<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-35678
PROSPECTUS
CROMPTON CORPORATION
OFFER TO EXCHANGE
ALL 8 1/2% SENIOR NOTES DUE 2005
($600,000,000 PRINCIPAL AMOUNT)
FOR
A LIKE PRINCIPAL AMOUNT OF
8 1/2% SENIOR NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
The exchange offer will expire at 5:00 p.m., New York City time, on June 9,
2000, unless extended.
------------------------
There is no existing market for the exchange notes, and we do not intend to
list the exchange notes on any national securities exchange.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF FACTORS THAT YOU
SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
------------------------
The date of this prospectus is May 5, 2000.
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 15
Forward-Looking Statements.................................. 17
The Exchange Offer.......................................... 17
Use of Proceeds............................................. 25
Capitalization.............................................. 26
Selected Historical Financial and Operating Data............ 27
Description of the Exchange Notes........................... 30
Exchange Offer; Registration Rights......................... 46
Certain U.S. Federal Tax Considerations..................... 48
Book-Entry; Delivery and Form............................... 49
Plan of Distribution........................................ 51
Available Information....................................... 51
Experts..................................................... 52
Validity of the Exchange Notes.............................. 52
Documents Incorporated by Reference......................... 52
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SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision. The terms "Crompton," "our
company," "the Company," and "we" as used in this prospectus refer to Crompton
Corporation and its subsidiaries and predecessors as a combined entity, except
where it is made clear that such term means only the parent company. To the
extent that this prospectus includes data or statements about our relative
market share, competitive position or related matters, we believe that these
data or statements are considered within the industry to be the best available
and generally are indicative of our relative market share and competitive
position.
THE COMPANY.
We are a leading global specialty chemical company formed through the
September 1, 1999, merger of Crompton & Knowles Corporation and Witco
Corporation. Following the merger our name was "CK Witco Corporation" until we
changed it to "Crompton Corporation" on April 27, 2000. We manufacture and
market a wide variety of specialty chemicals, polymers and polymer processing
equipment. Most of our products are sold to industrial customers for use as
additives, ingredients or intermediates that impart particular characteristics
to the customers' end products. Our products are currently marketed in over 120
countries and serve a wide variety of end-user markets, including tires,
agriculture, automobiles, textiles, plastics, lubricants, petrochemicals,
construction, recreation, mining, paper, packaging, home furnishings and
appliances. For the 1999 fiscal year, we had pro forma net sales of
$3.4 billion, total assets of $3.7 billion and basic and diluted earnings per
share of $0.60 and $0.59, respectively. We have approximately 9,000 employees.
PRODUCTS.
Our two primary businesses are Polymer Products and Specialty Products.
POLYMER PRODUCTS
Our polymer products business includes the following segments: polymer
additives, polymers and polymer processing equipment.
Our polymer additives segment includes plastic additives, rubber chemicals
and urethane chemicals. The plastic additives business provides PVC
manufacturers with additives that make processing easier and extend the life of
products. Also included in this business are polymerization inhibitors that
reduce the cost of styrene production, antioxidants, foaming agents and polymer
modifiers. Our rubber chemicals also extend the life of rubber products by
providing protection from exposure to oxygen and ozone. Other rubber chemical
products include vulcanization accelerators and foaming agents used to make
sponge rubber. Our urethane chemicals are used in a wide range of products,
including polyester foams, systems used in polyurethane shoe soles and
polyurethane dispersions used by fiberglass, glove and other manufacturers. Our
urethane chemicals business includes our own urethane chemical products, as well
as those produced by our 53% owned Baxenden joint venture. These chemicals are
sold predominantly to producers of urethane cast elastomers, urethane foam, shoe
sole and textile manufacturers.
Our polymers segment includes EPDM (an ethylene-propylene-diene-monomer
rubber polymer referred to as "crackless" rubber used in applications that
require resistance to sunlight and ozone, such as single-ply roofing, hoses,
electrical insulation, and tire sidewalls) and our interest in a joint venture
which produces Paracril (an oil-resistant rubber used in products that are
exposed to oil). We are the largest North American producer of EPDM. Our
polymers business also includes Adiprene/Vibrathane castable urethane
prepolymers used in solid industrial tires, printing rollers, industrial rolls,
abrasion-resistant mining products, mechanical goods and a variety of sports
equipment and other consumer items.
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Our polymer processing equipment segment is conducted primarily under the
Davis-Standard brand name and its offerings include plastic and rubber
extruders, industrial blow molding equipment, electronic controls and integrated
extrusion systems, as well as specialized service and modernization programs for
in-place polymer processing systems.
SPECIALTY PRODUCTS
Our specialty products business includes the following segments:
organosilicones, crop protection and other specialty products. Our
organosilicones segment is a leader in the fluids and chemical specialties
segment of the silicone industry. Our silanes business provides coupling agents
that aid in the production of a variety of products, including fiberglass and
thermoplastics. That business also provides additives used in coatings, such as
clear coat finishes in automobiles, and as silica-based replacements for the
carbon black typically used in tire manufacturing. The urethane additives
business provides catalysts and surfactants that help our customers produce
polyurethane foam. The specialty fluid business provides similar products for
use in non-polyurethane foam applications.
Our crop protection segment includes specialty actives, which consist of a
wide variety of crop protection chemicals used in fungicides, miticides,
insecticides, growth regulants and herbicides; our interest in Gustafson LLC, a
seed treatment joint venture; and industrial surfactants, which are used
primarily in formulating the delivery system for herbicides.
Other specialty products include petroleum additives, refined products,
glycerine and fatty acids, and colors. Petroleum additives encompasses a broad
line of additives used in the manufacture of numerous plastic and
petroleum-related products, including Synton PAO, a synthetic lubricant used in
gear oils. Refined products consists of white oils, pharmaceutical grade
petroleum jellies, petrolatum, refrigeration oils and cable filling compounds.
The majority of our glycerine and fatty acid production is consumed in our
polymer additives business with the remainder sold to third party customers in
the personal care and plastics markets. The colors business produces industrial
dyes, which are used in the paper, leather and ink industries.
RECENT DEVELOPMENTS.
FIRST QUARTER RESULTS
On April 25, 2000, the Company announced first quarter 2000 net earnings of
$29.7 million, or 26 cents per share.
First quarter net sales of $769.0 million declined 2 percent from adjusted
sales of $784.3 million in the first quarter of 1999, primarily due to lower
performance in the polymer processing equipment business and negative foreign
currency impact. Likewise, operating profit of $78.2 million was $5.6 million or
7 percent less than adjusted 1999 operating profit. Excluding the impact of
lower polymer processing equipment results and foreign currency impact, sales
and operating profit for the quarter increased by 3 percent and 6 percent,
respectively.
During the first quarter, the Company issued $600 million of old notes. Of
this amount, the Company swapped $300 million into a variable rate contract with
a current coupon of 7.5 percent.
Also during the quarter, the Company announced two major strategic
initiatives as part of its e-commerce strategy. The Company, along with 25 other
well known industry leaders, became an equity investor and charter member of
ChemConnect, the largest global internet exchange for chemicals and plastics. In
addition, the Company became an initial investor and founding member of
ElastomerSolutions.com, an e-commerce marketplace devoted to the elastomer
industry.
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On April 19, 2000, the Company announced that it was exploring strategic
alternatives, including possible sale, for its Refined Products business. The
business produces and markets highly refined hydrocarbon products and had sales
in excess of $230 million in 1999.
First quarter operating results for the Company's reporting segments are
summarized below.
POLYMER PRODUCTS
Polymer additives sales of $257.8 million were essentially unchanged from
adjusted first quarter 1999 sales of $258.3 million. Plastic additives sales
increased 2 percent, despite a negative foreign currency impact of 5 percent,
primarily due to continuing high demand for PVC. Rubber chemicals sales
decreased eight percent primarily as a result of lower pricing. Urethane
chemicals sales rose 5 percent primarily due to greater demand, partially offset
by negative foreign currency translation of 3 percent. Operating profit of
$22.3 million was down 2 percent from an adjusted $22.8 million in 1999
primarily as a result of lower selling prices in rubber chemicals.
Polymers sales of $81.4 million increased 3 percent from $78.7 million in
the first quarter of 1999. EPDM sales were up 1 percent primarily as a result of
higher pricing, reflecting a partial recovery of increased raw material costs.
Urethane sales rose 6 percent primarily due to greater demand attributable to
continuing growth of U.S. industrial production and strong sales to golf ball
manufacturers. Operating profit of $19.3 million decreased 13 percent from an
adjusted $22.3 million in the prior year primarily due to higher EPDM raw
material costs and start-up costs at our new nitrile rubber joint venture
facility in Mexico.
Polymer processing equipment sales of $69.1 million declined 22 percent from
$88.1 million in the first quarter of 1999. The decrease was primarily due to
the recent down cycle which the plastics machinery market has experienced over
the last three quarters. Operating profit of $4.3 million was $6.9 million
behind 1999 primarily due to the decline in sales volume. While shipments did
not recover to last year's level, orders rebounded with the backlog reaching a
record $131 million, up 16 percent from year-end 1999.
SPECIALTY PRODUCTS
OrganoSilicones sales of $127.0 million increased 10 percent from first
quarter 1999 adjusted sales of $115.0 million. The business benefited from
improved demand and market share in key markets such as "greentyre," automotive
clearcoat and personal care, partially offset by negative foreign currency
impact of two percent. Silane sales reached record levels on the strength of
continued "greentyre" growth. Operating profit of $21.8 million was 36 percent
above an adjusted $16.0 million in the first quarter of 1999, reflecting the
higher sales volume and cost reductions.
Crop protection sales of $105.5 million were 3 percent below an adjusted
$108.3 million in the first quarter of 1999. Prior year sales were bolstered by
a heavy mite infestation in Australia. Operating profit of $24.0 million was
15 percent behind the first quarter of 1999 primarily due to the sales decline
and an unfavorable product mix which included higher sales of surfactants and
lower active ingredients sales.
Other sales of $131.7 million decreased 3 percent from adjusted first
quarter 1999 sales of $135.8 million. Petroleum additives sales declined
2 percent primarily due to lower volume, much of which was associated with the
closure of the Gretna manufacturing facility. Refined Products sales were down
5 percent of which 3 percent related to negative foreign currency translation.
Industrial colors sales rose 6 percent primarily due to continued strength and
increased market share in the paper market. Glycerine/ fatty acids sales
declined 4 percent. Operating profit of $7.0 million was 12 percent lower than
the adjusted $8.0 million in the first quarter of 1999 primarily due to the
decline in sales volume and higher raw material costs.
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CONSOLIDATED STATEMENTS OF EARNINGS
First quarter ended 2000 and 1999
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FIRST QUARTER
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ADJUSTED
2000 1999 1999(A)
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(IN THOUSANDS OF DOLLARS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net Sales................................................... $769,018 $396,292 $784,291
Cost of products sold....................................... 517,716 247,295 521,480
Selling, general and admin.................................. 112,444 60,590 116,423
Depreciation and amortization............................... 45,764 18,837 42,808
Research and development.................................... 22,442 11,308 26,818
Equity (income) loss........................................ (7,545) (7,055) (7,055)
-------- -------- --------
Operating profit before special gain........................ 78,197 65,317 83,817
========
Interest expense............................................ 28,221 13,154
Other expense(b)............................................ 1,349 1,354
-------- --------
Earnings before income taxes and special gain............... 48,627 50,809
Income taxes(b)............................................. 18,954 18,419
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Earnings before after-tax special gain...................... 29,673 32,390
Gain on sale of specialty ingredients business.............. -- 26,813
-------- --------
Net earnings................................................ $ 29,673 $ 59,203
======== ========
Basic earnings per common share
Earnings before special gain................................ $ 0.26 $ 0.48
Net earnings................................................ $ 0.26 $ 0.87
Weighted avg shares outstanding............................. 114,334 67,717
Diluted earnings per common share
Earnings before special gain................................ $ 0.26 $ 0.47
Net earnings................................................ $ 0.26 $ 0.86
Weighted avg share outstanding.............................. 116,149 69,219
</TABLE>
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(a) Adjusted 1999 includes the impact of the September 1, 1999 merger of
Crompton & Knowles Corporation and Witco Corporation as if it had occurred
at the beginning of 1999, and excludes the impact of the August 31, 1999
sale of a significant portion of the oleochemicals and derivatives business
and the divestiture of the textile colors business at the end of 1999.
(b) Other expense and income taxes exclude the gain on the sale of the specialty
ingredients business which was sold on the first day of 1999 and is shown
separately above.
