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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 Commission file number 1-496
HERCULES INCORPORATED
A DELAWARE CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 51-0023450
HERCULES PLAZA
1313 NORTH MARKET STREET
WILMINGTON, DELAWARE 19894-0001
TELEPHONE: 302-594-5000
Securities registered pursuant to Section 12(b) of the Act
(Each class is registered on the New York Stock Exchange, Inc.)
Title of each class
Common Stock ($25/48 Stated Value)
6-1/2% Convertible Subordinated Debentures due June 30, 1999
8% Convertible Subordinated Debentures due August 15, 2010
9.42% Trust Originated Preferred Securities ($25 liquidation amount),
issued by Hercules Trust I and guaranteed by Hercules Incorporated
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
As of March 1, 1999, registrant had outstanding 100,820,245 shares of
common stock, $25/48 stated value ("Common Stock"), which is registrant's only
class of common stock.
The aggregate market value of registrant's Common Stock held by
non-affiliates based on the closing price on March 1, 1999 was approximately
$3.0 billion.
DOCUMENTS INCORPORATED BY REFERENCE
(SPECIFIC PAGES INCORPORATED ARE IDENTIFIED UNDER THE APPLICABLE ITEM HEREIN.)
Portions of the registrant's definitive Proxy Statement dated March 19, 1999
(the "Proxy Statement") are incorporated by reference in Part III of this
Report. Other documents incorporated by reference in this report
are listed in the Exhibit Index.
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PART I
ITEM 1. BUSINESS:
Hercules Incorporated ("Hercules" or the "company") is a diversified,
worldwide producer of chemicals and related products. The company was
incorporated in Delaware in 1912. During 1998, Hercules made five major
acquisitions with combined annual revenues of approximately $1,600 million. The
largest of these was BetzDearborn Inc., a global specialty chemical company
providing water and process treatment to a variety of commercial and industrial
processes. This acquisition not only adds a new franchise to Hercules'
portfolio, it transforms Hercules' paper chemicals business into a full service
provider to the pulp and paper industry. BetzDearborn's 1997 reported revenues
were $1,295 million. This business is included in the Process Chemicals and
Services segment. The other four acquisitions and the segments in which they are
reported are as follows: Houghton International's paper chemicals group (Process
Chemicals and Services); Citrus Colloids, a pectin manufacturer (Functional
Products); Alliance Technical Products, a manufacturer of resins serving the
water-based adhesives industry (Chemical Specialties); and the 49% share of
FiberVisions owned by Hercules' joint venture partner, making it a wholly owned
subsidiary of Hercules. This business is the world's largest producer of
thermal-bond fiber for disposable diapers and other hygienic products and is
included in the Chemical Specialties segment. In 1997, the company joint
ventured this business and retained a 51% ownership interest. The joint venture
was accounted for under the equity method. Hercules divested its Composite
Products Division (which produced graphite fiber) in 1996 and its Aerospace and
Electronics and Printing businesses in 1995. Accordingly, information related to
divested businesses has been omitted in this Form 10-K, except where relevant.
REPORTABLE SEGMENTS
Hercules operates, both domestically and throughout the world, in three
reportable segments: Process Chemicals and Services, Functional Products, and
Chemical Specialties. The financial information regarding Hercules' segments,
which includes net sales and profit from operations for each of the three years
in the period ended December 31, 1998 and capital employed as of December 31,
1998, 1997, and 1996, is provided in Note 24 to the Consolidated Financial
Statements. See Part II, Item 8.
Information regarding principal products produced and sold by each segment
and principal markets served by each segment is presented in the columns so
designated in the segment table presented below. These products are sold
directly to customers from plants and warehouses, as well as being sold in some
cases (particularly in markets outside the United States) to and through
distributors.
<TABLE>
<CAPTION>
BUSINESS SEGMENTS PRINCIPAL PRODUCTS PRIMARY MARKETS
- ----------------- ------------------ ---------------
<S> <C> <C>
Process Chemicals and Services - Offerings designed to enhance customers' processes and improve their manufacturing costs or
environmental impact. On-site service is key to customer satisfaction. Low capital requirements.
Divisions:
Pulp and Paper Performance additives: Pulp and paper mills; makers of
Wet strength, dry strength, rosin size, tissue, towel, packaging, beverage
AKD/ASA size, surface size, dispersed size containers, newsprint, magazine and
book papers, printing and writing
paper, labels, envelopes, etc.
Water treatment:
Influent clarification/mill supply,
cooling towers, boiler systems,
wastewater systems
Process treatment:
Deposit control, biofouling control, foam
control, clarification, retention/drainage,
felt conditioning, deinking, fiber recovery,
water closure, crepe and release aids,
deposit removal
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS SEGMENTS PRINCIPAL PRODUCTS PRIMARY MARKETS
- ----------------- ------------------ ---------------
<S> <C> <C>
BetzDearborn Water treatment: Industrial, commercial, and
Influent water, boilers, cooling towers, institutional establishments
wastewater
Process treatment: Refineries, chemical plants,
Petroleum refining, chemical manufacturers of metals, automobile
processing, metals processing and assembly plants, makers of food and
finishing, automotive manufacturing, beverage
food and beverage processing, sugar
and alcohol production, mineral processing
Functional Products - Products valued for the characteristics they bring to customer formulations. Key raw materials derived
from biomass. Capital-intensive businesses.
Divisions:
Aqualon Water-soluble polymers: Manufacturers of interior and
- Hydroxyethylcellulose (HEC) exterior water-based paints.
- Carboxymethylcellulose (CMC) Oilfield service companies for oil
- Methylcellulose (MC) and gas exploration. Paper mills.
- Hydroxypropylcellulose (HPC) Pharmaceutical companies. Makers of
oral hygiene products, cosmetics,
Solvent-soluble polymers: dairy and bakery products, building
- Nitrocellulose (NC) materials, furniture lacquer,
- Pentaerythritol (PE) printing inks, and aviation fluids
Food Gums Pectin for jams and jellies, yogurt fruit Multinational and regional food
preparations, confectionery, dairy processors located in 110 countries
applications, bakery products, of the world
low-fat/no-fat foods
Carrageenan for dairy, meat, poultry, and
fish products, bakery glazings, toothpaste
Agar for confectionery gels, icings,
biological media
Chemical Specialties - Provides low-cost, technology-driven solutions to meet customer needs and market demands.
Capital-intensive businesses.
Divisions:
FiberVisions Polypropylene and polyethylene Makers of disposable diapers, adult
monocomponent fibers and bicomponent incontinence products, feminine care
(PE/PP) fibers for disposable hygiene products, upholstered fabrics,
products automotive textiles, agricultural
fabrics
Textile fibers for automotive, decorative,
industrial applications
Resins Rosin resins from wood, gum, and tall oil Makers of such consumer and
for adhesives, food, rubber, plastics industrial products as adhesives for
nonwoven fabrics, textile fibers, and
Hydrocarbon resins for adhesives, graphic other materials; masking, packaging,
arts and duct tape; construction
materials; beverages; chewing gum;
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS SEGMENTS PRINCIPAL PRODUCTS PRIMARY MARKETS
- ----------------- ------------------ ---------------
<S> <C> <C>
Terpene resins for chewing gum, adhesives; wire and cables; plastics; fragrance
terpene specialties for flavor, fragrance, and flavors; printing inks; copier
household products toner
Peroxides for wire and cable insulation,
plastics, rubber
</TABLE>
Results of divested businesses (where applicable) are included in
"reconciling items" for segment financial reporting.
In general, Hercules does not produce against a backlog of firm orders;
production is geared primarily to the level of incoming orders and the
projections of future demand. Inventories of finished products, work in process,
and raw materials are maintained to meet delivery requirements of customers and
Hercules' production schedules.
The businesses of each of the segments are not seasonal to any significant
extent.
RAW MATERIALS AND ENERGY
Raw materials and supplies are purchased from a variety of industry
sources, including agricultural, forestry, mining, petroleum, and chemical
industries.
Important raw materials for the Process Chemicals and Services segment are
cationic and anionic polyacrylamides and emulsions, biocides, amines,
surfactants, rosin, adipic acid, epichlorohydrin, fumaric acid, stearic acid,
diethylenetriamine, phosphorus trichloride, wax and starch.
Raw materials important to the Functional Products segment are
acetaldehyde, fatty acids, chemical cotton, woodpulp, ethyl chloride, alcohols,
chlorine, ethylene oxide, propylene oxide, monochloroacetic acid, methyl
chloride, caustic, inorganic acids, fruit and floral extracts, guar splits,
seaweed, terpenes, and citrus peel.
The important raw materials for the Chemical Specialties segment are
ketones, alcohols, phenol, adipic acid, epichlorohydrin, fumaric acid, stearic
acid, diethylenetriamine, phosphorus trichloride, wax, casein, starch, pigments,
antioxidants, d-limonene, turpentine, crude tall oil, rosin, pine wood stumps,
aromatic and aliphatic resin formers, cumene, catalysts, pure monomers, toluene,
clay, process oils, and polypropylene resin.
Major requirements for key raw materials and fuels are typically purchased
pursuant to multi-year contracts. Hercules is not dependent on any one supplier
for a material amount of its raw material or fuel requirements, but certain
important raw materials are obtained from sole-source or a few major suppliers.
While temporary shortages of raw materials and fuels may occur
occasionally, these items are currently readily available. However, their
continuing availability and price are subject to domestic and world market and
political conditions as well as to the direct or indirect effect of United
States Government regulations. The impact of any future raw material and energy
shortages on Hercules' business as a whole or in specific world areas cannot be
accurately predicted. Operations and products may, at times, be adversely
affected by legislation, shortages or international or domestic events.
COMPETITION
Hercules encounters substantial competition in each of its three segments.
This competition, from other manufacturers of the same products and from
manufacturers of different products designed for the same uses, is expected to
continue in both the United States and markets outside the United States. Some
of Hercules' competitors, such as companies engaged in petroleum operations,
have more direct access to raw materials, and some have greater financial
resources than Hercules.
The number of Hercules' principal competitors varies from product to product. It
is not practicable to estimate the number of all competitors because of the
large variety of Hercules' products, the markets served and the worldwide
business interests of Hercules.
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PATENTS AND TRADEMARKS
Patents covering a variety of products and processes have been issued to
Hercules and its assignees. In addition, Hercules is licensed under certain
other patents covering its products and processes. Taken as a whole, the rights
of Hercules under these patents and licenses, which expire from time to time,
are considered by Hercules to constitute a valuable asset. However, Hercules
does not consider any single patent or license, or any group thereof related to
a specific product or process, to be of material importance to its business as a
whole.
Hercules or its wholly owned subsidiaries also have registered trademarks
for a number of its products. Some of the more significant trademarks include:
AQUAPEL(R) sizing agent, HERCON(R) sizing emulsions, KYMENE(R) resin,
REGALREZ(R) resin, AQUALON(R) water-soluble polymers, SLENDID(R) fat replacer,
NATROSOL(R) hydroxyethylcellulose, CULMINAL(R) methylcellulose, KLUCEL(R)
hydroxypropylcellulose, NATROSOL FPS(R) water-soluble polymer suspension,
PRECIS(R) sizing agent, NOVUS(R) polymer, DIANODIC(R) cooling water products,
CONTINUUM(R) cooling water products, and Herculon(R) fiber.
RESEARCH AND DEVELOPMENT
Research and development, which is directed toward the discovery and
development of new products and processes, the improvement and refinement of
existing products and processes and development of new applications for existing
products, is primarily company-sponsored. Hercules spent $61 million on research
activities during 1998, as compared to $53 million in 1997 and $56 million in
1996.
ENVIRONMENTAL MATTERS
Hercules believes that it is in compliance in all material respects with
applicable federal, state, and local environmental laws and regulations.
Expenditures relating to environmental cleanup costs have not materially
affected, and are not expected to materially affect, capital expenditures or
competitive position. Additional information regarding environmental matters is
provided in Note 22 to the Consolidated Financial Statements.
EMPLOYEES
As of December 31, 1998, Hercules had 12,357 employees worldwide.
Approximately 7,249 were located in the United States, and of these employees
about 18% were represented by various local or national unions.
INTERNATIONAL OPERATIONS
Information on net sales and long-lived assets by geographic areas, for
each of the three years ended December 31, 1998, appears in Note 24 to the
Consolidated Financial Statements. Direct export sales from the United States to
unaffiliated customers were $319 million, $309 million, and $295 million for
1998, 1997, and 1996, respectively. Hercules' operations outside the United
States are subject to the usual risks and limitations related to investments in
foreign countries, such as fluctuations in currency values, exchange control
regulations, wage and price controls, employment regulations, effects of foreign
investment laws, governmental instability (including expropriation or
confiscation of assets) and other potentially detrimental domestic and foreign
governmental policies affecting United States companies doing business abroad.
ITEM 2. PROPERTIES:
The company's corporate headquarters and major research center are located
in Wilmington, Delaware. In addition, the administrative headquarters of the
BetzDearborn Division is located in Trevose, Pennsylvania. Information as to
Hercules' principal manufacturing facilities and the segment served by each is
presented below.
All principal properties are owned by Hercules, except for the company's
corporate headquarters, which is leased.
The following are Hercules' major worldwide plants:
Process Chemicals and Services - Aberdeen, Scotland; Addison, Illinois;
Bakersfield, California; Beaumont, Texas; Beringen, Belgium; Bogota,
Colombia; Buenos Aires, Argentina; Burlington, Ontario, Canada; Busnago,
Italy; Chicopee, Massachusetts; Crissey, France; Edmonton, Alberta, Canada;
Ferentino, Italy; Franklin, Virginia; Garland, Texas; Hattiesburg,
Mississippi; Helsingborg, Sweden; Herentals, Belgium; Houston, Texas; Hsin
Chu Hsien, Taiwan; Iksan City, Korea; Ingleburn, Australia; Jurong Town,
Singapore; Kalamazoo, Michigan; Kilafors, Sweden; Kim Cheon, Korea;
Langhorne, Pennsylvania; Lilla Edet, Sweden; Macon,
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Georgia; Mexico City, Mexico; Milwaukee, Wisconsin; Mississauga, Ontario,
Canada; Nantou, Taiwan; New Philadelphia, Ohio; Orange, Texas; Pandaan,
Indonesia; Paulinia, Brazil; Pendlebury, England; Point-Claire, Quebec,
Canada; Portland, Oregon; Qualiano, Italy; Reserve, Louisiana; Sandarne,
Sweden; Santiago, Chile; Savannah, Georgia; Shanghai, China ; Sobernheim,
Germany; Sorocaba, Brazil; St.-Jean, Quebec, Canada; Tampere, Finland;
Tarragona, Spain; Traun, Austria; Valencia, Venezuela; Voreppe, France;
Washougal, Washington; Widnes, United Kingdom; Zwijndrecht, the
Netherlands.
Functional Products -. Alizay, France; Cebu, the Philippines ; Doel,
Belgium; Grossenbrode, Germany; Hopewell, Virginia; Kenedy, Texas; La
Calera, Chile; Lille Skensved, Denmark; Limeira, Brazil; Louisiana,
Missouri; Parlin, New Jersey; Zwijndrecht, the Netherlands. Chemical
Specialties - Athens, Georgia; Beringen, Belgium; Brunswick, Georgia;
Burlington, Ontario, Canada; Covington, Georgia; Franklin, Virginia;
Gibbstown, New Jersey; Hattiesburg, Mississippi; Jefferson, Pennsylvania;
Middelburg, the Netherlands; Portland, Oregon; San Juan del Rio, Mexico;
Savannah, Georgia; Suzhou, China; Tokushima, Japan; Uruapan, Mexico; Varde,
Denmark.
Hercules plants and facilities, which are continually added to and
modernized, are generally considered to be in good condition and adequate for
business operations. From time to time Hercules discontinues operations at, or
disposes of, facilities that have for one reason or another become unsuitable.
ITEM 3. LEGAL PROCEEDINGS:
In September 1993, Hercules and the U.S. Environmental Protection Agency
(EPA) Region 1 reached an agreement in principle in settlement of the EPA's
claims that Hercules violated its wastewater permit with the City of Chicopee
and the Federal pretreatment standard for industrial users of publicly owned
treatment works at its Chicopee, Massachusetts facility. Hercules signed a
Consent Decree, which was entered by the court on December 15, 1994, based on
this agreement, requiring supplemental environmental projects (at a cost of
approximately $375,000), compliance with permit limits in the future, and
$250,000 in fines. Hercules has paid the $250,000 fine and has completed
performance of the supplemental environmental projects. On March 26, 1998, the
Court granted its approval for the termination of the Consent Decree.
In December 1997, Hercules received notice of an enforcement action by the
State of Georgia, Environmental Protection Department (EPD). In the notice, EPD
requested that Hercules enter into a proposed Consent Order, alleged violations
of the Resource Conservation and Recovery Act (RCRA) and sought a civil penalty
of $250,000. Hercules, without admitting liability, has entered into a Consent
Order with the State of Georgia settling these claims. The Consent Order was
finalized and became effective in January 1999. The consent Order requires
Hercules to pay a fine of $80,000, install 3 aquaria in the Brunswick, Georgia
community, maintain the aquaria for 10 years and remediate certain soils that
are located at Hercules Brunswick, Georgia plant.
Environmental
Hercules has been identified as a potentially responsible party (PRP)
by U.S. federal and state authorities, or has been sued for contribution by
private parties, for the cost of environmental investigation and/or cleanup at
numerous sites. The estimated range of the reasonably possible share of costs
for investigation and cleanup is between $63 million and $199 million. The
actual costs will depend upon numerous factors, including the number of parties
found responsible at each environmental site and their ability to pay, the
actual methods of remediation, outcomes of negotiations with regulatory
authorities, outcomes of litigation, changes in environmental laws and
regulations, technological developments, and the years of remedial activity
required, which could range up to 30 years.
In 1992, Hercules brought suit against its insurance carriers for past
and future costs for cleanup of certain environmental sites. In April 1998, the
trial regarding insurance recovery for the Jacksonville, Arkansas site (see
discussion below) was completed. The jury returned a "Special Verdict Form" with
findings that will, in conjunction with the Court's other opinions, be used by
the Court to enter a judgment. The judgment will determine the amount of
Hercules recovery for past cleanup expenditures and will state that Hercules is
entitled to similar coverage for costs incurred since September 30, 1997 and in
the future. Hercules has not included any insurance recovery in the estimates
above.
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Hercules becomes aware of sites in which it may be, but has not yet
been named a PRP, principally through its knowledge of investigation of sites by
the U.S. Environmental Protection Agency (EPA) or other government agencies or
through correspondence with previously named PRPs requesting information on
Hercules' activities at sites under investigation. In addition, Hercules has
established procedures for identifying environmental issues at its respective
plant sites. Environmental coordinators, familiar with environmental laws and
regulations, are resources for identification of environmental issues. Further,
Hercules has environmental audit programs, which are designed to identify
environmental issues at operating plant sites. Through these programs and
information-gathering activities, Hercules identifies potential environmental,
regulatory, and remedial issues.
Litigation over liability at Jacksonville, Arkansas, the most
significant site, has been pending since 1980. As a result of a pretrial Court
ruling in October 1993, Hercules has been held jointly and severally liable for
costs incurred, and for future remediation costs, at the Jacksonville site by
the District Court, Eastern District of Arkansas (the Court).
Other defendants in this litigation have either settled with the
government or, in the case of the Department of Defense (DOD), have not been
held liable. Hercules appealed the Court's order finding the DOD not liable. On
January 31, 1995, the 8th Circuit Court of Appeals upheld the Court's order.
Hercules filed a petition to the U.S. Supreme Court requesting review and
reversal of the 8th Circuit Court ruling. This petition was denied on June 26,
1995, and the case was remanded to the District Court for further proceedings.
On May 21, 1997, the Court issued a ruling that Uniroyal is liable and
that Standard Chlorine is not liable to Hercules for contribution. A trial on
allocation and damages among Hercules, Uniroyal, and the United States was
scheduled to begin October 1998. Through the filing of separate summary judgment
motions, Hercules and Uniroyal raised a number of defenses to the United States'
ability to recover its costs. On October 23, 1998, the Court denied those
motions and granted the United States' summary judgment motion, ordering
Hercules and Uniroyal to pay the United States approximately $103 million plus
any additional response costs incurred or to be incurred after July 31, 1997.
Hercules expects that this amount will be reduced by approximately $7 million,
the amount received by the United States in previous settlements with other
parties. Trial testimony on the issue of allocation between Hercules and
Uniroyal was completed on November 6, 1998. Once a final judgment has been
entered, Hercules expects to appeal the Court's determination with respect to
its liability, the United States' costs, the divisibility of harm issue, and
Standard Chlorine's liability.
