copy of the Final Offering Memorandum or amendment or
supplement thereto was to be sent or given to such purchasers with addresses in
the United States and, to the extent required by applicable law, to other
purchasers, at or prior to the written confirmation of the sale of the
applicable Securities together with all amendments or supplements thereto
available at such time and was not sent or given and (ii) such untrue statement
or omission or alleged untrue statement or omission was corrected in the Final
Offering Memorandum or in any amendment or supplement thereto available at such
time.
(b) Indemnification of Company. Each Initial Purchaser severally agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Offering Memorandum in reliance upon
and in conformity with written information furnished to the Company by such
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum, and shall reimburse the Company for any and all expenses reasonably
incurred by the Company in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action.
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder except to the extent it is
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch and shall
be reasonably acceptable to the Company, and, in the case of parties indemnified
pursuant to Section 7(b) above, counsel to the indemnified parties shall be
selected by the Company and shall be reasonably acceptable to Merrill Lynch. An
indemnifying party may participate at its own expense in the defense of any such
action and, to the extent it
17
<PAGE>
wishes, shall be entitled to assume the defense of any such action with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (i)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (ii) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based upon advice of counsel to
the indemnified party) between the indemnified party and the indemnifying party
(in which case the indemnifying party will not have the right to direct the
defense of such action on behalf of the indemnified party) or (iv) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. In no event shall counsel to
the indemnifying party (except with the consent of the indemnified party) also
be counsel to the indemnified party. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Each indemnified party shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnified
party seeking or otherwise eligible for indemnification or contribution
hereunder will, without the prior written consent of the indemnifying party
(which shall not be unreasonably withheld), settle, compromise, consent to the
entry of any judgment in or otherwise seek to terminate any action, claim, suit,
investigation or proceeding pursuant to which indemnity or contribution is or
may be available hereunder. No indemnifying party shall, without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section or Section 8 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party. Notwithstanding, this
Section 7(c), if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, an indemnifying party shall not be liable for any settlement of the
nature contemplated by this Section 7(c) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.
18
<PAGE>
SECTION 8. Contribution. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Initial Purchasers on
the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company, on the one hand, and the total underwriting discount received by
the Initial Purchasers, on the other, bear to the aggregate initial offering
price of the Securities.
The relative fault of the Company on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section. The aggregate amount
of losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section, no Initial Purchaser shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities purchased and sold by it hereunder exceeds the
amount of any damages which such Initial Purchaser has otherwise been required
to pay under Section 7(b) by reason of such untrue or alleged untrue statement
or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls an Initial
Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same
19
<PAGE>
rights to contribution as such Initial Purchaser, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The Initial Purchasers' respective obligations to contribute pursuant to this
Section are several in proportion to the principal amount of Securities set
forth opposite their respective names in Schedule A hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
Subject to the initial sentence of Section 1(a), all representations, warranties
and agreements contained in this Agreement or in certificates of officers of the
Company or any of its subsidiaries submitted pursuant hereto shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Initial Purchaser or controlling person, or by or on behalf
of the Company, and shall survive delivery of the Securities to the Initial
Purchasers.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Representative may terminate this Agreement,
by notice to the Company, at any time at or prior to the Closing Time (i) if
there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Final Offering
Memorandum exclusive of any amendment or supplement thereto after the date
hereof, any material adverse change in the condition, financial or otherwise, or
in the earnings or business affairs of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representative,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ System has been suspended or materially limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 7,
8 and 9 shall survive such termination and remain in full force and effect.
SECTION 11. Default by One or More of the Initial Purchasers. If one or
more of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representative shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Initial Purchasers, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
20
<PAGE>
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder,
each of the non-defaulting Initial Purchasers shall be obligated, severally
and not jointly, to purchase the full amount thereof in the proportions
that their respective purchase obligations hereunder bear to the purchase
obligations of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the aggregate
principal amount of the Securities to be purchased hereunder, this
Agreement shall terminate without liability on the part of any
non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representative or the Company shall have the right to
postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Offering Memorandum or in any other documents
or arrangements. As used herein, the term "Initial Purchaser" includes any
person substituted for an Initial Purchaser under this Section.
SECTION 12. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Representative at North Tower, World
Financial Center, New York, New York 10281, attention of Greg Kelly, Vice
President; notices to the Company shall be directed to it at One American Lane,
Greenwich, CT 06831-2559, attention of Senior Vice President and General
Counsel; with a copy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New
York, NY 10019, attention of Steven A. Cohen, Esq.
SECTION 13. Parties. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 7 and 8
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Initial Purchasers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any Initial Purchaser shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction hereof.
21
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
CK WITCO CORPORATION
By:__________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
ABN AMRO INCORPORATED
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
DEUTSCHE BANK SECURITIES INC.
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By__________________
Authorized Signatory
For themselves and as Representative of the other Initial Purchasers named
in Schedule A hereto.
22
<PAGE>
SCHEDULE A
Principal
Amount of
Name of Initial Purchaser 8-1/2% Notes
Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . . . . $240,000,000
ABN AMRO Incorporated . . . . .. . . . . . . . . . . . . . . . . . 60,000,000
Banc of America Securities LLC . . . . . . . . . . . . . . . . . 60,000,000
Chase Securities Inc. . . . . . . . . . . . . . . . . . . . . . . 60,000,000
Deutsche Bank Securities Inc. . . . . . . . . . . . . . . . . . . 60,000,000
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . 60,000,000
Salomon Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . 60,000,000
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$600,000,000
------------
------------
<PAGE>
SCHEDULE B
CK WITCO CORPORATION
$600,000,000
8.50% Senior Notes due 2005
1. The initial public offering price of the 8.50% Notes shall be 99.559% of
the principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Initial Purchasers for the 8.50%
Notes shall be 98.959% of the principal amount thereof.
3. The interest rate on the 8.50% Notes shall be 8.50% per annum.
Sch B-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)*
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware.1
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum (except where the failure to have such power and authority would not
have a Material Adverse Effect) and to enter into and perform its obligations
under the Purchase Agreement.1
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.2
(iv) Each Designated Subsidiary has been duly incorporated and is validly
existing as a corporation under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum.
Each Designated Subsidiary organized under the laws of a state of the United
States is in good standing under the laws of its organization and is duly
qualified as a foreign corporation to transact business and is in good standing
in each state in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; all of the issued and outstanding capital stock of each
Designated Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable and, to the best of our knowledge and information, is owned
by the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.2
(v) The Purchase Agreement has been duly authorized, executed and delivered
by the Company.1
(vi) The Indenture has been duly authorized, executed and delivered by the
Company and (assuming the due authorization, execution and delivery thereof by
the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by
__________
* The paragraphs followed by footnote 1 will be given both by the Company
Counsel and WLR&K; paragraphs followed by footnote 2 will be given by the
Company Counsel only; paragraphs followed by footnote 3 will be given by WLR&K
only; and paragraphs followed by footnote 4 may be divided between the Company
Counsel and WLR&K.
A-1
<PAGE>
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).1
(vii) The Securities are in the form contemplated by the Indenture, have
been duly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in the manner provided in the Indenture (assuming
the due authorization, execution and delivery of the Indenture by the Trustee)
and issued and delivered against payment of the purchase price therefor, will
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium (including,
without limitation, all laws relating to fraudulent transfers), or other similar
laws relating to or affecting enforcement of creditor's rights generally, or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law), and will be entitled to the benefits of the
Indenture.1
(viii) The Securities and the Indenture conform in all material respects to
the descriptions thereof contained in the Offering Memorandum under "Description
of the Notes".3
(ix) The documents incorporated by reference in the Offering Memorandum
(other than the financial statements and supporting schedules therein, as to
which no opinion need be rendered), when they were filed with the Commission
complied as to form in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission thereunder.2
(x) There is not pending or, to the best of our knowledge, threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any subsidiary
thereof is subject, before or brought by any court or governmental agency or
body, which might reasonably be expected to result in a Material Adverse Effect,
or the consummation of the transactions contemplated in the Purchase Agreement
or the performance by the Company of its obligations thereunder or the
transactions contemplated by the Offering Memorandum.2
(xi) The information in the Offering Memorandum under "Summary-The
Offering" "Description of the Notes", "Certain Federal Income Tax
Considerations" and "Exchange Offer; Registration Rights," to the extent that it
constitutes summaries of legal matters or legal proceedings, or legal
conclusions, has been reviewed by us and fairly summarizes the matters described
therein.3
(xii) All descriptions in the Offering Memorandum of contracts and other
documents to which the Company or any of its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments that would be required to be described in the Offering
Memorandum that are not described or referred to in the Offering Memorandum
other than those described or referred to therein or incorporated by reference
thereto, and the descriptions thereof or references thereto are correct in all
material respects.2
(xiii) To the best of our knowledge, neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws and no default by the
Company or any of its subsidiaries exists in the due performance or observance
of any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
A-2
<PAGE>
instrument that is described or referred to in the Offering Memorandum or
incorporated by reference therein, except as would not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole.2
(xiv) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than such as may be required under the
applicable securities laws of the various jurisdictions in which the Securities
will be offered or sold, as to which we need express no opinion) by the Company
or its subsidiaries is necessary or required in connection with the due
authorization, execution and delivery of the Purchase Agreement or the due
execution, delivery or performance of the Indenture by the Company or for the
offering, issuance, sale or delivery of the Securities to the Initial Purchasers
or the resale by the Initial Purchasers in accordance with the terms of the
Purchase Agreement, provided that the foregoing is limited to the laws of the
State of New York, the general corporation law of the State of Delaware, and the
laws of the United States of America, that, in our experience, are normally
applicable to transactions of the type provided in the Purchase Agreement and
the Registration Rights Agreement.4
(xv) Assuming compliance by all parties with the terms and conditions of
the Purchase Agreement and Indenture, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchasers and to each
Subsequent Purchaser in the manner contemplated by the Purchase Agreement and
the Offering Memorandum to register the Securities under the 1933 Act or to
qualify the Indenture under the Trust Indenture Act.3
(xvi) The execution, delivery and performance of the Purchase Agreement,
the DTC Agreement, the Indenture and the Securities and the consummation of the
transactions contemplated in the Purchase Agreement and in the Offering
Memorandum (including the use of the proceeds from the sale of the Securities as
described in the Offering Memorandum under the caption "Use Of Proceeds") and
compliance by the Company with its obligations under the Purchase Agreement, the
Indenture and the Securities do not and will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a breach
of, or default or Repayment Event (as defined in Section 1(a)(xiii) of the
Purchase Agreement) under or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument,
known to us, to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any subsidiary thereof is subject (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation of (A)
the charter or by-laws of the Company or any of its subsidiaries, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its Designated
Subsidiaries or any of the respective properties, assets, or operations or (B)
the General Corporation Law of the State of Delaware, the laws of the State of
New York or the laws of the United States of America. Such counsel need not
express any opinion in this clause (xvi), however, as to (i) the blue sky laws
of any state, (ii) laws other than those that, in our experience, are normally
applicable to transactions of the type provided for by the Purchase Agreement
and the Registration Agreement and (iii) any consent or authorization which may
have become applicable to the Company as a result of the Initial Purchasers'
involvement in the Purchase Agreement or the
A-3
<PAGE>
Registration Rights Agreement because of the Initial Purchasers' legal or
regulatory status or because of any other facts specifically pertaining to the
Initial Purchasers.4
(xvii) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.3
Nothing has come to our attention that would lead us to believe that the
Offering Memorandum or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom as to which we need make no statement and
except as to documents incorporated by reference), at the time the Offering
Memorandum was issued, at the time any such amended or supplemented Offering
Memorandum was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.1
The foregoing opinions and statements may be subject to assumptions,
qualifications and limitations customary in similar transactions.
A-4
<PAGE>
Registration Rights Agreement
Dated As of March 7, 2000
among
CK Witco Corporation
and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
ABN AMRO Incorporated,
Banc of America Securities LLC,
Chase Securities Inc.,
Deutsche Bank Securities Inc.,
Goldman, Sachs & Co.,
and
Salomon Smith Barney Inc.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into this 7th day of March, 2000, among CK Witco
Corporation, a Delaware corporation (the "Company"), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO
Incorporated, Banc of America Securities LLC, Chase Securities
Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., and
Salomon Smith Barney Inc. (collectively, the "Initial
Purchasers").
This Agreement is made pursuant to the Purchase Agreement,
dated March 7, 2000, among the Company and the Initial Purchasers
(the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of an aggregate of $600,000,000
principal amount of the Company's 8.50% Senior Notes due 2005
(the "Securities"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Company has agreed to
provide to the Initial Purchasers and their direct and indirect
transferees the registration rights as set forth in this
Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree
as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as
amended from time to time.
"1934 Act" shall mean the Securities Exchange Act of
l934, as amended from time to time.
"Closing Date" shall mean the Closing Time as defined
in the Purchase Agreement.
"Company" shall have the meaning set forth in the
preamble and shall also include the Company's successors.
"Depositary" shall mean The Depository Trust Company,
or any other depositary appointed by the Company, provided,
however, that such depositary must have an address in the Borough
of Manhattan, in the City of New York.
"Exchange Offer" shall mean the exchange offer by the
Company of Exchange Securities for Registrable Securities
pursuant to Section 2.1 hereof.
"Exchange Offer Registration" shall mean a registration
under the 1933 Act effected pursuant to Section 2.1 hereof.
"Exchange Offer Registration Statement" shall mean an
exchange offer registration statement on Form S-4 (or, if
applicable, on another appropriate form), and all amendments and
supplements to such registration statement, including the
Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in
Section 2.1 hereof.
"Exchange Securities" shall mean the 8.50% Senior Notes
due 2005 issued by the Company under the Indenture containing
terms identical to the Securities in all material respects
(except for references to certain interest rate provisions,
restrictions on transfers and restrictive legends), to be offered
to Holders of Securities in exchange for Registrable Securities
pursuant to the Exchange Offer.
"Holder" shall mean an Initial Purchaser, for so long
as it owns any Registrable Securities, and each of its
successors, assigns and direct and indirect transferees who
become registered owners of Registrable Securities under the
Indenture and each Participating Broker-Dealer that holds
Exchange Securities for so long as such Participating Broker-
Dealer is required to deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Securities.
"Indenture" shall mean the Indenture relating to the
Securities, dated as of March 1, 2000, between the Company and
Citibank, N.A., as trustee, as the same may be amended,
supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof.
"Initial Purchaser" or "Initial Purchasers" shall have
the meaning set forth in the preamble.
"Majority Holders" shall mean the Holders of a majority
of the aggregate principal amount of Outstanding (as defined in
the Indenture) Registrable Securities; provided that whenever
the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable
Securities held by the Company and other obligors on the
Securities or any Affiliate (as defined in the Indenture) of the
Company shall be disregarded in determining whether such consent
or approval was given by the Holders of such required percentage
amount.
"Participating Broker-Dealer" shall mean any of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO
Incorporated, Banc of America Securities LLC, Chase Securities
Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., and
Salomon Smith Barney Inc. and any other broker-dealer which makes
a market in the Securities and exchanges Registrable Securities
in the Exchange Offer for Exchange Securities.
"Person" shall mean an individual, partnership (general
or limited), corporation, limited liability company, trust or
unincorporated organization, or a government or agency or
political subdivision thereof.
"Private Exchange" shall have the meaning set forth in
Section 2.1 hereof.
"Private Exchange Securities" shall have the meaning
set forth in Section 2.1 hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and
any such prospectus as amended or supplemented by any prospectus
supplement, including any such prospectus supplement with respect
to the terms of the offering of any portion of the Registrable
Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-
effective amendments, and in each case including all material
incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth
in the preamble.
"Registrable Securities" shall mean the Securities and,
if issued, the Private Exchange Securities; provided, however,
that Securities and, if issued, the Private Exchange Securities,
shall cease to be Registrable Securities when (i) a Registration
Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities shall
have been disposed of pursuant to such Registration Statement,
(ii) such Securities have been sold to the public pursuant to
Rule l44 (or any similar provision then in force, but not
Rule 144A) under the 1933 Act, (iii) such Securities shall have
ceased to be outstanding or (iv) the Exchange Offer is
consummated (except in the case of Securities purchased from the
Company and continued to be held by the Initial Purchasers).
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock
exchange or National Association of Securities Dealers, Inc. (the
"NASD") registration and filing fees, including, if applicable,
the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained by any holder
of Registrable Securities in accordance with the rules and
regulations of the NASD, (ii) all fees and expenses incurred in
connection with compliance with state securities or blue sky laws
and compliance with the rules of the NASD (including reasonable
fees and disbursements of counsel for any underwriters or Holders
in connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities and any filings with the
NASD), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and
distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all fees
and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or
exchanges, (v) all rating agency fees, (vi) the fees and
disbursements of counsel for the Company and of the independent
public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident
to such performance and compliance, (vii) the fees and expenses
of the Trustee, and any escrow agent or custodian, (viii) the
reasonable fees and expenses of the Initial Purchasers and
Holders of Registrable Securities in connection with the Exchange
Offer, including the reasonable fees and expenses of one firm of
attorneys (in addition to any local counsel) to the Initial
Purchasers and Holders of Registrable Securities in connection
therewith, and (ix) any fees and disbursements of the
underwriters customarily required to be paid by issuers or
sellers of securities and the fees and expenses of any special
experts retained by the Company in connection with any
Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration
statement of the Company which covers any of the Exchange
Securities or Registrable Securities pursuant to the provisions
of this Agreement, and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in
each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference
therein.
"Representative" shall mean Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
"SEC" shall mean the Securities and Exchange Commission
or any successor agency or government body performing the
functions currently performed by the United States Securities and
Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions
of Section 2.2 of this Agreement which covers all of the
Registrable Securities or all of the Private Exchange Securities
on an appropriate form under Rule 415 under the 1933 Act, or any
similar rule that may be adopted by the SEC, and all amendments
and supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
2. Registration Under the 1933 Act.
2.1 Exchange Offer. The Company shall, for the benefit
of the Holders, at the Company's cost, use its reasonable best
efforts to (A) prepare and, as soon as practicable but not later
than 75 days following the Closing Date, file with the SEC an
Exchange Offer Registration Statement on an appropriate form
under the 1933 Act with respect to a proposed Exchange Offer and
the issuance and delivery to the Holders, in exchange for the
Registrable Securities (other than Private Exchange Securities),
of a like principal amount of Exchange Securities, (B) cause the
Exchange Offer Registration Statement to be declared effective
under the 1933 Act within 150 days of the Closing Date, (C) keep
the Exchange Offer Registration Statement effective until the
closing of the Exchange Offer and (D) use its best efforts to
cause the Exchange Offer to be consummated not later than 180
days following the Closing Date. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall use its
reasonable best efforts to promptly commence the Exchange Offer,
it being the objective of such Exchange Offer to enable each
Holder eligible and electing to exchange Registrable Securities
for Exchange Securities (assuming that such Holder (a) is not an
affiliate of the Company within the meaning of Rule 405 under the
1933 Act, (b) is not a broker-dealer tendering Registrable
Securities acquired directly from the Company for its own
account, (c) acquired the Exchange Securities in the ordinary
course of such Holder's business and (d) has no arrangements or
understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the Exchange Securities) to
transfer such Exchange Securities from and after their receipt
without any limitations or restrictions under the 1933 Act or any
limitations or restrictions under state securities or blue sky
laws.
In connection with the Exchange Offer, the Company shall:
(a) in connection with the commencement, mail as
promptly as practicable to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(b) once commenced, keep the Exchange Offer open
for acceptance for a period of not less than 30 calendar days
after the date notice thereof is mailed to the Holders (or longer
if required by applicable law) (such period referred to herein as
the "Exchange Period");
(c) utilize the services of the Depositary for the
Exchange Offer;
(d) permit Holders to withdraw tendered Registrable
Securities at any time prior to 5:00 p.m. (Eastern Time), on the
last business day of the Exchange Period, through customary
procedures therefor;
(e) notify each Holder that any Registrable
Security not tendered will remain outstanding and continue to
accrue interest, but will not retain any rights under this
Agreement (except in the case of the Initial Purchasers and
Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all respects with all
applicable laws relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Securities acquired by them and having the
status of an unsold allotment in the initial distribution, the
Company upon the request of any Initial Purchaser shall,
simultaneously with the delivery of the Exchange Securities in
the Exchange Offer, issue and deliver to such Initial Purchaser
in exchange (the "Private Exchange") for the Securities held by
such Initial Purchaser, a like principal amount of debt
securities of the Company on a senior basis, that are identical
(except that such securities shall bear appropriate transfer
restrictions) to the Exchange Securities (the "Private Exchange
Securities").
The Exchange Securities and the Private Exchange Securities
shall be issued under (i) the Indenture or (ii) an indenture
identical in all material respects to the Indenture and which, in
either case, has been qualified under the Trust Indenture Act of
1939, as amended (the "TIA"), or is exempt from such
qualification and shall provide that the Exchange Securities
shall not be subject to the transfer restrictions set forth in
the Indenture but that the Private Exchange Securities shall be
subject to such transfer restrictions. The Indenture or such
indenture shall provide that the Exchange Securities, the Private
Exchange Securities and the Securities shall vote and consent
together on all matters as one class and that none of the
Exchange Securities, the Private Exchange Securities or the
Securities will have the right to vote or consent as a separate
class on any matter. The Private Exchange Securities shall be of
the same series as and the Company shall use commercially
reasonable efforts to have the Private Exchange Securities bear
the same CUSIP number as the Exchange Securities. The Company
shall not have any liability under this Agreement solely as a
result of such Private Exchange Securities not bearing the same
CUSIP number as the Exchange Securities.
As soon as practicable after the close of the Exchange Offer
and/or the Private Exchange, as the case may be, the Company
shall:
(i) accept for exchange all Registrable Securities
duly tendered and not validly withdrawn pursuant to the Exchange
Offer in accordance with the terms of the Exchange Offer
Registration Statement and the letter of transmittal, which shall
be an exhibit thereto;
(ii) deliver to the Trustee for cancellation all
Registrable Securities so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate
and deliver Exchange Securities or Private Exchange Securities,
as the case may be, to each Holder of Registrable Securities so
accepted for exchange in a principal amount equal to the
principal amount of the Registrable Securities of such Holder so
accepted for exchange.
Interest on each Exchange Security and Private Exchange
Security will accrue from the last date on which interest was
paid on the Registrable Securities surrendered in exchange
therefor or, if no interest has been paid on the Registrable
Securities, from the date of original issuance. The Exchange
Offer and the Private Exchange shall not be subject to any
conditions, other than (i) that the Exchange Offer or the Private
Exchange, or the making of any exchange by a Holder, does not
violate applicable law or any applicable interpretation of the
staff of the SEC, (ii) the due tendering of Registrable
Securities in accordance with the Exchange Offer and the Private
Exchange, (iii) that each Holder of Registrable Securities
exchanged in the Exchange Offer shall have represented that all
Exchange Securities to be received by it shall be acquired in the
ordinary course of its business and that at the time of the
consummation of the Exchange Offer it shall have no arrangement
or understanding with any person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange
Securities and shall have made such other representations as may
be reasonably necessary under applicable SEC rules, regulations
or interpretations to render the use of Form S-4 or other
appropriate form under the 1933 Act available and (iv) that no
action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency with respect to
the Exchange Offer or the Private Exchange which, in the
Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with the Exchange Offer or the
Private Exchange. The Company shall inform the Initial
Purchasers of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Initial Purchasers shall have the
right to contact such Holders and otherwise facilitate the tender
of Registrable Securities in the Exchange Offer.
2.2 Shelf Registration. (i) If, because of any changes
in law, SEC rules or regulations or applicable interpretations
thereof by the staff of the SEC, the Company is not permitted to
effect the Exchange Offer as contemplated by Section 2.1 hereof,
(ii) if for any other reason the Exchange Offer Registration
Statement is not declared effective within 150 days following the
original issue of the Registrable Securities or the Exchange
Offer is not consummated within 180 days after the original issue
of the Registrable Securities, (iii) upon the request of any of
the Initial Purchasers with respect to Securities held by such
Initial Purchaser that are not eligible for exchange in the
Exchange Offer if the Prospectus included in the Exchange Offer
Registration Statement is not available for resales or (iv) if a
Holder is not permitted to participate in the Exchange Offer or
does not receive fully tradeable Exchange Securities pursuant to
the Exchange Offer and if the Prospectus included in the Exchange
Offer Registration Statement is not available for resales (it
being understood that a requirement to deliver a Prospectus in
connection with market-making activities or other trading shall
not result in the applicable securities not being "fully
tradeable"), then in case of each of clauses (i) through (iv) the
Company shall, at its cost:
(a) As promptly as practicable, use its reasonable
best efforts to file with the SEC, and thereafter shall use its
reasonable best efforts to cause to be declared effective as
promptly as practicable but no later than 150 days after becoming
obligated as set forth in each of clauses (i) through (iv) above,
a Shelf Registration Statement relating to the offer and sale of
the Registrable Securities by the Holders from time to time in
accordance with the methods of distribution elected by the
Majority Holders participating in the Shelf Registration and set
forth in such Shelf Registration Statement.
(b) Use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to
permit the Prospectus forming part thereof to be usable by
Holders for a period of two years from the date the Shelf
Registration Statement is declared effective by the SEC, or for
such shorter period that will terminate when all Registrable
Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or cease to be
outstanding or otherwise to be Registrable Securities (the
"Effectiveness Period"); provided, however, that the
Effectiveness Period in respect of the Shelf Registration
Statement shall be extended to the extent required to permit
dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the 1933 Act and as otherwise
provided herein.
(c) Notwithstanding any other provisions hereof,
use its best efforts to ensure that (i) any Shelf Registration
Statement and any amendment thereto and any Prospectus forming
part thereof and any supplement thereto complies in all material
respects with the 1933 Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any
amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from
time to time), does not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make
the statements, in light of the circumstances under which they
were made, not misleading.
The Company shall not permit any securities other than
the Registrable Securities to be included in the Shelf
Registration Statement. The Company further agrees, if
necessary, to supplement or amend the Shelf Registration
Statement, as required by Section 3(b) below, and to furnish to
the Holders of Registrable Securities copies of any such
supplement or amendment promptly after its being used or filed
with the SEC.
2.3 Expenses. The Company shall pay all Registration
Expenses in connection with the registration pursuant to
Section 2.1 or 2.2. Each Holder shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
2.4. Effectiveness. (a) The Company will be deemed not
have used its best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as
the case may be, to become, or to remain, effective during the
requisite period if the Company voluntarily takes any action that
would, or omits to take any action which omission would, result
in any such Registration Statement not being declared effective
or in the Holders of Registrable Securities covered thereby not
being able to exchange or offer and sell such Registrable
Securities during that period as and to the extent contemplated
hereby, unless such action is required by applicable law.
(b) An Exchange Offer Registration Statement pursuant to
Section 2.1 hereof or a Shelf Registration Statement pursuant to
Section 2.2 hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided,
however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to an Exchange Offer
Registration Statement or a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court,
such Registration Statement will be deemed not to have become
effective during the period of such interference, until the
offering of Registrable Securities pursuant to such Registration
Statement may legally resume.
2.5 Interest. The Indenture executed in connection with
the Securities will provide that in the event that either (a) the
Exchange Offer Registration Statement is not filed with the SEC
on or prior to the 75th calendar day following the date of
original issue of the Securities, (b) the Exchange Offer
Registration Statement has not been declared effective on or
prior to the 150th calendar day following the date of original
issue of the Securities or (c) the Exchange Offer is not
consummated on or prior to the 180th calendar day following the
date of original issue of the Securities, or a Shelf Registration
Statement is not declared effective on or prior to the 150th day
after becoming obligated to file a Shelf Registration Statement
(each such event referred to in clauses (a) through (c) above, a
"Registration Default"), the interest rate borne by the
Securities shall be increased ("Additional Interest") by 0.25%
per annum upon the occurrence of each Registration Default, which
rate will increase by an additional 0.25% after each 90-day
period that such Additional Interest continues to accrue under
any such circumstance, provided that the maximum aggregate
increase in the interest rate will in no event exceed 1.00% per
annum. Following the cure of all Registration Defaults
(including, without limitation, by the filing or effectiveness of
the Exchange Offer Registration Statement, the declaration of
effectiveness or the consummation of the Exchange Offer at a date
after the specified deadline) the accrual of Additional Interest
will cease and the interest rate will revert to the original rate
specified in the Securities.
If the Shelf Registration Statement is unusable by the
Holders for any reason, and the aggregate number of days in any
consecutive twelve-month period for which the Shelf Registration
Statement shall not be usable exceeds 30 days in the aggregate,
then the interest rate borne by the Securities will be increased
by 0.25% per annum of the principal amount of the Securities for
the first 90-day period (or portion thereof) beginning on the
31st day that such Shelf Registration Statement ceases to be
usable, which rate shall be increased by an additional 0.25% per
annum of the principal amount of the Securities at the beginning
of each subsequent 90-day period, provided that the maximum
aggregate increase in the interest rate will in no event exceed
1.00% per annum. Any amounts payable under this paragraph shall
also be deemed "Additional Interest" for purposes of this
Agreement. Upon the Shelf Registration Statement once again
becoming usable, the interest rate borne by the Securities will
be reduced to the original interest rate if the Company is
otherwise in compliance with this Agreement at such time.
Additional Interest shall be computed based on the actual number
of days elapsed in each 90-day period in which the Shelf
Registration Statement is unusable.
The Company shall notify the Trustee within three business
days after each and every date on which an event occurs in
respect of which Additional Interest is required to be paid (an
"Event Date"). Additional Interest shall be paid by depositing
with the Trustee, in trust, for the benefit of the Holders of
Registrable Securities, on or before the applicable semiannual
interest payment date, immediately available funds in sums
sufficient to pay the Additional Interest then due. The
Additional Interest due shall be payable on each interest payment
date to the record Holder of Securities entitled to receive the
interest payment to be paid on such date as set forth in the
Indenture. Each obligation to pay Additional Interest shall be
deemed to accrue from and including the day following the
applicable Event Date.
It is hereby agreed that the Additional Interest provided
for in this Section 2.5 constitutes a reasonable estimate of and
shall constitute the sole damages and remedy in law or in equity
that will be suffered by Holders by reason of the failure of
(i) the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain usable, (iii) the
Exchange Offer Registration Statement to be declared effective,
(iv) the Exchange Offer to be consummated or (v) the Shelf
Registration Statement to be declared effective, in each case to
the extent required by this Agreement, and the right to seek any
additional damages or remedy is hereby irrevocably waived.
3. Registration Procedures.
In connection with the obligations of the Company with
respect to Registration Statements pursuant to Sections 2.1 and
2.2 hereof, the Company shall:
(a) prepare and file with the SEC a Registration
Statement, within the relevant time period specified in
Section 2, on the appropriate form under the 1933 Act, which form
(i) shall be selected by the Company, (ii) shall, in the case of
a Shelf Registration, be available for the sale of the
Registrable Securities by the selling Holders thereof,
(iii) shall comply as to form in all material respects with the
requirements of the applicable form and include or incorporate by
reference all financial statements required by the SEC to be
filed therewith or incorporated by reference therein, and
(iv) shall comply in all respects with the requirements of
Regulation S-T under the 1933 Act, and use its reasonable best
efforts to cause such Registration Statement to become effective
and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may
be necessary under applicable law to keep such Registration
Statement effective for the applicable period; and cause each
Prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provision then in force) under the
1933 Act and comply with the provisions of the 1933 Act, the 1934
Act and the rules and regulations thereunder applicable to them
with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance
with the intended method or methods of distribution by the
selling Holders thereof (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities, at least five business days
prior to filing, that a Shelf Registration Statement with respect
to the Registrable Securities is being filed and advising such
Holders that the distribution of Registrable Securities will be
made in accordance with the method selected by the Majority
Holders participating in the Shelf Registration; (ii) furnish to
each Holder of Registrable Securities and to each underwriter of
an underwritten offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto
and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules
and, if the Holder so requests, all exhibits in order to
facilitate the public sale or other disposition of the
Registrable Securities; and (iii) hereby consent to the use of
the Prospectus or any amendment or supplement thereto by each of
the selling Holders of Registrable Securities in connection with
the offering and sale of the Registrable Securities covered by
the Prospectus or any amendment or supplement thereto;
(d) use its reasonable best efforts to register or
qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder
of Registrable Securities covered by a Registration Statement and
each underwriter of an underwritten offering of Registrable
Securities shall reasonably request by the time the applicable
Registration Statement is declared effective by the SEC, and do
any and all other acts and things which may be reasonably
necessary or advisable to enable each such Holder and underwriter
to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however,
that the Company shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), or (ii) take any action which would
subject it to general service of process or taxation in any such
jurisdiction where it is not then so subject;
(e) notify promptly each Holder of Registrable
Securities under a Shelf Registration or any Participating
Broker-Dealer who has notified the Company that it is utilizing
the Exchange Offer Registration Statement as provided in
paragraph (f) below and, if requested by such Holder or
Participating Broker-Dealer, confirm such notification in writing
promptly (which notification pursuant to clauses (ii) through
(vii) hereof shall be accompanied by an instruction to suspend
the use of the prospectus until the requisite changes have been
made) (i) when a Registration Statement has become effective and
when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities
authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional
information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) in the case of a Shelf
Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities
covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the
offering cease to be true and correct in all material respects,
(v) of the happening of any event or the discovery of any facts
during the period a Shelf Registration Statement is effective
which may make any statement made in such Registration Statement
or the related Prospectus untrue in any material respect or which
may require the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein
not misleading, (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification
of the Registrable Securities or the Exchange Securities, as the
case may be, for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (vii) of any
determination by the Company that a post-effective amendment to
such Registration Statement would be appropriate or supplement to
any prospectus used thereunder;
(f) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution" which section
shall be reasonably acceptable to Merrill Lynch on behalf of the
Participating Broker-Dealers, and which shall contain a summary
statement of the positions taken or policies made by the staff of
the SEC with respect to the potential "underwriter" status of any
broker-dealer that holds Registrable Securities acquired for its
own account as a result of market-making activities or other
trading activities and that will be the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities to be received by such broker-dealer in the Exchange
Offer, whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or
policies, in the reasonable judgment of Merrill Lynch on behalf
of the Participating Broker-Dealers and its counsel, represent
the prevailing views of the staff of the SEC, including a
statement that any such broker-dealer who receives Exchange
Securities for Registrable Securities pursuant to the Exchange
Offer may be deemed a statutory underwriter and must deliver a
prospectus meeting the requirements of the 1933 Act in connection
with any resale of such Exchange Securities, (ii) furnish to each
Participating Broker-Dealer who has delivered to the Company the
notice referred to in Section 3(e), without charge, as many
copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary prospectus, and
any amendment or supplement thereto, as such Participating
Broker-Dealer may reasonably request, (iii) hereby consent to the
use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto, by
any Person subject to the prospectus delivery requirements of the
SEC, including all Participating Broker-Dealers, in connection
with the sale or transfer of the Exchange Securities covered by
the Prospectus or any amendment or supplement thereto, and
(iv) include in the transmittal letter or similar documentation
to be executed by an exchange offeree in order to participate in
the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Securities acquired for its own account as a result
of market-making activities or other trading activities, it will
deliver a prospectus meeting the requirements of the 1933 Act in
connection with any resale of Exchange Securities received in
respect of such Registrable Securities pursuant to the Exchange
Offer;" and
(y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a
Prospectus in connection with the exchange of Registrable
Securities, the broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the 1933 Act; and
(g) (i) in the case of an Exchange Offer, furnish to
counsel for the Initial Purchasers and (ii) in the case of a
Shelf Registration, furnish to counsel for the Holders of
Registrable Securities copies of any comment letters received
from the SEC or any other request by the SEC or any state
securities authority for amendments or supplements to a
Registration Statement and Prospectus or for additional
information;
(h) make reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration
Statement at the earliest possible moment;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, and each underwriter, if any,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules (without documents
incorporated therein by reference and all exhibits thereto,
unless requested);
(j) in the case of a Shelf Registration, cooperate with
the selling Holders of Registrable Securities to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such
denominations (consistent with the provisions of the Indenture)
and registered in such names as the selling Holders or the
underwriters, if any, may reasonably request at least three
business days prior to the closing of any sale of Registrable
Securities;
(k) in the case of a Shelf Registration, upon the
occurrence of any event or the discovery of any facts, each as
contemplated by Sections 3(e)(v) and 3(e)(vi) hereof, as promptly
as practicable after the occurrence of such an event, use its
reasonable best efforts to prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities or Participating Broker-
Dealers, such Prospectus will not contain at the time of such
delivery any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading or will remain so qualified. At such time as such
public disclosure is otherwise made or the Company determines
that such disclosure is not necessary, in each case to correct
any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Holder
of such determination and to furnish each Holder such number of
copies of the Prospectus as amended or supplemented, as such
Holder may reasonably request;
(l) in the case of a Shelf Registration, a reasonable
time prior to the filing of any Registration Statement, any
Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is
to be incorporated by reference into a Registration Statement or
a Prospectus after initial filing of a Registration Statement,
provide copies of such document to the Initial Purchasers on
behalf of such Holders; and make representatives of the Company
as shall be reasonably requested by the Holders of Registrable
Securities, or the Initial Purchasers on behalf of such Holders,
available for discussion of such document;
(m) obtain a CUSIP number for all Exchange Securities,
Private Exchange Securities or Registrable Securities, as the
case may be, not later than the effective date of a Registration
Statement, and provide the Trustee with printed certificates for
the Exchange Securities, Private Exchange Securities or the
Registrable Securities, as the case may be, in a form eligible
for deposit with the Depositary;
(n) (i) cause the Indenture to be qualified under the
TIA in connection with the registration of the Exchange
Securities or Registrable Securities, as the case may be,
(ii) cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and
(iii) execute, and use its best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes,
and all other forms and documents required to be filed with the
SEC to enable the Indenture to be so qualified in a timely
manner;
(o) in the case of a Shelf Registration, enter into
agreements (including underwriting agreements) and take all other
customary and appropriate actions in order to expedite or
facilitate the disposition of such Registrable Securities and in
such connection whether or not an underwriting agreement is
entered into and whether or not the registration is an
underwritten registration:
(i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters, if
any, in form, substance and scope as are customarily made by
issuers to underwriters in similar underwritten offerings as may
be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and
updates thereof (which opinions (in form, scope and substance)
shall be customary and reasonably satisfactory to the managing
underwriters, if any, and the holders of a majority in principal
amount of the Registrable Securities being sold) addressed to the
selling Holders and the underwriters, if any, covering the
matters customarily covered in opinions requested in sales of
securities or underwritten offerings and such other matters as
may be reasonably requested by such Holders and underwriters,
subject in each case to appropriate limitations;
(iii) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public
accountants (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements
are, or are required to be, included in the Registration
Statement) addressed to the underwriters, if any, and use
reasonable efforts to have such letter addressed to the selling
Holders of Registrable Securities (to the extent consistent with
Statement on Auditing Standards No. 72 of the American Institute
of Certified Public Accounts), such letters to be in customary
form and covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection with similar
underwritten offerings;
(iv) enter into a securities sales agreement with
the Holders and an agent of the Holders providing for, among
other things, the appointment of such agent for the selling
Holders for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be in form, substance and scope
customary for similar offerings;
(v) if an underwriting agreement is entered into,
cause the same to set forth indemnification provisions and
procedures substantially equivalent to the indemnification
provisions and procedures set forth in Section 4 hereof with
respect to the underwriters and all other parties to be
indemnified pursuant to said Section or, at the request of any
underwriters, in the form customarily provided to such
underwriters in similar types of transactions; and
(vi) deliver such documents and certificates as may
be reasonably requested and as are customarily delivered in
similar offerings to the Holders of a majority in principal
amount of the Registrable Securities being sold and the managing
underwriters, if any.
The above shall be done at (i) the effectiveness of such
Registration Statement (and each post-effective amendment
thereto) and (ii) each closing under any underwriting or similar
agreement as and to the extent required thereunder;
(p) in the case of a Shelf Registration or if a
Prospectus is required to be delivered by any Participating
Broker-Dealer in the case of an Exchange Offer, make available
for inspection by representatives of the Holders of the
Registrable Securities, any underwriters participating in any
disposition pursuant to a Shelf Registration Statement, any
Participating Broker-Dealer and any counsel or accountant
retained by any of the foregoing, all financial and other
records, pertinent corporate documents and properties of the
Company reasonably requested by any such persons, and cause the
respective officers, directors, employees, and any other agents
of the Company to supply all information reasonably requested by
any such representative, underwriter, special counsel or
accountant in connection with a Registration Statement, and make
such representatives of the Company available for discussion of
such documents as shall be reasonably requested by the Initial
Purchasers, provided, however, that any information that is
designated in writing by the Issuers, in good faith, as
confidential at the time of delivery of such information shall be
kept confidential by the Holders or any such underwriter,
attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such
information becomes available to the public generally or through
a third party without an accompanying obligation of
confidentiality;
(q) (i) in the case of an Exchange Offer Registration
Statement, a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part
thereof, any amendment to an Exchange Offer Registration
Statement or amendment or supplement to such Prospectus, provide
copies of such document to the Initial Purchasers and to counsel
to the Holders of Registrable Securities and make such changes in
any such document prior to the filing thereof as the Initial
Purchasers or counsel to the Holders of Registrable Securities
may reasonably request and, except as otherwise required by
applicable law, not file any such document in a form to which the
Initial Purchasers on behalf of the Holders of Registrable
Securities and counsel to the Holders of Registrable Securities
shall not have previously been advised and furnished a copy of or
to which the Initial Purchasers on behalf of the Holders of
Registrable Securities or counsel to the Holders of Registrable
Securities shall reasonably object, and make the representatives
of the Company available for discussion of such documents as
shall be reasonably requested by the Initial Purchasers; and
(ii) in the case of a Shelf Registration, a
reasonable time prior to filing any Shelf Registration Statement,
any Prospectus forming a part thereof, any amendment to such
Shelf Registration Statement or amendment or supplement to such
Prospectus, provide copies of such document to the Holders of
Registrable Securities, to the Initial Purchasers, to counsel for
the Holders and to the underwriter or underwriters of an
underwritten offering of Registrable Securities, if any, make
such changes in any such document prior to the filing thereof as
the Initial Purchasers, the counsel to the Holders or the
underwriter or underwriters reasonably request and not file any
such document in a form to which the Majority Holders, the
Initial Purchasers on behalf of the Holders of Registrable
Securities, counsel for the Holders of Registrable Securities or
any underwriter shall not have previously been advised and
furnished a copy of or to which the Majority Holders, the Initial
Purchasers of behalf of the Holders of Registrable Securities,
counsel to the Holders of Registrable Securities or any
underwriter shall reasonably object, and make the representatives
of the Company available for discussion of such document as shall
be reasonably requested by the Holders of Registrable Securities,
the Initial Purchasers on behalf of such Holders, counsel for the
Holders of Registrable Securities or any underwriter.
(r) in the case of a Shelf Registration, use its
reasonable best efforts to cause all Registrable Securities to be
listed on any securities exchange on which similar debt
securities issued by the Company are then listed if requested by
the Majority Holders, or if requested by the underwriter or
underwriters of an underwritten offering of Registrable
Securities, if any;
(s) in the case of a Shelf Registration, use its
reasonable best efforts to cause the Registrable Securities to be
rated by the appropriate rating agencies, if so requested by the
Majority Holders, or if requested by the underwriter or
underwriters of an underwritten offering of Registrable
Securities, if any;
(t) otherwise comply with all applicable rules and
regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering at least 12 months which shall satisfy the provisions of
Section 11(a) of the 1933 Act and Rule 158 thereunder;
(u) cooperate and assist in any filings required to be
made with the NASD and, in the case of a Shelf Registration, in
the performance of any due diligence investigation by any
underwriter and its counsel (including any "qualified independent
underwriter" that is required to be retained in accordance with
the rules and regulations of the NASD); and
(v) upon consummation of an Exchange Offer or a Private
Exchange, obtain a customary opinion of counsel to the Company
addressed to the Trustee for the benefit of all Holders of
Registrable Securities participating in the Exchange Offer or
Private Exchange, and which includes an opinion that (i) the
Company has duly authorized, executed and delivered the Exchange
Securities and/or Private Exchange Securities, as applicable, and
the related indenture, and (ii) each of the Exchange Securities
and related indenture constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its respective terms (with customary exceptions).
In the case of a Shelf Registration Statement, the Company
may (as a condition to such Holder's participation in the Shelf
Registration) require each Holder of Registrable Securities to
furnish to the Company such information regarding the Holder and
the proposed distribution by such Holder of such Registrable
Securities as the Company may from time to time reasonably
request in writing, and the Company may exclude from such
registration the Registrable Securities of any Holder that fails
to furnish such information within a reasonable time after
receiving such request.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the
happening of any event or the discovery of any facts, each of the
kind described in paragraphs (ii) through (vii) of Section 3(e)
hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until
such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(k) hereof or until
advised in writing by the Company that the use of the applicable
prospectus may be resumed, and, if so directed by the Company,
such Holder will deliver to the Company (at its expense) all
copies in such Holder's possession, other than permanent file
copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of
receipt of such notice.
In the event that the Company fails to effect the Exchange
Offer or file any Shelf Registration Statement and maintain the
effectiveness of any Shelf Registration Statement as provided
herein, the Company shall not file any Registration Statement
with respect to any securities (within the meaning of
Section 2(a)(1) of the 1933 Act) that constitute an offering of
bonds, debentures or other evidence of indebtedness of the
Company other than Registrable Securities.
If any of the Registrable Securities covered by any Shelf
Registration Statement are to be sold in an underwritten
offering, the underwriter or underwriters and manager or managers
that will manage such offering will be selected by the Majority
Holders of such Registrable Securities included in such offering
and shall be acceptable to the Company. No Holder of Registrable
Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to
approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwriting arrangements.
4. Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless
the Initial Purchasers, each Holder, each Participating Broker-
Dealer, each Person who participates as an underwriter (any such
Person being an "Underwriter") and each Person, if any, who
controls any Holder or Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as
follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, (at least quarterly), arising out of any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment or
supplement thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact to be
stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, (at least quarterly), to the extent of
the aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 4(d)
below) any such settlement is effected with the written consent
of the Company; and
(iii) against any and all expense whatsoever, (at least
quarterly) (including the reasonable fees and disbursements of
counsel), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply
to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity
with written information furnished to the Company by any Holder
or Underwriter expressly for use in a Registration Statement (or
any amendment thereto) or any Prospectus (or any amendment
thereto); provided, further, that with respect to any loss,
liability, claim, damage or expense arising out of any untrue
statement or omission or alleged untrue statement or omission
contained in any prospectus (or any amendment or supplement
thereto), the foregoing indemnity shall not inure to the benefit
of any person if (A) a copy of the prospectus with all amendments
or supplements thereto available at such time was to be sent or
given by or on behalf of such person and such amendments or
supplements were not sent or given and (B) such untrue statement
or omission or alleged untrue statement or omission was corrected
in the amendment or supplement thereto available at such time.
(b) Each Holder severally agrees to indemnify and
hold harmless the Company, the Initial Purchasers, each
Underwriter and the other selling Holders, and each Person, if
any, who controls the Company, the Initial Purchasers, any
Underwriter or any other selling Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, against
any and all loss, liability, claim, damage and expense described
in the indemnity contained in Section 4(a) hereof, as incurred,
but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf
Registration Statement (or any amendment thereto) or any
Prospectus included therein (or any amendment or supplement
thereto) in reliance upon and in conformity with written
information with respect to such Holder furnished to the Company
by such Holder expressly for use in the Shelf Registration
Statement (or any amendment thereto) or such Prospectus (or any
amendment or supplement thereto), and shall reimburse the Company
for any and all expenses reasonably incurred by the Company in
connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that no such Holder
shall be liable for any claims hereunder in excess of the amount
of net proceeds received by such Holder from the sale of
Registrable Securities pursuant to such Shelf Registration
Statement.
(c) Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of
any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure so to notify an
indemnifying party shall not relieve such indemnifying party from
any liability hereunder except to the extent it is materially
prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account
of this indemnity agreement. In the case of parties indemnified
pursuant to Section 4(a) above, counsel to the indemnified
parties shall be selected by the Representative and shall be
reasonably acceptable to the Company, and, in the case of parties
indemnified pursuant to Section 4(b) above, counsel to the
indemnified parties shall be selected by the Company and shall be
reasonably acceptable to the Representative. An indemnifying
party may participate at its own expense in the defense of any
such action and, to the extent it wishes, shall be entitled to
assume the defense of any such action with counsel reasonably
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this
Section 4 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof
other than reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own
counsel in any such action, but the fees, expenses and other
charges of such counsel for the indemnified party will be at the
expense of such indemnified party unless (i) the employment of
counsel by the indemnified party has been authorized in writing
by the indemnifying party, (ii) the indemnified party has
reasonably concluded (based upon advice of counsel to the
indemnified party) that there may be legal defenses available to
it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (iii) a
conflict or potential conflict exists (based upon advice of
counsel to the indemnified party) between the indemnified party
and the indemnifying party (in which case the indemnifying party
will not have the right to direct the defense of such action on
behalf of the indemnified party) or (iv) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements
and other charges of counsel will be at the expense of the
indemnifying party or parties. In no event shall counsel to the
indemnifying party (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event
shall the indemnifying party or parties be liable for the fees
and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the
same general allegations or circumstances. Each indemnified
party shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim.
No indemnified party seeking or otherwise eligible for
indemnification or contribution hereunder will, without the prior
written consent of the indemnifying party (which shall not be
unreasonably withheld), settle, compromise, consent to the entry
of any judgment in or otherwise seek to terminate any action,
claim, suit, investigation or proceeding pursuant to which
indemnity or contribution is or may be available hereunder. No
indemnifying party shall, without the prior written consent of
the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this
Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
Notwithstanding this Section 4(c), if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an
indemnifying party shall not be liable for any settlement of the
nature contemplated by this Section 4(c) effected without its
consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent
it considers such request to be reasonable and (ii) provides
written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such
settlement.
(d) If at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature
contemplated by Section 4(a)(ii) effected without its written
consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such
settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance
with such request prior to the date of such settlement.
(e) If the indemnification provided for in this
Section 4 is for any reason unavailable to or insufficient to
hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate
amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, in such
proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Holders and the Initial
Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable
considerations.
The relative fault of the Company on the one hand and the
Holders and the Initial Purchasers on the other hand shall be
determined by reference to, among other things, whether any such
untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to
information supplied by the Company, the Holders or the Initial
Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission.
The Company, the Holders and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant
to this Section 4 were determined by pro rata allocation (even if
the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this
Section 4. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and
referred to above in this Section 4 shall be deemed to include
any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial
Purchaser shall be required to contribute any amount in excess of
the amount by which the total price at which the Securities sold
by it were offered exceeds the amount of any damages which such
Initial Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission.
No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who
controls an Initial Purchaser or Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as such Initial Purchaser or
Holder, and each director of the Company, and each Person, if
any, who controls the Company within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The Initial Purchasers'
respective obligations to contribute pursuant to this Section 7
are several in proportion to the principal amount of Securities
set forth opposite their respective names in Schedule A to the
Purchase Agreement and not joint.
5. Miscellaneous.
5.1 Rule 144 and Rule 144A. For so long as the Company
is subject to the reporting requirements of Section 13 or 15 of
the 1934 Act, the Company covenants that it will file the reports
required to be filed by it under the 1933 Act and Section 13(a)
or 15(d) of the 1934 Act and the rules and regulations adopted by
the SEC thereunder. If the Company ceases to be so required to
file such reports, the Company covenants that it will upon the
request of any Holder of Registrable Securities (a) make publicly
available such information as is necessary to permit sales
pursuant to Rule 144 under the 1933 Act, (b) deliver such
information to a prospective purchaser as is necessary to permit
sales pursuant to Rule 144A under the 1933 Act and it will take
such further action as any Holder of Registrable Securities may
reasonably request, and (c) take such further action that is
reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its
Registrable Securities without registration under the 1933 Act
within the limitation of the exemptions provided by (i) Rule 144
under the 1933 Act, as such Rule may be amended from time to
time, (ii) Rule 144A under the 1933 Act, as such Rule may be
amended from time to time, or (iii) any similar rules or
regulations hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied
with such requirements. Notwithstanding any of the foregoing,
nothing in this Section 5.1 shall be deemed to require the
Company to register any of its securities pursuant to the
Exchange Act.
5.2 No Inconsistent Agreements. The Company has not
entered into and the Company will not after the date of this
Agreement enter into any agreement which is inconsistent with the
rights granted to the Holders of Registrable Securities in this
Agreement or otherwise conflicts with the provisions hereof. The
rights granted to the Holders hereunder do not and will not for
the term of this Agreement in any way conflict with the rights
granted to the holders of the Company's other issued and
outstanding securities under any such agreements.
5.3 Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Company has obtained the written consent of Holders of at least a
majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification,
supplement, waiver or departure.
5.4 Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (a) if to a Holder,
at the most current address given by such Holder to the Company
by means of a notice given in accordance with the provisions of
this Section 5.4, which address initially is the address set
forth in the Purchase Agreement with respect to the Initial
Purchasers; and (b) if to the Company, initially at the Company's
address and to its counsel set forth in the Purchase Agreement,
and thereafter at such other address of which notice is given in
accordance with the provisions of this Section 5.4.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; two business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to
the Trustee under the Indenture, at the address specified in such
Indenture.
5.5 Successor and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation
and without the need for an express assignment, subsequent
Holders; provided that nothing herein shall be deemed to permit
any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire
Registrable Securities, in any manner, whether by operation of
law or otherwise, such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be
conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the
restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such person shall be
entitled to receive the benefits hereof.
5.6 Third Party Beneficiaries. The Initial Purchasers
(even if the Initial Purchasers are not Holders of Registrable
Securities) shall be third party beneficiaries to the agreements
made hereunder between the Company, on the one hand, and the
Holders, on the other hand, and shall have the right to enforce
such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of
Holders hereunder. Each Holder of Registrable Securities shall
be a third party beneficiary to the agreements made hereunder
between the Company, on the one hand, and the Initial Purchasers,
on the other hand, and shall have the right to enforce such
agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.
5.7. Specific Enforcement. Without limiting the
remedies available to the Initial Purchasers and the Holders, the
Company acknowledges that any failure by the Company to comply
with its obligations under Sections 2.1 through 2.4 hereof may
result in material irreparable injury to the Initial Purchasers
or the Holders for which there is no adequate remedy at law, that
it would not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under
Sections 2.1 through 2.4 hereof subject to the last paragraph of
Section 2.5.
5.8. Restriction on Resales. Until the expiration of
two years after the original issuance of the Securities and the
Guarantees, the Company and the Guarantor will not, and will
cause their "affiliates" (as such term is defined in
Rule 144(a)(1) under the 1933 Act) not to, resell any Securities
and Guarantees which are "restricted securities" (as such term is
defined under Rule 144(a)(3) under the 1933 Act) that have been
reacquired by any of them and shall immediately upon any purchase
of any such Securities and Guarantees submit such Securities and
Guarantees to the Trustee for cancellation.
5.9 Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
5.10 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.12 Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CK WITCO CORPORATION
By:
Name:
Title:
Confirmed and accepted as
of the date first above
written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
ABN AMRO INCORPORATED
BANK OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
DEUTSCHE BANK SECURITIES INC.
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
Name:
Title:
UNIROYAL CHEMICAL CORPORATION
(f/k/a UCC INVESTORS HOLDING, INC.)
as Issuer
UNIROYAL CHEMICAL COMPANY, INC.
as successor to the Company
and
STATE STREET BANK AND TRUST COMPANY
as Trustee
________________________
SECOND SUPPLEMENTAL INDENTURE
Dated as of December 6, 1999
________________________
$300,000,000
10 1/2 % Senior Notes due 2002
SECOND SUPPLEMENTAL INDENTURE, dated as of December 6, 1999
("Second Supplemental Indenture"), among Uniroyal Chemical
Company, Inc., a New Jersey corporation (the "Company"), and
State Street Bank and Trust Company, a Massachusetts banking
corporation, as Trustee (the "Trustee").
WHEREAS, the Company is the successor to Uniroyal Chemical
Corporation (f/k/a UCC Investors Holding, Inc.), a Delaware
corporation, to the Indenture, dated as of February 8, 1993, as
amended and supplemented by the Supplemental Indenture, dated as
of June 28, 1996, as amended and supplemented by the First
Supplemental Indenture, dated as of December 9, 1998 (as it may
be amended or supplemented from time to time, the "Indenture"),
providing for the issuance of 10 1/2% Senior Notes due 2002 (the
"Securities"), in the aggregate principal amount of $300,000,000;
WHEREAS, the Company desires to delete or amend certain
provisions of the Indenture as set forth herein;
WHEREAS, there were outstanding immediately prior to the
date hereof Securities in the aggregate principal amount of
$150,263,000, of which $149,549,000 in principal amount tendered
such Securities and consented in writing to the amendments
contained herein pursuant to an offer to purchase for cash all
outstanding Securities and related consent solicitation;
WHEREAS, Section 8.02 of the Indenture provides that the
Company and the Trustee may amend or supplement the Indenture
with the written consent of the holders of at least a majority in
principal amount of the Securities;
WHEREAS, the Company has furnished the Trustee with an
Officers' Certificate and, as to legal issues, an Opinion of
Counsel, stating that this Second Supplemental Indenture is
authorized under the Indenture;
WHERAS, pursuant to Section 8.06 of the Indenture, in
signing this Second Supplemental Indenture, the Trustee shall be
fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that this Second Supplemental
Indenture is authorized under the Indenture; and
WHEREAS, all things necessary to make this Second
Supplemental Indenture a valid agreement, in accordance with its
terms, have been done.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein, the Company and the Trustee, intending
to be legally bound, mutually covenant and agree for the equal
and ratable benefit of the respective holders from time to time
of the Securities as follows (all capitalized terms used in this
Second Supplemental Indenture which are not defined herein have
the meanings assigned to them in the Indenture):
Section 1. Deletion of Certain Sections of the Indenture.
Sections 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.11 and 3.12
of the Indenture are hereby amended by deleting all such
sections, all references thereto and all defined terms used
exclusively therein in their entirety.
Section 2. Amendment of Section 3.10 of the Indenture.