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SEGMENT SALES AND OPERATING PROFIT
First quarter ended 2000 and 1999
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FIRST QUARTER
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ADJUSTED
2000 1999 1999(A)
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(IN THOUSANDS OF DOLLARS)
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NET SALES
Polymer Products
Polymer Additives......................................... $257,833 $ 99,745 $258,322
Polymers.................................................. 81,416 78,735 78,735
Polymer Processing Equipment.............................. 69,081 88,147 88,147
Eliminations.............................................. (3,544) --
-------- -------- --------
404,786 266,627 425,204
Specialty Products
OrganoSilicones........................................... 127,035 -- 114,989
Crop Protection........................................... 105,462 65,718 108,253
Other..................................................... 131,735 63,947 135,845
-------- -------- --------
364,232 129,665 359,087
Total net sales......................................... $769,018 $396,292 $784,291
======== ======== ========
OPERATING PROFIT
Polymer Products
Polymer Additives......................................... $ 22,337 $ 12,477 $ 22,764
Polymers.................................................. 19,319 22,303 22,303
Polymer Processing Equipment.............................. 4,252 11,169 11,169
-------- -------- --------
45,908 45,949 56,236
Specialty Products
OrganoSilicones........................................... 21,768 -- 15,963
Crop Protection........................................... 23,977 23,137 28,079
Other..................................................... 7,034 6,947 8,009
-------- -------- --------
52,779 30,084 52,051
General corporate expense including amortization.......... (20,490) (10,176) (24,470)
-------- -------- --------
Total operating profit before special gain................ $ 78,197 $ 65,317 $ 83,817
======== ======== ========
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(a) Adjusted 1999 includes the impact of the September 1, 1999 merger of
Crompton & Knowles Corporation and Witco Corporation as if it had occurred
at the beginning of 1999, and excludes the impact of the August 31, 1999
sale of a significant portion of the oleochemicals and derivatives business
and the divestiture of the textile colors business at the end of 1999.
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CONSOLIDATED BALANCE SHEET
March 31, 2000 and December 31, 1999
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MARCH 31, 2000 DECEMBER 31, 1999
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(IN THOUSANDS OF DOLLARS)
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ASSETS
CURRENT ASSETS
Cash...................................................... $ 19,038 $ 10,543
Accounts receivable....................................... 424,956 411,536
Inventories............................................... 546,394 523,363
Other current assets...................................... 174,044 174,311
---------- ----------
Total current assets.................................... 1,164,432 1,119,753
NON-CURRENT ASSETS
Property, plant and equipment............................. 1,245,406 1,262,345
Cost in excess of acquired net assets..................... 960,602 969,625
Other assets.............................................. 344,887 374,895
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$3,715,327 $3,726,618
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable............................................. $ 41,807 $ 81,162
Accounts payable.......................................... 286,504 33,591
Accrued expenses.......................................... 385,776 422,252
Income taxes payable...................................... 96,525 121,366
Other current liabilities................................. 30,906 22,599
---------- ----------
Total current liabilities............................... 841,518 977,970
NON-CURRENT LIABILITIES
Long-term debt............................................ 1,494,696 1,309,812
Post-retirement health care liability..................... 214,235 216,797
Other liabilities......................................... 431,076 462,127
STOCKHOLDERS' EQUITY
Common Stock.............................................. 1,194 1,191
Additional paid-in capital................................ 1,051,809 1,047,518
Accumulated deficit....................................... (176,408) (200,374)
Accumulated other comprehensive income.................... (72,733) (61,238)
Treasury stock at cost.................................... (70,060) (27,185)
Total stockholders' equity.............................. 733,802 759,912
---------- ----------
$3,715,327 $3,726,618
========== ==========
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CONSOLIDATED STATEMENTS OF CASH FLOWS
First quarter ended 2000 and 1999
<TABLE>
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FIRST QUARTER
--------------------------
2000 1999
------------ -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Increase (decrease) to cash
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.............................................. $ 29,673 $ 59,203
Adjustments to reconcile net earnings to net cash used in
operations:
Gain on sale of specialty ingredients..................... -- (42,060)
Depreciation and amortization............................. 45,764 18,837
Equity income............................................. (7,545) (7,055)
Changes in assets and liabilities, net.................... (58,946) (82,102)
--------- --------
Net cash (used in) operations............................. 8,976 (53,177)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of specialty ingredients............... -- 103,000
Capital expenditures...................................... (29,858) (12,471)
Merger related expenditures............................... (39,657) --
Other investing activities................................ (16,977) 1,862
--------- --------
Net cash (used in) provided by investing activities....... (86,492) 92,391
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on senior notes.................................. 593,754 --
(Payments) proceeds on long-term and short-term
borrowings.............................................. (445,573) 34,107
Repurchase of accounts receivable......................... (13,776) --
Treasury stock acquired................................... (43,463) (67,516)
Dividends Paid............................................ (5,707) --
Other financing activities................................ 858 169
--------- --------
Net cash provided by (used in) financing activities....... 86,093 (33,240)
CASH
Effect of exchange rates on cash.......................... (82) 160
Change in cash............................................ 8,495 6,134
Cash at beginning of period............................... 10,543 12,104
--------- --------
Cash at end of period..................................... $ 19,038 $ 18,238
========= ========
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SUMMARY OF TERMS OF THE EXCHANGE OFFER
On March 7, 2000, we completed the private offering of the old, unregistered
8 1/2% senior notes. We entered into a registration rights agreement with the
initial purchasers in the private offering in which we agreed to deliver to you
this prospectus as part of the exchange offer and agreed to use our reasonable
best efforts to complete the exchange offer within 180 days after the date of
original issuance of the old notes. You are entitled to exchange in the exchange
offer your old notes for exchange notes which are identical in all material
respects to the old notes except:
- the exchange notes have been registered under the Securities Act;
- the exchange notes are not entitled to some registration rights which are
applicable to the old notes under the exchange and registration rights
agreement; and
- contingent interest rate provisions, except for those relating to our
failure to keep effective a shelf registration statement, are no longer
applicable.
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The Exchange Offer........................... We are offering to exchange up to
$600,000,000 aggregate principal amount of
old notes for up to $600,000,000 aggregate
principal amount of exchange notes.
Resale....................................... Based on an interpretation by the staff of
the SEC set forth in no-action letters issued
to third parties, we believe that the
exchange notes issued pursuant to the
exchange offer in exchange for old notes may
be offered for resale, resold and otherwise
transferred by you (unless you are an
"affiliate" of us within the meaning of Rule
405 under the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that you are
acquiring the exchange notes in the ordinary
course of your business and that you have not
engaged in, do not intend to engage in, and
have no arrangement or understanding with any
person to participate in, a distribution of
the exchange notes.
Each participating broker-dealer that
receives exchange notes for its own account
under the exchange offer in exchange for old
notes that were acquired as a result of
market-making or other trading activity must
acknowledge that it will deliver a prospectus
in connection with any resale of the exchange
notes. See "Plan of Distribution."
Any holder of old notes who:
- is a broker-dealer that acquired the old
notes from us;
- is our affiliate;
- does not acquire exchange notes in the
ordinary course of its business; or
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- tenders in the exchange offer with the
intention to participate, or for the
purpose of participating, in a
distribution of exchange notes
cannot rely on the position of the staff of
the SEC stated in EXXON CAPITAL HOLDINGS
CORPORATION, MORGAN STANLEY & CO.
INCORPORATED or similar no-action letters
and, in the absence of an exemption, must
comply with the registration and prospectus
delivery requirements of the Securities Act
in connection with the resale of the exchange
notes.
Expiration of the Exchange Offer; Withdrawal
of Tender.................................. The exchange offer will expire at 5:00 p.m.,
New York City time, on June 9, 2000, or a
later date and time to which we extend it. We
do not currently intend to extend the
expiration of the exchange offer. You may
withdraw your tender of old notes pursuant to
the exchange offer at any time before
expiration of the exchange offer. Any old
notes not accepted for exchange for any
reason will be returned without expense to
you promptly after the expiration or
termination of the exchange offer.
Conditions to the Exchange Offer............. The exchange offer is subject to customary
conditions, which we may waive. Please read
the section under the caption "The Exchange
Offer--Conditions" of this prospectus for
more information regarding the conditions to
the exchange offer.
Procedures for Tendering Outstanding Notes... If you wish to participate in the exchange
offer, you must:
- complete, sign and date the accompanying
letter of transmittal, or a facsimile of
the letter of transmittal, according to
the instructions contained in this
prospectus and the letter of transmittal;
and
- mail or otherwise deliver the letter of
transmittal, or a facsimile of the letter
of transmittal, together with your old
notes and any other required documents, to
the exchange agent at the address set
forth on the cover page of the letter of
transmittal.
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If you hold old notes through The Depository
Trust Company and wish to participate in the
exchange offer, you must comply with DTC's
Automated Tender Offer Program procedures,
through which you will agree to be bound by
the letter of transmittal. By signing, or
agreeing to be bound by, the letter of
transmittal, you will represent to us that,
among other things:
- you acquired your old notes in the
ordinary course of your business;
- you have no arrangement or understanding
with any person or entity to participate
in a distribution of the exchange notes;
- if you are a broker-dealer that will
receive exchange notes for your own account
in exchange for old notes that were
acquired as a result of market-making
activities, that you will deliver a
prospectus, as required by law, in
connection with any resale of those
exchange notes; and
- you are not an "affiliate," as defined in
Rule 405 of the Securities Act, of us or, if
you are an affiliate, that you will comply
with any applicable registration and
prospectus delivery requirements of the
Securities Act.
Special Procedures for Beneficial Owners..... If you are a beneficial owner of old notes
that are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee, and you want to tender old
notes in the exchange offer, you should
contact the registered holder promptly and
instruct the registered holder to tender on
your behalf. If you wish to tender on your
own behalf, you must, before completing and
executing the letter of transmittal and
delivering your old notes, either make
appropriate arrangements to register
ownership of the old notes in your name or
obtain a properly completed bond power from
the registered holder. The transfer of
registered ownership may take considerable
time and may not be able to be completed
before expiration of the exchange offer.
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Guaranteed Delivery Procedures............... If you wish to tender your old notes and your
old notes are not immediately available or
you cannot deliver your old notes, the letter
of transmittal or any other documents
required by the letter of transmittal or
comply with the applicable procedures under
DTC's Automated Tender Offer Program before
expiration of the exchange offer, you must
tender your old notes according to the
guaranteed delivery procedures set forth
under the caption "The Exchange
Offer--Guaranteed delivery procedures."
Effect on Holders of Outstanding Notes....... By making the exchange offer and by accepting
for exchange all validly tendered old notes
under the exchange offer, we have fulfilled a
covenant contained in the registration rights
agreement. Accordingly, there will be no
increase in the interest rate on the old
notes under the circumstances described in
the registration rights agreement.
The trading market for old notes could be
adversely affected if some but not all of the
old notes are tendered and accepted in the
exchange offer.
Consequences of Failure to Exchange.......... If you are a holder of old notes and you do
not tender your old notes in the exchange
offer, your old notes will remain outstanding
and continue to accrue interest but will not
retain any rights under the registration
rights agreement (except in the case of the
initial purchasers and the participating
broker-dealers as provided in the
registration rights agreement).
All untendered old notes will remain subject
to the restrictions on transfer provided for
in the old notes and in the indenture. In
general, the old notes may not be offered or
sold, unless registered under the Securities
Act, except pursuant to an exemption from, or
in a transaction not subject to, the
Securities Act and applicable state
securities laws. Other than in connection
with the exchange offer, we do not currently
anticipate that we will register the old
notes under the Securities Act.
Federal Income Tax Considerations............ The exchange of old notes for exchange notes
in the exchange offer will not be a taxable
event for U.S. federal income tax purposes.
See "Certain U.S. Federal Tax Considerations"
for a more detailed description of the tax
consequences of the exchange.
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Use of Proceeds.............................. We will not receive any cash proceeds from
the issuance of exchange notes in the
exchange offer.
Exchange Agent............................... Citibank, N.A. is the exchange agent for the
exchange offer. The address and telephone
number of the exchange agent are set forth
under the caption "The Exchange
Offer--Exchange agent" of this prospectus.
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SUMMARY OF TERMS OF THE EXCHANGE NOTES
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Issuer....................................... Crompton Corporation.
Securities Offered........................... $600,000,000 aggregate principal amount of
8 1/2% Senior Notes due 2005.
Maturity..................................... March 15, 2005.
Interest Payment Dates....................... March 15 and September 15 of each year,
commencing on September 15, 2000.
Optional Redemption.......................... We may redeem the notes in whole or, from
time to time, in part on at least 30 but not
more than 60 days prior notice mailed to DTC,
at a redemption price equal to the greater of
- 100% of the principal amount of the notes
to be redeemed and
- the sum of the present value of the
remaining scheduled payments on the notes to
be redeemed discounted to the date of
redemption, on a semiannual basis, at the
Treasury Rate (as defined) plus 25 basis
points,
plus accrued interest to the date of
redemption. See "Description of the Exchange
Notes--Optional Redemption."