At December 31, 1998, the accrued liability for environmental
remediation represents management's best estimate of the probable and reasonably
estimable costs related to environmental remediation. The extent of liability is
evaluated quarterly. The measurement of the liability is evaluated based on
currently available information, including the process of remedial
investigations at each site and the current status of negotiations with
regulatory authorities regarding the method and extent of apportionment of costs
among other PRPs. Hercules does not anticipate that its financial condition will
be materially affected by environmental remediation costs in excess of amounts
accrued, although quarterly or annual operating results could be materially
affected.
Litigation
The company is a defendant in numerous lawsuits that arise out of, and
are incidental to, the conduct of its business. In these legal proceedings, no
specifically identified director, officer, or affiliate is a party or a named
defendant. These suits concern issues such as product liability, contract
disputes, labor-related matters, patent infringement, environmental proceedings,
property damage, and personal injury matters.
Hercules was a defendant in three Qui Tam (Whistle Blower) lawsuits in
the U.S. District Court for the Central District of Utah, brought by former
employees of the Aerospace business sold to Alliant Techsystems Inc. in March
1995. The first suit (United States of America ex. rel, Katherine A. Colunga v.
Hercules Incorporated, et al., Civil No. 89-C-954B), involved allegations
relating to submission of false claims and records under various government
contracts, delivery of defective products, a deficient quality control program,
and wrongful termination claims. The second suit (United States of America ex.
rel. Benny Hullinger, et al., Civil No. 92-CV-085) involved allegations relating
to submission of false claims and records, mischarging of work performed under
government contracts, misuse of government equipment, other acts of financial
mismanagement, and wrongful termination claims. The government, after
investigation of the allegations, declined to intervene in either lawsuit. (A
third Qui Tam lawsuit is described in the following paragraph.) The first
lawsuit was previously scheduled for trial in June 1998. The Court denied
various motions filed by Hercules, including motions for summary judgment and
other
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motions designed to limit the scope of the trial and the extent of damages
claimed. If any damages had been awarded by the jury under the False Claims Act,
such damages would have been automatically tripled by the Court, and attorneys'
fees and costs would also have been added. As a result of the Court's denial of
Hercules' motions, and the Court's position as to how the relevant contracts
should be interpreted, which position was adverse to Hercules, damage claims
could have been presented to the jury in amounts which, if awarded, would have
had a material adverse effect on Hercules. The damages in the second suit were
not defined. In May 1998, Hercules announced that it had agreed to settle the
first lawsuit. Under the terms of the settlement, Hercules was obligated to pay
$36 million to settle the case, plus another $19 million to cover the
plaintiff's attorneys fees, expenses, and costs. Hercules believed no damages
were incurred by the government, no false claims were made to the government,
and alleged damages were speculative and unsupportable. However, because of the
mounting legal costs, the prospect of treble damages, uncertainty present in any
litigation, and to avoid the major costs of a lengthy trial and subsequent
appeal by the losing party, management determined that the settlement was in the
best interest of Hercules' shareholders. The settlement was approved by the
Court and the case was dismissed in July 1998. In August 1998, the parties to
the second lawsuit reached a tentative settlement, subject to approval of the
Court. Although it did not intervene in the case, the U.S. Department of Justice
(DOJ) objected to approval of the tentative settlement, arguing that Hercules
should only be released from claims that the government contended were actually
investigated, and that the proposed allocation of settlement proceeds between
False Claims Act claims and wrongful termination claims should be revised to
attribute a higher percentage of recovery to claims arising under the False
Claims Act. On February 9, 1999, the Court entered a judgment approving the
settlement and dismissing the lawsuit. The DOJ has 60 days from that date in
which to file a Notice of Appeal, if it chooses to do so. The settlement was
recognized in the first quarter 1998.
In March 1995, Hercules sold its Aerospace business to Alliant
Techsystems, Inc. As part of the sale, Hercules received an ownership interest
in Alliant. In March 1997, Alliant and Hercules received a partially unsealed
complaint that named both as defendants, initiated on an unknown date, and filed
in an undisclosed federal Court, in a Qui Tam action by a former employee
alleging violations of the False Claims Act. The action was subsequently
identified as United States of America ex. rel. P. Robert Pratt v. Alliant
Techsystems, Inc and Hercules Incorporated, Civil No. 95-4812 SVW (JGx) in the
U.S. District Court for the Central District of California. The action alleged
labor mischarging at Alliant's Bacchus Works facility in Magna, Utah, and
contained a claim for wrongful termination. Damages were not specified, and
Alliant and Hercules agreed to share equally the cost of defense until such time
as a determination is made as to the applicability of the indemnification
provisions of the Purchase and Sale Agreement between Alliant and Hercules. In
February 1998, the parties reached a tentative settlement, which has since been
finalized, under which all claims alleging mischarging to the Intermediate
Nuclear Forces Contract were settled. The settlement was recognized in the
fourth quarter 1997. Other portions of the complaint, which included allegations
of mischarging to other government contracts and claims for wrongful termination
of employment were not resolved by the settlement. The government did not
intervene in these other matters. In August 1998, the parties reached a
tentative settlement of the remaining portions of the complaint, subject to
approval of the Court. The DOJ objected to approval of the tentative settlement,
arguing that Hercules should only be released from claims that the government
contended were actually investigated, and that the settlement agreement should
have contained certain provisions preventing Alliant from recovering certain
costs under its government contracts. On February 17, 1999, the Court entered a
judgment approving the settlement and dismissing the lawsuit. The DOJ has 60
days from that date in which to file a Notice of Appeal, if it chooses to do so.
The settlement was recognized in the first quarter 1998.
In addition to the Jacksonville, Arkansas, site litigation described
above, two individuals have sued Hercules in a lawsuit captioned Jeffrey
Shelton, Jr., et al. v. Hercules Incorporated, Civil No. LR-C-97-131 (E.D. Ark.
1997). These individuals seek medical monitoring and damages for loss of
recreational opportunities. They have brought a Resource Conservation and
Recovery Act (RCRA) citizens suit against Hercules seeking an injunction which
would require Hercules to fund or perform various environmental and health
studies and pay for any required remediation to the Bayou Meto. Trial is
presently scheduled for August 1999. Further, 19 individuals have sued Hercules
in a matter entitled Gary Graham, et al. v. Vertac Chemical Corporation and
Hercules Incorporated, No. LR-C-98-678 (E.D. Ark. 1998). These individuals seek
damages for personal injuries and diminution of property value as a result of
alleged dioxin contamination from the Jacksonville site. Trial is presently
scheduled for August 1999. Hercules denies liability in both actions, and
Hercules intends to vigorously defend itself.
BetzDearborn, along with Pacific Gas and Electric (PG&E), is a
defendant in four lawsuits involving in the aggregate approximately 2,350
plaintiffs pending in the Superior Court of Los Angeles County, California (the
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Lawsuits). Plaintiffs are comprised primarily of present and former PG&E
employees, their families, and residents living in the vicinity of the three
PG&E facilities that are the subject of the Lawsuits. Plaintiffs seek
unspecified monetary damages (including punitive damages) for personal injuries
arising from alleged exposures to chromate-based products sold or allegedly sold
by Betz Laboratories, Inc. (predecessor to BetzDearborn) to PG&E for use in the
cooling towers located at these facilities. The sales in question occurred or
allegedly occurred at various times between 1952 and the mid-1980s, depending
upon the facility. In the Acosta, Aguilar, and Aguayo cases, the parties have
selected 20 plaintiffs and 2 alternates whose claims will be tried together, and
prior to the claims for the remaining plaintiffs in the Lawsuits. It is
anticipated that the 20 plaintiffs' claims will be tried in late 1999.
BetzDearborn denies any legal liability to plaintiffs, believes it has
substantial defenses, and intends to contest the claims vigorously. BetzDearborn
further believes that any claim for punitive damages is without any legitimate
basis in fact or law. The Lawsuits are captioned as follows: Acosta, et al. v.
Betz Laboratories, et al., No. BC 161 669 (1996); Adams, et al. v. Betz
Laboratories, et al., No. BC 113 000 (1994); Aguilar, et al. v. Betz
Laboratories, et al., No. BC 158 588 (1996); and Aguayo et al. v. Betz
Laboratories, et al., No. BC 123 749 (1995).
Although both BetzDearborn and PG&E are named as defendants in each of
the Lawsuits, not all plaintiffs seek damages from both defendants. PG&E
previously settled a lawsuit brought by many of the same individuals who are
plaintiffs in the Adams lawsuit; as a result, PG&E will have no additional
liability to those plaintiffs.
In October 1998, BetzDearborn and PG&E settled a fifth lawsuit relating
to alleged exposure to chromate-based products sold or allegedly sold by Betz
Laboratories, Inc. to PG&E for use in cooling towers at one or more of the PG&E
facilities. That lawsuit was captioned Riep, et al. v. Betz Laboratories, et
al., No. 984695 (San Francisco County, 1997). The amount of the settlement was
not material.
BetzDearborn maintained insurance coverage for the purpose of securing
protection against alleged product and other liabilities, and certain of the
insurance carriers have undertaken to pay the cost of the defense of the
Lawsuits subject to various reservations of rights. BetzDearborn will pursue all
available insurance coverage to fund any damages payable to plaintiffs in
connection with the Lawsuits (excluding any punitive damages to the extent not
recoverable under BetzDearborn's insurance policies).
While it is not feasible to predict the outcome of all pending suits
and claims, the ultimate resolution of these matters could have a material
effect upon the financial position of Hercules, and the resolution of any of the
matters during a specific period could have a material effect on the quarterly
or annual operating results for that period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
No matter was submitted to a vote of security holders during the fourth
quarter of 1998, through the solicitations of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS:
Hercules Incorporated common stock is listed on the New York Stock Exchange
(ticker symbol HPC), The Stock Exchange, London, and the Swiss Stock Exchanges.
It is also traded on the Philadelphia, Midwest, and Pacific Exchanges.
The approximate number of holders of record of common stock ($25/48 stated
value) as of February 24, 1999, was 19,039.
<TABLE>
<CAPTION>
Period High Low
------ ---- ---
<S> <C> <C>
1997
First Quarter............................................... 47 7/8 41 1/2
Second Quarter.............................................. 49 3/16 37 3/4
Third Quarter............................................... 54 1/2 47 7/8
Fourth Quarter.............................................. 50 3/4 41 9/16
1998
First Quarter............................................... 51 3/8 45 3/16
Second Quarter.............................................. 50 1/2 40 1/2
Third Quarter............................................... 41 1/4 24 5/8
Fourth Quarter.............................................. 35 1/2 24 15/16
</TABLE>
On December 31, 1998, the closing price of the common stock was 27 1/4.
The company has paid quarterly cash dividends as follows:
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1997 ................................. $0.25 $0.25 $0.25 $0.25
1998 ................................. $0.27 $0.27 $0.27 $0.27
</TABLE>
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<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA:
A summary of selected financial data for Hercules for the years and year
ends specified is set forth in the table below.
<TABLE>
<CAPTION>
(Dollars and shares in millions, except per share)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR 1998* 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $2,145 $1,866 $2,060 $2,427 $2,821
Profit from operations 192 228 441 363 419
Income before effect of change in
accounting principle 9 324 325 333 274
Net income 9 319 325 333 274
Dividends 104 98 95 95 89
Per share of common stock
Basic:
Earnings before effect of change in
accounting principle .10 3.27 3.10 2.98 2.32
Earnings .10 3.22 3.10 2.98 2.32
Diluted:
Earnings before effect of change in
accounting principle .10 3.18 2.98 2.87 2.23
Earnings .10 3.13 2.98 2.87 2.23
Dividends 1.08 1.00 .92 .84 .75
Total assets 5,833 2,411 2,386 2,493 2,941
Long-term debt 3,096 419 345 298 307
Company-obligated preferred securities of
subsidiary trust 200 -- -- -- --
</TABLE>
* 1998 includes significant acquisitions (see Notes 1 and 21.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
This discussion should be read in connection with the information contained in
the Consolidated Financial Statements and Notes thereto.
ACQUISITIONS, DIVESTITURES, AND ONE-TIME ITEMS
In 1998, Hercules made five major acquisitions for an aggregate purchase price
of approximately $3,620 million, primarily in cash and assumed debt. (See Note
1.) These acquisitions were accounted for on the purchase method of accounting,
resulting in $2,531 million of goodwill and other intangible assets, and were
financed with borrowed funds. Total debt increased by $2,968 million in the same
period.
The combined annual revenue of the acquired businesses is approximately $1,600
million. The largest of these acquisitions was the purchase of BetzDearborn
Inc., a global specialty chemical company providing water and process treatment
to a variety of commercial and industrial processes. BetzDearborn reported 1997
revenue of approximately $1,295 million. This acquisition not only adds a new
franchise to Hercules' portfolio, it transforms Hercules' paper chemicals
business into a full service provider to the pulp and paper industry.
Additionally, the company acquired Houghton International's paper chemicals
group; Citrus Colloids, a pectin manufacturer; Alliance Technical Products, a
manufacturer of resins serving the water-based adhesives industry; and the 49%
share of FiberVisions owned by Hercules' joint venture partner, making it a
wholly owned subsidiary of Hercules.
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<PAGE> 12
This business is the world's largest producer of thermal-bond fiber for
disposable diapers and other hygienic products.
The results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition. In 1998, these
businesses added $363 million and $41 million of revenue and operating profit,
respectively, after amortization of goodwill and intangible assets of $19
million, reflected in selling, general and administrative expenses. Interest and
debt expense increased significantly as a result of the increased debt.
Primarily as a result of the acquisitions, Hercules incurred charges of $232
million before taxes ($197 million net of income taxes) in the fourth quarter of
1998; $215 million is reflected in Profit from operations and $17 million is
reflected in Other income (expense). The largest portion of these charges is
$130 million for purchased in-process research and development related to the
acquisition of BetzDearborn. (See Note 14.) The remainder of the charges relates
to the company's plans and actions to integrate the operations of BetzDearborn
and improve the efficiencies of its existing operations and support activities.
Charges include employee termination benefits, exit costs related to facility
closures, write-downs of property, plant and equipment, integration expenses,
and contract terminations. (See Notes 15 and 17.) These actions are anticipated
to yield synergies of at least $125 million before taxes on an annual basis;
approximately half of these are expected to be realized by the end of 1999 and
the remainder by the end of 2000. Additional integration expenses are expected
to be incurred during 1999. Other income (expense) in 1998 also includes a $62
million charge from the settlements of long-standing "whistle-blower" lawsuits
related to the divested Aerospace business. (See Note 22.)
Other operating expenses in 1997 included charges of $167 million for asset
rationalizations and impairments, termination benefits primarily associated with
reorganization of management and the adoption of new competitive strategies, and
other costs. (See Note 15.) Additionally, Other income (expense) in 1997
reflects the following items: a $20 million charge related to acquisition
activity; a $32 million charge for legal settlements; and a $368 million gain
from the monetization of Hercules' investment in Tastemaker. (See Note 17.)
Profit from operations in 1996 included $13 million of probable environmental
recoveries, a $2 million favorable settlement of an environmental remediation
claim, and a $3 million favorable adjustment to spare parts inventories.
Hercules divested or joint ventured several businesses in 1996 and 1997.
Revenues and operating profits related to these businesses were $84 million and
$9 million, respectively, in 1997 and $286 million and $25 million,
respectively, in 1996.
SEGMENT REPORTING
In 1998, Hercules adopted Statement of Financial Accounting Standards (SFAS) No.
131, "Disclosures about Segments of an Enterprise and Related Information." (See
Note 24.) In compliance with SFAS 131 and as a result of the acquisition of
BetzDearborn, the company has identified three reportable segments and has
restated prior years to conform with the 1998 presentation. The three segments
are: Process Chemicals and Services, comprised of Pulp and Paper, and
BetzDearborn; Functional Products, comprised of Aqualon and Food Gums; and
Chemical Specialties, comprised of Resins and FiberVisions. Accordingly, the
segment comparisons provided herein are on the basis prescribed by this
standard.
RESULTS OF OPERATIONS
(All comparisons are with the previous year, unless otherwise stated.)
1998 vs. 1997:
Consolidated revenues increased $279 million or 15% as the increase in revenues
from acquisitions was partially offset by the effects of the economic crisis in
Southeast Asia, the strength of the U.S. dollar, and competitive pricing
pressures. Consolidated profit from operations declined $36 million or 16%.
However, after adjusting for the impact of the one-time items described in the
previous section, profit from operations increased $12 million or 3%, while
operating margins decreased from 21.2% in 1997 to 19.0% in 1998. These results
are due to the operating profit impact of the revenue variance noted above,
coupled with manufacturing cost improvement initiatives, partly offset by higher
selling, general, and administrative expenses.
Process Chemicals and Services segment revenues increased 62%, resulting from
acquisitions. Excluding acquisitions, revenues in this segment were negatively
impacted by competitive pricing pressures, the impact of
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<PAGE> 13
the economic crisis in Southeast Asia, and the weakness of foreign currencies
relative to the dollar. Profit from operations increased 31% as the favorable
impact of acquisitions was partly offset by the adverse revenue impacts
described above, higher raw material costs used in the production of wet
strength products in Europe, and higher selling, general, and administrative
expenses.
Functional Products segment revenues declined 4% on lower volumes, particularly
in Asia and Eastern Europe, and also the U.S. oilfield markets, along with the
negative impact of weaker foreign currencies relative to the dollar, partly
offset by acquired revenues and improved pectin pricing. Profit from operations
declined 4%. This was the result of improved manufacturing costs and pectin
pricing mitigating the volume declines and the negative impact of the weaker
foreign currencies noted above.
Chemical Specialties segment revenues increased 8% as the additional revenues
from acquisitions were partly offset by lower pricing across the major Resins
product lines both in the U.S. and in Europe. Profit from operations rose 12% as
the profit from acquisitions was partly offset by the pricing declines in
Resins.
1997 VS. 1996:
Consolidated revenues declined $194 million or 9%, primarily due to
divestitures, partly offset by generally higher volumes. Weaker foreign
currencies impacted consolidated sales $88 million, or 4%. Profit from
operations declined $213 million or 48%. Excluding divestitures and one-time
items described in the previous section, profit from operations decreased $12
million or 3%, on a comparable basis. Higher volumes and manufacturing cost
improvements were offset by weaker foreign currencies, which negatively impacted
consolidated profit from operations $19 million or 5%.
Process Chemicals and Services revenues decreased 2% as higher volume from
increased market share of wet strength products in Europe and in alkaline size
associated with stronger industry-wide operating rates were essentially offset
by regional competitive pricing pressure across all major product lines and
weaker foreign currencies relative to the dollar. Profit from operations
declined 7% primarily due to the effects of lower pricing, higher selling,
general, and administrative expense spending, along with the negative effect of
the weaker foreign currencies relative to the dollar. These negative impacts
were only partly offset by lower raw material costs in the production of
alkaline size and wet strength products and the beneficial impact of continuing
manufacturing cost improvement initiatives.
Functional Products revenues declined $26 million or 3% primarily due to the
divestiture of a business unit, generally softer pricing, and weaker foreign
currencies relative to the dollar. These declines were partly offset by higher
water-soluble polymers and food gums volumes in various applications. Profit
from operations increased $4 million or 2% as a result of the volume improvement
described above, along with manufacturing cost improvement initiatives partly
offset by the divested business.
Chemical Specialties revenues declined 17% primarily due to the formation of the
FiberVisions joint venture in June 1997, the divestiture of a business unit, and
weaker foreign currencies relative to the dollar, partly offset by Resins volume
improvements. Profit from operations decreased 29% primarily due to the
divestitures, higher manufacturing costs at several Resins plants resulting from
the introduction of new processes and operability issues, and the effect of the
weaker foreign currencies relative to the dollar.
Equity in income of affiliated companies declined in 1998 and in 1997 as a
result of the monetization of Hercules' investment in Alliant Techsystems in
1997 and 1998 and the monetization of Hercules' investment in Tastemaker in
1997. (See Note 21.)
The provision for income taxes reflects effective tax rates of 88% in 1998, 45%
in 1997 and 33% in 1996. Both the 1998 and 1997 rates are significantly higher
than the federal statutory income tax rate of 35%. The 1998 rate is high because
the charges for purchased in-process research and development and goodwill
amortization are not deductible for income tax purposes. The impact of these
nondeductible items was reduced by favorable state tax settlements relating to a
prior year's sale of an investment and favorable federal tax adjustments related
to prior years' assessments. The 1997 rate reflects the relatively higher tax
rate on the monetization of the Tastemaker and Alliant Techsystems investments,
along with required increases to tax reserves related to anticipated assessments
from federal, state, and foreign authorities. The 1996 rate was favorably
affected by tax loss carryforwards. The 1999 tax rate is anticipated to be
approximately 40%, reflecting the effects of the nondeductible goodwill.