Section 3.10 of the Indenture is hereby amended by replacing all
references to "the Company" with references to "CK Witco
Corporation," which is the corporation that owns all of the
outstanding capital stock of the Company.
Section 3. Amendments to Section 4.01 of Article IV.
Section 4.01 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 4.01. Merger and Consolidation.
The Company shall not consolidate with or merge with or into
any other corporation or transfer all or substantially all of its
properties and assets as an entirety to any Person unless:
(a) either the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or to which the
properties and assets of the Company as an entirety are
transferred (the "Successor Corporation"), shall be a corporation
organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, all the obligations of the Company
under this Indenture and the Securities;
(b) immediately before and immediately after giving
effect to such transaction (and treating any Indebtedness which
becomes an obligation of the Successor Corporation or any
Restricted Subsidiary as a result of such transaction as having
been Incurred by such Successor Corporation or such Restricted
Subsidiary at the time of such transaction), no Default shall
have occurred and be continuing;
(c) the Company shall have delivered, or caused to be
delivered, to the Trustee an Officers' Certificate and, as to
legal issues, an Opinion of Counsel, each in form and substance
reasonably satisfactory to the Trustee stating that such
consolidation, merger or transfer and such supplemental indenture
comply with this Article and that all conditions precedent herein
provided for relating to such transaction and have been complied
with;
Notwithstanding the foregoing paragraph (b), (X) any
Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company
or any Wholly Owned Subsidiary or Wholly Owned Subsidiaries and
(Y) the Combination may be effected, and no violation of this
Section shall be deemed to have occurred as a consequence
thereof, as long as in each case the requirements of paragraphs
(a) and (c) are satisfied in connection therewith."
Section 4. Amendments to Section 5.01 of Article V.
Section 5.01 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 5.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on
any Security when the same becomes due and payable, and such
default continues for a period of 30 days;
(b) the Company defaults in the payment of the principal
of any Security when the same becomes due and payable at maturity
or otherwise or fails to redeem or purchase Securities when
required pursuant to this Indenture or the Securities;
(c) the Company fails to comply with any of its other
covenants or agreements in the Securities or this Indenture and
the default continues for 30 days after the date on which written
notice of such default is given to the Company by the Trustee or
to the Company and the Trustee by Holders of at least 25% in
principal amount of the Securities then outstanding hereunder;
(d) the Company or any Significant Subsidiary pursuant
to or within the meaning of any Bankruptcy Law;
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) admits in writing its inability to generally
pay its debts as such debts become due;
or takes any comparable action under any foreign laws relating to
insolvency;
(e) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any
Significant Subsidiary in an involuntary case,
(ii) appoints a Custodian of the Company or any
Significant Subsidiary or for all or substantially all of its
property, or
(iii) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the
order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means title 11 of the U.S. Code or
any similar Federal or State law for the relief of debtors. The
term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
Any notice of Default given by the Trustee or
Securityholders under this Section must specify the Default,
demand that it be remedied and state that the notice is a "Notice
of Default".
The Company shall deliver to the Trustee, within 30 days
after the occurrence thereof, written notice of any event which
with the giving of notice or the lapse of time or both would
become an Event of Default under clause (c) or (e) hereof.
Subject to the provisions of Section 6.01 and 6.02, the
Trustee shall not be charged with knowledge of any Event of
Default unless written notice thereof shall have been given to
the Trustee by the Company, the Paying Agent, any Holder or an
agent of any Holder."
Section 5. Effectiveness; Termination. The provisions of
this Second Supplemental Indenture will take effect immediately
upon its execution and delivery by the Company and the Trustee in
accordance with the terms of the Indenture. Prior to the
Acceptance Date, the Company may terminate this Second
Supplemental Indenture upon written notice to the Trustee. The
Company shall give the Trustee prompt written notice of the
Acceptance Date.
Section 6. Acceptance by Trustee. The Trustee accepts the
amendments to the Indenture effected by this Second Supplemental
Indenture and agrees to execute the trusts created by the
Indenture as hereby amended, but only upon the terms and
conditions set forth in the Indenture.
Section 7. Governing Law. The laws of the State of New
York govern this Second Supplemental Indenture and the
Securities, without regard to the conflicts of laws rules
thereof.
Section 8. Counterparts. This Second Supplemental
Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Second Supplemental Indenture to be duly executed as of the date
first above written.
UNIROYAL CHEMICAL COMPANY
By
Name: John Jepsen
Title: Treasurer
ATTEST:
By
Name: Barry J. Shainman
Title: Secretary
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE
By
Name:
Title:
ATTEST:
By
Name:
Title:
UNIROYAL CHEMICAL COMPANY, INC.
and
STATE STREET BANK AND TRUST COMPANY, Trustee
________________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of December 6, 1999
________________________
$270,000,000
9% Senior Notes due 2000
FIRST SUPPLEMENTAL INDENTURE, dated as of December 6, 1999
("First Supplemental Indenture"), between Uniroyal Chemical
Company, Inc., a New Jersey corporation (the "Company"), and
State Street Bank and Trust Company, a Massachusetts banking
corporation, as Trustee (the "Trustee").
WHEREAS, the Company and the Trustee are parties to the
Indenture, dated as of September 1, 1993 (as it may be amended or
supplemented from time to time, the "Indenture"), providing for
the issuance of 9% Senior Notes due 2000 (the "Securities"), in
the aggregate principal amount of $270,000,000;
WHEREAS, Section 8.02 of the Indenture provides that the
Company and the Trustee may amend or supplement the Indenture
with the written consent of the holders of at least a majority in
principal amount of the Securities;
WHEREAS, the Company desires to delete or amend certain
provisions of the Indenture as set forth herein;
WHEREAS, there were outstanding immediately prior to the
date hereof Securities in the aggregate principal amount of
$182,261,000, of which $180,606,000 in principal amount tendered
such Securities and consented in writing to the amendments
contained herein pursuant to an offer to purchase for cash all
outstanding Securities and related consent solicitation;
WHEREAS, the Company has furnished the Trustee with an
Officers' Certificate and, as to legal issues, an Opinion of
Counsel, stating that this Second Supplemental Indenture is
authorized under the Indenture;
WHERAS, pursuant to Section 8.06 of the Indenture, in
signing this Second Supplemental Indenture, the Trustee shall be
fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that this Second Supplemental
Indenture is authorized under the Indenture; and
WHEREAS, all things necessary to make this First
Supplemental Indenture a valid agreement, in accordance with its
terms, have been done.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein, the Company and the Trustee, intending
to be legally bound, mutually covenant and agree for the equal
and ratable benefit of the respective holders from time to time
of the Securities as follows (all capitalized terms used in this
First Supplemental Indenture which are not defined herein have
the meanings assigned to them in the Indenture):
Section 1. Deletion of Certain Sections of the Indenture.
Sections 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.11 and 3.12
of the Indenture are hereby amended by deleting all such
sections, all references thereto and all defined terms used
exclusively therein in their entirety.
Section 2. Amendment of Section 3.10 of the Indenture.
Section 3.10 of the Indenture is hereby amended by replacing all
references to "the Company" with references to "CK Witco
Corporation," which is the corporation that owns all of the
outstanding capital stock of the Company.
Section 3. Amendments to Section 4.01 of Article IV.
Section 4.01 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 4.01. Merger and Consolidation.
The Company shall not consolidate with or merge with or into
any other corporation or transfer all or substantially all of its
properties and assets as an entirety to any Person unless:
(a) either the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or to which the
properties and assets of the Company as an entirety are
transferred (the "Successor Corporation"), shall be a corporation
organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, all the obligations of the Company
under this Indenture and the Securities;
(b) immediately before and immediately after giving
effect to such transaction (and treating any Indebtedness which
becomes an obligation of the Successor Corporation or any
Restricted Subsidiary as a result of such transaction as having
been Incurred by such Successor Corporation or such Restricted
Subsidiary at the time of such transaction), no Default shall
have occurred and be continuing;
(c) the Company shall have delivered, or caused to be
delivered, to the Trustee an Officers' Certificate and, as to
legal issues, an Opinion of Counsel, each in form and substance
reasonably satisfactory to the Trustee stating that such
consolidation, merger or transfer and such supplemental indenture
comply with this Article and that all conditions precedent herein
provided for relating to such transaction and have been complied
with;
Notwithstanding the foregoing paragraph (b), (X) any
Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company
or any Wholly Owned Subsidiary or Wholly Owned Subsidiaries and
(Y) the Combination may be effected, and no violation of this
Section shall be deemed to have occurred as a consequence
thereof, as long as in each case the requirements of paragraphs
(a) and (c) are satisfied in connection therewith."
Section 4. Amendments to Section 5.01 of Article V.
Section 5.01 of the Indenture is hereby amended to read in its
entirety as follows:
"SECTION 5.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on
any Security when the same becomes due and payable, and such
default continues for a period of 30 days;
(b) the Company defaults in the payment of the principal
of any Security when the same becomes due and payable at maturity
or otherwise or fails to redeem or purchase Securities when
required pursuant to this Indenture or the Securities;
(c) the Company fails to comply with any of its other
covenants or agreements in the Securities or this Indenture and
the default continues for 30 days after the date on which written
notice of such default is given to the Company by the Trustee or
to the Company and the Trustee by Holders of at least 25% in
principal amount of the Securities then outstanding hereunder;
(d) the Company or any Significant Subsidiary pursuant
to or within the meaning of any Bankruptcy Law;
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) admits in writing its inability to generally
pay its debts as such debts become due;
or takes any comparable action under any foreign laws relating to
insolvency;
(e) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any
Significant Subsidiary in an involuntary case,
(ii) appoints a Custodian of the Company or any
Significant Subsidiary or for all or substantially all of its
property, or
(iii) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the
order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means title 11 of the U.S. Code or
any similar Federal or State law for the relief of debtors. The
term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
Any notice of Default given by the Trustee or
Securityholders under this Section must specify the Default,
demand that it be remedied and state that the notice is a "Notice
of Default".
The Company shall deliver to the Trustee, within 30 days
after the occurrence thereof, written notice of any event which
with the giving of notice or the lapse of time or both would
become an Event of Default under clause (c) or (e) hereof.
Subject to the provisions of Section 6.01 and 6.02, the
Trustee shall not be charged with knowledge of any Event of
Default unless written notice thereof shall have been given to
the Trustee by the Company, the Paying Agent, any Holder or an
agent of any Holder."
Section 5. Effectiveness; Termination. The provisions of
this First Supplemental Indenture will take effect immediately
upon its execution and delivery by the Company and the Trustee in
accordance with the terms of the Indenture. Prior to the
Acceptance Date, the Company may terminate this First
Supplemental Indenture upon written notice to the Trustee. The
Company shall give the Trustee prompt written notice of the
Acceptance Date.
Section 6. Acceptance by Trustee. The Trustee accepts the
amendments to the Indenture effected by this First Supplemental
Indenture and agrees to execute the trusts created by the
Indenture as hereby amended, but only upon the terms and
conditions set forth in the Indenture.
Section 7. Governing Law. The laws of the State of New
York govern this First Supplemental Indenture and the Securities,
without regard to the conflicts of laws rules thereof.
Section 8. Counterparts. This First Supplemental Indenture
may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
First Supplemental Indenture to be duly executed as of the date
first above written.
UNIROYAL CHEMICAL COMPANY
By
Name: John Jepsen
Title: Treasurer
ATTEST:
By
Name: Barry Shainman
Title: Secretary
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE
By
Name:
Title:
ATTEST:
By
Name:
Title:
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 10, 1999
Among
WITCO FUNDING CORPORATION
as the Seller
and
CIESCO L.P.
as the Investor
and
CITIBANK, N.A.
as the initial Bank
and
CITICORP NORTH AMERICA, INC.
as the Agent
and
WITCO CORPORATION
as Collection Agent and Originator
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT 1
ARTICLE I DEFINITIONS 1
SECTION 1.01. Certain Defined Terms 1
SECTION 1.02. Other Terms 20
ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES 21
SECTION 2.01. Purchase Facility 21
SECTION 2.02. Making Purchases 21
SECTION 2.03. Receivable Interest Computation 22
SECTION 2.04. Settlement Procedures 22
SECTION 2.05. Fees 25
SECTION 2.06. Payments and Computations, Etc. 25
SECTION 2.07. Dividing or Combining Receivable Interests 26
SECTION 2.08. Increased Costs 26
SECTION 2.09. Additional Yield on Receivable Interests
Bearing a Eurodollar Rate 27
SECTION 2.10. Intention of the Parties. 27
ARTICLE III CONDITIONS OF PURCHASES 28
SECTION 3.01. Conditions Precedent to Initial Purchase 28
SECTION 3.02. Conditions Precedent to All Purchases and
Reinvestments. 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES 30
SECTION 4.01. Representations and Warranties of the Seller 30
SECTION 4.02. Representations and Warranties of the Collection
Agent 33
ARTICLE V COVENANTS 34
SECTION 5.01. Covenants of the Seller 34
SECTION 5.02. Covenant of the Seller and the Originator 40
SECTION 5.03. Post Closing Opinion 41
ARTICLE VI ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES 41
SECTION 6.01. Designation of Collection Agent 41
SECTION 6.02. Duties of Collection Agent 41
SECTION 6.03. Certain Rights of the Agent 43
SECTION 6.04. Rights and Remedies 44
SECTION 6.05. Further Actions Evidencing Purchases 44
SECTION 6.06. Covenants of the Collection Agent and the
Originator 44
SECTION 6.07. Indemnities by the Collection Agent 45
ARTICLE VII EVENTS OF TERMINATION 46
SECTION 7.01. Events of Termination 46
ARTICLE VIII THE AGENT 49
SECTION 8.01. Authorization and Action 49
SECTION 8.02. Agent's Reliance, Etc 49
SECTION 8.03. CNAI and Affiliates 50
SECTION 8.04. Bank's Purchase Decision 50
ARTICLE IX INDEMNIFICATION 50
SECTION 9.01. Indemnities by the Seller 50
ARTICLE X MISCELLANEOUS 52
SECTION 10.01. Amendments, Etc 52
SECTION 10.02. Notices, Etc 53
SECTION 10.03. Assignability 53
SECTION 10.04. Costs, Expenses and Taxes 54
SECTION 10.05. No Proceedings 55
SECTION 10.06. Confidentiality 55
SECTION 10.07. GOVERNING LAW 56
SECTION 10.08. Execution in Counterparts 56
SECTION 10.09. Survival of Termination 56
SCHEDULES
SCHEDULE I - Lock-Box Banks
SCHEDULE II - Credit and Collection Policy
ANNEXES
ANNEX A - Form of Seller Report
ANNEX B-1 - Form of Control Agreement for Designated
Accounts
ANNEX B-2 - Form of Lock-Box Agreement for all other
Lock-Box Accounts
ANNEX C - Form of Opinion of Cravath, Swaine & Moore,
special counsel to the Seller and the
Originator
ANNEX D - Assignment and Acceptance
ANNEX E - Form of OPA Assignment
ANNEX F - Form of Funds Transfer Letter
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 10, 1999
WITCO FUNDING CORPORATION, a Delaware corporation (the
"Seller"), CIESCO L.P., a New York limited partnership, CITIBANK,
N.A. a national banking association ("Citibank"), and CITICORP
NORTH AMERICA, INC., a Delaware corporation ("CNAI"), as agent
(the "Agent") for the Investors and the Banks (as defined
herein), and WITCO CORPORATION, a Delaware corporation, as
Collection Agent and Originator, agree as follows:
PRELIMINARY STATEMENT. The Seller has acquired, and
may continue to acquire Receivables from the Originator (as
hereinafter defined), either by purchase or by contribution to
the capital of the Seller, as determined from time to time by the
Seller and the Originator. The Seller is prepared to sell
undivided fractional ownership interests (referred to herein as
"Receivable Interests") in the Receivables. Ciesco may, in its
sole discretion, purchase such Receivable Interests, and Citibank
and the other Banks from time to time, if any, are prepared to
purchase such Receivable Interests, in each case on the terms set
forth herein. Accordingly, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Adjusted Eurodollar Rate" means, for any
Settlement Period, an interest rate per annum equal to the rate
per annum obtained by dividing (i) the Eurodollar Rate for such
Settlement Period by (ii) a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Settlement Period.
"Adverse Claim" means a lien, security interest or
other charge or any other encumbrance.
"Affiliate" means, as to any Person, any other
Person that, directly or indirectly, is in control of, is
controlled by or is under common control with such Person or,
with respect to an individual, is a director or officer of such
Person.
"Affiliated Obligor" means any Obligor that is an
Affiliate of another Obligor.
"Agent's Account" means the special account
(account number 3885-8248) of the Agent maintained at the office
of Citibank at 399 Park Avenue, New York, New York.
"Alternate Base Rate" means a fluctuating interest
rate per annum as shall be in effect from time to time, which
rate shall be at all times equal to the highest of:
(a) the rate of interest announced publicly by Citibank
in New York, New York, from time to time as Citibank's base rate;
(b) 0.50% above the latest three-week moving average of
secondary market morning offering rates in the United States for
three-month certificates of deposit of major United States money
market banks, such three-week moving average being determined
weekly on each Monday (or, if such day is not a Business Day, on
the next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and published
by the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations for
such rates received by Citibank from three New York certificate
of deposit dealers of recognized standing selected by Citibank,
in either case adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of
one percent; and
(c) the Federal Funds Rate.
"Asset Purchase Agreement" means in the case of any
Bank other than Citibank, the asset purchase agreement entered
into by such Bank concurrently with the Assignment and Acceptance
pursuant to which it became party to this Agreement.
"Assignee Rate" for any Settlement Period for any
Receivable Interest means an interest rate per annum equal to
1.00% per annum above the Eurodollar Rate for such Settlement
Period; provided, however, that in case of:
(i) any Settlement Period on or prior to the first day
of which an Investor or Bank shall have notified the Agent that
the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank or
other governmental authority asserts that it is unlawful, for
such Investor or Bank to fund such Receivable Interest at the
Assignee Rate set forth above (and such Investor or Bank shall
not have subsequently notified the Agent that such circumstances
no longer exist),
(ii) any Settlement Period of one to (and including) 29
days,
(iii) any Settlement Period as to which the Agent does
not receive notice, by no later than 12:00 noon (New York City
time) on the third Business Day preceding the first day of such
Settlement Period, that the related Receivable Interest will not
be funded by issuance of commercial paper, or
(iv) any Settlement Period for a Receivable Interest
the Capital of which allocated to the Investors or the Banks is
less than $500,000,
the "Assignee Rate" for such Settlement Period shall be an
interest rate per annum equal to the Alternate Base Rate in
effect on the first day of such Settlement Period; provided
further that the Agent and the Seller may agree in writing from
time to time upon a different "Assignee Rate".
"Assignment and Acceptance" means an assignment and
acceptance agreement entered into by a Bank, an Eligible Assignee
and the Agent, pursuant to which such Eligible Assignee may
become a party to this Agreement, in substantially the form of
Annex D hereto.
"Average Maturity" means at any time that period of
days equal to the average maturity of the Pool Receivables
calculated by the Collection Agent in the then most recent Seller
Report; provided if the Agent reasonably disputes any such
calculation, the Agent may recalculate such Average Maturity.
"Bank" or "Banks" means Citibank and each Eligible
Assignee that shall become a party to this Agreement pursuant to
Section 10.03.
"Bank Commitment" of any Bank means, (a) with respect
to Citibank, $150,000,000 or such amount as reduced by any
Assignment and Acceptance entered into between Citibank and other
Banks; or (b) with respect to a Bank that has entered into an
Assignment and Acceptance, the amount set forth therein as such
Bank's Bank Commitment, in each case as such amount may be
reduced by an Assignment and Acceptance entered into between such
Bank and an Eligible Assignee, and as may be further reduced (or
terminated) pursuant to the next sentence. Any reduction (or
termination) of the Purchase Limit pursuant to the terms of this
Agreement shall reduce ratably (or terminate) each Bank's Bank
Commitment.
"Business Day" means any day on which (i) banks are not
authorized or required to close in New York City, and (ii) if
this definition of "Business Day" is utilized in connection with
the Eurodollar Rate, dealings are carried out in the London
interbank market.
"Capital" of any Receivable Interest means the original
amount paid to the Seller for such Receivable Interest at the
time of its purchase by Ciesco or a Bank pursuant to this
Agreement, or such amount divided or combined in accordance with
Section 2.07, in each case reduced from time to time by
Collections distributed on account of such Capital pursuant to
Section 2.04(d) or otherwise; provided that if such Capital shall
have been reduced by any distribution and thereafter all or a
portion of such distribution is rescinded or must otherwise be
returned for any reason, such Capital shall be increased by the
amount of such rescinded or returned distribution, as though it
had not been made.
"Ciesco" means Ciesco L.P., and any successor or assign
of Ciesco that is a receivables investment company managed by
CNAI or an Affiliate of CNAI which in the ordinary course of its
business issues commercial paper or other securities to fund its
acquisition and maintenance of receivables.
"Closing Date" means the date and time of the initial
purchase hereunder following the fulfillment or waiver of the
conditions precedent set forth in Section 3.01 hereof.
"Collection Agent" means at any time the Person then
authorized pursuant to Section 6.01 to administer and collect
Pool Receivables.
"Collection Agent Fee" has the meaning specified in
Section 2.05(a).
"Collection Agent Default" means any of the following
events:
(i) the Collection Agent (if the Originator or any of
its Affiliates) shall fail to perform or observe any term,
covenant or agreement under Section 6.02 and such failure shall
remain unremedied (in the reasonable judgment of the Agent) for
10 days following delivery of written notice of such failure from
the Agent; or
(ii) the Collection Agent (if the Originator or any of
its Affiliates) shall fail to make when due any payment or
deposit to be made by it under this Agreement; or
(iii) the occurrence and continuance of any Event of
Termination under Section 7.01(b), Section 7.01(c) (with respect
to any representation or warranty made by the Collection Agent),
Section 7.01(e), Section 7.01(f), Section 7.01(g), Section
7.01(j) (with respect to the Collection Agent), Section 7.01(l)
or Section 7.01(m).
"Collections" means, with respect to any Receivable,
all cash collections and other cash proceeds of such Receivable,
including, without limitation, all cash proceeds of Related
Security with respect to such Receivable, and any Collection of
such Receivable deemed to have been received pursuant to Section
2.04.
"Commitment Termination Date" means the earliest of
(a) June 8, 2000, unless, prior to such date (or the date so
extended pursuant to this clause), upon the Seller's request,
made not more than 90 nor less than 45 days prior to the then
Commitment Termination Date, one or more Banks having 100% of the
Purchase Limit shall in their sole discretion consent, which
consent shall be given not more than 30 days prior to the then
Commitment Termination Date, to the extension of the Commitment
Termination Date to the date occurring 364 days after the then
Commitment Termination Date; provided, however, that any failure
of any Bank to respond to the Seller's request for such extension
shall be deemed a denial of such request by such Bank, (b) the
Facility Termination Date, (c) the date determined pursuant to
Section 7.01, and (d) the date the Purchase Limit reduces to zero
pursuant to Section 2.01(b).
"Concentration Limit" for any Obligor means at any time
2.5%, or such other percentage ("Special Concentration Limit")
for such Obligor designated by the Agent in a writing delivered
to the Seller; provided that in the case of an Obligor with any
Affiliated Obligor, the Concentration Limit shall be calculated
as if such Obligor and such Affiliated Obligor are one Obligor;
provided further that the Agent may cancel any Special
Concentration Limit upon three Business Days' notice to the
Seller effective with respect to Eligible Receivables thereafter
transferred to the Seller by the Originator.
"Contract" means an agreement now or hereafter existing
between the Originator and an Obligor pursuant to or under which
such Obligor shall be obligated to pay for the provision or sale
of specialty chemical products or services of the Originator from
time to time.
"Control Agreement" means a Control Agreement with
respect to Designated Banks in substantially the form attached
hereto as Annex B-1.
"Credit and Collection Policy" means those receivables
credit and collection policies and practices of the Originator in
effect on the date of this Agreement and described in Schedule II
hereto, as modified in compliance with this Agreement.
"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred
purchase price of property or services, (iv) obligations as
lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles,
recorded as capital leases, (v) liabilities in respect of
unfunded vested benefits under plans covered by Title IV of
ERISA, and (vi) obligations under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others
of the kinds referred to in clauses (i) through (v) above.
"Default Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each calendar month by
dividing (i) the aggregate Outstanding Balance of all Pool
Receivables that were Defaulted Receivables on such day or that
would have been Defaulted Receivables on such day had they not
been written off the books of the Originator or the Seller during
such month by (ii) the aggregate Outstanding Balance of all Pool
Receivables on such day.
"Defaulted Receivable" means an Originator Receivable:
(i) as to which any payment, or part thereof,
remains unpaid for more than 90 days from the original due date
for such payment;
(ii) as to which the Obligor thereof or any other
Person obligated thereon or providing any Related Security in
respect thereof has taken any action, or suffered any event to
occur, of the type described in Section 7.01(g); or
(iii) which, consistent with the Credit and
Collection Policy, would be written off the Originator's or the
Seller's books as uncollectible.
"Deferred Purchase Price" has the meaning set forth in
the Originator Purchase Agreement.
"Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each calendar month by
dividing (i) the aggregate Outstanding Balance of all Pool
Receivables that were Delinquent Receivables on such day by (ii)
the aggregate Outstanding Balance of all Pool Receivables on such
day.
"Delinquent Receivable" means a Pool Receivable that is
not a Defaulted Receivable and:
(i) as to which any payment, or part thereof, remains
unpaid for more than 30 days and less than or equal to 90 days
from the original due date for such payment; or
(ii) which, consistent with the Credit and Collection
Policy, would be classified as delinquent by the Originator or
the Seller.
"Designated Account" or "Designated Accounts" means one
or more bank accounts established for the deposit of all
Collections at a Designated Bank and subject to an executed
Control Agreement.
"Designated Bank" means any bank or banks selected by
the Collection Agent from time to time (initially, to be Mellon
Bank) and approved by the Agent (such approval not to be
unreasonably withheld) to establish a Designated Account.
"Designated Obligor" means, at the time, each Obligor;
provided, however, that any Obligor shall cease to be a
Designated Obligor, based on the Agent's analysis of the
creditworthiness of such Obligor (as determined by the Agent in
its sole reasonable discretion), upon three Business Days' notice
by the Agent to the Seller effective with respect to Eligible
Receivables thereafter transferred by the Originator to the
Seller.
"Diluted Receivable" means that portion (and only that
portion) of any Pool Receivable which is reduced or canceled as a
result of (i) any defective, rejected or returned merchandise or
services or any failure by the Originator to deliver any
merchandise or provide any services or otherwise to perform under
the underlying Contract or invoice, (ii) any change in the terms
of or cancellation of, a Contract or invoice or any cash
discount, discount for quick payment or other adjustment by the
Originator which reduces the amount payable by the Obligor on the
related Receivable (except any such change or cancellation
resulting from or relating to the financial inability to pay or
insolvency of the Obligor of such Receivable) or (iii) any set-
off by an Obligor in respect of any claim by such Obligor as to
amounts owed by it on the related Pool Receivable; provided that
Diluted Receivables are calculated assuming that all chargebacks
are resolved in the Obligor's favor and do not include
contractual adjustments to the amount payable by an Obligor that
are eliminated from the Receivables balance sold to the Seller
through a reduction in the purchase price for the related
Receivable.
"Dilution Horizon Factor" means, as of any date, a
ratio computed by dividing (i) the aggregate original Outstanding
Balance of all Pool Receivables created by the Originator during
the three most recently ended calendar months, by (ii) the excess
of (a) the Outstanding Balance of Pool Receivables as at the last
day of the most recently ended calendar month, minus (b) the
aggregate Outstanding Balance of all Pool Receivables that became
Defaulted Receivables as at the last day of such month.
"Dilution Percentage" means, as of any date, the
product of (a) the sum of (i) the product of (x) two, multiplied
by (y) the average of the Dilution Ratios for each of the 12 most
recently ended calendar months, plus (ii) the Dilution Volatility
Ratio as at the last day of the most recently ended calendar
month, multiplied by (b) the Dilution Horizon Factor as of such
date.
"Dilution Ratio" means, as of any date, the ratio
(expressed as a percentage) computed for the most recently ended
calendar month by dividing (i) the aggregate amount of Pool
Receivables which became Diluted Receivables during such calendar
month by (ii) the aggregate Outstanding Balance (in each case, at
the time of creation) of all Pool Receivables created during the
calendar month immediately preceding such calendar month.
"Dilution Reserve" means for any Receivable Interest as
of any date, (x) when the Originator has maintained a rating of
all of the Originator's long term public senior debt securities
at not less than BBB by S&P and not less than Baa2 by Moody's, an
amount equal to 1.1 multiplied by the highest Dilution Ratio for
any calendar month during the immediately prior 24 months,
multiplied by the sum of (i) Capital plus (ii) the Yield/Fee
Reserve, in each case, of such Receivable Interest on such date,
and (y) when the Originator has not maintained both such ratings,
an amount equal to:
DP x (C + YFR)
where:
DP = the Dilution Percentage for such Receivable
Interest on such date.
C = the Capital of such Receivable Interest on such
date.
YFR = the Yield/Fee Reserve for such Receivable
Interest on such date.
"Dilution Volatility Ratio" means, as of any date, a
ratio (expressed as a percentage) equal to the product of (a) the
highest of the Dilution Ratios calculated for each of the 12 most
recently ended calendar months minus the average of the Dilution
Ratios for each of the twelve most recently ended calendar
months, and (b) a ratio calculated by dividing the highest of the
Dilution Ratios calculated for each of the twelve most recently
ended calendar months by the average of the Dilution Ratios for
each of the twelve most recently ended calendar months.
"E-Mail Seller Report"has the meaning specified in
Section 10.02.
"Eligible Assignee" means (i) Citibank and any other
Bank or the Investor that previously became a party to this
Agreement pursuant to Section 10.03, (ii) any of their respective
Affiliates, (iii) any Person managed by Persons included in
clauses (i) or (ii) above, or (iv) any other financial or other
institution identified by the Agent and consented to by the
Seller, such consent not to be unreasonably withheld; provided,
that if an Event of Termination is continuing at the time of the
proposed assignment, the consent of the Seller shall not be
required.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which is a United States resident, is
not an Affiliate of any of the parties hereto, and is not a
government or a governmental subdivision or agency;
(ii) the Obligor of which, at the time of the initial
creation of an interest therein under this Agreement, is a
Designated Obligor and is not the Obligor of any Defaulted
Receivables which in the aggregate constitute 10% or more of the
aggregate Outstanding Balance of all Receivables of such Obligor;
(iii) which at the time of the initial creation of an
interest therein under this Agreement is not a Defaulted or
Delinquent Receivable;
(iv) which, according to the Contract related thereto, is
required to be paid in full within 60 days of the original
billing date therefor;
(v) which is an obligation representing allor part of
the sales price of merchandise, insurance or services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940,
as amended;
(vi) the purchase of which from the Seller with the
proceeds of notes would constitute a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act of 1933, as
amended;
(vii) which is an "account" within the meaning of
Section 9-106 of the UCC of the applicable jurisdictions
governing the perfection of the interest created by a Receivable
Interest;
(viii) which is denominated and payable only in United
States dollars in the United States;
(ix) which arises under a Contract which, together with
such Receivable, is in full force and effect and constitutes the
legal, valid and binding obligation of the Obligor of such
Receivable and is not subject to any dispute, offset,
counterclaim or defense whatsoever (except the potential
discharge in bankruptcy of such Obligor);
(x) which, together with the Contract related thereto,
does not contravene in any material respect any laws, rules or
regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to usury, consumer
protection, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which none of the
Seller, the Originator or the Obligor is in violation of any such
law, rule or regulation in any material respect;
(xi) which arises under a Contract which does not require
the Obligor thereunder to consent to the transfer, sale or
assignment of payment rights of the Seller or the Originator
thereunder;
(xii) which was generated in the ordinary course of the
Originator's business;
(xiii) which, at the time of the initial creation of an
interest therein under this Agreement, has not been extended,
rewritten or otherwise modified from the original terms thereof
except in a manner permitted under the Credit and Collection
Policy;
(xiv) which (A) satisfies all applicable requirements of
the Credit and Collection Policy and (B) complies with such other
reasonable criteria and requirements (relating to the
Receivables) as the Agent may from time to time specify to the
Seller upon 30 days' notice; and
(xv) as to which, at or prior to the time of the initial
creation of an interest therein under this Agreement, the Agent
has not notified the Seller that such Receivable (or class of
Receivables) is no longer acceptable for purchase by Ciesco and
the Banks hereunder for bona fide credit-related reasons.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to
that term in Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Eurodollar Rate" means, for any Settlement Period, an
interest rate per annum equal to the rate per annum at which
deposits in U.S. dollars are offered by the principal office of
Citibank in London, England to prime banks in the London
interbank market at 11:00 A.M. (London Time) two Business Days
before the first day of such Settlement Period in an amount
substantially equal to the Capital associated with such
Settlement Period on such first day and for a period equal to
such Settlement Period.
"Eurodollar Rate Reserve Percentage" of any Investor or
Bank for any Settlement Period in respect of which Yield is
computed by reference to the Eurodollar Rate means the reserve
percentage applicable two Business Days before the first day of
such Settlement Period under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any
successor) (or if more than one such percentage shall be
applicable, the daily average of such percentages for those days
in such Settlement Period during which any such percentage shall
be so applicable) for determining the maximum applicable reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such
Investor or Bank with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities (or with respect to any
other category of liabilities that includes deposits by reference
to which the interest rate on Eurocurrency Liabilities is
determined) having a term equal to such Settlement Period.
"Event of Termination" has the meaning specified in
Section 7.01.
"Facility Termination Date" means the earliest of
(a) June 10, 2002 or (b) the date of termination determined
pursuant to Section 7.01 or (c) the date the Purchase Limit is
reduced to zero pursuant to Section 2.01(b).
"Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during
such period to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.
"Fee Letter" has the meaning specified in Section
2.05(b).
"Fees" has the meaning specified in Section 2.05(b).
"Final Termination Date" means the latest of (i) the
Facility Termination Date, and (ii) the date on which no Capital
of or Yield on any Receivable Interest shall be outstanding, all
other amounts owed by the Seller hereunder to the Investors, the
Banks or the Agent are paid in full and all purchase obligations
of the Banks have been terminated.
"Foreign Receivable" means, at any time, a receivable
the Obligor of which is not a United States resident.
"Funds Transfer Letter" means a letter in substantially
the form of Annex F hereto executed and delivered by the Seller
to the Agent, as the same may be amended or restated in
accordance with the terms thereof.
"Incipient Event of Termination" means an event that
but for notice or lapse of time or both would constitute an Event
of Termination.
"Investor" means Ciesco and all other owners by
assignment or otherwise of a Receivable Interest originally
purchased by Ciesco and, to the extent of the undivided interests
so purchased, shall include any participants.
"Investor Rate" for any Settlement Period for any
Receivable Interest means the per annum rate equivalent to the
weighted average of the per annum rates paid or payable by Ciesco
from time to time as interest on or otherwise (by means of
interest rate hedges or otherwise) in respect of those promissory
notes issued by Ciesco that are allocated, in whole or in part,
by the Agent (on behalf of Ciesco) to fund the purchase or
maintenance of such Receivable Interest during such Settlement
Period as determined by the Agent (on behalf of Ciesco) and
reported to the Seller and, if the Collection Agent is not the
Seller, the Collection Agent, which rates shall reflect and give
effect to the commissions of placement agents and dealers in
respect of such promissory notes, to the extent such commissions
are allocated, in whole or in part, to such promissory notes by
the Agent (on behalf of Ciesco); provided, however, that if any
component of such rate is a discount rate, in calculating the
Investor Rate for such Settlement Period the Agent shall for such
component use the rate resulting from converting such discount
rate to an interest bearing equivalent rate per annum.
"Liquidation Day" means, for any Receivable Interest,
(i) each day during a Settlement Period for such Receivable
Interest on which the conditions set forth in Section 3.02 are
not satisfied, and (ii) each day which occurs on or after the
Termination Date for such Receivable Interest.
"Liquidation Fee" means, for any Settlement Period
during which a Liquidation Day occurs, the amount, if any, by
which (i) the additional Yield (calculated without taking into
account any Liquidation Fee or any shortened duration of such
Settlement Period pursuant to clause (iii) of the definition
thereof) which would have accrued during such Settlement Period
on the reductions of Capital of the Receivable Interest relating
to such Settlement Period had such reductions remained as
Capital, exceeds (ii) the income, if any, received by the
Investors' investing the proceeds of such reductions of Capital.
"Lock-Box Bank" means (i) each Designated Bank, and
(ii) prior to December 31, 1999, any of the other banks listed on
Schedule I that are the subject of an undated Lock-Box Agreement.
"Lock-Box Account" means any Designated Account and any
other bank account at a Lock-Box Bank subject to a Lock-Box
Agreement.
"Lock-Box Agreement" means a Lock-Box Agreement with
respect to all Lock-Box Banks (other than Designated Banks) in
substantially the form attached hereto as Annex B-2.
"Loss Percentage" means for any Receivable Interest as
of any date, the greatest of (i) three times the highest Default
Ratio as of the last day of each of the twelve months ended
immediately preceding such date, (ii) four times the
Concentration Limit, and (iii) 10%.
"Loss-to-Liquidation Ratio" means the ratio (expressed
as a percentage) computed as of the last day of each calendar
month by dividing (i) the aggregate Outstanding Balance of all
Pool Receivables written off by the Originator or the Seller, or
which should have been written off by the Originator or the
Seller in accordance with the Credit and Collection Policy,
during the twelve calendar month period ending on such last day,
by (ii) the aggregate amount of Collections of Pool Receivables
actually received during such period.
"Loss Reserve" means, for any Receivable Interest on
any date, an amount equal to
LP x Capital
(1 - LP)
where:
LP = the Loss Percentage for such Receivable
Interest on such date.
Capital = the Capital of such Receivable Interest on such
date.
"Material Adverse Effect" means any condition, event or
series of events that has a material adverse effect on: (i) the
Receivable Interests or the collectibility of any material amount
of funds with respect thereto; (ii) the rights of the Agent, the
Banks or the Investors with respect to the Receivable Interests
and the rights set forth in this Agreement; (iii) the business,
consolidated financial position, consolidated results of
operation of the Collection Agent (if it is the Originator or an
Affiliate of the Originator), the Originator and its
Subsidiaries; (iv) the ability of the Seller, the Collection
Agent or the Originator to perform their respective duties and
obligations or exercise their rights and remedies under this
Agreement and the Transaction Documents; or (v) the legality,
validity or enforceability of the Transaction Documents.
"Moody's" means Moody's Investors Service, Inc.
"Net Receivables Pool Balance" means at any time the
Outstanding Balance of Eligible Receivables then in the
Receivables Pool reduced by the sum of (i) the Outstanding
Balance of such Eligible Receivables that are then Defaulted
Receivables, (ii) the aggregate amount by which the Outstanding
Balance of Eligible Receivables (other than Defaulted
Receivables) of each Obligor then in the Receivables Pool exceeds
the product of (A) the Concentration Limit for such Obligor
multiplied by (B) the Capital of the Eligible Receivables then in
the Receivables Pool, (iii) the aggregate amount by which the
Outstanding Balance of Eligible Receivables (other than Defaulted
Receivables) then in the Receivables Pool which, according to the
Contracts related thereto are required to be paid in full between
31 and 45 days of the original billing date therefor, exceeds 15%
of the Outstanding Balance of the Eligible Receivables then in
the Receivables Pool, (iv) the aggregate amount by which the
Outstanding Balance of Eligible Receivables (other than Defaulted
Receivables) then in the Receivables Pool which, according to the
Contracts related thereto are required to be paid in full between
46 and 60 days of the original billing date therefor, exceeds 15%
of the Outstanding Balance of Eligible Receivables then in the
Receivables Pool, and (v) the aggregate amount of Collections on
hand at such time for payment on account of any Eligible
Receivables, the Obligor of which has not been identified.
"Obligor" means a Person obligated to make payments
pursuant to a Contract.
"OPA Assignment" means the assignment agreement,
pursuant to which the Seller is assigning to the Agent the
Originator Purchase Agreement, duly acknowledged and consented to
by the Originator, in substantially the form of Annex E hereto.
"Originator" means Witco Corporation, a Delaware
corporation.
"Originator Purchase Agreement" means the Purchase and
Contribution Agreement dated as of the date of this Agreement
between the Originator, as seller, and the Seller, as purchaser,
as the same may be amended, modified or restated from time to
time.
"Originator Receivable" means the indebtedness of any
Obligor, other than an Obligor which is not a United States
resident, resulting from the provision or sale of specialty
chemical merchandise or services by the Originator under a
Contract, and includes the right to payment of any interest or
finance charges and other obligations of such Obligor with
respect thereto.
"Other Companies" means the Originator and all of its
Subsidiaries except the Seller.
"Outstanding Balance" of any Receivable at any time
means the then outstanding principal balance thereof.
"Percentage" of any Bank means, (a) with respect to
Citibank, the percentage set forth on the signature page to this
Agreement, or such amount as reduced by any Assignment and
Acceptance entered into with an Eligible Assignee, or (b) with
respect to a Bank that has entered into an Assignment and
Acceptance, the amount set forth therein as such Bank's
Percentage, or such amount as reduced by an Assignment and
Acceptance entered into between such Bank and an Eligible
Assignee.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint
stock company, trust, unincorporated association, joint venture
or other entity, or a government or any political subdivision or
agency thereof.
"Pool Receivable" means a Receivable in the Receivables
Pool.
"Purchase Limit" means $150,000,000, as such amount may
be reduced pursuant to Section 2.01(b). References to the unused
portion of the Purchase Limit shall mean, at any time, the
Purchase Limit, as then reduced pursuant to Section 2.01(b),
minus the then outstanding Capital of Receivable Interests under
this Agreement.
"Receivable" means any Originator Receivable which has
been acquired by the Seller from the Originator by purchase or by
capital contribution pursuant to the Originator Purchase
Agreement.
"Receivable Interest" means, at any time, an undivided
percentage ownership interest of the Investors or the Banks in
(i) all then outstanding Pool Receivables arising prior to the
time of the most recent computation or recomputation of such
undivided percentage interest pursuant to Section 2.03, (ii) all
Related Security with respect to such Pool Receivables, and (iii)
all Collections with respect to, and other proceeds of, such Pool
Receivables. Such undivided percentage interest shall be
computed as
C + YFR + LR + DR
NRPB
where:
C = the Capital of such Receivable Interest at the
time of computation.
YFR = the Yield/Fee Reserve of such Receivable
Interest at the time of computation.
LR = the Loss Reserve of such Receivable Interest at
the time of computation.
DR = the Dilution Reserve of such Receivable Interest
at the time of computation.
NRPB = the Net Receivables Pool Balance attributable to
such Receivable Interest at the time of
computation.
Each Receivable Interest shall be determined from time to time
pursuant to the provisions of Section 2.03.
"Receivables Pool" means at any time the aggregation of
each then outstanding Eligible Receivable or Originator
Receivable that was represented to be an Eligible Receivable on
the date of the initial creation of an interest in such
Receivable under this Agreement.
"Receivables Turnover Days" means at any time, the
average, for the immediately prior three months, of the
Outstanding Balance of Eligible Receivables at the end of each
such month, divided by Collections received during such month,
multiplied by 36.75 days.
"Related Security" means with respect to any
Receivable:
(i) all of the Seller's interest in any merchandise
(including returned merchandise) relating to any sale giving rise
to such Receivable;
(ii) all security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements
signed by an Obligor describing any collateral securing such
Receivable;
(iii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting
or securing payment of such Receivable whether pursuant to the
Contract related to such Receivable or otherwise; and
(iv) the Contract and all other books, records and other
information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software and related
property and rights) relating to such Receivable and the related
Obligor.
"S&P" means Standard & Poor's Rating Services, a
division of McGraw-Hill Companies, Inc.
"Seller Report" means a report in substantially the
form of Annex A hereto and containing such additional information
as the Agent may reasonably request from time to time, furnished
by the Collection Agent to the Agent pursuant to Section 6.02(g).
"Settlement Period" means, with respect to any
Receivable Interest:
(a) in the case of any Settlement Period in respect of
which Yield is computed by reference to the Investor Rate, each
successive period commencing on each Settlement Period Date for
such Receivable Interest and ending on the next succeeding
Settlement Period Date for such Receivable Interest; and
(b) in the case of any Settlement Period in respect of
which Yield is computed by reference to the Assignee Rate, each
successive period of from one to and including 29 days, or a
period of one month, as the Seller shall select and the Agent may
approve on notice by the Seller received by the Agent (including
notice by telephone, confirmed in writing) not later than 11:00
A.M. (New York City time) on (A) the day which occurs three
Business Days before the first day of such Settlement Period (in
the case of Settlement Periods in respect of which Yield is
computed by reference to the Eurodollar Rate) or (B) the first
day of such Settlement Period (in the case of Settlement Periods
in respect of which Yield is computed by reference to the
Alternate Base Rate), each such Settlement Period for such
Receivable Interest to commence on the last day of the
immediately preceding Settlement Period for such Receivable
Interest (or, if there is no such Settlement Period, on the date
of purchase of such Receivable Interest), except that if the
Agent shall not have received such notice, or the Agent and the
Seller shall not have so mutually agreed, before 11:00 A.M. (New
York City time) on such day, such Settlement Period shall be one
day;
provided, however, that:
(i) any Settlement Period (other than of one day) which
would otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day (provided, however,
if Yield in respect of such Settlement Period is computed by
reference to the Eurodollar Rate, and such Settlement Period
would otherwise end on a day which is not a Business Day, and
there is no subsequent Business Day in the same calendar month as
such day, such Settlement Period shall end on the next preceding
Business Day);
(ii) in the case of any Settlement Period of one day, (A)
if such Settlement Period is the initial Settlement Period for a
Receivable Interest, such Settlement Period shall be the day of
the purchase of such Receivable Interest; (B) any subsequently
occurring Settlement Period which is one day, if the immediately
preceding Settlement Period is more than one day, shall be the
last day of such immediately preceding Settlement Period and, if
the immediately preceding Settlement Period is one day, shall be
the day next following such immediately preceding Settlement
Period; and (C) if such Settlement Period occurs on a day
immediately preceding a day which is not a Business Day, such
Settlement Period shall be extended to the next succeeding
Business Day; and
(iii) in the case of any Settlement Period for any
Receivable Interest which commences before the Termination Date
for such Receivable Interest and would otherwise end on a date
occurring after such Termination Date, such Settlement Period
shall end on such Termination Date and the duration of each
Settlement Period which commences on or after the Termination
Date for such Receivable Interest shall be of such duration
(including, without limitation, a period of one day) as shall be
selected by the Agent.
"Settlement Period Date" means, for any Receivable
Interest, the date of purchase of such Receivable Interest and
thereafter, the 15th day of each calendar month (or, if such day
is not a Business Day, the immediately succeeding Business Day)
or any other day as shall have been agreed to in writing by the
Agent and the Seller prior to the first day of the preceding
Settlement Period for such Receivable Interest or, if there is no
preceding Settlement Period, prior to the first day of such
Settlement Period; provided, that, the first Settlement Period
Date after the Closing Date shall be the 15th day of the calendar
month succeeding the calendar month on such Closing Date;
provided, further, that, with respect to any Settlement Period
for which Yield is computed with reference to the Assignee Rate
for purposes of the payment of Yield, the Collection Agent Fee,
and fees under the Fee Letter, the Settlement Date shall be the
last day of the Settlement Period.
"Subsidiary" means any corporation or other entity of
which securities having ordinary voting power to elect a majority
of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the
Seller or the Originator, as the case may be, or one or more
Subsidiaries, or by the Seller or the Originator, as the case may
be, and one or more Subsidiaries.
"Tangible Net Worth" means at any time the excess of
(i) the Outstanding Balance of all Receivables plus cash and cash
equivalents of the Seller, minus (ii) the sum of (a) the
Outstanding Balance of Receivables that have become Defaulted
Receivables, plus (b) Capital, Yield/Fee Reserve, Loss Reserve
and Dilution Reserve.
"Termination Date" for any Receivable Interest means
(i) in the case of a Receivable Interest owned by an Investor,
the earlier of (a) the Business Day which the Seller or the Agent
so designates by notice to the other at least one Business Day in
advance for such Receivable Interest and (b) the Facility
Termination Date and (ii) in the case of a Receivable Interest
owned by a Bank, the earlier of (a) the Business Day which the
Seller so designates by notice to the Agent at least one Business
Day in advance for such Receivable Interest and (b) the
Commitment Termination Date.
"Transaction Documents" means this Agreement, the
Originator Purchase Agreement, each Lock-Box Agreement, each
Control Agreement, the OPA Assignment and all other agreements
and documents delivered hereto or thereto.
"UCC" means the Uniform Commercial Code as from time to
time in effect in the specified jurisdiction.
"Year 2000 Problem" means the risk that computer
applications used by the Collection Agent and its Subsidiaries
may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after
December 31, 1999.
"Yield" means:
(i) for each Receivable Interest for any Settlement
Period to the extent Ciesco will be funding such Receivable
Interest through the issuance of commercial paper,
IR x C x AD + LF
360
(ii) for each Receivable Interest for any Settlement
Period to the extent (x) the Investors will not be funding such
Receivable Interest through the issuance of commercial paper or
(y) the Banks will be funding such Receivable Interest,
AR x C x AD + LF
360
where:
AR = the Assignee Rate for such Receivable Interest for
such Settlement Period;
C = the Capital of such Receivable Interest during such
Settlement Period;
IR = the Investor Rate for such Receivable Interest for
such Settlement Period;
AD = the actual number of days elapsed during such
Settlement Period;
LF = the Liquidation Fee, if any, for such Receivable
Interest for such Settlement Period;
provided that no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the
maximum permitted by applicable law; and provided further that
Yield for any Receivable Interest shall not be considered paid by
any distribution to the extent that at any time all or a portion
of such distribution is rescinded or must otherwise be returned
for any reason.
"Yield/Fee Reserve" means, for any Receivable Interest
on any date, an amount equal to
(C x YFRP) + AUYF
where:
C = the Capital of such Receivable Interest at the close
of business of the Collection Agent on such date.
YFRP = the Yield/Fee Reserve Percentage on such date.
AUYF = accrued and unpaid Yield, Collection Agent Fee, and
fees under the Fee Letter on such date.
"Yield/Fee Reserve Percentage" means, for any
Receivable Interest on any date, a percentage equal to:
[(AER x 1.5) + AS + PF + CAF] x RTDF
360
where:
AER = the one-month Adjusted Eurodollar Rate in effect on
such date.
AS = the percentage per annum contained in the
definition of "Assignee Rate" in effect on such
date.
PF = the sum of the percentages per annum used in the
calculation of the Program Fee (as defined in the
Fee Letter), in effect on such date.
CAF = the percentage per annum used in the calculation of
the Collection Agent Fee in effect on such date.
RTDF = the highest monthly Receivable Turnover Days
during the most recently ended 12 months, plus 10
days.
SECTION 1.02. Other Terms . All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such
Article 9.
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Purchase Facility. (a) On the terms and
conditions hereinafter set forth, Ciesco may, in its sole
discretion, and the Banks shall, ratably in accordance with their
respective Bank Commitments, purchase Receivable Interests from
the Seller from time to time during the period from the Closing
Date to the Facility Termination Date (in the case of Ciesco) and
to the Commitment Termination Date (in the case of the Banks).
Under no circumstances shall Ciesco make any such purchase, or
the Banks be obligated to make any such purchase, if after giving
effect to such purchase, the aggregate outstanding Capital would
exceed the Purchase Limit.
(b) The Seller may, upon at least five Business Days'
notice to the Agent, terminate the facility provided for in this
Agreement in whole or, from time to time, reduce in part the
unused portion of the Purchase Limit; provided that each partial
reduction shall be in the amount of at least $1,000,000 or an
integral multiple thereof.
(c) At any time prior to the Termination Date, the
Agent, on behalf of the Investors which own Receivable Interests,
shall have the Collections attributable to such Receivable
Interests automatically reinvested pursuant to Section 2.04 in
additional undivided percentage interests in the Pool Receivables
by making an appropriate readjustment of such Receivable
Interests. The Agent, on behalf of the Banks which own
Receivable Interests, shall have the Collections attributable to
such Receivable Interests automatically reinvested pursuant to
Section 2.04 in additional undivided percentage interests in the
Pool Receivables by making an appropriate readjustment of such
Receivable Interests.
SECTION 2.02. Making Purchases. (a) Each purchase by
Ciesco or the Banks shall be made on at least three Business
Days' written notice from the Seller to the Agent. Each such
notice of a purchase shall specify (i) the amount requested to be
paid to the Seller (such amount, which shall not be less than
$2,000,000, being referred to herein as the initial "Capital" of
the Receivable Interest then being purchased), (ii) the date of
such purchase (which shall be a Business Day), and (iii) if the
Assignee Rate is to apply to such Receivable interest, the
duration of the initial Settlement Period for such Receivable
Interest. The Agent shall promptly thereafter notify the Seller
(and shall use its reasonable efforts to so notify on the same
Business Day if it receives notice prior to 2:00 p.m.) whether
Ciesco has determined to make a purchase and, if so, whether all
of the terms specified by the Seller are acceptable to Ciesco.
If Ciesco has determined not to make a proposed
purchase, the Agent shall promptly send notice (and shall use its
reasonable efforts to send such notice on the same Business Day
if it receives notice prior to 2:00 p.m.) of the proposed
purchase to all of the Banks concurrently by telecopier, telex or
cable specifying the date of such purchase, each Bank's
Percentage multiplied by the aggregate amount of Capital of
Receivable Interest being purchased, whether the Yield for the
Settlement Period for such Receivable Interest is calculated
based on the Eurodollar Rate (which may be selected only if such
notice is given at least two Business Days prior to the purchase
date) or the Alternate Base Rate, and the duration of the
Settlement Period for such Receivable Interest (which shall be
one day if the Seller has not selected another period).
(b) On the date of each such purchase of a Receivable
Interest, Ciesco or the Banks, as the case may be, shall, upon
satisfaction of the applicable conditions set forth in Article
III, make available to the Seller in same day funds an amount
equal to the initial Capital of such Receivable Interest, at the
account set forth in the Funds Transfer Letter.
(c) Effective on the date of each purchase pursuant to
this Section 2.02 and each reinvestment pursuant to Section 2.04,
the Seller hereby sells and assigns to the Agent, for the benefit
of the parties making such purchase, an undivided percentage
ownership interest, to the extent of the Receivable Interest then
being purchased, in each Pool Receivable then existing and in the
Related Security and Collections with respect thereto.
(d) Notwithstanding the foregoing, a Bank shall not be
obligated to make purchases under this Section 2.02 at any time
in an amount which would exceed such Bank's Bank Commitment less
the outstanding and unpaid amount of any purchases made by such
Bank under the Asset Purchase Agreement. Each Bank's obligation
shall be several, such that the failure of any Bank to make
available to the Seller any funds in connection with any purchase
shall not relieve any other Bank of its obligation, if any,
hereunder to make funds available on the date of such purchase,
but no Bank shall be responsible for the failure of any other
Bank to make funds available in connection with any purchase.
SECTION 2.03. Receivable Interest Computation. Each
Receivable Interest shall be initially computed on its date of
purchase. Thereafter until the Termination Date for such
Receivable Interest, such Receivable Interest shall be
automatically recomputed (or deemed to be recomputed) on each day
other than a Liquidation Day. Any Receivable Interest, as
computed (or deemed recomputed) as of the day immediately
preceding the Termination Date for such Receivable Interest,
shall thereafter remain constant. Such Receivable Interest shall
become zero when Capital thereof and Yield thereon shall have
been paid in full, and all Fees and other amounts owed by the
Seller hereunder to the Investors, the Banks or the Agent are
paid and the Collection Agent shall have received the accrued
Collection Agent Fee thereon.
SECTION 2.04. Settlement Procedures. (a) Collection of
the Pool Receivables shall be administered by a Collection Agent,
in accordance with the terms of Article VI of this Agreement.
The Seller shall provide to the Collection Agent (if other than
the Seller) on a timely basis all information needed for such
administration, including notice of the occurrence of any
Liquidation Day and current computations of each Receivable
Interest.
(b) The Collection Agent shall, on each day on which
Collections of Pool Receivables are received by it with respect
to any Receivable Interest:
(i) set aside on its books and records, which shall
be deemed to be held in trust (although the Collection Agent
shall not be required to segregate such amounts) for the benefit
of the Agent on behalf of the Investors or the Banks that hold
such Receivable Interest, out of the percentage of such
Collections represented by such Receivable Interest, an amount
equal to the Yield, Fees and Collection Agent Fee accrued through
such day for such Receivable Interest and not previously set
aside;
(ii) if such day is not a Liquidation Day for such
Receivable Interest, reinvest with the Seller on behalf of the
Investors or the Banks that hold such Receivable Interest the
percentage of such Collections represented by such Receivable
Interest, to the extent representing a return of Capital, by
recomputation (or deemed recomputation) of such Receivable
Interest pursuant to Section 2.03;
(iii) if such day is a Liquidation Day for such
Receivable Interest, set aside and hold in trust (and, at the
request of the Agent following the occurrence of an Event of
Termination, segregate) for the Investors or the Banks that hold
such Receivable Interest the entire remainder of such percentage
of Collections; provided that if amounts are set aside and held
in trust on any Liquidation Day occurring prior to the
Termination Date, and thereafter during such Settlement Period
the conditions set forth in Section 3.02 are satisfied or waived
by the Agent, such previously set aside amounts shall, to the
extent representing a return of Capital, be reinvested in
accordance with the preceding subsection (ii) on the day of such
subsequent satisfaction or waiver of conditions; and
(iv) during such times as amounts are required
to be reinvested in accordance with the foregoing subsection (ii)
or the proviso to subsection (iii), release to the Seller for its
own account any Collections in excess both of such amounts and of
the amounts that are required to be set aside pursuant to
subsection (i) above.
(c) The Collection Agent shall deposit into the Agent's
Account, on the last day of each Settlement Period for a
Receivable Interest, Collections held for the Investors or the
Banks that relate to such Receivable Interest pursuant to Section
2.04(b); provided, however, that if Yield with respect to such
Receivable Interest was computed by reference to the Investor
Rate during such Settlement Period and no Liquidation Day then
exists, Collections held for the Investors pursuant to subsection
(i) of Section 2.04(b) shall be deposited to the Agent's Account
on the second Business Day after the last date of such Settlement
Period instead of such last day.