Ranking...................................... The exchange notes are general unsecured
senior obligations and:
- rank senior to all of our existing and
future subordinated debt; and
- rank equally with all of our existing and
future senior debt.
All existing and future liabilities
(including trade payables) of our
subsidiaries will be effectively senior to
the notes. See "Description of the Exchange
Notes--Ranking."
Restrictive Covenants........................ We have issued the exchange notes under an
indenture with Citibank, N.A., as the
trustee. The indenture does, among other
things, restrict our ability and the ability
of our subsidiaries to:
- create or assume mortgages;
- enter into sale and leaseback
transactions; and
- engage in mergers, consolidations and
certain sales or leases of our properties and
assets.
</TABLE>
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<TABLE>
<S> <C>
The indenture also limits our subsidiaries
from incurring certain forms and amounts of
indebtedness without providing a guarantee
for the notes in the case of our domestic
subsidiaries and, with respect to our foreign
subsidiaries, a pledge of their stock.
See "Description of the Exchange
Notes--Certain Covenants."
Absence of Established Market for the
Notes...................................... The exchange notes are a new issue of
securities, and there is no established
trading market for the exchange notes. We do
not intend to apply for the exchange notes to
be listed on any securities exchange or to
arrange for quotation on any automated dealer
quotation system. The initial purchasers in
the private placement of the old notes have
advised us that they intend to make a market
in the exchange notes, but they are not
obligated to do so. The initial purchasers
may discontinue any market making in the
exchange notes at any time in their sole
discretion. We cannot assure you that a
liquid market will develop for the exchange
notes.
</TABLE>
* * * * *
We are located at One American Lane, Greenwich, Connecticut 06831. Our
telephone number is (203) 552-2000.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO EXCHANGE YOUR OLD NOTES FOR
EXCHANGE NOTES.
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO FULLY REALIZE THE EXPECTED BENEFITS
OF THE CROMPTON & KNOWLES/WITCO MERGER OR THAT WE WILL BE ABLE TO REALIZE THOSE
BENEFITS WITHIN THE EXPECTED TIME FRAME.
We cannot assure you that the cost savings, growth opportunities or other
anticipated benefits of the Crompton & Knowles/Witco merger will be realized or
that those benefits will be realized within the expected time frame. We also
cannot assure you that costs or difficulties relating to the integration of the
businesses of our predecessor companies will not be greater than anticipated.
Failure to realize these benefits or encountering costs or difficulties within
the expected time frame would adversely affect our cash flow and results of
operations.
WE RELY ON PATENTS FOR COMPETITIVE PURPOSES.
We own numerous U.S. and foreign patents and have patent applications
pending in the United States and abroad. We believe that our patents are of
material importance in the operation of our business, although we do not believe
that any single patent is material in relation to our business as a whole.
Our ability to compete effectively with other companies depends, to some
extent, on our ability to maintain existing patents and to create and discover
products and processes that can be protected by patents. If we are not able to
maintain our patents or to create or discover products and processes that we are
able to patent, our business could be materially adversely affected. There can
be no assurances that:
- we will succeed in obtaining patent protection for products or processes
that we create or discover;
- our existing patents will not be challenged, invalidated, narrowed or
circumvented; or
- the rights granted under our patents will provide proprietary protection
or competitive advantages in our businesses.
OUR CROP PROTECTION BUSINESS IS SEASONAL AND COULD BE NEGATIVELY IMPACTED BY
FACTORS AFFECTING THE AGRICULTURAL INDUSTRY AND BY GOVERNMENT REGULATION.
Our crop protection business is seasonal because of the planting, growing
and harvesting cycles of the agricultural industry, which impact the timing of
our customers' purchases of our products. The peak quarters for our sales are
usually the second and third fiscal quarters and therefore interim period
operating results of the crop business reflect the seasonal nature of the
business and are not indicative of results expected for the full fiscal year.
In addition, our crop protection business faces volatility as a result of a
number of other factors, including weather patterns and field conditions,
current and projected grain stocks and prices, and the agricultural policies of
the United States and foreign governments. These factors can negatively impact
production in the agricultural industry and thereby reduce the demand for our
crop protection products. The results of operations or cash flows of our crop
business may be adversely affected by these factors in any given period.
Furthermore, our crop protection business faces extensive government
regulation in the United States and abroad. The testing, manufacturing, and
marketing of some of our crop protection products face many requirements,
including, but not limited to, the requirements of the Food and Drug
Administration. Among other requirements, FDA approval of our products is
required before they may be marketed in the United States. Similar requirements
apply in our foreign markets. FIFRA, a health and safety statute, requires that
all pesticides sold or distributed in the U.S. must first be registered with the
Environmental Protection Agency. The registration process requires us to
demonstrate that our product will not cause unreasonable adverse effects on the
environment. As a result, government regulation may prohibit the sale
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<PAGE>
of some of our products or increase our operating expenses incurred in an effort
to comply with those regulations.
WE ARE AN INTERNATIONAL COMPANY AND THEREFORE FACE EXCHANGE RATE AND OTHER
RISKS.
A significant portion of our business is conducted in currencies other than
the U.S. dollar, which is our reporting currency. We recognize foreign currency
gains or losses arising from our operations in the period incurred. As a result,
currency fluctuations among the U.S. dollar and the currencies in which we do
business have caused and will continue to cause foreign currency transaction
gains and losses, which could be material. We cannot predict the effects of
exchange rate fluctuations upon our future operating results because of the
number of currencies involved, the variability of currency exposures and the
potential volatility of currency exchange rates. We take actions to manage our
foreign currency exposure such as entering into forwards and swaps, where
available, but we cannot assure you that our strategies will adequately protect
our operating results from the effects of exchange rate fluctuations.
In addition, we have determined that if we fail to implement systems that
are able to process both the Euro and participating countries' national
currencies, we might experience disruptions to operations including a temporary
inability to process transactions, send invoices or engage in normal business
activities. Alleviating these problems with manual processing could cause delays
in our normal business activities. Delays and disruptions could adversely affect
cash flow and results of operations.
We also face risks arising from the imposition of exchange controls and
currency devaluations. Exchange controls may limit our ability to convert
foreign currencies into U.S. dollars or to remit dividends and other payments by
our foreign subsidiaries or businesses located in or conducted within a country
imposing controls. Currency devaluations result in diminished value of funds
denominated in the currency of the country instituting a devaluation. Actions of
this nature could adversely affect our earnings or cash flow.
ENVIRONMENTAL MATTERS COULD HAVE A SUBSTANTIAL NEGATIVE IMPACT ON OUR BUSINESS.
We are subject to extensive federal, state, local and foreign environmental,
safety and health laws and regulations concerning, among other things, emissions
to the air, discharges to land and water and the generation, handling, treatment
and disposal of hazardous waste and other materials. Our operations entail the
risk of violations of those laws and regulations, many of which provide for
substantial fines and criminal sanctions for violations. We cannot assure you
that we have been or will be at all times in compliance with all of these
requirements.
In addition, these requirements, and enforcement of these requirements, may
become more stringent in the future. Although we cannot predict the ultimate
cost of compliance with any such requirements, the costs could be material.
Non-compliance could subject us to material liabilities, such as government
fines, third-party lawsuits or the suspension of non-compliant operations. We
may also be required to make significant site or operational modifications at
substantial cost. Future developments could also restrict or eliminate the use
of or require us to make modifications to our products, which could have a
significant negative impact on our cash flow and results of operations.
At any given time, we are involved in claims, litigation, administrative
proceedings and investigations of various types in a number of jurisdictions
involving potential environmental liabilities, including clean-up costs
associated with hazardous waste disposal sites, natural resource damages,
property damage and personal injury. We cannot assure you that the resolution of
these environmental matters will not have a material adverse effect on our
results of operations or cash flow.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES; RESTRICTIONS ON TRANSFER.
No trading market exists for the exchange notes, and there can be no
assurance regarding the future development of a market for the exchange notes.
If a trading market does not develop or is not
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<PAGE>
maintained, holders of the exchange notes may find it difficult or impossible to
resell their exchange notes. Although the initial purchasers have advised us
that they currently intend to make a market in the exchange securities, they are
not obligated to do so and may discontinue such market-making activity at any
time without notice. Accordingly, there can be no assurance that a market will
develop for the exchange securities, or as to the liquidity of any market that
does develop. The liquidity of any market for the exchange notes will depend
upon the number of holders of exchange notes, the interest of securities dealers
in making a market in the exchange notes and on other factors.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. We have based these
forward-looking statements on our current assumptions, expectations and
projections about future events. When used in this prospectus, the words
"believe," "anticipate," "intend," "estimate," "expect," "project" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain such words. These forward-looking
statements speak only as of the date of this prospectus. Neither we nor the
initial purchasers undertake any obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Although management believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct or that savings or
other benefits anticipated in the forward-looking statements will be achieved.
Important factors, some of which may be beyond our control, that could cause
actual results to differ materially from management's expectations ("cautionary
statements") are disclosed in this prospectus, including in conjunction with the
forward-looking statements included in this prospectus and under "Risk Factors."
Participants in the exchange offer are cautioned not to place undue reliance on
these forward-looking statements. All subsequent written and oral
forward-looking statements attributable to us are expressly qualified in their
entirety by the cautionary statements. See "Risk Factors." These forward-looking
statements are subject to risks, uncertainties and assumptions about us,
including, among other things:
- our anticipated cash flow, sales and earnings growth strategies,
- our intention to introduce new products,
- future expenditures for capital projects, and
- our ability to continue to control costs and maintain quality.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We entered into a registration rights agreement with the initial purchasers
of the old notes in which we agreed to use our reasonable best efforts to
file a registration statement relating to an offer to exchange the old notes for
exchange notes. We also agreed to use our reasonable best efforts to cause the
exchange offer to be consummated within 180 days following the original issue of
the old notes. The exchange notes have terms substantially identical to the old
notes except that the exchange notes do not contain terms with respect to
transfer restrictions, registration rights and additional interest for our
failure to observe obligations in the registration rights agreement. The old
notes were issued on March 2, 2000.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the SEC to declare effective a shelf registration statement
with respect to the resale of the old notes and keep the
17
<PAGE>
statement effective for up to two years after the original issue of the old
notes. These circumstances include:
- if we are not permitted to effect the exchange offer because of any
changes in law, SEC rules or regulations or applicable interpretations
thereof by the staff of the SEC;
- if for any other reason the exchange offer registration statement is not
declared effective within 150 days following the original issue of the
notes or the exchange offer is not consummated within 180 days after the
original issue of the notes;
- upon the request of any initial purchaser of the old notes, but only with
respect to any old notes not eligible for exchange in the exchange offer
if the prospectus included in the exchange offer registration statement is
not available for resales; or
- if any holder of the old notes is not permitted by any law or applicable
interpretations by the staff of the SEC to participate in the exchange
offer or does not receive fully tradeable exchange notes pursuant to the
exchange offer and if the prospectus included in the exchange offer
registration statement is not available for resales.
If we fail to comply with our obligations under the registration rights
agreement, we may be required to pay additional interest to holders of the old
notes. Please read the section captioned "Exchange Offer; Registration Rights"
for more details regarding the registration rights agreement.
RESALE OF EXCHANGE NOTES
Based on interpretations of the SEC staff set forth in no-action letters
issued to unrelated third parties, we believe that exchange notes issued under
the exchange offer in exchange for old notes may be offered for resale, resold
and otherwise transferred by any exchange note holder without compliance with
the registration and prospectus delivery provisions of the Securities Act, if:
- the holder is not our "affiliate" within the meaning of Rule 405 under the
Securities Act;
- the exchange notes are acquired in the ordinary course of the holder's
business; and
- the holder does not intend to participate in a distribution of the
exchange notes.
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange notes:
- cannot rely on the position of the staff of the SEC set forth in "Exxon
Capital Holdings Corporation" or similar interpretive letters; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
This prospectus may be used for an offer to resell, a resale or another
retransfer of exchange notes. With regard to broker-dealers, only broker-dealers
that acquired the old notes as a result of market-making activities or other
trading activities may participate in the exchange offer. Each broker-dealer
that receives exchange notes for its own account in exchange for old notes,
where the old notes were acquired by the broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
The Letter of Transmittal states that by acknowledging and delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Please read the section
captioned "Plan of Distribution" for more details regarding the transfer of
exchange notes.
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<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any old notes
properly tendered and not withdrawn before expiration of the exchange offer.
The form and terms of the exchange notes are substantially identical to the
form and terms of the old notes except that the exchange notes:
- are registered under the Securities Act;
- do not bear legends restricting their transfer; and
- do not provide for any additional interest upon our failure to fulfill our
obligations under the registration rights agreement to file, and cause to
be effective, a registration statement.