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<PAGE> 14
FINANCIAL CONDITION
Liquidity and financial resources: Net cash flow from operations was $181
million in 1998, $187 million in 1997, and $225 million in 1996. 1998 included
higher interest payments related to increased debt and higher payments of legal
settlements, offset by lower income tax payments and cash flow from acquired
businesses. 1997 decreased primarily from lower trade payables, severance
payments, and higher legal and environmental spending, partially offset by lower
tax payments.
As noted above, during 1998, the company completed five acquisitions for
approximately $3.62 billion, primarily in cash and assumed debt. The company
financed the acquisitions and refinanced existing debt with borrowings under a
$3.65 billion credit facility with a syndicate of banks. Borrowings consisted of
three tranches of varying maturity term loans totaling $2.75 billion due in
various amounts through December 2003. The facility bears interest at London
Interbank Offered Rate (LIBOR) plus 2% and may decrease to LIBOR plus .75% after
six months if a $500 million term-loan tranche has been repaid. The credit
facility includes a $900 million revolving credit agreement. The company's debt
agreement contains restrictive covenants that require maintenance of certain
financial covenants, including leverage, net worth, and interest coverage, and
provides that the entry of a judgment or judgments involving aggregate
liabilities of $50 million or more be vacated, discharged, stayed, or bonded
within 60 days of entry of such judgment or judgments.
In September 1998, the company filed a shelf registration to increase accessible
securities from $300 million to $3.0 billion. The registration allows for
issuance of equity, equity-like, and debt securities. In November 1998, a wholly
owned subsidiary of the company completed a private placement of units
consisting of $200 million in Trust-preferred securities and a forward
underwriting contract to purchase Hercules common stock. The Trust's obligation
is guaranteed by the company. (See Note 7.) The securities are expected to be
remarketed within 12 months of their issuance. Under certain circumstances,
Hercules may be required to redeem these securities. In addition, Hercules has
agreed to sell $200 million of Hercules common stock following the successful
remarketing or redemption of the securities.
In March 1999, another wholly owned subsidiary trust of the company commenced a
public offering, under the registration statement noted above, to sell $250
million of Trust Originated Preferred Securities. As an update to the foregoing,
the offering was over-subscribed and the Trust sold an aggregate of $362 million
of Trust Originated Preferred Securities on March 17, 1999. Proceeds of the
offering were used to repay long-term debt. The Trust's obligations will be
guaranteed by the company.
Issuance of Hercules common stock and the Trust Originated Preferred Securities,
in the updated amount, reduced the amount accessible under the shelf
registration to $2.438 billion. Hercules anticipates issuing additional
equity-like securities to repay long-term debt during 1999.
As of December 31, 1998, the company has $612 million available under the
revolving credit agreement and $219 million of short-term lines of credit.
Capital Structure and Commitments: Total capitalization (stockholders' equity,
trust-preferred securities, and debt) increased to $4.4 billion at December 31,
1998, from $1.4 billion in the prior year. The debt-to-total capitalization
ratio increased to 83% at year-end 1998 from 50% at year-end 1997 and 43% at the
end of 1996. The significant increase in the ratio in 1998 is from debt
financing of acquisitions. The increase in 1997 is from lower stockholders'
equity as a result of the company's stock repurchase program combined with an
increase in total debt. Over the next several years, management plans to reduce
the company's debt-to-total capitalization ratio to pre-acquisition levels. The
company has maintained investment grade rating on outstanding debt.
A quarterly dividend has been paid without interruption since 1913, the
company's first year of operation. The annual dividend of $1.08 per share during
1998 represents a total pay out for the year of $104 million. This reflects an
8% increase announced in December 1997 and payable March 25, 1998, to
shareholders of record on March 6, 1998.
Capital expenditures during 1998 were $157 million, with 27% of the expenditures
related to increased production capacity, compared with 38% in 1997 and 29% in
1996. The remainder mostly relates to cost-savings projects, capacity
maintenance, and regulatory requirements. The increase in 1998 capital
expenditures of approximately $38 million over 1997 and 1996 is primarily from
companies acquired in 1998 and higher spending in the Functional Products
segment. Capital expenditures are expected to approximate $240 million during
1999. This
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<PAGE> 15
includes funds for continuing or completing existing projects and new expansion
projects, including the methylcellulose expansion in Doel, Belgium, and the
pectin expansion in Grossenbrode, Germany.
YEAR 2000
Readiness
The company has recognized the need to ensure that its operations and
relationships with its business partners will not be adversely affected by the
Year 2000 problem, and thus has developed and implemented a comprehensive
project that addresses those areas of vulnerability. A cross-functional Year
2000 Program Office has been created by the company at the corporate level to
coordinate and provide policies, guidance, and support for its Year 2000
initiatives. Site compliance teams have been formed at all major sites
worldwide.
The areas addressed by the Program Office include:
-- Corporate and plant computer systems
-- Desktop and telecommunications systems
-- Safety, environmental and quality systems
-- Process control systems and plant floor equipment and devices with
embedded chips
-- Equipment manufactured by or for the BetzDearborn Division and sold
to customers
-- Business partner and supply chain risk management
A risk management plan has been developed for Hercules' business partners,
including suppliers, shippers, financial institutions and service providers
involving direct communications to them and feedback analysis to assess their
Year 2000 readiness as it relates to their potential impact on Hercules'
business. Contingency plans are being developed in those cases where the company
appears to be at risk.
The company is engaged in a major project to implement SAP R/3(TM) software. All
vendor supplied SAP code is Year 2000 compliant. The resulting systems comprise
the company's core business systems, including sales and distribution, inventory
and purchasing, finance and control, product costing, human resources and
payroll, and fixed assets. Other internally developed programs are still in the
process of being tested for Year 2000 compliance. The system is in the process
of being rolled out in North America and Europe. The most critical applications
are either already operational or will be in early 1999. Overall, the project is
on schedule to be completed by third quarter 1999.
In other regions of the world, only minor changes are required to make the core
business systems Year 2000 compliant. The recently acquired BetzDearborn
Division is also in the process of implementing SAP R/3(TM) software and is on
schedule to complete its program in the second quarter of 1999 in North America.
BetzDearborn's Information Technology (IT) systems in other regions are or will
be Year 2000 compliant by second quarter 1999.
For all plants and departments, inventories have been taken of equipment that
may have an embedded chip. Assessments of the compliance status and potential
impact on company operations and remediation plans are being completed.
Additionally, suppliers of raw materials and other critical services have been
identified. Questionnaires requesting Year 2000 status have been sent to all
major identified suppliers. Identification of the most critical suppliers is in
progress and, where necessary, additional research is being conducted.
Contingency plans are being developed or alternate suppliers identified in those
cases where the company appears at risk.
The BetzDearborn Division sells chemical feed equipment installed at customer
sites. Earlier versions of this equipment were not Year 2000 compliant. A kit to
make this equipment Year 2000 compliant has been designed and tested. Affected
equipment will be updated through both regular and Year 2000 specific service
visits of the field technicians.
It is also possible that some customers may be unable to place orders or conduct
business due to their potential inability to cope with the Year 2000. Due to the
broad dispersion of sales among Hercules' customer base, there are currently no
plans to conduct any customer readiness assessments.
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<PAGE> 16
Costs
The primary strategy for achieving Year 2000 compliance is the replacement of
the core business systems through the installation of SAP R/3(TM) software. For
non-IT systems, operational staff conducted departmental inventories under the
direction of an outside consulting firm. The company is in the process of
identifying the costs associated with any necessary process control equipment
upgrades or replacements. The company has also engaged outside consultants
specializing in Year 2000 readiness programs to provide support to the program
office in the final stages of Year 2000 readiness and compliance.
The total cost of the Year 2000 project is currently estimated to be
approximately $8 million and approximately 45% has been spent to date. This cost
estimate does not include the cost to upgrade or replace process control
equipment. These costs are expensed as incurred and are being funded through
operating cash flow. The cost of implementing the SAP R/3(TM) replacement system
is not included in the Year 2000 project cost estimate.
Risks and Contingency Plans
Failure to complete implementation of the SAP system by the end of 1999 would
represent the worst case Year 2000 scenario for Hercules. At the present time,
the company believes that the implementation efforts will be completed as
scheduled so that the risks of material adverse consequences to the company's
results of operations, liquidity, or financial condition, as a result of its
Year 2000 readiness, should be reduced. Some of Hercules' production facilities
are similar in nature and products could be manufactured and shipped from
alternate locations. At these locations, there are feasible manual procedures
that can be implemented in the case of a Year 2000 related failure. For cases
where product cannot be made in multiple locations or where manual procedures
are not feasible, appropriate contingency plans are being developed and are
targeted for completion in the third quarter of 1999.
The company believes that it is unlikely to experience a material adverse effect
to its business, results of operations, liquidity, or financial condition as a
result of Year 2000 related failures.
Forward-looking Statements
The foregoing Year 2000 discussion includes forward-looking statements of the
company's efforts and management's expectations relating to Year 2000 readiness.
The company's ability to achieve Year 2000 compliance and the level of
incremental costs associated therewith could be adversely affected by, among
other things, the availability and cost of remediation and testing resources,
vendors' and customers' abilities to install or modify IT and non-IT systems and
unanticipated problems identified in the ongoing Year 2000 readiness review.
The costs of the Year 2000 project and the dates by which the company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third parties' remediation plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained to perform Year 2000 modifications;
the ability of the company to locate and correct all non-compliant computer
codes and embedded controls; the ability of material customers, suppliers, and
trading partners to successfully complete their own Year 2000 remediation
projects; the accuracy of information received from third parties concerning the
Year 2000 compliance of their information systems or automated equipment or
concerning their Year 2000 business risk assessments; and similar uncertainties.
CONVERSION TO THE EURO CURRENCY
On January 1, 1999, the Euro was adopted as the common legal currency, in
coexistence with the national currencies for 11 European Union member nations
until January 1, 2002. Hercules started its preparations in early 1997 with
internal Euro awareness training and the formation of a multifunctional project
team. Since then the company's Euro team has developed and implemented a
strategic action plan that positioned the company for the Euro by mid-1998.
This plan consisted of a project portfolio that was implemented in the second
half of 1998. The company has made the necessary adjustments to its IT systems
to ensure compliance of all business transactional Euro requirements and is
preparing its IT systems for the withdrawal of the national currencies by
January 1, 2002, after which the
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<PAGE> 17
Euro becomes the sole legal currency for the 11 member states. The company will
be prepared for any European Union nation that enters the Euro.
The company has communicated its strategy to deal in Euro with its business
partners in Euro-participating countries, and it will continuously reconcile its
strategy with its business partners to maintain the competitive position of the
company. The company has trained its employees and ensures compliance with all
legal and tax implications of the Euro. The company does not expect major
differences in its exchange rate and interest rate risk from the Euro.
The company does not expect the Euro adoption to have a material adverse impact
on its financial condition or results of operations.
RISK FACTORS
Market Risk - Fluctuations in interest and foreign currency exchange rates
affect the company's financial position and results of operations. The company
uses several strategies to actively hedge interest rate and foreign currency
exposure and minimize the effect of such fluctuations on reported earnings and
cash flow. (See "Foreign Currency Translation" and "Financial Instruments and
Hedging" in the Summary of Significant Accounting Policies and Notes 17 and 20.)
Sensitivity of the company's financial instruments to selected changes in market
rates and prices, which are reasonably possible over a one-year period, are
described below. Market values are the present value of projected future cash
flows based on the market rates and prices chosen. The market values for
interest rate risk are calculated by the company utilizing a third-party
software model that utilizes standard pricing models to determine the present
value of the instruments based on the market conditions as of the valuation
date.
The company's derivative and other financial instruments subject to interest
rate risk consist of debt instruments, interest rate swaps, and currency swaps.
In addition, at December 31, 1997, the company held a five-year $500 million
note received as a result of the Tastemaker transaction, which it sold during
1998. At December 31, 1998 and 1997, net market value of these combined
instruments was a liability of $3.66 billion and $239 million, respectively. The
increase is primarily the result of acquisition debt incurred during 1998. The
sensitivity analysis assumes an instantaneous 100-basis point move in interest
rates from their levels, with all other variables held constant. A 100-basis
point increase in interest rates at December 31, 1998 and 1997 would result in a
$36 million and $24 million decrease in the net market value of the liability,
respectively. A 100-basis point decrease in interest rates at December 31, 1998
and 1997 would result in a $45 million and $33 million increase in the net
market value of the liability, respectively.
The market value of the company's portfolio of financial instruments subject to
equity price risk at December 31, 1998 and 1997, was an asset of $22 million and
$51 million, respectively. The sensitivity analysis assumes an instantaneous 10%
change in valuation with all other variables held constant. A 10% change at
December 31, 1998 and 1997, would increase or decrease the asset position by $2
million and $5 million, respectively.
The company's financial instruments subject to foreign currency exchange risk
consist of foreign currency forwards and options and represent a net asset
position of $6 million and $2 million at December 31, 1998 and 1997,
respectively. The sensitivity analysis assumes an instantaneous 10% change in
foreign currency exchange rates from year-end levels, with all other variables
held constant. At December 31, 1998 and 1997, a 10% strengthening of the U.S.
dollar versus other currencies would result in an increase in the net asset
position of $63 million and $14 million, respectively, while a 10% weakening of
the dollar versus all other currencies would result in a decrease of $78 million
and $18 million, respectively.
Foreign exchange forward and option contracts are used to hedge the company's
firm and anticipated foreign currency cash flows. Thus, there is either an asset
or cash flow exposure related to all the financial instruments in the above
sensitivity analysis for which the impact of a movement in exchange rates would
be in the opposite direction and substantially equal to the impact on the
instruments in the analysis. There are presently no significant restrictions on
the remittance of funds generated by the company's operations outside the United
States.
Environmental - Hercules has been identified by U.S. federal and state
authorities as a potentially responsible party for environmental cleanup at
numerous sites. The estimated range of reasonably possible costs for
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<PAGE> 18
remediation is between $63 million and $199 million. The company does not
anticipate that its financial condition will be materially affected by
environmental remediation costs in excess of amounts accrued, although quarterly
or annual operating results could be materially affected. (See Note 22.)
Environmental remediation expenses are funded from internal sources of cash.
Such expenses are not expected to have a significant effect on the company's
ongoing liquidity. Environmental cleanup costs, including capital expenditures
for ongoing operations, are a normal, recurring part of operations and are not
significant in relation to total operating costs or cash flows.
Litigation - Hercules is a defendant in numerous lawsuits that arise out of, and
are incidental to, the conduct of its business. These suits concern issues such
as product liability, contract disputes, labor-related matters, patent
infringement, environmental proceedings, property damage, and personal injury
matters. While it is not feasible to predict the outcome of all pending suits
and claims, the ultimate resolution of these matters could have a material
effect upon the financial position of Hercules, and the resolution of any of the
matters during a specific period could have a material effect on the quarterly
or annual operating results for that period. (See Note 22.)
FORWARD-LOOKING STATEMENT
This annual report includes forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995, reflecting management's
current analysis and expectations, based on reasonable assumptions. Results
could differ materially depending on such factors as business climate, economic
and competitive uncertainties, higher manufacturing costs, reduced level of
customer orders, ability to integrate BetzDearborn, changes in strategies, risks
in developing new products and technologies, the ability of Hercules' customers
and suppliers to achieve Year 2000 readiness, environmental and safety
regulations and clean-up costs, foreign exchange rates, adverse legal and
regulatory developments, and adverse changes in economic and political climates
around the world. Accordingly, there can be no assurance that the company will
meet analysts' earnings estimates. As appropriate, additional factors are
contained in reports filed with the Securities and Exchange Commission. This
paragraph is included to provide safe harbor for forward-looking statements,
which are not required to be publicly revised as circumstances change.
18
<PAGE> 19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
For discussion of quantitative and qualitative disclosures about
market risk, see the caption "Risk Factors" under Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
REQUIRED SUPPLEMENTARY DATA
HERCULES INCORPORATED
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS Page
<S> <C>
Report of Independent Accountants................................................................ 20
Consolidated Statement of Income for the Years Ended December 31, 1998, 1997, and
1996.......................................................................................... 21
Consolidated Balance Sheet as of December 31, 1998 and 1997...................................... 22
Consolidated Statement of Cash Flow for the Years Ended December 31, 1998, 1997, and
1996.......................................................................................... 23
Consolidated Statement of Stockholders' Equity for the Years Ended December 31, 1998,
1997, and 1996................................................................................ 24
Consolidated Statement of Comprehensive Income for the Years Ended December 31,
1998, 1997, and 1996.......................................................................... 25
Notes to Consolidated Financial Statements....................................................... 26-50
SUPPLEMENTARY DATA
Summary of Quarterly Results (Unaudited)......................................................... 51
Subsidiaries of Registrant....................................................................... 52
</TABLE>
19
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of
Hercules Incorporated
Wilmington, Delaware
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows present fairly, in all material respects, the financial position
of Hercules Incorporated and subsidiary companies at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14(a)(2) on page
54 presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards that require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 23 to the financial statements, in 1997, the company
changed its method of accounting for costs incurred in connection with its
enterprise software installation.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 19, 1999
20
<PAGE> 21
<TABLE>
<CAPTION>
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF INCOME (Dollar in millions, except per share)
Year ended December 31,
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $2,145 $1,866 $ 2,060
------ ------ -------
Cost of sales 1,287 1,169 1,320
Selling, general, and administrative expenses 399 251 262
Research and development 61 53 56
Purchased in-process research and development (Note 14) 130 -- --
Other operating expenses (income), net (Note 15) 76 165 (19)
------ ------ -------
Profit from operations 192 228 441
Equity in income of affiliated companies 10 30 53
Interest and debt expense (Note 16) 103 39 35
Other income (expense), net (Note 17) (22) 374 26
------ ------ -------
Income before income taxes and effect of change in accounting principle 77 593 485
Provision for income taxes (Note 18) 68 269 160
------ ------ -------
Income before effect of change in accounting principle 9 324 325
Effect of change in accounting principle (Note 23) -- (5) --
------ ------ -------
Net income $ 9 $ 319 $ 325
====== ====== =======
Earnings per share (Note 19)
Basic:
Earnings before effect of change in accounting principle $.10 $3.27 $3.10
Effect of change in accounting principle -- (.05) --
------ ------ -------
Earnings per share $.10 $3.22 $3.10
====== ====== =======
Diluted:
Earnings before effect of change in accounting principle $.10 $3.18 $2.98
Effect of change in accounting principle -- (.05) --
------ ------ -------
Earnings per share $.10 $3.13 $2.98
====== ====== =======
</TABLE>
The accompanying accounting policies and notes are an integral part of the
consolidated financial statements.
21
<PAGE> 22
<TABLE>
<CAPTION>
HERCULES INCORPORATED
CONSOLIDATED BALANCE SHEET (Dollar in millions)
December 31,
- ---------------------------------------------------------------------------------------------------------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 68 $ 17
Accounts receivable, net (Note 2) 663 389
Inventories (Note 3) 416 234
Deferred income taxes (Note 18) 93 49
------ ------
Total current assets 1,240 689
Property, plant, and equipment, net (Note 12) 1,438 687
Investments (Note 4) 51 615
Goodwill (net of accumulated amortization - 1998, $28; 1997, $12) 2,356 41
Other intangible assets (net of accumulated amortization - 1998, $22; 1997, $15) 192 3
Prepaid pension (Note 13) 218 216
Deferred charges and other assets 338 160
------ ------
Total assets $5,833 $2,411
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 270 $ 116
Short-term debt (Note 5) 566 275
Accrued expenses (Note 12) 481 408
------ ------
Total current liabilities 1,317 799
Long-term debt (Note 6) 3,096 419
Deferred income taxes (Note 18) 225 160
Other postretirement benefits (Note 13) 136 139
Deferred credits and other liabilities 300 204
------ ------
Total liabilities 5,074 1,721
Company-obligated preferred securities of subsidiary trust (Note 7) 200 --
Stockholders' equity
Series preferred stock (Note 8) -- --
Common stock, $25/48 par value (Note 9) 81 80
(shares issued: 1998 - 154,823,496; 1997 - 154,357,015)
Additional paid-in capital 504 504
Unearned compensation (Note 10) (130) --
Foreign currency translation adjustment (13) (2)
Retained earnings 2,068 2,163
------ ------
2,510 2,745
Reacquired stock, at cost (shares: 1998 - 53,995,692; 1997 - 58,289,376) 1,951 2,055
------ ------
Total stockholders' equity 559 690
------ ------
Total liabilities and stockholders' equity $5,833 $2,411
====== ======
</TABLE>
The accompanying accounting policies and notes are an integral part of the
consolidated financial statements.