(d) Upon receipt of funds deposited into the Agent's
Account, the Agent shall distribute them as follows:
(i) if such distribution occurs on a day that is
not a Liquidation Day, first to the Investors or the Banks that
hold the relevant Receivable Interest and to the Agent in payment
in full of all accrued Yield and Fees and then to the Collection
Agent in payment in full of all accrued Collection Agent Fee.
(ii) if such distribution occurs on a Liquidation
Day, first to the Investors or the Banks that hold the relevant
Receivable Interest and to the Agent in payment in full of all
accrued Yield and Fees, second to such Investors or Banks in
reduction to zero of all Capital, third to such Investors, Banks
or the Agent in payment of any other amounts owed by the Seller
hereunder, and fourth to the Collection Agent in payment in full
of all accrued Collection Agent Fee.
After the Capital, Yield, Fees and Collection Agent Fee
with respect to a Receivable Interest, and any other amounts
payable by the Seller to the Investors, the Banks or the Agent
hereunder, have been paid in full, all additional Collections
with respect to such Receivable Interest shall be paid to the
Seller for its own account.
(e) For the purposes of this Section 2.04:
(i) if on any day the Outstanding Balance of any
Pool Receivable is reduced or adjusted as a result of any
defective, rejected or returned merchandise or services, or any
cash discount, discount for quick payment or other adjustment
made by the Seller or the Originator, or any setoff, the Seller
shall be deemed to have received on such day a Collection of such
Pool Receivable in the amount of such reduction or adjustment;
(ii) if on any day any of the representations or
warranties contained in Section 4.01(h) is no longer true with
respect to any Pool Receivable, the Seller shall be deemed to
have received on such day a Collection of such Pool Receivable in
full;
(iii) except as provided in subsection (i) or (ii)
of this Section 2.04(e), or as otherwise required by applicable
law or the relevant Contract, all Collections received from an
Obligor of any Receivables shall be applied to the Receivables of
such Obligor in the order of the age of such Receivables,
starting with the oldest such Receivable, unless such Obligor
designates its payment for application to specific Receivables;
and
(iv) if and to the extent the Agent, the Investors
or the Banks shall be required for any reason to pay over to an
Obligor any amount received on its behalf hereunder, such amount
shall be deemed not to have been so received but rather to have
been retained by the Seller and, accordingly, the Agent, the
Investors or the Banks, as the case may be, shall have a claim
against the Seller for such amount, payable when and to the
extent that any distribution from or on behalf of such Obligor is
made in respect thereof.
SECTION 2.05. Fees. (a) Each Investor and Bank shall pay
to the Collection Agent a fee (the "Collection Agent Fee") of
0.75% per annum on the average daily Capital of each Receivable
Interest owned by such Investor or Bank, from the date of
purchase of such Receivable Interest until the later of the
Termination Date for such Receivable Interest or the date on
which such Capital is reduced to zero, payable on the last day of
each Settlement Period for such Receivable Interest (or, if the
proviso in Section 2.04(c) is then applicable, the second
Business Day after the last day of such Settlement Period). Upon
three Business Days' notice to the Agent, the Collection Agent
(if not the Originator, the Seller or its designee or an
Affiliate of the Seller) may elect to be paid, as such fee,
another percentage per annum on the average daily Capital of such
Receivable Interest, but in no event in excess for all Receivable
Interests relating to a single Receivables Pool of 110% of the
reasonable costs and expenses of the Collection Agent in
administering and collecting the Receivables in such Receivables
Pool. The Collection Agent Fee shall be payable only from
Collections pursuant to, and subject to the priority of payment
set forth in, Section 2.04. So long as the Originator is acting
as the Collection Agent hereunder, amounts paid as the Collection
Agent Fee pursuant to this Section 2.05(a) shall reduce, on a
dollar-for-dollar basis, the obligation of the Seller to pay the
"Collection Agent Fee" pursuant to Section 6.03 of the Originator
Purchase Agreement, provided that such obligation of the Seller
shall in no event be reduced below zero.
(b) The Seller shall pay to the Agent certain fees
(collectively, the "Fees") in the amounts and on the dates set
forth in a separate fee letter of even date between the Seller
and the Agent, as the same may be amended or restated from time
to time (the "Fee Letter").
SECTION 2.06. Payments and Computations, Etc. (a) All
amounts to be paid or deposited by the Seller or the Collection
Agent hereunder shall be paid or deposited no later than 11:00
A.M. (New York City time) on the day when due in same day funds
to the Agent's Account.
(b) Each of the Seller and the Collection Agent shall,
to the extent permitted by law, pay interest on any amount not
paid or deposited by it when due hereunder, at an interest rate
per annum equal to 1.00% per annum above the Alternate Base Rate,
payable on demand.
(c) All computations of interest under subsection (b)
above and all computations of Yield, Fees, and other amounts
hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first but excluding the
last day) elapsed. Whenever any payment or deposit to be made
hereunder shall be due on a day other than a Business Day, such
payment or deposit shall be made on the next succeeding Business
Day and such extension of time shall be included in the
computation of such payment or deposit.
SECTION 2.07. Dividing or Combining Receivable Interests.
Either the Seller or the Agent may, upon notice to the other
party received at least three Business Days prior to the last day
of any Settlement Period in the case of the Seller giving notice,
or up to the last day of such Settlement Period in the case of
the Agent giving notice, either (i) divide any Receivable
Interest into two or more Receivable Interests having aggregate
Capital equal to the Capital of such divided Receivable Interest,
or (ii) combine any two or more Receivable Interests originating
on such last day or having Settlement Periods ending on such last
day into a single Receivable Interest having Capital equal to the
aggregate of the Capital of such Receivable Interests; provided,
however, that no Receivable Interest owned by Ciesco may be
combined with a Receivable Interest owned by any Bank.
SECTION 2.08. Increased Costs. (a) If CNAI, any Investor,
any Bank, any entity which enters into a commitment to purchase
Receivable Interests or interests therein, or any of their
respective Affiliates (each an "Affected Person") determines that
compliance with any law or regulation or any guideline or request
from any central bank or other governmental authority (whether or
not having the force of law) affects or would affect the amount
of the capital required or expected to be maintained by such
Affected Person and such Affected Person determines that the
amount of such capital is increased by or based upon the
existence of any commitment to make purchases of or otherwise to
maintain the investment in Pool Receivables or interests therein
related to this Agreement or to the funding thereof and other
commitments of the same type, then, upon demand by such Affected
Person (with a copy to the Agent), the Seller shall immediately
pay to the Agent for the account of such Affected Person (as a
third-party beneficiary), from time to time as specified by such
Affected Person, additional amounts sufficient to compensate such
Affected Person in the light of such circumstances, to the extent
that such Affected Person reasonably determines such increase in
capital to be allocable to the existence of any of such
commitments. A certificate as to such amounts submitted to the
Seller and the Agent by such Affected Person shall be conclusive
and binding for all purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of
reserve requirements referred to in Section 2.09) in or in the
interpretation of any law or regulation or (ii) compliance with
any guideline or request from any central bank or other
governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Investor or Bank
of agreeing to purchase or purchasing, or maintaining the
ownership of Receivable Interests in respect of which Yield is
computed by reference to the Eurodollar Rate, then, upon demand
by such Investor or Bank (with a copy to the Agent), the Seller
shall immediately pay to the Agent, for the account of such
Investor or Bank (as a third-party beneficiary), from time to
time as specified by such Investor or Bank, additional amounts
sufficient to compensate such Investor or Bank for such increased
costs. A certificate as to such amounts submitted to the Seller
and the Agent by such Investor or Bank shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.09. Additional Yield on Receivable Interests
Bearing a Eurodollar Rate. The Seller shall pay to any Investor
or Bank, so long as such Investor or Bank shall be required under
regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional
Yield on the unpaid Capital of each Receivable Interest of such
Investor or Bank during each Settlement Period in respect of
which Yield is computed by reference to the Eurodollar Rate, for
such Settlement Period, at a rate per annum equal at all times
during such Settlement Period to the remainder obtained by
subtracting (i) the Eurodollar Rate for such Settlement Period
from (ii) the rate obtained by dividing such Eurodollar Rate
referred to in clause (i) above by that percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Investor or
Bank for such Settlement Period, payable on each date on which
Yield is payable on such Receivable Interest. Such additional
Yield shall be determined by such Investor or Bank and notice
thereof given to the Seller through the Agent within 30 days
after any Yield payment is made with respect to which such
additional Yield is requested. The affected Bank or Investor
shall take reasonable efforts to provide the Seller with prompt
notice of such additional yield charges and a certificate as to
such additional Yield submitted to the Seller and the Agent by
such Investor or Bank shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.10. Intention of the Parties. The parties
hereto have structured this Agreement with the intention that
each purchase of undivided interests in Receivables hereunder be
treated as a sale of such Receivables by the Seller to the
Investor or the Banks, as the case may be, for all purposes,
other than federal and state income tax purposes. This Agreement
is, and the parties intend this Agreement to be, a security
agreement, as such term is understood under Article 9 of the UCC.
Section 9-105 of the UCC provides that a " 'Security agreement'
means an agreement which creates or provides for a security
interest", and Section 1-201 of the UCC provides that a "security
interest" under the UCC " . . . also includes any interest of a
buyer of accounts or chattel paper which is subject to Article 9
. . ." of the UCC.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase.
The initial purchase of a Receivable Interest under this
Agreement on the Closing Date is subject to the conditions
precedent that the Agent shall have received on or before the
date of such purchase the following, each (unless otherwise
indicated) dated such date, in form and substance reasonably
satisfactory to the Agent:
(a) Certified copies of the resolutions of the Board of
Directors of each of the Seller and the Originator approving this
Agreement and the Originator Purchase Agreement and certified
copies of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this
Agreement, as the case may be, and the Originator Purchase
Agreement.
(b) A certificate of the Secretary or Assistant
Secretary of the Seller and the Originator certifying the names
and true signatures of the officers of the Seller and the
Originator authorized to sign the Originator Purchase Agreement
and this Agreement and the other documents to be delivered by it
hereunder and thereunder.
(c) Acknowledgment copies of proper financing
statements, duly filed on or before the date of such initial
purchase under the UCC of all jurisdictions that the Agent may
deem necessary or desirable in order to perfect the ownership
interests contemplated by this Agreement and the Originator
Purchase Agreement.
(d) Acknowledgment copies of proper financing
statements, if any, necessary to release all security interests
and other rights of any Person in (i) the Receivables, Contracts
or Related Security previously granted by the Seller or the
Originator and (ii) the collateral security referred to in
Section 2.10 previously granted by the Seller.
(e) Completed requests for information, dated on or
before the date of such initial purchase, listing the financing
statements referred to in subsection (c) above and all other
effective financing statements filed in the jurisdictions
referred to in subsection (c) above that name the Seller or the
Originator as debtor, together with copies of such other
financing statements (none of which shall cover any Receivables,
Contracts, Related Security or the collateral security referred
to in Section 2.10).
(f) Executed copies of the Control Agreement to the
initial Designated Bank and the undated executed copies of the
Lock-Box Agreements to the other Lock-Box Banks.
(g) A favorable opinion of (i) Cravath, Swaine & Moore,
as counsel for the Seller and the Originator and (ii) internal
counsel to the Seller and the Originator, substantially in the
forms of Annex C hereto and as to such other matters as the Agent
may reasonably request.
(h) The Fee Letter.
(i) The Funds Transfer Letter.
(j) An executed copy of the Originator Purchase
Agreement and an executed copy of the OPA Assignment.
(k) A copy of the by-laws of the Seller, certified by
the Secretary or Assistant Secretary of the Seller.
(l) A copy of the certificate or articles of
incorporation of the Seller, certified as of a recent date by the
Secretary of State or other appropriate official of the state of
its organization, and a certificate as to the good standing of
the Seller from such Secretary of State or other official, dated
as of a recent date.
(m) A favorable opinion of Kaye, Scholer, Fierman, Hays
& Handler, LLP, counsel for the Agent, as to such matters as the
Agent may reasonably request.
SECTION 3.02. Conditions Precedent to All Purchases and
Reinvestments. Each purchase (including the initial purchase)
and each reinvestment shall be subject to the further conditions
precedent that (a) in the case of each purchase, the Collection
Agent shall have delivered to the Agent at least one Business Day
prior to such purchase, in form and substance satisfactory to the
Agent, a completed Seller Report containing information covering
the most recently ended reporting period for which information is
required pursuant to Section 6.02(g) and demonstrating that after
giving effect to such purchase no Event of Termination or
Incipient Event of Termination under Section 7.01(i) would occur,
(b) in the case of each reinvestment, on or prior to the date of
such reinvestment the Collection Agent shall have delivered to
the Agent as and when due in accordance with this Agreement, in
form and substance satisfactory to the Agent, a completed Seller
Report containing information covering the most recently ended
reporting period for which information is required pursuant to
Section 6.02(g), (c) on the date of such purchase or reinvestment
the following statements shall be true (and acceptance of the
proceeds of such purchase or reinvestment shall be deemed a
representation and warranty by the Seller that such statements
are then true):
(i) The representations and warranties contained in
Section 4.01 are correct on and as of the date of such purchase
or reinvestment as though made on and as of such date,
(ii) No event has occurred and is continuing, or
would result from such purchase or reinvestment, that constitutes
an Event of Termination or an Incipient Event of Termination,
(iii) The Originator shall have sold or contributed
to the Seller, pursuant to the Originator Purchase Agreement, all
Originator Receivables arising on or prior to such date,
(iv) With respect to all purchases and reinvestments
made on or after January 1, 2000, the Agent shall have received
evidence satisfactory to it that Collections are not being sent
to any bank account other than a Designated Account, and
(v) The Agent shall have received such other
approvals, opinions or documents as it may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller. The Seller hereby represents and warrants as follows:
(a) The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware,
and is duly qualified to do business, and is in good standing, in
every jurisdiction where the nature of its business requires it
to be so qualified.
(b) The execution, delivery and performance by the
Seller of the Transaction Documents to which it is a party and
the other documents to be delivered by it hereunder, including
the Seller's use of the proceeds of purchases and reinvestments,
(i) are within the Seller's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not
contravene (1) the Seller's charter or by-laws, (2) any law, rule
or regulation applicable to the Seller, (3) any contractual
restriction binding on or affecting the Seller or its property or
(4) any order, writ, judgment, award, injunction or decree
binding on or affecting the Seller or its property, and (iv) do
not result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to
any of its properties (except for the interest created pursuant
to this Agreement). Each of the Transaction Documents to which
the Seller is a party has been duly executed and delivered by the
Seller.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by the Seller of the Transaction Documents to which
it is a party or any other document to be delivered thereunder,
except for the filing of UCC financing statements which are
referred to therein.
(d) Each of the Transaction Documents constitutes the
legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms.
(e) The balance sheets of the Originator and its
consolidated Subsidiaries as at December 31, 1998, and the
related statements of income and retained earnings of the
Originator and its consolidated Subsidiaries for the fiscal year
then ended, copies of which have been furnished to the Agent,
fairly present the financial condition of the Originator and its
consolidated Subsidiaries as at such date and the results of the
operations of the Originator and its consolidated Subsidiaries
for the period ended on such date, all in accordance with
generally accepted accounting principles consistently applied,
and since March 31, 1999 there has been no change in the business
(taken as a whole), consolidated financial condition or
consolidated results of operation of the Originator and its
consolidated Subsidiaries that reasonably could be expected to
result in a Material Adverse Effect.
(f) The opening pro forma balance sheet of the Seller as
at June 10, 1999, giving effect to the initial purchase to be
made under this Agreement, a copy of which has been furnished to
the Agent, fairly presents the financial condition of the Seller
as at such date, in accordance with generally accepted accounting
principles, and since June 10, 1999 there has been no material
adverse change in the business, operations or financial position
of the Seller.
(g) Except as disclosed in the Form 10-Q filed with the
Securities and Exchange Commission on May 7, 1999, there is no
action, suit or proceeding pending against or, to the knowledge
of the Seller or any of its Subsidiaries, threatened against or
affecting the Seller or any of its Subsidiaries before any court
or arbitrator, any governmental body, agency or official that
reasonably could be expected to result in a Material Adverse
Effect.
(h) Neither the Originator nor any Subsidiary is in
default with respect to any order of any court, arbitration or
governmental body except for defaults with respect to orders of
governmental agencies that reasonably could be expected to result
in a Material Adverse Effect.
(i) The Seller is the legal and beneficial owner of the
Pool Receivables and Related Security free and clear of any
Adverse Claim; upon each purchase or reinvestment, the Investors
or the Banks, as the case may be, shall acquire a valid and
perfected first priority undivided percentage ownership interest
to the extent of the pertinent Receivable Interest in each Pool
Receivable then existing or thereafter arising and in the Related
Security and Collections with respect thereto. No effective
financing statement or other instrument similar in effect
covering any Contract or any Pool Receivable or the Related
Security or Collections with respect thereto is on file in any
recording office, except those filed in favor of the Agent
relating to this Agreement and those filed by the Seller pursuant
to the Originator Purchase Agreement.
(j) Each Seller Report (if prepared by the Seller or one
of its Affiliates, or to the extent that information contained
therein is supplied by the Seller or an Affiliate), information,
exhibit, financial statement, document, book, record or report
furnished or to be furnished at any time by or on behalf of the
Seller to the Agent, the Investors or the Banks in connection
with this Agreement is or will be accurate in all material
respects as of its date or (except as otherwise disclosed to the
Agent, Investors or the Banks, as the case may be, at such time)
as of the date so furnished, and no such document contains or
will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances
under which they were made, not misleading.
(k) The principal place of business and chief executive
office of the Seller and the office where the Seller keeps its
records concerning the Pool Receivables are located at the
address or addresses referred to in Section 5.01(b).
(l) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts of the
Seller at such Lock-Box Banks, are as specified in Schedule I
hereto, as such Schedule I may be updated from time to time
pursuant to Section 5.01(g).
(m) Each purchase of a Receivable Interest from the
Seller and each reinvestment of Collections in Pool Receivables
of the Seller will constitute (i) a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act of 1933, as
amended, and (ii) a purchase or other acquisition of notes,
drafts, acceptances, open accounts receivable or other
obligations representing part or all of the sales price of
merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as
amended.
(n) The Seller is not known by and does not use any
tradename or doing-business-as name.
(o) The Seller was incorporated on June 4, 1999, and the
Seller did not engage in any business activities prior to the
date of this Agreement. The Seller has no Subsidiaries.
(p)(i) The fair value of the property of the Seller is
greater than the total amount of liabilities, including
contingent liabilities, of the Seller, (ii) the present fair
salable value of the assets of the Seller is not less than the
amount that will be required to pay all probable liabilities of
the Seller on its debts as they become absolute and matured,
(iii) the Seller does not intend to, and does not believe that it
will, incur debts or liabilities beyond the Seller's abilities to
pay such debts and liabilities as they mature and (iv) the Seller
is not engaged in a business or a transaction, and is not about
to engage in a business or a transaction, for which the Seller's
property would constitute unreasonably small capital.
(q) With respect to each Pool Receivable, the Seller
(i) shall have received such Pool Receivable as a contribution to
the capital of the Seller by the Originator or (ii) shall have
purchased such Pool Receivable from the Originator in exchange
for payment (made by the Seller to the Originator in accordance
with the provisions of the Originator Purchase Agreement) of
cash, Deferred Purchase Price, or a combination thereof, in an
amount which constitutes fair consideration and reasonably
equivalent value. Each such sale referred to in clause (ii) of
the preceding sentence shall not have been made for or on account
of an antecedent debt owed by the Originator to the Seller and no
such sale is or may be voidable or subject to avoidance under any
section of the Federal Bankruptcy Code.
SECTION 4.02. Representations and Warranties of the
Collection Agent . The Collection Agent hereby represents and
warrants as follows:
The Collection Agent is a corporation duly
incorporated, validly existing and in good standing under the
laws of Delaware, and is duly qualified to do business, and is in
good standing, in New York and every other jurisdiction where the
nature of its business requires it to be so qualified, except to
the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
(b) The execution, delivery and performance by the
Collection Agent of this Agreement and any other documents to be
delivered by it hereunder (i) are within the Collection Agent's
corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) do not contravene (1) the Collection
Agent's charter or by-laws, (2) any law, rule or regulation
applicable to the Collection Agent, (3) any contractual
restriction binding on or affecting the Collection Agent or its
property or (4) any order, writ, judgment, award, injunction or
decree binding on or affecting the Collection Agent or its
property, and (iv) do not result in or require the creation of
any lien, security interest or other charge or encumbrance upon
or with respect to any of its properties. This Agreement has
been duly executed and delivered by the Collection Agent.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by the Collection Agent of this Agreement or any
other document to be delivered by it hereunder.
(d) This Agreement constitutes the legal, valid and
binding obligation of the Collection Agent enforceable against
the Collection Agent in accordance with its terms.
(e) The balance sheets of the Collection Agent and its
consolidated Subsidiaries as at December 31, 1998, and the
related statements of income and retained earnings of the
Collection Agent and its consolidated Subsidiaries for the fiscal
year then ended, copies of which have been furnished to the
Agent, fairly present the financial condition of the Collection
Agent and its consolidated Subsidiaries as at such date and the
results of the operations of the Collection Agent and its
consolidated Subsidiaries for the period ended on such date, all
in accordance with generally accepted accounting principles
consistently applied, and since March 31, 1999 there has been no
change in the business (taken as a whole), consolidated financial
position or consolidated results of operation of the Collection
Agent and its consolidated Subsidiaries that has resulted in or
reasonably could be expected to result in a Material Adverse
Effect.
(f) Except as disclosed in the Form 10-Q filed with the
Securities and Exchange Commission on May 7, 1999, there is no
action, suit or proceeding pending against or, to the knowledge
of the Seller or any of its Subsidiaries, threatened against or
affecting the Seller or any of its Subsidiaries before any court
or arbitrator, any governmental body, agency or official that has
resulted in or reasonably could be expected to result in a
Material Adverse Effect.
(g) The Collection Agent and its Subsidiaries have
reviewed the areas within their business and operations that
could be adversely affected by, and have a developed a program to
address on a timely basis, the Year 2000 Problem. To the extent
it reasonably deems appropriate, the Collection Agent agrees to
make related appropriate inquiry of its material suppliers and
vendors whose performance may materially affect the Collection
Agent's performance hereunder. Based on such review and program,
the Collection Agent believes that the Year 2000 Problem is not
reasonably expected to result in a Material Adverse Effect.
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of the Seller . Until the latest
of the Facility Termination Date or the date on which no Capital
of or Yield on any Receivable Interest shall be outstanding or
the date all other amounts owed by the Seller hereunder to the
Investors, the Banks or the Agent are paid in full:
(a) Compliance with Laws, Etc. The Seller will comply
in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate
existence, rights, franchises, qualifications, and privileges
except to the extent to the extent that the failure to do so
comply could reasonably be expected to result in a Material
Adverse Effect
(b) Offices, Records and Books of Account. The Seller
will keep its principal place of business and chief executive
office and the office where it keeps its records concerning the
Pool Receivables at the address of the Seller set forth under its
name on the signature pages to this Agreement or, upon 30 days'
prior written notice to the Agent, at any other locations in
jurisdictions where all actions reasonably requested by the Agent
to protect and perfect the interest in the Pool Receivables have
been taken and completed. The Seller also will maintain and
implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing
Pool Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all
documents, books, records and other information reasonably
necessary or advisable for the collection of all Pool Receivables
(including, without limitation, records adequate to permit the
daily identification of each Pool Receivable and all Collections
of and adjustments to each existing Pool Receivable).
(c) Performance and Compliance with Contracts and Credit
and Collection Policy. The Seller will, at its expense, timely
and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under
the Contracts related to the Pool Receivables, and timely and
fully comply in all material respects with the Credit and
Collection Policy in regard to each Pool Receivable and the
related Contract.
(d) Sales, Liens, Etc. The Seller will not sell, assign
(by operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any Adverse Claim upon or with respect
to, the Seller's undivided interest in any Pool Receivable,
Related Security, related Contract or Collections, or upon or
with respect to any account to which any Collections of any Pool
Receivable are sent, or assign any right to receive income in
respect thereof, other than liens for taxes not yet due and
payable.
(e) Extension or Amendment of Receivables. Except as
provided in Section 6.02(c), the Seller will not extend, amend or
otherwise modify the terms of any Pool Receivable, or amend,
modify or waive any payment provisions of any Contract related
thereto
(f) Change in Business or Credit and Collection Policy.
The Seller will not make any change in the character of its
business or in the Credit and Collection Policy that would, in
either case, materially adversely affect the collectibility of
the Receivables Pool or the ability of the Seller to perform its
obligations under this Agreement.
(g) Change in Payment Instructions to Obligors. The
Seller will not add any bank as a Lock-Box Bank to those listed
in Schedule I to this Agreement. The Seller will not add any
bank as a Designated Bank unless the Agent shall have received
notice of such addition (including an updated Schedule I) and a
fully executed copy of a Control Agreement for each new
Designated Bank. The Seller will terminate each Lock-Box Account
(other than the Designated Accounts) on or prior to December 31,
1999. Following the delivery of any Lock-Box Agreement or
Control Agreement, as applicable, the Seller will not make any
change in its instructions to Obligors regarding payments to be
made to the Seller or payments to be made to any Lock-Box Bank,
other than instructing Obligors that are making payments to a
Lock-Box Account that is not a Designated Account to make
payments to a Designated Account.
(h) Deposits to Lock-Box Accounts. At all times on and
prior to December 31, 1999, the Seller will deposit, or cause to
be deposited, all Collections of Receivables solely into Lock-Box
Accounts. At all times subsequent to December 31, 1999, the
Seller will deposit, or cause to be deposited, all Collections of
Receivables solely into a Designated Account. The Seller will
not deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Lock-Box Account cash or cash
proceeds other than Collections of Receivables and shall promptly
(and in any event within two Business Days) cause any Collections
deposited in a Lock-Box Account and not relating to Receivables
to be removed from the applicable Lock-Box Account.
(i) Marking of Records. At its expense, the Seller will
mark its master data processing records evidencing Pool
Receivables with a legend evidencing that Receivable Interests
related to such Pool Receivables and related Contracts have been
sold in accordance with this Agreement.
(j) Further Assurances. The Seller agrees from time
to time, at its expense, promptly to execute and deliver all
further instruments and documents, and to take all further
reasonable actions requested by the Agent, that may be reasonably
necessary or desirable, or that the Agent may reasonably request,
to perfect, protect or more fully evidence the Receivable
Interests purchased under this Agreement, or to enable the
Investors, the Banks or the Agent to exercise and enforce their
respective rights and remedies under this Agreement. Without
limiting the foregoing, the Seller will, upon the request of the
Agent, execute and file such financing or continuation
statements, or amendments thereto, and such other instruments and
documents, that may be necessary or desirable, or that the Agent
may reasonably request, to perfect, protect or evidence such
Receivable Interests.
(ii) The Seller authorizes the Agent to file
financing or continuation statements, and amendments thereto and
assignments thereof, relating to the Pool Receivables and the
Related Security, the related Contracts and the Collections with
respect thereto without the signature of the Seller where
permitted by law. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement where
permitted by law.
(k) Reporting Requirements. The Seller will provide to
the Agent (in multiple copies, if requested by the Agent) the
following:
(i) as soon as available and in any event within 60
days after the end of the first three quarters of each fiscal
year of the Originator, consolidated balance sheets of the
Originator and its Subsidiaries as of the end of such quarter and
consolidated statements of income and retained earnings of the
Originator and its Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of such
quarter, certified by the chief financial officer, controller or
other chief accounting officer of the Originator;
(ii) as soon as available and in any event within
120 days after the end of each fiscal year of the Originator, a
copy of the annual report for such year for the Originator and
its Subsidiaries, containing financial statements for such year
audited by a "Big 5" accounting firm or other independent public
accountants acceptable to the Agent;
(iii) as soon as possible and in any event within
five days after the Seller obtains knowledge of the occurrence of
each Event of Termination or Incipient Event of Termination, to
the extent that such event is continuing, a statement of the
chief financial officer of the Seller setting forth details of
such Event of Termination or event and the action that the Seller
has taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all reports that the Originator sends to any of its
security holders, and copies of all reports and registration
statements that the Originator or any of its Subsidiaries files
with the Securities and Exchange Commission or any national
securities exchange;
(v) promptly after the filing or receiving thereof,
copies of all reports and notices that the Seller or any
Affiliate files under ERISA with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation or the U.S. Department
of Labor or that the Seller or any Affiliate receives from any of
the foregoing or from any multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) to which the Seller or any
Affiliate is or was, within the preceding five years, a
contributing employer, in each case in respect of the assessment
of withdrawal liability or an event or condition which could, in
the aggregate, result in the imposition of liability on the
Seller and/or any such Affiliate in excess of $10,000,000;
(vi) at least ten Business Days prior to any change
in the name of the Originator or the Seller, a notice setting
forth the new name and the effective date thereof;
(vii) promptly after the Seller obtains knowledge
thereof, notice of any "Event of Termination" or "Facility
Termination Date" under the Originator Purchase Agreement and, if
such event is continuing, a description of the nature thereof;
(viii) so long as any Capital shall be outstanding,
as soon as possible and in any event no later than the day of
occurrence thereof, notice that the Originator has stopped
selling or contributing to the Seller, pursuant to the Originator
Purchase Agreement, all newly arising Originator Receivables that
constitute or are believed to constitute Eligible Receivables;
(ix) at the time of the delivery of the financial
statements provided for in clauses (i) and (ii) of this
paragraph, a certificate of the chief financial officer or the
treasurer of the Seller to the effect that, to the best of such
officer's knowledge, no Event of Termination has occurred and is
continuing or, if any Event of Termination has occurred and is
continuing, specifying the nature and extent thereof;
(x) promptly after receipt thereof, copies of all
notices received by the Seller from the Originator under the
Originator Purchase Agreement, or under any Control Agreement or
Lock-Box Agreement; and
(xi) such other information respecting the
Receivables or the condition or operations, financial or
otherwise, of the Seller as the Agent may from time to time
reasonably request.
(l) Corporate Separateness. (i) The Seller shall at
all times maintain at least one independent director who (x) is
not currently and has not been during the five years preceding
the date of this Agreement an officer, director or employee of an
Affiliate of the Seller or any Other Company, (y) is not a
current or former officer or employee of the Seller and (z) is
not a stockholder of any Other Company or any of their respective
Affiliates.
(ii) The Seller shall not direct or participate in
the management of any of the Other Companies' operations.
(iii) The Seller shall conduct its business from an
office separate from that of the Other Companies (but which may
be located in the same facility as one or more of the Other
Companies). The Seller shall have stationery and other business
forms and a mailing address and a telephone number separate from
that of the Other Companies.
(iv) The Seller shall at all times be adequately
capitalized in light of its contemplated business.
(v) The Seller shall at all times provide for its
own operating expenses and liabilities from its own funds.
(vi) The Seller shall maintain its assets and
transactions separately from those of the Other Companies and
reflect such assets and transactions in financial statements
separate and distinct from those of the Other Companies and
evidence such assets and transactions by appropriate entries in
books and records separate and distinct from those of the Other
Companies. The Seller shall hold itself out to the public under
the Seller's own name as a legal entity separate and distinct
from the Other Companies. The Seller shall not hold itself out
as having agreed to pay, or as being liable, primarily or
secondarily, for, any obligations of the Other Companies.
(vii) The Seller shall not maintain any joint
account with any Other Company or become liable as a guarantor or
otherwise with respect to any Debt or contractual obligation of
any Other Company.
(viii) The Seller shall not make any payment or
distribution of assets with respect to any obligation of any
Other Company or grant an Adverse Claim on any of its assets to
secure any obligation of any Other Company.
(ix) The Seller shall not make loans, advances or
otherwise extend credit to any of the Other Companies other than
as contemplated under the Originator Purchase Agreement.
(x) The Seller shall hold regular duly noticed
meetings of its Board of Directors and make and retain minutes of
such meetings.
(xi) The Seller shall have bills of sale (or similar
instruments of assignment) and, if appropriate, UCC-1 financing
statements, with respect to all assets purchased from any of the
Other Companies.
(xii) The Seller shall not engage in any transaction
with any of the Other Companies, except as permitted by this
Agreement and as contemplated by the Originator Purchase
Agreement.
(xiii) The Seller shall comply with (and cause to
be true and correct) each of the facts and assumptions contained
in Sections 2 through 4 on pages 5-8 of the opinion of Cravath,
Swaine & Moore delivered pursuant to Section 3.01(g) and
designated as Annex C to this Agreement.
(m) Originator Purchase Agreement. The Seller will not
amend, waive or modify any provision of the Originator Purchase
Agreement (provided that the Seller may extend the "Facility
Termination Date" thereunder) or waive the occurrence of any
"Event of Termination" under the Originator Purchase Agreement,
without in each case the prior written consent of the Agent. The
Seller will perform all of its obligations under the Originator
Purchase Agreement in all material respects and will enforce the
Originator Purchase Agreement in accordance with its terms in all
material respects.
(n) Nature of Business. The Seller will not engage in
any business other than the purchase of Receivables, Related
Security and Collections from the Originator and the transactions
contemplated by this Agreement. The Seller will not create or
form any Subsidiary.
(o) Mergers, Etc. The Seller will not merge with or
into or consolidate with or into, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series
of transactions), all or substantially all of its assets (whether
now owned or hereafter acquired) to, or acquire all or
substantially all of the assets or capital stock or other
ownership interest of, or enter into any joint venture or
partnership agreement with, any Person, other than as
contemplated by this Agreement and the Originator Purchase
Agreement.
(p) Distributions, Etc. The Seller will not declare or
make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of
any shares of any class of capital stock of the Seller, or return
any capital to its shareholders as such, or purchase, retire,
defease, redeem or otherwise acquire for value or make any
payment in respect of any shares of any class of capital stock of
the Seller or any warrants, rights or options to acquire any such
shares, now or hereafter outstanding; provided, however, that the
Seller may declare and pay cash dividends on its capital stock to
its shareholders so long as (i) no Event of Termination shall
then exist or would occur as a result thereof, (ii) such
dividends are in compliance with all applicable law including the
General Corporation Law of the State of Delaware, and (iii) such
dividends have been approved by all necessary and appropriate
corporate action of the Seller.
(q) Debt. The Seller will not incur any Debt, other
than any Debt incurred pursuant to this Agreement and the
Deferred Purchase Price.
(r) Certificate of Incorporation. The Seller will not
amend or delete Articles III, IV or XI of its certificate of
incorporation.
(s) Tangible Net Worth. The Seller will maintain
Tangible Net Worth at all times equal to at least 3% of the
Outstanding Balance of the Receivables at such time.
SECTION 5.02. Covenant of the Seller and the Originator .
Until the Final Termination Date, each of the Seller and the
Originator will, at their respective expense, from time to time
during regular business hours and following reasonable notice to
the Seller and Originator permit the Agent or its agents or
representatives (including independent public accountants, which
may be the Seller's or the Originator's independent public
accountants), (i) to conduct periodic audits of the Receivables,
the Related Security and the related books and records and
collections systems of the Seller or the Originator, as the case
may be, relating to Receivables generation and collection,
(ii) to examine and make copies of and abstracts from all books,
records and documents (including, without limitation, computer
tapes and disks) in the possession or under the control of the
Seller or the Originator, as the case may be, relating to Pool
Receivables and the Related Security, including, without
limitation, the Contracts, and (iii) to visit the offices and
properties of the Seller or the Originator, as the case may be,
for the purpose of examining such materials described in
clause (ii) above, and to discuss matters relating to Pool
Receivables and the Related Security or the Seller's or the
Originator's performance under the Transaction Documents or under
the Contracts with any of the officers or employees of the Seller
or the Originator, as the case may be, having knowledge of such
matters; provided, however, prior to the occurrence and
continuance of any Event of Termination or Incipient Event of
Termination, audits, examinations and visits described in (i),
(ii) and (iii) above (together with the audit rights set forth in
Section 6.06(a) hereof and Section 5.01(g) of the Originator
Purchase Agreement) shall occur no more frequently than annually.
In addition, upon the Agent's request at least once per year, the
Seller will, at its expense, appoint independent public
accountants (which, so long as no Event of Termination is
continuing, shall be the Seller's regular independent public
accountants), or utilize the Agent's representatives or auditors,
to prepare and deliver to the Agent a written report with respect
to the Receivables and the Credit and Collection Policy
(including, in each case, the systems, procedures and records
relating thereto) on a scope and in a form reasonably requested
by the Agent.
SECTION 5.03. Post Closing Opinion. On or before June 25,
1999, the Seller shall arrange for its counsel, Cravath, Swaine &
Moore, to deliver to the Agent a favorable opinion in form and
substance reasonably satisfactory to the Agent addressing issues
related to the representation contained in Section 4.01(m)(i) and
consistent with the discussions held between counsel to the Agent
and counsel to the Seller.
ARTICLE VI
ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES
SECTION 6.01. Designation of Collection Agent. The
servicing, administration and collection of the Pool Receivables
shall be conducted by the Collection Agent so designated
hereunder from time to time. The Originator is hereby designated
as, and hereby agrees to perform the duties and obligations of
the Collection Agent pursuant to the terms hereof. Upon the
occurrence of a Collection Agent Default, the Agent may designate
as Collection Agent any Person (including itself) to succeed the
Originator or any successor Collection Agent, if such Person
shall consent and agree to the terms hereof. The Collection
Agent may, with the prior consent of the Agent (such consent not
to be unreasonably withheld), subcontract with any other Person
for the servicing, administration or collection of the Pool
Receivables. Any such subcontract shall not affect the
Collection Agent's liability for performance of its duties and
obligations pursuant to the terms hereof.
SECTION 6.02. Duties of Collection Agent . The Collection
Agent shall take or cause to be taken all such actions as may be
reasonably necessary or advisable to collect each Pool Receivable
from time to time, all in accordance with applicable laws, rules
and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy. The Seller and
the Agent hereby appoint the Collection Agent, from time to time
designated pursuant to Section 6.01, as agent for themselves and
for the Investors and the Banks to enforce their respective
rights and interests in the Pool Receivables, the Related
Security and the related Contracts. In performing its duties as
Collection Agent, the Collection Agent shall exercise the same
care and apply the same policies as it would exercise and apply
if it owned such Receivables and shall act in a manner consistent
with the Credit and Collection Policy and in the best interests
of the Seller, the Investors and the Banks.
(b) The Collection Agent shall administer the
Collections in accordance with the procedures described in
Section 2.04.
(c) If no Event of Termination or Incipient Event of
Termination shall have occurred and be continuing, the
Originator, while it is the Collection Agent, may, in accordance
with the Credit and Collection Policy, extend the maturity or
adjust the Outstanding Balance of any Receivable as the
Originator deems appropriate, or otherwise amend or adjust the
payment terms under the related Contract in a manner consistent
with the Credit and Collection Policy, to maximize Collections
thereof, provided that the classification of any such Receivable
as a Delinquent Receivable or Defaulted Receivable shall not be
affected by any such extension.
(d) The Collection Agent shall hold in trust for the
Seller and each Investor and Bank, in accordance with their
respective interests, all documents, instruments and records
(including, without limitation, computer tapes or disks) which
evidence or relate to Pool Receivables. The Collection Agent
shall cause the Originator to mark, legend or otherwise designate
its master data processing records indicating that an interest in
the Pool Receivables has been transferred hereunder.
(e) The Collection Agent shall, as soon as practicable
following receipt, turn over to the Seller any cash collections
or other cash proceeds received with respect to Receivables not
constituting Pool Receivables.
(f) The Collection Agent shall, from time to time at the
request of the Agent, furnish to the Agent (promptly after any
such request) a calculation of the amounts set aside for the
Investors and the Banks pursuant to Section 2.04.
(g) Prior to the 10th Business Day of each month, the
Collection Agent shall prepare and forward to the Agent a Seller
Report relating to the Receivable Interests outstanding on the
last day of the immediately preceding month.
In connection with the preparation by the Collection Agent
of the "Dilution", "Collections" and "Sales" figures contained in
Seller Report, the Agent acknowledges the Collection Agent does
not have the systems capability to exclude Foreign Receivables
from such figures and the current Seller Report includes Foreign
Receivables. So long as Foreign Receivables do not exceed 20% of
the total aggregate Receivables appearing in any Seller Report,
the inclusion of Foreign Receivables in the "Dilution",
"Collections" and "Sales" figures of any Seller Report shall
comply with the Collection Agent's reporting requirements and
shall not constitute a default or violation of the Collection
Agent's representations and warranties or covenants or in the
performance of its duties. The Collection Agent hereby covenants
and agrees to utilize its best efforts to eliminate the inclusion
of Foreign Receivables in the "Dilution", "Collections" and
"Sales" figures of each Seller Report as soon as practicable and
in no event later than December 31, 1999 (unless the Collection
Agent and the Agent agree to another mutually acceptable
reporting modification).
SECTION 6.03. Certain Rights of the Agent. The Seller
hereby transfers to the Agent the exclusive ownership and control
of the Lock-Box Accounts to which the Obligors of Pool
Receivables shall make payments.
(b) At any time following the designation of a
Collection Agent other than the Originator pursuant to Section
6.01 or following and during the continuance of an Event of
Termination or an Incipient Event of Termination:
(i) The Agent may direct the Obligors of Pool
Receivables that all payments thereunder be made directly to the
Agent or its designee.
(ii) The Agent may deliver a Lock-Box Agreement to
the Lock-Box Banks with open Lock-Box Accounts as at such date.
(iii) At the Agent's request and at the Seller's
expense, the Seller shall notify (i) each Obligor of Pool
Receivables of the ownership of Receivable Interests under this
Agreement and direct that payments be made directly to such
account (including a Designated Account) as instructed by Agent
or its designee, and (ii) all other obligors to redirect funds
and make payment with respect to amounts owing to the Originator
to accounts of the Originator other than a Designated Account.
(iv) At the Agent's request and at the Seller's
expense, the Seller and the Collection Agent shall (A) assemble
all of the documents, instruments and other records (including,
without limitation, computer tapes and disks) that evidence or
relate to the Pool Receivables and the related Contracts and
Related Security, or that are otherwise necessary or desirable to
collect the Pool Receivables, and shall make the same available
to the Agent at a place selected by the Agent or its designee,
and (B) segregate all cash, checks and other instruments received
by it from time to time constituting Collections of Pool
Receivables in a manner acceptable to the Agent and, promptly
upon receipt, remit all such cash, checks and instruments, duly
indorsed or with duly executed instruments of transfer, to the
Agent or its designee.
(v) The Seller authorizes the Agent to take any and
all steps in the Seller's name and on behalf of the Seller that
are necessary or desirable, in the determination of the Agent, to
collect amounts due under the Pool Receivables, including,
without limitation, endorsing the Seller's name on checks and
other instruments representing Collections of Pool Receivables
and enforcing the Pool Receivables and the Related Security and
related Contracts.
SECTION 6.04. Rights and Remedies. If the Collection
Agent fails to perform any of its obligations under this
Agreement, the Agent may (but shall not be required to) itself
perform, or cause performance of, such obligation; and the
Agent's costs and expenses incurred in connection therewith shall
be payable by the Collection Agent.
(b) The Seller and the Originator shall perform their
respective obligations under the Contracts related to the Pool
Receivables to the same extent as if Receivable Interests had not
been sold and the exercise by the Agent on behalf of the
Investors and the Banks of their rights under this Agreement
shall not release the Collection Agent or the Seller from any of
their duties or obligations with respect to any Pool Receivables
or related Contracts. Neither the Agent, the Investors nor the
Banks shall have any obligation or liability with respect to any
Pool Receivables or related Contracts, nor shall any of them be
obligated to perform the obligations of the Seller thereunder.
(c) In the event of any conflict between the provisions
of Article VI of this Agreement and Article VI of the Originator
Purchase Agreement, the provisions of this Agreement shall
control.
SECTION 6.05. Further Actions Evidencing Purchases . The
Originator agrees from time to time, at its expense, to promptly
execute and deliver all further instruments and documents, and to
take all further actions, that may be reasonably necessary or
desirable, or that the Agent may reasonably request, to perfect,
protect or more fully evidence the Receivable Interests purchased
hereunder, or to enable the Investors, the Banks or the Agent to
exercise and enforce their respective rights and remedies
hereunder. Without limiting the foregoing, the Originator will
upon the request of the Agent (i) execute and file such financing
or continuation statements, or amendments thereto, and such other
instruments and documents, that may be reasonably necessary or
desirable, or that the Agent may reasonably request, to perfect,
protect or evidence such Receivable Interests; and (ii) mark,
legend or otherwise designate its master data processing records
and, following the occurrence and during the continuance of an
Event of Termination or Incipient Event of Termination Event, the
Contracts, in each case, indicating that such Pool Receivables
have been transferred hereunder.
SECTION 6.06. Covenants of the Collection Agent and the
Originator . Audits. The Collection Agent will, from time to
time during regular business hours as requested by the Agent, and
following reasonable notice to the Collection Agent, permit the
Agent, or its agents or representatives (including independent
public accountants, which may be the Collection Agent's
independent public accountants), (i) to conduct periodic audits
of the Receivables, the Related Security and the related books
and records and collections systems of the Collection Agent
relating to Receivables generation and collection, (ii) to
examine and make copies of and abstracts from all books, records
and documents (including, without limitation, computer tapes and
disks) in the possession or under the control of the Collection
Agent relating to Pool Receivables and the Related Security,
including, without limitation, the Contracts, and (iii) to visit
the offices and properties of the Collection Agent for the
purpose of examining such materials described in clause
(ii) above, and to discuss matters relating to Pool Receivables
and the Related Security or the Collection Agent's performance
hereunder with any of the officers or employees of the Collection
Agent having knowledge of such matters; provided however, prior
to the occurrence of and continuance of a Collection Agent
Default or Incipient Event of Termination, audits described in
(i), (ii) and (iii) above (together with the audit rights set
forth in Section 5.02 hereof and Section 5.01(g) of the
Originator Purchase Agreement) shall occur no more frequently
than annually.
(b) Change in Credit and Collection Policy. The
Originator will not make any change in the Credit and Collection
Policy that would impair the collectibility of any Pool
Receivable or the ability of the Originator (if it is acting as
Collection Agent) to perform its obligations under this
Agreement.
SECTION 6.07. Indemnities by the Collection Agent .
Without limiting any other rights that the Agent, any Investor,
any Bank or any of their respective Affiliates (each, a "Special
Indemnified Party") may have hereunder or under applicable law,
and in consideration of its appointment as Collection Agent, the
Collection Agent hereby agrees to indemnify each Special
Indemnified Party from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) (all of the
foregoing being collectively referred to as "Special Indemnified
Amounts") arising out of or resulting from any of the following
(excluding, however, (a) Special Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on
the part of such Special Indemnified Party, (b) recourse for
uncollectible Receivables or (c) any income taxes or any other
tax or fee measured by income incurred by such Special
Indemnified Party arising out of or as a result of this Agreement
or the ownership of Receivable Interests or in respect of any
Receivable or any Contract):
(i) any representation or warranty or statement
made or deemed made by the Collection Agent under or in
connection with this Agreement which shall have been incorrect in
any material respect when made;
(ii) the failure by the Collection Agent to comply
with any applicable law, rule or regulation with respect to any
Pool Receivable or Contract; or the failure of any Pool
Receivable or Contract to conform to any such applicable law,
rule or regulation;
(iii) the failure to have filed, or any delay in
filing, financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivables in, or purporting
to be in, the Receivables Pool, the Contracts and the Related
Security and Collections in respect thereof, whether at the time
of any purchase or reinvestment or at any subsequent time;
(iv) any failure of the Collection Agent to perform
its duties or obligations in accordance with the provisions of
this Agreement;
(v) the commingling of Collections of Pool
Receivables at any time by the Collection Agent with other funds;
(vi) any action or omission by the Collection Agent
reducing or impairing the rights of the Investors or the Banks
with respect to any Pool Receivable or the value of any Pool
Receivable;
(vii) any restriction applicable to the Agent, the
Investors or the Banks in their ability to exercise their rights
under this Agreement due to a confidentiality provision in a
Contract that purports to restrict the ability of the Investors
or the Banks to exercise their rights under this Agreement,
including, without limitation, their right to review the
Contract;
(viii) any Collection Agent Fees or other costs and
expenses payable to any replacement Collection Agent, to the
extent in excess of the Collection Agent Fees payable to the
Collection Agent hereunder; or
(ix) any claim brought by any Person other than a
Special Indemnified Party arising from any activity by the
Collection Agent or its Affiliates in servicing, administering or
collecting any Receivable; or
(x) the failure of the Collection Agent's computer
applications to resolve the Year 2000 Problem.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination . If any of the
following events ("Events of Termination") shall occur and be
continuing:
(a) The occurrence of any Collection Agent Default; or
(b) The Seller or the Originator shall fail following a
Collection Agent Default, to transfer to the Agent when
requested, any rights pursuant to this Agreement or the OPA
Assignment, which the Seller or the Originator then has as
Collection Agent, or (ii) to make any payment required under
Section 2.04; or
(c) Any representation or warranty made or deemed made
by the Seller or the Collection Agent under this Agreement or any
other Transaction Document or any written information or report
(including, without limitation, any E-Mail Seller Report)
delivered by the Seller or the Collection Agent pursuant to this
Agreement or any other Transaction Document shall prove to have
been incorrect or untrue in any material respect when made or
deemed made or delivered, and such condition, to the extent it is
capable of being remedied, shall remain unremedied for 10 days;
or
(d) The Seller or the Originator shall fail to perform
or observe any other term, covenant or agreement contained in
this Agreement on its part to be performed or observed and any
such failure shall remain unremedied for 10 days after written
notice thereof shall have been given to the Seller by the Agent;
or
(e) The Seller or the Originator shall fail to pay any
payment of principal, face amount, interest, premium, fees or any
similar obligation in respect of any Debt in an aggregate amount
exceeding $25,000,000 when due or within any applicable grace
period (provided, that if Section 6.01(e) of the Originator's
existing $500,000,000 credit agreement, dated as of March 31,
1997, is amended to provide that no "Event of Default" under such
credit agreement will result until such Debt is declared to be or
otherwise becomes due and payable in such aggregate amount, then
this clause (e) shall not constitute an Event of Termination
hereunder unless such Debt is declared to be or otherwise becomes
due and payable in such aggregate amount); or
(f) Any purchase or any reinvestment pursuant to this
Agreement shall for any reason (other than pursuant to the terms
hereof) cease to create, or any Receivable Interest shall for any
reason cease to be, a valid and perfected first priority
undivided percentage ownership or security interest (as
understood under the UCC) to the extent of the pertinent
Receivable Interest in each applicable Pool Receivable and the
Related Security and Collections with respect thereto; or the
interest created under the OPA Assignment shall for any reason
cease to be a valid and ownership interest thereunder; or
(g) The Seller or the Originator shall generally not pay
its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall
be instituted by or against the Seller or the Originator seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of
a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property and, in the case of
any such proceeding instituted against it (but not instituted by
it), either such proceeding shall remain undismissed or unstayed
for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any
substantial part of its property) shall occur; or the Seller or
the Originator shall take any corporate action to authorize any
of the actions set forth above in this subsection (g); or
(h) As of the last day of any calendar month, the three
month rolling average of (w) the Dilution Ratio shall exceed
5.3%, (x) the Default Ratio shall exceed 6%, (y) the Delinquency
Ratio shall exceed 5.2%, or (z) the Loss-to-Liquidation Ratio
shall exceed 1%; or
(i) The Net Receivables Pool Balance shall on any
Business Day be less than 100% of the sum of the aggregate
outstanding Capital of all Receivable Interests or the sum of the
Receivable Interests shall on any 5 consecutive Business Day be
greater than 95%; or
(j) There shall have occurred any event or events that
results in a Material Adverse Effect; or
(k) An "Event of Termination", "Incipient Event of
Termination" or "Facility Termination Date" shall occur and be
continuing under the Originator Purchase Agreement, or any
material provision in the Originator Purchase Agreement shall
cease to be in full force and effect; or
(l) All of the outstanding capital stock of the Seller
shall cease to be owned, directly or indirectly, by the
Originator; or
(m) Any of the Originator's long term public senior
unsecured debt securities (having a rating not dependant on any
guaranty) are no longer rated at least BBB- by S&P and at least
Baa3 by Moody's, or the Originator has not maintained both such
ratings;
then, and in any such event, any or all of the following actions
may be taken by notice to the Seller: (x) the Investor or the
Agent may declare the Facility Termination Date to have occurred
(in which case the Facility Termination Date shall be deemed to
have occurred), (y) the Agent may declare the Commitment
Termination Date to have occurred (in which case the Commitment
Termination Date shall be deemed to have occurred), and (z) if
such Event of Termination coincides with or also constitutes a
Collection Agent Default, and without limiting any right under
this Agreement to replace the Collection Agent, the Agent may
designate another Person to succeed the Originator as the
Collection Agent; provided, that, automatically upon the
occurrence of any event (without any requirement for the passage
of time or the giving of notice) described in paragraph (g) of
this Section 7.01, the Facility Termination Date and the
Commitment Termination Date shall occur, the Originator (if it is
then serving as the Collection Agent) shall cease to be the
Collection Agent, and the Agent or its designee shall become the
Collection Agent. Upon any such declaration or designation or
upon such automatic termination, the Investors, the Banks and the
Agent shall have, in addition to the rights and remedies which
they may have under this Agreement, all other rights and remedies
provided after default under the UCC and under other applicable
law, which rights and remedies shall be cumulative.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action . Each Investor and
each Bank hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto.
SECTION 8.02. Agent's Reliance, Etc . Neither the Agent
nor any of its directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them
as Agent under or in connection with this Agreement (including,
without limitation, the Agent's servicing, administering or
collecting Pool Receivables as Collection Agent), except for its
or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Agent: (a) may
consult with legal counsel (including counsel for the Seller and
the Collection Agent), independent certified public accountants
and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or
experts; (b) makes no warranty or representation to any Investor
or Bank (whether written or oral) and shall not be responsible to
any Investor or Bank for any statements, warranties or
representations (whether written or oral) made in or in
connection with this Agreement; (c) shall not have any duty to
ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement on
the part of the Seller or the Collection Agent or to inspect the
property (including the books and records) of the Seller or the
Collection Agent; (d) shall not be responsible to any Investor or
Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (e) shall
incur no liability under or in respect of this Agreement by
acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by
telecopier or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
SECTION 8.03. CNAI and Affiliates . The obligation of
Citibank to purchase Receivable Interests under this Agreement
may be satisfied by CNAI or any of its Affiliates. With respect
to any Receivable Interest or interest therein owned by it, CNAI
shall have the same rights and powers under this Agreement as any
Bank and may exercise the same as though it were not the Agent.
CNAI and any of its Affiliates may generally engage in any kind
of business with the Seller, the Collection Agent or any Obligor,
any of their respective Affiliates and any Person who may do
business with or own securities of the Seller, the Collection
Agent or any Obligor or any of their respective Affiliates, all
as if CNAI were not the Agent and without any duty to account
therefor to the Investors or the Banks.
SECTION 8.04. Bank's Purchase Decision . Each Bank
acknowledges that it has, independently and without reliance upon
the Agent, any of its Affiliates or any other Bank and based on
such documents and information as it has deemed appropriate, made
its own evaluation and decision to enter into this Agreement.
Each Bank also acknowledges that it will, independently and
without reliance upon the Agent, any of its Affiliates or any
other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
decisions in taking or not taking action under this Agreement.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Indemnities by the Seller . Without
limiting any other rights that the Agent, the Investors, the
Banks or any of their respective Affiliates (each, an
"Indemnified Party") may have hereunder or under applicable law,
the Seller hereby agrees to indemnify each Indemnified Party from
and against any and all claims, losses and liabilities (including
reasonable attorneys' fees) (all of the foregoing being
collectively referred to as "Indemnified Amounts") arising out of
or resulting from this Agreement or the other Transaction
Documents or the use of proceeds of purchases or reinvestments or
the ownership of Receivable Interests or in respect of any
Receivable or any Contract, excluding, however, (a) Indemnified
Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party, (b) recourse
(except as otherwise specifically provided in this Agreement) for
uncollectible Receivables or (c) any income taxes incurred by
such Indemnified Party arising out of or as a result of this
Agreement or the ownership of Receivable Interests or in respect
of any Receivable or any Contract. Without limiting or being
limited by the foregoing, the Seller shall pay on demand to each
Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
(i) the creation of an undivided percentage ownership
interest in any Receivable which purports to be part of the Net
Receivables Pool Balance but which is not at the date of the
creation of such interest an Eligible Receivable;
(ii) reliance on any representation or warranty or
statement made or deemed made by the Seller (or any of its
officers) under or in connection with this Agreement and the
other Transaction Documents which shall have been incorrect in
any material respect when made;
(iii) the failure by the Seller or the Originator to
comply with any applicable law, rule or regulation with respect
to any Pool Receivable or the related Contract; or the failure of
any Pool Receivable or the related Contract to conform to any
such applicable law, rule or regulation;
(iv) the failure to vest in the Investors or the Banks,
as the case may be, (a) a perfected undivided percentage
ownership interest, to the extent of each Receivable Interest, in
the Receivables in, or purporting to be in, the Receivables Pool
and the Related Security and Collections in respect thereof, or
(b) a perfected security interest as provided in Section 2.10, in
each case free and clear of any Adverse Claim;
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable
laws with respect to any Receivables in, or purporting to be in,
the Receivables Pool and the Related Security and Collections in
respect thereof, whether at the time of any purchase or
reinvestment or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense based
on such Receivable or the related Contract not being a legal,
valid and binding obligation of such Obligor enforceable against
it in accordance with its terms), or any other claim resulting
from the sale of the merchandise or services related to such
Receivable or the furnishing or failure to furnish such
merchandise or services or relating to collection activities with
respect to such Receivable (if such collection activities were
performed by the Seller or any of its Affiliates acting as
Collection Agent);
(vii) any failure of the Seller to perform its duties or
obligations in accordance with the provisions hereof or to
perform its duties or obligations under the Contracts;
(viii) any products liability or other claim arising out
of or in connection with merchandise, insurance or services which
are the subject of any Contract;
(ix) the commingling of Collections of Pool Receivables
at any time with other funds;
(x) any investigation, litigation or proceeding related
to this Agreement or the use of proceeds of purchases or
reinvestments or the ownership of Receivable Interests or in
respect of any Receivable or Related Security or Contract;
(xi) any failure of the Seller to comply with its
covenants contained in Section 5.01;
(xii) any claim brought by any Person other than an
Indemnified Party arising from any activity by the Seller or any
Affiliate of the Seller in servicing, administering or collecting
any Receivable; or
(xiii) the failure of the Seller's computer applications
to resolve the Year 2000 Problem.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc . No amendment or waiver
of any provision of this Agreement or consent to any departure by
the Seller therefrom shall be effective unless in a writing
signed by the Agent, as agent for the Investors and the Banks
(and, in the case of any amendment, also signed by the Seller),
and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given; provided, however, that no amendment, waiver or
consent shall, unless in writing and signed by the Collection
Agent in addition to the Agent, affect the rights or duties of
the Collection Agent under this Agreement. No failure on the
part of the Investors, the Banks or the Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or
the exercise of any other right.