The exchange notes evidence the same debt as the old notes. The exchange
notes are issued under and entitled to the benefits of the same indenture that
authorized the issuance of the old notes. Consequently, both series will be
treated as a single class of debt securities under that indenture. For a
description of the indenture, see "Description of Exchange Notes."
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange.
As of the date of this prospectus, $600 million aggregate principal amount
of the old notes are outstanding. This prospectus and the letter of transmittal
are being sent to all registered holders of old notes. There will be no fixed
record date for determining registered holders of old notes entitled to
participate in the exchange offer.
We are conducting the exchange offer in accordance with the provisions of
the registration rights agreement, the applicable requirements of the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC. Old notes that are not tendered for exchange in the
exchange offer will remain outstanding and continue to accrue interest and will
be entitled to the rights and benefits their holders have under the indenture
relating to the old notes.
We will be deemed to have accepted for exchange properly tendered old notes
when we have given oral or written notice of the acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purposes of receiving the exchange notes from us and delivering the exchange
notes to holders. Subject to the terms of the registration rights agreement, we
expressly reserve the right to amend or terminate the exchange offer, and not to
accept for exchange any old notes not previously accepted for exchange, upon the
occurrence of any of the conditions specified below under the caption
"--Conditions."
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes. We
will pay all charges and expenses, other than applicable taxes described below,
in connection with the exchange offer. It is important that you read the section
labeled "--Fees and expenses" below for more details regarding fees and expenses
incurred in the exchange offer.
EXPIRATION OF THE EXCHANGE OFFER; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on June 9,
2000, unless, in our sole discretion, we extend it.
In order to extend the exchange offer, we will notify the exchange agent by
oral or written notice of any extension, followed by a public announcement of
the extension no later than 9:00 a.m., New York City time, on the business day
after the previously scheduled expiration of the exchange offer.
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<PAGE>
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, termination or amendment of the
exchange offer, we will have no obligation to publish, advertise, or otherwise
communicate any public announcement, other than by making a timely release to a
financial news service.
CONDITIONS
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any old notes, and we
may terminate the exchange offer as provided in this prospectus before accepting
any old notes for exchange if in our reasonable judgment:
- the exchange offer, or the making of any exchange by a holder of old
notes, would violate applicable law or any applicable interpretation of
the staff of the SEC; or
- any action or proceeding has been instituted or threatened in any court or
by or before any governmental agency with respect to the exchange offer
that, in our judgment, would reasonably be expected to impair our ability
to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the old notes
of any holder that has not made to us:
- the representation that all exchange notes 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 notes 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
under the 1933 Act available;
- the representations described under "--Procedures for tendering"; and
- any other representations that may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make available to
us an appropriate form for registration of the exchange notes under the
Securities Act.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any old notes by giving oral or written notice of an
extension to their holders. During an extension, all old notes previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange. We will return any old notes that we do not accept for exchange for
any reason without expense to their tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer, and
to reject for exchange any old notes not previously accepted for exchange, upon
the occurrence of any of the conditions of the exchange offer specified above.
We will give oral or written notice of any extension, amendment, non-acceptance
or termination to the holders of the old notes as promptly as practicable. In
the case of any extension, the notice of extension will be issued no later than
9:00 a.m., New York City time, on the business day after the previously
scheduled expiration of the exchange offer.
These conditions are solely for our benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them in
whole or in part at any time or at various times in our sole discretion. If we
fail at any time to exercise any of the foregoing rights, this failure will not
constitute a waiver of that right. Each of these rights will be deemed an
ongoing right that we may assert at any time or at various times.
In addition, we will not accept for exchange any old notes tendered, and
will not issue exchange notes in exchange for any old notes, if at that time a
stop order is threatened or in effect with respect to the registration statement
of which this prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act of 1939.
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PROCEDURES FOR TENDERING
Only a holder of record of old notes may tender old notes in the exchange
offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
the letter of transmittal or facsimile to the exchange agent prior to the
expiration date; or
- comply with DTC's Automated Tender Offer Program procedures described
below.
In addition, either:
- the exchange agent must receive old notes along with the letter of
transmittal; or
- the exchange agent must receive, before expiration of the exchange offer,
a timely confirmation of book-entry transfer of old notes into the
exchange agent's account at DTC according to the procedure for book-entry
transfer described below or a properly transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "--Exchange agent" before expiration of the
exchange offer.
The tender by a holder that is not withdrawn before expiration of the
exchange offer will constitute an agreement between that holder and us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE HOLDER'S ELECTION AND RISK.
RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD ALLOW SUFFICIENT TIME TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE EXPIRATION OF THE EXCHANGE OFFER. HOLDERS
SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OLD NOTES TO US. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.
Any beneficial owner whose old notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct it to tender on the
owner's behalf. If the beneficial owner wishes to tender on its own behalf, it
must, prior to completing and executing the letter of transmittal and delivering
its old notes, either:
- make appropriate arrangements to register ownership of the old notes in
the owner's name; or
- obtain a properly completed bond power from the registered holder of old
notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the U.S.
or another "eligible institution" within the meaning of Rule 17Ad-15 under the
Exchange Act, unless the old notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the registered
holder of any old notes, the old notes must be endorsed or accompanied by a
properly completed bond power. The bond power must
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be signed by the registered holder as the registered holder's name appears on
the old notes and an eligible institution must guarantee the signature on the
bond power.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, these
persons should so indicate when signing. Unless we waive this requirement, they
should also submit evidence satisfactory to us of their authority to deliver the
letter of transmittal.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the old notes to the exchange agent in
accordance with its procedures for transfer. DTC will then send an agent's
message to the exchange agent. The term "agent's message" means a message
transmitted by DTC, received by the exchange agent and forming part of the
book-entry confirmation, to the effect that:
- DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering old notes that are the
subject of the book-entry confirmation;
- the participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that the participant has received and agrees to be
bound by the applicable notice of guaranteed delivery; and
- the agreement may be enforced against the participant.
We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt), acceptance of tendered old notes
and withdrawal of tendered old notes. Our determination will be final and
binding. We reserve the absolute right to reject any old notes not properly
tendered or any old notes the acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular old notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of old notes must be cured within the time that we determine. Although we intend
to notify holders of defects or irregularities with respect to tenders of old
notes, neither we, the exchange agent nor any other person will incur any
liability for failure to give notification. Tenders of old notes will not be
deemed made until any defects or irregularities have been cured or waived. Any
old notes received by the exchange agent that are not properly tendered and as
to which those defects or irregularities have not been cured or waived will be
returned by the exchange agent without cost to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In all cases, we will issue exchange notes for old notes that we have
accepted for exchange under the exchange offer only after the exchange agent
timely receives:
- old notes or a timely book-entry confirmation that old notes have been
transferred into the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all other
required documents or a properly transmitted agent's message.
By signing the letter of transmittal, each tendering holder of old notes
represents to us that, among other things:
- any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange notes;
- if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the exchange notes;
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- if the holder is a broker-dealer that will receive exchange notes for its
own account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, that it will deliver
a prospectus, as required by law, in connection with any resale of those
exchange notes (see "Plan of Distribution"); and
- the holder is not an "affiliate," as defined in Rule 405 of the Securities
Act, of us or, if the holder is an affiliate, it will comply with any
applicable registration and prospectus delivery requirements of the
Securities Act.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus; and any financial institution participating in DTC's
system may make book-entry delivery of old notes by causing DTC to transfer old
notes into the exchange agent's account at DTC in accordance with DTC's
procedures for transfer. Holders of old notes who are unable to deliver
confirmation of the book-entry tender of their old notes into the exchange
agent's account at DTC or all other documents required by the letter of
transmittal to the exchange agent on or prior to the expiration date must tender
their old notes according to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their old notes but whose old notes are not
immediately available or who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent or comply with
the applicable procedures under DTC's Automated Tender Offer Program before
expiration of the exchange offer may tender if:
- the tender is made through an eligible institution;
- before expiration of the exchange offer, the exchange agent receives from
the eligible institution either a properly completed and duly executed
notice of guaranteed delivery, by facsimile transmission, mail or hand
delivery, or a properly transmitted agent's message and notice of
guaranteed delivery:
- setting forth the name and address of the holder and the registered
number(s) and the principal amount of old notes tendered;
- stating that the tender is being made by guaranteed delivery; and
- guaranteeing that, within three New York Stock Exchange trading days
after expiration of the exchange offer, the letter of transmittal or
facsimile thereof together with the old notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
- the exchange agent receives the properly completed and executed letter
of transmittal or facsimile thereof, as well as all tendered old notes
in proper form for transfer or a book-entry confirmation, and all other
documents required by the letter of transmittal, within three New York
Stock Exchange trading days after expiration of the exchange offer.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of old notes may
withdraw their tenders at any time before expiration of the exchange offer.
23
<PAGE>
For a withdrawal to be effective:
- the exchange agent must receive a written notice, which may be by
telegram, telex, facsimile transmission or letter, of withdrawal at one of
the addresses set forth below under "--Exchange agent"; or
- holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.
Any notice of withdrawal must:
- specify the name of the person who tendered the old notes to be withdrawn;
- identify the old notes to be withdrawn, including the principal amount of
the old notes to be withdrawn; and,
- where certificates for old notes have been transmitted, specify the name
in which the old notes were registered, if different from that of the
withdrawing holder.
If certificates for old notes have been delivered or otherwise identified to
the exchange agent, then, prior to the release of those certificates, the
withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
institution, unless the withdrawing holder is an eligible institution.
If old notes have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn old notes and
otherwise comply with the procedures of the facility. We will determine all
questions as to the validity, form and eligibility, including time of receipt,
of notices of withdrawal, and our determination shall be final and binding on
all parties. We will deem any old notes so withdrawn not to have been validly
tendered for exchange for purposes of the exchange offer. We will return any old
notes that have been tendered for exchange but that are not exchanged for any
reason to their holder without cost to the holder, or in the case of old notes
tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described above, those old notes will be credited to
an account maintained with DTC for old notes, as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. You may
retender properly withdrawn old notes by following one of the procedures
described under "--Procedures for tendering" above at any time on or before
expiration of the exchange offer.
EXCHANGE AGENT
Citibank, N.A. has been appointed as exchange agent for the exchange offer.
You should direct questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests for the
notice of guaranteed delivery to the exchange agent addressed as follows:
Citibank, N.A.
111 Wall Street, 5(th) Floor
New York, NY 10005
Attn: Global Agency and Trust Services
By Facsimile Transmission (for Eligible Institutions Only):
(212) 825-3483
To Confirm by Telephone or for Information Call:
(800) 422-2066
24
<PAGE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SHOWN
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitations by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the exchange
offer. These expenses include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees; and
- printing and mailing costs.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of old
notes under the exchange offer. The tendering holder, however, will be required
to pay any transfer taxes, whether imposed on the registered holder or any other
person, if:
- certificates representing old notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of old notes
tendered;
- tendered old notes are registered in the name of any person other than the
person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of old
notes under the exchange offer.
If satisfactory evidence of payment of transfer taxes is not submitted with
the letter of transmittal, the amount of any transfer taxes will be billed to
the tendering holder.
ACCOUNTING TREATMENT
We will record the exchange notes in our accounting records at the same
carrying value as the old notes, which is the aggregate principal amount, as
reflected in our accounting records on the date of exchange. Accordingly, we
will not recognize any gain or loss for accounting purposes in connection with
the exchange offer. We will record the expenses of the exchange offer as
incurred.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. We urge you to consult your financial and tax
advisors in making your own decision on what action to take.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
25
<PAGE>
CAPITALIZATION
The following sets forth the capitalization of our company as of
December 31, 1999, on an as adjusted basis to reflect the sale of the old notes
and $25,000,000 principal amount of Floating Rate Notes due 2001 and the
application of the net proceeds from their sale.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
AS ADJUSTED
---------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C>
Short-term debt................................... $ 31,162
----------
Long-term debt (including current portion):
Senior Notes, net of discount of $2,646........... 597,354
Floating Rate Notes due 2001...................... 25,000
364-Day Senior Unsecured Revolving Credit
Facility........................................ --
Five year Senior Unsecured Credit Facility........ 112,246
6.6% Notes due 2003............................... 159,248
6.125% Notes due 2006............................. 135,499
6.875% Debentures due 2026........................ 122,515
7.75% Debentures due 2023......................... 108,304
AIBOR plus 0.5925% Bank Loans due 2003............ 54,364
AIBOR plus 1.725% Bank Loan due 2003.............. 11,934
5.85% Bonds due 2023.............................. 9,279
Variable Rate Bond due 2014....................... 8,500
8.2% Bank Loan due 2006........................... 7,501
Capital lease obligation.......................... 6,629
Other............................................. 6,039
----------
Total long-term debt.......................... 1,364,412
----------
Shareholders' equity
Common stock, $0.01 par value (500,000,000 shares
authorized and 119,071,693 shares issued)....... 1,191
Additional paid-in capital........................ 1,047,518
Accumulated deficit............................... (200,374)
Accumulated other comprehensive loss.............. (61,238)
Treasury stock, at cost........................... (27,185)
----------
Total shareholders' equity.................... 759,912
----------
Total capitalization.......................... $2,155,486
==========
</TABLE>
26
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following tables contain selected historical financial and operating
data of the Company, Crompton & Knowles and Witco as of the dates and for the
periods indicated. You should read the following data together with the other
historical information and statements (including related notes) of the Company
incorporated by reference in this prospectus. Please also read "Capitalization."