22
<PAGE> 23
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
(Dollar in millions)
Year Ended December 31,
__________________________________________________________________________________________________
1998 1997 1996
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 9 $319 $325
Adjustments to reconcile net income to net cash provided from
operations:
Depreciation 86 73 106
Amortization 22 3 2
Write-off in-process research and development 130 -- --
Nonoperating gain on disposals (23) (398) (22)
Noncash charges (credits) 38 92 (26)
Other (6) 15 5
Accruals and deferrals of cash receipts and payments:
Affiliates' earnings in excess of dividends received (6) (25) (25)
Accounts receivable 26 (41) 6
Inventories (14) (6) (17)
Accounts payable and accrued expenses (72) 137 (83)
Noncurrent assets and liabilities (9) 18 (46)
------- ------ -----
Net cash provided by operations 181 187 225
------- ------ -----
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (157) (119) (120)
Proceeds of investment and fixed asset disposals 600 295 196
Acquisitions, net of cash acquired (3,109) -- --
Other (25) (34) (6)
------- ------ -----
Net cash (used in) provided by investing activities (2,691) 142 70
------- ------ -----
CASH FLOW FROM FINANCING ACTIVITIES:
Long-term debt proceeds 3,111 343 75
Long-term debt repayments (247) (130) (27)
Change in short-term debt (228) (35) 112
Payment of debt issuance costs and underwriting fees (66) -- --
Proceeds from trust preferred securities 200 -- --
Common stock issued 10 38 15
Common stock reacquired (114) (458) (417)
Dividends paid (104) (98) (95)
------- ------ -----
Net cash provided by (used in) financing activities 2,562 (340) (337)
Effect of exchange rate changes on cash (1) (2) (1)
------- ------ -----
Net increase (decrease) in cash and cash equivalents 51 (13) (43)
Cash and cash equivalents at beginning of year 17 30 73
------- ------ -----
Cash and cash equivalents at end of year $ 68 $ 17 $ 30
======= ====== =====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized) $ 100 $ 37 $ 30
Income taxes paid, net 117 152 190
Noncash investing and financing activities:
Conversion of notes and debentures 8 31 1
ESOP and incentive plan stock issuances 196 15 14
Accounts payable for common stock acquisitions -- 5 8
Investment in unconsolidated affiliates -- -- 1
Investment in long-term notes -- 504 --
Accounts receivable from sale of investment/asset disposals -- 8 9
Assumed debt of acquired businesses 307 -- --
The accompanying accounting policies and notes are an integral part of the consolidated financial statements.
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Dollars in millions)
Unearned
Common Paid-in Compen- Translation Retained Reacquired
Stock Capital sation Adjustment Earnings Stock
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1996 $79 $472 $-- $ 75 $1,712 $1,256
(Common shares: issued 151,663,465;
reacquired, 43,176,841)
Net income -- -- -- -- 325 --
Cash dividends, $.92 per common share -- -- -- -- (95) --
Foreign currency translation adjustment -- -- -- (30) -- --
Purchase of common stock, 7,970,784 shares -- -- -- -- -- 425
Issuance of common stock:
Incentive plans, net, 844,751 shares
including 281,063 from reacquired stock -- 20 -- -- -- (9)
Conversion of notes and debentures,
41,923 shares -- 1 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1996 $79 $493 $ -- $ 45 $1,942 $1,672
(Common shares: issued 152,269,076;
reacquired, 50,866,562)
Net income -- -- -- -- 319 --
Cash dividends, $1.00 per common share -- -- -- -- (98) --
Foreign currency translation adjustment -- -- -- (47) -- --
Purchase of common stock, 9,536,619 shares -- -- -- -- -- 455
Issuance of common stock:
Incentive plans, net, 2,113,805 shares
from reacquired stock -- (19) -- -- -- (72)
Conversion of notes and debentures,
2,087,939 shares 1 30 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997 $80 $504 $ -- $ (2) $2,163 $2,055
(Common shares: issued 154,357,015;
reacquired, 58,289,376)
Net income -- -- -- -- 9 --
Cash dividends, $1.08 per common share -- -- -- -- (104) --
Foreign currency translation adjustment -- -- -- (11) -- --
Purchase of common stock, 2,361,390 shares -- -- -- -- -- 109
Issuance of common stock:
Incentive plans, net, 764,201 shares
from reacquired stock -- (7) -- -- -- (27)
ESOP, 5,890,873 shares from reacquired
stock -- -- (130) -- -- (186)
Conversion of notes and debentures,
466,481 shares 1 7 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 $81 $504 $(130) $(13) $2,068 $1,951
(Common shares: issued 154,823,496;
reacquired, 53,995,692)
</TABLE>
The accompanying accounting policies and notes are an integral part of the
consolidated financial statements.
24
<PAGE> 25
<TABLE>
<CAPTION>
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Dollars in millions)
Year Ended December 31,
- -------------------------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Income $ 9 $319 $325
Foreign currency translation, net of tax (11) (47) (30)
---- ---- ----
Comprehensive income (loss) $ (2) $272 $295
===== ==== ====
</TABLE>
The accompanying accounting policies and notes are an integral part of the
consolidated financial statements.
25
<PAGE> 26
HERCULES INCORPORATED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Hercules
Incorporated and all majority-owned subsidiaries. Following the acquisition of
BetzDearborn, the company continued BetzDearborn's practice of using a November
30 fiscal year-end for all former BetzDearborn non-U.S. subsidiaries, excluding
Canada, to expedite the year-end closing process. Investments in affiliated
companies with a 20% or greater ownership interest are accounted for on an
equity basis and, accordingly, consolidated income includes Hercules' share of
their income.
USE OF ESTIMATES
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures that pertain to current operations or future revenues
are expensed or capitalized according to the company's capitalization policy.
Expenditures for remediation of an existing condition caused by past operations
that do not contribute to current or future revenues are expensed. Liabilities
are recognized for remedial activities when the cleanup is probable and the cost
can be reasonably estimated.
CASH AND CASH EQUIVALENTS
Cash in excess of operating requirements is invested in short-term,
income-producing instruments. Cash equivalents include commercial paper and
other securities with original maturities of 90 days or less. Book value
approximates fair value because of the short maturity of those instruments.
INVENTORIES
Inventories are stated at the lower of cost or market. Domestic inventories are
valued predominantly on the last-in, first-out (LIFO) method. Foreign and
certain domestic inventories, which in the aggregate represent 67% of total
inventories at December 31, 1998, are valued principally on the average-cost
method.
PROPERTY AND DEPRECIATION
Property, plant, and equipment are stated at cost. The company changed to the
straight-line method of depreciation, effective January 1, 1991, for newly
acquired processing facilities and equipment. Assets acquired before then
continue to be depreciated by accelerated methods. The company believes
straight-line depreciation provides a better matching of costs and revenues over
the lives of the assets. The estimated useful lives of depreciable assets are as
follows: buildings - 30 years; plant, machinery and equipment - 15 years; other
machinery and equipment - 3 to 15 years.
Maintenance, repairs, and minor renewals are charged to income; major renewals
and betterments are capitalized. Upon normal retirement or replacement, the cost
of property (less proceeds of sale or salvage) is charged to income.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and Other intangible assets are amortized on a straight-line basis over
the estimated future periods to be benefited, generally 40 years for goodwill
and 5 to 15 years for other intangible assets.
LONG-LIVED ASSETS
The company reviews its long-lived assets, including goodwill and other
intangibles, for impairment on an exception basis whenever events or changes in
circumstances indicate carrying amounts of the assets may not be recoverable
through future cash flows. If an impairment loss has occurred based on expected
future cash flows (undiscounted), the loss is recognized in the income
statement. The amount of the impairment loss is the excess of the carrying
amount of the impaired asset over the fair value of the asset. The fair value
represents expected future cash flows from the use of the assets, discounted at
the rate used to evaluate potential investments.
26
<PAGE> 27
FOREIGN CURRENCY TRANSLATION
With the exception of operations in countries with highly inflationary
economies, the financial statements of Hercules' non-U.S. entities are
translated into U.S. dollars using current rates of exchange, with gains or
losses included in the foreign currency translation adjustment account in the
stockholders' equity section of the balance sheet. The related allocation for
income taxes is not significant. For operations in countries with highly
inflationary economies, financial statements are translated at either current or
historical exchange rates, as appropriate. These adjustments, along with gains
and losses on currency transactions (denominated in currencies other than local
currency), are reflected in net income.
FINANCIAL INSTRUMENTS AND HEDGING
Derivative financial instruments are used to hedge risk caused by fluctuating
currency and interest rates. The company enters into forward-exchange contracts
and currency swaps to hedge foreign currency exposure. Decisions regarding
hedging are made on a case-by-case basis, taking into consideration the amount
and duration of the exposure, market volatility, and economic trends. The
company uses the fair-value method of accounting, recording realized and
unrealized gains and losses on these contracts quarterly. They are included in
other income (expense), net, except for gains and losses on contracts to hedge
specific foreign currency commitments, which are deferred and accounted for as
part of the transaction. Gains or losses on contracts used to hedge the value of
investments in certain non-U.S. subsidiaries are accounted for under the
deferral method and are included in the foreign currency translation adjustment
account. It is the company's policy to match the term of financial instruments
with the term of the underlying designated item. If the designated item is an
anticipated transaction no longer likely to occur, gains or losses from the
instrument designated as a hedge are recognized in current period earnings. The
company does not hold or issue financial instruments for trading purposes. In
the Consolidated Statement of Cash Flow, the company reports the cash flows
resulting from its hedging activities in the same category as the related item
that is being hedged. Net investment hedges, requiring cash receipts or payments
from borrowed foreign currencies not identified with any specific cash flows,
are classified as financing activities.
The company uses interest rate swap agreements to manage interest costs and
risks associated with changing rates. The differential to be paid or received is
accrued as interest rates change and is recognized in interest expense over the
life of the agreements. Counterparties to the forward exchange, currency swap,
and interest rate swap contracts are major financial institutions. Credit loss
from counterparty nonperformance is not anticipated.
STOCK-BASED COMPENSATION
Compensation costs attributable to stock option and similar plans are recognized
based on any difference between the quoted market price of the stock on the date
of grant over the amount the employee is required to pay to acquire the stock
(the intrinsic-value method under Accounting Principles Board [APB] Opinion 25).
Such amount, if any, is accrued over the related vesting period, as appropriate.
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation," requires companies electing to continue to use the
intrinsic-value method to make pro forma disclosures of net income and earnings
per share as if the fair-value-based method of accounting had been applied.
NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the company adopted SFAS, No. 130, "Reporting
Comprehensive Income." SFAS 130 establishes standards for reporting and display
of comprehensive income and its components in financial statements. This
statement requires all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in the financial
statements and displayed with the same prominence as other financial statements.
In 1998, the company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." (See Note 24).
PENDING ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133 is
effective for fiscal years beginning after June 15, 1999. SFAS 133 requires that
all derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction. For fair-value hedge transactions in
which the company is hedging changes in the fair value of an asset, liability,
or firm commitment, changes in the fair value of the derivative instrument will
generally be offset in the income statement by changes in the hedged item's fair
value. For cash-flow hedge transactions, in which the company is hedging the
variability of cash flows related to a variable-rate asset, liability, or a
forecasted transaction, changes in the fair value of the derivative instrument
27
<PAGE> 28
will be reported in other comprehensive income. Gains and losses on the
derivative instrument that are reported in other comprehensive income will be
reclassified as earnings in periods in which earnings are impacted by the
variability of the cash flows of the hedged item. The ineffective portion of all
hedges will be recognized in current-period earnings.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides guidance
on the capitalization and amortization of costs of computer software developed
or obtained for internal use, and is effective for fiscal years beginning after
December 15, 1998. The company is currently capitalizing the design and
implementation costs of its ongoing enterprise-wide software installation
program.
The company is currently evaluating the impact that these statements will have
on its results of operations or financial position.
RECLASSIFICATIONS
Certain amounts in the 1997 and 1996 consolidated financial statements and notes
have been reclassified to conform to the 1998 presentation.
28
<PAGE> 29
HERCULES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS
All acquisitions have been accounted for under the purchase method. The results
of operations of the acquired businesses are included in the consolidated
financial statements from the dates of acquisition.
BetzDearborn - On October 15, 1998, the company acquired all of the outstanding
shares of BetzDearborn Inc., a global specialty chemical company engaged in the
treatment of water and industrial process systems, for $2,235 million in cash
and $186 million in common stock exchanged for the shares held by the
BetzDearborn ESOP Trust. In addition, the company assumed debt with a fair value
of $117 million and repaid $557 million of other long-term debt held by
BetzDearborn. This acquisition was financed with borrowings under a $3,650
million credit facility with a syndicate of banks. (See Note 6.)
The purchase price was allocated to the estimated fair value of net assets
acquired, with the excess of $2,074 million recorded as goodwill, which is being
amortized over its estimated useful life of 40 years. Additionally, based on an
independent appraisal, approximately $130 million of the purchase price was
allocated to purchased in-process research and development and was charged to
expense at the date of acquisition. (See Note 14.)
As of the acquisition date, the company began to formulate plans to combine the
operations of BetzDearborn and Hercules. It formed a program office, engaged
outside consultants and established several functional integration teams to
formulate and implement the plan and capture anticipated synergies. At December
31, 1998, the company had identified and approved various actions such as
personnel reductions, consolidation of operations and support functions, closure
of redundant or inefficient offices and facilities, and relocation of former
BetzDearborn employees. Accordingly, the company has included a $94 million
liability as part of the purchase price allocation. The liability includes
approximately $78 million related to employee termination benefits for
approximately 850 BetzDearborn manufacturing, technical, sales and marketing,
administrative and support personnel worldwide. Also included is $16 million for
office and facility closures, relocation of BetzDearborn employees and other
related exit costs. Through December 31, 1998, the company paid $5 million of
termination benefits for approximately 130 redundancies, and the remaining
liability is $89 million.
The purchase price allocation for BetzDearborn is a preliminary allocation and
the goodwill recorded is subject to further adjustment resulting primarily from
the completion of the integration and exit plans, which could result in
additional liabilities; adjustments to the fair value of the net assets
acquired; and the resolution of pre-acquisition contingencies, primarily legal
matters and product liabilities, net of any related tax effects.
The allocation of the purchase price is expected to be completed in 1999.
FiberVisions L.L.C. - In July 1998, the company completed the acquisition of the
49% share of FiberVisions L.L.C. owned by its joint venture partner Jacob Holm &
Sons A/S for approximately $230 million in cash, plus assumed debt of $188
million. The allocation of the purchase price resulted in $188 million of
goodwill, which is being amortized over its estimated useful life of 40 years.
29
<PAGE> 30
The following unaudited pro forma information presents a summary of consolidated
results of operations of the company as if the BetzDearborn and FiberVisions
acquisitions had occurred at the beginning of each of the periods presented
below:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997
---- ----
<S> <C> <C>
Net sales $3,276 $3,366
Income (loss) before effect of change in accounting
principle (70) 237
Net income (loss) (70) 226
Net earnings per share:
Basic
Earnings before effect of change in accounting
principle $ (.69) $ 2.25
Earnings per share (.69) 2.15
Diluted
Earnings before effect of change in accounting
principle $ (.69) $ 2.21
Earnings per share (.69) 2.11
</TABLE>
The pro forma results of operations are for comparative purposes only and
reflect increased amortization and interest expense resulting from the
acquisitions described above, but do not include any potential cost savings from
combining the acquired businesses with the company's operations. Consequently,
the pro forma results do not reflect the actual results of operations had the
acquisitions occurred on the dates indicated, and are not intended to be a
projection of future results or trends.
Other - The company also made three other acquisitions in 1998 for an aggregate
purchase price of approximately $105 million in cash. These acquisitions
included the worldwide paper chemicals group of Houghton International, Inc. and
Citrus Colloids Ltd., a pectin manufacturer, in April 1998, and Alliance
Technical Products, Ltd., a rosin dispersions company, in September 1998.
Allocations of the purchase prices for these acquisitions resulted in
approximately $67 million of goodwill, which is being amortized over estimated
useful lives ranging from 30 to 40 years.
2. ACCOUNTS RECEIVABLE, NET
<TABLE>
<CAPTION>
Accounts receivable, net, consists of: (Dollars in millions)
1998 1997
---- ----
<S> <C> <C>
Trade $598 $285
Other 78 107
---- ----
Total 676 392
Less allowance for doubtful accounts 13 3
---- ----
$663 $389
==== ====
</TABLE>
At December 31, 1998, net trade accounts receivable from customers located in
the United States, Europe, the Americas, and Asia were $404 million, $150
million, $24 million, and $7 million, respectively.
3. INVENTORIES
<TABLE>
<CAPTION>
The components of inventories are: (Dollars in millions)
1998 1997
---- ----
<S> <C> <C>
Finished products $218 $121
Materials, supplies, and work in process 198 113
---- ----
$416 $234
==== ====
</TABLE>
Inventories valued on the LIFO method were lower than if valued under the
average-cost method, which approximates current cost, by $33 million and $37
million at December 31, 1998 and 1997, respectively.
30
<PAGE> 31
4. INVESTMENTS
Total equity investments in affiliated companies were $9 million at December 31,
1998, and $21 million at December 31, 1997. Dividends received from affiliated
companies were $0 in 1998 and 1997, and $11 million in 1996.
Other investments, at cost or less, were $42 million and $594 million at
December 31, 1998 and 1997, respectively. Included in these amounts are
non-current marketable securities aggregating $31 million and $81 million for
the corresponding years, classified as "available for sale." The value of these
investments, based on market quotes, approximates book values. At December 31,
1997, investments also included a $500 million 6.2% interest-bearing five-year
note (the Tastemaker note), which was sold in October 1998 for a $3 million net
loss as part of financing the BetzDearborn acquisition.
5. SHORT-TERM DEBT
<TABLE>
<CAPTION>
A summary of short-term debt follows: (Dollars in millions)
1998 1997
---- ----
<S> <C> <C>
Commercial paper $ -- $195
Banks 80 80
Current maturities of long-term debt 486 --
---- ----
$566 $275
==== ====
</TABLE>
The commercial paper program was replaced by the debt syndication utilized for
the acquisition of BetzDearborn. Previously, commercial paper was issued or
renewed for varying periods, with interest at prevailing market rates. Bank
borrowings represent primarily foreign overdraft facilities and short-term lines
of credit, which are generally payable on demand with interest at various rates.
Book values of commercial paper and bank borrowings approximate market value
because of their short maturity period.
At December 31, 1998, Hercules had $219 million of unused lines of credit that
may be drawn as needed, with interest at a negotiated spread over lenders' cost
of funds. Lines of credit in use at December 31, 1998, were $80 million.
Weighted-average interest rates on short-term borrowings at December 31, 1998
and 1997, were 5.10% and 5.40%, respectively.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
A summary of long-term debt follows: (Dollars in millions)
1998 1997
---- ----
<S> <C> <C>
6.15% notes due 2000 $100 $100
6.60% notes due 2027 (a) 100 100
7.85% notes due 2000 25 25
6.625% notes due 2003 (b) 125 125
8% convertible subordinated debentures due 2010 (c) 3 10
Term loan tranche A due in varying amounts through 2003 (d) 1,250 --
Term loan tranche B due 1999 (d) 470 --
Term loan tranche C due 2000 (d) 1,000 --
Revolving credit agreement due 2003 (d) 288 --
ESOP debt (e) 110 --
Term notes at various rates from 5.11% to 9.60% due in varying
amounts through 2006 (f) 102 --
Commercial paper -- 50
Variable rate loans -- 2
Other 9 7
------ ----
3,582 419
Current maturities of long-term debt (486) --
------ ----
Net long-term debt $3,096 $419
====== ====
</TABLE>
31
<PAGE> 32
(a) 30-year debentures with a 10-year put option, exercisable by
bondholder at a redemption price equal to principal amount.
(b) Par value of $125 million issued June 1993.
(c) Subordinated debentures are convertible into common stock at $14.90
per share and are redeemable at the option of the company at varying rates. The
annual sinking fund requirement of $5 million, beginning in 1996, has been
satisfied through conversions of debentures.
(d) The BetzDearborn acquisition was financed with borrowings under a
$3,650 million credit facility with a syndicate of banks, and was consummated on
October 15, 1998. The syndication included three tranches of varying maturity
term loans totaling $2,750 million and a $900 million revolving credit
agreement. The facility bears interest at London Interbank Offered Rate (LIBOR)
plus 2% and may decrease to LIBOR plus .75% after six months and after certain
conditions are met, including repayments of term-loan tranche B. Interest rates
are reset for one, three or six-month periods at the company's option. The
company's debt agreement contains various restrictive covenants that, among
other things, require maintenance of certain financial covenants: leverage, net
worth and interest coverage, and provides that the entry of a judgment or
judgments involving aggregate liabilities of $50 million or more be vacated,
discharged, stayed or bonded pending appeal within 60 days of entry. Issuance
costs of $59 million related to the financing are included in Deferred charges
and other assets and are being amortized over the term of the loans, using the
effective interest method. As of December 31, 1998, $612 million of the $900
million revolver is available for use.