SECTION 10.02. Notices, Etc . All notices and other
communications hereunder shall, unless otherwise stated herein,
be in writing (which shall include facsimile communication) and
faxed or delivered, to each party hereto, at its address set
forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written
notice to the other parties hereto. Notices and communications
by facsimile shall be effective when sent (and shall be followed
by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when
received.
(b) The Collection Agent may, with the consent of the
Agent (which consent may be withdrawn at any time by notice from
the Agent to the Collection Agent and the Seller) accept delivery
of Seller Reports by electronic mail (each, an "E-Mail Seller
Report"), subject to the following conditions:
(i) The Collection Agent shall have made
arrangements with VeriSign, Inc. (or another authenticating
organization acceptable to the Agent) to enable the Collection
Agent to generate digital signatures,
(ii) The Collection Agent shall be solely
responsible for safeguarding keys, access codes or other means of
generating its digital signature,
(iii) Each E-Mail Seller Report shall be formatted
in a manner designated by the Agent from time to time, shall be
digitally signed, and shall be sent to an electronic mail address
designated by the Agent, and
(iv) The Agent shall be authorized to rely on any
E-Mail Seller Report for the purposes of this Agreement to the
same extent as if the contents thereof had been otherwise
delivered to the Agent in accordance with Section 10.02(a).
SECTION 10.03. Assignability . This Agreement and the
Investors' rights and obligations herein (including ownership of
each Receivable Interest) shall be assignable by the Investors,
with the prior consent of the Seller, which consent shall not be
unreasonably withheld. Each assignor of a Receivable Interest or
any interest therein shall notify the Agent and the Seller of any
such proposed assignment. Each assignor of a Receivable Interest
or any interest therein may, in connection with a proposed
assignment or participation, disclose to the assignee or
participant any information relating to the Seller or the
Originator, including the Receivables, furnished to such assignor
by or on behalf of the Seller or by the Agent ; provided that,
prior to any such disclosure, the assignee or participant agrees
to preserve the confidentiality of any confidential information
relating to the Seller or the Originator received by it from any
of the foregoing entities.
(b) Each Bank may assign to any Eligible Assignee or to
any other Bank all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a
portion of its Bank Commitment and any Receivable Interests or
interests therein owned by it). The parties to each such
assignment shall execute and deliver to the Agent an Assignment
and Acceptance. In addition, Citibank or any of its Affiliates
may assign any of its rights (including, without limitation,
rights to payment of Capital and Yield) under this Agreement to
any Federal Reserve Bank without notice to or consent of the
Seller or the Agent.
(c) This Agreement and the rights and obligations of the
Agent herein shall be assignable by the Agent and its successors
and assigns (i) prior to the occurrence of any Event of
Termination, with the prior consent of the Seller, which consent
shall not be unreasonably withheld, and (ii) following the
occurrence of any Event of Termination, without consent of any
nature.
(d) The Seller may not assign its rights or obligations
hereunder or any interest herein without the prior written
consent of the Agent.
SECTION 10.04. Costs, Expenses and Taxes. (a) In addition
to the rights of indemnification granted under Section 9.01
hereof, the Seller agrees to pay on demand all reasonable costs
and expenses in connection with the preparation, execution,
delivery and administration (including periodic auditing and the
other activities contemplated in Section 5.02) of this Agreement,
any Asset Purchase Agreement and the other documents and
agreements to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent, CNAI, Ciesco, Citibank and their
respective Affiliates with respect thereto and with respect to
advising the Agent, CNAI, Ciesco, Citibank and their respective
Affiliates as to their rights and remedies under this Agreement,
and all costs and expenses, if any (including reasonable counsel
fees and expenses), of the Agent, CNAI, the Investors, the Banks
and their respective Affiliates, in connection with the
enforcement of this Agreement and the other documents and
agreements to be delivered hereunder.
(b) In addition, the Seller shall pay (i) any and all
commissions of placement agents and dealers in respect of
commercial paper notes issued to fund the purchase or maintenance
of any Receivable Interest, (ii) any and all costs and expenses
of any issuing and paying agent or other Person responsible for
the administration of Ciesco's commercial paper program in
connection with the preparation, completion, issuance, delivery
or payment of commercial paper notes issued to fund the purchase
or maintenance of any Receivable Interest, and (iii) any and all
stamp and other taxes and fees payable in connection with the
execution, delivery, filing and recording of this Agreement or
the other documents or agreements to be delivered hereunder, and
agrees to save each Indemnified Party harmless from and against
any liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees. A certificate as
to such amounts submitted to the Seller shall be conclusive and
binding for all purposes, absent manifest error.
(c) The Seller also shall pay on demand all other costs,
expenses and taxes (excluding income taxes) incurred by Ciesco or
any partner of Ciesco ("Other Costs"), including the cost of
auditing Ciesco's books by certified public accountants, the cost
of rating Ciesco's commercial paper by independent financial
rating agencies, the taxes (excluding income taxes) resulting
from Ciesco's operations, and the reasonable fees and out-of-
pocket expenses of counsel for any partner of Ciesco with respect
to advising as to rights and remedies under this Agreement, the
enforcement of this Agreement or advising as to matters relating
to Ciesco's operations; provided that the Seller and any other
Persons who from time to time sell receivables or interests
therein to Ciesco ("Other Sellers") each shall be liable for such
Other Costs ratably in accordance with the usage under their
respective facilities; and provided further that if such Other
Costs are attributable to the Seller and not attributable to any
Other Seller, the Seller shall be solely liable for such Other
Costs.
SECTION 10.05. No Proceedings . Each of the Seller, the
Agent, the Collection Agent, each Investor, each Bank, each
assignee of a Receivable Interest or any interest therein and
each entity which enters into a commitment to purchase Receivable
Interests or interests therein hereby agrees that it will not
institute against Ciesco any proceeding of the type referred to
in Section 7.01(g) so long as any commercial paper or other
senior indebtedness issued by Ciesco shall be outstanding or
there shall not have elapsed one year plus one day since the last
day on which any such commercial paper or other senior
indebtedness shall have been outstanding.
SECTION 10.06. Confidentiality . Unless otherwise
required by applicable law or regulation, the Seller and the
Collection Agent each agrees to maintain the confidentiality of
this Agreement in communications with third parties and
otherwise; provided that this Agreement may be disclosed to
(a) third parties to the extent such disclosure is made pursuant
to a written agreement of confidentiality in form and substance
reasonably satisfactory to the Agent, (b) the legal counsel and
auditors of the Seller and the Collection Agent if they agree to
hold it confidential, and (c) to rating agencies rating the
Originator's equity and debt instruments.
(b) Unless otherwise required by applicable law or
regulation (including, without limitation, state and federal
banking authorities), the Investors and the Banks each agrees to
maintain the confidentiality of this Agreement in communications
with third parties and otherwise; provided that this Agreement
may be disclosed to (a) third parties to the extent such
disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to
the Agent, (b) the legal counsel and auditors of the Seller and
the Collection Agent if they agree to hold it confidential, and
(c) to rating agencies rating the commercial paper issued by the
Investors.
SECTION 10.07. GOVERNING LAW. THIS AGREEMENT SHALL, IN
ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES
THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION; PROVIDED THAT THE PROVISIONS RELATING TO THE
PERFECTION AND PRIORITY OF RECEIVABLE INTERESTS SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF CONNECTICUT AND THE UNIFORM
COMMERCIAL CODE IN EFFECT IN THE STATE OF CONNECTICUT.
SECTION 10.08. Execution in Counterparts . This Agreement
may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and all of which
when taken together shall constitute one and the same agreement.
SECTION 10.09. Survival of Termination . This Agreement
shall become effective on the Closing Date and shall terminate on
the Final Termination Date. The provisions of Sections 2.08,
2.09, 6.07, 9.01, 10.04, 10.05 and 10.06 shall survive the Final
Termination Date.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
INVESTOR: CIESCO L.P.
By: Citicorp North America,
Inc., as Attorney-in-Fact
By
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: U.S. Securitization
Facsimile No. 914-899-7890
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: U.S. Securitization
Facsimile No. 914-899-7890
BANK: CITIBANK, N.A.
By:
Attorney-in-Fact
Percentage Interest: 100%
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Facsimile No. 914-899-7890
SELLER WITCO FUNDING CORPORATION
By:
Title:
One American Lane
Greenwich, Connecticut 06831-2559
Attention: ______________
Telephone: _____________
Fax: _________________
ORIGINATOR AND WITCO CORPORATION
COLLECTION AGENT:
By:
Title:
One American Lane
Greenwich, Connecticut 06831-2559
Attention: ______________
Telephone: _____________
Fax: _________________
PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of June 10, 1999
Between
WITCO CORPORATION
as Seller
and
WITCO FUNDING CORPORATION
as Purchaser
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENTS 1
ARTICLE I DEFINITIONS 1
SECTION 1.01. Certain Defined Terms 1
Adverse Claim 1
Affiliate 1
Alternate Base Rate 1
Business Day 2
Collection Agent 2
Collection Agent Default 2
Collection Agent Fee 2
Collections 2
Contract 3
Contributed Receivable 3
Credit and Collection Policy 3
Debt 3
Defaulted Receivable 3
Deferred Purchase Price 3
Delinquent Receivable 4
Designated Account" or "Designated Accounts 4
Designated Bank 4
Designated Obligor 4
Dilution 4
Discount 4
Eligible Receivable 4
ERISA 6
Event of Termination 6
Facility 6
Facility Termination Date 6
Federal Funds Rate 6
General Trial Balance 7
Incipient Event of Termination 7
Indemnified Amounts 7
Lock-Box Account 7
Lock-Box Bank 7
Obligor 7
Outstanding Balance 7
Person 7
Purchase 8
Purchase Date 8
Purchase Price 8
Purchased Receivable 8
Purchaser Loan 8
Receivable 8
Related Security 8
Sale Agreement 9
Seller Report 9
Settlement Date 9
Transferred Receivable 9
UCC 9
SECTION 1.02. Other Terms 9
ARTICLE II AMOUNTS AND TERMS OF PURCHASES AND
CONTRIBUTIONS 9
SECTION 2.01. Facility 9
SECTION 2.02. Making Purchases 10
SECTION 2.03. Collections. 10
SECTION 2.04. Settlement Procedures 11
SECTION 2.05. Payments and Computations, Etc. 12
SECTION 2.06. Contributions 12
ARTICLE III CONDITIONS OF PURCHASES 12
SECTION 3.01. Conditions Precedent to Initial
Purchase from the Seller 12
SECTION 3.02. Conditions Precedent to All Purchases 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES 14
SECTION 4.01. Representations and Warranties of the
Seller 14
ARTICLE V COVENANTS 17
SECTION 5.01. Covenants of the Seller 17
SECTION 5.02. Covenant of the Seller and the
Purchaser 22
ARTICLE VI ADMINISTRATION AND COLLECTION 22
SECTION 6.01. Designation of Collection Agent 22
SECTION 6.02. Duties of Collection Agent 22
SECTION 6.03. Collection Agent Fee 23
SECTION 6.04. Certain Rights of the Purchaser 23
SECTION 6.05. Rights and Remedies. 24
SECTION 6.06. Transfer of Records to Purchaser. 25
ARTICLE VII EVENTS OF TERMINATION 25
SECTION 7.01. Events of Termination 25
ARTICLE VIII INDEMNIFICATION 27
SECTION 8.01. Indemnities by the Seller 27
ARTICLE IX MISCELLANEOUS 29
SECTION 9.01. Amendments, Etc. 29
SECTION 9.02. Notices, Etc. 30
SECTION 9.03. Binding Effect; Assignability 30
SECTION 9.04. Costs, Expenses and Taxes 30
SECTION 9.05. No Proceedings 31
SECTION 9.06. Confidentiality 31
SECTION 9.07. GOVERNING LAW 31
SECTION 9.08. Third Party Beneficiary 31
SECTION 9.09. Execution in Counterparts 31
EXHIBITS
EXHIBIT A Form of Opinion of Counsel for the Seller
EXHIBIT B Credit and Collection Policy
EXHIBIT C Lock-Box Banks
EXHIBIT D Form of Deferred Purchase Price Note
PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of June 10, 1999
WITCO CORPORATION, a Delaware corporation (the
"Seller"), and WITCO FUNDING CORPORATION, a Delaware corporation
(the "Purchaser"), agree as follows:
PRELIMINARY STATEMENTS . (1) Certain terms which are
capitalized and used throughout this Agreement (in addition to
those defined above) are defined in Article I of this Agreement.
(2) The Seller has Receivables that it wishes to
sell to the Purchaser, and the Purchaser is prepared to purchase
such Receivables on the terms set forth herein.
(3) The Seller may also wish to contribute
Receivables to the capital of the Purchaser on the terms set
forth herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms . As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Adverse Claim " means a lien, security interest or other
charge or any other encumbrance.
"Affiliate "means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is
under common control with such Person or, with respect to an
individual, is a director or officer of such Person.
"Alternate Base Rate " means a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall
be at all times equal to the highest of:
(a) the rate of interest announced publicly by Citibank,
N.A. in New York, New York, from time to time as Citibank, N.A.'s
base rate;
(b) 0.50% above the latest three-week moving average of
secondary market morning offering rates in the United States for
three-month certificates of deposit of major United States money
market banks, such three-week moving average being determined
weekly on each Monday (or, if such day is not a Business Day, on
the next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank, N.A. on the basis of
such rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank, N.A. from three
New York certificate of deposit dealers of recognized standing
selected by Citibank, N.A., in either case adjusted to the
nearest 1/4 of one percent or, if there is no nearest 1/4 of one
percent, to the next higher 1/4 of one percent; and
(c) the Federal Funds Rate.
"Business Day " means any day on which banks are not
authorized or required to close in New York City.
"Collection Agent " means at any time the Person then
authorized pursuant to Section 6.01 to administer and collect
Transferred Receivables.
"Collection Agent Default " means any of the following
events:
(i) the Collection Agent (if the Seller or any of its
Affiliates) shall fail to perform or observe any term, covenant
or agreement under Section 6.02 and such failure shall remain
unremedied (in the reasonable judgment of the Purchaser) for 10
days following delivery of written notice of such failure from
the Purchaser; or
(ii) the Collection Agent (if the Seller or any of its
Affiliates) shall fail to make when due any payment or deposit to
be made by it under this Agreement; or
(iii) the occurrence and continuance of any Event of
Termination under Section 7.01(b), Section 7.01(c) (with respect
to any representation or warranty made by the Collection Agent),
Section 7.01(e), Section 7.01(f), Section 7.01(g), Section
7.01(j) (with respect to the Collection Agent), Section 7.01(i)
(with respect to the Collection Agent) or Section 7.01(j).
"Collection Agent Fee " has the meaning specified in Section
6.03.
"Collections " means, with respect to any Receivable, all
cash collections and other cash proceeds of such Receivable,
including, without limitation, all cash proceeds of Related
Security with respect to such Receivable, and all funds deemed
to have been received by the Seller or any other Person as a
Collection pursuant to Section 2.04.
"Contract " means an agreement now or hereafter existing
between the Seller and an Obligor pursuant to or under which such
Obligor shall be obligated to pay for the provision or sale of
specialty chemical products or services from time to time.
"Contributed Receivable " has the meaning specified in
Section 2.06.
"Control Agreement" means a Control Agreement with respect
to Designated Banks in substantially the form attached hereto as
Annex B-1.
"Credit and Collection Policy " means those receivables
credit and collection policies and practices of the Seller in
effect on the date of this Agreement applicable to the
Receivables and described in Exhibit B hereto, as modified in
compliance with this Agreement.
"Debt " means (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred
purchase price of property or services, (iv) obligations as
lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles,
recorded as capital leases, (v) liabilities in respect of
unfunded vested benefits under plans covered by Title IV of ERISA
and (vi) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of the
kinds referred to in clauses (i) through (v) above.
"Defaulted Receivable " means a Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for more than 90 days from the original due date for such
payment;
(ii) as to which the Obligor thereof or any other Person
obligated thereon or providing any Related Security in respect
thereof has taken any action, or suffered any event to occur, of
the type described in Section 7.01(g); or
(iii) which, consistent with the Credit and Collection
Policy, would be written off the Seller's books as uncollectible.
"Deferred Purchase Price " means the portion of the Purchase
Price of Purchased Receivables purchased on any Purchase Date
exceeding the amount of the Purchase Price under Section 2.02 to
be paid in cash, which portion when added to the cumulative
amount of all previous Deferred Purchase Prices (after giving
effect to any payments made on account thereof) shall not exceed
25% of the Outstanding Balance of the Transferred Receivables.
The obligations of the Purchaser in respect of the Deferred
Purchase Price shall be evidenced by the Purchaser's subordinated
promissory note in the form of Exhibit D hereto.
"Delinquent Receivable " means a Receivable that is not a
Defaulted Receivable and:
(i) as to which any payment, or part thereof, remains
unpaid for more than 30 days and less than or equal to 90 days
from the original due date for such payment or
(ii) which, consistent with the Credit and Collection
Policy, would be classified as delinquent by the Seller.
"Designated Account" or "Designated Accounts " means one or
more bank accounts established for the deposit of all Collections
at a Designated Bank and subject to an executed Control
Agreement.
"Designated Bank "means any bank or banks selected by the
Collection Agent from time to time (initially, to be Mellon Bank)
and approved by the Agent (such approval not to be unreasonably
withheld) to establish a Designated Account.
"Designated Obligor " means, at any time, each Obligor;
provided, however, that any Obligor shall cease to be a
Designated Obligor based on an analysis of the creditworthiness
of such Obligor (as determined by the Purchaser (or its assignee)
in its sole reasonable discretion), upon three Business Days'
notice by the Purchaser to the Seller effective with respect to
Eligible Receivables thereafter transferred by the Seller to the
Purchaser.
"Dilution " means, with respect to any Receivable, the
aggregate amount of any reductions or adjustments in the
Outstanding Balance of such Receivable as a result of any
defective, rejected, returned, repossessed or foreclosed
merchandise or services or any cash discount, discount for quick
payment or other adjustment or setoff, excluding adjustments,
reductions or cancellations in respect of such Obligor's
bankruptcy or financial inability to pay.
"Discount " means, in respect of each Purchase, 3% of the
Outstanding Balance of the Receivables that are the subject of
such Purchase; provided, however, the foregoing Discount may be
revised prospectively by request of either of the parties hereto
to reflect changes in recent experience with respect to write-
offs, timing and cost of Collections and cost of funds, provided
that such revision is consented to by both of the parties (it
being understood that each party agrees to duly consider such
request but shall have no obligation to give such consent).
"Eligible Receivable " means a Receivable:
(i) the Obligor of which is a United States resident, is
not an Affiliate of any of the parties hereto, and is not a
government or a governmental subdivision or agency;
(ii) the Obligor of which, at the time of the initial
creation of an interest therein under this Agreement, is a
Designated Obligor and is not the Obligor of any Defaulted
Receivables which in the aggregate constitute 10% or more of the
aggregate Outstanding Balance of all Receivables of such Obligor;
(iii) which at the time of the initial creation of an
interest therein under this Agreement is not a Defaulted or
Delinquent Receivable;
(iv) which, according to the Contract related thereto,
is required to be paid in full within 60 days of the original
billing date therefor;
(v) which is an obligation representing all or part of
the sales price of merchandise, insurance or services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940,
as amended;
(vi) the purchase of which from the Purchaser with the
proceeds of notes would constitute a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act of 1933, as
amended;
(vii) which is an "account" within the meaning of
Section 9-106 of the UCC of the applicable jurisdictions
governing the perfection of the interest created by a Receivable
Interest;
(viii) which is denominated and payable only in United
States dollars in the United States;
(ix) which arises under a Contract which, together with
such Receivable, is in full force and effect and constitutes the
legal, valid and binding obligation of the Obligor of such
Receivable and is not subject to any dispute, offset,
counterclaim or defense whatsoever (except the potential
discharge in bankruptcy of such Obligor);
(x) which, together with the Contract related thereto,
does not contravene in any material respect any laws, rules or
regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to usury, consumer
protection, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which none of the
Purchaser, the Seller or the Obligor is in violation of any such
law, rule or regulation in any material respect;
(xi) which arises under a Contract which does not
require the Obligor thereunder to consent to the transfer, sale
or assignment of payment rights of the Purchaser or the Seller
thereunder;
(xii) which was generated in the ordinary course of the
Seller's business;
(xiii) which, at the time of the initial creation of an
interest therein under this Agreement, has not been extended,
rewritten or otherwise modified from the original terms thereof
except in a manner permitted under the Credit and Collection
Policy;
(xiv) which (A) satisfies all applicable requirements of
the Credit and Collection Policy and (B) complies with such other
reasonable criteria and requirements (relating to the
Receivables) as the Purchaser may from time to time specify to
the Seller upon 30 days' notice; and
(xv) as to which, at or prior to the time of the initial
creation of an interest therein under this Agreement, the
Purchaser has not notified the Seller that such Receivable (or
class of Receivables) is no longer acceptable for purchase by
Ciesco and the Banks under the Sale Agreement for bona fide
credit-related reasons.
"ERISA " means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Event of Termination " has the meaning specified in Section
7.01.
"Facility " means the willingness of the Purchaser to
consider making Purchases of Receivables from the Seller from
time to time pursuant to the terms of this Agreement.
"Facility Termination Date " means the earliest of (i) June
10, 2002, (ii) the date of termination of the Facility pursuant
to Section 7.01 and (iii) the date which the Seller designates by
at least two Business Days' notice to the Purchaser.
"Federal Funds Rate " means, for any period, a fluctuating
interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by
Citibank, N.A. from three Federal funds brokers of recognized
standing selected by it.
"General Trial Balance " of the Seller on any date means the
Seller's accounts receivable trial balance (whether in the form
of a computer printout, magnetic tape or diskette) on such date,
listing Obligors and the Receivables respectively owed by such
Obligors on such date together with the aged Outstanding Balances
of such Receivables, in form and substance satisfactory to the
Purchaser.
"Incipient Event of Termination " means an event that but
for notice or lapse of time or both would constitute an Event of
Termination.
"Indemnified Amounts " has the meaning specified in Section
8.01.
"Lock-Box Account " means any Designated Account and any
other bank account at a Lock-Box Bank subject to a Lock-Box
Agreement.
"Lock-Box Bank " means (i) each Designated Bank, and (ii)
prior to December 31, 1999, any of the other banks listed on
Schedule I that are the subject of an undated Lock-Box Agreement.
"Material Adverse Effect" means any condition, event or
series of events that has a material adverse effect on: (i) the
Receivables or the collectibility of any material amount of funds
with respect thereto; (ii) the rights of the Purchaser with
respect to the Receivables and the rights set forth in this
Agreement; (iii) the business, consolidated financial position,
consolidated results of operation of the Seller and its
Subsidiaries; (iv) the ability of the Purchaser, the Collection
Agent or the Seller to perform their respective duties and
obligations or exercise their rights and remedies under this
Agreement and the Transaction Documents; or (v) the legality,
validity or enforceability of the Transaction Documents.
"Obligor " means a Person obligated to make payments to the
Seller pursuant to a Contract.
"OPA Assignment" means the assignment agreement, pursuant to
which the Purchaser is assigning this Agreement to Citibank North
America, Inc., as Agent under Sale Agreement, duly acknowledged
and consented to by the Seller, in substantially the form of
Annex E to the Sale Agreement.
"Outstanding Balance " of any Receivable at any time means
the then outstanding principal balance thereof.
"Person " means an individual, partnership, corporation
(including a business trust), limited liability company, joint
stock company, trust, unincorporated association, joint venture
or other entity, or a government or any political subdivision or
agency thereof.
"Purchase " means a purchase by the Purchaser of Receivables
from the Seller pursuant to Article II.
"Purchase Date " means each day on which a Purchase is made
pursuant to Article II.
"Purchase Price " for any Purchase means an amount equal to
the Outstanding Balance of the Receivables that are the subject
of such Purchase as set forth in the Seller's General Trial
Balance, minus the Discount for such Purchase.
"Purchased Receivable " means any Receivable which is
purchased by the Purchaser pursuant to Section 2.02.
"Purchaser Loan " means any loan made by the Purchaser, at
its option, to the Seller, upon the Seller's request, provided
that (a) the aggregate principal amount at any one time
outstanding of Purchaser Loans shall not exceed $30 million and
(b) no such Purchaser Loans may be made if an Event of
Termination or an Incipient Event of Termination has occurred and
is continuing, or would occur after giving effect thereto, or if
any amounts are outstanding under the Deferred Purchase Price.
Purchaser Loans made by the Purchaser hereunder shall be
evidenced by promissory notes of the Seller in substantially the
form of Exhibit E hereto.
"Receivable " means the indebtedness of any Obligor, other
than an Obligor which is not a United States resident, under a
Contract, and includes the right to payment of any interest or
finance charges and other obligations of such Obligor with
respect thereto.
"Related Security " means with respect to any Receivable:
(i) all of the Seller's interest in any merchandise
(including returned merchandise) relating to any sale giving rise
to such Receivable;
(ii) all security interests or liens and property
subject thereto from time to time purporting to secure payment of
such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements
signed by an Obligor describing any collateral securing such
Receivable;
(iii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting
or securing payment of such Receivable whether pursuant to the
Contract related to such Receivable or otherwise; and
(iv) the Contract and all other books, records and other
information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software and related
property and rights) relating to such Receivable and the related
Obligor.
"Sale Agreement " means that certain Receivables Purchase
Agreement, dated as of the date hereof, among the Purchaser, as
seller, Ciesco L.P., as purchaser, Citibank, N.A., Citicorp North
America, Inc., as agent, and the Seller, as collection agent, as
amended or restated from time to time.
"Seller Report " means a report, in form and substance
satisfactory to the Purchaser, furnished by the Collection Agent
to the Purchaser pursuant to Section 6.02(b).
"Settlement Date " means the 15th day of each calendar month
(or if such day is not a Business Day, the immediately succeeding
Business Day); provided, however, that following the occurrence
of an Event of Termination, Settlement Dates shall occur on such
days as are selected from time to time by the Purchaser or its
designee in a written notice to the Collection Agent.
"Transaction Documents" means this Agreement, the Sale
Agreement, each Lock-Box Agreement, each Control Agreement, the
OPA Assignment and all other agreements and documents delivered
hereto or thereto.
"Transferred Receivable " means a Purchased Receivable or a
Contributed Receivable.
"UCC " means the Uniform Commercial Code as from time to
time in effect in the specified jurisdiction.
SECTION 1.02. Other Terms . All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such
Article 9.
ARTICLE II
AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS
SECTION 2.01. Facility . On the terms and conditions
hereinafter set forth and without recourse to the Seller (except
to the extent as is specifically provided herein), the Seller may
at its option sell or contribute to the Purchaser all Receivables
originated by it from time to time and the Purchaser may at its
option purchase or accept as a contribution from the Seller all
Receivables of the Seller from time to time, in each case during
the period from the date hereof to the Facility Termination Date.
SECTION 2.02. Making Purchases .
(a) Initial Purchase. The Seller shall give the
Purchaser at least one Business Day's notice of its request for
the initial purchase hereunder, which request shall specify the
date of such Purchase (which shall be a Business Day) and the
proposed Purchase Price for such Purchase. The Purchaser shall
promptly notify the Seller whether it has determined to make such
Purchase. On the date of such Purchase, the Purchaser shall,
upon satisfaction of the applicable conditions set forth in
Article III pay the Purchase Price for such Purchase in the
manner provided in Section 2.02(c).
(b) Subsequent Purchases. On each Business Day
following the initial Purchase, unless either party shall notify
the other party to the contrary, the Seller shall sell to the
Purchaser and the Purchaser shall purchase from the Seller all
Receivables originated by the Seller which have not previously
been sold or contributed to the Purchaser; provided, however,
that the Seller may, at its option on any Purchase Date,
contribute all or any of such Receivables to the Purchaser
pursuant to Section 2.06, instead of selling such Receivables to
the Purchaser pursuant to this Section 2.02(b). On the date of
each such Purchase, the Purchaser shall, upon satisfaction of the
applicable conditions set forth in Article III, pay the Purchase
Price for such Purchase in the manner provided in Section
2.02(c).
(c) Payment of Purchase Price. The Purchase Price
for each Purchase shall be paid on the Purchase Date therefor by
means of any one or a combination of the following: (i) a deposit
in same day funds to the Seller's account designated by the
Seller, (ii) an increase in the Deferred Purchase Price (subject
at all times to the limitations contained in the definition
thereof), or (iii) a credit against interest and/or principal
owed by the Seller with respect to any Purchaser Loan. The
allocation of the Purchase Price as among such methods of payment
shall be subject in each instance to the approval of the
Purchaser and the Seller.
(d) Ownership of Receivables and Related Security.
On each Purchase Date, after giving effect to the Purchase (and
any contribution of Receivables) on such date, the Purchaser
shall own all Receivables originated by the Seller as of such
date (including Receivables which have been previously sold or
contributed to the Purchaser hereunder). The Purchase or
contribution of any Receivable shall include all Related Security
with respect to such Receivable.
SECTION 2.03. Collections. (a) Unless otherwise agreed,
the Collection Agent shall, on each Settlement Date, deposit into
an account of the Purchaser or the Purchaser's assignee all
Collections of Transferred Receivables then held by the
Collection Agent.
(b) In the event that the Seller believes that
Collections which are not Collections of Transferred Receivables
have been deposited into an account of the Purchaser or the
Purchaser's assignee, the Seller shall so advise the Purchaser
and, on the Business Day following such identification, the
Purchaser shall remit, or shall cause to be remitted, all
Collections so deposited which are identified, to the Purchaser's
satisfaction, to be Collections of Receivables which are not
Transferred Receivables to the Seller.
(c) On each Settlement Date, the Purchaser shall pay
to the Seller accrued interest on the Deferred Purchase Price and
the Purchaser may, at its option, prepay in whole or in part the
principal amount of the Deferred Purchase Price; provided that
each such payment shall be made solely from (i) Collections of
Transferred Receivables after all other amounts then due from the
Purchaser under the Sale Agreement have been paid in full and all
amounts then required to be set aside by the Purchaser or the
Collection Agent under the Sale Agreement have been so set aside
or (ii) excess cash flow from operations of the Purchaser which
is not required to be applied to the payment of other obligations
of the Purchaser; and provided further, that no such payment
shall be made at any time when an Event of Termination shall have
occurred and be continuing. At such time following the Facility
Termination Date when all Capital, Yield and other amounts owed
by the Purchaser under the Sale Agreement shall have been paid in
full, the Purchaser shall apply, on each Settlement Date, all
Collections of Transferred Receivables received by the Purchaser
pursuant to Section 2.03(a) (and not previously distributed)
first to the payment of accrued interest on the Deferred Purchase
Price, and then to the reduction of the principal amount of the
Deferred Purchase Price.
SECTION 2.04. Settlement Procedures . (a) If on any day
the Outstanding Balance of any Purchased Receivable is reduced or
adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed merchandise or services or any cash
discount, discount for quick payment or other adjustment made by
the Seller, or any set-off or dispute in respect of any claim by
the Obligor thereof against the Seller (whether such claim arises
out of the same or a related transaction or an unrelated
transaction but excluding adjustments, reductions or
cancellations on account of the insolvency, bankruptcy, or
financial inability to pay of the applicable Obligor, whether
pursuant to an adjustment of the payment amount for such
Receivable in accordance with Section 6.02(c) or otherwise), the
Seller shall be deemed to have received on such day a Collection
of such Purchased Receivable in the amount of such reduction or
adjustment. If the Seller is not the Collection Agent, the
Seller shall pay to the Collection Agent on or prior to the next
Settlement Date all amounts deemed to have been received pursuant
to this subsection.
(b) Upon discovery by the Seller or the Purchaser
of a breach of any of the representations and warranties made by
the Seller in Section 4.01(j) with respect to any Transferred
Receivable, such party shall give prompt written notice thereof
to the other party, as soon as practicable and in any event
within three Business Days following such discovery. The Seller
shall, upon not less than two Business Days' notice from the
Purchaser or its assignee or designee, repurchase such
Transferred Receivable on the next succeeding Settlement Date for
a repurchase price equal to the Outstanding Balance of such
Transferred Receivable. Each repurchase of a Transferred
Receivable shall include the Related Security with respect to
such Transferred Receivable. The proceeds of any such repurchase
shall be deemed to be a Collection in respect of such Transferred
Receivable. If the Seller is not the Collection Agent, the
Seller shall pay to the Collection Agent on or prior to the next
Settlement Date the repurchase price required to be paid pursuant
to this subsection.
(c) Except as stated in subsection (a) or (b) of this
Section 2.04 or as otherwise required by law or the underlying
Contract, all Collections from an Obligor of any Transferred
Receivable shall be applied to the Receivables of such Obligor in
the order of the age of such Receivables, starting with the
oldest such Receivable, unless such Obligor designates its
payment for application to specific Receivables.
SECTION 2.05. Payments and Computations, Etc. (a) All
amounts to be paid or deposited by the Seller or the Collection
Agent hereunder shall be paid or deposited no later than 11:00
A.M. (New York City time) on the day when due in same day funds
to an account designated by the Purchaser from time to time,
which account shall initially be account no. 910-4-005385 at
Chase Manhattan Bank.
(b) The Seller shall, to the extent permitted by law,
pay to the Purchaser interest on any amount not paid or deposited
by the Seller (whether as Collection Agent or otherwise) when due
hereunder at an interest rate per annum equal to 1.00% per annum
above the Alternate Base Rate, payable on demand.
(c) All computations of interest and all computations
of fees hereunder shall be made on the basis of a year of 360
days for the actual number of days (including the first but
excluding the last day) elapsed. Whenever any payment or deposit
to be made hereunder shall be due on a day other than a Business
Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of such payment or deposit.
SECTION 2.06. Contributions . The Seller may from time to
time at its option, by notice to the Purchaser on or prior to the
date of the proposed contribution, identify Receivables which it
proposes to contribute to the Purchaser as a capital
contribution. On the date of each such contribution and after
giving effect thereto, the Purchaser shall own in fee simple the
Receivables so identified and contributed (collectively, the
"Contributed Receivables") and all Related Security with respect
thereto. The foregoing notwithstanding, on the date of the
initial Purchase hereunder the Seller agrees to contribute to the
Purchaser all Receivables which are not included in such initial
Purchase.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase from
the Seller . The initial Purchase of Receivables from the Seller
hereunder is subject to the conditions precedent that the
Purchaser shall have received on or before the date of such
Purchase the following, each (unless otherwise indicated) dated
such date, in form and substance satisfactory to the Purchaser:
(a) Certified copies of the resolutions of the Board of
Directors of the Seller approving this Agreement and certified
copies of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this
Agreement.
(b) A certificate of the Secretary or Assistant Secretary
of the Seller certifying the names and true signatures of the
officers of the Seller authorized to sign this Agreement and the
other documents to be delivered by it hereunder.
(c) Acknowledgment copies of proper financing statements,
duly filed on or before the date of the initial Purchase, naming
the Seller as the seller/debtor and the Purchaser as the
purchaser/ secured party, or other similar instruments or
documents, as the Purchaser may deem necessary or desirable under
the UCC of all appropriate jurisdictions or other applicable law
to perfect the Purchaser's ownership of and security interest in
the Transferred Receivables and Related Security and Collections
with respect thereto.
(d) Acknowledgment copies of proper financing statements,
if any, necessary to release all security interests and other
rights of any Person in the Transferred Receivables, Contracts or
Related Security previously granted by the Seller.
(e) Completed requests for information, dated on or
before the date of such initial Purchase, listing the financing
statements referred to in subsection (c) above and all other
effective financing statements filed in the jurisdictions
referred to in subsection (c) above that name the Seller as
debtor, together with copies of such other financing statements
(none of which shall cover any Transferred Receivables, Contracts
or Related Security).
(f) A favorable opinion of (i) Cravath, Swaine & Moore,
counsel for the Seller, and (ii) internal counsel to the Seller,
substantially in the form of Exhibit A hereto, and as to such
other matters as the Purchaser may reasonably request.
(g) An executed copy of the Control Agreement with the
initial Designated Bank and undated executed copies of Lock-Box
Agreements to the other Lock-Box Banks.
SECTION 3.02. Conditions Precedent to All Purchases . Each
Purchase (including the initial Purchase) hereunder shall be
subject to the further conditions precedent that:
(a) with respect to any such Purchase, on or prior to
the date of such Purchase, the Seller shall have delivered to the
Purchaser, (i) if requested by the Purchaser, the Seller's
General Trial Balance (which if in magnetic tape or diskette
format shall be compatible with the Purchaser's computer
equipment) as of a date not more than 31 days prior to the date
of such Purchase, and (ii) a written report identifying, among
other things, the Receivables to be included in such Purchase and
the then outstanding Purchased Receivables and the aged balance
thereof, in each case correlated to Purchases;
(b) with respect to any such Purchase, on or prior to the
date of such Purchase, the Collection Agent shall have delivered
to the Purchaser, in form and substance satisfactory to the
Purchaser, a completed Seller Report for the most recently ended
reporting period for which information is required pursuant to
Section 6.02(b) and containing such additional information as may
reasonably be requested by the Purchaser;
(c) The Seller shall have marked its master data processing
records and, at the request of the Purchaser during the
continuance of a Termination Event or Incipient Event of
Termination, each Contract giving rise to Purchased Receivables
and all other relevant records evidencing the Receivables which
are the subject of such Purchase with a legend, acceptable to the
Purchaser, stating that such Receivables, the Related Security
and Collections with respect thereto, have been sold in
accordance with this Agreement; and
(d) on the date of such Purchase the following statements
shall be true (and the Seller, by accepting the amount of such
Purchase, shall be deemed to have certified that):
(i) The representations and warranties contained in Section
4.01 are correct on and as of the date of such Purchase as though
made on and as of such date,
(ii) No event has occurred and is continuing, or would
result from such Purchase, that constitutes an Event of
Termination or would constitute an Incipient Event of
Termination,
(iii) The Purchaser shall not have delivered to the Seller a
notice that the Purchaser shall not make any further Purchases
hereunder, and
(iv) With respect to all Purchases made on or after January
1, 2000, the Purchaser shall have received evidence satisfactory
to it that Collections are not being sent to any bank account
other than a Designated Account; and
(e) the Purchaser shall have received such other approvals,
opinions or documents as the Purchaser may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller
. The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware,
and is duly qualified to do business, and is in good standing, in
every jurisdiction where the nature of its business requires it
to be so qualified except to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse
Effect.
(b) The execution, delivery and performance by the
Seller of this Agreement and the other documents to be delivered
by it hereunder, including the Seller's sale and contribution of
Receivables hereunder and the Seller's use of the proceeds of
Purchases, (i) are within the Seller's corporate powers, (ii)
have been duly authorized by all necessary corporate action,
(iii) do not contravene (1) the Seller's charter or by-laws,
(2) any law, rule or regulation applicable to the Seller, (3) any
contractual restriction binding on or affecting the Seller or its
property or (4) any order, writ, judgment, award, injunction or
decree binding on or affecting the Seller or its property, and
(iv) do not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with
respect to any of its properties (except for the transfer of the
Seller's interest in the Transferred Receivables pursuant to this
Agreement). This Agreement has been duly executed and delivered
by the Seller.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by the Seller of this Agreement or any other document
to be delivered by it hereunder.
(d) This Agreement constitutes the legal, valid and
binding obligation of the Seller enforceable against the Seller
in accordance with its terms.
(e) Sales and contributions made pursuant to this
Agreement will constitute a valid sale, transfer, and assignment
of the Transferred Receivables to Purchaser, enforceable against
creditors of, and purchasers from, the Seller. The Seller shall
have no remaining property interest in any Transferred
Receivable.
(f) The balance sheets of the Seller and its
consolidated Subsidiaries as at December 31, 1998, and the
related statements of income and retained earnings of the Seller
and its consolidated Subsidiaries for the fiscal year then ended,
copies of which have been furnished to the Agent under the Sale
Agreement, fairly present the financial condition of the Seller
and its consolidated Subsidiaries as at such date and the results
of the operations of the Seller and its consolidated Subsidiaries
for the period ended on such date, all in accordance with
generally accepted accounting principles consistently applied,
and since March 31, 1999 there has been no change in the business
(taken as a whole), consolidated financial condition or
consolidated results of operation of the Seller and its
consolidated Subsidiaries that reasonably could be expected to
result in a Material Adverse Effect.
(g) Except as disclosed in the Form 10-Q filed with the
Securities and Exchange Commission on May 7, 1999, there is no
action, suit or proceeding pending against or, to the knowledge
of the Seller or any of its Subsidiaries, threatened against or
affecting the Seller or any of its Subsidiaries before any court
or arbitrator, any governmental body, agency or official that
reasonably could be expected to result in a Material Adverse
Effect.
(h) No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(i) Each Receivable sold by the Seller hereunder (unless
expressly purported not to be an Eligible Receivable) is an
Eligible Receivable, and each such Receivable and each
Transferred Receivable, together with the Related Security, is
owned (prior to its sale or contribution hereunder) by the Seller
free and clear of any Adverse Claim (other than any Adverse Claim
arising solely as the result of any action taken by the
Purchaser). When Purchaser makes a Purchase it shall acquire
valid and perfected first priority ownership of each Purchased
Receivable and the Related Security and Collections with respect
thereto free and clear of any Adverse Claim (other than any
Adverse Claim arising solely as the result of any action taken by
the Purchaser), and no effective financing statement or other
instrument similar in effect covering any Transferred Receivable,
any interest therein, the Related Security or Collections with
respect thereto is on file in any recording office except such as
may be filed in favor of Purchaser in accordance with this
Agreement or in connection with any Adverse Claim arising solely
as the result of any action taken by the Purchaser.
(j) Each Seller Report (if prepared by the Seller, or to
the extent that information contained therein is supplied by the
Seller), information, exhibit, financial statement, document,
book, record or report furnished or to be furnished at any time
by the Seller to the Purchaser in connection with this Agreement
is or will be accurate in all material respects as of its date or
(except as otherwise disclosed to the Purchaser at such time) as
of the date so furnished, and no such document contains or will
contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances
under which they were made, not misleading.
(k) The principal place of business and chief executive
office of the Seller and the office where the Seller keeps its
records concerning the Transferred Receivables are located at the
address or addresses referred to in Section 5.01(b).
(l) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts at
such Lock-Box Banks, are specified in Exhibit C (as the same may
be updated from time to time pursuant to Section 5.01(h)).
(m) The Seller is not known by and does not use any
tradename or doing-business-as name.
(n) The purchase of each Receivable from the Seller and
each reinvestment of Collections in Receivables of the Seller
will constitute (i) a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended, and
(ii) a purchase or other acquisition of notes, drafts,
acceptances, open accounts receivable or other obligations
representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of
the Investment Company Act of 1940, as amended.
(o) With respect to any programs used by the Seller in
the servicing of the Receivables, no sublicensing agreements are
necessary in connection with the designation of a new Collection
Agent pursuant to Section 6.01(b) so that such new Collection
Agent shall have the benefit of such programs (it being
understood that, however, the Collection Agent, if other than the
Seller, shall be required to be bound by a confidentiality
agreement reasonably acceptable to the Seller).
(p) The transfers of Transferred Receivables by the
Seller to the Purchaser pursuant to this Agreement, and all other
transactions between the Seller and the Purchaser, have been and
will be made in good faith and without intent to hinder, delay or
defraud creditors of the Seller.
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of the Seller . From the date
hereof until the first day following the Facility Termination
Date on which all of the Transferred Receivables are either
collected in full or become Defaulted Receivables:
(a) Compliance with Laws, Etc. The Seller will comply
in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate
existence, rights, franchises, qualifications and privileges
except to the extent that the failure so to comply with such
laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications, and
privileges would not materially adversely affect the
collectibility of the Transferred Receivables or the ability of
the Seller to perform its obligations under this Agreement.
(b) Offices, Records and Books of Account. The Seller will
keep its principal place of business and chief executive office
and the office where it keeps its records concerning the
Transferred Receivables at the address of the Seller set forth
under its name on the signature page to this Agreement or, upon
30 days' prior written notice to the Purchaser, at any other
locations in jurisdictions where all actions required by
Section 5.01(j) shall have been taken and completed. The Seller
also will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Transferred Receivables and related Contracts
in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection
of all Transferred Receivables (including, without limitation,
records adequate to permit the daily identification of each new
Transferred Receivable and all Collections of and adjustments to
each existing Transferred Receivable). The Seller shall make a
notation in its books and records, including its computer files,
to indicate which Receivables have been sold or contributed to
the Purchaser hereunder.
(c) Performance and Compliance with Contracts and Credit
and Collection Policy. The Seller will, at its expense, timely
and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under
the Contracts related to the Transferred Receivables, and timely
and fully comply in all material respects with the Credit and
Collection Policy in regard to each Transferred Receivable and
the related Contract. Without limiting the generality of the
foregoing, the Seller will not reduce or suffer or permit
reductions in the amounts payable by Obligors on the Receivables
in the form of "volume rebate credits" (including, without
limitation, with respect to Zeneca, Griffin, Monsanto and
Occidental); provided, that, prior to the occurrence and
continuance of any Event of Termination or Incipient Event of
Termination, the Seller may grant "volume rebate credits" in an
aggregate amount not to exceed $500,000 annually with respect to
all Obligors.
(d) Sales, Liens, Etc. Except for the sales and
contributions of Receivables contemplated herein, the Seller will
not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon
or with respect to, any Transferred Receivable, Related Security,
related Contract or Collections, or upon or with respect to any
account to which any Collections of any Transferred Receivable
are sent, or assign any right to receive income in respect
thereof, other than liens for taxes not yet due and payable.
(e) Extension or Amendment of Transferred Receivables.
Except as provided in Section 6.02(c), the Seller will not
extend, amend or otherwise modify the terms of any Transferred
Receivable, or amend, modify or waive any payment provisions of
any Contract related thereto.
(f) Change in Credit and Collection Policy. The Seller
will not make any change in the Credit and Collection Policy that
would, in either case, materially adversely affect the
collectibility of the Transferred Receivables or the ability of
the Seller to perform its obligations under this Agreement.
(g) Audits. The Seller will, from time to time during
regular business hours and following reasonable notice to the
Seller, permit the Purchaser, or its agents, representatives or
assigns, (i) to examine and make copies of and abstracts from all
books, records and documents (including, without limitation,
computer tapes and disks) in the possession or under the control
of the Seller relating to Transferred Receivables and the Related
Security, including, without limitation, the related Contracts,
and (ii) to visit the offices and properties of the Seller for
the purpose of examining such materials described in clause
(i) above, and to discuss matters relating to Transferred
Receivables and the Related Security or the Seller's performance
hereunder or under the Contracts with any of the officers or
employees of the Seller having knowledge of such matters;
provided, however, prior to the occurrence and continuance of any
Event of Termination or Incipient Event of Termination, audits,
examinations and visits described in (i) and (ii) above (together
with the audit rights set forth in Sections 5.02 and 6.06(a) of
the Sale Agreement) shall occur no more frequently than annually.
(h) Change in Payment Instructions to Obligors. The
Seller will not add any bank or bank account as a Lock-Box Bank
or Lock-Box Account to those listed in Exhibit C to this
Agreement. The Seller will not add any bank as a Designated Bank
unless the Purchaser shall have received notice of such addition
(including an updated Exhibit C) and a fully executed copy of a
lock-box notice agreement for each new Designated Bank. The
Seller will terminate each Lock-Box Account (other than the
Designated Accounts) on or prior to December 31, 1999. Following
the delivery of any lock-box notice or lock-box notice agreement,
the Seller will not make any change in its instructions to
Obligors regarding payments to be made to the Seller or payments
to be made to any Lock-Box Bank, other than instructing Obligors
that are making payments to a Lock-Box Account which is not a
Designated Account to make payments to a Designated Account.
(i) Deposits to Lock-Box Accounts. At all times on and
prior to December 31, 1999, the Seller will deposit, or cause to
be deposited, all Collections of Receivables solely into Lock-Box
Accounts. At all times subsequent to December 31, 1999, the
Seller will deposit, or cause to be deposited, all Collections of
Receivables solely into a Designated Account. The Seller will
not deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Lock-Box Account cash or cash
proceeds other than Collections of Receivables and shall promptly
(and in any event within two Business Days) cause any Collections
deposited in a Lock-Box Account and not relating to Receivables
to be removed from the applicable Lock-Box Account.
(j) Further Assurances. (i) The Seller agrees from
time to time, at its expense, promptly to execute and deliver all
further instruments and documents, and to take all further
reasonable actions, that may be reasonably necessary or
desirable, or that the Purchaser or its assignee may reasonably
request, to perfect, protect or more fully evidence the sale and
contribution of Receivables under this Agreement, or to enable
the Purchaser or its assignee to exercise and enforce its
respective rights and remedies under this Agreement. Without
limiting the foregoing, the Seller will, upon the request of the
Purchaser or its assignee, (A) execute and file such financing or
continuation statements, or amendments thereto, and such other
instruments and documents, that may be necessary or desirable to
perfect, protect or evidence such Transferred Receivables; and
(B) deliver to the Purchaser copies of all Contracts relating to
the Transferred Receivables and all records relating to such
Contracts and the Transferred Receivables, whether in hard copy
or in magnetic tape or diskette format (which if in magnetic tape
or diskette format shall be compatible with the Purchaser's
computer equipment).
(ii) The Seller authorizes the Purchaser or its
assignee to file financing or continuation statements, and
amendments thereto and assignments thereof, relating to the
Transferred Receivables and the Related Security, the related
Contracts and the Collections with respect thereto without the
signature of the Seller where permitted by law. A photocopy or
other reproduction of this Agreement shall be sufficient as a
financing statement where permitted by law.
(iii) The Seller shall perform its obligations under
the Contracts related to the Transferred Receivables to the same
extent as if the Transferred Receivables had not been sold or
transferred.
(k) Reporting Requirements. The Seller will provide to the
Purchaser the following:
(i) as soon as available and in any event within 60
days after the end of the first three quarters of each fiscal
year of the Seller, consolidated balance sheets of the Seller and
its Subsidiaries as of the end of such quarter and consolidated
statements of income and retained earnings of the Seller and its
Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, certified by
the chief financial officer, controller or other chief accounting
officer of the Seller;
(ii) as soon as available and in any event within 120
days after the end of each fiscal year of the Seller, a copy of
the annual report for such year for the Seller and its
Subsidiaries, containing financial statements for such year
audited by a "Big 4" accounting firm or other independent public
accountants acceptable to the Purchaser;
(iii) as soon as possible and in any event within five
days after the Seller obtains knowledge of the occurrence of each
Event of Termination or Incipient Event of Termination, to the
extent that such event is continuing, a statement of the chief
financial officer of the Seller setting forth details of such
Event of Termination or event and the action that the Seller has
taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all reports that the Seller sends to any of its
security holders, and copies of all reports and registration
statements that the Seller or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(v) promptly after the filing or receiving thereof,
copies of all reports and notices that the Seller or any
Affiliate files under ERISA with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation or the U.S. Department
of Labor or that the Seller or any Affiliate receives from any of
the foregoing or from any multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) to which the Seller or any
Affiliate is or was, within the preceding five years, a
contributing employer, in each case in respect of the assessment
of withdrawal liability or an event or condition which could, in
the aggregate, result in the imposition of liability on the
Seller and/or any such Affiliate in excess of $10,000,000;
(vi) at least ten Business Days prior to any change in
the name of the Seller, a notice setting forth the new name and
the effective date thereof; and
(vii) such other information respecting the Receivables
or the condition or operations, financial or otherwise, of the
Seller as the Purchaser may from time to time reasonably request.
(l) Separate Conduct of Business. The Seller will:
(i) maintain separate corporate records and books of account from
those of the Purchaser; (ii) conduct its business from an office
separate from that of the Purchaser; (iii) ensure that all oral
and written communications, including without limitation,
letters, invoices, purchase orders, contracts, statements and
applications, will be made solely in its own name; (iv) have
stationery and other business forms and a mailing address and a
telephone number separate from those of the Purchaser; (v) not
hold itself out as having agreed to pay, or as being liable for,
the obligations of the Purchaser; (vi) not engage in any
transaction with the Purchaser except as contemplated by this
Agreement or as permitted by the Sale Agreement;
(vii) continuously maintain as official records the resolutions,
agreements and other instruments underlying the transactions
contemplated by this Agreement; and (viii) prepare and disclose
on its annual financial statements (A) the effects of the
transactions contemplated by this Agreement in accordance with
generally accepted accounting principles and (B) in manner that
is wholly consistent with the conclusion that the assets of the
Purchaser are not available to pay its creditors; and (ix)
otherwise comply with (and cause to be true and correct) each of
the facts and assumptions contained in Sections 2 through 4 on
pages 5-8 of the opinion of Cravath, Swaine & Moore delivered
pursuant to Section 3.01(g) and designated as Exhibit A to this
Agreement.
SECTION 5.02. Covenant of the Seller and the Purchaser .
The Seller and the Purchaser have structured this Agreement with
the intention that each Purchase of Receivables hereunder be
treated as a sale of such Receivables by the Seller to the
Purchaser for all purposes and each contribution of Receivables
hereunder shall be treated as an absolute transfer of such
Receivables by the Seller to the Purchaser for all purposes. The
Seller and the Purchaser shall record each Purchase and
contribution as a sale or purchase or capital contribution, as
the case may be, on its books and records, and reflect each
Purchase and contribution in its financial statements and tax
returns as a sale or purchase or capital contribution, as the
case may be.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent . The
servicing, administration and collection of the Transferred
Receivables shall be conducted by such Person (the "Collection
Agent") so designated hereunder from time to time. The Seller is
hereby designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms
hereof. Upon the occurrence of a Collection Agent Default, the
Purchaser or its assignee may designate as Collection Agent any
Person (including itself) to succeed the Seller or any successor
Collection Agent, if such Person shall consent and agree to the
terms hereof. Upon the Seller's receipt of such notice, the
Seller agrees that it will terminate its activities as Collection
Agent hereunder in a manner which the Purchaser (or its designee)
believes will facilitate the transition of the performance of
such activities to the new Collection Agent, and the Seller shall
use its best efforts to assist the Purchaser (or its designee) to
take over the servicing, administration and collection of the
Transferred Receivables, including, without limitation, providing
access to and copies of all computer tapes or disks and other
documents or instruments that evidence or relate to Transferred
Receivables maintained in its capacity as Collection Agent and
access to all employees and officers of the Seller responsible
with respect thereto. The Collection Agent may, with the prior
consent of the Purchaser, (such consent not to be unreasonably
withheld) subcontract with any other Person for the servicing,
administration or collection of Transferred Receivables. Any
such subcontract shall not affect the Collection Agent's
liability for performance of its duties and obligations pursuant
to the terms hereof.
SECTION 6.02. Duties of Collection Agent . (a) The
Collection Agent shall take or cause to be taken all such actions
as may be reasonably necessary or advisable to collect each
Transferred Receivable from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit and Collection
Policy. The Purchaser hereby appoints the Collection Agent, from
time to time designated pursuant to Section 6.01, as agent to
enforce its ownership and other rights in the Transferred
Receivables, the Related Security and the Collections with
respect thereto. In performing its duties as Collection Agent,
the Collection Agent shall exercise the same care and apply the
same policies as it would exercise and apply if it owned the
Transferred Receivables and shall act in a manner consistent with
the Credit and Collection Policy and in the best interests of the
Purchaser and its assignees.
(b) Prior to the 10th Business Day of each month, the
Collection Agent shall prepare and forward to the Purchaser (i) a
Seller Report, relating to all then outstanding Transferred
Receivables, and the Related Security and Collections with
respect thereto, in each case, as of the close of business of the
Collection Agent on the last day of the immediately preceding
month, and (ii) if requested by the Purchaser, a listing by
Obligor of all Transferred Receivables, together with an aging
report of such Transferred Receivables.
(c) If no Event of Termination or Incipient Event of
Termination shall have occurred and be continuing, the Seller,
while it is the Collection Agent, may, in accordance with the
Credit and Collection Policy, extend the maturity or adjust the
Outstanding Balance of any Transferred Receivable as the Seller
deems appropriate, or otherwise amend or adjust the payment terms
under the related Contract in a manner consistent with the Credit
and Collection Policy, to maximize Collections thereof, provided
that the classification of any such Transferred Receivable as a
Delinquent Receivable or Defaulted Receivable shall not be
affected by any such extension.
(d) The Seller shall deliver to the Collection Agent,
and the Collection Agent shall hold in trust for the Seller and
the Purchaser in accordance with their respective interests, all
documents, instruments and records (including, without
limitation, computer tapes or disks) which evidence or relate to
Transferred Receivables.
(e) The Collection Agent shall as soon as practicable
following receipt turn over to the Seller any cash collections or
other cash proceeds received with respect to Receivables not
constituting Transferred Receivables, less, in the event the
Seller is not the Collection Agent, all reasonable and
appropriate out-of-pocket costs and expenses of the Collection
Agent of servicing, collecting and administering the Receivables
to the extent not covered by the Collection Agent Fee received by
it.
(f) The Collection Agent also shall perform the other
obligations of the "Collection Agent" set forth in this Agreement
with respect to the Transferred Receivables.
SECTION 6.03. Collection Agent Fee . The Purchaser shall
pay to the Collection Agent, so long as it is acting as the
Collection Agent hereunder, a periodic collection fee (the
"Collection Agent Fee") of 0.75% per annum on the average daily
aggregate Outstanding Balance of the Transferred Receivables,
payable on the 15th day of each month (or, if such day is not a
Business Day, the immediately succeeding Business Day) or such
other day during each calendar month as the Purchaser and the
Collection Agent shall agree.