CROMPTON AND CROMPTON & KNOWLES HISTORICAL FINANCIAL AND OPERATING DATA(1)
The Crompton and Crompton & Knowles historical financial data as of and for
each of the years in the five-year period ended December 31, 1999 have been
derived from audited financial statements of the Company.
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------------------------------------
DEC 30, 1995 DEC. 28, 1996 DEC. 27, 1997 DEC. 26, 1998 DEC. 31, 1999
------------ ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales............................ $1,744,834 $1,803,969 $1,851,180 $1,796,119 $2,092,358
Interest expense..................... 122,398 114,244 103,349 78,520 69,833
Earnings (loss) before extraordinary
loss and cumulative effect of
accounting changes................... 139,922 (22,054)(3) 92,071(4) 183,223(5) (159,351)(6)
Net earnings (loss).................. 131,643 (22,495) 86,829 161,755 (175,038)
EBITDA(2)............................ 305,540 301,212 332,134 340,394 342,549
Earnings per common share basic:
Earnings (loss) per common share
before extraordinary loss and
cumulative effect of accounting
changes.............................. 2.13 (0.31)(3) 1.25(4) 2.48(5) (1.91)(6)
Net earnings (loss) per common
share................................ 2.01 (0.31) 1.18 2.20 (2.10)
Weighted average number of shares
outstanding.......................... 65,572 72,026 73,373 73,696 83,507
Earnings per common share diluted:
Earnings (loss) per common share
before extraordinary loss and
cumulative effect of accounting
changes.............................. 2.11 (0.31)(3) 1.22(4) 2.42(5) (1.91)(6)
Net earnings (loss) per common
share................................ 1.99 (0.31) 1.15 2.14 (2.10)
Weighted average number of shares
outstanding.......................... 66,269 72,026 75,358 75,700 83,507
CONSOLIDATED BALANCE SHEET DATA:
Total assets......................... 1,655,845 1,657,190 1,548,820 1,408,893 3,726,618
Long-term debt....................... 974,156 1,054,982 896,291 646,857 1,309,812
Cash dividends declared per common
share................................ 0.52 0.27 0.05 0.05 0.10
RATIO OF EARNINGS TO FIXED CHARGES: 1.76 0.92 2.46 4.75 (7)
</TABLE>
- --------------------------
(1) Data for all periods presented represent the results of Crompton & Knowles
(the predecessor to Crompton Corporation) except for the twelve months ended
December 31, 1999, which also includes four months of results from the
merger of Crompton & Knowles and Witco.
(2) EBITDA represents operating profit plus depreciation and amortization and
excludes one-time non-recurring gains and losses noted in items (3) through
(6) below to the extent included in operating profit. EBITDA is not intended
to represent cash flow or any other measure of performance in accordance
with generally accepted accounting principles. We use EBITDA as a key
internal performance measure and have included EBITDA because EBITDA may be
used by certain investors as one measure of a company's ability to service
its debt.
27
<PAGE>
(3) Includes an after-tax charge of $68.1 million for merger and related costs
and an after-tax special environmental charge of $18.5 million.
(4) Includes an after-tax special environmental charge of $9.0 million, an
after-tax charge for severance and other costs of $7.8 million, and an
after-tax gain of $16.8 million related to the settlement of certain
post-retirement liabilities.
(5) Includes an after-tax gain of $92.1 million from the sale of a 50% interest
of the seed treatment business, an after-tax charge of $21.1 million related
to facility closure costs, and an after-tax charge of $5.0 million for the
conversion of certain inventories from LIFO to FIFO.
(6) Includes an after-tax gain of $26.8 million related to the sale of the
specialty ingredients business, an after-tax loss of $65.5 million related
to the sale of the textile colors business, an after-tax charge of
$20.6 million related to merger and related costs, and an after-tax charge
of $195.0 million for the write-off of acquired in-process research and
development.
(7) Earnings were less than fixed charges by $119.7 million for 1999.
28
<PAGE>
WITCO HISTORICAL FINANCIAL AND OPERATING DATA
The Witco historical financial data as of and for each of the years in the
four-year period ended December 31, 1998, have been derived from the
consolidated financial statements of Witco, which have been audited by Ernst &
Young LLP, independent certified public accountants. The Witco historical
financial data as of June 30, 1998 and 1999 and for each of the six-month
periods then ended, have been derived from Witco's unaudited consolidated
financial statements which, in the opinion of Witco's management, include all
material adjustments necessary for a fair presentation thereof.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- -----------------------
1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales....................... $1,985,077 $2,263,327 $2,187,402 $1,941,529 $1,011,676 $ 974,433
Interest expense................ 43,689 69,334 53,004 48,361 23,992 28,291
Earnings (loss) from continuing
operations before cumulative
effect of accounting change... 100,346(2) (247,174)(3) 90,078(4) 58,935(5) 35,602(6) 21,323(7)
Net earnings (loss)............. 104,445 (315,087) 94,877 58,935 35,602 21,323
EBITDA(1)....................... 263,535 298,559 325,958 245,773 141,521 129,197
Earnings per common share basic:
Earnings (loss) per common share
from continuing operations
before cumulative effect of
accounting change............. 1.78(2) (4.37)(3) 1.58(4) 1.02(5) 0.62(6) 0.37(7)
Net earnings (loss) per common
share......................... 1.85 (5.57) 1.66 1.02 0.62 0.37
Weighted average number of
shares outstanding............ 56,312 56,591 57,130 57,518 57,485 57,565
Earnings per common share
diluted:
Earnings (loss) per common share
from continuing operations
before cumulative effect of
accounting change............. 1.77(2) (4.37)(3) 1.55(4) 1.02(5) 0.61(6) 0.37(7)
Net earnings (loss) per common
share......................... 1.84 (5.57) 1.63 1.02 0.61 0.37
Weighted average number of
shares outstanding............ 56,656 56,591 58,042 57,958 58,173 57,739
CONSOLIDATED BALANCE SHEET DATA:
Total assets.................... 2,750,604 2,391,705 2,297,652 2,338,869 2,256,467 2,307,166
Long-term debt.................. 683,830 700,820 645,101 688,192 680,400 677,334
Cash dividends declared per
common share.................. 1.12 1.12 1.12 1.12 0.56 0.56
</TABLE>
- --------------------------
(1) EBITDA represents operating profit plus depreciation and amortization and
excludes one-time non-recurring gains and losses noted in items (2) through
(6) below to the extent included in operating profit. EBITDA is not intended
to represent cash flow or any other measure of performance in accordance
with generally accepted accounting principles. We use EBITDA as a key
internal performance measure and have included EBITDA because EBITDA may be
used by certain investors as one measure of a company's ability to service
its debt.
29
<PAGE>
(2) Includes a net after-tax gain of $33.7 million related to settlements with
certain insurers, an after-tax gain of $33.0 million related to the
disposition of businesses, an after-tax restructuring charge of
$20.6 million, and an after-tax charge of $11.0 million for environmental
remediation costs and litigation.
(3) Includes an after-tax restructuring charge of $239.3 million, other
after-tax charges of $71.3 million for environmental remediation costs,
litigation and other matters, and a net after-tax gain of $2.6 million
related to settlements with certain insurers.
(4) Includes an after-tax restructuring charge of $8.0 million, a net after-tax
gain of $0.6 million related to settlements with certain insurers, and an
after-tax gain of $1.2 million from the disposition of businesses.
(5) Includes after-tax restructuring credits, net of $21.1 million, an after-tax
charge of $13.4 million for environmental remediation costs, litigation and
other matters, and after-tax gains of $3.2 million related to the
disposition of businesses and an investment.
(6) Includes an after-tax restructuring charge of $3.1 million, an after-tax
gain of $2.5 million from the disposition of an investment and an after-tax
gain of $0.2 million from the disposition of businesses.
(7) Includes an after-tax restructuring charge of $2.0 million and an after-tax
gain of $1.3 million from the disposition of businesses.
DESCRIPTION OF THE EXCHANGE NOTES
We are issuing the exchange notes under the same indenture, dated as of
March 1, 2000, between us and Citibank, N.A., as trustee, under which the old
notes were issued. We will provide you with a copy of the indenture upon
request. The indenture contains provisions that define your rights under the
exchange notes. In addition, the indenture governs our obligations under the
exchange notes. The terms of the exchange notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act.
The following description is meant to be only a summary of the indenture. It
does not restate the terms of the indenture in their entirety. We urge you to
read carefully the indenture as it, and not this description, governs your
rights as holders.
PRINCIPAL, MATURITY AND INTEREST
We are initially issuing exchange notes in an aggregate principal amount of
$600 million. The exchange notes will mature on March 15, 2005. We are issuing
the exchange notes in fully registered form, without coupons, in denominations
of $1,000 and any integral multiple of $1,000.
Each exchange note we issue will bear interest at a rate of 8 1/2% and will
pay interest beginning on September 15, 2000. We will pay interest semiannually
on March 15 and September 15 of each year by wire transfer in immediately
available funds. Interest on the securities will accrue from the most recent
date to which interest has been paid on the securities or, if no interest has
been paid, from March 7, 2000. We will pay interest on overdue principal or
premium, if any (plus interest on such interest to the extent lawful), at the
rate borne by the securities to the extent lawful. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
PAYING AGENT AND REGISTRAR
We will pay the principal of, premium, if any, and interest on the exchange
notes at any office of ours or any agency designated by us which is located in
the Borough of Manhattan, the City of New York. We have initially designated
Citibank, N.A. as the Paying Agent and Registrar. The location of the Paying
Agent's office is 111 Wall Street, 5(th) Floor, New York, New York 10005. We
reserve the right, however, to pay interest by check mailed directly to holders
at their registered addresses. We may appoint and change any Paying Agent,
Registrar or co-registrar without notice to any security holder. We or any of
our domestically incorporated subsidiaries may act as Paying Agent, Registrar or
co-registrar.
30
<PAGE>
Holders may exchange or transfer their exchange notes at the location given
in the preceding paragraph. No service charge will be made for any registration
of transfer or exchange of exchange notes. We may, however, require holders to
pay any transfer tax or other similar governmental charge payable in connection
with a transfer or exchange.
OPTIONAL REDEMPTION
We may redeem the exchange notes in whole or, from time to time, in part on
at least 30 but not more than 60 days prior notice mailed to DTC, at a
redemption price equal to the greater of
- 100% of the principal amount of the exchange notes to be redeemed and
- the sum of the present value of the Remaining Scheduled Payments on the
exchange notes to be redeemed discounted to the date of redemption, on a
semiannual basis, at the Treasury Rate plus 25 basis points,
plus accrued interest to the date of redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the exchange notes to be redeemed that would be utilized,
at the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the exchange notes. "Independent Investment Banker" means one
of the Reference Treasury Dealers appointed by us.
"Comparable Treasury Price" means, with respect to any redemption date,
- the average of the bid and asked price for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such redemption date, as set forth in the
daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities" or
- if such release (or any successor release) is not published or does not
contain such prices on such Business Day, (a) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or (b) if
the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as
a percentage of its principal amount) quoted in writing to the Trustee by
such Reference Treasury Dealer at 5:00 p.m. on the third Business Day
preceding such redemption date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Salomon Smith Barney Inc., and Goldman, Sachs & Co. and
their respective successors and, at the option of the Company, additional
Primary Treasury Dealers; PROVIDED, HOWEVER, that if any of the foregoing shall
cease to be a primary U.S. Government Securities dealer in The City of New York
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any exchange note, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related redemption date but for
such redemption; PROVIDED, HOWEVER, that, if such redemption date is not an
interest payment date with respect to such exchange note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such redemption date.
31
<PAGE>
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
SELECTION
If we partially redeem exchange notes, the Trustee will select the exchange
notes to be redeemed on a ratable basis, by lot or by such other method as the
Trustee deems to be fair and appropriate. However, no exchange note of $1,000 in
original principal amount or less will be redeemed in part. On and after the
redemption date, interest will cease to accrue on exchange notes or portions of
exchange notes called for redemption so long as we have deposited with the
paying agent funds sufficient to pay the principal of, plus accrued and unpaid
interest on, and additional amounts in respect of, the exchange notes to be
redeemed.