(e) The company assumed a loan with a fair market value of $110 million
related to the BetzDearborn ESOP Trust. The proceeds of the loan were used by
the ESOP Trust for the purchase of BetzDearborn preferred shares which, upon
acquisition by Hercules, were converted into equivalent shares of Hercules
common stock. The loan was recorded at fair market value at the date of
acquisition, and the $16 million fair value step-up is being amortized over the
term of the debt. The loan and guarantee mature in June 2009.
(f) Debt assumed in conjunction with the acquisition of FiberVisions
L.L.C. (see Note 1), less repayments through December 31, 1998.
Long-term debt maturities during the next five years are $486 million in 1999,
$1,342 million in 2000, $318 million in 2001, $366 million in 2002, and $831
million in 2003.
7. COMPANY-OBLIGATED PREFERRED SECURITIES OF SUBSIDIARY TRUST
In the fourth quarter of 1998, Hercules Trust V (the Trust), the company's
wholly owned consolidated subsidiary trust created under the laws of the State
of Delaware, completed a private placement of units, consisting of Trust
Preferred Securities (the Securities) in the amount of $200 million and a
forward underwriting contract to purchase Hercules common stock. The proceeds of
the Securities were invested by the Trust in the company's newly issued Junior
Subordinated Debenture Notes (the Notes). Each Security will accrue and pay
distributions equal to LIBOR plus 175 basis points, compounded quarterly. The
obligations of the Trust are fully and unconditionally guaranteed by the
company.
The Securities are expected to be remarketed pursuant to their terms within 12
months from their issuance. The distribution rates will be reset to a fixed rate
in the remarketing based on bids received in a private auction to qualified
institutional buyers, and the maturity date will be reset to the one-year
anniversary of the successful remarketing. Hercules will be required to redeem
the Securities if remarketing does not occur within the established period. The
remarketing of the Securities may be accelerated under certain circumstances,
including the price of the company's common stock closing at or below $22.6875
(twenty-two and eleven-sixteenths). In addition, Hercules has agreed to offer
and sell, and a third party has agreed to underwrite $200 million of Hercules
common stock following the successful remarketing or redemption of the
Securities.
8. SERIES PREFERRED STOCK
The series preferred stock is without par value and is issuable in series. There
are 2,000,000 shares authorized for issuance, none of which have been issued.
9. COMMON STOCK
Hercules common stock has a stated value of $25/48, and 300,000,000 shares are
authorized for issuance. At December 31, 1998, a total of 16,023,661 shares were
reserved for issuance for the following purposes: 879,999 shares for sales to
the Savings Plan Trustee; 11,382,530 shares for the exercise of awards under the
Stock Option Plan; 2,197,137 shares for awards under incentive compensation
plans; 337,440 shares for conversion of debentures and notes; and 1,226,555
shares for employee stock purchases.
32
<PAGE> 33
For the company's stock repurchase program, from its start in 1991 through
year-end 1998, the Board authorized the repurchase of up to 74,650,000 shares of
company common stock. Of that total, 6,150,000 shares were intended to satisfy
requirements of various employee benefit programs. During this period, a total
of 66,490,592 shares of common stock were purchased in the open market at an
average price of $37.33 per share.
10. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
In connection with the acquisition of BetzDearborn, the company acquired its
ESOP and related trust as a long-term benefit for substantially all of
BetzDearborn's U.S. employees. The plan is a supplement to the company's
retirement plan. The ESOP trust has existing long-term debt of $94 million (fair
value of $110 million - see Note 6) which is guaranteed by the company. The
proceeds of the original loan were used to purchase BetzDearborn convertible
preferred stock, which, at the date of the BetzDearborn acquisition, was
converted into Hercules common stock.
The BetzDearborn 401(k) program was previously integrated with the ESOP.
Eligible employees may invest 2% to 15% of eligible compensation. The company's
matching contributions equal to 50% of the first 6% of employees' investments,
fully vest to employees upon the completion of 5 years of service. The company's
matching contributions, which are made in the form of Hercules common stock, are
included in ESOP expense. After satisfying the 401(k) matching contributions and
the dividends on allocated shares, the remaining shares of ESOP stock are
allocated to each participant based on the ratio of participants' compensation
to total compensation of all participants.
The company contribution and dividends on the shares held by the ESOP trust are
used to repay the loan, and stock is allocated as the principal and interest are
paid. Long-term debt is reduced as payments are made on the third-party
financing. The loan and unearned compensation are recorded in the company's
Consolidated Balance Sheet as long-term debt and a reduction in shareholders'
equity, respectively.
The number of shares allocated and unallocated at December 31 are as follows:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Allocated 1,776,338
Unallocated 4,052,556
---------
Total shares held by ESOP 5,828,894
=========
</TABLE>
The company is required to make cash contributions to the Plan which enable the
trust to service its indebtedness. ESOP expense was $1 million for 1998 which
was net of $2 million of dividends paid and charged to retained earnings.
11. LONG-TERM INCENTIVE COMPENSATION PLANS
The company's long-term incentive compensation plans provide for the grant of
stock options and the award of common stock and other market-based units to
certain key employees and nonemployee directors. Through 1994, shares of common
stock awarded under these plans normally were either restricted stock or
performance shares. During the restriction period, award holders have the rights
of stockholders, including the right to vote and receive cash dividends, but
they cannot transfer ownership.
In 1995, Hercules changed the structure of the long-term incentive compensation
plans to place a greater emphasis on shareholder value creation through grants
of regular stock options, performance-accelerated stock options, and Cash Value
Awards (performance-based awards denominated in cash and payable in shares of
common or restricted stock, subject to the same restrictions as restricted
stock). Restricted stock and other market-based units are awarded with respect
to certain programs. The number of awarded shares outstanding was 1,083,613;
873,627; and 1,881,946 at December 31, 1998, 1997, and 1996, respectively.
Under the company's incentive compensation plans, 2,197,137 shares of common
stock were available for grant as stock awards or stock option awards. Stock
awards are limited to approximately 15% of the total authorizations. Regular
stock options are granted at the market price on the date of grant and are
exercisable at various periods from one to five years after date of grant.
Performance-accelerated stock options are also granted at the market price on
the date of grant and are normally exercisable at nine and one-half years.
Exercisability may be
33
<PAGE> 34
accelerated based upon the achievement of predetermined performance goals. Both
regular and performance-accelerated stock options expire 10 years after the date
of grant.
Restricted shares, options and performance-accelerated stock options are
forfeited and revert to the company in the event of employment termination,
except in the case of death, disability, retirement, or other specified events.
The company applies APB Opinion 25 in accounting for its plans. Accordingly, no
compensation cost has been recognized for the stock option plans. The cost of
stock awards and other market-based units, which are charged to income over the
restriction or performance period, amounted to $5 million for 1998; $4 million
for 1997, and $9 million for 1996.
Below is a summary of outstanding stock option grants under the incentive
compensation plans during 1996, 1997, and 1998:
<TABLE>
<CAPTION>
Regular Performance-Accelerated
Weighted-average Weighted-average
Number of Shares Price Number of Shares Price
---------------- ----- ---------------- -----
<S> <C> <C> <C> <C>
January 1, 1996 3,883,184 $26.24 786,375 $48.54
Granted 673,450 $55.40 2,303,750 $49.66
Exercised (646,247) $21.29 -- --
Forfeited (800) $47.25 (14,319) $48.29
- -----------------------------------------------------------------------------------------------------------------------
December 31, 1996 3,909,587 $32.49 3,075,806 $49.38
Granted 1,708,100 $40.14 810,125 $41.07
Exercised (1,611,449) $20.97 -- --
Forfeited (4,950) $56.26 (10,534) $53.07
- -----------------------------------------------------------------------------------------------------------------------
December 31, 1997 4,001,288 $40.41 3,875,397 $47.63
Granted 2,696,215 $32.75 1,170,890 $41.09
Exercised (279,795) $24.93 -- --
Forfeited (66,430) $41.58 (15,035) $46.09
- -----------------------------------------------------------------------------------------------------------------------
December 31, 1998 6,351,278 $37.83 5,031,252 $46.12
</TABLE>
The weighted-average fair value of regular stock options granted during 1996,
1997, and 1998 was $14.36, $10.13, and $8.53 respectively. The weighted-average
fair value of performance-accelerated stock options granted during 1996, 1997,
and 1998 was $10.20, $9.39, and $9.24 respectively.
Following is a summary of regular stock options exercisable at December 31,
1996, 1997, and 1998, and their respective weighted-average share prices:
<TABLE>
<CAPTION>
Weighted-average
Number of Shares Exercise Price
---------------- --------------
<S> <C> <C>
Options exercisable
December 31, 1996 2,636,457 $25.08
Options exercisable
December 31, 1997 2,013,148 $38.54
Options exercisable
December 31, 1998 3,300,628 $41.57
</TABLE>
There were no performance-accelerated stock options exercisable at December 31,
1996, 1997 and 1998.
34
<PAGE> 35
Following is a summary of stock options outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Exercisable Options
Outstanding Options
Number Weighted-average Number
Exercise Price Outstanding Remaining Weighted-average Exercisable at Weighted-average
Range at 12/31/98 Contractual Life Exercise Price 12/31/98 Exercise Price
----- ----------- ---------------- -------------- -------------- --------------
Regular Stock Options
<S> <C> <C> <C> <C> <C>
$11 - $20 257,263 2.58 $15.62 257,263 $15.62
$21 - $30 1,915,600 9.31 $25.53 129,400 $25.00
$31 - $40 1,912,695 7.82 $38.75 1,491,140 $38.68
$41 - $60 2,265,720 7.79 $49.97 1,422,825 $50.79
--------- ---------
6,351,278 3,300,628
========= =========
Performance-Accelerated Stock Options
$25 - $40 1,094,733 9.01 $36.18 -- --
$41 - $50 3,114,778 7.83 $47.10 -- --
$51 - $61 821,741 7.08 $55.62 -- --
---------
5,031,252
=========
</TABLE>
The company estimates at December 31, 1998, 100% of performance-accelerated
stock options will eventually vest.
The company's Employee Stock Purchase Plan is a qualified noncompensatory plan,
which allows eligible employees to acquire shares of common stock through
systematic payroll deductions. The plan consists of three-month subscription
periods, beginning July 1 of each year. The purchase price is 85% of the fair
market value of the common stock on either the first or last day of that
subscription period, whichever is lower. Purchases may range from 2% to 15% of
an employee's base salary each pay period, subject to certain limitations.
Currently, 1,226,555 shares of Hercules common stock are registered for offer
and sale under the plan. Shares issued at December 31, 1998 and 1997, were
573,445 and 468,706, respectively. The company applies APB Opinion 25 and
related interpretations in accounting for its Employee Stock Purchase Plan.
Accordingly, no compensation cost has been recognized for the Employee Stock
Purchase Plan.
Had compensation cost for the company's Stock-Based Incentive Plans and Employee
Stock Purchase Plan been determined on the basis of fair value according to SFAS
No. 123, the fair value of each option granted or share purchased would be
estimated on the grant date using the Black-Scholes option pricing model.
The following assumptions would be used in estimating fair value for 1998, 1997,
and 1996:
<TABLE>
<CAPTION>
Performance accelerated Employee Stock
Assumption Regular Plan Plan Purchase Plan
---------- ------------ ---- -------------
<S> <C> <C> <C>
Dividend yield 3.0% 3.0% 3.0%
Risk-free interest rate 5.84% 5.77% 5.32%
Expected life 7.4 yrs. 5 yrs. 3 mos.
Expected volatility 23.1% 21.9% 27.0%
</TABLE>
35
<PAGE> 36
The company's net income and earnings per share for 1998, 1997, and 1996 would
approximate the pro forma amounts below:
<TABLE>
<CAPTION>
(Dollars in millions, except per share)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income
As reported $ 9 $319 $ 325
Pro forma $ (5) $308 $ 317
Basic earnings per share
As reported $ .10 $3.22 $3.10
Pro forma $ (.06) $3.10 $3.02
Diluted earnings per share
As reported $ .10 $3.13 $2.98
Pro forma $ (.06) $3.04 $2.92
</TABLE>
SFAS No. 123 does not apply to awards prior to 1995, and additional
awards in future years are anticipated.
12. ADDITIONAL BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997
---- ----
<S> <C> <C>
Property, plant, and equipment
Land $ 74 $ 18
Buildings and equipment 2,837 1,957
Construction in progress 126 113
------ ------
Total 3,037 2,088
Accumulated depreciation and amortization 1,599 1,401
------ ------
Net property, plant, and equipment $1,438 $ 687
====== ======
Accrued expenses
Payroll and employee benefits $ 63 $ 37
Income taxes payable 15 91
Accrued pension benefits 29 --
Other 374 280
------ ------
$ 481 $ 408
====== ======
</TABLE>
36
<PAGE> 37
13. PENSION AND OTHER POSTRETIREMENT BENEFITS
The company provides defined benefit pension and postretirement benefit plans to
employees. The pension and postretirement benefit plans for BetzDearborn
employees are included in the 1998 valuation. The following provides a
reconciliation of benefit obligations, plan assets, and funded status of the
plans.
<TABLE>
<CAPTION>
(Dollars in millions)
Other Postretirement
Pension Benefits Benefits
--------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at January 1 $ 1,114 $ 1,046 $ 141 $ 141
Service cost 20 17 1 1
Interest cost 83 78 10 10
Amendments -- 6 -- --
Assumption change 52 77 3 10
Divestiture -- (4) -- --
Acquisition 284 -- 9 --
Translation difference 7 (13) -- --
Actuarial loss 28 12 10 --
Benefits paid from plan assets (89) (105) (2) (2)
Benefits paid by Company -- -- (18) (19)
------- ------- ------- -------
Benefit obligation at December 31 $ 1,499 $ 1,114 $ 154 $ 141
======= ======= ======= =======
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1 $ 1,237 $ 1,168 $ 9 $ 9
Actual return on plan assets 182 187 1 2
Divestiture -- (2) -- --
Acquisition 256 -- -- --
Company contributions (refund) (2) 4 -- --
Translation difference 6 (15) -- --
Benefits paid from plan assets (90) (105) (2) (2)
------- ------- ------- -------
Fair value of plan assets at December 31 $ 1,589 $ 1,237 $ 8 $ 9
======= ======= ======= =======
Funded status of the plans $ 90 $ 124 $ (146) $ (132)
Unrecognized actuarial loss 89 93 34 22
Unrecognized prior service cost (benefit) 35 39 (44) (50)
Unrecognized net transition obligation (25) (40) -- --
Amount included in accrued expenses- other -- -- 20 21
------- ------- ------- -------
Prepaid (accrued) benefit cost $ 189 $ 216 $ (136) $ (139)
======= ======= ======= =======
AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL
POSITION CONSIST OF:
Prepaid benefit cost 218 216 -- --
Accrued benefit liability (29) -- (136) (139)
------- ------- ------- -------
$ 189 $ 216 $ (136) $ (139)
======= ======= ======= =======
ASSUMPTIONS AS OF DECEMBER 31
Weighted average discount rate 7.00% 7.25% 7.00% 7.25%
Expected return on plan assets 9.25% 9.25% 9.25% 9.25%
Rate of compensation increase 4.50% 4.50% 4.50% 4.50%
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
---------------- -----------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 20 $ 17 $ 19 $ 1 $ 1 $ 1
Interest cost 83 78 77 10 10 11
Return on plan assets (expected) (114) (103) (99) (1) (1) (1)
Amortization and deferrals 12 5 6 (4) (5) (5)
Amortization of transition asset (14) (14) (14) -- -- --
---- ------- ------- ------ ------ ------
Benefit cost (credit) $ (13) $ (17) $ (11) $ 6 $ 5 $ 6
====== ======= ======= ==== ==== ====
</TABLE>
37
<PAGE> 38
Pension
During 1997, the company recognized a charge of approximately $8 million for
special termination benefits.
Other Postretirement Benefits
The non-pension postretirement benefit plans are contributory health care and
life insurance plans. In August 1993, a Voluntary Employees' Beneficiary
Association (VEBA) Trust was established and funded with $10 million of company
funds. The company periodically obtains reimbursement for union retiree claims,
while other claims are paid from company assets. The participant contributions
are immediately used to cover claim payments, and for this reason do not appear
as contributions to plan assets.
The assumed health care cost trend rate at December 31, 1998 and 1997, was 5%
for those under age 65 and 4.75% for those over age 65, decreasing to 4.5% in
subsequent years.
A one-percentage point increase or decrease in the assumed health care cost
trend rate would increase or decrease the postretirement benefit obligation by
$6 million or $7 million, respectively, and would not have a material effect on
aggregate service and interest cost components.
14. PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT
Purchased in-process research and development (IPR&D) represents the value
assigned in a purchase business combination to research and development projects
of the acquired business that were commenced but not yet completed at the date
of the acquisition, and which, if unsuccessful, have no alternative future use
in research and development activities or otherwise. Amounts assigned to
purchased IPR&D must be charged to expense at the date of consummation of the
purchase business combination. Accordingly, the company has charged
approximately $130 million to expense at the acquisition date for IPR&D related
to the BetzDearborn acquisition. (See Note 1.)
The IPR&D projects were principally included in the water treatment and paper
process divisions of the acquired business. The former Water Treatment Group
(WTG) provided specialty water and process treatment programs for boiler,
cooling, influent, and effluent applications to markets such as refining,
chemical, paper, electric utility, food, industrial, commercial and
institutional establishments. Overall, the products are used to control
corrosion, scale, deposit formation, and microbiological growth, conserve energy
and improve efficiency. Additionally, the former Paper Process Group (PPG)
brought to market custom-engineered programs for the process-related problems
associated with paper production. These problems include deposition, corrosion,
microbiological fouling, foam control, deinking and felt conditioning.
38
<PAGE> 39
The following is a summary of the significant projects and the values assigned:
<TABLE>
<CAPTION>
(Dollars in millions)
Estimated
Percent Cost to Estimated Projected
Project Group Complete Complete Total Cost Launch Date IPR&D Value
------- ----- -------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
New Blend of Actives
(1) PPG 73% $.3 $1.0 1999 $38
New Corrosion
Inhibitor (2) WTG 31% 1.5 2.1 2002 26
Alkaline Drainage Aid
(3) PPG 39% 1.6 2.7 2000 6
Other major projects WTG 54% Avg. 3.5 7.6 1999-2001 27
Other major projects PPG 80% Avg. .7 3.7 1999-2001 15
All other projects Various 29% Avg. 4.3 6.1 Various 18
-------- ----- ----- ----
Total IPR&D 49% $11.9 $23.2 $130
======== ===== ===== ====
</TABLE>
1) This project will continuously screen new microbiocidal actives in order
to identify promising compounds that may improve current product mix of
offerings.
2) This project involves the development of new corrosion control chemistry
for application in a range of water treatment systems.
3) This project involves the development of advanced retention, drainage,
and formation systems for printing and writing paper.
Due to the uniqueness of each of the projects, the costs and effort required are
estimated based on the latest available information. Additionally, the launch
date reflects management's best estimate of the time that the company will begin
to benefit from cash inflow of the projects. However, there is a risk that
certain projects may not be completed successfully for a variety of reasons
including: change in strategies, inability to develop a cost efficient
treatment, and changes in market demand or customer requirements.
The IPR&D valuation charge was measured by the stage of completion method,
primarily calculated by dividing the costs incurred to date by the total
estimated costs. These percentages were applied to the results of
project-by-project discounted cash flow models that estimated the present value
of residual cash flows deemed attributable solely to the underlying IPR&D.
The projected revenues, costs, and margins in the cash flow forecasts are
consistent with projections by management based on available historical data.
The revenue projections are based on an opportunity analysis for each project,
which takes into account market and competitive conditions, potential customers,
and strategic goals. The weighted average cost of capital for the overall
business was estimated at 11% and the risk-adjusted discount rate used in the
IPR&D project valuation model was 13%.
15. OTHER OPERATING EXPENSES (INCOME), NET
As a result of the BetzDearborn acquisition in the fourth quarter of 1998,
Hercules began to formulate and implement a plan to merge the operations of
BetzDearborn with Hercules (see Note 1). Additionally, the company reviewed its
existing operations and support infrastructure and approved a plan to terminate
Hercules employees and exit activities to eliminate redundancies and
inefficiencies. As a result, the company incurred charges of approximately $76
million. These charges include employee termination benefits of $31 million;
exit costs related to facility closures of $10 million; write-downs of property,
plant and equipment of $24 million; and integration expenses of $11 million.