SECTION 6.04. Certain Rights of the Purchaser . (a) The
Seller hereby transfers to the Purchaser (and its assigns and
designees) the exclusive ownership and control of the Lock-Box
Accounts maintained by the Seller for the purpose of receiving
Collections.
(b) At any time following the designation of a Collection
Agent other than the Seller pursuant to Section 6.01 or following
and during the continuance of an Event of Termination or an
Incipient Event of Termination: the Purchaser may give notice of
ownership and/or direct the Obligors of Transferred Receivables
and any Person obligated on any Related Security, or any of them,
that payment of all amounts payable under any Transferred
Receivable shall be made directly to the Purchaser or its
designee; and the Seller shall, upon the Purchaser's request and
at the Seller's expense, (i) give notice of such ownership to
each Obligor of Transferred Receivables and direct that payments
of all amounts payable under such Transferred Receivables be made
directly to the Purchaser or its designee, and (ii) notify all
other obligors to redirect funds and make payment with respect to
amounts owing to the Seller to accounts of the Seller other than
a Designated Account.
(c) At the Purchaser's request and at the Seller's expense,
the Seller and the Collection Agent shall (A) assemble all of the
documents, instruments and other records (including, without
limitation, computer tapes and disks) that evidence or relate to
the Transferred Receivables and the related Contracts and Related
Security, or that are otherwise necessary or desirable to collect
the Transferred Receivables, and shall make the same available to
the Purchaser at a place selected by the Purchaser or its
designee, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting
Collections of Transferred Receivables in a manner acceptable to
the Purchaser and, promptly upon receipt, remit all such cash,
checks and instruments, duly indorsed or with duly executed
instruments of transfer, to the Purchaser or its designee.
(d) The Seller authorizes the Purchaser to take any and all
steps in the Seller's name and on behalf of the Seller that are
necessary or desirable, in the determination of the Purchaser, to
collect amounts due under the Transferred Receivables, including,
without limitation, endorsing the Seller's name on checks and
other instruments representing Collections of Transferred
Receivables and enforcing the Transferred Receivables and the
Related Security and related Contracts.
SECTION 6.05. Rights and Remedies. (a) If the Seller or
the Collection Agent fails to perform any of its obligations
under this Agreement, the Purchaser may (but shall not be
required to) itself perform, or cause performance of, such
obligation, and, if the Seller (as Collection Agent or otherwise)
fails to so perform, the costs and expenses of the Purchaser
incurred in connection therewith shall be payable by the Seller
as provided in Section 8.01 or Section 9.04 as applicable.
(b) The Seller shall perform all of its obligations
under the Contracts related to the Transferred Receivables to the
same extent as if the Seller had not sold or contributed
Receivables hereunder and the exercise by the Purchaser of its
rights hereunder shall not relieve the Seller from such
obligations or its obligations with respect to the Transferred
Receivables. The Purchaser shall not have any obligation or
liability with respect to any Transferred Receivables or related
Contracts, nor shall the Purchaser be obligated to perform any of
the obligations of the Seller thereunder.
(c) The Seller shall cooperate with the Collection Agent in
collecting amounts due from Obligors in respect of the
Transferred Receivables.
(d) The Seller hereby grants to Collection Agent an
irrevocable power of attorney, with full power of substitution,
coupled with an interest, to take in the name of the Seller all
steps necessary or advisable to endorse, negotiate or otherwise
realize on any writing or other right of any kind held or
transmitted by the Seller or transmitted or received by Purchaser
(whether or not from the Seller) in connection with the
collection and enforcement of any Transferred Receivable.
SECTION 6.06. Transfer of Records to Purchaser. Each
Purchase and contribution of Receivables hereunder shall include
the transfer to the Purchaser of all of the Seller's right and
title to and interest in the records relating to such Receivables
and shall include an irrevocable non-exclusive license to the use
of the Seller's computer software system to access and create
such records. Such license shall be without royalty or payment
of any kind, is coupled with an interest, and shall be
irrevocable until all of the Transferred Receivables are either
collected in full or become Defaulted Receivables.
The Seller shall take such action requested by the
Purchaser, from time to time hereafter, that may be necessary or
appropriate to ensure that the Purchaser has an enforceable
ownership interest in the records relating to the Transferred
Receivables and rights (whether by ownership, license or
sublicense) to the use of the Seller's computer software system
to access and create such records.
In recognition of the Seller's need to have access to the
records transferred to the Purchaser hereunder, the Purchaser
hereby grants to the Seller an irrevocable license to access such
records in connection with any activity arising in the ordinary
course of the Seller's business or in performance of its duties
as Collection Agent, provided that (i) the Seller shall not
disrupt or otherwise interfere with the Purchaser's use of and
access to such records during such license period and (ii) the
Seller consents to the assignment and delivery of the records
(including any information contained therein relating to the
Seller or its operations) to any assignees or transferees of the
Purchaser provided they agree to hold such records confidential.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination . If any of the
following events ("Events of Termination") shall occur and be
continuing:
(a) The occurrence of any Collection Agent Default; or
(b) The Seller shall fail (i) following a Collection
Agent Default, to transfer to the Purchaser when requested
rights, pursuant to this Agreement, which the Seller then has as
Collection Agent, or (ii) to make any payment required under
Section 2.04; or
(c) Any representation or warranty made or deemed made
by the Seller or the Collection Agent under this Agreement or any
other Transaction Document or any written information or report
(including, without limitation, any E-Mail Seller Report)
delivered by the Seller pursuant to this Agreement shall prove to
have been incorrect or untrue in any material respect when made
or deemed made or delivered and such condition, to the extent it
is capable of being remedied, shall remain unremedied for 10
days; or
(d) The Seller shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement on
its part to be performed or observed and any such failure shall
remain unremedied for 10 days after written notice thereof shall
have been given to the Seller by the Purchaser; or
(e) The Seller shall fail to pay any payment of
principal, face amount, interest, premium, fees or any similar
obligation in respect of any Debt in an aggregate amount
exceeding $25,000,000 when due or within any applicable grace
period (provided, that if Section 6.01(e) of the Seller's
existing $500,000,000 credit agreement, dated as of March 31,
1997, is amended to provide that no "Event of Default" under such
credit agreement will result until such Debt is declared to be or
otherwise becomes due and payable in such aggregate amount, then
this clause (e) shall not constitute an Event of Termination
hereunder unless such Debt is declared to be or otherwise becomes
due and payable in such aggregate amount); or
(f) Any Purchase or contribution of Receivables
hereunder, the Related Security and the Collections with respect
thereto shall for any reason cease to constitute valid and
perfected ownership of such Receivables, Related Security and
Collections free and clear of any Adverse Claim; or
(g) The Seller shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or
against the Seller seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial
part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of
30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its
property) shall occur; or the Seller shall take any corporate
action to authorize any of the actions set forth above in this
subsection (g); or
(h) an Event of Termination shall have occurred under
the Sale Agreement; or
(i) There shall have occurred any event or events that
result in a Material Adverse Effect; or
(j) Any of the Seller's long term public senior
unsecured debt securities (having a rating not dependant on any
guaranty) are no longer rated at least BBB- by Standard & Poor's
Rating Services and at least Baa3 by Moody's Investors Service,
Inc., or the Seller has not maintained both such ratings;
then, and in any such event, the Purchaser may, by notice to the
Seller, take either or both of the following actions: (x)
declare the Facility Termination Date to have occurred (in which
case the Facility Termination Date shall be deemed to have
occurred) and (y) if such Event of Termination coincides with or
also constitutes a Collection Agent Default, and without limiting
any right under this Agreement to replace the Collection Agent,
designate another Person to succeed the Seller as Collection
Agent; provided, that, automatically upon the occurrence of any
event (without any requirement for the passage of time or the
giving of notice) described in paragraph (g) of this Section
7.01, the Facility Termination Date shall occur, the Seller (if
it is then serving as the Collection Agent) shall cease to be the
Collection Agent, and the Purchaser (or its assigns or designees)
shall become the Collection Agent. Upon any such declaration or
designation or upon such automatic termination, the Purchaser
shall have, in addition to the rights and remedies under this
Agreement, all other rights and remedies with respect to the
Receivables provided after default under the UCC and under other
applicable law, which rights and remedies shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Seller . Without limiting
any other rights which the Purchaser may have hereunder or under
applicable law, the Seller hereby agrees to indemnify the
Purchaser and its assigns and transferees (each, an "Indemnified
Party") from and against any and all damages, claims, losses,
liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts"), awarded
against or incurred by any Indemnified Party arising out of or as
a result of this Agreement or the purchase or contribution of any
Transferred Receivables or in respect of any Transferred
Receivable or any Contract, including, without limitation,
arising out of or as a result of:
(i) the inclusion, or purported inclusion, in any
Purchase of any Receivable (unless expressly purported not to be
an Eligible Receivable) that is not an Eligible Receivable on the
date of such Purchase, or the characterization in any Seller
Report or other statement made by the Seller of any Transferred
Receivable as an Eligible Receivable which is not an Eligible
Receivable as of the date of such Seller Report or statement;
(ii) reliance on any representation or warranty or
statement made or deemed made by the Seller (or any of its
officers) under or in connection with this Agreement, which shall
have been incorrect in any material respect when made;
(iii) the failure by the Seller to comply with any
applicable law, rule or regulation with respect to any
Transferred Receivable or the related Contract; or the failure of
any Transferred Receivable or the related Contract to conform to
any such applicable law, rule or regulation;
(iv) the failure to vest in the Purchaser absolute
ownership of the Receivables that are, or that purport to be, the
subject of a Purchase or contribution under this Agreement and
the Related Security and Collections in respect thereof, free and
clear of any Adverse Claim;
(v) the failure of the Seller to have filed, or any
delay in filing, financing statements or other similar
instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any
Receivables that are, or that purport to be, the subject of a
Purchase or contribution under this Agreement and the Related
Security and Collections in respect thereof, whether at the time
of any Purchase or contribution or at any subsequent time;
(vi) any restriction applicable to Persons other than
the Seller that inhibits their ability to exercise their rights
under this Agreement due to a confidentiality provision in a
Contract that purports to restrict the ability of such Persons to
exercise their rights under this Agreement, including, without
limitation, their right to review the Contract;
(vii) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable that is, or that purports to be, the
subject of a Purchase or contribution under this Agreement
(including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the
sale of the merchandise or services related to such Receivable or
the furnishing or failure to furnish such merchandise or services
or relating to collection activities with respect to such
Receivable (if such collection activities were performed by the
Seller acting as Collection Agent);
(viii) any failure of the Seller, as Collection Agent or
otherwise, to perform its duties or obligations in accordance
with the provisions hereof or to perform its duties or
obligations under any Contract related to a Transferred
Receivable;
(ix) any products liability or other claim arising out
of or in connection with merchandise, insurance or services which
are the subject of any Contract;
(x) the commingling of Collections of Transferred
Receivables by the Seller or a designee of the Seller, as
Collection Agent or otherwise, at any time with other funds of
the Seller or an Affiliate of the Seller;
(xi) any investigation, litigation or proceeding related
to this Agreement or the use of proceeds of Purchases or the
ownership of Receivables, the Related Security, or Collections
with respect thereto or in respect of any Receivable, Related
Security or Contract;
(xii) any failure of the Seller to comply with its
covenants contained in Section 5.01;
(xiii) any Collection Agent Fees or other costs and
expenses payable to any replacement Collection Agent, to the
extent in excess of the Collection Agent Fees payable to the
Seller hereunder;
(xiv) any claim brought by any Person other than an
Indemnified Party arising from any activity by the Seller or any
Affiliate of the Seller in servicing, administering or collecting
any Transferred Receivable; or
(xv) any Dilution with respect to any Transferred
Receivable.
It is expressly agreed and understood by the parties hereto
(i) that the foregoing indemnification is not intended to, and
shall not, constitute a guarantee of the collectibility or
payment of the Transferred Receivables and (ii) that nothing in
this Section 8.01 shall require the Seller to indemnify any
Person (A) for Receivables which are not collected, not paid or
uncollectible on account of the insolvency, bankruptcy, or
financial inability to pay of the applicable Obligor, (B) for
damages, losses, claims or liabilities or related costs or
expenses resulting from such Person's gross negligence or willful
misconduct, or (C) for any income taxes or franchise taxes
incurred by such Person arising out of or as a result of this
Agreement or in respect of any Transferred Receivable or any
Contract.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of
any provision of this Agreement or consent to any departure by
the Seller therefrom shall be effective unless in a writing
signed by the Purchaser and, in the case of any amendment, also
signed by the Seller, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given. No failure on the part of the
Purchaser to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
SECTION 9.02. Notices, Etc. All notices and other
communications hereunder shall, unless otherwise stated herein,
be in writing (which shall include facsimile communication) and
be faxed or delivered, to each party hereto, at its address set
forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written
notice to the other parties hereto. Notices and communications
by facsimile shall be effective when sent (and shall be followed
by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when
received.
SECTION 9.03. Binding Effect; Assignability . (a) This
Agreement shall be binding upon and inure to the benefit of the
Seller, the Purchaser and their respective successors and
assigns; provided, however, that the Seller may not assign its
rights or obligations hereunder or any interest herein without
the prior written consent of the Purchaser. In connection with
any sale or assignment by the Purchaser of all or a portion of
the Transferred Receivables, the buyer or assignee, as the case
may be, shall, to the extent of its purchase or assignment, have
all rights of the Purchaser under this Agreement (as if such
buyer or assignee, as the case may be, were the Purchaser
hereunder) except to the extent specifically provided in the
agreement between the Purchaser and such buyer or assignee, as
the case may be.
(b) This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such
time, after the Facility Termination Date, when all of the
Transferred Receivables are either collected in full or become
Defaulted Receivables; provided, however, that rights and
remedies with respect to any breach of any representation and
warranty made by the Seller pursuant to Article IV and the
provisions of Article VIII and Sections 9.04, 9.05 and 9.06 shall
be continuing and shall survive any termination of this
Agreement.
SECTION 9.04. Costs, Expenses and Taxes . (a) In addition
to the rights of indemnification granted to the Purchaser
pursuant to Article VIII hereof, the Seller agrees to pay on
demand all costs and expenses in connection with the preparation,
execution and delivery of this Agreement and the other documents
and agreements to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Purchaser with respect thereto and with respect
to advising the Purchaser as to its rights and remedies under
this Agreement, and the Seller agrees to pay all costs and
expenses, if any (including reasonable counsel fees and
expenses), in connection with the enforcement of this Agreement
and the other documents to be delivered hereunder excluding,
however, any costs of enforcement or collection of Transferred
Receivables which are not paid on account of the insolvency,
bankruptcy or financial inability to pay of the applicable
Obligor.
(b) In addition, the Seller agrees to pay any and all
stamp and other taxes and fees payable in connection with the
execution, delivery, filing and recording of this Agreement or
the other documents or agreements to be delivered hereunder, and
the Seller agrees to save each Indemnified Party harmless from
and against any liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
SECTION 9.05. No Proceedings . The Seller hereby agrees
that it will not institute against the Purchaser any proceeding
of the type referred to in Section 7.01(g) so long as there shall
not have elapsed one year plus one day since the later of (i) the
Facility Termination Date and (ii) the date on which all of the
Transferred Receivables are either collected in full or become
Defaulted Receivables.
SECTION 9.06. Confidentiality . Unless otherwise required
by applicable law or regulation, each party hereto agrees to
maintain the confidentiality of this Agreement in communications
with third parties and otherwise; provided that this Agreement
may be disclosed to (a) third parties to the extent such
disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to
the other party hereto, and such party's assignee, (b) the legal
counsel and auditors of the Seller and the Purchaser if they
agree to hold it confidential, and (c) to rating agencies rating
the Seller's equity and debt instruments.
SECTION 9.07. GOVERNING LAW . THIS AGREEMENT SHALL, IN
ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES
THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION; PROVIDED THAT THE PROVISIONS RELATING TO THE
PERFECTION OF THE PURCHASER'S OWNERSHIP INTEREST IN THE
RECEIVABLES SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
CONNECTICUT.
SECTION 9.08. Third Party Beneficiary . Each of the
parties hereto hereby acknowledges that the Purchaser is
assigning its rights (but not its obligations) under this
Agreement to Citicorp North America, Inc., as agent under the
Sale Agreement, that such assignee and any subsequent assignees
may (except as otherwise agreed to by such assignees) further
assign their rights under this Agreement, and the Seller hereby
consents to any such assignments. All such assignees, including
parties to the Sale Agreement in the case of assignment to such
parties, shall be third party beneficiaries of, and shall be
entitled to enforce the Purchaser's rights and remedies under,
this Agreement to the same extent as if they were parties
thereto, except to the extent specifically limited under the
terms of their assignment.
SECTION 9.09. Execution in Counterparts . This Agreement
may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and all of which
when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
SELLER: WITCO CORPORATION
By: ___________________________
Title: ____________________
Address:
One American Lane
Greenwich, Connecticut 06831-2559
Attention: ____________________
Facsimile No.: (___) ___-____
PURCHASER: WITCO FUNDING CORPORATION
By: ___________________________
Title: ____________________
Address:
One American Lane
Greenwich, Connecticut 06831-2559
Attention: ____________________
Facsimile No.: (___) ___-____
Merger Synergy Restricted Stock Agreement
This Agreement, made and entered into as of October 19,
1999, (the "Agreement") by and between CK Witco Corporation (the
"Corporation") and Name (the "Executive") of Town.
WHEREAS, Crompton & Knowles Corporation ("C&K") and Witco
Corporation ("Witco") merged on September 1, 1999, to form the
Corporation;
WHEREAS, the merger of C&K and Witco presents an opportunity
for the Corporation to realize significant cost savings through
synergies resulting from the merger; and
WHEREAS, by virtue of the Executive's position with the
Corporation, the Executive can make a valuable contribution
toward achievement by the Corporation of merger related cost
savings, and the Corporation is offering incentives to the
Executive and other senior executives of the Corporation to work
to achieve $60 million in annual savings from such synergies;
NOW, THEREFORE, the Executive and the Corporation hereby agree as
follows:
1. Definitions.
For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Performance Period" shall mean the period September
1, 1999, to December 31, 2001.
(b) "Synergy Cost Savings" shall mean total annual
savings as follows:
(i) Savings from headcount reductions. Payroll and
benefit savings from headcount reductions will be determined by
comparison to a baseline of June 30, 1999. Spending for payroll
and benefits based on the employee census as of the baseline date
will be annualized and compared to actual spending (adjusted to
eliminate wage and benefit increases that are effective on or
after January 1, 2000) for each of fiscal years 2000 and 2001.
(ii) Savings from expense reductions. Non-
capitalized expense reductions with respect to consultants,
travel and entertainment, logistics, purchasing, insurance, rent,
purchased supplies and services and communications will be
determined by the comparison of actual annual spending for those
categories of expense in each of fiscal years 2000 and 2001 to
the total combined spending of Crompton & Knowles, Witco and CK
Witco for the same categories of expense in 1999.
(iii) Manufacturing savings. Manufacturing savings
from consolidation and shutdown of plants and other facilities
and improvements in manufacturing operations will be determined
by comparison of actual spending in each of fiscal years 2000 and
2001 to a baseline of June 30, 1999.
(iv) Interest expense and tax savings. Savings
from lower interest expense for each of fiscal years 2000 and
2001 will be determined by the comparison of actual interest
expense in those years to combined interest expense for Crompton
& Knowles, Witco and CK Witco for 1999. Savings, if any, from a
lower effective tax rate will be measured based on any
improvement in the effective consolidated tax rate in years after
1999 from 39.2% (the pro forma tax rate for CK Witco as if the
merger had occurred on January 1, 1999).
KPMG LLP will report to the Organization, Compensation and
Governance Committee of the Corporation's board of directors (the
"Committee") on the savings achieved as of the last day of each
complete fiscal year of the Corporation during the Performance
Period.
(c) "Retirement" shall mean cessation of the Executive's
employment with the Corporation or a subsidiary of the
Corporation occurring on or after the Executive's sixty-second
(62nd) birthday.
(d) "Cause" shall mean (i) the Executive's willful and
continued failure to substantially perform assigned duties with
the Corporation or its subsidiary corporations (other than any
such failure resulting from incapacity due to physical or mental
illness or any such actual or anticipated failure resulting from
termination for Good Reason), after a demand for substantial
performance is delivered to the Executive by the Board of
Directors of the Corporation by which the Executive is employed
(the "Board"), specifically identifying the manner in which the
Board believes that the duties have not been substantially
performed, or (ii) the Executive's willful conduct which is
demonstrably and materially injurious to the Corporation or any
subsidiary corporation by which the Executive is employed. For
purposes of this subsection 2(c), no act, or failure to act,
shall be considered "willful" unless done, or omitted to be done,
not in good faith and without reasonable belief that such action
or omission was in the best interest of the Corporation and the
subsidiary corporation, if any, by which the Executive is
employed.
(e) "Good Reason" shall mean (i) the assignment to the
Executive of any duties inconsistent in any respect with the
Executive's position (including status, offices, titles, and
reporting requirements), authority, duties or responsibilities as
contemplated by any employment agreement between the Executive
and the Corporation or a subsidiary of the Corporation, or any
other action by the Corporation or the subsidiary corporation, if
any, by which the Executive is employed which results in a
diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation or such subsidiary
corporation promptly after receipt of notice thereof given by the
Executive; (ii) any failure by the Corporation or the subsidiary
corporation, if any, by which the Executive is employed to comply
with any of the provisions of any employment agreement between
the Executive and the Corporation or such subsidiary corporation,
other than an insubstantial and inadvertent failure which is
remedied by the Corporation or such subsidiary corporation
promptly after receipt of notice thereof given by the Executive;
(iii) any change not concurred in by the Executive in the
location of the office at which the Executive is principally
based on the date hereof, except for travel reasonably required
in the performance of the Executive's responsibilities and
substantially consistent with prior business travel obligations
of the Executive; or (iv) any purported termination by the
Corporation or the subsidiary corporation, if any, by which the
Executive is employed of the Executive's employment otherwise
than as permitted by any employment agreement between the
Executive and the Corporation or such subsidiary corporation.
(f) "Change in Control" shall have the meaning set forth
in Section 10 of the Crompton & Knowles Corporation 1998 Long
Term Incentive Plan (the "Plan").
2. Grant.
In accordance with the terms and conditions of the Plan and
of this Agreement, the Executive is granted the opportunity to
earn "Shares" shares of the common stock of the Corporation (the
shares earned by the Executive, if any, hereinafter being called
the "Award") during the Performance Period.
3. Performance Objective.
(a) An Award shall be earned upon the achievement by the
Corporation during the Performance Period of $60 million in
Synergy Cost Savings.
(b) Total Synergy Cost Savings shall be determined as of
the last day of each complete fiscal year of the Corporation
during the Performance Period, and any Award that is earned shall
vest and be paid in accordance with Section 7 hereof.
4. Termination of Employment During Performance Period and
Prior to an Award's Having Been Earned.
(a) If the Executive's employment with the Corporation
or a subsidiary of the Corporation terminates during the
Performance Period and prior to an Award's having been earned
because of death, disability or Retirement, the Committee may, in
its sole discretion, make a pro rata Award to the Executive.
(b) If, following a Change in Control occurring after
the date of this Agreement and prior to an Award's having been
earned, the Executive's employment with the Corporation or a
subsidiary of the Corporation is terminated by the Executive for
Good Reason or by the Corporation by which the Executive is
employed other than for Cause, the Executive shall become
immediately vested in, and shall be promptly paid an Award.
(c) In the event that the Executive's employment with
the Corporation terminates during the Performance Period and
prior to an Award's having been earned for any reason other than
as specified in subsections 4(a) and 4(b) hereof, the Executive
shall not be entitled to receive any Award for the Performance
Period.
5. Voting of Shares.
After the date of any Award to the Executive hereunder, and
prior to the transfer to the Executive of all of the shares of
the Corporation comprising the Award, the Executive shall have
the right to instruct the trustee of the Crompton & Knowles
Corporation Long Term Incentive Plan Trust (the "Trustee") as to
the voting of such number of shares of the Corporation comprising
the Award as are held by the Trustee, together with any other
shares held by the Trustee in any account which may be
established by the Trustee on or after the date of the Award in
the name of the Executive.
6. Dividends.
The Executive shall be paid, at the time any shares earned
by him are transferred to him, such sum of money or, at the sole
discretion of the Corporation, such additional shares or other
property, as shall be equal to the Executive's pro rata share of
the Trust earnings to the date of and attributable to such
payment, but less such cash or shares, if any, as the Corporation
shall in its sole discretion determine are required to be
withheld to pay taxes due on the cash or shares then being
transferred to the Executive. The Executive shall have the right
to defer any portion of the earned Award.
7. Vesting and Payment of Award.
Any Award earned by the Executive hereunder shall vest in
and be paid to the Executive as follows:
(i) if earned on or before December 31, 2000
33.33% on January 1, 2001
33.33% on January 1, 2002
33.33% on January 1, 2003
(ii) if earned after December 31, 2000
33.33% on January 1, 2002
33.33% on January 1, 2003
33.33% on January 1, 2004
Notwithstanding any other provision of this Section 7, upon
the termination of the Executive's employment with the
Corporation on or after December 31, 2000, due to death,
disability, Retirement or for any reason following a Change in
Control occurring after December 31, 2000, any Award theretofore
earned by the Executive hereunder shall immediately become fully
vested in him, and be payable in shares, or the cash equivalent
of the fair market value on the date so vested. Termination of
the Executive's employment with the Corporation on or after
December 31, 2000, for any reason other than those specified in
the preceding sentence shall cause the forfeiture of any portion
of an Award not vested prior to the date of such termination of
employment.
8. Certain Further Payments by the Company.
In the event that any amount paid or distributed to the
Executive pursuant to this Agreement (taken together with any
amounts otherwise paid or distributed to the Executive in
connection with a change of control referred to in Section
280G(b)(i)) are subject to an excise tax under Section 4999 of
the Code or any successor or similar provision thereto (the
"Excise Tax"), the Corporation shall pay to the Executive an
additional amount such that, after taking into account all taxes
(including federal, state, local and foreign income, excise and
other taxes) incurred by the Executive on the receipt of such
additional amount, the Executive is left with the same after-tax
amount the Executive would have been left with had no Excise Tax
been imposed.
9. At Will Employment.
This Agreement does not alter the "at will" nature of the
Executive's employment, which employment may be terminated at any
time by the Executive or the Corporation by which the Executive
is employed.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CK Witco Corporation
By:
Its:
Name
1999-2001 Long Term Performance Award Agreement
This Agreement, dated as of February 1, 1999, (the
"Agreement") is made by and between Crompton & Knowles
Corporation (the "Corporation") and (the "Executive").
WHEREAS, the Corporation has adopted the 1998 Long Term
Incentive Plan (the "Plan") for the purpose of attracting,
motivating and retaining key employees by offering them long term
performance-based incentives and an opportunity to acquire
ownership of shares of the Corporation's common stock.
NOW, THEREFORE, the Executive, a key employee of the
Corporation, is granted the opportunity to earn shares of common
stock of the Corporation in accordance with the terms and
conditions of the Plan and this Agreement.
1. The Executive is granted the opportunity to earn a
maximum of shares of the common stock of the Corporation (the
actual number of shares earned by the Executive, if any,
hereinafter being called the "Award") during the Performance
Period.
2. Definitions
For purposes of this Agreement, the following terms shall have
the following meanings:
(a) "Performance Period" shall mean the period
January 1, 1999, to December 31, 2001.
(b) "Retirement" shall mean cessation of the
Executive's employment with the Corporation or a subsidiary of
the Corporation on or after the first day of the month on or next
after the Executive's sixth-second (62nd) birthday.
(c) "Cause" shall mean (i) the Executive's willful
and continued failure to substantially perform assigned duties
with the Corporation or its subsidiary corporations (other than
any such failure resulting from incapacity due to physical or
mental illness or any such actual or anticipated failure
resulting from termination for Good Reason), after a demand for
substantial performance is delivered to the Executive by the
Board of Directors of the Corporation by which the Executive is
employed (the "Board"), specifically identifying the manner in
which the Board believes that the duties have not been
substantially performed, or (ii) the Executive's willful conduct
which is demonstrably and materially injurious to the Corporation
or any subsidiary corporation by which the Executive is employed.
For purposes of this subsection 2(c), no act, or failure to act,
shall be considered "willful" unless done, or omitted to be done,
not in good faith and without reasonable belief that such action
or omission was in the best interest of the Corporation and the
subsidiary corporation, if any, by which the Executive is
employed.
(d) "Good Reason" shall mean (i) the assignment to
the Executive of any duties inconsistent in any respect with the
Executive's position (including staus, offices, titles, and
reporting requirements), authority, duties or responsibilities as
contemplated by any employment agreement between the Executive
and the Corporation or a subsidiary of the Corporation, or any
other action by the Corporation or the subsidiary corporation, if
any, by which the Executive is employed which results in a
diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation or such subsidiary
corporation promptly after receipt of notice thereof given by the
Executive; (ii) any failure by the Corporation or the subsidiary
corporation, if any, by which the Executive is employed to comply
with any of the provisions of any employment agreement between
the Executive and the Corporation or such subsidiary corporation,
other than an insubstantial and inadvertent failure which is
remedied by the Corporation or such subsidiary corporation
promptly after receipt of notice thereof given by the Executive;
(iii) any change not concurred in by the Executive in the
location of the office at which the Executive is principally
based on the date hereof, except for travel reasonably required
in the performance of the Executive's responsibilities and
substantially consistent with prior business travel obligations
of the Executive; or (iv) any purported termination by the
Corporation or the subsidiary corporation, if any, by which the
Executive is employed of the Executive's employment otherwise
than as permitted by any employment agreement between the
Executive and the Corporation or such subsidiary corporation.
(e) "Change in Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 1(a) of the Current Report on Form 8-K, as in
effect on January 1, 1998, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a "Change in Control" shall be
deemed to have occurred if (x) a third person, including a
"group" as such term is used in Section 13(d)(3) of the Exchange
Act, other than the trustee of any employee benefit plan of the
Corporation, becomes the beneficial owner, directly or
indirectly, of 20% or more of the combined voting power of the
Corporation's outstanding voting securities ordinarily having the
right to vote for the election of directors of the Corporation;
(y) during any period of 24 consecutive months individuals who,
at the beginning of such consecutive 24-month period, constitute
the Board of Directors of the Corporation (the "Crompton &
Knowles Board" generally and, as of the date of this Agreement,
the "Incumbent Board") cease for any reason (other than
Retirement upon reaching normal Retirement age, disability, or
death) to constitute at least a majority of the Crompton &
Knowles Board; provided that any person becoming a director of
the Corporation subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was
approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest
relating to the election of the directors of the Corporation, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent
Board; or (z) the Corporation shall cease to be a publicly owned
corporation having its outstanding common stock listed on the New
York Stock Exchange, the NASDAQ Stock Market or the American
Stock Exchange.
3. Performance Objectives
There shall be two Performance Objectives used to determine the
amount of the Award, if any, earned by the Executive, as follows:
(a) Return on Capital Objective
This objective, which must be achieved in order for the
Executive to earn an Award, shall be the achievement by the
Corporation of an average annual return on capital for the
Performance Period equal to or greater than the lesser of (i)
twelve percent (12%) or (ii) the average annual return on capital
achieved by a select group of specialty chemical companies as
monitored by the Corporation.
(b) Earnings Per Share ("EPS") Objective
This objective shall be the achievement by the Corporation
of cumulative earnings per share for the Performance Period of
not less than $4.84 per common share.
The following table shows by way of example the cumulative
earnings per share which will be realized by the Corporation if
the earnings per share increase annually during the Performance
Period at rates of eight, ten and thirteen percent from the 1998
base of $1.38 per share and the Award associated with cumulative
earnings per share at each of those levels:
Threshold Award Target Award Maximum Award
Cumulative $4.84 $5.02 $5.31
EPS
Award Earned
The actual Award, if any, earned by the Executive shall be
based upon the actual cumulative earnings per share achieved by
the Corporation during the Performance Period, and except in the
event that cumulative earnings per share for the Performance
Period are equal to the amounts shown in the above table, shall
be determined by interpolation from the values shown in the
table.
4. Termination of Employment During Performance
Period
(a) If the Executive's employment with the Corporation
or a subsidiary of the Corporation terminates during the
Performance Period because of death, disability or Retirement,
the Executive Compensation Committee of the Crompton & Knowles
Board (the "Committee") may, in its sole discretion, make a pro
rata Award to the Executive.
(b) If, following a Change in Control occurring
after the date of this Agreement, the Executive's employment with
the Corporation or a subsidiary of the Corporation is terminated
during the Performance Period by the Executive for Good Reason or
by the Corporation by which the Executive is employed other than
for Cause, the Executive shall become immediately vested in, and
shall be promptly paid a pro rata Award which Award shall be
determined on the basis of the cumulative earnings per share
achieved by the Corporation during the Performance Period through
the date of such termination of the Executive's employment and a
proration (based on the number of days in the Performance Period
which have elapsed on the date of such termination of the
Executive's employment) of the share and cumulative earnings per
share quantities specified in section 3 hereof. The Executive
shall be entitled to a prorated Award pursuant to this subsection
(b) without regard to whether or not the Corporation has achieved
the return on capital objective specified in section 3 hereof.
(c) In the event that the Executive's employment with
the Corporation terminates during the Performance Period for any
reason other than
as specified in subsections 4(a) and 4(b) hereof, the
Executive shall not be entitled to receive any Award for the
Performance Period.
5. After the date of any Award to the Executive
hereunder, and prior to the transfer to the Executive of all of
the shares of the Corporation comprising the Award, the Executive
shall have the right to instruct the trustee of the Crompton &
Knowles Corporation Long Term Incentive Plan Trust (the
"Trustee") as to the voting of such number of shares of the
Corporation comprising the Award as are held by the Trustee,
together with any other shares held by the Trustee in any account
which may be established by the Trustee on or after the date of
the Award in the name of the Executive.
6. The Executive shall be paid, at the time any shares
earned by him are transferred to him, such sum of money or, at
the sole discretion of the Corporation, such additional shares or
other property, as shall be equal to the Executive's pro rata
share of the Trust earnings to the date of and attributable to
such payment, but less such cash or shares, if any, as the
Corporation shall in its sole discretion determine are required
to be withheld to pay taxes due on the cash or shares then being
transferred to the Executive. The Executive shall have the right
to defer any portion of the earned Award.
7. Any Award made to the Executive hereunder shall
vest in the Executive and the Executive shall be entitled to
receive the Award only as follows:
25% on December 31, 2001
25% on December 31, 2002
25% on December 31, 2003
25% on Retirement of the Executive
Notwithstanding any other provision of this Section 7, upon
the termination of the Executive's employment with the
Corporation on or after December 31, 2001, due to death,
disability, Retirement or for any reason following a Change in
Control occurring after December 31, 2001, any Award theretofore
earned by the Executive hereunder shall immediately become fully
vested in him. Termination of the Executive's employment with
the Corporation on or after December 31, 2001, for any reason
other than those specified in the preceding sentence shall cause
the forfeiture of any portion of an Award not vested prior to the
date of such termination of employment.
8. This Agreement does not alter the "at will"
nature of the Executive's employment, which employment may be
terminated at any time by the Executive or the Corporation by
which the Executive is employed.
9. In the event that the shareholders of the
Corporation do not approve the Crompton & Knowles Corporation
1998 Long Term Incentive Plan on or before April 27, 1999, this
Agreement shall be null and void and of no further force or
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CROMPTON & KNOWLES CORPORATION
By:
The Executive
2000-2002 Long Term Performance Award Agreement
This Agreement, dated as of February 24, 2000, (the
"Agreement") is made by and between CK Witco Corporation (the
"Corporation") and Name (the "Executive") of Town.
WHEREAS, the Corporation has adopted the 1998 Long Term
Incentive Plan (the "Plan") for the purpose of attracting,
motivating and retaining key employees by offering them long term
performance-based incentives and an opportunity to acquire
ownership of shares of the Corporation's common stock.
NOW, THEREFORE, the Executive, a key employee of the
Corporation, is granted the opportunity to earn shares of common
stock of the Corporation in accordance with the terms and
conditions of the Plan and this Agreement.
1. The Executive is granted the opportunity to earn a
maximum of Maximum shares of the common stock of the Corporation
(the actual number of shares earned by the Executive, if any,
hereinafter being called the "Award") during the Performance
Period.
2. Definitions
For purposes of this Agreement, the following terms shall have
the following meanings:
(a) "Performance Period" shall mean the period January
1, 2000, to December 31, 2002.
(b) "Retirement" shall mean cessation of the Executive's
employment with the Corporation or a subsidiary of the
Corporation occurring on or after the Executive's sixty-second
(62nd) birthday.
(c) "Cause" shall mean (i) the Executive's willful and
continued failure to substantially perform assigned duties with
the Corporation or its subsidiary corporations (other than any
such failure resulting from incapacity due to physical or mental
illness or any such actual or anticipated failure resulting from
termination for Good Reason), after a demand for substantial
performance is delivered to the Executive by the Board of
Directors of the Corporation by which the Executive is employed
(the "Board"), specifically identifying the manner in which the
Board believes that the duties have not been substantially
performed, or (ii) the Executive's willful conduct which is
demonstrably and materially injurious to the Corporation or any
subsidiary corporation by which the Executive is employed. For
purposes of this subsection 2(c), no act, or failure to act,
shall be considered "willful" unless done, or omitted to be done,
not in good faith and without reasonable belief that such action
or omission was in the best interest of the Corporation and the
subsidiary corporation, if any, by which the Executive is
employed.
(d) "Good Reason" shall mean (i) the assignment to the
Executive of any duties inconsistent in any respect with the
Executive's position (including status, offices, titles, and
reporting requirements), authority, duties or responsibilities as
contemplated by any employment agreement between the Executive
and the Corporation or a subsidiary of the Corporation, or any
other action by the Corporation or the subsidiary corporation, if
any, by which the Executive is employed which results in a
diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation or such subsidiary
corporation promptly after receipt of notice thereof given by the
Executive; (ii) any failure by the Corporation or the subsidiary
corporation, if any, by which the Executive is employed to comply
with any of the provisions of any employment agreement between
the Executive and the Corporation or such subsidiary corporation,
other than an insubstantial and inadvertent failure which is
remedied by the Corporation or such subsidiary corporation
promptly after receipt of notice thereof given by the Executive;
(iii) any change not concurred in by the Executive in the
location of the office at which the Executive is principally
based on the date hereof, except for travel reasonably required
in the performance of the Executive's responsibilities and
substantially consistent with prior business travel obligations
of the Executive; or (iv) any purported termination by the
Corporation or the subsidiary corporation, if any, by which the
Executive is employed of the Executive's employment otherwise
than as permitted by any employment agreement between the
Executive and the Corporation or such subsidiary corporation.
(e) "Change in Control" shall have the meaning set forth
in Section 10 of the Crompton & Knowles Corporation 1998 Long
Term Incentive Plan (the "Plan").
(f) "Fair Market Value" shall have the meaning set forth
in Section 2 (j) of the Plan
3. Performance Objectives
There shall be two Performance Objectives used to determine the
amount of the Award, if any, earned by the Executive, as follows:
(a) Return on Equity Objective
This objective, which must be achieved in order for
the Executive to earn an Award, shall be the achievement by the
Corporation of a return on equity for the fiscal year ending
December 31, 2002, of not less than seventeen and a half percent
(17.5%).
(b) Earnings Per Share ("EPS") Objective
This objective shall be the achievement by the
Corporation of cumulative earnings per share for the Performance
Period of not less than $4.32 per common share.
The following table shows the Award associated with
cumulative earnings per share for the Performance Period at three
different levels:
Threshold Award Target Award Maximum Award
Cumulative $4.32 $4.49 $4.65
EPS
Award Earned Threshold Target Maximum
The actual Award, if any, earned by the Executive shall be based
upon the actual cumulative earnings per share achieved by the
Corporation during the Performance Period, and except in the
event that cumulative earnings per share for the Performance
Period are equal to the amounts shown in the above table, shall
be determined by interpolation from the values shown in the
table.
4. Termination of Employment During Performance Period
(a) If the Executive's employment with the Corporation or
a subsidiary of the Corporation terminates during the Performance
Period because of death, disability or Retirement, the Executive
Compensation Committee of the CK Witco Board (the "Committee")
may, in its sole discretion, make a pro rata Award to the
Executive.
(b) If, following a Change in Control occurring after
the date of this Agreement, the Executive's employment with the
Corporation or a subsidiary of the Corporation is terminated
during the Performance Period by the Executive for Good Reason or
by the Corporation by which the Executive is employed other than
for Cause, the Executive shall become immediately vested in, and
shall be promptly paid a pro rata Award which Award shall be
determined on the basis of the cumulative earnings per share
achieved by the Corporation during the Performance Period through
the date of such termination of the Executive's employment and a
proration (based on the number of days in the Performance Period
which have elapsed on the date of such termination of the
Executive's employment) of the cumulative earnings per share
objectives specified in section 3 hereof. In no case shall the
Award be less than the Target Award. The Executive shall be
entitled to an Award pursuant to this subsection (b) without
regard to whether or not the Corporation has achieved the return
on equity objective specified in section 3 hereof.
(c) In the event that the Executive's employment with
the Corporation terminates during the Performance Period for any
reason other than as specified in subsections 4(a) and 4(b)
hereof, the Executive shall not be entitled to receive any Award
for the Performance Period.
5. Voting of Shares
After the date of any Award to the Executive
hereunder, and prior to the transfer to the Executive of all of
the shares of the Corporation comprising the Award, the Executive
shall have the right to instruct the trustee of the CK Witco
Corporation Long Term Incentive Plan Trust (the "Trustee") as to
the voting of such number of shares of the Corporation comprising
the Award as are held by the Trustee, together with any other
shares held by the Trustee in any account which may be
established by the Trustee on or after the date of the Award in
the name of the Executive.
6. Vesting and Payment of Award
Any Award made to the Executive hereunder shall vest in
the Executive and the Executive shall be entitled to receive the
Award only as follows:
33.3% on January 1, 2003
33.3% on January 1, 2004
33.3% on January 1, 2005
Notwithstanding any other provision of this Section 6, upon
the termination of the Executive's employment with the
Corporation on or after December 31, 2002, due to death,
disability, Retirement or for any reason following a Change in
Control occurring after December 31, 2002, any Award theretofore
earned by the Executive hereunder shall immediately become fully
vested in him, and be payable in shares, or the cash equivalent
of the Fair Market Value of the shares constituting the Award on
the date so vested. Termination of the Executive's employment
with the Corporation on or after December 31, 2002, for any
reason other than those specified in the preceding sentence shall
cause the forfeiture of any portion of an Award not vested prior
to the date of such termination of employment.
7. Certain Further Payments by the Company.
In the event that any amount paid or distributed to the
Executive pursuant to this Agreement (taken together with any
amounts otherwise paid or distributed to the Executive in
connection with a change of control referred to in Section
280G(b)(i)) is subject to an excise tax under Section 4999 of the
Code or any successor or similar provision thereto (the "Excise
Tax"), the Corporation shall pay to the Executive an additional
amount such that, after taking into account all taxes (including
federal, state, local and foreign income, excise and other taxes)
incurred by the Executive on the receipt of such additional
amount, the Executive is left with the same after-tax amount the
Executive would have been left with had no Excise Tax been
imposed.
8. At Will Employment
This Agreement does not alter the "at will" nature of the
Executive's employment, which employment may be terminated at any
time by the Executive or the Corporation by which the Executive
is employed.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CK WITCO CORPORATION
By:
Its:
Name
SUPPLEMENTAL RETIREMENT AGREEMENT
THIS AGREEMENT dated as of ,
("Agreement"), by and between of
, ("Employee") and CK Witco Corporation, a
Delaware corporation ("Corporation").
WITNESSETH:
WHEREAS, the Corporation and the Employee are parties to a
Supplemental Retirement Agreement dated as of ,
; and
WHEREAS, the Corporation and the Employee wish to amend and
restate in its entirety the aforementioned Supplemental Retirement
Agreement;
NOW, THEREFORE, the Employee and the Corporation hereby agree
that the Supplemental Retirement Agreement between the Employee and
the Corporation dated as of , shall be
amended and restated in its entirety to read as follows:
1. The Corporation has entered into this Agreement to
induce the Employee to continue in its employ, recognizing that in
the case of a limited number of key executive employees, including
the Employee, the ordinary retirement benefits provided under the
Corporation's retirement system do not afford sufficient incentive
in terms of economic security, when compared with retirement
arrangements available from other prospective employers who have
been, are, or may be competing for their services. Nothing herein
shall be deemed a contract of employment for any minimum fixed
term, or shall restrict the freedom of the Corporation or the
Employee to terminate the employment relationship between them at
any time.
2. All references herein to the Corporation shall be
deemed to include any subsidiary corporation as to which the
Corporation owns, directly or indirectly, one hundred percent of
the voting stock.
3. For the purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Actuarial Equivalent" shall mean an amount or
benefit of equivalent value computed using the UP 1994 Mortality
Table and an interest rate equal to the average of the 10-year
Moody's Aaa Municipal Bond Yield Average for the fourth, fifth and
sixth full weeks immediately preceding the date on which payments
are to commence.
(b) "Cause" shall mean (i) the Employee's willful and
continued failure to substantially perform assigned duties with the
Corporation (other than any such failure resulting from incapacity
due to physical or mental illness or any such actual or anticipated
failure resulting from termination for Good Reason (as defined in
subsection 3(f) hereof), after a demand for substantial performance
is delivered to the Employee by the Board of Directors of the
Corporation, specifically identifying the manner in which the Board
believes that the duties have not been substantially performed, or
(ii) the Employee's willful conduct which is demonstrably and
materially injurious to the Corporation. For purposes of this
subsection (b), no act, or failure to act, shall be considered
"willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the
best interest of the Corporation.
(c) "Change in Control" shall mean a change in
control of the Corporation of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date of this Agreement, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a "Change
in Control" shall be deemed to have occurred if: (i) a third
person, including a "group" as such term is used in Section
13(d)(3) of the Exchange Act, other than the trustee of any
employee benefit plan of the Corporation, becomes the beneficial
owner, directly or indirectly, of 20% or more of the combined
voting power of the Corporation's outstanding voting securities
ordinarily having the right to vote for the election of directors
of the Corporation; (ii) during any period of 24 consecutive months
individuals who, at the beginning of such consecutive 24-month
period, constitute the Board of Directors of the Corporation (the
"Board" generally and, as of the date of this Agreement, the
"Incumbent Board") cease for any reason (other than retirement upon
reaching normal retirement age, disability, or death) to constitute
at least a majority of the Board; provided that any person becoming
a director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was
approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest
relating to the election of the Directors of the Corporation, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent
Board; or (iii) the Corporation shall cease to be a publicly owned
corporation having its outstanding Common Stock listed on the New
York Stock Exchange, the NASDAQ Stock Market or the American Stock
Exchange.
(d) "Company Plan Benefit" shall mean the amount of
benefit payable to or for the account of the Employee from the
Corporation's Individual Account Retirement Plan or any other
retirement plan sponsored by the Corporation which may hereafter be
adopted in lieu of or in addition to said Individual Account
Retirement Plan.
(e) "Compensation" shall mean all of the Employee's
cash compensation for a calendar year, including salary, any amount
contributed by the Employee to a cash or deferred plan under
Section 401(k) of the Internal Revenue Code of 1986, as amended
from time to time, and any incentive compensation award or bonus
with respect to such year (even if paid in a subsequent year), but
excluding any incentive compensation award or bonus paid during
such year with respect to a prior year and extraordinary earnings
such as insurance costs or gains on exercise of stock options.
(f) "Good Reason" shall mean (i) the assignment to
the Employee of any duties inconsistent in any respect with the
Employee's position (including status, offices, titles, and
reporting requirements), authority, duties, or responsibilities as
contemplated by any Employment Agreement between the Employee and
the Corporation, or any other action by the Corporation which
results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation promptly after receipt
of notice thereof given by the Employee; (ii) any failure by the
Corporation to comply with any of the provisions of any Employment
Agreement between the Employee and the Corporation, other than an
insubstantial and inadvertent failure which is remedied by the
Corporation promptly after receipt of notice thereof given by the
Employee; (iii) any change not concurred in by the Employee in the
location of the office at which the Employee is principally based,
except for travel reasonably required in the performance of the
Employee's responsibilities and substantially consistent with prior
business travel obligations of the Employee; or (iv) any purported
termination by the Corporation of the Employee's employment
otherwise than as permitted by any Employment Agreement between the
Employee and the Corporation.
(g) "Normal Retirement Date" shall mean the first day
of the first full month commencing on or after the Employee's
sixty-second (62nd) birthday.
(h) "Projected Compensation" shall mean (i) for any
calendar year throughout which the Employee is employed by the
Corporation, his Compensation (as defined in subsection 3(e)
hereof) for such year, and (ii) for any calendar year during or
after which his employment has been terminated, the compensation
the Employee would have received for such year if he had received
(A) salary at a rate determined by projecting his annual rate of
salary at the end of the last full calendar year of his employment
forward at an annual rate of increase equal to 5% in excess of the
annual percentage change in the Consumer Price Index as published
by the U.S. Bureau of Labor Statistics for the last full year of
his employment and (B) a bonus each year equal to fifty percent
(50%) of his salary as thus projected.
4. If, prior to his Normal Retirement Date, the Employee
shall voluntarily terminate his employment with the Corporation
without Good Reason or his employment shall be terminated by the
Corporation for Cause, he shall thereby forfeit all rights and
benefits under this Agreement. If the employment of the Employee
shall be terminated on or after his Normal Retirement Date, the
Employee shall voluntarily terminate his employment for Good Reason
or the employment of the Employee shall be terminated by the
Corporation without Cause, this Agreement shall continue in full
force and effect, and the Employee shall become entitled to the
rights and benefits hereinafter set forth upon the occurrence of
the events respectively giving rise thereto.
5. If the Employee shall remain in the employ of the
Corporation until and shall reach his Normal Retirement Date, he
shall be entitled to receive a supplemental retirement benefit
under this Agreement which shall be at an annual rate equal to
fifty percent (50%) of the Employee's average annual Compensation
during those five (5) calendar years in which such Compensation was
highest during the ten (10) calendar years immediately preceding
his actual retirement date. Such supplemental retirement benefit
shall commence on the Employee's actual retirement date and shall
be payable in one of the benefit payment forms described in
subsection 9(a), as the Employee shall elect.
6. If the Employee's employment by the Corporation shall
be terminated (other than by reason of his death or disability or
following a Change in Control as described in section 7 of this
Agreement) prior to his Normal Retirement Date under circumstances
not resulting in his forfeiture of benefits and rights under
section 4 of this Agreement, he shall be entitled to receive a
reduced supplemental retirement benefit under this Agreement which
shall be at an annual rate computed as follows:
(a) There shall first be determined the amount which
is equal to fifty percent (50%) of the Employee's average annual
Compensation during those five (5) calendar years in which such
Compensation was highest during the ten (10) calendar years
immediately preceding the year in which the termination of his
employment occurs.
(b) The amount thus determined shall be multiplied by
a fraction in which the numerator shall be the number of full years
of continuous service the Employee shall have completed with the
Corporation prior to the termination of his employment and the
denominator shall be the number of full years of continuous service
he would have completed had he remained in the continuous service
of the Corporation until his Normal Retirement Date.
Such reduced supplemental retirement benefit shall commence on the
first day of the month following the Employee's termination of
employment and shall be payable in one of the benefit payment forms
described in subsection 9(a), as the Employee shall elect.
7. Anything in sections 4 or 6 of this Agreement to the
contrary notwithstanding, if, prior to his Normal Retirement Date
but after a Change in Control of the Corporation shall have
occurred, the Corporation shall terminate the Employee's employment
other than for Cause, disability, or death or the employment of the
Employee shall be terminated voluntarily by the Employee for Good
Reason, he shall be entitled to receive one of the following
supplemental retirement benefits:
(a) If the Employee has not attained the age of 55 on
the date his termination of employment occurs, a supplemental
retirement benefit which shall be at an annual rate equal to the
amount by which fifty percent (50%) of the Employee's average
annual Projected Compensation during those five (5) calendar years
in which such Projected Compensation is highest during the ten (10)
calendar years immediately preceding the year in which he would
have attained age 55. Such supplemental retirement benefit shall
commence on the first day of the month following the month in which
the Employee attains age 62 and shall be payable in one of the
benefit payment forms described in subsection 9(a), as the Employee
shall elect.
(b) If the employee has attained age 55 on the date
his termination of employment occurs, a supplemental retirement
benefit which shall be at an annual rate equal to fifty percent
(50%) of the Employee's average annual Compensation during those
five (5) calendar years in which such Compensation was highest
during the ten (10) calendar years immediately preceding the year
in which the termination of his employment occurs. Such
supplemental retirement benefit shall commence on the first day of
the month following the month in which the Employee attains age 62
and shall be payable in one of the benefit payment forms described
in subsection 9(a), as the Employee shall elect.
(c) At the election of the Employee, a lump sum
payment in an amount which shall be the single sum Actuarial
Equivalent value as of the date of termination of the Employee's
employment by the Corporation of the benefit to which the Employee
would have been entitled under subsections 7(a) or 7(b) of this
Agreement. Such supplemental retirement benefit shall be paid to
the Employee not later than fifteen (15) days following the date of
termination of the Employee's employment by the Corporation.
8. If in the opinion of the Corporation the Employee
becomes totally and permanently disabled at any time while in the
employment of the Corporation, he shall become entitled to a
disability benefit which shall be at an annual rate equal to the
amount by which
(a) seventy-five percent (75%) of the Employee's
average annual Compensation during those five (5) calendar years in
which such Compensation was highest during the ten (10) calendar
years preceding the year in which his disability occurs
exceeds
(b) the annual benefit which the Employee would be
entitled to receive under the Corporation's long term disability
insurance program if he was then eligible for benefits thereunder
(regardless of whether he participates in said program);
provided, however, that if the Employee is not entitled to receive
any benefit under said program, the disability benefit to which he
is entitled hereunder shall be in an amount equal to forty percent
(40%) of the Employee's average annual Compensation determined as
provided in subsection 8(a) above, and provided further that the
disability benefit to which the Employee is entitled hereunder
shall in no event be less than five percent (5%) of his average
annual Compensation determined as provided in subsection 8(a)
above. Such disability benefit shall be payable in equal monthly
installments, the first payment to be made on the first day of the
month following that in which the Employee's salary is terminated
because of such disability, and payments shall be made on the first
day of each month thereafter so long as such total disability
subsists and the Employee lives; provided, however, if the Employee
lives until his Normal Retirement Date, he may thereupon elect to
receive, in lieu of the disability benefit he had been receiving
under this section 8, the supplemental retirement benefit to which
he would then be entitled under section 6 if his employment by the
Corporation had terminated other than by reason of disability on
the date his disability occurred.
9. (a) The normal form in which the benefit payable
under sections 5, 6, 7(a) or 7(b) of this Agreement shall be paid
shall be a monthly benefit payable for life and without refund. In
lieu of such normal benefit payment form, the Employee may elect to
receive his benefit hereunder in the form of a monthly benefit
payable for life with a period certain of up to 180 months, in the
form of a monthly benefit payable for a period certain, or in the
form of a monthly benefit payable for life with continuation of
such payments (or a specified percentage thereof) to such
beneficiary as the Employee may designate for the life of such
beneficiary ("Joint and Survivor Annuity"). The amount of benefit
payable under each such alternative benefit payment form shall be
the Actuarial Equivalent of the benefit payable in the normal form
to which the Employee would otherwise be entitled hereunder. Any
election of an alternative benefit payment form shall be made in
writing and may be changed or rescinded by the Employee at any time
prior to the date on which benefit payments are to commence. The
Employee shall have the right to designate in writing the
beneficiary or beneficiaries to receive the benefit, if any, which
is payable under any benefit payment form after the Employee's
death and may change his designation of beneficiary from time to
time, at any time prior to the date on which benefit payments are
to commence. If there shall be no beneficiary designated and
surviving at the Employee's death, the estate of the Employee shall
be the beneficiary. Whenever any benefits hereunder become payable
to the beneficiary of the Employee, the Corporation may, in its
discretion, authorize payment of such benefits to the beneficiary
in a single lump sum which is the Actuarial Equivalent of such
benefits.
(b) Anything in this subsection 9(a) to the contrary
notwithstanding, at any time after the date on which benefit
payments commence, the Employee may elect to receive his benefits
hereunder in a single lump sum in an amount which is equal to 90%
of the Actuarial Equivalent of the benefit payable in the normal
form to which the Employee is otherwise entitled hereunder on the
date as of which such election is made.
10. (a) If the Employee shall die while currently
receiving a benefit under the provisions of sections 5, 6, 7(a) or
7(b) of this Agreement and the Employee shall have elected a
benefit payment form other than a monthly benefit payable for life
with no period certain, any benefits payable after his death shall
be paid to his beneficiary in accordance with the provisions of the
benefit payment form elected by the Employee. If the Employee
shall die after having reached his Normal Retirement Date but prior
to his actual retirement date and the Employee shall have elected
a benefit payment form other than a monthly benefit payable for
life with no period certain, benefits shall be paid to his
beneficiary as if the Employee had commenced to receive benefits
hereunder on the first day of the month in which his death
occurred. If the Employee shall die while in the active employ of
the Corporation but prior to his Normal Retirement Date, or if the
Employee shall die after having become entitled to receive a
disability benefit under section 8 but prior to his Normal
Retirement Date, a death benefit shall be paid to the Employee's
beneficiary, in lieu of any other benefit under this Agreement,
which shall be at an annual rate equal to fifty percent (50%) of
the Employee's average annual Compensation during those five (5)
calendar years in which such Compensation was highest during the
ten (10) calendar years immediately preceding the year in which his
death occurs or the year in which his disability occurred, as the
case may be. Such death benefit, which shall be in addition to any
Company Plan Benefit or benefits under any group life insurance
plan sponsored by the Corporation which is payable on account of
the Employee's death, shall be payable in equal monthly
installments beginning on the first day of the month following that
in which the death of the Employee occurs and continuing thereafter
for a period certain of 120 months; provided that the Beneficiary
entitled thereto may elect to have such benefit paid in any of the
forms described in section 9, except a Joint and Survivor Annuity,
in an amount which is the Actuarial Equivalent of the form of
benefit otherwise payable under this section 10.