RANKING
The exchange notes:
- are general unsecured obligations of us;
- rank equally in right of payment to all of our existing and future senior
indebtedness;
- rank senior in right of payment to all of our existing and future
subordinated indebtedness.
Although we are an operating company, we conduct some of our operations
through Subsidiaries. All existing and future liabilities (including trade
payables) of our Subsidiaries will be effectively senior to the exchange notes.
As adjusted to reflect this offering, the offering of the Floating Rate Notes
and the application of the net proceeds therefrom, as of December 31, 1999, on a
consolidated basis we would have had $1.4 billion of indebtedness outstanding,
and no indebtedness ranking senior to the exchange notes. As adjusted to reflect
this offering and the offering of the Floating Rate Notes, as of December 31,
1999, our Subsidiaries would have had an immaterial amount of indebtedness and
trade payables. The Indenture contains a covenant that will limit our
subsidiaries from incurring certain forms and amounts of indebtedness without
providing a guarantee for the exchange notes in the case of our domestic
Subsidiaries and, with respect to our Foreign Subsidiaries, a pledge of their
stock. See "--Certain Covenants--Limitation on Subsidiary Indebtedness."
CERTAIN COVENANTS
LIMITATION ON MORTGAGES. We may not create or assume and may not permit any
Restricted Subsidiary other than a Foreign Subsidiary to create or assume any
Mortgage of or upon any of our Principal Properties, or of or upon any income or
profits therefrom, without making effective provision whereby the exchange notes
will be secured by such Mortgage equally and ratably with any and all other
obligations and Indebtedness secured by such Mortgage or shall be secured by a
senior Mortgage, so long as any such other obligations and Indebtedness shall be
so secured. However, the foregoing covenant will not apply to any of the
following:
(a) the creation of any Mortgage on any after-acquired property,
contemporaneously with the 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 us or any Restricted Subsidiary of any Mortgage upon any
after-acquired property existing at the time such property is acquired, except
to the extent that the principal amount of any Indebtedness secured by any such
Mortgage created or assumed exceeds the cost to us or the 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 by such Mortgage), or the fair value (if and as determined
by our Board of Directors) of such property at the time the Mortgage is created
or assumed, whichever is less;
32
<PAGE>
(b) any Mortgage on any property acquired by us or any Restricted Subsidiary
existing at the time of such acquisition and any Mortgage executed by any
corporation or other entity acquired by us 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 us or any Restricted
Subsidiary;
(c) any Mortgage executed (i) by any Restricted Subsidiary and exclusively
securing any Indebtedness incurred by such Restricted Subsidiary to us 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;
(d) 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 the preceding clauses (a), (b) or (c) or one or more of
the Mortgages existing on March 7, 2000 on any of our assets or the assets of a
Restricted Subsidiary or one or more Mortgages permitted by this paragraph.
However, the aggregate principal amount of Indebtedness secured by any such
extending, 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, renewal, refinancing
or refunding Mortgage shall be limited to: all or any part of the same property
(and improvements on the property) which secured the Mortgage extended, renewed,
refinanced or refunded or in the case of a simultaneous extension, renewal,
refinancing or refunding of one or more Mortgages on contiguous property (and
improvements on the property), all or any part of the same contiguous property
which secured the Mortgage extended, renewed, refinanced or refunded. However,
in the case of any extension, renewal, refinancing or refunding of any Mortgage
of the type described in (c) above or in this clause (d), neither we 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, renewal,
refinancing or refunding Mortgage;
(e) 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;
(f) liens in favor of the United States of America, or any state or
subdivision thereof, or any other county or subdivision thereof where we or any
Restricted Subsidiary may transact any of its business, or any governmental
agency, to the extent required in the ordinary course of business;
(g) 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;
(h) 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;
(i) 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;
(j) leases made or existing (i) on property 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;
(k) landlords' liens on property held under lease;
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(l) 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 (ii) 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;
(m) liens with respect to Permitted Subsidiary Indebtedness incurred
pursuant to the seventh, eighth and tenth bullet points of the definition of
Permitted Subsidiary Indebtedness;
(n) any Mortgage securing Indebtedness, the net proceeds of which are
promptly deposited to defease the Securities as described under "Defeasance and
Covenant Defeasance;" and
(o) any Mortgage created pursuant to and in compliance with the provisions
under "--Sales of Accounts Receivable."
Notwithstanding the foregoing limitation on Mortgages, we or any Restricted
Subsidiary may grant easements for ingress and egress over property owned by us
or such Restricted Subsidiary in favor of the United States or any state (or any
instrumentality 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 we or any Restricted Subsidiary may have granted a lien or transferred
title to such government or governmental agency under any exception to the
limitation on mortgages or the limitation on sale and leaseback transactions
described below in connection with the financing of such anti-pollution
equipment or other property. However, any such Mortgage on such anti-pollution
equipment or property does not apply to any other property owned by us or any
Restricted Subsidiary and any such transfer of title to such anti-pollution
equipment or property does not include transfer of title to any other property
theretofore owned by us 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
from the sale or transfer 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 will not be deemed
to create any Mortgage upon any of our assets or the assets of any Restricted
Subsidiary.
If at any time the Company or any Restricted Subsidiary shall create or
assume any Mortgage not excepted from this limitation on Mortgages as above
provided, and not exempted under "--Exempted Indebtedness," 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 the foregoing
limitation on Mortgages 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 exchange notes
equally and ratably with, or senior to, any other obligation or Indebtedness
pursuant to the provisions of this limitation on Mortgages, the Trustee is
authorized to enter into an amendment to the Indenture or agreement supplemental
thereto 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 exchange notes so
secured equally and ratably with such other obligation or Indebtedness. The
Trustee shall be entitled to receive an opinion of counsel as conclusive
evidence that any amendment hereto or action taken equally and ratably to secure
the exchange notes complies with the provisions of this limitation on Mortgages.
In the event that the Company or any Restricted Subsidiary shall be entitled in
accordance with the provisions of the Indenture to a release of any Mortgage
granted to secure the exchange notes, 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 under "--Limitation on Sale and Leaseback
Transactions," 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.
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The foregoing limitation on Mortgages is subject to the provision for
"Exempted Indebtedness" described below.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. We may not, nor may we
permit any Restricted Subsidiary, other than a Foreign Subsidiary, to enter into
any arrangement with any person providing for the leasing by us or any
Restricted Subsidiary of any Principal Property (except for temporary leases of
not more than three years and except for leases between us and a Restricted
Subsidiary or between Restricted Subsidiaries), which property has been or is to
be sold or transferred by us or such Subsidiary to such person unless either we
or the Restricted Subsidiary would be permitted under "--Limitation on
Mortgages" 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
leaseback transaction without equally and ratably securing the exchange notes;
or we apply an amount at least equal to the net proceeds of such sale or
transfer or the fair value of such property as determined by the Board of
Directors, whichever is greater, to the redemption or retirement, within
120 days of the effective date of any such arrangement of Indebtedness which is
not subordinate or junior in right of payment to the exchange notes. However, in
lieu of applying such amount to such redemption or retirement of such
Indebtedness, we may, within 75 days after such sale, voluntarily retire
Indebtedness, excluding redemption and retirement of Indebtedness under
mandatory sinking fund or mandatory prepayment provisions or by payment at
maturity, and thereby reduce the amount of cash which we will be required to
apply to the redemption or retirement of Indebtedness described above by an
amount equal to the aggregate of the principal amount of the Indebtedness, as
the case may be, so redeemed or retired.
The foregoing limitations on sale and leaseback transactions are subject to
the provision for "Exempted Indebtedness" described below.
EXEMPTED INDEBTEDNESS. Notwithstanding the provisions on limitations on
Mortgages and sale and leaseback transactions, we and our Restricted
Subsidiaries may incur Indebtedness secured by Mortgages without securing the
exchange notes or may enter into sale and leaseback transactions without
redeeming or retiring other Indebtedness, or we may engage in a combination of
such transactions, if the sum of the aggregate amount of such otherwise
prohibited Indebtedness then outstanding, and Attributable Debt relating to
otherwise prohibited sale and leaseback transactions under then existing leases
would not exceed 10% of Consolidated Net Tangible Assets.
LIMITATION ON SUBSIDIARY INDEBTEDNESS. We will not cause or permit any
Restricted Subsidiary that is not a Foreign Subsidiary, which is not a Guarantor
of the exchange notes, 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 exchange notes. We will
not cause or permit any Restricted Subsidiary that is a Foreign Subsidiary (a
"Foreign Restricted Subsidiary"), the stock of which is not already pledged to
secure our obligations with respect to the exchange notes, 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 our obligations with respect to the exchange
notes (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:
- all outstanding Subsidiary Indebtedness (excluding Permitted Subsidiary
Indebtedness);
- all outstanding obligations or Indebtedness secured by Mortgages that
would be prohibited under "--Limitation on Mortgages" (without taking into
account the provisions under "--Exempted Indebtedness"); and
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- all Attributable Debt relating to all then existing leases under sale and
leaseback transactions which would have been prohibited by the provisions
under "--Limitation on Sale and Leaseback Transactions" (without taking
into account the provisions under "--Exempted Indebtedness"),
does not at the time of incurrence thereof exceed 10% of Consolidated Net
Tangible Assets.
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, we shall, in our 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.
Notwithstanding anything in the foregoing to the contrary, any Guarantee by
a Restricted Subsidiary or a Foreign Stock Pledge with respect to the exchange
notes shall provide by its terms that it, and any liens securing the same, shall
be automatically and unconditionally released and discharged upon:
- any sale, exchange or transfer, to 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 the 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;
- 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 delivery of a Guarantee or a
Foreign Stock Pledge; and
- 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.
For purposes of this covenant, 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.
In the event that the Company or any Subsidiary shall be entitled in
accordance with the provisions of the Indenture to a release of any Guarantee or
a Foreign Stock Pledge granted to secure the exchange notes, the Trustee is
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.
LEVERAGED TRANSACTIONS. Except for the limitations on Mortgages and sale
and leaseback transactions referred to above and on consolidations, mergers or
transfers of our assets substantially as an entirety referred to below, the
Indenture and the terms of the exchange notes do not contain any covenants or
other provisions designed to afford holders of any exchange notes protection in
the event of a highly leveraged transaction.
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SALES OF ACCOUNTS RECEIVABLE. We may, and any of our 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:
- 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;
- 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
- 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.
We
- 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;
- 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;
- 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
- 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.
CERTAIN DEFINITIONS
Certain terms are defined in the Indenture and are used in this prospectus as
follows:
"Accounts Receivable Subsidiary" means a Subsidiary of the Company:
- 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;
- which is designated by the Board of Directors as an Accounts Receivable
Subsidiary pursuant to a resolution set forth in an officers' certificate
and delivered to the Trustee;
- 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;
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- 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 under "--Limitation on
Subsidiary Indebtedness," 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 the covenant
described under "--Limitation on Subsidiary Indebtedness;"
- 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 the provisions under
"--Sales of Accounts Receivable" and fees payable in the ordinary course
of business in connection with servicing accounts receivable and/or notes
receivable; and
- 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 the provisions
under "--Sales of Accounts Receivable" 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:
- existing at the time such person becomes a Restricted Subsidiary; or
- 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.
"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 day upon which it may be so terminated.
"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
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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:
- United States dollars;
- 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;
- 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;
- repurchase obligations with a term of not more than seven days for
underlying securities of the types described in the second and third
bullet points above entered into with any financial institution meeting
the qualifications specified in the third bullet point above;
- 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
- money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in this definition.
"Consolidated Net Tangible Assets" means total consolidated assets of the
Company and its Subsidiaries, less the following: (a) current liabilities of the
Company and its Subsidiaries; (b) all depreciation and valuation reserves and
all other reserves (except (i) reserves for contingencies which have not been
allocated to any particular purpose and (ii) deferred credits, including
deferred federal and foreign income taxes and deferred investment tax credits)
of the Company and its Subsidiaries; (c) the net book amount of all intangible
assets of the Company and its Subsidiaries, including, but without limitation,
the unamortized portions of such items as goodwill, trademarks, trade names,
patents and debt discount and expense less debt premium and (d) appropriate
adjustments on account of minority interests of other persons holding stock in
Subsidiaries.
"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:
- matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise;
- is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
- 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 notes.
"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
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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
notes 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 notes and the Indenture.
"Guarantor" means any Restricted Subsidiary, other than Foreign
Subsidiaries, that after the date of the Indenture executes a guarantee of the
notes contemplated under "--Limitation on Subsidiary Indebtedness" until a
successor replaces such party pursuant to the applicable provisions of the
Indenture, or until otherwise released in accordance with terms of the
Indenture.
"Hedging Obligations" means, with respect to any person, the obligations of
such person under
- 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
- 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.