Employee termination benefits are for approximately 350 Hercules manufacturing,
sales
39
<PAGE> 40
and marketing, administration, technology and support personnel. Facility
closures and exit costs relate primarily to Process Chemicals and Services in
connection with the acquisition. Write-downs of property, plant and equipment
relate to asset impairments in Chemical Specialties and Functional Products
resulting from adverse business negotiations, the effects of the BetzDearborn
acquisition, and the loss of a customer. Integration expenses include consulting
and legal fees, integration bonuses, travel and training, and are expensed as
incurred.
Other operating expenses in 1997 included charges of $146 million, primarily
associated with reorganization of management and the adoption of new competitive
strategies (announced in early 1997). The charges included $122 million related
to asset rationalizations and impairment and $24 million related to severance
benefits. Included in the $122 million is an impairment loss of $95 million.
Additionally, the company recognized approximately $27 million of
rationalization charges primarily associated with certain assets, which were no
longer being utilized, and lease abandonment costs. Concurrently, management
authorized and committed the company to a plan to reduce its work force by
approximately 270 employees and accrued $24 million of severance-related
benefits. The plan included reorganization of management, reductions in
operating personnel at certain domestic and foreign facilities, and the
consolidation of certain support functions. Other operating expenses in 1997
also include $13 million of net environmental cleanup costs, principally for
nonoperating sites and $8 million of executive retirement benefits.
In 1996, other operating expenses (income), net, included probable recoveries
related to environmental remediation of $13 million and reduction in the
estimated loss on the divestiture of the Composite Products Division of $5
million.
During 1998, the company paid $10 million of these liabilities. As of December
31, 1998, the remaining liability for these charges is $36 million for
termination benefits representing approximately 370 employees and $10 million
for other exit costs. Reorganization in the foreign facilities has proceeded
slower than anticipated due to changes in the information system implementation
schedule, acquisition activity and other corporate initiatives. Management
expects to complete remaining actions under this plan during 2000.
16. INTEREST AND DEBT EXPENSE
Interest and debt costs are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Costs incurred $114 $47 $40
Amount capitalized 11 8 5
---- --- ---
Amount expensed $103 $39 $35
==== === ===
</TABLE>
17. OTHER INCOME (EXPENSE), NET
Other income (expense), net, consists of the following:
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Interest income $ 36 $ 29 $ 5
Net gains on dispositions 23 398 22
Acquisition costs -- (20) --
Legal settlements and accruals (66) (41) --
Interest rate swap termination (13) -- --
Miscellaneous income (expense), net (2) 8 (1)
----- ---- ---
$(22) $374 $26
===== ==== ===
</TABLE>
Interest income in 1998 and 1997 relates primarily to the $500 million note
received upon completion of the Tastemaker monetization. The note was sold
during the fourth quarter of 1998 with a net loss of $3 million reported in net
gains on dispositions. Also, gains of $12 million and $19 million in 1998 and
1997, respectively, were recorded from the sale of Alliant Techsystems common
stock held by Hercules. (See Note 21.) Additionally, 1997 includes a gain of
$368 million on the completion of transactions that monetized the company's
investment in Tastemaker, a 50%-owned flavors joint venture. Net gains on
dispositions in 1996 reflect the sale of real estate and the sale of a product
line. Acquisition costs in 1997 represent a charge primarily related to the
company's
40
<PAGE> 41
unsuccessful bid for Allied Colloids. The 1998 legal settlements and
accruals relate primarily to settlements of Qui Tam ("Whistle Blower") lawsuits.
(See Note 22.) The 1998 loss from terminated interest rate swaps is related to
the company's financing effort upon the acquisition of BetzDearborn.
Miscellaneous income (expense), net, includes net foreign currency gains of $5
million, $19 million, and $11 million in 1998, 1997, and 1996, respectively.
18. INCOME TAXES
The domestic and foreign components of income before taxes and effect of
change in accounting principle are presented below:
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Domestic $(147) $396 $250
Foreign 224 197 235
----- ---- ----
$ 77 $593 $485
===== ==== ====
</TABLE>
A summary of the components of the tax provision follows:
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable
U.S. federal $(26) $169 $33
Foreign 74 63 60
State (4) 2 9
Deferred
Domestic 17 30 41
Foreign 7 5 17
--- ---- ----
Provision for income taxes $68 $269 $160
=== ==== ====
</TABLE>
Deferred tax liabilities (assets) at December 31 consist of:
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997
---- ----
<S> <C> <C>
Depreciation $153 $119
Prepaid pension 93 82
Inventory 6 15
Investments 84 84
Other 46 22
---- ----
Gross deferred tax liabilities 382 322
---- ----
Postretirement benefits other than pensions (81) (66)
Accrued expenses (126) (110)
Loss carryforwards (24) (15)
Other (31) (32)
---- ----
Gross deferred tax assets (262) (223)
---- ----
Valuation allowance 12 12
---- ----
$132 $111
==== ====
</TABLE>
41
<PAGE> 42
A reconciliation of the U.S. statutory income tax rate to the effective
rate follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. statutory income tax rate 35% 35% 35%
Purchased in-process research and development (Note 14) 59 -- --
Goodwill amortization 7 -- --
Foreign dividends net of credits -- 2 --
State taxes 2 -- 1
Utilization of operating losses -- -- (2)
Reserves (17) 7 --
Other 2 1 (1)
--- --- ---
Effective tax rate 88% 45% 33%
=== === ===
</TABLE>
The company provides taxes on undistributed earnings of subsidiaries and
affiliates included in consolidated retained earnings to the extent such
earnings are planned to be remitted and not reinvested permanently.
The undistributed earnings of subsidiaries and affiliates on which no provision
for foreign withholding or U.S. income taxes has been made amounted to
approximately $400 million at December 31, 1998. U.S. and foreign income taxes
that would be payable if such earnings were distributed may be lower than the
amount computed at the U.S. statutory rate because of the availability of tax
credits.
19. EARNINGS PER SHARE
The following table shows the amounts used in computing earnings per share and
the effect on income and the weighted-average number of shares of dilutive
potential common stock:
<TABLE>
<CAPTION>
(Dollars and shares in millions, except per share)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Basic EPS computation:
Income before effect of change in accounting principle $ 9 $ 324 $ 325
Effect of change in accounting principle -- (5) --
------- ------- -------
Net income $ 9 $ 319 $ 325
======= ======= =======
Weighted-average shares outstanding 96.3 99.2 104.9
Earnings per share before effect of change in
accounting principle $ .10 $ 3.27 $ 3.10
Effect of change in accounting principle -- (.05) --
------- ------- -------
Earnings per share $ .10 $ 3.22 $ 3.10
======= ======= =======
Diluted EPS computation:
Income before effect of change in accounting principle $ 9 $ 324 $ 325
Interest on convertible debentures -- 2 2
Effect of change in accounting principle -- (5) --
------- ------- -------
Net Income $ 9 $ 321 $ 327
======= ======= =======
Weighted-average shares outstanding 96.3 99.2 104.9
Options .6 1.1 1.9
Convertible debentures .5 2.1 2.9
------- ------- -------
Adjusted weighted-average shares 97.4 102.4 109.7
======= ======= =======
Earnings per share before effect of change in
accounting principle $ .10 $ 3.18 $ 2.98
Effect of change in accounting principle -- (.05) --
------- ------- -------
Earnings per share $ .10 $ 3.13 $ 2.98
======= ======= =======
</TABLE>
42
<PAGE> 43
20. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Notional Amounts and Credit Exposure of Derivatives
The notional amounts of derivatives summarized below do not represent amounts
exchanged by the parties and, thus, are not a measure of the exposure of the
company through its use of derivatives. The amounts exchanged are calculated on
the basis of the notional amounts and the other terms of the derivatives, which
relate to interest rates or exchange rates.
Interest Rate Risk Management
During 1998, interest rate swaps which converted 6.02% average fixed-rate debt
to floating-rate debt expired. During the fourth quarter, a series of interest
rate swap agreements converting floating rate debt into fixed rate debt ranging
from 6.05% to 7.08% per year were terminated primarily in conjunction with the
sale of the Tastemaker note (see Note 4) and the BetzDearborn acquisition. New
interest rate swaps totaling $1.0 billion were added in the fourth quarter 1998.
This series of interest rate swap agreements, maturing from 1999 through
December 2002, effectively converts floating-rate debt into debt with a fixed
rate ranging from 4.91% to 5.21% per year as a hedge against the company's
interest rate exposure on its variable rate debt outstanding. For the years
1998, 1997, and 1996, these contracts resulted in a less than 1% change in the
effective interest rate on the weighted-average notional principal amounts
outstanding. The aggregate notional principal amounts at the end of 1998 and
1997 were $1.0 billion and $650 million, respectively.
The following table indicates the types of swaps used and their weighted-average
interest rates:
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997
---- ----
<S> <C> <C>
Pay fixed on swaps notional amount (at year-end) $ 1,000 $ 650
Average pay rate 6.4% 6.4%
Average receive rate 5.5% 5.7%
</TABLE>
Foreign Exchange Risk Management
The company selectively uses foreign currency forward contracts and currency
swaps to offset the effects of exchange rate changes on reported earnings, cash
flow, and net asset positions. The primary exposures are denominated in Danish
kroner, Dutch guilder, Belgian franc, British pound sterling, and the German
mark. Some of the contracts involve the exchange of two foreign currencies,
according to local needs in foreign subsidiaries. The term of the currency
derivatives is rarely more than one year. At December 31, 1998 and 1997, the
company had outstanding forward-exchange contracts to purchase foreign
currencies aggregating $117 million and $29 million and to sell foreign
currencies aggregating $320 million and $171 million, respectively. Non-U.S.
dollar cross-currency trades aggregated $380 million and $630 million at
December 31, 1998 and 1997, respectively. Currency swap agreements, used to
hedge net investment positions, totaled $512 million at December 31, 1998. The
forward-exchange contracts and currency swap agreements outstanding at December
31, 1998 will mature during 1999.
Fair Values
The following table presents the carrying amounts and fair values of the
company's financial instruments at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(Dollars in millions)
1998 1997
---------------------------- ---------------------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Investment securities (available for sale) $ 31 $ 31 $ 81 $ 81
Investment securities (held to maturity) -- -- 500 500
Long-term debt (3,096) (3,101) (419) (452)
Company-obligated preferred securities of subsidiary trust (200) (200) -- --
Foreign exchange contracts 6* 6 2* 2
Currency swaps 8* 8 -- --
Interest rate swap contracts -- 1 (1)* (12)
</TABLE>
*The carrying amount represents the net unrealized gain or net interest payable
associated with the contracts at the end of the period.
43
<PAGE> 44
Fair values of derivative contracts are indicative of cash that would have been
required had settlement been December 31, 1998.
Basis of Valuation
Investment securities: Quoted market prices.
Long-term debt: Present value of expected cash flows related to existing
borrowings discounted at rates currently available to the company for long-term
borrowings with similar terms and remaining maturities.
Company obligated preferred securities of subsidiary trust: Year-end interest
rates and company common stock price.
Foreign exchange contracts: Year-end exchange rates.
Currency swaps: Year-end interest and exchange rates.
Interest rate swap contracts: Bank or market quotes or discounted cash flows
using year-end interest rates.
21. DIVESTITURES
In March 1997, the company completed transactions to monetize its investment in
Tastemaker for approximately $608 million, including $108 million in cash and a
$500 million, 6.2%, interest-bearing five-year note. Equity in income of
affiliated companies included Tastemaker earnings of $11 million in 1997 and $32
million in 1996.
In June 1997, the company completed a joint venture of its polypropylene fiber
business with Jacob Holm & Sons A/S (Denmark) in which Hercules owned 51% of the
joint venture, which was accounted for on the equity method at that time. In
July 1998, Hercules purchased its partner's 49% share of the joint venture, with
the operating results of FiberVisions being included in Hercules' consolidated
financial statements since the date of acquisition. (See Note 1.)
Pursuant to a 1997 agreement, Hercules sold its remaining shares of Alliant
Techsystems Inc. for $12 million in 1998.
In June 1996, the company sold its Composite Products Division for $141 million
in cash. Net sales and operating profit of this business were $49 million and $8
million, respectively in 1996.
22. COMMITMENTS AND CONTINGENCIES
Leases
Hercules has operating leases (including office space, transportation, and data
processing equipment) expiring at various dates. Rental expense was $35 million
in 1998, and $31 million in both 1997 and 1996.
At December 31, 1998, minimum rental payments under noncancelable leases
aggregated $317 million with subleases of $30 million. A significant portion of
these payments relates to a long-term operating lease for corporate office
facilities. The net minimum payments over the next five years are $39 million in
1999, $32 million in 2000, $24 million in 2001, $20 million in 2002, and $18
million in 2003.
Environmental
Hercules has been identified as a potentially responsible party (PRP) by U.S.
federal and state authorities, or has been sued for contribution by private
parties, for the cost of environmental investigation and/or cleanup at numerous
sites. The estimated range of the reasonably possible share of costs for
investigation and cleanup is between $63 million and $199 million. The actual
costs will depend upon numerous factors, including the number of parties found
responsible at each environmental site and their ability to pay, the actual
methods of remediation, outcomes of negotiations with regulatory authorities,
outcomes of litigation, changes in environmental laws and regulations,
technological developments, and the years of remedial activity required, which
could range up to 30 years.
In 1992, Hercules brought suit against its insurance carriers for past and
future costs for cleanup of certain environmental sites. In April 1998, the
trial regarding insurance recovery for the Jacksonville, Arkansas site (see
discussion below) was completed. The jury returned a "Special Verdict Form" with
findings that will, in conjunction with the court's other opinions, be used by
the Court to enter a judgment. The judgment will determine the amount of
Hercules recovery for past cleanup expenditures and will state that Hercules is
entitled to similar coverage for costs incurred since September 30, 1997 and in
the future. Hercules has not included any insurance recovery in the estimates
above.
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<PAGE> 45
Hercules becomes aware of sites in which it may be, but has not yet been named a
PRP, principally through its knowledge of investigation of sites by the U.S.
Environmental Protection Agency (EPA) or other government agencies or through
correspondence with previously named PRPs requesting information on Hercules'
activities at sites under investigation. In addition, Hercules has established
procedures for identifying environmental issues at its respective plant sites.
Environmental coordinators, familiar with environmental laws and regulations,
are resources for identification of environmental issues. Further, Hercules has
environmental audit programs, which are designed to identify environmental
issues at operating plant sites. Through these programs and
information-gathering activities, Hercules identifies potential environmental,
regulatory, and remedial issues.
Litigation over liability at Jacksonville, Arkansas, the most significant site,
has been pending since 1980. As a result of a pretrial court ruling in October
1993, Hercules has been held jointly and severally liable for costs incurred,
and for future remediation costs, at the Jacksonville site by the District
Court, Eastern District of Arkansas (the Court).
Other defendants in this litigation have either settled with the government or,
in the case of the Department of Defense (DOD), have not been held liable.
Hercules appealed the Court's order finding the DOD not liable. On January 31,
1995, the 8th Circuit Court of Appeals upheld the Court's order. Hercules filed
a petition to the U.S. Supreme Court requesting review and reversal of the 8th
Circuit Court ruling. This petition was denied on June 26, 1995, and the case
was remanded to the District Court for further proceedings.
On May 21, 1997, the Court issued a ruling that Uniroyal is liable and that
Standard Chlorine is not liable to Hercules for contribution. A trial on
allocation and damages among Hercules, Uniroyal, and the United States was
scheduled to begin October 1998. Through the filing of separate summary judgment
motions, Hercules and Uniroyal raised a number of defenses to the United States'
ability to recover its costs. On October 23, 1998, the Court denied those
motions and granted the United States' summary judgment motion, ordering
Hercules and Uniroyal to pay the United States approximately $103 million plus
any additional response costs incurred or to be incurred after July 31, 1997.
Hercules expects that this amount will be reduced by approximately $7 million,
the amount received by the United States in previous settlements with other
parties. Trial testimony on the issue of allocation between Hercules and
Uniroyal was completed on November 6, 1998. Once a final judgment has been
entered, Hercules expects to appeal the Court's determination with respect to
its liability, the United States' costs, the divisibility of harm issue, and
Standard Chlorine's liability.
At December 31, 1998, the accrued liability for environmental remediation
represents management's best estimate of the probable and reasonably estimable
costs related to environmental remediation. The extent of liability is evaluated
quarterly. The measurement of the liability is evaluated based on currently
available information, including the process of remedial investigations at each
site and the current status of negotiations with regulatory authorities
regarding the method and extent of apportionment of costs among other PRPs.
Hercules does not anticipate that its financial condition will be materially
affected by environmental remediation costs in excess of amounts accrued,
although quarterly or annual operating results could be materially affected.
Litigation:
The company is a defendant in numerous lawsuits that arise out of, and are
incidental to, the conduct of its business. In these legal proceedings, no
specifically identified director, officer, or affiliate is a party or a named
defendant. These suits concern issues such as product liability, contract
disputes, labor-related matters, patent infringement, environmental proceedings,
property damage, and personal injury matters.
Hercules was a defendant in three Qui Tam (Whistle Blower) lawsuits brought by
former employees of the Aerospace business sold to Alliant Techsystems Inc. in
March 1995. Among the allegations made in the three lawsuits were allegations
relating to submission of false claims and records under various government
contracts, delivery of defective products, a deficient quality control program,
mischarging of work performed under government contracts, misuse of government
equipment, other acts of financial mismanagement, and wrongful termination
claims. The government, after investigation of the allegations, declined to
intervene in two of these lawsuits and partially intervened in the third. In May
1998, Hercules announced that it had agreed to settle the first lawsuit. The
settlement was approved by the court and the case was dismissed in July 1998.
In August 1998, the parties to the second lawsuit reached a tentative
settlement, subject to approval of the court. Although it did not intervene in
the case, the U.S. Department of Justice (DOJ) objected to approval of the
tentative
45
<PAGE> 46
settlement, arguing that Hercules should only be released from claims that the
government contended were actually investigated, and that the proposed
allocation of settlement proceeds between False Claims Act claims and wrongful
termination claims should be revised to attribute a higher percentage of
recovery to claims arising under the False Claims Act. On February 9, 1999, the
court entered a judgment approving the settlement and dismissing the lawsuit.
The DOJ has 60 days from that date in which to file a Notice of Appeal, if it
chooses to do so.
In February 1998, the parties to the third lawsuit reached a tentative
settlement, which has since been finalized, under which all claims alleging
mischarging to the Intermediate Nuclear Forces Contract were settled. Other
portions of the complaint were not resolved by the settlement. In August 1998,
the parties reached a tentative settlement of the remaining portions of the
complaint, subject to approval of the Court. The DOJ objected to approval of the
tentative settlement, arguing that Hercules should only be released from claims
that the government contended were actually investigated, and that the
settlement agreement should have contained certain provisions preventing Alliant
Techsystems Inc., which was also a defendant in the lawsuit, from recovering
certain costs under its government contracts. On February 17, 1999, the Court
entered a judgment approving the settlement and dismissing the lawsuit. The DOJ
has 60 days from that date in which to file a Notice of Appeal, if it chooses to
do so.
As a result of these settlements, the company recognized charges of $4 million
and $62 million in 1997 and 1998, respectively.
In addition to the Jacksonville, Arkansas, site litigation described above, two
individuals have sued Hercules in a lawsuit captioned Jeffrey Shelton, Jr., et
al. v. Hercules Incorporated, Civil No. LR-C-97-131 (E.D. Ark. 1997). These
individuals seek medical monitoring and damages for loss of recreational
opportunities. They have brought a Resource Conservation and Recovery Act (RCRA)
citizens suit against Hercules seeking an injunction which would require
Hercules to fund or perform various environmental and health studies and pay for
any required remediation to the Bayou Meto. Trial is presently scheduled for
August 1999. Further, 19 individuals have sued Hercules in a matter entitled
Gary Graham, et al. v. Vertac Chemical Corporation and Hercules Incorporated,
No. LR-C-98-678 (E.D. Ark. 1998). These individuals seek damages for personal
injuries and diminution of property value as a result of alleged dioxin
contamination from the Jacksonville site. Trial is presently scheduled for
August 1999. Hercules denies liability in both actions, and Hercules intends to
vigorously defend itself.
BetzDearborn, along with Pacific Gas and Electric (PG&E), is a defendant in four
lawsuits involving in the aggregate approximately 2,350 plaintiffs pending in
the Superior Court of Los Angeles County, California (the Lawsuits). Plaintiffs
are comprised primarily of present and former PG&E employees, their families,
and residents living in the vicinity of the three PG&E facilities that are the
subject of the Lawsuits. Plaintiffs seek unspecified monetary damages (including
punitive damages) for personal injuries arising from alleged exposures to
chromate-based products sold or allegedly sold by Betz Laboratories, Inc.