(b) If the Employee shall die after having become
entitled to a benefit under subsections 7(a) or 7(b) hereof but
prior to attaining age 62, a death benefit shall be paid to the
Employee's beneficiary, in lieu of any other benefit under this
Agreement, which shall be the single sum Actuarial Equivalent value
as of the Employee's death of the benefit to which he would have
been entitled had he survived to age 62. Such death benefit shall
be payable in a lump sum as soon as practicable after the
Employee's death; provided that the beneficiary entitled thereto
may elect to have such death benefit paid in any of the forms
described in section 9 except a Joint and Survivor Annuity.
11. Anything in this Agreement to the contrary
notwithstanding, if at any time following termination of his
employment with the Corporation the Employee shall directly or
indirectly compete with the Corporation (which shall be deemed to
include any subsidiary or affiliate of the Corporation), whether as
an individual proprietor or entrepreneur or as an officer,
employee, partner, stockholder, or in any capacity connected with
any enterprise, in any business in which the Corporation is engaged
at the time of the termination of the Employee's employment within
any state or possession of the United States of America or any
foreign country within which business is then specifically planned
by the Corporation to be conducted, the Corporation may suspend the
payment of any benefits hereunder to the Employee until such
competition shall have ceased, and in the event such competition by
the Employee shall not have ceased to the satisfaction of the
Corporation within 90 days after the Corporation shall have given
written notice to the Employee to cease the conduct thereof, the
Corporation may at any time thereafter terminate its obligations
under this Agreement. For the purpose of the preceding sentence,
conducting business, doing business, or engaging in business shall
be deemed to embrace sales to customers or performance of services
for customers who are within a relevant geographical area, without
any necessity of any presence of the Corporation therein. Nothing
herein, however, shall prohibit the Employee from acquiring or
holding any issue of stock or securities of any company which has
any securities listed on a national exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any
one time he and members of his immediate family do not own more
than five percent (5%) of the voting securities of any such
company.
12. This Agreement is an unfunded plan maintained for the
purpose of providing deferred compensation for one of a select
group of management or highly compensated employees for purposes of
Title I of the Employee Retirement Income Security Act of 1974.
The Corporation will make all benefit payments hereunder solely on
a current disbursement basis out of the general assets of the
Corporation, including without limitation from assets held in any
grantor trust established by the Corporation for the purpose of
making some or all of such payments.
13. This Agreement shall bind and run to the benefit of
the successors and assigns of the Corporation, including any
corporation or other form of business organization with which it
may merge or consolidate or to which it may transfer substantially
all of its assets.
14. The rights of the Employee under this Agreement shall
not be assigned, hypothecated, or otherwise transferred in any
manner.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Employee has hereunto signed his name
and CK Witco Corporation has caused this instrument to be executed
in its name and on its behalf by its duly authorized officer, as of
the day of , .
Employee
CK WITCO CORPORATION
By:
Its:
CK WITCO CORPORATION
1999 ANNUAL REPORT
GLOBAL SOLUTIONS
<PAGE>
ABOUT THE COMPANY
CK Witco is a global producer and marketer of polymer products and
specialty chemicals and was formed with the 1999 merger of Crompton & Knowles
Corporation and Witco Corporation. The company has about 8,600 employees in
research, manufacturing, sales, and administrative facilities in every major
market around the world.
Available in 120 countries, our products and services solve customer
problems and add value to customers' products. Our 114 million shares of common
stock are traded on the New York Stock Exchange under the symbol CNW. Up-to-date
information about the company is available at www.ckwitco.com.
The company has more than 50 manufacturing facilities in 20
countries and receives 43% of its revenues from customers outside of the United
States.
MANUFACTURING LOCATIONS
NORTH AMERICA LATIN/SOUTH AMERICA ASIA/PACIFIC
Alabama Brazil Australia
Connecticut Mexico China
Illinois Indonesia
Louisiana EUROPE Malaysia
New Jersey Singapore
North Carolina Belgium South Korea
Pennsylvania Denmark Taiwan
Tennessee France Thailand
Texas Germany
West Virginia Italy
Bahamas Netherlands
Canada United Kingdom
CONTENTS
Financial highlights............................................. 1
Chairman's letter................................................ 2
Review of business............................................... 6
Management's discussion & analysis............................... 26
Consolidated financial statements................................ 34
Notes to consolidated financial statements....................... 38
Responsibility for financial statements.......................... 53
Independent auditors' report..................................... 53
Five-year selected financial data................................ 54
Responsible Care(R) statement.................................... 55
Corporate management............................................. 56
Board of Directors and corporate data
(INSIDE BACK COVER)
<PAGE>
1999 ADJUSTED SALES*
[PIE CHART]
Polymer Additives 34%
Polymers 10%
Polymer Processing Equipment 10%
OrganoSilicones 15%
Crop Protection 13%
Other 18%
1999 ADJUSTED OPERATING PROFIT*
[PIE CHART]
Polymer Additives 28%
Polymers 22%
Polymer Processing Equipment 5%
OrganoSilicones 15%
Crop Protection 22%
Other 8%
The company has six primary business segments divided into two
groups:
POLYMER PRODUCTS
$1.7 Billion In Sales*
POLYMER ADDITIVES
The largest worldwide producer of heat stabilizers for polyvinyl
chloride. A leading worldwide producer of additives for plastics and rubber.
KEY PRODUCTS
Plastics additives include alkyls, amides, stearates, white oils,
heat stabilizers, plasticizers, lubricants, olefin additives, tin specialties,
antioxidants, antistats, polymer modifiers, foaming agents, polymerization
inhibitors, chemical intermediates, curatives, and dispersants. Rubber chemicals
include antioxidants, antiozonants, accelerators, and miscellaneous specialty
products. Urethane chemicals include polyester polyols, polyurethane
dispersions, microcellular systems, silicones, amine catalysts, and specialty
modifiers.
MARKETS SERVED
Products are sold to producers, compounders, extruders, and molders
of vinyl, rubber, styrenics, polyolefins, and fiberglass. Rubber and plastic
applications in construction,
- -------------------
* Pro forma as adjusted for divested businesses.
<PAGE>
automotive, transportation, packaging, flooring, and synthetic fibers. Coatings
and adhesives for industrial and marine uses.
POLYMERS
The number one world supplier of castable urethane prepolymers. The
number one manufacturer of EPDM in North America. World's largest dedicated
nitrile rubber production facility.
KEY PRODUCTS
Abrasion and wear-resistant castable urethane prepolymers. Heat-,
sunlight-, and ozone-resistant EPDM rubber. Oil-resistant nitrile rubber
polymers.
MARKETS SERVED
Urethane end products include industrial and printing rolls, mining
machinery and equipment, mechanical goods, solid industrial tires & wheels, and
sporting/recreational goods. EPDM is used in automotive applications as well as
in roofing, hose, and wire & cable insulation. Nitrile rubber is used in
automotive hoses, seals, O-rings, and other consumer and industrial
applications.
POLYMER PROCESSING EQUIPMENT
The number one worldwide producer of plastics and rubber extruders
and extrusion systems.
KEY PRODUCTS
Integrated single-screw, twin-screw and compounding extruders, and
extrusion systems with advanced electronic controls.
MARKETS SERVED
Packaging, automotive, construction, appliance, medical, power &
communications cables, plastics.
<PAGE>
1999 ADJUSTED REGIONAL SALES*
PIE CHART]
United States 57%
Canada 4%
Asia/Pacific 7%
Europe/Africa 28%
Latin America 4%
1999 END MARKET SALES
[PIE CHART]
Auto & Transport 25%
Construction/Home Furnishings 24%
Agriculture 12%
Non-Tire Rubber 9%
Packaging/Paper 7%
Apparel 7%
Other 16%
-------------------------
SPECIALTY PRODUCTS
$1.4 Billion in sales*
ORGANOSILICONES
World's leading supplier of specialty silicones and organofunctional
silanes serving a wide variety of industrial and consumer markets.
KEY PRODUCTS
Silane coupling agents and adhesion promoters. Silicone surfactants,
foam control agents, and other specialty silicones. Urethane foam additives,
including surfactants and catalysts.
MARKETS SERVED
Rubber, coatings, fiberglass, adhesives & sealants used for
automotive, transportation and tires, construction, and other industrial
applications. Urethane foam for automotive, appliances and construction.
Textiles and non-wovens, agriculture, personal care.
CROP PROTECTION
A world leader in seed treatment products, with the largest seed
treatment company in North America, our Gustafson joint venture with Bayer
Corporation.
<PAGE>
KEY PRODUCTS
Fungicides, miticides, insecticides, herbicides, growth regulants,
seed treatments, and surfactants.
MARKETS SERVED
Focus on high-value crops such as fruits, nuts, cotton, turf and
ornamentals. Seed treatments cross all major crop segments and geographies.
OTHER SPECIALTIES
World's leading supplier of amine antioxidants serving the
lubricants industry. A leading global supplier of sodium sulfonates for the
metalworking industry. Leading producer of industrial dyes.
KEY PRODUCTS
Petroleum and lubricant additives. USP white mineral oils,
petrolatums, microcrystalline waxes, cable-filling compounds. Industrial dyes.
Fatty acids and glycerines.
MARKETS SERVED
Petroleum and lubricant additive components for automotive, marine
and metalworking. Paper, coatings and inks. Personal care, household, and
institutional.
<PAGE>
FINANCIAL HIGHLIGHTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) (a) 1999 1998
-----------------------
Net sales $2,092,358 $1,796,119
Operating profit $ 1,383 $ 218,298
Interest expense $ 69,833 $ 78,520
Net earnings (loss) $ (175,038) $ 161,755
Basic earnings (loss) per share $ (2.10) $ 2.20
Diluted earnings (loss) per share $ (2.10) $ 2.14
Total assets $3,726,618 $1,408,893
Long-term debt $1,309,812 $ 646,857
Operating profit, EBITDA and net earnings before
special items (refer to page 54) are as follows:
EBITDA before special items (b) $ 342,549 $ 340,394
Operating profit before special items $ 225,901 $ 259,858
Net earnings before special items $ 94,988 $ 117,270
- --------------------------------------------------------------------------------
Sales
$ IN BILLIONS
[BAR GRAPH]
1995 - $1,744.8
1996 - $1,804.0
1997 - $1,851.2
1998 - $1,796.1
1999 - $2,092.4
RETURN ON AVERAGE TOTAL CAPITAL
BEFORE SPECIAL ITEMS
[BAR GRAPH]
1995 - 14.2%
1996 - 12.8%
1997 - 16.5%
1998 - 18.6%
1999 - 11.4%
<PAGE>
EBITDA (b)
BEFORE SPECIAL ITEMS
$ IN MILLIONS
[BAR GRAPH]
1995 - $305.5
1996 - $301.2
1997 - $332.1
1998 - $340.4
1999 - $342.5
LONG-TERM DEBT
$ IN BILLIONS
[BAR GRAPH]
1995 - $ 974.2
1996 - $1,055.0
1997 - $ 896.3
1998 - $ 646.9
1999 - $1,309.8
(a) The 1999 amounts include the results of operations of Crompton & Knowles
Corporation for the twelve months ended December 1999 and the results of
operations of Witco Corporation for the months of September through
December 1999. The 1995 to 1998 amounts represent the results of Crompton &
Knowles Corporation.
(b) EBITDA represents operating profit plus depreciation and amortization and
excludes special items.
-2-
<PAGE>
FELLOW SHAREHOLDERS:
We are pleased to report that 1999 marked the attainment of another
milestone in management's strategic plan to build a world-scale specialty
chemical company. We accomplished this by merging Crompton & Knowles with Witco,
creating CK Witco Corporation, a $3.1 billion company with core strengths in
polymer products and technology, crop protection and specialty organosilicones.
The combination gives our new company leadership positions in a
majority of our product lines, supported by global research and development and
production capacity able to meet customer needs with increased quality, speed
and reliability. As a result we have enhanced our platforms for growth,
increased our flexibility to optimize our business portfolio, and set the stage
for accelerated growth in revenues and earnings.
Our strengths are significant, and we're excited by the
opportunities. Nevertheless, we remain focused on a single overarching principle
that guides all of our thinking as well as our actions: TO INCREASE SHAREHOLDER
VALUE. Global scale, improved customer service and growth, in our view, are only
vehicles for delivering improved returns to shareholders. Our confidence in our
ability to achieve this is borne out by our accomplishments in the seven months
since the completion of the merger on September 1, 1999.
OUTSTANDING BUSINESS OPPORTUNITIES
We continue to integrate the businesses making up the two operating
groups of our company -- Polymer Products and Specialty Products -- and the
synergies are powerful. Our broad-based and diversified business portfolio
positions us to grow our share of existing markets and open new markets through
product innovation, advanced technology and production economies in the 120
countries where we do business.
In Polymer Products, with annual adjusted sales of $1.7 billion, our
worldwide product mix is unparalleled by any of our competitors regardless of
their size. The combined businesses, consisting of polymer additives, polymers
and polymer processing equipment, have leading technology in elastomer and
rubber and leadership positions in polymer and urethane chemistry. Our
substantial market position and broad range of product offerings are enabling us
to simplify our supply chain for our customers, pulling through more sales in
growth markets. The synergistic benefits are obvious to our customers as we
deliver solutions unavailable before our combination.
An illustration of this is our ability to test and market new
plastics additives using the extrusion processing expertise of our
Davis-Standard laboratories, the world's confirmed leader in plastics extrusion
systems. Specialized knowledge, internal access and cooperative development of
this nature gives us and our customers a quantifiable edge in the marketplace.
Our Specialty Products group, with annual adjusted sales of $1.4
billion, consists of OrganoSilicones, Crop Protection and Petroleum Additives,
businesses which offer an array of value-added products that solve customers'
problems and create profitable opportunities for them
-3-
<PAGE>
to improve their products and processes. The complementary nature of our product
lines and overlapping customer bases have already enabled us to increase sales
of our products.
That customer overlap is very evident in our OrganoSilicones and
Rubber Chemicals businesses, both of which are leading suppliers of essential
products to the worldwide tire industry. Our antiozonants and antioxidants
continue to improve the life and performance of rubber tires as our silanes
replace carbon black, producing more fuel efficient and longer-lasting tires. To
satisfy accelerated growth in this market for silanes, we are investing $70
million in expanded proprietary production capacity.
[PHOTOGRAPH OF VINCENT A. CALARCO, CHAIRMAN,
PRESIDENT AND CHIEF EXECUTIVE OFFICER]
The bottom line is that our core operating businesses have new
opportunities for enhanced profitability, growth and new product development as
a result of our merger. These developments have been very well received by our
customers as evidenced by increased sales with key accounts.
Our combined businesses also benefit from increased geographic
reach. The United States continues to be our single largest market, but
international operations now account for approximately 43 percent of our
revenues. In Europe, with about $850 million in sales, we have a manufacturing
infrastructure in place with well established customer access. Asia, with sales
of more than $200 million, has the capacity to meet the growing opportunities in
China and India. Similarly, in Canada and Latin America, our $250 million in
sales gives us a good footprint for expansion and growth. With this strong base
we fully expect to drive international sales to more than 50 percent of our
company's revenues within the next five years even as we continue to grow our
domestic business.
PRODUCTIVITY GAINS AND COST SAVINGS
We began this merger with specific actions to improve our new
company's productivity and to reduce costs.
We are well on our way to fulfilling our commitment to take out $60
million in costs in 2000. We have reduced our workforce by 600 employees, and
reduced the cost of logistics, insurance, consultants, and other outside
services. We are also benefiting from the efficiencies of a global purchasing
organization, which buys in excess of $1.2 billion in raw materials and
utilities annually.
Facilities consolidations will also improve our productivity in the
new year. Plant closures in Brooklyn, New York and Gretna, Louisiana and sales
office combinations in Asia, Europe and Latin America have already been
accomplished with other opportunities for consolidation currently being
analyzed.
FINANCIAL STRATEGIES
Concurrent with the cost reductions throughout our company, we have
taken other steps to improve our performance and to strengthen our financial
position.
-4-
<PAGE>
We improved our portfolio by divesting two underperforming business
units: textile colors and oleochemicals. Witco sold the oleochemicals operation
in August, before the merger, and used the $249 million in cash to pay down
debt. The textile colors operation was sold in December for $86.5 million and
generated $78 million in cash that was used to buy back our company's common
stock under a Board authorization to repurchase 10 percent of the 119 million
shares then outstanding. We have identified additional businesses, with annual
sales of approximately $400 million, for potential divestment. We will continue
to review our portfolio of businesses to concentrate our investments in growth
areas, and to dispose of non-core operations.
At the end of 1999, we also repurchased our 10.5% and 9% notes in
order to secure more favorable financing terms and eliminate some restrictive
financial covenants. In the first quarter of 2000, we completed a $600 million
bond offering at a coupon rate of 8.5%. Our company's total year-end debt was
$1.4 billion, and a key corporate objective is to reduce it by approximately
$125 million annually. We believe this objective is reasonable in light of the
$150 to $200 million in free cash flow we will generate annually.
Following the merger, our Board set a five cents per share regular
quarterly dividend in line with our peer group in the specialty chemicals
industry.
LONG-TERM PERFORMANCE GOALS
We are focused on accelerating the growth of our individual
businesses and improving their long-term strategic positions in order to improve
our return on invested capital. This is how shareholder value is created. We are
continually evaluating our businesses in the context of both financial
performance and market-driven parameters to determine which businesses will be
components of our corporation in the future.
The criteria we use to assess the potential to achieve and sustain
performance over the long term is simple and straightforward.
The first financial measure is operating profit margin of more than
15 percent, on a sustainable, long-term basis. This has to be accompanied by
operating profit growth of more than 10 percent per year and a return on capital
employed of more than 18 percent at the operating level.
Our non-financial, market-driven criteria for each business is
related specifically to sustainability of leadership positions, and each
business should have a mix of these characteristics. First, each should have a
leading market position, being number one or two in its identifiable market.
Second, the business should have a proprietary or unique product or process
technology that provides a competitive advantage, and, third, each should be a
low-cost producer. Additionally, the business should have a new product pipeline
that would sustain or put it in a position to meet the other criteria.
Most of our combined businesses have these market-driven attributes
and should be able to achieve our financial goals as we make progress in
implementing our programs. More details about these opportunities are outlined
in the business and markets review section of this report.
-5-
<PAGE>
We are pleased to report that in early 2000, as part of our strategy
to enhance our growth opportunities via e-commerce, we made an equity investment
in ChemConnect Inc., the largest global internet exchange for chemicals and
plastics. We expect that our internet strategy will improve customer service,
grow sales and gain efficiencies throughout our company.
BOARD CHANGES
Since the completion of the merger there have been several changes
in our Board of Directors. In November, E. Gary Cook, chairman of CK Witco, and
former chairman, president and chief executive officer of Witco Corporation,
retired from the company and the Board. At year-end, Don L. Blankenship,
chairman, president and chief executive officer of A.T. Massey Coal Company,
Inc, retired from the Board. In January, Richard M. Hayden, limited partner of
Goldman Sachs, retired from the Board. Not standing for election at the April
2000 annual meeting of shareholders will be James A. Bitonti, chairman and chief
executive officer of BITCO International, Inc., and Nicholas Pappas, president,
chief executive officer and vice chairman of BioTraces, Inc., who have reached
our mandatory retirement age, and Simeon Brinberg, senior vice president of BRT
Realty Trust, who has chosen to retire. We thank them for their service to CK
Witco and our predecessor companies.
In summary, the merger of Crompton & Knowles and Witco was an astute
move for both companies. We have created a new and powerful global force in the
specialty chemical industry with significant business efficiencies and growth
opportunities in all of our core businesses. The potential for value creation is
significant, and we are highly confident of the ability of our 8,600 employees
to deliver on this potential. We will achieve our goals by adhering to this
management's guiding principles of keeping everyone focused on meeting
customers' needs and working to improve every day. By assuring the success of
our customers, we will succeed with them and thereby reward our shareholders.
While 1999 was a year of great change for our company, and while
there are significant challenges ahead, we fully expect to have a record year in
2000 that will set us on a course for continued prosperity and success in the
new century. The specialty chemical industry will, no doubt, continue to
consolidate as companies seek competitive global advantage. We view this as an
opportunity to strategically reinforce our market positions and to further
broaden our core business strengths. Our objective remains constant --
profitable growth.
-6-
<PAGE>
Thank you for your support. We look forward to keeping you informed
of our progress.
Respectfully yours,
/s/ V. A. Calarco
Vincent A. Calarco
Chairman, President and
Chief Executive Officer
March 15, 2000
-7-
<PAGE>
SOLUTION: UNIPRENE(R) THERMOPLASTIC VULCANIZATES
[PHOTO]
Our Royalene(R) EPDM technology is used in Uniprene(R) thermoplastic
vulcanizates (TPVs) to provide the functional performance of vulcanized rubber
combined with the processability of plastics. We have partnered with Teknor Apex
Company in Pawtucket, Rhode Island by contributing our EPDM technology and
technical service to its technical, manufacturing and marketing efforts for the
Uniprene product.
(UNIPRENE IS A REGISTERED TRADEMARK OF TEKNOR APEX COMPANY)
[PHOTO CAPTION]: INSET LEFT: AUGUST PETERSEN (RIGHT), OUR TECHNICAL
SALES SERVICE REPRESENTATIVE FOR ELASTOMERS, DISCUSSES PRODUCT BENEFITS OF
UNIPRENE(R) PELLETS WITH JITENDER BATRA, TEKNOR APEX'S UNIPRENE TECHNICAL
MANAGER. THIS COOPERATIVE EFFORT WILL ALLOW BOTH CK WITCO AND TEKNOR APEX TO
ACCELERATE THE PENETRATION OF TPVS INTO THE CONSUMER, AUTOMOTIVE AND
CONSTRUCTION MARKETS.
With the merger of Crompton & Knowles and Witco, we have created a
new global force in the chemical industry, a company with world-class product
lines and service capabilities in polymer products and specialty chemicals. The
superior service, technology and performance of our individual business units
provide our customers with the tools to excel in their markets. As a result of
the merger, our businesses have new products and services, new talent and
knowledge, and new product development and production capability. The
customer-focused cultures of both companies have been combined into a
market-driven enterprise.
The managers of our business units are experienced in growing
businesses and building value through our entrepreneurial business approach. Our
managers are accountable for performance, and they are rewarded for achieving
maximum targeted returns on the capital entrusted to them. Our businesses
operate as independent units while seeking opportunities for synergies with
other business units. They respond to customers with speed, innovation and
flexibility, knowing our success is dependent on the success of our customers.
The merger has given us operating and market strengths that are
unique in the chemical industry. Over 60 percent of our sales are to markets
where we have leading positions, and many of our products are sold to common
markets. The product lines are complementary not competitive, and we can achieve
remarkable efficiencies in sales and service through the improved integration of
our supply chains and the loyalty of long-time customers.
We are building on decades of Crompton & Knowles and Witco successes
that resulted from listening closely and working hard to understand customers'
businesses and markets. From product development and manufacturing to logistics
and technical service, our people strive to anticipate customer needs, and to
identify and solve their problems. We respond with maximum effort to make sure
our customers' products and processes are better than the competition. When our
customers are more competitive, we are more competitive, and our shared
successes build long-term relationships.
-8-
<PAGE>
Customer service starts with our specialized sales forces of trained
scientists, engineers and technicians with an in-depth knowledge of our specific
products and their market applications, and our customers' products and markets.
Our technology is based on a customer-first approach to research &
development, concentrating on projects with the greatest market potential. Our
R&D activities are closely aligned with our customers' business objectives.
Our performance is measured by our ability to deliver quality
materials that are key to our customers' success by making their products
better, less expensive, easier to manufacture or more environmentally friendly.
Service, technology and performance add value to our customers'
products and to their businesses.
SOLUTION: MARK(R)VINYL ADDITIVES
[PHOTO]
Marley Mouldings depends on our Mark(R) organotin stabilizers for
the efficient production of its wide variety of vinyl products for the
construction market. Our stabilizers protect Marley's products from heat
degradation and discoloration during the extrusion process. The ability to
produce consistent quality form extrusions at economical rates helps make Marley
a leading global supplier of residential mouldings, window and other vinyl
profiles used in a wide variety of construction applications. In addition to
stabilizers, we offer a complete line of additives to provide manufacturing
solutions for PVC (polyvinyl chloride) producers including lubricants and
plasticizers. Our polymer additives are critical not only to PVC production, but
also to olefinic and styrenic polymers, rubber, and polyurethanes.
[PHOTO CAPTION]: CHRIS BOND (LEFT), OUR RIGID- VINYL PRODUCT
MANAGER, DISCUSSES THE USE OF MARK(R) STABILIZERS IN MARLEY MOULDING PRODUCTS
WITH LOWELL CARPENTER, MARLEY'S BLENDING MANAGER.
Our POLYMER ADDITIVES unit has one of the broadest and most
extensive product lines for the polymer industry providing products across the
entire industry's supply chain from polymerization to compounding to
fabrication. Our products are critical in the manufacture of polyvinyl chloride,
olefinic and styrenic polymers, rubber, and polyurethanes. We are benefiting
from a strong demand for plastics in general and engineered plastics in
particular.
We are the world's largest producer of polymer additives for PVC,
offering a complete line of metal and metal-free vinyl stabilizers.
Our products for the olefins and styrenics markets are used in every
stage of the manufacturing process.
We are a world leader in rubber chemicals with a comprehensive line
of more than 100 different products used in rubber processing.
-9-
<PAGE>
Our urethane chemicals provide key products to global polyurethane
processors.
We are benefiting from growing demand for PVC in the global
construction and automotive markets and from our market position and product
development strengths. In 1999, we debottlenecked our PVC stabilizer line in
Louisiana, adding 25 percent more capacity for tin stabilizers, and we signed an
agreement with Songwon of Korea to market its methlytin heat stabilizers outside
of Korea, China and Taiwan. This product supplements our tin stabilizer capacity
and will help fuel our growth in Asia and enable us to compete aggressively in
key PVC growth segments around the world.
In addition to stabilizers, our complete product line for PVC
manufacturers includes lubricants, plasticizers and other solutions for our
customers' manufacturing challenges. Working with the readily available
technology of our Davis-Standard polymer processing equipment, we can both
adjust the recipe of additives used in materials, and better understand the
process conditions to deliver unique value to our customers for their
production.
Our experienced and highly trained sales force has been able to
introduce new products into the PVC additives market including Paracril(R)
nitrile rubber and blowing agents.
Makers of plastics around the world depend on us to specify the
appropriate products to meet their production needs and ensure the performance
of their end products.
Our Naugard(R) antioxidants significantly extend the life of
products such as wire and cable, and our additives are essential to a broad
range of new plastic products. For example, these additives enhance the
performance and durability of plastics enabling automobile manufacturers to
increase the use of plastics that reduce the weight of vehicles thus improving
gas mileage.
Our polymer modifiers, Royaltuf(R) modified EPDM, used to toughen
engineered thermoplastics, and Polybond(R) coupling agents, critical to the
production of advanced composite materials, are among the fastest growing
segments of the specialty chemicals industry.
Last year, we introduced a new Polybond(R) coupling agent with
easier mixing and enhanced performance characteristics for wire and cable
insulation and wood-filled compounds. Our new Royaltuf 498 gives Nylon 6
superior low-temperature impact resistance for use in sporting goods and
hand-held power tool housings. Our polymer modifier business is growing with
these and other new products including Polybond 3109 for toughened nylon and
Polybond 1158 for bonding polyethylene and polypropylene to metal.
We have growing opportunities in cutting-edge technologies such as
nanocomposites that offer the automotive industry and other plastic users
products with dramatic improvements in mechanical, thermal and flame-retardant
properties.
In 1999, we acquired the Unite(R) product line of polypropylene
coupling agents from Aristech Chemical Corporation. Complementing our existing
line of high value-added products, Unite(R) products serve the glass-filled
polypropylene market with uses from swimming pools to automobiles.
-10-
<PAGE>
SOLUTION: ROYALEDGE(R)/ROYALENE(R) EPDM
[PHOTO]
A new grade of RoyalEdge(R) EPDM polymer was recently introduced in
response to growing customer needs for a high-performance EPDM material for the
wire & cable market. American Insulated Wire in Pawtucket, Rhode Island uses
Davis-Standard machinery to extrude RoyalEdge(R) and Royalene(R) EPDM strips
into wire & cable insulations for industrial, utility, automotive, and
residential applications.
We also provide Silcat(R) silanes and silane technology, Paracril(R)
nitrile rubber, Witcogel(R) filling compounds, and other synthetic, mineral-oil,
natural, and polymer-based compounds to this growing market.
[PHOTO CAPTION]: INSET LEFT: LOWELL LISKER (RIGHT), VICE PRESIDENT
OF ENGINEERING FOR AMERICAN INSULATED WIRE (AIW), AND BOUNITA FAVORITE, OUR
TECHNICAL SALES REPRESENTATIVE, DISCUSS THE PERFORMANCE OF ROYALEDGE(R) EPDM IN
LOW-TO-MEDIUM VOLTAGE INSULATION FOR WIRE & CABLE. CUSTOMERS LIKE AIW RELY ON
OUR TECHNICAL EXPERTISE TO HELP THEM DEVELOP NEW PRODUCTS FOR THEIR EVOLVING
MARKET NEEDS.
Our Naugard(R) polymerization inhibitors that prevent the formation
of polymers during the production of monomers, and our new Naugard(R) polyol
stabilizer for flexible foam achieved significant market acceptance in 1999. We
are continuing to develop new grades of inhibitors, polymer modifiers and
antioxidants to serve expanding international plastics markets.
Our Delac(R) accelerators, Flexzone(R) antiozonants, Naugard(R)
antioxidants, and other additives are recognized around the world for their
ability to effectively process and protect rubber from ozone, oxygen, heat, and
light, dramatically extending product life and lowering costs. While we provide
these products to a broad range of rubber producers including makers of hose,
sponge, belts, weather stripping, and wire and cable, over 50 percent of sales
are to tire manufacturers. Technologically, we capitalize on our 100-year-old
heritage in rubber chemicals and our proprietary catalysts, specialty equipment
and multi-step processing.
We are positioning a number of our products for accelerated growth
in rubber applications over the next five years including silanes, bonding
agents, accelerators, silicone-modified EPDM, solid polyurethanes, and liquid
polymers. These products will be at the core of a thrust to acquire synergistic
rubber chemical products and technologies in order to expand markets and develop
new products.
Asia is projected to be the strongest growth area for rubber
production over the next decade, and we have expanded our presence there by
buying out our joint venture partner in Korea and increasing our joint-venture
ownership in Thailand. We are also looking at opportunities to increase our
presence elsewhere in Asia and Europe.
The merger allowed us to increase sales of urethane chemicals to our
Adiprene(R)/Vibrathane(R) castable urethanes business where polyester polyols
are important raw materialS that give the product its wear resistance
characteristics. Our Fomrez(R) products are also critical in flexible foams for
a wide range of products from automotive to packaging.
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We are experiencing strong demand for Witcobond(R) aqueous
polyurethane dispersions in automotive coatings, fiberglass and
textile-laminating markets. Witcobond(R) dispersions provide a hard, clear
topcoat for automotive finishes that stretch and bend and keep on shining.
Witcothane(R) microcellular systems provide increased wear and lightweight
characteristics to footwear and industrial applications. Our Baxenden joint
venture in the United Kingdom provides Trixene(R) for waterborne polyurethanes
for leather and textiles.
Our POLYMERS business is benefiting from strong global demand for
Royalene(R) EPDM and Adiprene(R)/Vibrathane(R) castable urethanes.
We are the largest North American manufacturer of EPDM, commonly
known as "crackless rubber" because it can withstand sunlight and ozone without
deteriorating. With three production lines devoted to Royalene(R) EPDM, we have
significant production flexibility and high-volume production capability with
consistent product quality to meet a full range of customer demands.
We produce over 30 different variations of this polymer primarily
for applications in automotive parts including hoses, belts, weather stripping,
brake components, and seals and gaskets, as well as in roofing, industrial hose
and wire and cable. Royalene(R) EPDM is used by most of the world's auto makers,
and the typical new car contains 20 pounds of EPDM rubber. We expect that will
grow to 25 pounds over the next five years as new uses, such as engine mounts,
are refined.
SOLUTION: ADIPRENE(R) URETHANES
[PHOTO]
Adiprene(R) LFTDI castable urethane prepolymers improve the
durability and performance of golf ball covers and are used extensively in
top-performing golf ball brands around the world. We also supply Witcobond(R)
polyurethane dispersions for coating systems for golf balls and Royalene(R) EPDM
synthetic rubber for golf club grips.
[PHOTO CAPTION]: PERFORMANCE CHARACTERISTICS SUCH AS RESILIENCE,
TOUGHNESS, DISTANCE, AND SPIN RATES ARE KEY TO THE NEXT-GENERATION OF PREMIER
GOLF BALLS. CHET ZAWACKI (LEFT), WORLDWIDE MARKETING MANAGER FOR
ADIPRENE(R)/VIBRATHANE(R) URETHANES, AND RON ROSENBERG, R&D MANAGER, CHECK THE
PROPERTIES OF A GOLF BALL COVERED WITH OUR URETHANES MATERIAL.
We are enjoying considerable success with RoyalEdge(R), a new
generation of EPDM introduced two years ago for the weather seal and wire and
cable markets. In July, we introduced a new RoyalEdge(R) product with improved
electrical stability and processing properties for wire and cable. The new
product was developed in response to customers' requests for custom-formulated
material for low-to-medium voltage applications.
EPDM demand continues to be strong. In 1998, we completed the
debottlenecking of our Geismar, Louisiana plant, and we were sold out of the
full increase in capacity in 1999. We are evaluating options for increasing
production capacity in Europe, where demand is growing.
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We are confident that we will maintain our leadership position and
retain the loyalty of our customers with aggressive marketing efforts and new
product innovations in EPDM. In addition, we expect that our profitability will
continue to benefit from improved production efficiencies.
We are the world's largest supplier of castable urethanes with over
200 prepolymers in our product line. Golf ball covers are one of the newest
applications for Adiprene(R)/Vibrathane(R) urethanes adding to a growing use in
sporting goods applications. We are supplying our urethane material to major
golf ball manufacturers to use as covers on their new lines of premium balls.
Our products impart a unique combination of durability and performance.
The unique abrasion resistance and durability characteristics of our
castable urethane products continue to open new markets. Our customer service,
technical support and ability to customize products ensure our leadership
position in the market.
A number of new urethane prepolymers achieved market success last
year. Adiprene(R) LFTDI (low-free toluene diisocyanate) prepolymers offer strong
growth potential in transportation and industrial markets by providing improved
processability, performance and workplace safety for the user and higher
performance in end-use applications.
Adiprene(R) PPDI (para-phenylene diisocyanate) urethane prepolymers
are responding to growing market demand for ultra-high-performance products such
as wheels for "People Mover" transit systems and amusement park rides and
bearing seals for steel mill rolls. We have developed a proprietary process to
produce these PPDI-based polymers in more environmentally friendly low-free
forms.
In the second quarter of 2000, we will open our first Adiprene(R)
LFTDI plant in Europe in response to growing demand for high-performance
products with environmentally sound characteristics. The plant in Latina, Italy
will provide customers with products that contribute to workplace safety and
provide a superior material for use in high-speed, high-load-bearing
applications such as industrial rolls and tires.
Meanwhile, we completed expansion of our Adiprene(R) low-free PPDI
plant in Gastonia, North Carolina, in the first quarter of 2000. Again, the
product satisfies the customers' industrial hygiene concerns while providing a
product with exceptional dynamic properties for use in products such as
hydraulic seals, drive belts and sheave liners.
Our innovative products are backed by our advanced manufacturing
technology such as our Ribbon Flow(R) Systems, a moldless casting alternative to
traditional hot casting, which is making substantial inroads into new
applications. This economic combination of rotational casting and room
temperature curing provides a more cost-effective system to produce
high-performance rolls for the paper and steel industries.
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<PAGE>
SOLUTION: DAVIS-STANDARD EXTRUSION SYSTEMS
AND PARACRIL(R) NITRILE RUBBER
[PHOTO]
Quabaug Corporation in North Brookfield, Massachusetts relies on
Davis-Standard extruders to help it convert our Paracril(R) nitrile rubber for
use in Vibram(R) shoe soles. The Vibram brand name is recognized worldwide as
the leader in high-performance soling products for rugged outdoor, work and
service footwear.
(VIBRAM IS A REGISTERED TRADEMARK OF QUABAUG CORPORATION)
The merger has given us the immediate benefit of vertical
integration in manufacturing urethanes. Witco had been the primary supplier of
polyester polyols for Adiprene(R)/ Vibrathane(R) urethanes, supplying over 50
percent of this critical raw material.
Our production capacity for oil-resistant Paracril(R) nitrile rubber
will double as the result of a joint venture with DESC, a diversified Mexican
chemical company. In 1999, we closed a high-cost plant in Ohio and moved
production to a state-of-the-art, 40,000 metric ton facility near Tampico,
Mexico, the largest dedicated nitrile rubber plant in the world. We expect that
this expanded capacity will allow us to supply new automotive and industrial
customers worldwide. Customers will also benefit from a new line of
Paraclean(TM) NBR polymers that prevent mold deposits from forming in today's
high-speed injection molding machines.
[PHOTO CAPTION]: INSET LEFT: CHITTA LAHIRI (RIGHT), OUR RESEARCH
SCIENTIST FOR PARACRIL(R) NBR, EXPLAINS THE ENVIRONMENTAL AND PERFORMANCE
ADVANTAGES OF PARACLEAN(TM) NBR POLYMERS TO DAN HIBBARD (LEFT), SUPERVISOR, AND
TIM MINER, LABORATORY MANAGER, BOTH OF QUABAUG CORPORATION.
[PHOTO CAPTION]: DAVIS-STANDARD IS THE LEADING WORLDWIDE SUPPLIER OF
PLASTIC AND RUBBER EXTRUDERS, ELECTRONIC CONTROLS AND EXTRUSION SYSTEMS.
POLYMER PROCESSING EQUIPMENT customers rely on Davis-Standard for
the most responsive customer service and the most advanced and productive
systems available for polymer processing. Our integrated systems, which combine
extruders with advanced computer-based controls and other equipment, produce
rubber and plastic extruded forms for a wide range of everyday products. These
include: food, snack and display packaging, construction products such as window
profiles, insulated wire, appliance housings, automotive seals and tubing,
medical tubing and bags, copper and fiber communication cables, footwear, picnic
coolers, toys, and outdoor furniture.
With backlog in excess of $100 million at year-end and improved
order intake, we expect to rebound in the spring of 2000 from a cyclical
slowdown in orders that began in the second quarter of 1999.
We have restructured the business in response to market conditions
and strengthened our development labs and technical centers in the U.S. and
Europe. The restructuring en-
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<PAGE>
hanced our ability to develop new products and processes for the equipment
market as well as new polymer materials and additives for our polymer customers.
With over 50 years of experience in developing the most advanced
systems for polymer processing, our technological expertise also supports our
leading market positions in polymers and polymer additives. With a common
customer base with polymers and polymer additives, Davis-Standard systems can be
used to test the elasticity, viscosity and plasticity of new materials saving
our customers significant time in commissioning new products. Our ability to
service the market with technically proven products is unique in the industry,
and allows us to bring both equipment and polymer products to market faster and
at lower cost than our competition.
Our impetus for technological product innovation is the driving
factor that allows us to provide the productivity improvements demanded by our
customers. By combining several state-of-the-art products, we produce
comprehensive systems that allow our customers to reduce manufacturing steps and
increase the return on their investment. Our twin-screw, in-line compounding
systems are used in conjunction with our single-screw extruders to process
engineered plastics into very technically sophisticated products.
SOLUTION: SILQUEST(R) SILANES
[PHOTO]
Silica-tires, the next generation of passenger car tires, use sulfur
silanes to couple silica with rubber. Using silica instead of carbon black in
tires decreases rolling resistance, and improves comfort, safety and fuel
economy. The tires are also referred to as "Greentyres" because of their
environmentally friendly properties of better vehicle fuel economy and longer
wear life. We are a leading global supplier of rubber chemicals with a
comprehensive line of more than 100 different products used in rubber
processing.
In pursuit of the goals of zero defects and timely delivery, we have
opened a 40,000 square foot testing area, adjacent to our Connecticut production
plant, where we set up, wire and test complete systems prior to shipping. To
improve service to our customers, we assign assembly specialists to new complex
systems when production begins. The specialist follows the machine through
manufacturing, inspection, testing, and shipment, so an intimate knowledge of
the product is brought to the customer site when the system is reassembled and
installed. The benefit is a dramatic reduction in the time spent on the final
installation at the customer's facility.
With a thorough understanding of our customers' requirements, we
continue to develop new products to serve new markets. By combining our
twin-screw and single- screw technologies, Davis-Standard has been able to
supply lumber systems which produce a variety of wood-type products utilizing
plastic and wood filler. The ability to provide extrusion systems that can
produce products at economical rates and with consistent quality is the
cornerstone of Davis-Standard. Lumber products, that are expected to combine up
to 60 percent wood fiber with 40 percent polymer, will be manufactured on our
systems that will enable manufacturers to use a broad range of natural fibers
including sawdust. We have patents pending on several new
-15-
<PAGE>
product developments including a new barrier screw technology that improves melt
and mixing performance and is expected to surpass industry expectations.
We have expanded our European presence through acquisitions in
Germany, France and the United Kingdom, and we are growing in Asia and Latin
America with aggressive marketing and sales efforts. In 1999, we acquired
Kunstsoff und Kabelmaschinenbau of Haan, Germany. Its technology made a
substantial contribution to our ability to serve the European wire and cable
market. Our business plan is to reinforce our position as the leading full-line
supplier of extrusion equipment to worldwide markets.
[PHOTO CAPTION]: HARWICK CHEMICAL MANUFACTURING CORP. OF AKRON, OHIO
PRODUCES AN EASY-TO-HANDLE DRY SILANE CONCENTRATE FROM OUR LIQUID SILQUEST(R)
ORGANOFUNCTIONAL SILANES. IN THIS FORM, HARWICK SUPPLIES THE SILANE PRODUCT TO
THE GOODYEAR RUBBER COMPANY FOR USE AS A COUPLING AGENT IN MINERAL-FILLED RUBBER
COMPOUNDS USED FOR GASOLINE HOSES AND A VARIETY OF OTHER PRODUCTS. PICTURED AT
HARWICK (LEFT TO RIGHT) ARE: ART FRITZ, GENERAL MANAGER OF HARWICK, PAUL
SCHUMACHER, OUR ACCOUNT EXECUTIVE, AND SUSAN DECKARD OF GOODYEAR'S INDUSTRIAL
PRODUCTS GROUP.
Our ORGANOSILICONES business is the world's leading supplier of
organofunctional silanes that are used in a wide variety of materials including
rubber products, adhesives and sealants, coatings, thermoplastics, and
fiberglass. Silanes are critical as coupling agents between organic and
inorganic materials allowing the cross-linking of materials and imparting
outstanding adhesion, durability and abrasion-resistant properties.
We are able to offer customers state-of-the-art products and
services by working closely with them at their facilities to develop products
they need and find answers to their technical questions. While we are solving
current problems, we are anticipating future needs.
Our sulfur silanes have been instrumental in the development of
"Greentyres", the most advanced product offering in the passenger car tire
market. Our silanes act as a coupling agent allowing tire makers to use silica
instead of carbon black in the rubber compound. Silica lowers the rolling
resistance of tires improving handling characteristics and fuel economy. The
automobile industry expects the growth of "Greentyres" to equal or surpass the
explosive growth of radial tires 30 years ago. OrganoSilicones is a significant
force in this market with most of the world's major tire companies as customers.
Our silanes technology continues to enable recent product advances
in the coatings industry. Silanes have always provided substantial benefits in
adhesion and durability for coatings, but until recently, the use of silanes in
waterborne coatings had been restricted. Their extreme water reactivity made it
impossible to take full advantage of the benefits silanes can offer waterborne
coatings. We have developed breakthrough, patented chemistry that has opened an
expanded market for a unique line of water-stable silanes in paints, sealants,
adhesives, and polymer solutions. Using these new silanes, environmentally
friendly waterborne coatings and adhesives can compete with solvent-based
products.
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SOLUTION: NIAX(R) AND FOMREZ(R) URETHANE ADDITIVES
[PHOTO]
With products in over 180 vehicle models, Woodbridge Foam is the
world's largest independent supplier of polyurethane foam components for the
automotive industry. Woodbridge values dependable and innovative partners in its
global supply chain, and our proprietary urethane additives and technology are
important to Woodbridge products including seating components, energy-absorbing
safety foams and acoustical foams.
[PHOTO CAPTION]: WOODBRIDGE FOAM, HEADQUARTERED IN TORONTO, IS A
LEADING MANUFACTURER OF SPECIALTY URETHANE FOAMS. WOODBRIDGE DRAWS ON OUR GLOBAL
MANUFACTURING CAPABILITY AND SUPPLY CHAIN TO DELIVER QUALITY PRODUCTS AND
SERVICES TO ITS 39 FACILITIES IN EUROPE, ASIA, AUSTRALIA, THE MIDDLE EAST, NORTH
AMERICA, AND LATIN AMERICA.
PIERRE MARTINEAU (LEFT), OUR WOODBRIDGE ACCOUNT REPRESENTATIVE, AND
ROBERT BRULOTTE (RIGHT), OUR CANADIAN BUSINESS DIRECTOR, DISCUSS THE PROPERTIES
NEEDED IN FOAM SEATING WITH DR. HAMDY KHALIL, WOODBRIDGE'S CORPORATE DIRECTOR OF
CHEMICAL RESEARCH AND DEVELOPMENT.
As a result of our innovative, customer-driven product and process
improvements, we are market leaders in silanes, and we have an aggressive growth
plan in place to build on this leadership position that is supported by
innovative thinking and appropriate capital investments. Our direct TMS
(Trimethoxysilane) process has been commercialized at our facility in Termoli,
Italy, and is an integral part of our $50 million expansion now underway. This
is an efficient, environmentally friendly process that provides significant
waste reduction over traditional methods, eliminating chlorides. Additional
process improvements are expected to cut waste even further in future
expansions. This direct TMS process was the recipient of the 1999 Kirkpatrick
Achievement Award, the most prestigious technology award in the chemical process
industry. The delivery of continuous product innovations and technology
improvements that benefit our customers will continue to drive the growth of our
silanes business.
For the consumer market, our Silsoft(R) OrganoSilicone copolymers
are just one example of products that enhance performance for consumers in a
number of major brands. Silsoft(R) OrganoSilicone copolymers provide for
exceptional hair conditioning without buildup in products such as shampoos,
conditioners and styling products.
Our Magnasoft(R) brands of organo-modified silicones are the
preferred choice of the textile industry to provide superior softening for
high-end fabrics for garments, bedding and toweling. Our seven manufacturing and
blending sites located around the world allow us to react swiftly to changing
needs in the marketplace.
The broad product lines of SAG(R) and Sentry(R) foam control
additives find theiR way into such diverse markets as food and beverage
processing, pharmaceuticals and waste water treatment. In 1999, we fully
commercialized the most effective silicone-based foam control agent for
high-speed pulp and paper manufacturing, allowing producers to effectively
eliminate the use of a potentially harmful additive.
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<PAGE>
Performance, quality and consistency are attributes that customers
have come to expect from our urethane additives. We are among the leaders in the
urethane industry with a broad range of product offerings including Niax(R)
silicone surfactants, amine and Fomrez(R) tin catalysts, and performance
additives such as Geolite(R) modifiers, antioxidants and processing aids. We are
known for our problem-solving innovation in an industry that is challenged with
transitioning to alternative processing technology in all significant market
segments.
Our products are indispensable in many applications important to the
consumer. To keep up with emission requirements in specialty foam manufacturing
used in furniture and bedding, new surfactant technology has been designed and
introduced to meet the challenges of processing foam blown with environmentally
acceptable carbon dioxide. Our rigid surfactant technology improves dimensional
stability and insulation integrity in refrigeration, transportation and
construction applications, including small home refrigeration units, heated
insulated trucks and insulated panels for housing. Product offerings for molded
foam markets improve comfort at an acceptable cost for automotive seating. As
interior car parts are designed to improve safety margins and promote a quieter
ride, urethane foam formulations, using our unique and in many cases proprietary
additives, are replacing other materials. As urethane foam is considered for
carpet backing, laser printing components and decorative floor coverings, our
products and services are valued by our customers.
SOLUTION: COMITE(R) MITICIDE
[PHOTO]
Australia's $1.1 billion cotton crop was threatened by a severe mite
infestation in 1999. In a record sales effort, Comite(R) miticide protected the
crop against mite damage and improved the performance of other products used to
control bollworms. As with all of our crop protection products, success requires
not only the best chemistry but also service and technology based on careful
planning and close monitoring of climatic conditions and other agriculture
variables. Mites, tiny parasitic arachnids, are a global threat to many crops.
We have a major share of the $525 million miticide market with Comite(R),
Omite(R), Micromite(R), and the newly introduced Floramite(R).
[PHOTO CAPTION]: INSET LEFT: RICHARD WRIGHT (FAR RIGHT), OUR SALES
AGRONOMIST IN MOREE, NEW SOUTH WALES, AUSTRALIA, WORKED CLOSELY WITH HIS
COLLEAGUES FROM IAMA LTD. TO CONTROL THE MITE OUTBREAK IN AUSTRALIAN COTTON IN
JANUARY 1999. PICTURED FROM LEFT TO RIGHT ARE; MAURIE FAY, IAMA SENIOR COTTON
AGRONOMIST; GREG MCLAREN, IAMA COMITE(R) COORDINATOR; AND NICOLE ROOKE, IAMA
DEMAND MANAGER. IAMA IS OUR SINGLE-STEP DISTRIBUTION PARTNER FOR COTTON PRODUCTS
IN AUSTRALIA.
[PHOTO CAPTION]: ABOVE: JOHN WESTCOTT (LEFT), WORLDWIDE BUSINESS
DIRECTOR-INSECTICIDES, REVIEWS HIS 12-MONTH ROLLING PRODUCTION/SUPPLY PLAN FOR
COMITE(R) MITICIDE WITH CHRIS HAYNER, OPERATIONS COORDINATOR.
Our CROP PROTECTION business provides farmers in over 120 countries
with products and services to improve crop quality and increase yields. We focus
our marketing efforts on high-value crops such as nuts, citrus, cotton, rice,
tree and vine fruits, and ornamental plants.
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With the merger, we added strong technology and products in agricultural
surfactants that increase the effectiveness of the active ingredients in
fungicides, herbicides and insecticides. Surfactants also have a broad range of
uses in oilfield chemicals used in well drilling, production and enhanced oil
recovery.
Our specialized crop protection product lines include fungicides,
miticides, insecticides, herbicides, and growth regulants formulated for
specific crops and geographic regions. Our superior service based on formulation
expertise and application advice is responsible for a loyal and expanding
customer base.
Our focus on high-value market niches is based on our knowledge of
the crops and growing conditions of specific geographic areas and enables us to
generate higher sales margins. Larger commodity markets such as cotton and corn
are served with targeted, value-added products. Our Harvade(R) defoliant aids in
the harvesting of cotton, canola and sunflowers.
We are constantly expanding our presence in niche markets by
developing new products, obtaining new use registrations, and acquiring new
labels.
In 1999, our Harvade(R) defoliant for cotton received EPA
registration for new use as a cotton herbicide. With spray directed under the
young cotton plant, Harvade(R) is very effective in weed control and is later
used as a defoliant at harvest time. One Tennessee cotton farmer reported 100
percent control of troublesome sicklepod and morning glory vines and a 25
percent cost savings over last season's product application.
Our newly developed Floramite(R) miticide sold out after its summer
registration for the ornamental market. It received accelerated review by the
EPA as a reduced risk product. In 2000, we expect to receive registration for
food crops including apples, citrus and tea in Japan and Korea, where we will
introduce the product under the tradename Acramite(TM). Floramite(R) complements
our highly successful line of Omite(R), Comite(R) and Micromite(R) miticides
that already have a major share of the annual $525 million worldwide market.
A new granular formulation of Micromite(R) miticide for citrus makes
the product more user friendly and easier to measure and mix. In 1999, we
received registration for use of Dimilin(R) to combat rice water weevils. This
opens a new market with a much more ecologically friendly alternative to
chemistry now in use.
Over 65 percent of our sales are offshore and geographic expansion
is essential to achieving continuing sales growth as third-world economic growth
improves the diets of people around the world. In Poland, we have entered a
joint venture with FMC and Rohm & Haas to sell our products directly in one of
Europe's largest agricultural economies. In Brazil, the world's fourth-largest
agricultural economy, we introduced Pantera(R) herbicide that promises solid
sales growth after it was used with success on 60,000 acres of soybeans. In
addition, we added FMC's citrus products to our Brazilian sales lines in 1999.
In China, we expanded our direct sales force of Chinese nationals and achieved
substantial sales growth especially in Omite(R) for citrus.
We are a world leader in seed treatment products to assure
germination and healthy seedlings. Our Vitavax(R) fungicide is one of the
world's best-selling seed treatment
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products and stimulates growth as well as controlling disease. About half of our
Crop Protection business, including the Gustafson joint venture, is related to
seed treatment products and application systems. Our Gustafson joint venture
with Bayer is the largest seed treatment company in North America. The
partnership is a powerful combination of agricultural chemical strengths: Bayer
is a leading developer of active ingredients for seed treatment, and Gustafson
is a leader in formulating and delivering seed treatment products.
SOLUTION: CALCINATE(R)/NAUGALUBE(R) PETROLEUM ADDITIVES
[PHOTO]
Cutting-edge best describes our additives for the industrial
lubricant market. In metalworking fluids, our products protect manufacturers'
investments in sophisticated machinery and insure the quality of finished
machined products. Calcinate(R) calcium sulfonate provides the lubricant with
anti-corrosion and anti-wear properties, and Naugalube(R) additives protect
fluids from oxidation.
In 1999, Gustafson received three new product registrations for use
on grains, and we expect substantial success starting with spring wheat
applications in the 2000 planting season. We anticipate accelerating growth in
seed treatment because of the enhanced environmental attractiveness of the
localized use of chemicals at very low application rates.
In Australia, our Hannaford Seedmaster Services subsidiary holds a
major share of the seed treatment market and has leveraged that market position
to expand its product offerings to crop application chemicals with direct
selling. We had a record Comite(R) miticide sales season in Australia driven by
our aggressive direct product distribution program and high mite infestations in
cotton.
[PHOTO CAPTION]: WITH THE MERGER, WE HAVE OPENED NEW OPPORTUNITIES
FOR ONE OF THE MOST COMPLETE PRODUCT OFFERINGS IN THE PETROLEUM ADDITIVES
INDUSTRY. WE SERVE A WIDE RANGE OF CUSTOMERS WHO FORMULATE AND MANUFACTURE
PRODUCTS FOR THE TRANSPORTATION, INDUSTRIAL, GREASE, AND FUELS MARKETS. MARINE
TRANSPORTATION IS AMONG THE INDUSTRIES THAT CAN BENEFIT FROM OUR SYNTON(R) AND
TRILENE(R) PRODUCTS TO HELP INCREASE THE PERFORMANCE EFFICIENCY OF LUBRICANT
SYSTEMS.
Our INDUSTRIAL SURFACTANTS business serves global agriculture
markets with an impressive product line. Our wetting agents, primarily used in
herbicides and insecticides, reduce the surface tension of the product,
increasing its ability to spread and penetrate. Farmers can cover more acreage
with less active ingredients and lower spray volume, providing both economic and
ecological benefits.
We find solutions to farmers' problems in the field. This customer
focus is instrumental in how we develop specialty products such as our patented
Silwet(R) super-spreading dispersants, that enable customers to reduce the
amount of active chemicals required to protect crops, and our Morwet(R) silicone
surfactants, that contribute to the success of a wide range of products marketed
by the crop protection industry.
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In the oil field market, our industrial surfactants are achieving
increased customer acceptance with growing oil exploration and production
activity. Applications technology centers in Switzerland, Singapore and Brazil
have improved our ability to support customers' needs with promising new gas
hydrate inhibitors and enhanced oilfield recovery (EOR) technologies. Gas
hydrate inhibitors are used in deep water gas wells to prevent gas from
crystallizing at cold temperatures and high pressure.
Our innovative EOR products and technologies allow customers to
efficiently and profitably extend the life of existing underground oil
reservoirs. Prior to EOR advancements, drillers were forced to leave as much as
60 to 70 percent of available oil in the ground. EOR provides an environmentally
acceptable method for oil companies to extract as much as 40 percent more oil
from a reservoir than the traditional pressure or water-based extraction
methods. It is estimated that EOR will add over one billion barrels of oil to
current U.S. reserves.
Our PETROLEUM ADDITIVES unit offers one of the most comprehensive
product lines of components to lubricant additive package formulators and
manufacturers of products for the transportation, industrial, grease, and fuels
markets. With the merger, we have achieved a synergy that opens broader new
markets for one of the largest product offerings in the industry. Our
performance components allow our customers to formulate products that can meet
demanding new industry specifications driven by more demanding performance and
environmental requirements.
We have combined Crompton & Knowles' century of experience in
sulfur-nitrogen chemistry with Witco's advanced detergent technology to provide
performance enhancements in lubricants and fuels. Proposed new and more
stringent lubricant specifications that our customers will be required to meet
will provide us with new product opportunities in friction modifiers,
antioxidants, anti-wear compounds, and deposit control additives, all of which
are critical to cleaner, more efficient lubricant systems.
SOLUTION: SILQUEST(R) SILANES
[PHOTO]
Prestone(R) antifreeze/coolant uses our organofunctional silanes to
provide stability to the product's performance. Used in small additive
proportions, this silane, proprietary to Prestone(R), is an important enhancer
to the world's best-selling antifreeze. The global automotive market depends on
our silanes for silica-tires, the most advanced product in passenger car tires,
and for durable clear coat automotive finishes.