"Indebtedness" means all items of indebtedness or liability (except capital
and surplus) which in accordance with generally accepted accounting principles
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, indebtedness secured by any Mortgage existing on property owned
subject to such Mortgage, whether or not the indebtedness secured thereby shall
have been assumed and 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.
"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.
"Permitted Subsidiary Indebtedness" means:
- any Indebtedness existing on March 7, 2000;
- any Indebtedness owed to the Company or a Restricted Subsidiary;
- any Indebtedness secured by a Mortgage permitted under "--Limitation on
Mortgages;"
- 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 the first bullet point above,
including, without limitation, any premium, prepayment penalties or fees
or expenses incurred in connection therewith;
- Indebtedness incurred by an Accounts Receivables Subsidiary in connection
with a transaction pursuant to and in compliance with the terms described
under "Sales of Accounts Receivable;"
- 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 the Indenture;
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- the incurrence by the Restricted Subsidiaries of Hedging Obligations
incurred with respect to any Indebtedness or Obligation that is permitted
by the terms of the Indenture to be outstanding;
- Indebtedness incurred by Restricted Subsidiaries constituting
reimbursement obligations with respect to letters of credit issued in the
ordinary course of business, including without limitation 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;
- 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 by the Restricted Subsidiary;
- 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;
- Indebtedness that constitutes an accrued expense or trade payable;
- Indebtedness of a Restricted Subsidiary, to the extent the net proceeds
thereof are promptly deposited to defease the notes as described under
"Defeasance and Covenant Defeasance;"
- Indebtedness that constitutes a liability for federal, state, local or
other taxes; and
- Indebtedness that constitutes an obligation to pay salary or benefits to
officers, employees and directors in the ordinary course of business.
"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.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"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):
- 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;
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- 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;
- 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);
- 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 the first three bullet points 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);
- 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);
- all obligations of the type referred to in the bullet points above 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
- all obligations of the type referred to in the bullet points above 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.
"Unrestricted Subsidiary" means:
- 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
- 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.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person or convey,
transfer or lease our properties and assets substantially as an entirety to any
person, and we shall not permit any person to consolidate with or merge into us
or convey, transfer or lease its properties and assets substantially as an
entirety to us (such transaction being herein referred to as a "Merger
Transaction") unless: in the case where we consolidate with or merge into
another person or convey, transfer or lease our properties and assets
substantially as an entirety to any person, the person formed by such Merger
Transaction is a corporation, partnership, limited liability company or trust
validly organized and existing under the laws of the United States of America,
any state thereof or the District of Columbia and such person expressly assumes,
by supplemental indentures, the payment of the principal, premium, if any, and
interest on the exchange notes and the performance of every covenant of the
Indenture; immediately after giving effect to any such Merger Transaction and
treating any indebtedness which becomes an obligation of ours or of any
Subsidiary as a result of such Merger Transaction as having been incurred by us
or such Subsidiary at the time of such Merger 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; if, as a result of any Merger
Transaction, our properties or assets become subject to a mortgage, pledge,
lien, security interest or other encumbrance which would not be permitted by the
Indenture, we or the successor person take such steps as shall be necessary to
secure all exchange notes equally and ratably with (or prior to) all
indebtedness secured thereby; and we deliver to the Trustee officers'
certificates and an opinion of counsel, each stating that such Merger
Transaction and any required supplemental indentures comply with all the
provisions of this covenant.
EVENTS OF DEFAULT
Under the Indenture an Event of Default is defined as any one of the
following events:
(a) default in the payment of any interest on the exchange notes when it
becomes due and payable, and continuance of such default for a period of
30 days;
(b) default in the payment of the principal of, or premium, if any, on the
exchange notes at maturity;
(c) default in the performance, or breach, of any other covenant in the
applicable Indenture and continuance of such default for a period of 60 days
after either the Trustee or the holders of at least 10% of the principal amount
of the outstanding exchange notes have given written notice thereof by first
class mail;
(d) certain events in bankruptcy, insolvency or reorganization; and
(e) a default under any evidence of indebtedness for money borrowed with a
principal amount (individually or in the aggregate) in excess of $25 million,
which default results in such indebtedness becoming due and payable prior to the
date 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 the Trustee or the holders of at least 10% of
the principal of the outstanding notes give written notice to us.
If an Event of Default occurs, the Trustee shall give notice to the holders
of the exchange notes of such default; PROVIDED, HOWEVER, that in the case of a
default described in (c) above, no such notice to holders shall be given until
at least 30 days after the occurrence thereof.
If an Event of Default occurs and is continuing, either the Trustee or the
holders of at least 25% of the aggregate principal amount of the outstanding
exchange notes may declare the principal amount of all the exchange notes to be
due and payable immediately. Under certain circumstances any declaration of
acceleration with respect to the exchange notes may be rescinded and past
defaults (except, unless theretofore cured, a default in the payment of
principal of or any premium or interest on the exchange notes) may be waived by
the holders of a majority in aggregate principal amount of the exchange notes.
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The Indenture provides that, subject to the duty of the Trustee during a
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the applicable
Indenture at the request or direction of any of the holders, unless such holders
shall have offered to the Trustee reasonable security or indemnity. Subject to
the provisions for the indemnification of the Trustee and to certain other
conditions, the holders of a majority of the aggregate principal amount of the
exchange notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the exchange notes.
No holder of exchange notes may institute any proceeding under the Indenture
unless: such holder previously has given to the Trustee written notice of a
continuing Event of Default; the holders of at least 25% of the aggregate
principal amount of the outstanding exchange notes have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee; in the 60-day period following receipt of a written notice from a
holder, the Trustee has not received from the holders of a majority of the
aggregate principal amount of the outstanding exchange notes a direction
inconsistent with such request; and the Trustee shall have failed to institute
such proceeding within such 60-day period.
These limitations do not apply to a suit instituted by a holder of exchange
notes for enforcement of payment of the principal of and premium, if any, or
interest on the exchange notes on or after the respective due dates.
We are required to furnish to the Trustee annually a statement as to our
performance of certain obligations under the Indenture and as to any default in
such performance.
MODIFICATION AND WAIVER
We may, with the Trustee, without the consent of the holders of exchange
notes affected thereby, modify and amend the Indenture to
- cure any ambiguity, omission, defect or inconsistency;
- provide for the assumption by a successor to the Company or the Trustee of
the obligations thereof under the Indenture;
- provide for uncertificated notes;
- add to the covenants of the Company for the benefit of the holders or
surrender any right or power therein conferred upon the Company;
- comply with SEC requirements necessary to qualify the applicable Indenture
under the Trust Indenture Act of 1939; or
- make any change that does not adversely affect the rights of any
noteholder.
In addition, we may, with the Trustee, modify and amend the provisions of
the Indenture with the consent of the holders of not less than a majority of the
aggregate principal amount of the outstanding exchange notes; PROVIDED, HOWEVER,
that no such modification or amendment may, without the consent of the holders
of all the exchange notes: change the stated maturity date of the principal of,
or any installment of principal of or interest on, any exchange notes; reduce
the principal amount of, or the premium, if any, or interest on, the exchange
notes; change the place or currency of payment of principal of, or the premium,
if any, or interest on, the exchange notes; impair the right to institute suit
for the enforcement of any payment on the exchange notes on or after the stated
maturity thereof; reduce the percentage of the principal amount of outstanding
exchange notes, the consent of whose holders is required for modification or
amendment of the Indenture or for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults; or modify this section or
sections of the Indenture regarding waivers of past defaults and waivers of
certain covenants, except to increase any percentage or provide that other
provisions of the Indenture cannot be modified or waived without the consent of
each affected holder.
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Except as described above, the holders of not less than a majority in
aggregate principal amount of the outstanding exchange notes may, on behalf of
all holders of exchange notes, agree to waive our compliance with the covenants
described under "Limitation on Mortgages," "Limitation on Sale and Leaseback
Transactions," "Exempted Indebtedness" and "Limitation on Subsidiary
Indebtedness." The holders of a majority of the aggregate principal amount of
the exchange notes may, on behalf of all holders of the exchange notes, waive
any past default under the Indenture, except a default in the payment of
principal, premium or interest or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the holder of
each exchange note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that we may elect at any time either:
- to defease and be discharged from any and all obligations in respect of
the exchange notes then outstanding (except for certain obligations to
register the transfer of or exchange of the exchange notes, replace
stolen, lost or mutilated exchange notes, maintain paying agencies and
hold monies for payment in trust); or
- to be released from our obligations to comply with the covenants related
to our existence, the maintenance of our properties, payment of taxes and
other claims and the covenants set forth under "Limitation on Mortgages,"
"Limitation on Sale and Leaseback Transactions," "Limitation on Subsidiary
Indebtedness," "Consolidation, Merger and Sale of Assets" and certain
other covenants; and to have a default in any defeased covenant or under
the cross-acceleration provision described under clause (e) of "Events of
Default" no longer be an Event of Default,
if we deposit, in trust, with the Trustee, money or U.S. Government Obligations,
which through the payment of interest and principal in accordance with their
terms will provide money, in an amount sufficient to pay all the principal of
and premium, if any, and interest on the exchange notes on the dates such
payments are due in accordance with the terms of the exchange notes. A trust may
only be established if, among other things:
- no Event of Default or event which, with the giving of notice or lapse of
time, or both, would become an Event of Default, shall have occurred and
be continuing on the date of such deposit, or with regard to any Event of
Default, or any such event, specified as a bankruptcy event at any time
during the period ending on the 123(rd) day following such date of
deposit;
- the deposit will not cause the Trustee to have any conflicting interest
with respect to other securities; and
- we shall have delivered an opinion of counsel to the effect that the
holders will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such deposit or defeasance and will be subject
to U.S. federal income tax in the same manner as if such defeasance had
not occurred (and except in the case of covenant defeasance, such opinion
is based on a ruling from the Internal Revenue Service or change in
applicable federal income tax law).
In the event we fail to comply with our remaining obligations with respect
to the exchange notes after exercising our covenant defeasance option and the
exchange notes are declared due and payable because of the subsequent occurrence
of any Event of Default, the amount of money and U.S. Government Obligations on
deposit with the Trustee may be insufficient to pay amounts due on the exchange
notes at the time of the acceleration resulting from such Event of Default.
However, we will remain liable in respect of such payments.
CONCERNING THE TRUSTEE
Citibank, N.A. is to be the Trustee under the indenture and has been
appointed by us as registrar and paying agent with regard to the exchange notes.
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GOVERNING LAW
The indenture and the exchange notes are governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
EXCHANGE OFFER; REGISTRATION RIGHTS
We entered into separate registration rights agreements with the initial
purchasers, for the benefit of the holders of the notes, under which we agreed
to use reasonable best efforts to file with the Commission the registration
statement (the "Exchange Offer Registration Statement") containing this
prospectus with respect to an offer to exchange (the "Exchange Offer") the notes
for new notes with identical terms (the "Exchange Notes"). Also, the Company
agreed to use reasonable best efforts to file with the Commission a shelf
registration statement to cover resales of the Registrable Notes:
- if the Company is not permitted to effect the Exchange Offer because of
any changes in law, Commission rules or regulations or applicable
interpretations thereof by the staff of the Commission;
- if for any other reason the Exchange Offer Registration Statement is not
declared effective within 150 days following the original issue of the
notes or the Exchange Offer is not consummated within 180 days after the
original issue of the notes;
- upon the request of any initial purchaser with respect to notes 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
- if a holder is not permitted to participate in the Exchange Offer or does
not receive fully tradeable Exchange Notes in the Exchange Offer if the
prospectus included in the Exchange Offer Registration Statement is not
available for resales.
The Exchange Offer Registration Statement in which this prospectus is
included has been declared effective. Assuming that the Exchange Offer is
consummated as contemplated in this prospectus, the Company will have satisfied
its obligations under the registration rights agreement except with respect to a
possible shelf registration statement as described herein.
For purposes of the foregoing, "Registrable Notes" means each note until:
- a registration statement with respect to such note shall have been
declared effective under the Securities Act and such note shall have been
disposed of under such registration statement;
- such note is sold to the public under Rule 144 (or any similar provision
then in force, but not Rule 144A) under the Securities Act;
- such note shall have ceased to be outstanding; or
- the Exchange Offer is consummated (except in the case of notes purchased
from us and continued to be held by the initial purchasers).
Under existing Commission interpretations, the Exchange Notes would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act. However, in the case of broker-dealers
participating in the Exchange Offer, the broker-dealers must deliver a
prospectus meeting the requirements of the Securities Act in connection with
resales of the Exchange Notes. We have agreed to provide each broker-dealer who
gives certain notice to the Company with as many copies of this prospectus (and
any amendment or supplement thereto) as they may reasonably request. A
broker-dealer that delivers the prospectus to purchasers in connection with
these resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Rights Agreement (including certain indemnification rights and obligations).