(predecessor to BetzDearborn) to PG&E for use in the cooling towers located at
these facilities. The sales in question occurred or allegedly occurred at
various times between 1952 and the mid-1980s, depending upon the facility. In
the Acosta, Aguilar, and Aguayo cases, the parties have selected 20 plaintiffs
and 2 alternates whose claims will be tried together, and prior to the claims
for the remaining plaintiffs in the Lawsuits. It is anticipated that the 20
plaintiffs' claims will be tried in late 1999. BetzDearborn denies any legal
liability to plaintiffs, believes it has substantial defenses, and intends to
contest the claims vigorously. BetzDearborn further believes that any claim for
punitive damages is without any legitimate basis in fact or law. The Lawsuits
are captioned as follows: Acosta, et al. v. Betz Laboratories, et al., No. BC
161 669 (1996); Adams, et al. v. Betz Laboratories, et al., No. BC 113 000
(1994); Aguilar, et al. v. Betz Laboratories, et al., No. BC 158 588 (1996); and
Aguayo et al. v. Betz Laboratories, et al., No. BC 123 749 (1995).
Although both BetzDearborn and PG&E are named as defendants in each of the
Lawsuits, not all plaintiffs seek damages from both defendants. PG&E previously
settled a lawsuit brought by many of the same individuals who are plaintiffs in
the Adams lawsuit; as a result, PG&E will have no additional liability to those
plaintiffs.
In October 1998, BetzDearborn and PG&E settled a fifth lawsuit relating to
alleged exposure to chromate-based products sold or allegedly sold by Betz
Laboratories, Inc. to PG&E for use in cooling towers at one or more of the PG&E
facilities. That lawsuit was captioned Riep, et al. v. Betz Laboratories, et
al., No. 984695 (San Francisco County, 1997). The amount of the settlement was
not material.
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<PAGE> 47
BetzDearborn maintained insurance coverage for the purpose of securing
protection against alleged product and other liabilities, and certain of the
insurance carriers have undertaken to pay the cost of the defense of the
Lawsuits subject to various reservations of rights. BetzDearborn will pursue all
available insurance coverage to fund any damages payable to plaintiffs in
connection with the Lawsuits (excluding any punitive damages to the extent not
recoverable under BetzDearborn's insurance policies).
While it is not feasible to predict the outcome of all pending suits and claims,
the ultimate resolution of these matters could have a material effect upon the
financial position of Hercules, and the resolution of any of the matters during
a specific period could have a material effect on the quarterly or annual
operating results for that period.
23. CHANGE IN ACCOUNTING PRINCIPLE
In November 1997, FASB's Emerging Issues Task Force (EITF) reached a final
consensus on Issue 97-13, "Accounting for Costs Incurred in Connection With a
Consulting Contract That Combines Business Process Reengineering and Information
Technology Transformation." Activities deemed to be business process
reengineering include the following: current state assessments, configuring and
prototyping, process reengineering, and work force restructuring. The consensus
requires that the unamortized amounts of such costs previously capitalized as of
the beginning of the quarter, which includes November 20, 1997, be charged
during that quarter as the cumulative effect of a change in accounting
principle. The company adopted the consensus during the fourth quarter of 1997
and recorded a cumulative-effect adjustment of $5 million.
24. OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
In 1998, Hercules adopted Statement of Financial Accounting Standards (SFAS) No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
statement establishes new standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosure about products and services, geographic area, and major
customers. In compliance with SFAS 131 and with the acquisition of BetzDearborn,
the company has identified three reportable segments and has restated prior
years to conform with the 1998 presentation.
Process Chemicals and Services: (Pulp and Paper and BetzDearborn.) Products and
services in this segment are designed to enhance customers' processes and
improve their manufacturing costs or environmental impact. Principal products
and markets include performance additives and water and process treatment
chemicals and related on-site services for a wide variety of industrial and
commercial applications including pulp and paper mills, refineries, chemical
plants, metals manufacturers, automobile assembly plants and makers of food and
beverages.
Functional Products: (Aqualon and Food Gums.) Products from this segment are
principally derived from natural resources and are sold as key raw materials to
other manufacturers. Principal products and markets include water-soluble
polymers and natural gums, used as thickeners, emulsifiers and stabilizers for
water-based paints, oil and gas exploration, building materials, dairy and
bakery products and other processed food products such as jams, jellies and
meats.
Chemical Specialties: (Resins and FiberVisions.) Products in this segment
provide low-cost, technology driven solutions to meet customer needs and market
demands. Principal products and markets include rosin and hydrocarbon resins for
adhesives used in nonwoven fabrics, textile fibers, and adhesive tapes;
thermal-bond polypropylene staple fiber for disposable diapers and other
hygienic products; and automotive textiles.
The company evaluates performance and makes decisions based primarily on "Profit
from Operations" and "Capital Employed." Consolidated capital employed
represents the total resources employed in the company and is the sum of total
debt, trust preferred securities and stockholders' equity. Capital employed in
each reportable segment represents the net operating assets employed to conduct
business in that segment and generally includes working capital (excluding cash)
and property, plant and equipment. Other assets and liabilities, primarily
goodwill and other intangibles, not specifically allocated to business segments,
are reflected in "Reconciling Items" in the table below.
Hercules has no single customer representing greater than 10% of its revenues.
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<PAGE> 48
GEOGRAPHIC REPORTING
For geographic reporting, no single country, outside the United States, is
material for separate disclosure. However, because the company has significant
foreign operations, revenues and long-lived assets are disclosed by geographic
region.
Revenues are reported on a "customer basis," meaning that net sales are included
in the geographic area where the customer is located. Long-lived assets are
included in the geographic areas in which the producing entities are located.
Intersegment sales are eliminated in consolidation.
48
<PAGE> 49
(Dollars in millions)
<TABLE>
<CAPTION>
PROCESS
CHEMICALS
AND FUNCTIONAL CHEMICAL RECONCILING
INDUSTRY SEGMENTS SERVICES PRODUCTS SPECIALTIES ITEMS CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------------------------
1998
<S> <C> <C> <C> <C> <C>
Net sales $717 $863 $566 $ (1) $2,145
Profit (loss) from operations 131 215 75 (229)(a) 192
Equity in income of affiliated companies 10
Interest and debt expense 103
Other income (expense), net (22)
------
Income before income taxes 77
Capital employed 756 392 388 2,885 (d) 4,421
Capital expenditures 44 53 36 24 157
Depreciation and amortization 22 32 19 35 108
- ------------------------------------------------------------------------------------------------------------------------------------
1997
Net sales $443 $898 $526 $ (1) $1,866
Profit (loss) from operations 100 224 67 (163)(b) 228
Equity in income of affiliated companies 30
Interest and debt expense 39
Other income, net 374
------
Income before income taxes 593
Capital employed 138 355 168 723 (d) 1,384
Capital expenditures 22 47 30 20 119
Depreciation and amortization 11 34 13 18 76
- ------------------------------------------------------------------------------------------------------------------------------------
1996
Net sales $452 $924 $633 $ 51 (c) $2,060
Profit (loss) from operations 108 220 95 18 (c) 441
Equity in income of affiliated companies 21 32 53
Interest and debt expense 35
Other income, net 26
------
Income before income taxes 485
Capital employed 137 398 268 742 (d) 1,545
Capital expenditures 14 48 31 27 120
Depreciation and amortization 13 49 20 26 108
</TABLE>
<TABLE>
<CAPTION>
UNITED
GEOGRAPHIC AREAS STATES EUROPE AMERICAS (e) ASIA PACIFIC TOTAL
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Net sales $ 944 $ 785 $ 258 $ 158 $2,145
Long-lived assets (f) 3,083 681 125 97 3,986
1997
Net sales 826 655 212 173 1,866
Long-lived assets (f) 387 309 19 16 731
1996
Net sales 929 726 223 182 2,060
Long-lived assets (f) 529 339 39 9 916
</TABLE>
49
<PAGE> 50
(a) Includes costs for purchased in-process research and development,
facility closure and contract termination, employee termination
benefits, write-downs of property, plant and equipment, other
integration expenses, and amortization of goodwill and intangibles.
(See Notes 14 and 15.)
(b) Primarily includes asset rationalizations, impairments and severance
costs. (See Note 15.)
(c) Includes revenues and profits pertaining to the Composite Products
business sold in June 1996.
(d) Assets and liabilities not specifically allocated to business segments,
primarily goodwill, intangibles, and other long-term assets net of
liabilities.
(e) Ex-U.S.A.
(f) Long-lived assets include Property, plant and equipment, Goodwill and
Other intangible assets. In 1998, the goodwill and other intangible
assets related to the BetzDearborn acquisition are reflected in the
United States region. Once the purchase price allocation is completed,
these assets will be reported in the appropriate regions.
50
<PAGE> 51
Hercules Incorporated
Summary of Quarterly Results (Unaudited) (Dollars in millions, except per share)
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Results
-----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 430 $ 495 $ 445 $ 502 $ 510 $ 448 $ 760 $ 421 $2,145 $1,866
Cost of sales 262 320 267 314 323 270 435 265 1,287 1,169
SG&A and R&D 74 80 80 82 88 71 218 71 460 304
Purchased in-process
research and development -- -- -- -- -- -- 130 -- 130 --
Other operating expenses
(income), net -- 163 (3) (1) (2) -- 81 3 76 165
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Profit (loss) from operations 94 (68) 101 107 101 107 (104) 82 192* 228*
Equity income 5 17 5 4 -- 4 -- 5 10 30
Interest and debt expense 11 10 13 9 18 10 61 10 103 39
Other income (expense), net (44) 335 16 13 18 22 (12) 4 (22) 374
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Income (loss) before income
taxes and effect of change in
accounting principle 44 274 109 115 101 123 (177) 81 77 593
Income taxes 16 166 35 40 30 41 (13) 22 68 269
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Income (loss) before effect of
change in accounting principle 28 108 74 75 71 82 (164) 59 9 324
Effect of change in accounting
principle -- -- -- -- -- -- -- (5) -- (5)
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Net income (loss) $ 28 $ 108 $ 74 $ 75 $ 71 $ 82 $ (164) $ 54 $ 9 $ 319
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
Earnings per share**
Basic:
Earnings before effect
of change in
accounting principle $ .29 $ 1.07 $ .78 $ .75 $ .75 $ .83 $ (1.64) $ .62 $ .10 $ 3.27
Effect of change in
accounting principle -- -- -- -- -- -- -- (.05) -- (.05)
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Earnings (loss) per share $ .29 $ 1.07 $ .78 $ .75 $ .75 $ .83 $ (1.64) $ .57 $ .10 $ 3.22
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
Diluted:
Earnings before effect
of change in
accounting principle $ .29 $ 1.03 $ .77 $ .73 $ .74 $ .81 $ (1.64) $ .61 $ .10 $ 3.18
Effect of change in
accounting principle -- -- -- -- -- -- -- (.05) -- (.05)
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Earnings (loss) per share $ .29 $ 1.03 $ .77 $ .73 $ .74 $ .81 $ (1.64) $ .56 $ .10 $ 3.13
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
</TABLE>
*Includes one-time charges of $215 million in 1998 (see Notes 14 and 15) and
$167 million in 1997 (see Note 15).
**Earnings per share calculations for each of the quarters are based on the
weighted-average number of shares outstanding for each period. The sum of the
quarters may not necessarily be equal to the full year's earnings per share
amounts.
51
<PAGE> 52
PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY)
AUSTRIA
Patex Chemie GmbH, Traun
THE BAHAMAS
Hercules International Trade Corporation Limited (HINTCO), Nassau
BELGIUM
Hercules Belgium N.V., Doel/Beringen
S.A. Hercules Europe N.V., Brussels
BERMUDA
Curtis Bay Insurance Co., Ltd., Hamilton
BRAZIL
Citrus Colloids SA, Limeira
CANADA
Genu Products Canada Ltd., Pubnico, Nova Scotia
Hercules Canada Inc., Mississauga, Ontario
CHINA
Hercules China Limited, Hong Kong
Special Administrative Region
CZECH REPUBLIC
Hercules CZ s.r.o., Prague
DENMARK
Copenhagen Pectin A/S, Lille Skensved
ENGLAND
Hercules Limited, Surrey
Alliance Technical Products, Stonehouse
FINLAND
Oy Hercofinn Ab, Helsinki
FRANCE
Aqualon France B.V., Rueil
Hercules S.A., Rueil
GERMANY
Hercules GmbH, Dusseldorf
Pomosin GmbH, Grossenbrode
ITALY
Hercules Italia S.p.A., Milan
JAPAN
Hercules Japan Ltd., Tokyo
MEXICO
Quimica Hercules, S.A. de C.V., Mexico City
THE NETHERLANDS
Hercules B.V., Rijswijk
THE PHILIPPINES
Hercules Ultramarine Inc., Cebu
POLAND
Hercules Polska Sp. z. o. o., Warsaw
SINGAPORE (REPUBLIC OF)
Hercules Singapore Pte Ltd., Singapore
SPAIN
Hercules Quimica, S.A., Tarragona
SWEDEN
Hercules AB, Goteborg
UNITED STATES
BetzDearborn Inc., Trevose, Pennsylvania
Hercules Finance Company, Wilmington, Delaware
FiberVisions L.L.C., Wilmington, Delaware
VIRGIN ISLANDS
Hercules Overseas Corporation, St. Thomas
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE:
None.
52
<PAGE> 53
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
Information regarding directors and nominees for directors of the company is
included under the caption entitled "Re-election of Directors" on page 8 of the
Proxy Statement and is incorporated herein by reference. Information regarding
executive officers begins on page 16 of that report.
Disclosure of information for directors, officers, and other persons not meeting
the timely reporting requirements under section 16(a) of the Exchange Act is
contained in the Proxy Statement under the caption entitled "Compliance With
Section 16(a) Reporting" on page 22 and is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT:
The name, age, and current position of each executive officer (as defined
by Securities and Exchange Commission rules) of the company as of March 1, 1999,
are listed below. Each of the officers, except Richard G. Dahlen, has served in
one or more executive capacities with the company and/or its affiliates during
the past five years. Richard Dahlen was employed by Monsanto Company for 30
years, holding positions in its Law Department. He joined Hercules in 1996 as
vice president and general counsel. There are no family relationships among
executive officers.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
<S> <C> <C>
R. Keith Elliott 57 Chairman and Chief Executive Officer
Vincent J. Corbo 55 President and Chief Operating Officer
Dominick W. DiDonna 50 Senior Vice President and General Manager, Pulp and Paper
George MacKenzie 49 Senior Vice President and Chief Financial Officer
Larry V. Rankin 55 Senior Vice President and General Manager, BetzDearborn
Harry J. Tucci 58 Senior Vice President, Corporate Development
June B. Barry 47 Vice President, Human Resources
Thomas A. Ciconte, Jr. 51 Vice President, External Affairs and International
Richard G. Dahlen 59 Vice President and General Counsel
Israel J. Floyd 52 Corporate Secretary and Assistant General Counsel
Bruce W. Jester 47 Vice President, Taxes
Vikram Jog 42 Vice President and Controller
Jan M. King 49 Vice President and Treasurer
Michael J. Scott 47 Vice President, Business Analysis, and Assistant Controller
David L. Chester 47 Assistant Controller
Stuart C. Shears 48 Assistant Treasurer
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION:
Information regarding executive compensation of Hercules' directors and
executive officers is included in the Proxy Statement under the caption entitled
"Board of Directors - Highlights" on page 13, and the caption entitled "Report
of the Compensation Committee" on pages 19 through 21, respectively, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
Information regarding beneficial ownership of the Common Stock by certain
beneficial owners and by management of the company is included under the caption
entitled "Stock Ownership of Directors and Officers" on page 22 of the Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
In 1998, no director or officer had an involvement in such transactions of a
nature or magnitude to require disclosure under the applicable SEC thresholds.
53
<PAGE> 54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K:
(a) Documents filed as part of this Report:
1. Financial Statements
See Item 8 for an Index to the Consolidated
Financial Statements of Hercules Incorporated.
Also filed herewith are BetzDearborn Inc.
Unaudited Interim Financial Statements and an
Unaudited Pro Forma Condensed Combined Statement
of Income of Hercules Incorporated.
<TABLE>
<CAPTION>
BETZDEARBORN INTERIM FINANCIAL STATEMENTS PAGE
-----------------------------------------
<S> <C>
Consolidated Statements of Income for the nine months ended September 30, 1998
and 1997 (Unaudited) ..................................................... 55
Consolidated Statements of Cash Flows for the nine months ended September 30, 1998
and 1997 (Unaudited) ..................................................... 56
Consolidated Statements of Stockholders' Equity for the nine months ended
September 30, 1998 and 1997 (Unaudited) .................................. 57
Notes to Consolidated Financial Statements (Unaudited) ............................... 58-59
PRO FORMA FINANCIAL STATEMENTS OF HERCULES INCORPORATED
-------------------------------------------------------
Unaudited Pro Forma Condensed Combined Statement of Income for the Year Ended
December 31, 1998 ........................................................ 60
Notes to Unaudited Pro Forma Condensed Combined Statement of Income .................. 61
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts ...................................... 62
</TABLE>
All other schedules are omitted because they are not
applicable, not required, or the information required is either
presented in the Notes to Financial Statements or has not changed
materially from that previously reported.
3. Exhibits:
A complete listing of exhibits required is given
in the Exhibit Index which precedes the exhibits
filed with this Report.
(b) Reports on Form 8-K.
<TABLE>
<CAPTION>
Financial Statements
Report Date of Report Item Nos. Included
--------------------------------------------------------------------------------
<S> <C> <C> <C>
8-K October 15, 1998 2, 5 and 7 Yes
8-K November 12, 1998 5 No
8-K/A October 15, 1998 7 Yes
8-K March 5, 1999 5 and 7 Yes
8-K March 17, 1999 5 No
</TABLE>
54
<PAGE> 55
BETZDEARBORN INC.
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
(Dollars in millions, except per share)
<TABLE>
<CAPTION>
Nine months ended September 30,
- -------------------------------------------------------------------------------------
1998 1997
----- -----
<S> <C> <C>
Net Sales $ 948 $ 961
Cost of Sales 390 384
Selling, general, and administrative expenses 400 407
Research and development 30 31
----- -----
Profit from operations 128 139
Interest and debt expense 29 35
Other income (expense), net (12) (1)
----- -----
Income before income taxes 87 103
Income tax expense 31 37
----- -----
Net Income $ 56 $ 66
===== =====
Earnings per share:
Basic $1.76 $2.18
Diluted 1.66 2.02
</TABLE>
See notes to consolidated financial statements.
55
<PAGE> 56
BETZDEARBORN INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in millions)
<TABLE>
<CAPTION>
Nine months ended September 30,
1998 1997
----- -----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 122 $ 62
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (71) (55)
Proceeds from sales of long-term assets 6 8
Purchases of businesses and long-term investments (3) --
Other, net -- (1)
----- -----
Net cash used in investing activities (68) (48)
FINANCING ACTIVITIES
Net long-term repayments under credit facilities (17) (17)
Net short-term (repayments) borrowings (22) 10
Dividends paid (39) (38)
Proceeds from issuance of common shares, including
treasury shares 12 40
----- -----
Net cash used in financing activities (66) (5)
Effect of exchange rate changes on cash (3) (1)
----- -----
Increase (decrease) in cash and cash equivalents (15) 8
Cash and cash equivalents at beginning of period 37 38
----- -----
Cash and cash equivalents at end of period $ 22 $ 46
===== =====
</TABLE>
See notes to consolidated financial statements
56
<PAGE> 57
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
(Dollars in millions)
<TABLE>
<CAPTION>
Capital in Foreign
excess of currency
Common par value of Retained Treasury Unearned translation
stock stock earnings stock compensation adjustments
------ ------------ -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 3 $ 94 $464 $ (188) $(4) $ 10
(common shares: issued 33,637,359;
reacquired, 5,509,124)
Net earnings 66
Dividends on preferred shares ($12.00 per
share) (6)
Dividends on common shares ($1.13 per
share) (21)
Impact of shares issued under employee
stock plans 22 6 23 --
Incentive plans, net, 998,158 shares
including 992,129 from reacquired stock
Currency translation adjustments (42)
------ ---- -------- ------ --- ---------
Balance at September 30, 1997 $ 3 $116 $ 509 $ (165) $(4) $(32)
====== ==== ======== ====== ==== =========
</TABLE>
<TABLE>
<CAPTION>
Capital in Foreign
excess of currency
Common par value of Retained Treasury Unearned translation
stock stock earnings stock compensation adjustments
------ ------------ -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 3 $132 $501 $(155) $(4) $(31)
(common shares: issued 33,631,330;
reacquired, 4,181,807)
Net earnings 56
Dividends on preferred shares ($12.00 per (6)
share)
Dividends on common shares ($1.14 per
share) (22)
Impact of shares issued under employee
stock plans 6 11 --
Incentive plans, net, 389,282 shares
including 386,675 from reacquired stock
Currency translation adjustments (18)
------ ---- -------- ------ --- ---------
Balance at September 30, 1998 $ 3 $138 $529 $(144) $(4) $(49)
====== ==== ======== ====== ==== =========
</TABLE>
See notes to consolidated financial statements.