[PHOTO CAPTION]: INSET LEFT: MELANIE BISACCIO (RIGHT), OUR TECHNICAL
SALES REPRESENTATIVE, DISCUSSES PRESTONE'S SILANES DELIVERY SCHEDULES WITH
PRESTONE PERSONNEL, LEFT TO RIGHT: CHRISTINE HOH, MATERIAL COORDINATOR,
GABRIELLE DALY, PURCHASING/DISTRIBUTION MANAGER, AND ERNESTINE HINES, PURCHASING
COORDINATOR.
[PHOTO CAPTION]: DEEP-DYED SPECIALTY NAPKINS ARE AMONG THE BROAD
RANGE OF PRODUCTS THAT BENEFIT FROM OUR HIGH-QUALITY INDUSTRIAL DYES.
-21-
<PAGE>
With the merger, the benefits of liquid polymers and synthetic
fluids to increase performance efficiency are now available to the metalworking
and marine transportation industries, markets that Synton(R) PAO (poly alpha
olefins) and Trilene(R) liquid polymers had not focused on previously.
For automotive and industrial lubricants makers, Synton(R) PAO
synthetic fluids can lower life-cycle costs by extending drain intervals and
enhancing high-temperature performance in machinery and gear-boxes. PAO-based
lubricants have excellent thermal and oxidative stability in demanding
applications. This capability is now offered to makers of products for the
metalworking industry that have stringent safety and environmental requirements
as well as high performance demands.
In 2000, we will complete our fifth plant expansion in the past five
years in Elmira, Ontario, Canada for Synton(R) PAO, doubling the capacity while
improving the manufacturing process. We expect this new capacity to be sold out
quickly, and we will continue to invest in new capacity to support the rapidly
increasing demand for these high-performance products.
Responding to the demands of the transportation industry, we are
developing new dispersants to enable diesel engines to operate more cleanly. We
are also working on new Naugalube(R) antioxidants, MolyFM(TM) friction
modifiers, and enhanced grades of Trilene(R) liquid polymers to protect engines
while enhancing efficiency that improves fuel economy for larger vehicles.
After a thorough evaluation of the potential of the textile dyes
business and the options available to us, we elected to exit the business and
sold Textile Colors in December. We are now concentrating on the paper, plastics
and other specialized areas of the industrial marketplace in North and South
America. Our INDUSTRIAL COLORS business accounts for about $50 million in annual
sales.
Good progress was made in 1999 in growing our market share for
liquid and powder direct dyes to the paper industry with our strong domestic
manufacturing position and technical service capabilities combined with our
customer-focused technical programs.
One example of what was accomplished is our new position as the
long-term exclusive dyestuff supplier to a market leader in the production of
deep-dyed specialty napkin goods for the U.S. hospitality industry. Our
consistent high-quality, powdered, direct dyes in accurate pre-weighed,
repulpable paper bags, that minimize waste and environmental impact by
eliminating direct handling and measurement, assure us of this strong market
position.
Industrial Colors is also growing in a wide range of user industries
including specialty printing inks and wood stains as a result of our technical
capabilities and intense service and marketing efforts.
Our REFINED PRODUCTS business serves a broad range of industries
including cosmetics, inks and industrial markets with white oils, cable fillers
and refrigeration oils. Last year, the cosmetics industry embraced our new
Hydrobrite(R) 1000 white mineral oil that we introduced
-22-
<PAGE>
for skin care creams and lotions. This unique product has all the moisturizing
qualities of petrolatum but remains in a liquid form.
Sonolube(R), a blend of white oils and performance additives that
serves industrial customers, has been accepted by industrial users as a superior
product for protecting machinery from wear and rust. Our Witcogel(R) patented
white oil and polymer blend is a leading fiber-optic cable filler for the
telecommunications market.
-23-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
LIQUIDITY AND CAPITAL RESOURCES
The December 31, 1999 working capital balance of $141.8 million
decreased $61.6 million from the December 26, 1998 balance of $203.4 million,
while the current ratio decreased to 1.1 from 1.5 in 1998. The decrease in
working capital and the current ratio were primarily due to the merger (the
"Merger") of Crompton and Knowles Corporation (Crompton) and Witco Corporation
(Witco) effective September 1, 1999. Days sales in receivables averaged 46 days
in 1999, versus 54 days in 1998, principally due to the impact of the accounts
receivable securitization programs. Inventory turnover averaged 3.4, compared to
3.1 in 1998.
Net cash provided by operations of $88.6 million decreased $80.9
million from the net cash provided by operations of $169.5 million in 1998, due
primarily to lower earnings. Net cash provided by operations, acquired cash of
Witco, additional credit agreement and short-term borrowings, and the proceeds
from the sales of the specialty ingredients business and the textile colors
business, were used primarily to repurchase common shares, finance capital
expenditures, pay merger costs, make dividend payments, repurchase the 9% and
10.5% Senior Notes, and pay $48.2 million of income taxes related to the 1998
Gustafson gain. The Company's debt to total capital ratio decreased to 65% from
91% in 1998, primarily as a result of the Merger. The Company's liquidity needs,
including debt servicing, are expected to be financed from operations.
On October 28, 1999, the Company entered into a $600 million 364-day
senior unsecured revolving credit facility and a $400 million five-year senior
unsecured credit facility with a syndicate of lenders. Borrowings on these
facilities are at various rate options to be determined on the date of
borrowing. Borrowings under these facilities totaled $680 million at December
31, 1999, with a weighted average interest rate of 7%.
In addition, the Company has available accounts receivable
securitization programs to sell up to $232 million of domestic accounts
receivable to agent banks. As of December 31, 1999, $164.7 million of domestic
accounts receivable had been sold under these agreements.
In September 1998, the Company announced a share repurchase program
to buy back 7.5 million shares, or approximately 10% of the common shares then
outstanding. In January 1999, the Company announced a share repurchase program
for 6.8 million shares, or approximately 10% of the common shares then
outstanding. From September 1998 through the completion of these programs in
1999, the Company repurchased 9.5 million common shares at an average price of
$17.85 per share.
In November 1999, the Board of Directors approved another share
repurchase program for 10% of the common shares then outstanding, or
approximately 11.9 million shares. As of December 31, 1999, the Company had
repurchased 2.2 million common shares under that program at an average price of
$12.16 per share.
-24-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
In November 1999, the Company announced that it is committed to a
cost savings program that will enable it to reduce costs by $60 million in 2000.
Cost savings of $44 million are expected to be achieved through salaried staff
reductions. The remaining savings are expected to be achieved through the
consolidation of plants and offices, purchasing and logistics efficiencies, and
the elimination of outside services and consultants. As of December 31, 1999,
the Company reduced its workforce by 478 employees.
In January 1999, the Company sold its specialty ingredients business
to Chr. Hansen Holding A/S of Denmark for $103 million, which resulted in a
pre-tax gain of $42.1 million in the first quarter of 1999.
In December 1999, the Company sold its textile colors business to
Yorkshire Group PLC for $86.5 million ($78 million in cash proceeds and a 12.4%
equity interest in Yorkshire valued at approximately $8.5 million). The sale
resulted in a pre-tax loss of $83.3 million.
Capital expenditures for 1999 amounted to $131.8 million as compared
to $66.6 million in 1998. The increase is primarily due to the Merger, year 2000
related expenditures and cost savings initiatives. Capital expenditures are
expected to approximate $175 million in 2000, primarily for the Company's
replacement needs and improvement of domestic and foreign facilities.
YEAR 2000 ISSUES
The Company successfully implemented its SAP and non-SAP projects
prior to December 31, 1999. As a result, the Company did not experience any
significant Year 2000 related system failures.
The total costs associated with the SAP and non-SAP projects were
$19.4 million (including $13.4 million capitalized and $6 million expensed).
Expenditures of $14.6 million were made during 1999 ($11.5 million capitalized
and $3.1 million expensed).
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." In June 1999, the FASB issued Statement No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133" which delays the effective date of FASB Statement No.
133 to fiscal years beginning after June 15, 2000. The Company plans to adopt
the provisions of this statement in the first quarter of 2001. The Company has
not yet determined what the effect of FASB Statement No. 133 will be on its
earnings and financial position.
ENVIRONMENTAL MATTERS
The Company is involved in claims, litigation, administrative
proceedings and investigations of various types in a number of jurisdictions. A
number of such matters involve claims for a material amount of damages and
relate to or allege environmental liabilities, in-
-25-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
cluding clean-up costs associated with hazardous waste disposal sites, natural
resource damages, property damage and personal injury. The Company and some of
its subsidiaries have been identified by federal, state or local governmental
agencies, and by other potentially responsible parties (each a "PRP") under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or comparable state statutes, as a PRP with respect to costs associated
with waste disposal sites at various locations in the United States. In
addition, the Company is involved with environmental remediation and compliance
activities at some of its current and former sites in the United States and
abroad.
Each quarter, the Company evaluates and reviews estimates for future
remediation and other costs to determine appropriate environmental reserve
amounts. For each site a determination is made of the specific measures that are
believed to be required to remediate the site, the estimated total cost to carry
out the remediation plan, the portion of the total remediation costs to be borne
by the Company and the anticipated time frame over which payments toward the
remediation plan will occur. As of December 31, 1999, the Company's reserves for
environmental remediation activities totaled $198 million. It is reasonably
possible that the Company's estimates for environmental remediation liabilities
may change in the future should additional sites be identified, further
remediation measures be required or undertaken, the interpretation of current
laws and regulations be modified or additional environmental laws and
regulations be enacted.
The Company intends to assert all meritorious legal defenses and all
other equitable factors which are available to it with respect to the above
matters. The Company believes that the resolution of these environmental matters
will not have a material adverse effect on its consolidated financial position.
While the Company believes it is unlikely, the resolution of these environmental
matters could have a material adverse effect on its consolidated results of
operations in any given year if a significant number of these matters are
resolved unfavorably.
MARKET RISK & RISK MANAGEMENT POLICIES
The operations of the Company are exposed to financial market risks,
including changes in interest rates and foreign currency exchange rates. The
Company uses derivative financial instruments to mitigate its exposure to these
risks. The Company does not use derivative financial instruments for trading or
speculative purposes.
The Company's primary interest rate risk exposure results from
changes in the fair value of its long-term, U.S. dollar fixed rate debt, as well
as cash flow risk associated with long-term variable rate debt. The Company used
interest rate swap contracts to convert a portion of its long-term, variable
rate foreign denominated debt to fixed rate debt. Each interest rate swap
contract is designated with the principal balance and the term of the specific
debt obligation. These contracts involve the exchange of interest payments over
the life of the contract without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as interest
rates change is accrued as other liabilities or assets and recognized as an
adjustment to interest expense. The changes in the fair value of the swap
contracts due to changes in market interest rates are not recognized in the
financial statements. In the event of early extinguishment of the designated
debt obligations, any realized or unrealized gain
-26-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
or loss from the swap would be recognized in income coincident with the
extinguishment gain or loss.
The following table provides information about the Company's
derivative and other financial instruments that are sensitive to changes in
interest rates. For long-term financial instruments, the table presents
principal cash flows and related weighted average interest rates by expected
maturity date. Weighted average variable interest rates are based on the
applicable floating rate index as of the reporting date. For interest rate
swaps, the table presents the notional amount and weighted average interest
rates by maturity date. The notional amounts are used to calculate the
contractual cash flows to be exchanged under the respective contracts.
-27-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
Fair
2005 and Value at
(IN THOUSANDS) 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
- -------------------------------------------------------------------------------------------------------------
NOTE RECEIVABLE:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $9,000 $ 9,000 $8,694
Average interest 6.54%
rate
LONG-TERM PAYABLE:
Fixed rate $2,597 $2,597 $1,947 $1,298 $ 8,439 $ 7,720
Average interest rate 6.30% 6.30% 6.30% 6.30%
LONG-TERM DEBT:
Fixed rate $4,033 $1,806 $2,039 $166,361 $1,454 $702,411 $878,104 $799,509
Average interest rate 7.32% 7.31% 7.28% 7.29% 7.48% 7.49%
Variable rate-swapped $66,298 $66,298 $66,298
Average interest rate AIBOR AIBOR AIBOR AIBOR
+.80% +.80% +.80% +.80%
Other variable rate $400,000 $ 8,500 $408,500 $408,500
Average interest rate(a) 6.55% 6.55% 6.55% 6.55% 6.55% 5.60%
INTEREST RATE SWAPS:
Total pay fixed/receive
variable $66,298 $66,298 $ (635)
Average pay rate 5.20% 5.20% 5.20% 5.20%
Average receive rate AIBOR AIBOR AIBOR AIBOR
+.80% +.80% +.80% +.80%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
AIBOR - Amsterdam Interbank Offered Rate
(a) Average variable interest rate is based on rates in effect at December 31,
1999.
The Company's short-term exposure to changes in foreign currency
exchange rates results from transactions entered into by the Company and its
foreign subsidiaries in currencies other than their local currency (primarily
trade payables and receivables). The Company manages these transactional
currency risks on a consolidated basis, which allows it to net its trade payable
and receivable exposure. The Company is also exposed to currency risk on
intercompany transactions. The Company purchases foreign currency forward
contracts, primarily denominated in Hong Kong dollars, British pounds, Singapore
dollars, Canadian dollars and the Euro, to hedge its transaction exposure.
Contracts to hedge its net payable/receivable transaction exposure are generally
outstanding for one to six months and contracts to hedge intercompany
transactions are settled on a monthly basis. Realized and unrealized gains and
losses on foreign currency forward contracts that are designated and effective
as hedges of recorded transactions are recognized in earnings to offset the
impact of valuing recorded foreign currency trade payables, receivables and
intercompany transactions. Unrealized gains and losses are cumulatively measured
as the differential between the spot exchange rate at the contract's inception
and the spot exchange rate as of the balance sheet date and are included in
other current assets. Discounts and premiums on foreign currency forward
contracts that are designated and effective as hedges are recorded as a deferred
asset and amortized over the respective contract life. Realized and unrealized
gains and losses on contracts that do not satisfy the requirements of an
effective hedge are reported as other expense (income). The fair value of the
foreign currency forward contracts used to hedge the Company's intercompany
loan, trade payable and trade receivable exposures are not significant.
-28-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The Company's long-term foreign currency exchange risk exposure
results from its net investments in international subsidiaries (including
long-term intercompany loans). The Company uses foreign currency swap contracts
denominated in German marks and Italian lira to reduce its exposure to foreign
currency risk from its net investments in its international subsidiaries. For
foreign currency swap contracts designated and effective as hedges, realized and
unrealized gains and losses, net of related taxes, are included in the
accumulated other comprehensive income component of shareholders' equity.
Discounts or premiums resulting from the differential between the contractual
payments and receipts are amortized over the life of the contract. The related
amounts due to or from counterparties are included in other assets.
The following table summarizes information on the foreign currency
swap contacts, including the notional amounts and the related weighted average
contract rates by contractual maturity date. The notional amounts are used to
calculate the contractual cash flows to be exchanged under the contract. The
table does not include the net investments for which the foreign exchange
translation adjustments would offset the realized and unrealized gains and
losses on the related swap contracts.
EXPOSURES RELATED TO DERIVATIVE CONTRACTS WITH EUROPEAN FUNCTIONAL CURRENCIES
<TABLE>
<CAPTION>
Fair
2005 and Value at
(IN THOUSANDS) 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SWAP CONTRACT TO
BUY U.S. DOLLARS:
PAY GERMAN MARKS
Notional amount $162,974 $162,974 $21,987
Average contract .6519 .6519
rate
SWAP CONTACT TO BUY
GERMAN MARKS:
PAY ITALIAN LIRA
Notional amount $7,814 $7,814 $(570)
Average contract .000994 .000994
rate
</TABLE>
EURO CONVERSION
On January 1, 1999, certain member countries of the European Union
adopted the Euro as their common legal currency. Between January 1, 1999 and
July 1, 2002, transactions may be conducted in either the Euro or the
participating countries' national currency. However, by July 1, 2002, the
participating countries will withdraw their national currency as legal tender
and complete the conversion to the Euro.
The Company conducts business in Europe and does not expect the
conversion to the Euro to have an adverse effect on its competitive position or
consolidated financial position. The Company believes that the implementation of
its SAP Project will allow the Company to conduct business transactions in both
the Euro as well as the participating countries' national currency.
The Company has determined that failure to implement systems that
are able to process both the Euro and participating countries' national currency
may cause disruptions to
-29-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
operations including, among other things, a temporary inability to process
transactions, send invoices or engage in normal business activities. These
problems could be substantially alleviated with manual processing. However, this
would cause delays in certain normal business activities.
FORWARD-LOOKING STATEMENTS
Certain statements made in this annual report are forward-looking
statements that involve risks and uncertainties. These statements are based on
currently available information and the Company's actual results may differ
significantly from the results discussed. Investors are cautioned that there can
be no assurance that the actual results will not differ materially from those
suggested in such forward-looking statements.
OPERATING RESULTS -- 1999 COMPARED TO 1998
OVERVIEW
Consolidated net sales increased 16% to $2.09 billion in 1999 from
$1.8 billion in 1998. After adjusting 1998 net sales to exclude $216.1 million
from deconsolidated joint ventures and the divestiture of the specialty
ingredients business, and to include $550.8 million from Witco operations for
the months of September through December 1998, net sales decreased 2%. This
decrease is primarily the result of lower sales in the Polymer Processing
Equipment and Crop Protection businesses. International sales, including U.S.
exports, were 45% of total sales, up from 40% in 1998.
The net loss for 1999 was $175 million, or $2.10 per common share
basic and diluted, as compared to net earnings of $161.8 million, or $2.20 per
common share basic and $2.14 per common share diluted in 1998. Earnings before
after-tax special items (as detailed on page 54) were $95 million, or $1.14 per
common share basic and diluted, as compared to $117.3 million, or $1.59 per
common share basic and $1.55 per common share diluted, in 1998.
Gross margin as a percentage of sales decreased to 34.9% from 36.2%
in 1998. The decrease was primarily due to the impact of including four months
of Witco results, lower pricing and unfavorable product mix. Consolidated
operating profit before special items decreased $34 million to $225.9 million
from $259.9 million in 1998. After further adjusting to exclude $19.6 million
from the consolidated joint ventures and the divestiture of the specialty
ingredients business, and to include $24 million from Witco operations for the
months of September through December 1998, operating profit decreased 14.5% from
$264.3 million in 1998.
-30-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
------------------ -------------------------------------------------------------
Witco
Operations
Four Months
AS As Ended Deconsolidated Divested As
REPORTED Reported December 31 Joint Ventures Business Adjusted
--------- -----------------------------------------------------------------
NET SALES
Polymer Products
<S> <C> <C> <C> <C> <C> <C>
Polymer
Additives $620,188 $391,964 $214,608 $ -- $ -- $606,572
Polymers 316,300 342,527 -- (41,520) -- 301,007
Polymer Processing
Equipment 300,016 344,480 -- -- -- 344,480
Eliminations (3,469) -- -- -- -- --
--------- ------------------------------------------------------------------
1,233,035 1,078,971 214,608 (41,520) -- 1,252,059
--------- -------------------------------------------------------------------
Specialty Products
OrganoSilicones 158,925 -- 144,718 -- -- 144,718
Crop Protection 294,798 348,000 49,376 (84,966) -- 312,410
Other 405,600 369,148 142,075 -- (89,590) 421,633
---------- --------------------------------------------------------------------
859,323 717,148 366,169 (84,966) (89,590) 878,761
---------- --------------------------------------------------------------------
Total net sales $2,092,358 $1,796,119 $ 550,777 $(126,486) $(89,590) $2,130,820
========== ====================================================================
OPERATING PROFIT
Polymer Products
Polymer Additives $ 67,880 $ 49,215 $ 16,325 $ -- $ -- $ 65,540
Polymers 82,951 79,892 -- (709) -- 79,183
Polymer Processing
Equipment
Eliminations 19,981 46,653 -- -- -- 46,653
--------- --------------------------------------------------------------------
170,812 175,760 16,325 (709) -- 191,376
--------- --------------------------------------------------------------------
Specialty Products
OrganoSilicones 16,784 -- 16,621 -- -- 16,621
Crop Protection 69,194 84,882 820 (10,840) -- 74,862
Other 25,144 35,760 1,544 -- (7,863) 29,441
--------- --------------------------------------------------------------------
111,122 120,642 18,985 (10,840) (7,863) 120,924
--------- --------------------------------------------------------------------
General corporate
expense including
amortization (56,033) (36,544) (11,273) (187) -- (48,004)
--------- ------------------------------------------------------------------
Total operating profit
before special items 225,901 259,858 $ 24,037 $ (11,736) $(7,863) 264,296
====================================================
Special items (a) (224,518) (41,560)
--------- ---------
Total operating profit $ 1,383 $218,298
========= ========
</TABLE>
(a) Special items affecting operating profit include the following expenses:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Write-off of in-process and development $195,000 $ --
Merger related costs 29,518 --
Facility closure costs -- 33,600
Other -- 7,960
- -----------------------------------------------------------------------------------------------------
Total special items $224,518 $41,560
=====================================================================================================
</TABLE>
POLYMER PRODUCTS
Polymer products sales of $1.23 billion represent a decrease of 2%
from an adjusted $1.25 billion for 1998. Operating profit for polymer products
of $170.8 million declined 11% from an adjusted $191.4 million for 1998.
-31-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Polymer additives sales of $620.2 million increased 2% from an
adjusted $606.6 million for 1998 primarily due to volume growth of 6%, partially
offset by 2% declines attributable to lower pricing and foreign currency
translation. Plastic additives sales were up 4% primarily as a result of higher
volume, partially offset by lower foreign currency translation. Rubber chemicals
sales were essentially unchanged from 1998 as greater volume of 5% was offset by
lower pricing. Urethane chemicals sales rose 3% primarily due to higher volume
of 8%, partially offset by lower foreign currency translation of 3% and lower
pricing of 2%. Polymer additives operating profit of $67.9 million rose 4% from
an adjusted $65.5 million in 1998 primarily as a result of higher sales volume,
partially offset by lower pricing in rubber chemicals.
Polymers sales of $316.3 million rose 5% versus an adjusted $301
million for 1998 primarily due to volume growth of 4% and improved pricing of
2%. Urethane sales were up 6% primarily as a result of higher volume. EPDM sales
increased 4% primarily due to improved pricing. Polymers operating profit of $83
million increased 5% from an adjusted $79.2 million in 1998 primarily as a
result of improved pricing and greater sales volume, partially offset by higher
EPDM raw material costs.
Polymer processing equipment sales of $300 million decreased 13%
from 1998 primarily due to lower sales volume and pricing which was reflective
of the downward cycle experienced by the plastics machinery market during the
second half of 1999. Operating profit of $20 million decreased 57% from 1998
primarily as a result of competitive pricing pressure, lower volume and
increased sales of lower margin equipment systems. The equipment order backlog
totaled $113 million at the end of 1999 compared to $118 million at the end of
1998.
SPECIALTY PRODUCTS
Specialty products sales of $859.3 million represent a decrease of
2% from an adjusted $878.8 million for 1998. Operating profit of $111.1 million
decreased 8% from an adjusted $120.9 million for 1998.
OrganoSilicones sales of $158.9 million were 10% above an adjusted
$144.7 million for 1998 primarily due to volume growth of 14%, partially offset
by lower foreign currency translation of 4%. The business benefited from a
recovering Asian economy, new product introductions, growth in the "greentyre"
market and increased orders with major customers. Operating profit of $16.8
million was 1% above an adjusted $16.6 million for 1998 primarily due to
increased sales volume, partially offset by higher 1999 consulting costs and
certain non-recurring items that had a favorable impact on 1998 earnings.
Crop protection sales of $294.8 million declined 6% from an adjusted
$312.4 million in 1998 primarily due to lower volume particularly in the
herbicides and fungicides businesses. These businesses were adversely affected
by a general weakness in the U.S. and European farm economies, unfavorable
weather conditions and increased competition associated with genetically
engineered seeds. Operating profit of $69.2 million decreased 8% from an
adjusted $74.9 million in 1998 primarily as a result of lower sales volume.
-32-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Other sales of $405.6 million declined 4% from an adjusted $421.6
million in 1998 primarily due to lower pricing of 3% and lower foreign currency
translation of 1%. Colors sales were down 14% primarily due to lower volume and
pricing for textile colors. The textile colors business was sold in December
1999. Glycerine/fatty acids sales rose 5% primarily due to volume growth,
partially offset by lower pricing. Refined products and petroleum additives
sales increased 12% and 7%, respectively, primarily as a result of higher sales
volume. Other operating profit of $25.1 million decreased 15% from an adjusted
$29.4 million in 1998 primarily due to lower pricing in the colors business,
partially offset by higher sales volume in the remaining businesses.
OTHER
Selling, general and administrative expenses of $331.1 million
increased 25% versus 1998 primarily due to the Merger, offset partially by the
impact of the deconsolidation of the joint ventures and the divestiture of the
specialty ingredients business. Depreciation and amortization (up 45%) and
research and development costs (up 29%) also increased as a result of the
Merger. Interest expense of $69.8 million decreased 11% primarily due to lower
levels of indebtedness prior to the Merger, which more than offset the four
months impact of the debt acquired in the Merger. Other expense of $48 million
in 1999 includes a loss on the sale of Colors for $83.3 million, a gain on the
sale of Specialty Ingredients for $42.1 million and fees related to the accounts
receivable securitization for $6.3 million. Other income of $158.9 million in
1998 includes a gain of $153.4 million resulting from the sale of a 50% interest
in the Gustafson seed treatment business. The effective tax rate, excluding the
impact of special items was 36.4% compared to 37.2% in 1998.
OPERATING RESULTS -- 1998 COMPARED TO 1997
OVERVIEW
Consolidated net sales decreased 3% to $1.80 billion from $1.85
billion in 1997. The decrease was primarily attributable to lower volume of 2%
and lower foreign currency translation of 1%. International sales, including
U.S. exports, increased slightly as a percentage of total sales to 40% from 39%
in 1997.
Net earnings for 1998 were $161.8 million, or $2.20 per share basic
and $2.14 per share diluted, compared to earnings of $86.8 million, or $1.18 per
share basic and $1.15 per share diluted, in 1997. Before after-tax special items
(as detailed on page 54), net earnings were $117.3 million, or $1.59 per share
basic and $1.55 per share diluted, compared with $92.1 million, or $1.25 per
share basic and $1.22 per share diluted, in 1997.
Gross margins as a percentage of net sales increased to 36.2% from
35.4% in the prior year. The increase was primarily attributable to lower raw
material costs, improved pricing and product mix. Consolidated operating profit
of $218.3 million declined 3% from the prior year; however, excluding the impact
of special items, operating profit increased 3% to $259.9 million from $252.3
million in the prior year.
-33-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
POLYMER PRODUCTS
Polymer products sales of $1.08 billion represent an increase of 1%
from 1997. Operating profit of $175.8 increased 6% from 1997.
Polymer additives sales of $392 million decreased 6% versus 1997
primarily attributable to lower pricing of 3%, lower volume of 2% and lower
foreign currency translation of 1%. Rubber chemical sales were 9% lower than
1997 primarily due to lower volume and pricing. Plastic additive sales were
essentially unchanged as higher volume of 1% was offset by lower foreign
currency translation. Polymer additives operating profit of $49.2 million
decreased 31% from 1997. The decrease was primarily attributable to lower
volume, unfavorable manufacturing variances and an unfavorable product mix.
Polymers sales of $342.5 million were essentially unchanged from
1997 as improved pricing of 4% was offset primarily by lower volume. EPDM sales
increased 6% from 1997 primarily due to improved pricing. Urethane and nitrile
rubber sales were lower by 3% and 9%, respectively, due primarily to lower
volume. Polymers operating profit of $79.9 million increased 38% from 1997
primarily attributable to improved pricing and lower raw material costs in the
EPDM business.
Polymer processing equipment sales of $344.5 million increased 11%
from 1997 primarily due to higher volume. Operating profit of $46.7 million
increased 26% from 1997 due to increased volume and improved product mix. The
equipment order backlog totaled $118 million at the end of 1998 compared to $106
million at the end of 1997.
SPECIALTY PRODUCTS
Specialty products sales of $717.1 million represent a decrease of
8% from 1997. Operating profit for specialty products was $120.6 million
compared to $123.6 in 1997.
Crop protection sales of $348 million decreased 6% versus 1997
primarily due equally to the deconsolidation of the Gustafson seed treatment
business in December 1998 and lower volume, particularly in the insecticide
business. Operating profit of $84.9 million increased 2% from 1997 primarily due
to lower operating costs, and improved pricing and product mix.
Other sales of $369.1 million decreased 10% versus 1997 primarily
attributable to lower volume of 8%, lower pricing of 1% and lower foreign
currency translation of 1%. Petroleum additives sales were 5% lower primarily
due to lower volume. Colors sales decreased 11% primarily due to lower volume in
apparel dyes. Specialty ingredients sales decreased 11% also principally due to
lower volume. This business was sold effective the first day of fiscal 1999.
Operating profit of $35.8 decreased 11% versus 1997, due primarily to lower
volume.
OTHER
Selling, general and administrative expenses of $264.7 million
decreased 2% versus 1997, but as a percentage of sales remained essentially
unchanged at 14.7%. Depreciation
-34-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
and amortization of $80.5 million increased 1% from 1997 primarily as a result
of a higher fixed asset base. Research and development costs of $52.8 million
decreased 2% from 1997, but as a percentage of sales remained constant at 2.9%.
Facility closure costs of $33.6 million represent primarily the
write-off of plant and equipment, severance and other costs related to the
closure of the Company's nitrile rubber facility in Painesville, Ohio.
Interest expense of $78.5 million decreased 24% from 1997 primarily
due to lower levels of indebtedness and lower interest cost on borrowings used
to redeem high cost debt in 1998. Other income of $158.9 million in 1998
includes a gain in the amount of $153.4 million resulting from the sale of a 50%
interest in the Gustafson seed treatment business. Other income of $27.8 million
in 1997 includes a gain of $28 million relating to a settlement with the U.S.
Department of the Army. The effective tax rate excluding the impact of special
items was 37.2% compared to 38.1% in 1997.
-35-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal years ended 1999, 1998, and 1997
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
NET SALES $ 2,092,358 1,796,119 1,851,180
COSTS AND EXPENSES
Cost of products sold 1,361,373 1,146,200 1,196,030
Selling, general and administrative 331,050 264,710 269,405
Depreciation and amortization 116,648 80,536 79,856
Research and development 67,954 52,775 53,611
Equity (income) loss (10,568) -- --
Acquired in-process research and development 195,000 -- --
Merger and related costs 29,518 -- --
Facility closure costs -- 33,600 --
Severance and other costs -- -- 13,000
Special environmental change -- -- 15,000
---------------------------------------------
OPERATING PROFIT 1,383 218,298 224,278
Interest expense 69,833 78,520 103,349
Other expense (income) 47,979 (158,938) (27,817)
---------------------------------------------
EARNINGS
Earnings (loss) before income taxes and extraordinary loss (116,429) 298,716 148,746
Income Taxes 42,922 115,493 56,675
---------------------------------------------
Earnings (loss) before extraordinary loss (159,351) 183,223 92,071
Extraordinary loss on early extinguishment of debt (15,687) (21,468) (5,242)
---------------------------------------------
Net earnings (loss) $ (175,038) $ 161,755 $ 86,829
---------------------------------------------
BASIC EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) before extraordinary loss $ (1.91) $ 2.48 $ 1.25
Extraordinary loss (.19) (.28) (.07)
---------------------------------------------
Net earnings (loss) (2.10) 2.20 1.18
---------------------------------------------
DILUTED EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) before extraordinary loss $ (1.91) $ 2.42 $ 1.22
Extraordinary loss (.19) (.28) (.07)
---------------------------------------------
Net earnings (loss) (2.10) 2.14 1.15
=============================================
</TABLE>
See accompanying notes to consolidated financial statements
CK WITCO CORPORATION AND SUBSIDIARIES
-36-
<PAGE>
CONSOLIDATED BALANCE SHEETS
Fiscal years ended 1999 and 1998
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1999 1998
---------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 10,543 $ 12,104
Accounts receivable 411,536 173,668
Inventories 523,363 334,562
Other current assets 174,311 77,422
-------------------------------
Total current assets 1,119,753 597,756
NON-CURRENT ASSETS 1,262,345 473,403
Property, plant and equipment 969,625 166,184
Cost in excess of acquired net assets 374,895 171,550
--------------------------------
Other assets $ 3,726,618 $ 1,408,893
--------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 81,162 $ 17,305
Accounts payable 330,591 117,338
Accrued expenses 422,252 139,401
Income taxes payable 121,366 103,179
Other current liabilities 22,599 17,149
--------------------------------
Total current liabilities 977,970 394,372
--------------------------------
NON-CURRENT LIABILITIES
Long-term debt 1,309,812 646,857
Postretirement health care liability 216,797 142,727
Other liabilities 462,127 158,234
STOCKHOLDERS' EQUITY
Common stock, $.01 and $.10 par value - issued 119,071,693
and 77,332,751 shares 1,191 7,733
Additional paid-in capital 1,047,518 238,615
Accumulated deficit (200,374) (15,985)
Accumulated other comprehensive income (61,238) (38,414)
Treasury stock at cost (27,185) (125,246)
--------------------------------
Total stockholders' equity 759,912 66,703
--------------------------------
$ 3,726,618 $ 1,408,893
================================
See accompanying notes to consolidated financial statements
CK WITCO CORPORATION AND SUBSIDIARIES
</TABLE>
-37-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended 1999, 1998 and 1997
<TABLE>
<CAPTION>
Increase (decrease) to cash (In thousands of dollars) 1999 1998 1997
-----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings (loss) $ (175,038) $ 161,755 $ 86,829
Adjustments to reconcile net earnings
(loss) to net cash provided by operations:
Acquired in-process research and development 195,000 -- --
Loss on sale of textile colors 83,333 -- --
Gain on sale of specialty ingredients (42,060) -- --
Merger and related costs 29,518 -- --
Extraordinary loss on early debt extinguishment 15,687 21,468 5,242
Gustafson joint venture gain -- (153,429) --
Facility closure costs -- 33,600 --
Depreciation and amortization 116,648 80,536 79,856
Equity income (10,568) -- --
Deferred taxes (26,281) (5,366) 18,184
Changes in assets and liabilities:
Accounts receivable 4,539 497 (2,997)
Inventories (25,475) 7,314 (3,960)
Other current assets 25,422 (11,508) 5,688
Other assets 7,333 3,358 2,165
Accounts payable and accrued expenses (73,963) (32,188) 8,573
Income taxes payable (10,776) 79,568 13,055
Other current liabilities 4,983 (10,562) 7,244
Postretirement health care liability (2,342) (3,727) (32,460)
Other liabilities (24,624) (7,161) 12,306
Other (2,712) 5,367 16,062
------------------------------------------------
Net cash provided by operations 88,624 169,522 215,787
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of specialty ingredients 103,000 -- --
Proceeds from sale of textile colors 75,322 -- --
Proceeds from Gustafson joint venture -- 180,000 --
Capital expenditures (131,782) (66,628) (50,176)
Acquired cash of Witco Corporation 236,658 -- --
Other investing activities (32,941) (9,717) 5,569
------------------------------------------------
Net cash provided by (used in) investing activities 250,257 103,655 (44,607)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term notes (356,449) (460,034) (76,860)
Proceeds (payments) on credit agreement 93,720 199,894 (91,529)
borrowings
Proceeds (payments) on short-term borrowings 61,267 15,535 (5,903)
Proceeds from sale of accounts receivable -- 80,000 --
Premium paid on early extinguishment of debt (20,431) (22,984) (7,065)
Treasury stock acquired (101,781) (94,974) --
Dividends paid (9,351) (3,721) (3,671)
Other financing activities (6,222) 14,425 4,240
------------------------------------------------
Net cash used in financing activities (339,247) (271,859) (180,788)
------------------------------------------------
CASH
Effect of exchange rates on cash (1,195) 179 (905)
------------------------------------------------
Change in cash (1,561) 1,497 (10,513)
Cash at beginning of period 12,104 10,607 21,120
------------------------------------------------
Cash at end of period $ 10,543 $ 12,104 $ 10,607
================================================
</TABLE>
See accompanying notes to consolidated financial statements
CK WITCO CORPORATION AND SUBSIDIARIES
-38-
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Fiscal years ended 1999, 1998 and 1997
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Accumulated Comprehensive Treasury
Stock Capital Deficit Income Stock Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1996 $ 7,724 $ 232,010 $ (257,177) $ (30,892) $ (48,083) $ (96,418)
Comprehensive income:
Net earnings 86,829 86,829
Equity adjustment for translation
of foreign currencies (16,453) (16,453)
Other 1,556 1,556
Total comprehensive income 71,932
Cash dividends ($.05 per share) (3,671) (3,671)
Stock options, warrants and other
issuances (668,552 shares) 9 203 7,855 8,067
--------------------------------------------------------------------------------------
BALANCE, DECEMBER 27, 1997 7,733 232,213 (174,019) (45,789) (40,228) (20,090)
--------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 161,755 161,755
Equity adjustment for translation
of foreign currencies 5,427 5,427
Other 1,948 1,948
Total comprehensive income 169,130
Cash dividends ($.05 per share) (3,721) (3,721)
Stock options, warrants and other
issuances (1,130,258 shares) 6,402 9,956 16,358
Treasury stock acquired
(5,368,600 shares) (94,974) (94,974)
---------------------------------------------------------------------------------------
BALANCE, DECEMBER 26, 1998 7,733 238,615 (15,985) (38,414) (125,246) 66,703
---------------------------------------------------------------------------------------
Comprehensive
income:
Net loss (175,038) (175,038)
Equity adjustment for translation of
foreign currencies (22,984) (22,984)
Other 160 160
Total comprehensive income (197,862)
Cash dividends ($.10 per share) (9,351) (9,351)
Stock options and other issuances
(17,030 common shares and
243,017 treasury shares) 3,703 2,132 5,835
Treasury stock acquired
(6,366,900 shares) (101,781) (101,781)
Change in par value (5,893) 5,893 -
Cancellation of treasury stock
(11,850,119 shares) (1,185) (196,525) 197,710 -
Acquisition of Witco
(53,572,031 shares) 536 995,832 996,368
--------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $ 1,191 $ 1,047,518 $ (200,374) $ (61,238) $ (27,185) $ 759,912
======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
CK WITCO CORPORATION AND SUBSIDIARIES
-39-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MERGER
On September 1, 1999, the shareholders of Crompton and Knowles
Corporation (Crompton) and Witco Corporation (Witco) approved a tax-free
stock-for-stock merger of Crompton and Witco (the "Merger"). The terms of the
Merger provided that (a) Crompton merge with and into CK Witco Corporation (the
"Company") and (b) immediately thereafter, Witco merge with and into the
Company, so that the Company is the surviving corporation. Also, under the terms
of the Merger, each share of Crompton's common stock was automatically converted
into one share of the Company's common stock, and each share of Witco's common
stock was exchanged for 0.9242 shares of the Company's common stock.
The Merger was accounted for as a purchase and accordingly, the
results of operations of Witco have been included in the consolidated financial
statements from the date of acquisition. An allocation of the purchase price
resulted in cost in excess of the estimated fair value of acquired net assets
(goodwill) of approximately $834 million. This is being amortized on a
straight-line basis over forty years.
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of all majority-owned subsidiaries. Other affiliates in which the
Company has a 20% to 50% ownership are accounted for in accordance with the
equity method. All significant intercompany balances and transactions have been
eliminated in consolidation.
Effective with the Merger, the Company adopted a fiscal year ending
on December 31. Prior to the Merger, Crompton's fiscal year ended on the last
Saturday in December.
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles which requires the
Company to make estimates and assumptions that affect the amounts and
disclosures reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with
the current year presentation.
INVENTORY VALUATION
Inventories are valued at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) basis.
-40-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, less accumulated
depreciation. Depreciation expense ($89.2 million in 1999, $59.4 million in 1998
and $58.7 million in 1997) is computed generally on the straight-line method
using the following ranges of asset lives: buildings and improvements: 10 to 40
years, machinery and equipment: 3 to 25 years, and furniture and fixtures: 3 to
10 years.
Renewals and improvements which extend the useful lives of the
assets are capitalized. Capitalized leased assets and leasehold improvements are
depreciated over their useful lives or the remaining lease term, whichever is
shorter. Expenditures for maintenance and repairs are charged to expense as
incurred.
LONG-LIVED ASSETS
The Company evaluates the recoverability of the carrying value of
long-lived assets, including intangible assets, of each of its businesses by
assessing whether the projected cash flows of each of its businesses is
sufficient to recover the existing unamortized cost of these assets. In
addition, the Company periodically evaluates the future period over which the
benefit of long-lived assets will be received, based on the undiscounted value
of future cash flows. If the Company determines that any assets have been
permanently impaired, the amount of the impaired assets is written-off against
earnings in the quarter in which the impairment is determined.
INTANGIBLE ASSETS
The excess cost over the fair value of net assets of businesses
acquired is being amortized on a straight-line basis over 20 to 40 years.
Accumulated amortization was $49.4 million and $44.6 million in 1999 and 1998,
respectively.
Patents, unpatented technology, trademarks and other intangibles
(net) of $152.3 million in 1999 and $59 million in 1998, included in other
assets, are being amortized principally on a straight-line basis over their
estimated useful lives ranging from 6 to 40 years. Accumulated amortization was
$135.5 million and $120.9 million in 1999 and 1998, respectively.
FINANCIAL INSTRUMENTS
Financial instruments are presented in the accompanying consolidated
financial statements at either cost or fair value as required by generally
accepted accounting principles.
TRANSLATION OF FOREIGN CURRENCIES
Balance sheet accounts denominated in foreign currencies are
translated generally at the current rate of exchange as of the balance sheet
date, while revenues and expenses are translated at average rates of exchange
during the periods presented. The cumulative foreign currency adjustments
resulting from such translation are included in accumulated other comprehensive
income. For foreign subsidiaries operating in highly inflationary economies,
monetary balance sheet accounts and related revenue and expenses are translated
at current rates of exchange while non-monetary balance sheet accounts and
related revenues and expenses are trans-
-41-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
lated at historical exchange rates. The resulting translation gains and losses
related to those countries are reflected in operations and are not significant
in any of the years presented.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
COMPREHENSIVE INCOME
Effective in the first quarter of 1998, the Company adopted FASB
Statement No. 130 "Reporting Comprehensive Income." The Statement establishes
standards for reporting "Comprehensive Income" and its components in the
consolidated financial statements. The adoption of this statement had no impact
on the Company's net earnings (loss) or stockholders' equity. Further
information is provided in the footnote on Comprehensive Income.
STATEMENTS OF CASH FLOWS
Cash includes bank term deposits of three months or less. Cash
payments during the fiscal years ended 1999, 1998 and 1997 included interest
payments of $89.6 million, $79.5 million and $90.8 million and income tax
payments of $67 million, $33.5 million and $28.3 million, respectively.
OTHER DISCLOSURES
Included in accounts receivable are allowances for doubtful accounts
in the amount of $23.4 million in 1999 and $9.8 million in 1998.
Included in accrued expenses are environmental liabilities of $47.8
million in 1999 and $18.4 in 1998 and merger related accruals of $110.7 million
in 1999.
Included in other liabilities are environmental liabilities in the
amount of $150.2 million in 1999 and $75.6 million in 1998 and pension
liabilities of $148.5 million in 1999 and $51.6 million in 1998.
In 1997, the Company incurred a $13 million charge related to
severance ($6.9 million) and other non-recurring costs ($6.1 million). As of
December 31, 1999 all amounts had been realized.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
Acquired in-process research and development (IPR&D) represents the
value assigned in a purchase business combination to research and development
projects of the acquired business that had commenced, but had not yet been
completed at the date of acquisition, and which, if unsuccessful, have no
alternative future use in research and development activities or otherwise. In
accordance with FASB Statement No. 2 "Accounting for Research and Development
Costs" as clarified by FASB Interpretation No. 4, amounts assigned to purchased
IPR&D that meet the above stated criteria must be charged to expense as part of
the allocation of the purchase price of the business combination. Accordingly,
charges totaling $195 million were re-
-42-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
corded in the third quarter of 1999 as part of the allocation of the purchase
price related to the acquisition of Witco.
The Company engaged an independent appraiser to provide a basis for
allocating a portion of the purchase price of Witco to the purchased IPR&D. The
fair value assigned to purchased IPR&D was determined by the independent
appraiser applying the income approach and a valuation model, incorporating
revenue and expense projections, probability of commercial and technological
success, stage of development and present value factors.
The more significant IPR&D projects were principally in the Polymer
Additives and OrganoSilicones segments. The following is a summary of the IPR&D
projects and the values assigned:
Projected IPR&D
Business Percent Completion Value
Segment Complete Date (In thousands)
- -------------------------------------------------------------------------------
Polymer
Additives (a) 24-86% 2000-2003 $ 62,000
OrganoSilicones (b) 8-65% 2000-2001 106,000
Crop Protection (c) 21-37% 2000-2004 27,000
- -------------------------------------------------------------------------------
Total IPR&D $195,000
- -------------------------------------------------------------------------------
(a) Includes the development of an internal anti-static agent for use in
acrylic sheets and pellets for extrusion and injection molding ($18,000),
replacement of lead-based stabilizers utilized in PVC ($15,000) and
approximately 35 other projects ($29,000).
(b) Includes the development of a family of chemicals utilized in finished
tires, which are expected to provide improved compounding and dispersion of
silica in a single compounding pass ($11,000), production of a chemical to
be used in the manufacture of silica tires, resulting in improved
performance and longer life ($21,000) and approximately 78 other projects
($74,000).
(c) Includes approximately 29 projects.
Due to the uniqueness of each of the projects, the costs and effort
required are estimated based on the latest available information. Additionally,
the completion date reflects management's best estimate of the time that the
company will begin to benefit from cash inflows or cost reductions from the
projects. However, there is a risk that certain projects may not be completed
successfully for a variety of reasons including change in strategies, changes in
market demand or customer requirements, technology issues, etc. However, the
projected revenues, costs, and margins in the cash flow forecasts are
substantially consistent with projections utilized by management in evaluating
the feasibility of research and development projects.
PRO FORMA FINANCIAL INFORMATION
The following pro forma unaudited results of operations for the
twelve months ended 1999 and 1998, assume the merger had been consummated as of
January 1, 1998, and exclude the write-off of acquired in-process research and
development of $195 million:
-43-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
1999 1998
---------- ------------
Net sales $3,421,651 $3,797,742
---------- ------------
Earnings before extraordinary loss (a) $ 52,611 $ 234,652
---------- ------------
Net earnings (a) $ 36,924 $ 213,184
---------- ------------
Net earnings before extraordinary loss per
basic common share $ 0.44 $ 1.85
---------- ------------
Net earnings before extraordinary loss per
diluted common share $ 0.44 $ 1.82
---------- ------------
Net earnings per basic common share $ 0.31 $ 1.68
---------- ------------
Net earnings per diluted common share $ 0.31 $ 1.65
---------- ------------
Weighted average basic shares outstanding 119,489 126,854
---------- ------------
Weighted average diluted shares outstanding 120,846 128,961
---------------------------
(a) The pro forma net earnings before extraordinary loss and net earnings
include the following after-tax special items:
(IN THOUSANDS) 1999 1998
---------- ------------
Restructuring charges (credits) - net $ 1,954 $ (21,100)
Environmental charge - 13,435
(Gain) loss on sale of businesses and
investment - net 38,731 (95,288)
Merger and related costs 20,608 -
Facility closure costs - 21,100
Other - 5,000
---------- ------------
(Earnings) loss from special items $ 61,293 $ (76,853)
---------- ------------
MERGER ACCRUALS
As a result of the Merger, the Company recorded $176.1 million of
merger related accruals as a component of the cost in excess of acquired net
assets (goodwill), summarized as follows:
1999
(IN THOUSANDS) Accrual Payments Balance
---------------------------------
Severance and related accruals $ 128,261 $ 53,961 $ 74,300
Merger related fees 41,619 10,400 31,219
Other merger related costs 6,174 967 5,207
---------------------------------
$ 176,054 $ 65,328 $ 110,726
---------------------------------
Also, as a result of the Merger, the Company recorded a charge of
$29.5 million during the fourth quarter of 1999, summarized as follows:
-44-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
1999
(IN THOUSANDS) Charge Realized Balance
---------------------------------
Severance and other employee benefit
related costs $ 18,959 $ 8,942 $ 10,017
Facility closure and maintenance costs 8,988 125 8,863
Other merger related costs 1,571 406 1,165
----------------------------------
$ 29,518 $ 9,473 $ 20,045
----------------------------------
JOINT VENTURES AND DIVESTITURES
In December 1999, the Company sold its textile colors business to
Yorkshire Group PLC for $86.5 million ($78 million in cash proceeds and a 12.4%
equity interest in Yorkshire valued at approximately $8.5 million). The sale
resulted in a pre-tax loss of $83.3 million.
In January 1999, the Company sold its specialty ingredients business
to Chr. Hansen Holding A/S of Denmark for $103 million, which resulted in a
pre-tax gain of $42.1 million in the first quarter of 1999.
In November 1998, the Company and Bayer Corporation formed a 50/50
joint venture to serve the agricultural seed treatment markets in North America.
The basis of the joint venture is the Company's Gustafson seed treatment
business. The Company received cash proceeds of $180 million in the transaction
which resulted in a fourth quarter 1998 pre-tax gain of $153.4 million. Also, in
November 1998, the Company announced the formation of a joint venture with
GIRSA, a subsidiary of DESC, S.A. de C.V. to produce nitrile rubber products in
Mexico. The joint venture resulted in the closure of the Company's existing
nitrile rubber facility in Painesville, Ohio. In connection with the facility
closure, the Company incurred a charge of $33.6 million summarized as follows:
1998 1999
(IN THOUSANDS) Charge Realized Balance
---------------------------------
Write-off of long lived assets $ 13,811 $ 13,811 $ -
Facility closure and maintenance costs 12,239 4,505 7,734
Severance and other costs 7,550 7,550 -
---------------------------------
$ 33,600 $ 25,866 $ 7,734
---------------------------------
ACCOUNTS RECEIVABLE PROGRAM
The Company has entered into two separate agreements to sell
domestic accounts receivable to agent banks. The first agreement, dated December
1998, is a five year agreement to sell up to $82 million in receivables, of
which $80 million had been sold at December 31, 1999 and December 26, 1998 at a
cost of approximately 6.43% and 5.85%, respectively. The second agreement, dated
June 1999, is a three year agreement to sell up to $150 million in receivables,
of which $84.7 million had been sold at December 31, 1999 at a cost of
approximately 6.12%. These programs reduce financing costs versus borrowings
under the revolving credit agreement and diversifies the Company's sources of
financing.
-45-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
INVENTORIES
(IN THOUSANDS) 1999 1998
---------------------------
Finished goods $ 410,513 $ 226,663
Work in process 27,394 45,237
Raw materials and supplies 85,456 62,662
---------------------------
$ 523,363 $ 334,562
---------------------------
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS) 1999 1998
---------------------------
Land and improvements $ 50,922 $ 30,380
Buildings and improvements 189,982 155,578
Machinery and equipment 1,264,954 634,136
Furniture and fixtures 41,170 37,989
Construction in progress 163,663 50,000
---------------------------
1,710,691 908,083
Less accumulated depreciation 448,346 434,680
---------------------------
$ 1,262,345 $ 473,403
---------------------------
LEASES
At December 31, 1999, minimum rental commitments related to
continuing operations under non-cancelable operating leases amounted to $27.8
million (2000), $24.2 million (2001), $22.2 million (2002), $20.2 million
(2003), $19.3 million (2004) and $149.4 million (2005 and thereafter).
Rental expenses under operating leases were $20.9 million (1999),
$15.8 million (1998) and $16.8 million (1997).
Future minimum lease payments under capital leases at December 31,
1999, were as follows:
(IN THOUSANDS)
- -------------------------------------------------------------------------------
2000 $ 1,327
2001 1,327
2002 1,327
2003 1,327
2004 1,327
2005 and thereafter 3,981
- -------------------------------------------------------------------------------
Total minimum lease payments 10,616
Amounts representing interest (3,298)
- -------------------------------------------------------------------------------
Present value of net minimum lease payments 7,318
Current portion (689)
- -------------------------------------------------------------------------------
Long-term obligation $ 6,629
- -------------------------------------------------------------------------------
-46-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Real estate taxes, insurance and maintenance expenses generally are
obligations of the Company and, accordingly, are not included as part of rental
payments. It is expected that, in the normal course of business, leases that
expire will be renewed or replaced by similar leases.
INDEBTEDNESS
LONG-TERM DEBT
(IN THOUSANDS) 1999 1998
------------------------
Credit facilities $ 680,000 $ 286,280
6.60% Notes due 2003 net of unamortized discount
of $5,752, with an effective interest rate of 159,248 -
7.67%
6.125% Notes due 2006, net of unamortized discount
of $14,501, with an effective interest rate of 135,499 -
7.71%
6.875% Debentures due 2026, net of unamortized
discount of $27,485, with an effective interest
rate of 7.58% 122,515 -
7.75% Debentures due 2023, net of unamortized
discount of $1,696, with an effective interest
rate of 7.82% 108,304 -
AIBOR Based Bank Loans due 2003 66,298 -
9% Senior Notes due 2000 1,655 182,261
10.5% Senior Notes due 2002 714 173,128
Other 35,579 5,188
-------------------------
$1,309,812 $ 646,857
-------------------------
The Company's long-term debt instruments are recorded at face value,
net of unamortized discounts and premiums. Such discounts and premiums will be
amortized to interest expense over the life of the related debt instrument.
At December 31, 1999, the Company had outstanding interest rate swap
contracts with an aggregate notional amount of $66.3 million. These contracts
are used to convert the Company's variable interest rate (AIBOR - Amsterdam
Interbank Offered Rate), Dutch guilder denominated debt to fixed rate debt. The
weighted average fixed interest rate on these swap contracts was 5.2% at
December 31, 1999.
DEBT REDEMPTIONS AND REPURCHASES
On November 4, 1999, the Company offered to purchase for cash any
and all of its outstanding 9% Senior Notes and 10.5% Senior Notes. As a result
of the offer, during the fourth quarter of 1999, the Company repurchased $180.6
million of 9% Senior Notes and $149.5 million of 10.5% Senior Notes at a
purchase price of 102% and 110%, respectively, plus accrued
-47-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
and unpaid interest. Also during 1999, the Company repurchased in the open
market $22.9 million of 10.5% Senior Notes. As a result of these repurchases,
the Company recognized an extraordinary loss of $15.7 million, net of a tax
benefit of $8.9 million.
During 1998, the Company redeemed the outstanding 11% Senior
Subordinated Notes at a price of 105.5% of the principal amount thereof and the
12% Subordinated Discount Notes at a price of 100% of the principal amount
thereof. In addition, the Company repurchased in the open market $44.4 million
of 9% Senior Notes and $62.8 million of 10.5% Senior Notes. As a result of the
redemptions and repurchases, the Company recognized an extraordinary loss of
$21.5 million, net of tax benefit of $13.1 million.
During 1997, the Company repurchased in the open market $24 million
of 9% Senior Notes, $47.1 million of 10.5% Senior Notes, $3.5 million of 11%
Senior Subordinated Notes, and $2.5 million of 12% Subordinated Discount Notes.
As a result of the repurchases, the Company recognized an extraordinary loss of
$5.3 million, net of tax benefit of $3.5 million.
CREDIT FACILITIES
On October 28, 1999, the Company entered into a $600 million 364-day
senior unsecured revolving credit facility (with an option to renew for an
additional year) and a $400 million five-year senior unsecured credit facility
with a syndicate of lenders. Borrowings on these facilities are at various rate
options to be determined on the date of borrowing. In addition, the Company must
pay a facility fee on the aggregate amount of the 364-day and the five-year
credit facilities (currently these rates are .15% and .20%, respectively). The
Company is also required to pay a utilization fee on the outstanding balance of
each of the credit facilities, if such balances are in excess of 33% of the
available credit (currently the rate is .25% for both facilities). At December
31, 1999, borrowings under the 364-day and the five-year credit facilities were
$280 million and $400 million, respectively, with weighted average interest
rates of 7.16% and 6.86%.
The Company has classified the 364-day credit facility as long-term
based on its ability and intent to refinance this facility with an offering of
new long-term notes. On March 7, 2000, $600 million of 8.5% Senior Notes due
2005 and $25 million of floating rate Senior Notes due 2001 were issued via a
private placement.
The Company also has access to short-term uncommitted facilities
based on current money market rates. At December 31, 1999, borrowings under
these short-term uncommitted facilities were $75.3 million, with a weighted
average interest rate of 6.72%. The Company also has arrangements with various
banks for lines of credit for its international subsidiaries aggregating $19.9
million, of which $2.8 million was outstanding at December 31, 1999.
DEBT COVENANTS
The Company's various debt agreements contain covenants which limit
the ability to incur additional debt, create or assume mortgages or engage in
mergers, consolidations, and certain sales or leases of assets. In addition, the
credit agreement requires the Company to maintain certain financial ratios.
-48-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MATURITIES
At December 31, 1999, the scheduled maturities of long-term debt
during the next five fiscal years are: 2000 - $4 million; 2001 - $2.5 million;
2002 - $2.8 million; 2003 - $233.5 million; and 2004 - $402.4 million.
FINANCIAL INSTRUMENTS
The Company purchases foreign currency forward contracts that are
designated and effective as hedges of recorded transactions (principally foreign
currency trade receivables and payables, as well as intercompany debt), which
otherwise would expose the Company to foreign currency risk. The Company uses
foreign currency swap contracts to reduce its exposure to foreign currency
fluctuations from its net investment (including long-term intercompany loans) in
its international subsidiaries. The Company also enters into interest rate swap
contracts to modify the interest characteristics of its outstanding debt.
Further information is provided in the Market Risk and Risk Management Policies
section of Management's Discussion and Analysis of Financial Condition and
Results of Operations.
At December 31, 1999, the Company had outstanding foreign currency
forward contracts with aggregate notional amounts of approximately $138 million,
to hedge foreign currency risk on accounts receivable and payable and
intercompany debt. These forward contracts are generally outstanding for one to
six months and are primarily denominated in German marks, Italian lira, Dutch
guilders, Swiss and French francs, Hong Kong dollars, and British pounds.
At December 31, 1999, the Company had outstanding foreign currency
swap contracts with aggregate notional amounts of approximately $170.8 million,
to hedge its foreign net investments. At December 31, 1999 the swap contracts
are primarily in German marks, which expire in March 2003.