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Each holder of notes that wishes to exchange such notes for Exchange Notes
in the Exchange Offer will be required to make representations, including among
other things, that it:
- is not an "affiliate" within the meaning of Rule 405 under the Securities
Act,
- is not a broker-dealer tendering Registrable Notes acquired directly from
us for its own account,
- acquired the Exchange Notes in the ordinary course of business, and
- has no arrangements or understandings with any person to participate in
the Exchange Offer for the purpose of distributing the Exchange Notes.
If it is not a broker-dealer, it will be required to represent that it is
not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for notes that were acquired as a result
of market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and delivering a prospectus,
it will not be deemed to admit that it is an underwriter within the meaning of
the Securities Act.
We have agreed to pay all expenses incident to the Exchange Offer and will
indemnify the Initial Purchasers against certain liabilities, including
liabilities under the Securities Act.
The registration rights agreement provides that unless the Exchange Offer
would not be permitted by applicable law or Commission policy, we will use
reasonable best efforts to:
- file the Exchange Offer Registration Statement with the Commission on or
prior to 75 days after the original issue of the notes,
- cause the Exchange Offer Registration Statement to be declared effective
by the Commission on or prior to 150 days after the date of original issue
of the notes, and
- promptly commence the Exchange Offer upon the effectiveness of the
Exchange Offer Registration Statement and consummate the Exchange Offer
within 180 days after the date of original issue of the notes.
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 sells 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 is not filed with the Commission
on or prior to the 75(th) 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 150(th) calendar day following the date of original
issue of the notes, or
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- the Exchange Offer is not consummated on or prior to the 180(th) 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.
If the shelf registration statement is unusable by the holders of notes for
any reason for more than 30 days in any consecutive twelve-month period, then
the interest rate borne by the notes will be increased by 0.25% per annum for
the first 90-day period (or portion thereof) beginning on the 31(st) day that
the shelf registration statement is unusable. The rate will increase by an
additional 0.25% per annum at the beginning of each subsequent 90-day period, up
to a maximum increase of 1.00% per annum. The interest will be computed based on
the actual number of days elapsed in each 90-day period in which the shelf
registration statement is unusable. These amounts are also deemed "Additional
Interest." Upon the shelf registration statement once again becoming usable, the
interest rate borne by the notes will be reduced to the original interest rate.
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
SCOPE OF DISCUSSION
This general discussion of certain United States federal income tax
consequences of the exchange of old notes for exchange notes pursuant to the
exchange offer applies to you if you acquired old notes at original issue for
cash and hold the old notes as a "capital asset," generally, for investment,
under Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code"). This summary does not consider state, local or foreign tax laws. In
addition, it does not include all of the rules which may affect the United
States tax treatment of your exchange of old notes for exchange notes. For
example, special rules not discussed here may apply to you if you are:
- a broker-dealer, a dealer in securities, a trader in securities who elects
to apply a mark-to-market method of accounting or a financial institution;
- an S corporation;
- an insurance company;
- a tax-exempt organization;
- subject to the alternative minimum tax provisions of the Code;
- holding the notes as part of a hedge, straddle, conversion transaction or
other risk reduction or constructive sale transaction;
- holding the notes through a partnership; or
- an expatriate.
This discussion is based upon current United States federal tax law, which
is subject to change, possibly with retroactive effect.
THIS SUMMARY MAY NOT COVER YOUR PARTICULAR CIRCUMSTANCES BECAUSE IT DOES NOT
CONSIDER FOREIGN, STATE OR LOCAL TAX RULES, DISREGARDS CERTAIN SPECIAL FEDERAL
TAX RULES, AND DOES NOT DESCRIBE FUTURE CHANGES IN FEDERAL TAX RULES. PLEASE
CONSULT YOUR TAX ADVISOR RATHER THAN RELYING ON THIS GENERAL DESCRIPTION.
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The exchange of old notes for exchange notes pursuant to the exchange offer
will not be a taxable event. Your basis in the old notes will carry over to the
exchange notes received and your holding period of the exchange notes will
include your holding period of the old notes surrendered.
BOOK-ENTRY; DELIVERY AND FORM
The exchange notes will initially be represented by one or more permanent
global notes in definitive, fully registered book-entry form, without interest
coupons that will be deposited with, or on behalf of, DTC and registered in the
name of Cede and Co., as custodian for DTC, on behalf of the acquirors of
exchange notes for credit to the accounts of the acquirors or to other accounts
as they may direct at DTC.
The global notes may be transferred, in whole and not in part, solely to
another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the global notes may not be exchanged for exchange notes in
physical, certificated form except in the limited circumstances described below.
BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The description of the operations and procedures of DTC set forth below are
provided as a matter of convenience. These operations and procedures are solely
within the control of the settlement systems and are subject to change by them
from time to time. We take no responsibility for these operations or procedures,
and you are urged to contact the relevant system or its participants directly to
discuss these matters.
DTC has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York,
- a "banking organization" within the meaning of the New York Banking Law,
- a member of the Federal Reserve System,
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended, and
- a "clearing agency" registered pursuant to Section 17A of the Exchange
Act.
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants, eliminating
the need for physical transfer and delivery of certificates. DTC's participants
include securities brokers and dealers, including the initial purchasers in the
private offering of the old notes, banks and trust companies, clearing
corporations and similar organizations. Indirect access to DTC's system is also
available to indirect participants, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Investors who are not participants
may beneficially own securities held by or on behalf of DTC only through
participants or indirect participants.
We expect that pursuant to procedures established by DTC, ownership of the
exchange notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC, with respect to the interests
of participants, and the records of participants and the indirect participants,
with respect to the interests of persons other than participants.
The laws of some jurisdictions may require that purchasers of securities
take physical delivery of purchased securities in definitive form. Accordingly,
the ability to transfer interests in the exchange notes represented by a global
note to those persons may be limited. In addition, because DTC can act only on
behalf of its participants, who in turn act on behalf of persons who hold
interests through participants, the ability of a person having an interest in
exchange notes represented by a global note to pledge or transfer that interest
to persons or entities that do not participate in DTC's system, or to otherwise
take actions in
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respect of that interest, may be affected by the lack of a physical definitive
security in respect of that interest.
So long as DTC or its nominee is the registered owner of a global note, DTC
or its nominee will be considered the sole owner or holder of the exchange notes
represented by the global note for all purposes under the indenture. Except as
provided below, owners of beneficial interests in a global note will not be
entitled to have exchange notes represented by that global note registered in
their names, will not receive or be entitled to receive physical delivery of
certificated exchange notes and will not be considered the owners or holders
thereof under the indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the trustee. Accordingly,
each holder owning a beneficial interest in a global note must rely on the
procedures of DTC and, if the holder is not a participant or an indirect
participant, on the procedures of the participant through which the holder owns
its interest, to exercise any rights of a holder of exchange notes under the
indenture or the global note. We understand that under existing industry
practice, in the event that we request any action of holders of exchange notes,
or a holder that is an owner of a beneficial interest in a global note desires
to take any action that DTC, as the holder of that global note, is entitled to
take, DTC would authorize the participants to take that action and the
participants would authorize holders owning through the participants to take
that action or would otherwise act upon the instruction of the holders. Neither
we nor the trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of exchange notes by DTC, or
for maintaining, supervising or reviewing any records of DTC relating to
exchange notes.
Payments with respect to the principal of, and premium, if any, liquidated
damages, if any, and interest on, any exchange notes represented by a global
note registered in the name of DTC or its nominee on the applicable record date
will be payable by the trustee to or at the direction of DTC or its nominee in
its capacity as the registered holder of the global note representing the
exchange notes under the indenture. Under the terms of that indenture, we and
the trustee may treat the persons in whose names the exchange notes, including
the global notes, are registered as the owners thereof for the purpose of
receiving payment thereon and for any and all other purposes whatsoever.
Accordingly, neither we nor the trustee has or will have any responsibility or
liability for the payment of these amounts to owners of beneficial interests in
a global note, including principal, premium, if any, liquidated damages, if any,
and interest. Payments by the participants and the indirect participants to the
owners of beneficial interests in a global note will be governed by standing
instructions and customary industry practice and will be the responsibility of
the participants or the indirect participants and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
CERTIFICATED EXCHANGE NOTES
Interests in a global note will be exchanged for certificated securities if:
- DTC notifies us that it is unwilling or unable to continue as depositary
for the global notes, or DTC ceases to be a "Clearing Agency" registered
under the Exchange Act, and a successor depositary is not appointed by us
within 40 days; or
- an Event of Default has occurred and is continuing and the registrar has
received a request from DTC.
Upon the occurrence of any of the events described in the preceding sentence, we
will cause the appropriate certificated securities to be delivered to each
person that DTC identifies as the beneficial owner of the exchange notes
represented by the global notes. Upon that issuance, the trustee is required to
register the certificated exchange notes in the name of that person, or the
nominee of any thereof, and cause the same to be delivered to that person. In
addition, if required to do so pursuant to any applicable law or regulation,
beneficial owners may obtain certificated securities in exchange for their
beneficial interests in a global note upon written request in accordance with
the Depositary's and Citibank, N.A.'s procedures.
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Neither we nor the trustee shall be liable for any delay by DTC or any
participant or indirect participant in identifying the beneficial owners of the
related exchange notes, and each beneficial owner of exchange debentures may
conclusively rely on, and shall be protected in relying on, instructions from
DTC for all purposes, including with respect to the registration and delivery,
and the respective principal amounts, of the exchange notes to be issued.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the exchange
notes. This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of exchange notes
received in exchange for old notes where the old notes were acquired as a result
of market-making activities or other trading activities. We have agreed to
provide each broker-dealer who gives certain notice to the Company with as many
copies of this prospectus (and any amendment or supplement thereto) as they may
reasonably request.
We will not receive any proceeds from any sales of the exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of methods of
resale, at market prices prevailing at the time of resale, at prices related to
those prevailing market prices or at negotiated prices. Any resale may be made
directly to the purchaser or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from the broker-dealer
and/or the purchasers of the exchange notes. Any broker-dealer that holds the
old notes 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 notes to be received by such
broker-dealer in the exchange offer, any broker-dealer that resells the exchange
notes that were received by it for its own account pursuant to the exchange
offer and any broker or dealer that participates in a distribution of the
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any resale of exchange notes and any
commissions or concessions received by any of those persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We have agreed to pay the expenses incident to the exchange offer, other
than commission or concessions of any brokers or dealers and the fees of any
counsel or other advisors or experts retained by the holders of old notes, and
will indemnify the holders of the exchange notes (including any broker-dealers)
against related liabilities, including liabilities under the Securities Act.
AVAILABLE INFORMATION
We are subject to the periodic reporting and other financial requirements of
the Exchange Act, and, in accordance with the Exchange Act, we file reports and
other information with the Commission. These reports and other information filed
with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at its regional offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13(th)
Floor, New York, New York 10048. Copies of this material can be obtained from
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates and may also be accessed
electronically by means of the Commission's website at http://www.sec.gov. These
materials can also be inspected at the offices of the New York Stock Exchange
(the "NYSE"), 20 Broad Street, New York, New York 10005. We will provide without
charge, upon the written request of a holder of a note or a prospective investor
in a note or beneficial interest designated by
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such holder, a copy of the information required by Rule 144A(d)(4) under the
Securities Act to enable resales of the notes to be made pursuant to Rule 144A.
Written requests for this information should be addressed to Crompton
Corporation, One American Lane, Greenwich, CT 06831-2559, Attention: Corporate
Secretary. Our telephone number is (203) 552-2000.
EXPERTS
The consolidated financial statements and schedule of the Company as of
December 31, 1999, and December 26, 1998, and for each of the years in the
three-year period ended December 31, 1999, have been incorporated by reference
herein in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
VALIDITY OF THE EXCHANGE NOTES
The validity of the notes we are offering and various other legal matters in
connection with the offering are being passed upon for us by John T. Ferguson
II, Esq., Senior Vice President and General Counsel.
DOCUMENTS INCORPORATED BY REFERENCE
We hereby incorporate by reference in this prospectus our Annual Report on
Form 10-K for the fiscal year ended December 31, 1999.
In addition, all documents filed by us pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this prospectus and prior
to the expiration date are deemed to be incorporated by reference into this
prospectus and to be a part of this prospectus from the date of filing of those
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this prospectus modifies
or supersedes the statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
We will provide, without charge, to each person to whom this prospectus has
been delivered, a copy of any or all of the documents referred to above which
have been or may be incorporated by reference into those documents, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in this prospectus). Requests for these copies should be directed
to Crompton Corporation, One American Lane, Greenwich, CT 06831-2559, Attention:
Corporate Secretary, telephone number (203) 552-2000.
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