At December 31, 1999, the Company had outstanding interest rate swap
contracts with an aggregate notional amount of approximately $66.3 million.
These contracts are used to convert the Company's variable interest rate Dutch
guilder denominated debt to fixed rate debt.
At December 26, 1998 the Company had an interest rate lock contract
("Interest Hedge") for $230 million at a rate of 6.04%. The settlement value of
the Interest Hedge as of December 26, 1998 was approximately $17 million. During
the second quarter of 1999, the Company settled the Interest Hedge. The Interest
Hedge would have expired on September 1, 2000.
All contracts have been entered into with major financial
institutions. The risk associated with these transactions is the cost of
replacing these agreements, at current market rates, in the event of default by
the counterparties. Management believes the risk of incurring such losses is
remote.
The carrying amounts for cash, accounts receivable, accounts payable
and other current liabilities approximate their fair value because of the
short-term maturities of these instruments. The fair value of the note
receivable is estimated by discounting the future cash flows
-49-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
using the interest rates at which similar loans would be made under current
conditions. The fair value of the long-term payable is estimated by discounting
the future cash flows using the Company's incremental borrowing rate. The fair
value of long-term debt is based on quoted market values. For all other
long-term debt which have no quoted market values, the fair value is estimated
by discounting projected future cash flows using the Company's incremental
borrowing rate. The fair value of interest rate swap and foreign currency
forward and swap contracts is the amount at which the contracts could be settled
based on quotes provided by investment banking firms.
The following table presents the carrying amounts and estimated fair
values of material financial instruments used by the Company in the normal
course of its business.
1999
---------------------------
CARRYING FAIR
(IN THOUSANDS) AMOUNT VALUE
- -------------------------------------------------------------------------------
Note receivable $ 8,767 $ 8,694
Long-term payable $ 7,427 $ 7,720
Long-term debt $ 1,309,812 $ 1,280,936
Interest rate swap contracts $ 1,389 $ 635
Foreign currency forward and swap contracts $ 16,732 $ 21,607
- -------------------------------------------------------------------------------
---------------------------
1998
---------------------------
Carrying Fair
(IN THOUSANDS) Amount Value
- -------------------------------------------------------------------------------
Long-term debt $ 646,857 $ 685,900
Interest hedge $ -- $ 17,000
- -------------------------------------------------------------------------------
At December 31, 1999, the carrying amount of the note receivable is
included in other current assets, the carrying amounts of the long-term payable
and the interest rate swap contracts are included in other liabilities, and the
carrying amounts of the foreign currency forward and swap contracts are included
in other assets.
INCOME TAXES
The components of earnings (loss) before income taxes and
extraordinary loss, and the provision for income taxes are as follows:
(IN THOUSANDS) 1999 1998 1997
------------------------------------
Pretax Earnings (Loss):
Domestic $ (153,347) $ 207,595 $ 104,886
Foreign 36,918 91,121 43,860
------------------------------------
$ (116,429) $ 298,716 $ 148,746
------------------------------------
Income Taxes:
Domestic
Current $ 27,949 $ 95,386 $ 22,506
Deferred (10,833) (7,381) 16,989
----------------------------------
17,116 88,005 39,495
----------------------------------
-50-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(IN THOUSANDS) 1999 1998 1997
------------------------------------
Foreign
Current 41,254 25,473 15,985
Deferred (15,448) 2,015 1,195
----------------------------------
25,806 27,488 17,180
----------------------------------
Total
Current 69,203 120,859 38,491
Deferred (26,281) (5,366) 18,184
----------------------------------
$ 42,922 $ 115,493 $ 56,675
----------------------------------
The provision (benefit) for income taxes differs from the Federal
statutory rate for the following reasons:
(IN THOUSANDS) 1999 1998 1997
------------------------------------
Provision (benefit) at statutory rate $ (40,750) $ 104,551 $ 52,061
Non-deductible acquired IPR&D 68,250 -- --
Impact of valuation allowance 3,216 3,598 (3,616)
Goodwill amortization 4,016 4,395 1,619
Foreign income tax rate differential 10,766 (5,686) 674
State income taxes, net of federal benefit (2,105) 7,629 5,141
Other, net (471) 1,006 796
----------------------------------
Actual provision for income taxes $ 42,922 $ 115,493 $ 56,675
----------------------------------
Provisions have been made for deferred taxes based on differences
between financial statement and tax bases of assets and liabilities using
currently enacted tax rates and regulations. The components of the net deferred
tax assets and liabilities are as follows:
(IN THOUSANDS) 1999 1998
-----------------------
Deferred tax assets:
Pension and other postretirement $ 118,989 $ 81,398
Accruals for environmental remediation 59,802 28,992
Merger related accruals 17,226 --
Other accruals 129,660 45,860
NOL and credit carryforwards 79,070 15,774
Inventories and other 4,448 17,147
Deferred tax liabilities:
Property, plant and equipment (108,966) (65,771)
Intangibles (23,267) (5,862)
Financial instruments (29,353) --
Other (10,267) (5,769)
-----------------------
Net deferred tax asset before valuation
allowance $ 237,342 $ 111,769
Valuation allowance (53,562) (16,064)
-51-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Net deferred tax asset after valuation allowance $ 183,780 $ 95,705
-----------------------
Net deferred taxes include $127.8 million and $46.9 million in
current assets and $56 million and $48.8 million in long-term assets in 1999 and
1998, respectively.
At December 31, 1999, the Company had an aggregate of $147.8 million
of net operating loss carryforwards (NOL's) ($116.9 million generated
domestically and $30.9 million related to the Company's foreign subsidiaries),
$20.9 million of excess foreign tax credits and $4 million of local foreign tax
credit carryforwards. The Company has concluded that it is uncertain if it will
be able to utilize all of the NOL's or the excess foreign tax credits and the
other local foreign tax credits, thus a valuation allowance has been
established. The valuation allowance includes $28.6 million related to the
NOL's, $4 million for the other local foreign tax credits and $20.9 million
related to excess foreign tax credits for which subsequently recognized tax
benefits will be applied to reduce goodwill.
The Company's NOL's are subject to certain limitations and will
begin to expire in 2005. The Company's excess foreign tax credits begin to
expire in 2000 and the local foreign tax credits will begin to expire in 2000.
A provision has not been made for U.S. taxes which would be payable
if undistributed earnings of the foreign subsidiaries of approximately $246
million at December 31,1999, were distributed to the Company in the form of
dividends, since certain foreign countries limit the extent of repatriation of
earnings, while for others, the Companies intention is to permanently reinvest
such foreign earnings. The determination of the amount of the unrecognized
deferred tax liability related to undistributed earnings is not practicable.
The Company has not recognized a deferred tax liability for the
difference between the book basis and the tax basis of its investment in the
common stock of its subsidiaries (such difference relates primarily to
unremitted earnings of foreign subsidiaries of approximately $247 million)
because the Company does not expect this basis to become subject to tax at the
parent level as it is the Company's intention to permanently reinvest such
foreign earnings.
EARNINGS PER COMMON SHARE
The computation of basic earnings (loss) per common share is based
on the weighted average number of common shares outstanding. Diluted earnings
per share is based on the weighted average number of common and common
equivalent shares outstanding. The computation of diluted loss per share for
fiscal year 1999 equals the basic calculation since common stock equivalents
were antidilutive.
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997
----------------------------------
Earnings (loss) before extraordinary loss $ (159,351) $ 183,223 $ 92,071
----------------------------------
Net earnings (loss) $ (175,038) $ 161,755 $ 86,829
----------------------------------
BASIC
Weighted average shares outstanding 83,507 73,696 73,373
----------------------------------
Earnings (loss) before extraordinary loss $ (1.91) $ 2.48 $ 1.25
----------------------------------
-52-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997
----------------------------------
Net earnings (loss) $ (2.10) $ 2.20 $ 1.18
----------------------------------
DILUTED
Weighted average shares outstanding 83,507 73,696 73,373
Stock options, warrants and other -- 2,004 1,985
equivalents ----------------------------------
Weighted average shares adjusted for 83,507 75,700 75,358
dilution
Earnings (loss) before extraordinary $ (1.91) $ 2.42 $ 1.22
loss ---------------------------------
Net earnings (loss) $ (2.10) $ 2.14 $ 1.15
---------------------------------
CAPITAL STOCK
The Company is authorized to issue 500 million shares of $.01 par
value common stock. Prior to the Merger, Crompton was authorized to issue 250
million shares of $.10 par value common stock. There were 119,071,693 and
77,332,751 shares issued at year-end 1999 and 1998, respectively, of which
2,236,500 and 7,962,736 shares were held in the treasury in 1999 and 1998,
respectively.
In November 1999, the Board of Directors approved a share repurchase
program for 10% of the common shares then outstanding, or approximately 11.9
million shares. As of December 31, 1999, the Company had repurchased 2.2 million
common shares under that program at an average price of $12.16 per share.
In September 1998, the Board of Directors authorized a plan to
repurchase 7.5 million shares of the Company's common shares then outstanding.
In January 1999, the Company announced a share repurchase program for 6.8
million shares, or approximately 10% of the common shares then outstanding. From
September 1998 through the completion of these programs in 1999, the Company
repurchased 9.5 million common shares at an average price of $17.85 per share.
The Company is authorized to issue 250,000 shares of preferred stock
without par value, none of which are outstanding. At the time of the Merger,
Crompton's existing preferred share purchase rights were terminated. On
September 3, 1999, the Company declared a dividend distribution of one Preferred
Share Purchase Right (Rights) on each outstanding share of common stock. These
Rights entitle stockholders to purchase one one-hundredth of a share of a new
series of junior participating preferred stock at an exercise price of $100. The
Rights are only exercisable if a person or group acquires 15% or more of the
Company's common stock or announces a tender offer which, if successful, would
result in ownership of 15% or more of the Company's common stock.
COMPREHENSIVE INCOME
Components of accumulated other comprehensive income are as follows:
(IN THOUSANDS) 1999 1998
-----------------------
Foreign currency translation adjustment $ (59,602) $ (36,618)
Other (1,636) (1,796)
-----------------------
Accumulated other comprehensive income $ (61,238) $ (38,414)
-----------------------
-53-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
STOCK INCENTIVE PLANS
The 1988 Long-Term Incentive Plan (1988 Plan), as amended,
authorized the Board to grant stock options, stock appreciation rights,
restricted stock and long-term performance awards covering up to 10 million
shares to the officers and other key employees of the Company over a period of
ten years through October 1998. Non-qualified and incentive stock options were
granted under the 1988 plan at prices not less than 100% of the market value on
the date of the grant. All outstanding options will expire not more than ten
years and one month from the date of grant.
The 1993 Stock Option Plan for Non-Employee Directors, as amended in
1996, authorized 200,000 options to be granted to non-employee directors. The
options vest over a two year period and are exercisable over a ten year period
from the date of grant, at a price equal to the fair market value on the date of
grant.
The 1998 Long-Term Incentive Plan (1998 Plan) was approved by the
shareholders of Crompton in 1999. This plan authorizes the Board to grant stock
options, stock appreciation rights, restricted stock and long-term performance
awards to eligible employees and stock options to non-employee directors over a
ten year period. During 1999, non-qualified and incentive stock options were
granted under the 1998 plan at prices not less than 100% of the market value on
the date of grant. All outstanding options will expire not more than ten years
and one month from the date of grant. The 1998 Plan authorizes the Company to
grant shares and options for shares of common stock equal to the sum of (i)
shares available for award under the 1988 Plan and the 1993 Stock Option Plan
for Non-Employee Directors as of October 18, 1998 and (ii) shares awarded under
prior plans of the Company which were forfeited, expired, lapsed, not earned or
tendered to pay the exercise price of options or withholding taxes. In 1999, the
number of common shares reserved for issuance under the 1998 plan was increased
by 2.8 million shares, and pursuant to the Merger, increased by an additional 5
million shares. Under the terms of the Merger, the shareholders also approved
the conversion of all outstanding Witco options into options to purchase the
Company's common stock. These 4.7 million converted options expired 30 days
after the Merger, and are now available for grant under the 1998 Plan.
Under the 1988 Plan, 1,261,000 common shares have been transferred
to an independent trustee to administer restricted stock awards for the
Company's long-term incentive program. At December 31, 1999 deferred
compensation relating to such shares in the amount of $0.7 million is being
amortized over an estimated service period of six to fifteen years. In 1996, the
Company granted long-term incentive awards from the 1988 Plan in the amount of
824,250 shares which were earned at the end of 1998 based upon the achievement
of certain financial criteria. The shares earned in 1998 vest ratably at 25% per
year with the final installment at retirement. Compensation expense related to
such shares is accrued over a six year period.
In 1999, the Company granted long-term incentive awards in the
amount of 1,207,500 shares to be earned at the end of 2001 if certain financial
criteria were met. At the time of the Merger, these awards were cancelled, and
upon cancellation, cash payments were made to award recipients.
-54-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In October 1999, the Company granted long-term incentive awards in
the amount of 2,175,000 shares of restricted stock from the 1998 Plan. These
shares will vest over a three year period ending on January 1, 2003 or 2004,
depending on when and if certain financial goals are achieved. The compensation
expense relating to these shares is being accrued ratably over a three year
period.
In January 2000, the Company granted long-term incentive awards from
the 1998 Plan in the amount of 2,745,750 shares, to be earned at the end of
2002, if certain financial criteria are met. The shares covered by this grant
vest ratably over a three year period, upon achievement of the financial
criteria, and the compensation expense relating to these shares will be accrued
over a six year period.
Effective in 1996, the Company adopted the provisions of FASB
Statement No. 123 "Accounting and Disclosure of Stock-Based Compensation." As
permitted, the Company elected to continue its present method of accounting for
stock-based compensation. Accordingly, compensation expense has not been
recognized for stock based compensation plans other than restricted stock awards
under the Company's long-term incentive programs. Had compensation cost for the
Company's stock option and long-term incentive awards been determined under the
fair value method, net earnings (loss) (in thousands) would have been
$(182,747), $158,641, and $84,660 for the years 1999, 1998 and 1997,
respectively. Net earnings (loss) per common share (basic) would have been
$(2.19), $2.15, and $1.15 and net earnings (loss) per common share (diluted)
would have been $(2.19), $2.06, and $1.11 for the years 1999, 1998 and 1997,
respectively. The average fair value per share of options granted was $3.42 in
1999, $5.46 in 1998, and $10.53 in 1997. The fair value of options granted was
estimated using the Black-Scholes option pricing model with the following
assumptions for 1999, 1998 and 1997, respectively: dividend yield 2.1%, .35%,
and .19%, expected volatility 33%, 31%, and 28%, risk-free interest rate 6.3%,
4.6%, and 6.1%, and expected life 8 years, 6 years, and 6 years.
Changes during 1999, 1998 and 1997 in shares under option are
summarized as follows:
Price Per Share
---------------------------
Range Average Shares
-------------------------------------------
Outstanding at 12/28/96 $ 2.47-23.75 $ 12.47 6,271,975
Granted 19.31-26.41 26.39 613,251
Exercised 2.47-19.31 6.69 (667,733)
Lapsed 9.31-19.31 14.62 (86,917)
Outstanding at 12/27/97 3.13-26.41 14.46 6,130,576
Granted 14.34 14.34 1,077,112
Exercised 3.13-19.31 9.74 (966,664)
Lapsed 13.00-26.41 19.06 (34,543)
Outstanding at 12/26/98 3.13-26.41 15.15 6,206,481
Granted 8.34-17.13 9.36 4,320,500
Exercised 5.22-16.88 8.38 (177,865)
Lapsed 8.34-26.41 16.24 (115,870)
Outstanding at 12/31/99 $ 3.13-26.41 $ 12.81 10,233,246
-55-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Price Per Share
---------------------------
Range Average Shares
-------------------------------------------
Exercisable at 12/27/97 $ 3.13-23.75 $ 12.32 3,866,992
Exercisable at 12/26/98 $ 3.13-26.41 $ 14.16 3,650,289
Exercisable at 12/31/99 $ 3.13-26.41 $ 15.15 4,461,652
Shares available for grant at year-end 1999 and 1998 were 8,697,610
and 2,552,948, respectively.
The following table summarizes information concerning currently
outstanding and exercisable options:
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at end of Contractual Exercise at end of Exercise
Prices 1999 Life Price 1999 Price
- --------------------------------------------------------------------------------
$ 3.13-5.22 225,139 2.5 $ 4.93 225,139 $ 4.93
$ 8.34-9.31 3,896,532 9.6 $ 8.37 115,032 $ 9.30
$11.75-13.57 1,232,356 3.8 $12.20 1,232,356 $12.20
$14.34-17.13 3,799,856 6.5 $15.15 1,955,637 $15.07
$18.31-26.41 1,079,363 5.2 $22.94 933,488 $22.39
---------------------------------------------------------------
10,233,246 7.1 $12.81 4,461,652 $15.15
The Company has an Employee Stock Ownership Plan that is offered to
eligible employees of the Company and certain of its subsidiaries. The Company
makes contributions equivalent to a stated percentage of employee contributions.
The Company's contributions were $4.2 million in 1999 and $2 million in 1998 and
1997.
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company has several defined benefit and defined contribution
pension plans covering substantially all of its domestic employees and certain
international employees. Benefits are primarily based on the employees' years of
service and compensation during employment. The Company's funding policy for the
defined benefit plans is based on contributions at the minimal annual amounts
required by law plus such amounts as the Company may deem appropriate.
Contributions for the defined contribution plans are determined as a percentage
of each covered employees' salary. Plan assets consist of publicly traded
securities and investments in commingled funds administered by independent
investment advisors.
Employees of international locations are covered by various pension
benefit arrangements, some of which are considered to be defined benefit plans
for financial reporting purposes. Assets of the plans are comprised primarily of
insurance contracts and equity securities. Benefits under these plans are
primarily based upon levels of compensation. Funding policies are based on legal
requirements, tax considerations and local practices.
The Company also provides health and life insurance benefits for
certain retired and active employees and their beneficiaries and covered
dependents for substantially all of its
-56-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
domestic employees and certain international employees. These plans are
generally not pre-funded and are paid by the Company as incurred.
<TABLE>
<CAPTION>
CHANGE IN BENEFIT OBLIGATION:
Pension Plans Post-Retirement Plans
-----------------------------------------------
(IN THOUSANDS) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation at beginning $251,798 $ 244,364 $ 151,440 $ 154,829
of year
Service cost 7,791 7,635 1,272 1,256
Interest cost 28,345 16,044 10,820 9,958
Plan participants' contributions 328 122 301 91
Plan amendments -- -- -- (238)
Actuarial gains (39,936) (2,649) (26,271) (5,374)
Foreign currency exchange rate (6,150) (1,724) 258 (432)
changes
Acquisitions 547,377 -- 78,395 --
Benefits paid (25,051) (13,520) (12,960) (8,650)
Curtailments (14,183) 1,526 341 --
- ----------------------------------------------------------------------------------------
Benefit obligation at end of $750,319 $251,798 $203,596 $151,440
year
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN PLAN ASSETS:
Pension Plans Post-Retirement Plans
-----------------------------------------------
(IN THOUSANDS) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fair value of plan assets at $203,247 $197,229 $ 40,953 $ 40,002
beginning of year
Actual return on plan assets 64,573 17,004 4,966 3,271
Foreign currency exchange rate (3,012) (1,949) -- --
changes
Employer contributions 10,296 4,361 10,251 6,239
Plan participants' contributions 328 122 301 91
Acquisitions 471,590 - -- --
Benefits paid (25,051) (13,520) (12,960) (8,650)
- -----------------------------------------------------------------------------------------
Fair value of plan assets at $721,971 $203,247 $ 43,511 $ 40,953
end of year
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUNDED STATUS:
Pension Plans Post-Retirement Plans
-----------------------------------------------
(IN THOUSANDS) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Funded status $ (28,348) $(48,551) $(160,085) $(110,487)
Unrecognized transition asset 3,499 1,257 -- --
Unrecognized actuarial (gain) loss (78,994) 4,017 (32,298) (2,379)
Unrecognized prior service cost 6,377 (2,339) (24,414) (29,861)
- -----------------------------------------------------------------------------------------
Net amount recognized $ (97,466) $(45,616) $(216,797) $(142,727)
- -----------------------------------------------------------------------------------------
</TABLE>
The amounts recognized in the consolidated balance sheets consist of the
following:
<TABLE>
<CAPTION>
Pension Plans Post-Retirement Plans
-----------------------------------------------
(IN THOUSANDS) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid benefit costs $ 48,030 $ 1,597 $ -- $ --
Accrued benefit liabilities (148,478) (51,603) (216,797) (142,727)
Intangible asset 2,048 3,437 -- --
Accumulated other comprehensive 934 953 -- --
income
- -----------------------------------------------------------------------------------------
Net amount recognized $ (97,466) $(45,616) $(216,797) $(142,727)
- -----------------------------------------------------------------------------------------
</TABLE>
-57-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
COMPONENTS OF NET PERIODIC BENEFIT COST (CREDIT):
Pension Plans Post-Retirement Plans
---------------------------------------------------------------
(IN THOUSANDS) 1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 7,791 $ 7,635 $ 6,599 $ 1,272 $ 1,256 $1,174
Interest cost 28,345 16,044 15,171 10,820 9,958 10,298
Expected return on plan (31,045) (15,610) (14,328) (3,175) (3,271) (910)
assets
Amortization of prior 1,166 410 577 (5,561) (6,196) (6,148)
service cost
Amortization of unrecognized
transition obligation (asset) 36 58 (131) -- -- --
Recognized actuarial 5,883 74 136 (1,269) (1,367) (671)
(gains) losses
Curtailment (gain) loss (14,449) 2,570 -- 196 -- --
recognized
- -----------------------------------------------------------------------------------------------------
Net periodic benefit cost $ (2,273) $ 11,181 $ 8,024 $ 2,283 $ 380 $ 3,743
(credit)
- -----------------------------------------------------------------------------------------------------
</TABLE>
The assumed health care cost trend rate ranged from 7% - 8.8% and is
assumed to decrease gradually to a range of 4% - 6.1% in 2020 and remain level
thereafter.
Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plan. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
One-Percentage One-Percentage
Point Point
(IN THOUSANDS) Increase Decrease
- --------------------------------------------------------------------------------
Effect on the aggregate of the service
and interest cost components of net
periodic post-retirement health care
benefit cost for 1999 $ 1,041 $ (927)
Effects on accumulated post-retirement
benefit obligation for health care
benefits as of December 31, 1999 $17,804 $(15,822)
- --------------------------------------------------------------------------------
For plans with benefit obligations in excess of plan assets, the
aggregate benefit obligation was $292.2 million in 1999 and $229.2 million in
1998, and the aggregate fair value of plan assets was $188.2 million in 1999 and
$178.6 million in 1998.
The weighted-average discount rate used to calculate the projected
benefit obligation ranged from 5.75% - 7.75% in 1999 and 5.75% - 7% in 1998. The
expected long-term rate of return on plan assets ranged from 7% - 9% in 1999 and
7.75% - 9% in 1998. The assumed rate of compensation increase ranged from 2.5% -
4.5% in 1999 and 2% - 4% in 1998.
The Company's net cost of pension plans, including defined
contribution plans, was $11.2 million, $19 million, and $15 million in 1999,
1998, and 1997, respectively.
CONTINGENCIES
The Company is involved in claims, litigation, administrative
proceedings and investigations of various types in various jurisdictions. A
number of such matters involve claims for a material amount of damages and
relate to or allege environmental liabilities, including clean-up costs
associated with hazardous waste disposal sites, natural resource damages,
property damage and personal injury. The Company and some of its subsidiaries
have been identified by federal, state or local governmental agencies, and by
other potentially responsible parties (each a "PRP") under the Comprehensive
Environmental Response, Compensation and Liability
-58-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Act of 1980, as amended, or comparable state statutes, as a PRP with respect to
costs associated with waste disposal sites at various locations in the United
States. In addition, the Company is involved with environmental remediation and
compliance activities at some of its current and former sites in the United
States and abroad.
Each quarter, the Company evaluates and reviews estimates for future
remediation and other costs to determine appropriate environmental reserve
amounts. For each site, a determination is made of the specific measures that
are believed to be required to remediate the site, the estimated total cost to
carry out the remediation plan, the portion of the total remediation costs to be
borne by the Company and the anticipated time frame over which payments toward
the remediation plan will occur. The total amount accrued for such environmental
liabilities at December 31, 1999 was $198 million. The Company estimates its
potential environmental liability to range from $181 million to $222 million at
December 31, 1999. It is reasonably possible that the Company's estimates for
environmental remediation liabilities may change in the future should additional
sites be identified, further remediation measures be required or undertaken, the
interpretation of current laws and regulations be modified or additional
environmental laws and regulations be enacted.
On May 21, 1997, the United States District Court, Eastern District
of Arkansas, entered an order finding that Uniroyal Chemical Co./Cie. (a
wholly-owned subsidiary of the Company) is jointly and severally liable to the
United States and Hercules Incorporated and Uniroyal Chemical Co./Cie. are
liable to each other in contribution with respect to the remediation of the
Vertac Chemical Corporation site in Jacksonville, Arkansas. On October 23, 1998,
the Court entered an order granting the United State's motion for summary
judgment against Uniroyal Chemical Co./Cie and Hercules for removal and
remediation costs of $102.9 million at the Vertac site. On February 3, 2000,
after trial on the allocation of these costs, the Court entered an order finding
Uniroyal Chemical Co./Cie liable to the United States for approximately $2.3
million and liable to Hercules in contribution for approximately $700,000 of
these costs. Uniroyal Chemical Co./Cie and Hercules have each appealed to the
United States Court of Appeals for the Eighth Circuit.
The Company is a defendant in two similar actions arising out of the
Company's involvement in the polybutylene resin manufacturing business in the
1970's. The following cases are currently pending in California state courts:
Alameda County Water District v. Mobil Oil Corporation, et al., filed in April
1996, and Marin Municipal Water District v. Shell Oil Company, et al., filed in
May 1996, both pending in Superior Court for the County of San Mateo. The
actions generally allege that the Company and several other defendants
negligently misrepresented the performance of polybutylene pipe and fittings
installed in water distribution systems. Other allegations include breach of the
California Unfair Practices Act, and breach of warranty, fraud and strict
liability. It is possible that the Company may be named as a defendant in future
actions arising out of its past involvement in the polybutylene resin
manufacturing business.
The Company intends to assert all meritorious legal defenses and all
other equitable factors which are available to it with respect to the above
matters. The Company believes that the resolution of these matters will not have
a material adverse effect on its consolidated financial position. While the
Company believes it is unlikely, the resolution of these matters could
-59-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
have a material adverse effect on its consolidated results of operations in any
given year if a significant number of these matters are resolved unfavorably.
BUSINESS SEGMENT DATA
Effective in 1998, the Company adopted FASB Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information" which
established revised standards for reporting information about operating
segments. Pursuant to Statement No. 131 and the Merger, the Company redefined
its reporting segments into two major business categories, "Polymer Products"
and "Specialty Products." Polymer Products includes reporting segments of
Polymer Additives (plastic additives, rubber chemicals and urethane chemicals),
Polymers (EPDM, urethanes and nitrile rubber) and Polymer Processing Equipment
(specialty processing equipment and controls). Specialty Products includes
reporting segments of OrganoSilicones (silanes and specialty silicones), Crop
Protection (actives, seed treatment and surfactants) and Other (petroleum
additives, refined products, colors and glycerine/fatty acids).
The accounting policies of the operating segments are the same as
those described in the summary of accounting policies. The Company evaluates a
segment's performance based on several factors, of which a primary financial
measure is operating profit. In computing operating profit, the following items
have not been deducted: amortization, interest expense, other income and income
taxes. Corporate assets are principally cash, intangible assets and other assets
maintained for general corporate purposes. Prior to 1999, inter-segment sales
were not significant. A summary of business data for the Company's reportable
segments for the years 1999, 1998 and 1997 follows.
INFORMATION BY BUSINESS SEGMENT
(IN THOUSANDS) 1999 1998 1997
--------------------------------------------------
SALES
Polymer Products
Polymer
Additives $ 620,188 $ 391,964 $ 417,204
Polymers 316,300 342,527 342,154
Polymer
Processing
Equipment 300,016 344,480 311,673
Eliminations (3,469) -- --
--------------------------------------------------
1,233,035 1,078,971 1,071,031
--------------------------------------------------
Specialty Products
OrganoSilicones 158,925 -- --
Crop Protection 294,798 348,000 370,091
Other 405,600 369,148 410,058
--------------------------------------------------
859,323 717,148 780,149
--------------------------------------------------
$ 2,092,358 $ 1,796,119 $ 1,851,180
--------------------------------------------------
(IN THOUSANDS) 1999 1998 1997
--------------------------------------------------
OPERATING PROFIT
Polymer Products
Polymer
Additives $ 67,880 $ 49,215 $ 71,184
Polymers 82,951 79,892 57,824
-60-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(IN THOUSANDS) 1999 1998 1997
--------------------------------------------------
Polymer
Processing
Equipment 19,981 46,653 36,983
--------------------------------------------------
170,812 175,760 165,991
--------------------------------------------------
Specialty Products
OrganoSilicones 16,784 -- --
Crop Protection 69,194 84,882 83,478
Other 25,144 35,760 40,104
--------------------------------------------------
111,122 120,642 123,582
__________________________________________________
General
corporate
expenses (56,033) (36,544) (37,295)
Special items (224,518) (41,560) (28,000)
--------------------------------------------------
$ 1,383 $ 218,298 $ 224,278
--------------------------------------------------
DEPRECIATION AND AMORTIZATION
Polymer Products
Polymer
Additives $ 30,054 $18,043 $19,786
Polymers 13,957 14,008 14,453
Polymer
Processing
Equipment 2,951 3,481 3,111
--------------------------------------------------
46,962 35,532 37,350
--------------------------------------------------
Specialty Products
OrganoSilicones 6,929 -- --
Crop Protection 9,414 8,616 8,252
Other 19,615 15,779 13,635
--------------------------------------------------
35,958 24,395 21,887
__________________________________________________
Corporate 33,728 20,609 20,619
--------------------------------------------------
$ 116,648 $80,536 $79,856
--------------------------------------------------
SEGMENT ASSETS
Polymer Products
Polymer
Additives $ 788,062 $340,621 $381,389
Polymers 226,678 192,172 225,838
Polymer
Processing
Equipment 128,679 132,911 156,961
--------------------------------------------------
1,143,419 665,704 764,188
--------------------------------------------------
Specialty Products
OrganoSilicones 384,392 -- --
Crop Protection 316,733 181,036 213,915
Other 438,699 318,073 327,658
--------------------------------------------------
1,139,824 499,109 541,573
__________________________________________________
Corporate 1,443,375 244,080 243,059
--------------------------------------------------
$ 3,726,618 $1,408,893 $1,548,820
--------------------------------------------------
-61-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(IN THOUSANDS) 1999 1998 1997
--------------------------------------------------
CAPITAL EXPENDITURES
Polymer Products
Polymer
Additives $ 49,005 $20,408 $18,833
Polymers 23,938 15,937 8,708
Polymer
Processing
Equipment 3,204 4,733 2,676
--------------------------------------------------
76,147 41,078 30,217
--------------------------------------------------
Specialty Products
OrganoSilicones 8,586 -- --
Crop Protection 17,458 10,234 8,696
Other 21,333 14,888 11,140
--------------------------------------------------
47,377 25,122 19,836
--------------------------------------------------
Corporate 8,258 428 123
--------------------------------------------------
$ 131,782 $66,628 $50,176
--------------------------------------------------
EQUITY METHOD INVESTMENTS
Polymer Products
Polymer
Additives $33,051 $31,090 $20,900
Polymers 7,551 -- --
Polymer
Processing
Equipment -- -- --
--------------------------------------------------
40,602 31,090 20,900
--------------------------------------------------
Specialty Products
OrganoSilicones 52 -- --
Crop Protection 22,262 11,909 --
Other 11,194 -- --
--------------------------------------------------
33,508 11,909 --
--------------------------------------------------
$74,110 $42,999 $20,900
--------------------------------------------------
GEOGRAPHIC INFORMATION
Sales are attributed based on location of customer.
(IN THOUSANDS) 1999 1998 1997
--------------------------------------------------
SALES
United States $1,140,401 $1,077,190 $1,125,121
Canada 108,041 106,230 107,386
Latin America 132,674 133,870 116,734
Europe/Africa 505,597 359,760 348,294
Asia/Pacific 205,645 119,069 153,645
--------------------------------------------------
$2,092,358 $1,796,119 $1,851,180
--------------------------------------------------
-62-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
United States $ 938,555 $360,241 $374,395
Canada 47,869 22,158 21,040
Latin America 15,021 7,213 6,016
Europe/Africa 233,836 71,168 62,180
Asia/Pacific 27,064 12,623 11,261
--------------------------------------------------
$1,262,345 $473,403 $474,892
--------------------------------------------------
SUMMARIZED UNAUDITED QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1999
----------------------------------------------------
FIRST SECOND THIRD FOURTH
----------------------------------------------------
Net sales $ 396,292 $409,174 $500,429 $786,463
Gross profit 148,997 160,592 170,799 250,597
Earnings (loss)
before
extraordinary loss 59,203 37,969 (179,920) (76,603)
Net earnings (loss) 59,203 36,884 (180,128) (90,997)
Earnings (loss) before
extraordinary loss
per common share
Basic .87 .58 (2.21) (.64)
Diluted .86 .57 (2.21) (.64)
Net earnings (loss)
per common share:
Basic .87 .56 (2.21) (.77)
Diluted .86 .55 (2.21) (.77)
Common dividends
per share - .05 - .05
Market price
per common share:
High 21 3/8 20 15/16 20 7/16 14 15/16
Low 15 5/16 14 15/16 13 7/8 7 1/8
The sum of earnings per common share for the four quarters do not
equal the total earnings per common share for 1999 due to changes in the average
number of shares outstanding.
1999
----------------------------------------------------
First Second Third Fourth
----------------------------------------------------
Net sales $477,219 $474,337 $442,768 $401,795
Gross profit 174,754 182,246 163,168 129,751
Earnings before
extraordinary loss 31,943 39,795 30,592 80,893
Net earnings 29,992 25,952 24,918 80,893
Earnings before
extraordinary loss
per common share
Basic .43 .53 .41 1.13
Diluted .42 .52 .40 1.11
Net earnings
per common share:
Basic .40 .35 .34 1.13
Diluted .39 .34 .33 1.11
Common dividends
per share - .05 - -
Market price
per common share:
High 31 1/16 32 13/16 26 7/8 21 9/16
Low 25 7/16 23 13 3/8 13 1/4
-63-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The sum of earnings per common share for the four quarters do not
equal the total earnings per common share for 1998 due to changes in the average
number of shares outstanding.
-64-
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and have
been audited by KPMG LLP, Independent Certified Public Accountants, whose report
is presented herein.
Management of the Company assumes responsibility for the accuracy
and reliability of the financial statements. In discharging such responsibility,
management has established certain standards which are subject to continuous
review and are monitored through the Company's financial management and internal
audit group.
The Board of Directors pursues its oversight role for the financial
statements through its Audit Committee which consists of outside directors. The
Audit Committee meets on a regular basis with representatives of management, the
internal audit group and KPMG LLP.
-65-
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CK WITCO CORPORATION
We have audited the accompanying consolidated balance sheets of CK
Witco Corporation and subsidiaries (the Company) as of December 31, 1999 and
December 26, 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the years in the
three-year period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1999 and December 26, 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
(KPMG signature)
Stamford, Connecticut
January 31, 2000, except for the private placement information described in the
note captioned "Credit Facilities" as to which the date is March 7, 2000
-66-
<PAGE>
<TABLE>
<CAPTION>
FIVE YEAR SELECTED FINANCIAL DATA
(In millions of dollars, except per share data) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net sales $ 2,092.4 1,796.1 1,851.2 1,804.0 1,744.8
Cost of products sold $ 1,361.4 1,146.2 1,196.0 1,170.6 1,126.2
Selling, general and administrative $ 331.1 264.7 269.4 279.8 270.3
Depreciation and amortization $ 116.6 80.5 79.9 82.6 80.1
Research and development $ 68.0 52.8 53.6 52.4 50.1
Equity income $ (10.6) -- -- -- --
Acquired in-process research and $ 195.0 -- -- -- --
development
Merger and related costs $ 29.5 -- -- 85.0 --
Facility closure costs $ -- 33.6 -- -- --
Severance and other costs $ -- -- 13.0 -- --
Special environmental charge $ -- -- 15.0 30.0 --
Operating profit $ 1.4 218.3 224.3 103.6 218.1
Interest expense $ 69.8 78.5 103.3 114.2 122.4
Other expense (income) $ 48.0 (158.9) (27.8) (1.3) (2.7)
Earnings (loss) before income taxes $ (116.4) 298.7 148.8 (9.3) 98.4
and extraordinary loss
Provision (benefit) for income $ 42.9 115.4 56.7 12.7 (41.5)
taxes
Earnings (loss) before $ (159.3) 183.3 92.1 (22.0) 139.9
extraordinary loss
Extraordinary loss $ (15.7) (21.5) (5.3) (.5) (8.3)
Net earnings (loss) $ (175.0) 161.8 86.8 (22.5) 131.6
Special items, net of tax (included above):
Acquired in-process research and $ (195.0) -- -- -- --
development
Merger and related costs $ (20.6) -- -- (68.1) --
Textile colors loss $ (65.5) -- -- -- --
Specialty ingredients gain $ 26.8 -- -- -- --
Seed treatment gain $ -- 92.1 -- -- --
Facility closure costs $ -- (21.1) -- -- --
Severance and other costs $ -- -- (7.8) -- --
Special environmental charge $ -- -- (9.0) (18.5) --
Postretirement settlement gain $ -- -- 16.8 -- --
Early extinguishment of debt $ (15.7) (21.5) (5.3) (.5) (8.3)
Change in deferred tax valuation $ -- -- -- -- 78.9
allowance
Other $ -- (5.0) -- -- 4.4
Total special items, net of tax $ (270.0) 44.5 (5.3) (87.1) 75.0
PER SHARE STATISTICS
Basic
Earnings (loss) before $ (1.91) 2.48 1.25 (.31) 2.13
extraordinary loss
Net earnings (loss) $ (2.10) 2.20 1.18 (.31) 2.01
Diluted
Earnings (loss) before $ (1.91) 2.42 1.22 (.31) 2.11
extraordinary loss
Net earnings (loss) $ (2.10) 2.14 1.15 (.31) 1.99
Dividends $ .10 .05 .05 .27 .52
Book value $ 8.82 .32 (.27) (1.32) (.83)
Common stock trading range: High 21 3/8 32 13/16 27 3/8 20 1/8 20
Low 7 1/8 13 1/4 17 7/8 13 12
Average shares outstanding 83,507 73,696 73,373 72,026 65,572
(thousands) - Basic
Average shares outstanding 83,507 75,700 75,358 72,026 66,269
(thousands) - Diluted
FINANCIAL POSITION
Current assets $ 1,119.8 597.8 715.0 742.2 697.0
Non-current assets $ 2,606.8 811.1 833.8 915.0 958.8
Total assets $ 3,726.6 1,408.9 1,548.8 1,657.2 1,655.8
Current liabilities $ 978.0 394.4 363.1 357.5 420.6
Long-term debt $ 1,309.8 646.9 896.3 1,055.0 974.2
Other liabilities $ 678.9 300.9 309.5 341.1 320.2
Stockholders' equity (deficit) $ 759.9 66.7 (20.1) (96.4) (59.2)
Current ratio 1.1 1.5 2.0 2.1 1.7
Total capital $ 2,150.9 730.9 878.0 967.9 1,020.1
Total debt-to-capital % 64.7 90.9 102.3 110.0 105.8
PROBABILITY STATISTICS (BEFORE
SPECIAL ITEMS)
% Operating profit on sales 10.8 14.5 13.6 12.1 12.2
% Earnings on sales 4.5 6.5 5.0 3.6 3.2
% Earnings on average total capital 11.4 18.6 16.5 12.8 14.2
OTHER STATISTICS
EBITDA before special items $ 342.5 340.4 332.1 301.2 305.5
Capital spending $ 131.8 66.6 50.2 39.2 87.7
</TABLE>
-67-
<PAGE>
<TABLE>
<CAPTION>
FIVE YEAR SELECTED FINANCIAL DATA
(In millions of dollars, except per share data) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Depreciation $ 89.2 59.4 58.7 59.2 57.4
Number of employees 8,612 5,536 5,583 5,725 5,641
</TABLE>
-68-
<PAGE>
RESPONSIBLE CARE(R) STATEMENT
[PHOTO]
After an extensive collaboration with federal and state regulators,
local stakeholders and national environmental groups, our Sistersville, West
Virginia facility became the first chemical plant in the U.S. to initiate an
approved project under the EPA's Project XL.
Project XL encourages companies to undertake innovative and often
cost-saving approaches in lieu of restrictive federal environmental regulations.
Under the Sistersville program, we installed efficient vent emission controls
that reduce our emissions by about 200,000 pounds a year. Under the deferred
federal regulatory requirements, controls on the plant's wastewater treatment
facility would have reduced our emissions by 130,000 pounds annually. The cost
to the Sistersville plant was $700,000, versus $5 million that the federal
regulations would have required. Also as part of the project, we have recycled
over one million pounds of methanol for beneficial reuse.
Sistersville has an active Pollution Prevention Council, made up of
a broad cross-section of employees, that has implemented projects to
substantially reduce waste while saving the company $1 million annually.
All of CK Witco is dedicated to the Responsible Care principles of
the Chemical Manufacturers Association that call for "continuous progress toward
the vision of no accidents, injuries or harm to the environment."
[LOGO]
[PHOTO CAPTION]: ABOVE: WILD TURKEYS AND OTHER WILDLIFE ARE
TESTIMONIALS TO THE ENVIRONMENTAL PROTECTION PROGRAM AT SISTERSVILLE. HERE
TURKEYS FEED ABOVE A CAPPED LANDFILL AT THE FACILITY.
-69-
<PAGE>
CORPORATE MANAGEMENT
[PHOTO]
[PHOTO CAPTION]: STANDING (LEFT TO RIGHT): JAMES J. CONWAY, WILLIAM
A. STEPHENSON, ALFRED F. INGULLI, VINCENT A. CALARCO, ROBERT W. ACKLEY, JOSEPH
B. EISENBERG, WALTER K. RUCK, AND MARY GUM. SEATED (LEFT TO RIGHT): JOHN T.
FERGUSON II, CHARLES J. MARSDEN, MARVIN H. HAPPEL, AND PETER BARNA.
VINCENT A. CALARCO Organization and
Chairman, President and Administration
Chief Executive Officer
CHARLES J. MARSDEN
ROBERT W. ACKLEY Senior Vice President
Executive Vice President Strategy and Development
Polymer Processing
Equipment WALTER K. RUCK
Senior Vice President
JAMES J. CONWAY Operations
Executive Vice President
Performance Chemicals and OTHER CORPORATE
Elastomers OFFICERS
JOSEPH B. EISENBERG BRIAN J. DICK
Executive Vice President Vice President, Finance
Polymer Additives
JOHN R. JEPSEN
MARY GUM Vice President, Treasurer
Executive Vice President
OrganoSilicones MICHAEL F. VAGNINI
Corporate Controller
ALFRED F. INGULLI
Executive Vice President GERALD H. FICKENSCHER
Crop Protection Regional Vice President
Europe, Africa & the Middle
WILLIAM A. STEPHENSON East
Executive Vice President
Urethanes and Petroleum EDWARD L. HAGEN
Additives Regional Vice President
Asia-Pacific
PETER BARNA
Senior Vice President and MICHEL J. DUCHESNE
Chief Financial Officer Regional Vice President
Latin America
JOHN T. FERGUSON II
Senior Vice President
general Counsel and
Secretary
MARVIN H. HAPPEL
Senior Vice President
-70-
<PAGE>
BOARD OF DIRECTORS CORPORATE DATA
JAMES A. BITONTI (3) CORPORATE HEADQUARTERS
Chief Executive Officer
DSS/BITCO International One American Lane
Greenwich, CT 06831
SIMEON BRINBERG (1,4) (203) 552-2000
Senior Vice President www.ckwitco.com
BRT Realty Trust
AUDITORS
VINCENT A. CALARCO KPMG LLP
Chairman of the Board Stamford Square
President 3001 Summer Street
and Chief Executive Officer Stamford, CT 06905
ROBERT A. FOX (1,4)
President and
Chief Executive Officer TRANSFER AGENT AND REGISTRAR
Foster Farms
ChaseMellon Shareholder Services L.L.C.
Roger L. Headrick (2,3) 85 Challenger Road
Managing General Partner Ridgefield Park, NJ 07660
HMCH Ventures (800) 288-9541
www.chasemellon.com
Leo I. Higdon, Jr. (2)
President ANNUAL MEETING
Babson College
The annual meeting of stockholders will
be held at 11:15 a.m. on Tuesday, April
25, 2000, at the Sheraton Stamford Hotel,
HARRY G. HOHN (2,3) 2701 Summer Street, Stamford, CT 06905
Retired Chairman and
Chief Executive Officer
New York Life Insurance Company FORM 10-K
NICHOLAS PAPPAS, PH.D. (4) A copy of the Company's report on Form
Vice Chairman of the Board 10-K for 1999, as filed with the
BioTraces, Inc. Securities and Exchange Commission, may
Retired Executive Vice President be obtained free of charge by writing to
E.I. du Pont de Nemours and Company the Secretary of the Corporation, Benson
Road, Middlebury, CT 06749
INVESTOR RELATIONS
C.A. PICCOLO (1,4)
President and William A. Kuser
Chief Executive Officer CK Witco Corporation
HealthPic Consultants, Inc. One American Lane
Greenwich, CT 06831
Bruce F. Wesson (1) (203) 552-2000
President [email protected]
Galen Associates
General Partner PUBLIC RELATIONS
Galen Partners, L.P.
Robert P. Harwood
PATRICIA K. WOOLF, PH.D. (1,4) CK Witco Corporation
Private Investor and Lecturer Benson Road
Department of Molecular Biology Middlebury, CT 06749
Princeton University (203) 573-2000
[email protected]
1 Member of Audit Committee (C) 2000 CK Witco Corporation. All
2 Member of Finance and Pension Committee rights reserved.
3 Member of Organization, Compensation (R) and TM indicate registered and
and Governance Committee unregistered trade and service
4 Member of Safety, Health and marks.
Environment Committee
<PAGE>
CK WITCO CORPORATION
ONE AMERICAN LANE, GREENWICH, CT 06831
WWW.CKWITCO.COM
SUBSIDIARIES OF CK WITCO CORPORATION
Percentage of
Voting Securities
Owned Directly or State or
Indirectly by Country of
CK Witco Corporation Organization
9056-0921 Quebec Inc. 100.0 Canada
Agro ST Inc. 100.0 Delaware
Assured Insurance Company 100.0 Vermont
Baxenden Chemicals Limited 53.5 United Kingdom
Baxenden Scandinavia AS 53.5 Denmark
CNK Disposition Corporation 100.0 Florida
CNK One B.V. 100.0 The Netherlands
CNK Two B.V. 100.0 The Netherlands
CNK Italiana SRL 100.0 Italy
CK Holding Corporation 100.0 Delaware
CK Witco Asia Pacific PTE Ltd. 100.0 Singapore
CK Witco China Limited. 100.0 China
CK Witco Europe Financial
Services Co. 100.0 Delaware
CK Witco Financial Services Co. 100.0 Ireland
CK Witco Funding Corporation 100.0 Delaware
CK Witco Hong Kong Limited 100.0 Hong Kong
CK Witco International Corporation 100.0 New Jersey
CK Witco International Services
Corporation 100.0 Connecticut
CK Witco Singapore Private Limited 100.0 Singapore
Crompton & Knowles Acceptance
Corporation 100.0 Massachusetts
Crompton & Knowles Canada Ltd. 100.0 Canada
Crompton & Knowles Chemische
Produckte GmbH & Co. K.G. 100.0 Dusseldorf
Crompton & Knowles Colors
Incorporated 100.0 Delaware
Crompton & Knowles Europe S.P.R.L 100.0 Belgium
Crompton & Knowles International,
Inc. 100.0 US Virgin
Islands
Crompton & Knowles International
SARL 100.0 France
Crompton & Knowles I.P.R.
Corporation 100.0 Delaware
Crompton & Knowles Overseas
Corporation 100.0 Delaware
Crompton & Knowles Realty
Corporation 100.0 Pennsylvania
Crompton & Knowles Receivables
Corporation 100.0 Delaware
Crompton & Knowles Services
S.P.R.L. 100.0 Belgium
Crompton & Knowles Specialties
Holdings B.V. 100.0 The Netherlands
Davis-Standard Corporation 100.0 Delaware
Davis-Standard (France) SARL 100.0 France
Davis-Standard (Deutschland) GmbH 100.0 Germany
Davis-Standard Limited 100.0 England & Wales
Enenco, Incorporated 50.0 New York
ER-WE-PA Davis-Standard GmbH 100.0 Germany
Ecart, Inc 100.0 Nevada
Firma W/K Witco EPA 50.0 The Netherlands
GT Seed Treatment, Inc. 100.0 Minnesota
Gustafson International Company 100.0 Texas
Gustafson LLC 50.0 Delaware
Gustafson Partnership 50.0 Ontario
Hannaford Seedmaster Services
(Australia) Pty. Ltd. 100.0 Australia
Industrias Gustafson S.A. de C.V. 100.0 Mexico
Immobiliaria Huilquimex, S.A.
de C.V. 100.0 Mexico
Interbel Trading, Inc. 100.0 Florida
Jonk BV 100.0 The Netherlands
Kem Manufacturing Corporation 100.0 Georgia
Kem International Corporation 100.0 Delaware
Lokar Enterprises, Inc. 100.0 Delaware
Naugatuck Treatment Company 100.0 Connecticut
Nerap Expeditie BV 100.0 The Netherlands
ParaTec S.A. de C.V. 49.0 Mexico
OSi Specialties Inc. (Chile)
Limitada 100.0 Chile
ParaTec Elastomers LLC 51.0 Delaware
PT Witco Indonesia. 100.0 Indonesia
Quebec, Inc. 100.0 Canada
Rubicon Inc. 50.0 Louisiana
TOA Uni Chemicals Ltd. 48.98 Thailand
TOA Uni Chemical Manufacturing Ltd 48.94 Thailand
Trace Chemicals LLC 100.0 Delaware
Unicorb Limited 100.0 England
Uniroyal Chemica Srl 100.0 Italy
Uniroyal Chemical Asia, Ltd. 100.0 Delaware
Uniroyal Chemical Asia Pte. Ltd. 100.0 Singapore
Uniroyal Chemical B.V. 100.0 The Netherlands
Uniroyal Chemical Brazil Holding,
Inc. 100.0 Delaware
Uniroyal Chemical Co./Cie. 100.0 Canada
Uniroyal Chemical Company, Inc. 100.0 New Jersey
Uniroyal Chemical Company Limited 100.0 Bahamas/
Delaware
Uniroyal Chemical (Europe) B.V. 100.0 The Netherlands
Uniroyal Chemical European
Holdings B.V. 100.0 The Netherlands
Uniroyal Chemical Export Limited 100.0 Delaware
Uniroyal Chemical Holding S.A. de
C.V. 100.0 Mexico
Uniroyal Chemical Holdings B.V. 100.0 The Netherlands
Uniroyal Chemical International
Company 100.0 Texas
Uniroyal Chemical International
Sales Corp. 100.0 Barbados
Uniroyal Chemical Investments Ltd. 100.0 Canada
Uniroyal Chemical Korea Inc. 100.0 Korea
Uniroyal Chemical Leasing Company,
Inc. 100.0 Delaware
Uniroyal Chemical Limited 100.0 Scotland
Uniroyal Chemical Netherlands B.V. 100.0 The Netherlands
Uniroyal Chemical Overseas B.V. 100.0 The Netherlands
Uniroyal Chemical Partipacoes Ltda 100.0 Brazil
Uniroyal Chemical (Proprietary)
Limited 100.0 South Africa
Uniroyal Chemical Pty. Ltd. 100.0 Australia
Uniroyal Chemical S.A 100.0 Spain
Uniroyal Chemical S.A. de C.V. 100.0 Mexico
Uniroyal Chemical S.A.R.L. 100.0 Switzerland
Uniroyal Chemical Specialties, Inc. 100.0 Delaware
Uniroyal Chemical Taiwan Ltd. 80.0 Taiwan
Uniroyal Chemical Technology B.V. 100.0 The Netherlands
Uniroyal Quimica S.A. 100.0 Brazil
Uniroyal Quimica Sociedad Anonima
Comerciale Industrial 100.0 Argentina
Witco (Europe) S.A. 100.0 Switzerland
Witco Australia Pty Limited 100.0 Australia
Witco Benelux N.V 100.0 Belgium
Witco BV 100.0 The Netherlands
Witco Canada Inc. 100.0 Canada
Witco Corporation (Malaysia) Sdn
Bhd. 100.0 Malaysia
Witco Corporation UK Osil Group
Limited 100.0 United Kingdom
Witco Corporation UK Limited 100.0 United Kingdom
Witco Deutschland GmbH 100.0 Germany
Witco do Brasil Ltda 100.0 Brazil
Witco Dominion Financial Services
Company, Ltd. 100.0 Canada
Witco Ecuador S.A. 100.0 Ecuador
Witco Espana, S.L. 100.0 Spain
Witco Europe Investment Partners 100.0 Delaware
Witco Foreign Sales Corporation 100.0 Barbados
Witco GmbH 100.0 Germany
Witco Grand Banks, Inc. 100.0 Canada
Witco Handels GmbH. 100.0 Austria
Witco Investment Holdings BV 100.0 The Netherlands
Witco Investments BV 100.0 The Netherlands
Witco Investments SNC 100.0 France
Witco Ireland Investment Company
Limited 100.0 Ireland
Witco Italiana SrL 100.0 Italy
Witco Korea Ltd. 100.0 Korea
Witco Mexico S.A. de C.V. 100.0 Mexico
Witco Polymers and Resins BV. 100.0 The Netherlands
Witco S.A. 100.0 France
Witco Solvay Duromer GmbH 50.0 Germany
Witco Specialties (Thailand) Ltd. 100.0 Thailand
Witco Specialties Italia S.p.A. 100.0 Italy
Witco Specialties PTE Ltd. 100.0 Singapore
Witco Surfactants GmbH 100.0 Germany
Witco Taiwan Ltd. 100.0 Taiwan
Witco Warmtekracht BV 100.0 The Netherlands
Independent Auditors' Report and Consent
The Board of Directors and Stockholders
CK Witco Corporation:
Under date of January 31, 2000, except for the private placement
information described in the note captioned "Credit Facilities"
as to which the date is March 7, 2000, we reported on the
consolidated balance sheets of CK Witco Corporation and
subsidiaries (the Company) as of December 31, 1999 and December
26, 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the
years in the three-year period ended December 31,1999, which are
incorporated by reference in this Form 10 K. In connection with
our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial
statement schedule included in this Form 10 K. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We consent to the incorporation by reference in the registration
statements (Nos. 33-21246, 33-42280, 33-67600, 333-62429 and 333-
87035) on Form S-8 of CK Witco Corporation of our report, dated
January 31, 2000, except for the private placement information
described in the note captioned "Credit Facilities" as to which
the date is March 7, 2000, relating to the consolidated balance
sheets of CK Witco Corporation and subsidiaries as of December
31, 1999 and December 26, 1998, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash
flows for each of the years in the three-year period ended
December 31, 1999, which report is incorporated by reference in
the December 31, 1999 Annual Report on Form 10-K of CK Witco
Corporation.
Stamford, Connecticut
March 29, 2000
POWER OF ATTORNEY
We, the undersigned officers and directors of CK Witco
Corporation, hereby constitute and appoint Vincent A. Calarco,
Peter Barna and John T. Ferguson II, and each of them severally,
our true and lawful attorneys or attorney, with full power to
them and each of them to execute for us, and in our names in the
capacities indicated below, and to file with the Securities and
Exchange Commission the Annual Report on Form 10-K of CK Witco
Corporation for the fiscal year ended December 31, 1999, and any
and all amendments thereto.
IN WITNESS WHEREOF, we have signed this Power of Attorney in
the capacities indicated on January 25, 2000.
/s/Peter Barna /s/James A. Bitonti
Peter Barna James A. Bitonti
Principal Financial Officer Director
Senior Vice President and
Chief Financial Officer
/s/Simeon Brinberg /s/Vincent A. Calarco
Simeon Brinberg Vincent A. Calarco
Director Principal Executive
Officer, Chairman,
President, CEO
and Director
/s/Brian Dick /s/Robert A. Fox
Brian Dick Robert A. Fox
Principal Accounting Officer Director
Vice President - Finance
/s/Roger L. Headrick /s/Leo I. Higdon, Jr.
Roger L. Headrick Leo I. Higdon, Jr.
Director Director
/s/Harry G. Hohn /s/Nicholas Pappas
Harry G. Hohn Nicholas Pappas
Director Director
/s/C.A. Piccolo /s/Bruce F. Wesson
C. A. Piccolo Bruce F. Wesson
Director Director
/s/Patricia K. Woolf
Patricia K. Woolf
Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001091862
<NAME> CK WITCO CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,543
<SECURITIES> 0
<RECEIVABLES> 411,536
<ALLOWANCES> 23,356
<INVENTORY> 523,363
<CURRENT-ASSETS> 1,119,753
<PP&E> 1,262,345
<DEPRECIATION> 448,346
<TOTAL-ASSETS> 3,726,618
<CURRENT-LIABILITIES> 977,970
<BONDS> 1,309,812
0
0
<COMMON> 1,191
<OTHER-SE> 758,721
<TOTAL-LIABILITY-AND-EQUITY> 3,726,618
<SALES> 2,092,358
<TOTAL-REVENUES> 2,092,358
<CGS> 1,361,373
<TOTAL-COSTS> 2,090,975
<OTHER-EXPENSES> 47,979
<LOSS-PROVISION> 3,937
<INTEREST-EXPENSE> 69,833
<INCOME-PRETAX> (116,429)
<INCOME-TAX> 42,922
<INCOME-CONTINUING> (159,351)
<DISCONTINUED> 0
<EXTRAORDINARY> (15,687)
<CHANGES> 0
<NET-INCOME> (175,038)
<EPS-BASIC> (2.10)
<EPS-DILUTED> (2.10)
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