57
<PAGE> 58
BETZDEARBORN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998 AND 1997
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of BetzDearborn
Inc. (the "Company") for the nine-month periods ended September 30, 1998 and
1997 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for fair presentation have been included. Certain amounts
in the financial statements for the year ended December 31, 1997 have been
reclassified to conform with 1998 classifications. Operating results for the
nine-month period ended September 30, 1998 are not necessarily indicative of the
results for the full year ended December 31, 1998.
Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive
Income," requires the Company to report in its financial statements all
non-owner related changes in equity for the periods being reported.
Comprehensive income for the nine-month periods ended September 30, 1998 and
1997 was $38 million and $24 million, respectively, consisting of net income and
foreign currency translation adjustments.
In the fourth quarter of 1997, the Company changed its method of accounting for
business process reengineering costs incurred in connection with its ongoing
major project that combined business process reengineering and information
technology transformation. This accounting change was mandated by the consensus
position of the Financial Accounting Standards Board's Emerging Issues Task
Force (Issue No. 97-13). Effective October 1, 1997, all such costs were expensed
as incurred, whereas previously such costs were capitalized. In the fourth
quarter of 1997, business process reengineering costs capitalized through
September 30, 1997 were written off as a cumulative effect type adjustment.
Note 2 - Common Shares Reserved for Stock Plans
At September 30, 1998, 4,917,827 and 426,482 Common Shares were reserved for
possible issuance pursuant to the exercise of stock options and grants under the
Company's Stock Option and Incentive Plans, respectively. An additional 256,508
Common Shares were reserved for purchase through payroll deductions under the
terms of the Employee Stock Purchase Plan. Further, 2,673,000 Common Shares were
reserved for possible conversion of the Series A ESOP Convertible preferred
stock.
58
<PAGE> 59
Note 3 - Earnings per Share
In compliance with Financial Accounting Standards Board Statement No. 128,
"Earnings per share," the Company changed its method of computing earnings per
share and restated the prior year to conform to the new requirements. Basic and
diluted earnings per share as calculated under Statement 128 were as follows (in
millions, except per share amounts):
<TABLE>
<CAPTION>
Nine months ended September 30,
1998 1997
<S> <C> <C>
Basic Earnings per Share:
Net earnings $ 56 $ 66
Effect of preferred stock dividends, net of taxes (4) (4)
-------- --------
Net earnings available to common shareholders $ 52 $ 62
======== ========
Average Common Shares outstanding - basic 29.5 28.6
Basic Earnings per Common Share $ 1.76 $ 2.18
======== ========
Diluted Earnings per Share:
Net earnings $ 56 $ 66
Effect of ESOP charge to operations assuming conversion
of Series A ESOP Convertible Preferred Shares, net of taxes (2) (2)
-------- --------
Net earnings available to common shareholders $ 54 $ 64
======== ========
Average Common Shares outstanding - basic 29.5 28.6
Effect of dilutive securities:
Contingently issuable shares .2 .1
Employee stock options .1 .5
Assumed conversion of Series A ESOP Convertible
Preferred Shares 2.6 2.7
-------- --------
Average Common Shares outstanding - diluted 32.4 31.9
======== ========
Diluted Earnings per Common Share $ 1.66 $ 2.02
======== ========
</TABLE>
Note 4 - Subsequent Event
On October 15, 1998, BetzDearborn and Hercules Incorporated completed the
Agreement and Plan of Merger, dated July 30, 1998, with BetzDearborn surviving
the merger as a wholly owned subsidiary of Hercules Incorporated.
59
<PAGE> 60
PRO FORMA FINANCIAL STATEMENTS OF HERCULES INCORPORATED (Unaudited)
The Unaudited Pro Forma Condensed Combined Statement of Income of Hercules
Incorporated for the year ended December 31, 1998 reflects the acquisition of
BetzDearborn Inc. as if it had occurred at the beginning of the year ended
December 31, 1998. The pro forma information is based on the historical
financial statements of Hercules and BetzDearborn after giving effect to the
acquisition using the purchase method of accounting and a preliminary purchase
price allocation. The actual allocation of the purchase price is expected to be
completed during 1999, based on a complete evaluation of the assets acquired and
liabilities assumed. Accordingly, the information presented herein may differ
from the final purchase price allocation. The Unaudited Pro Forma Condensed
Combined Statement of Income also reflects assumptions and adjustments deemed
appropriate by Hercules management, which are described in the accompanying
notes to the Unaudited Pro Forma Condensed Combined Statement of Income. Cost
savings benefits from synergies to be derived from the planned acquisition,
which may be significant, are not reflected in the Unaudited Pro Forma Condensed
Combined Statement of Income.
The Unaudited Pro Forma Condensed Combined Statement of Income does not purport
to be indicative of Hercules' results of operations had the planned acquisition
actually occurred on the date assumed nor is it necessarily indicative of
Hercules' future operating results. The Unaudited Pro Forma Condensed Combined
Statement of Income should be read in conjunction with the audited consolidated
financial statements of Hercules and the notes thereto set forth in Part II,
Item 8, of this Form 10-K, and the historical consolidated financial statements
of BetzDearborn and the notes thereto set forth in BetzDearborn's 1997 Annual
Report on Form 10-K and the unaudited financial statements of BetzDearborn for
the periods ended March 31, 1998 and June 30, 1998, as set forth in its
quarterly reports on Form 10-Q for those periods.
HERCULES INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
(Dollars in millions, except per share)
<TABLE>
<CAPTION>
Year ended December 31, 1998
---------------------------------------------------------------
BetzDearborn
Hercules as 1/1/98 - Pro forma Pro forma
Reported 9/30/98 Adjustments Combined
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 2,145 $ 948 $ $ 3,093
Cost of sales 1,287 390 (12)(a) 1,665
Selling, general, and administrative expenses 399 400 48 (b) 835
(12)(c)
Research and development 61 30 91
Purchased in-process research and development 130 -- (130)(d) --
Other operating expenses (income), net 76 (11)(e) 65
------- ------- ------ -------
Profit from operations 192 128 117 437
Equity in income of affiliated companies 10 -- 10
Interest and debt expense 103 29 150(f) 282
Other income (expense), net (22) (12) (34)
------- ------- ------ -------
Income before income taxes 77 87 (33) 131
Income tax expense 68 31 (44)(g) 55
------- ------- ------ -------
Net income $ 9 $ 56 $ 11 $ 76
======= ======= ====== =======
Earnings per share
Basic $ .10 $ .75
Diluted $ .10 $ .75
Weighted-average shares outstanding
Basic 96.3 100.7 (h)
Diluted 97.4 101.8 (h)
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma condensed
combined statement of income.
60
<PAGE> 61
HERCULES INCORPORATED
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
(Dollars in millions)
(a) To record the net change in depreciation expense resulting from the
increase in fair value of fixed assets and the adjustment to estimated
useful lives.
(b) To record amortization of goodwill of $2,074 over its estimated useful
life of 40 years, and amortization of other identified intangible
assets of $145 over their estimated useful lives ranging from 10 to 15
years.
(c) To eliminate historical BetzDearborn goodwill and intangible
amortization.
(d) To remove nonrecurring write-off of purchased in-process research and
development.
(e) To remove nonrecurring integration charges related to the acquisition.
(f) To record incremental interest expense at an assumed interest rate of
7.3%, approximate borrowing rate for Hercules, on borrowings under the
$3,650 credit facility used to finance the BetzDearborn acquisition and
amortization of debt issuance costs.
(g) To record the tax effect of the pro forma adjustments at the statutory
rate of 35% for the period presented. In-process research and
development and amortization of goodwill (substantially non-deductible)
have not been tax effected.
(h) Shares of the BetzDearborn ESOP were exchanged for approximately 5.9
million Hercules common shares and are considered outstanding.
61
<PAGE> 62
HERCULES INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Dollars in millions)
<TABLE>
<CAPTION>
Col. A. Col. B Col. C Col. D Col. E
- ----------------------------------------------------------------------------------------------------------------------------------
Additions
-------------------------
Balance at Charged to Charged to Balance
beginning of costs and other at end of
Description period expenses accounts Deductions period
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
- ---------
Allowance for doubtful accounts $ 3 -- $10(a) -- $13
Tax valuation allowance 12 -- -- -- 12
1997
- ---------
Allowance for doubtful accounts $ 4 -- -- 1(b) $ 3
Tax valuation allowance 15 -- -- 3(c) 12
1996
- ---------
Allowance for doubtful accounts $ 5 -- -- 1(b) $ 4
Tax valuation allowance 15 -- -- -- 15
</TABLE>
(a) Primarily a result of 1998 acquisitions.
(b) Write-off of uncollectible accounts, net of recoveries.
(c) Utilization of net operating loss carryforwards.
62
<PAGE> 63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 30, 1999.
HERCULES INCORPORATED
By GEORGE MACKENZIE
-----------------------------------
George MacKenzie, Senior Vice
President and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on March 30, 1999.
PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR:
Chairman and Chief Executive Officer R. KEITH ELLIOTT
-----------------
R. Keith Elliott
PRINCIPAL FINANCIAL OFFICER:
Senior Vice President and
Chief Financial Officer GEORGE MACKENZIE
-----------------
George MacKenzie
PRINCIPAL ACCOUNTING OFFICER:
Vice President and Controller VIKRAM JOG
-----------------
Vikram Jog
DIRECTORS:
VINCENT J. CORBO
-------------------------
Vincent J. Corbo
JOHN G. DROSDICK
-------------------------
John G. Drosdick
RICHARD M. FAIRBANKS, III
-------------------------
Richard M. Fairbanks, III
ALAN R. HIRSIG
-------------------------
Alan R. Hirsig
EDITH E. HOLIDAY
-------------------------
Edith E. Holiday
ROBERT G. JAHN
-------------------------
Robert G. Jahn
GAYNOR N. KELLEY
-------------------------
Gaynor N. Kelley
RALPH L. MACDONALD, JR.
-------------------------
Ralph L. MacDonald, Jr.
H. EUGENE MCBRAYER
-------------------------
H. Eugene McBrayer
PETER MCCAUSLAND
-------------------------
Peter McCausland
JOHN A. H. SHOBER
-------------------------
John A. H. Shober
PAULA A. SNEED
-------------------------
Paula A. Sneed
63
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION INCORPORATED BY REFERENCE TO
<S> <C> <C>
2-A Agreement and Plan of Merger among Hercules Incorporated, Water Exhibit 2.1, BetzDearborn Inc. Current Report on
Acquisition Company, and BetzDearborn Inc., dated July 30, 1998 Form 8-K, filed July 30, 1998
3-A.1 Restated Certificate of Incorporation of Hercules Incorporated as Exhibit 3-A, Annual Report on Form 10-K, filed
revised and amended July 6, 1988 March 26, 1993
3-A.2 Certificate of Amendment to Hercules' Restated Certificate of Exhibit 4.1a, Registration Statement on Form S-3,
Incorporation as revised and amended October 24, 1995 filed September 15, 1998
3-B By-Laws of Hercules Incorporated as revised and amended October 30, Exhibit 3-B, Annual Report on Form 10-K, filed
1991 March 26, 1993
4-C Junior Subordinated Debentures Indenture, dated November 12, 1998,
between Hercules Incorporated and The Chase Manhattan Bank, as Trustee
4-D First Supplemental Indenture, dated November 12, 1998, between Hercules
Incorporated and The Chase Manhattan Bank, as Trustee
4-E Preferred Securities Guarantee Agreement, dated November 12, 1998,
executed by Hercules Incorporated and The Chase Manhattan Bank, as
Trustee, with respect to Hercules Trust V
4-F Amended and Restated Trust Agreement of Hercules Trust V, dated
November 12, 1998
4-G Remarketing Agreement, dated November 12, 1998, among Hercules
Incorporated, Hercules Trust V and NationsBanc Montgomery Securities
LLC
4-H Form of Junior Subordinated Debenture Indenture between Hercules Exhibit 4.4, Amendment No. 1 to Registration
Incorporated and The Chase Manhattan Bank, as Trustee Statement on Form S-3, filed October 29, 1998
4-I Officers' Certificate, dated as of March 17, 1999, pursuant to the Exhibit 4.1, Current Report on Form 8-K, dated
Junior Subordinated Debenture Indenture between Hercules Incorporated March 17, 1999
and The Chase Manhattan Bank, as Trustee
4-J Form of Preferred Securities Guarantee by Hercules Incorporated and The Exhibit 4.28, Amendment No. 1 to Registration
Chase Manhattan Bank, as trustee, with respect to Hercules Trust I Statement on Form S-3, filed October 29, 1998
4-K Form of Amended and Restated Trust Agreement of Hercules Trust I Exhibit 4.13, Amendment No. 1 to Registration
Statement on Form S-3, filed October 29, 1998
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
NUMBER DESCRIPTION INCORPORATED BY REFERENCE TO
<S> <C> <C>
4-L Form of 9.42% Trust Originated Preferred Securities of Hercules Trust I Exhibit 4.2, Current Report on Form 8-K, dated
March 17, 1999
4-M Form of 9.42% Junior Subordinated Deferrable Interest Debentures due Exhibit 4.3, Current Report on Form 8-K, dated
2029 March 17, 1999
</TABLE>
Hercules is party to several long-term debt instruments under which in each case
the total amount of securities authorized does not exceed 10% of the total
assets of Hercules. Hercules agrees to furnish a copy of such instruments to the
Securities and Exchange Commission upon request.
<TABLE>
<S> <C> <C>
10-A Hercules Incorporated Unit Incentive Plan Appendix A, Notice of Annual Meeting and Proxy
Statement Dated February 10, 1969*.
10-B Hercules Executive Survivor Benefit Plan Exhibit 10-D, Annual Report on Form 10-K, filed
March 27, 1981*.
10-C Hercules Incorporated Phantom Stock Plan Exhibit E, Notice of Annual Meeting and Proxy
Statement Dated February 14, 1986*
10-D Hercules Incorporated Restricted Stock Plan of 1986 Exhibit B. Notice of Annual Meeting and Proxy
Statement Dated February 14, 1986*
10-E Hercules Incorporated Stock Option Plan of 1986 Exhibit D. Notice of Annual Meeting and Proxy
Statement Dated February 14, 1986*
10-F Hercules Incorporated Deferred Compensation Plan Exhibit 10-I, Annual Report on Form 10-K, filed
March 29, 1988*
10-H Hercules Incorporated Annual Management Incentive Compensation Plan Exhibit 10-H, Annual Report on Form 10-K, filed
March 26, 1993
10-I Hercules Incorporated 1993 Nonemployee Director Stock Accumulation Plan Exhibit 4.1, Registration Statement on Form S-8,
filed July 16, 1993
10-J Hercules Incorporated Deferred Compensation Plan for Nonemployee Exhibit 10-J, Annual Report on Form 10-K, filed
Directors March 26, 1993
10-L Hercules Employee Pension Restoration Plan Exhibit 10-L, Annual Report on Form 10-K, filed
March 26, 1993
10-M Form of Employment Contract between the company and certain directors Exhibit 10-J, Annual Report on Form 10-K, filed
and officers of the company March 29, 1988*
10-N Form of Indemnification Agreement between the company and certain Annex II, Notice of Annual Meeting and Proxy
directors and officers of the company Statement Dated February 19, 1987*
10-P Hercules Incorporated Amended and Restated Long Term Incentive Exhibit 10-P, Annual Report on Form 10-K, filed
Compensation Plan March 31, 1995
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
NUMBER DESCRIPTION INCORPORATED BY REFERENCE TO
<S> <C> <C>
10-Q Credit Agreement, dated October 15, 1998, among the company, Exhibit 10.1, Current Report on Form 8-K, filed
Administrative Agent, and the lender's party thereto October 29, 1998
10-R Forward Underwriting Agreement, dated November 12, 1998, between
NationsBanc Montgomery Securities and Hercules Incorporated
10-S Underwriting Agreement, dated March 12, 1999, among Hercules Exhibit 1.1, Current Report on Form 8-K, dated
Incorporated, Hercules Trust I and the Underwriters named therein March 17, 1999
10-T Employment Agreement effective August 1 1998, between the company
and Vincent J. Corbo
10-U Employment Agreement dated October 15, 1998, between the company and
William R. Cook
21 Subsidiaries of the Registrant Page 52 of 1998 Form 10-K. See Part II, Item 8
23-A Consent of Independent Accountants
27 Financial Data Schedule
</TABLE>
* Previously filed as indicated and incorporated herein by reference.
Exhibits incorporated by reference should be located in SEC File No. 1-496.
<PAGE> 1
Exhibit 4-C
HERCULES INCORPORATED, AS ISSUER
AND
THE CHASE MANHATTAN BANK, AS TRUSTEE
INDENTURE
DATED AS OF NOVEMBER 12, 1998
JUNIOR SUBORDINATED DEBENTURES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions............................................................................1
Section 1.02 Other Definitions......................................................................6
Section 1.03 Incorporation by Reference of TIA......................................................6
Section 1.04 Rules of Construction..................................................................7
Section 1.05 Acts of Holders and Holders of Preferred Securities....................................7
ARTICLE 2
THE DEBENTURES
Section 2.01 Amount Unlimited; Issuable in Series...................................................8
Section 2.02 Payment of Principal and Interest.....................................................10
Section 2.03 Execution, Authentication and Delivery................................................12
Section 2.04 Registrar and Paying and Conversion Agents............................................14
Section 2.05 Paying Agent to Hold Money in Trust...................................................15
Section 2.06 Debentureholder Lists.................................................................15
Section 2.07 Transfer and Exchange.................................................................15
Section 2.08 Replacement Debentures................................................................16
Section 2.09 Outstanding Debentures; Determinations of Holders' Action.............................16
Section 2.10 Temporary Debentures..................................................................17
Section 2.11 Book-Entry System.....................................................................17
Section 2.12 Cancellation..........................................................................18
ARTICLE 3
REDEMPTION
Section 3.01 Redemption: Notice to Trustee.........................................................19
Section 3.02 Selection of Debentures to be Redeemed................................................19
Section 3.03 Notice of Redemption..................................................................19
Section 3.04 Effect of Notice of Redemption........................................................20
Section 3.05 Deposit of Redemption Price...........................................................21
Section 3.06 Debentures Redeemed in Part...........................................................21
ARTICLE 4
COVENANTS
Section 4.01 Payment of Principal, Premium and Interest............................................21
Section 4.02 Prohibition Against Dividends.........................................................22
Section 4.03 SEC Reports...........................................................................22
Section 4.04 Compliance Certificates...............................................................23
Section 4.05 Further Instruments and Acts..........................................................23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.06 Payment of Expenses of each Trust.....................................................23
Section 4.07 Ownership of Common Securities........................................................23
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01 When the Company May Merge............................................................24
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.....................................................................24
Section 6.02 Acceleration..........................................................................26
Section 6.03 Other Remedies........................................................................27
Section 6.04 Waiver of Past Defaults...............................................................27
Section 6.05 Control by Holders....................................................................27
Section 6.06 Limitation on Suits...................................................................28
Section 6.07 Unconditional Right of Holders to Receive Principal, Premium and
Interest..............................................................................28
Section 6.08 Direct Action Right of Holders of Trust Preferred Securities..........................29
Section 6.09 Collection Suits by the Trustee.......................................................29
Section 6.10 Trustee May File Proofs of Claim......................................................30
Section 6.11 Priorities............................................................................30
Section 6.12 Undertaking for Costs.................................................................31
ARTICLE 7
THE TRUSTEE
Section 7.01 Duties and Responsibilities of the Trustee............................................31
Section 7.02 Rights of the Trustee.................................................................32
Section 7.03 Not Responsible for Recitals or Issuances of Debentures...............................33
Section 7.04 Notice of Defaults....................................................................33
Section 7.05 Reports by Trustee to Holders.........................................................33
Section 7.06 Compensation and Indemnity............................................................34
Section 7.07 Eligibility; Disqualification.........................................................34
Section 7.08 Resignation and Removal; Appointment of Successor.....................................35
Section 7.09 Acceptance of Appointment by Successor................................................36
Section 7.10 Successor Trustee by Merger...........................................................37
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 8
SATISFACTION AND DISCHARGE OF
INDENTURE; UNCLAIMED MONEYS
Section 8.01 Satisfaction and Discharge of Indenture...............................................37
Section 8.02 Application by Trustee of Funds Deposited for Payment of Debentures...................38
Section 8.03 Repayment of Moneys Held by Paying Agent..............................................39
Section 8.04 Return of Moneys Held by the Trustee and Paying Agent Unclaimed
for Two Years.........................................................................39
ARTICLE 9
SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without Consent of Holders....................................39
Section 9.02 Supplemental Indentures With Consent of Holders.......................................40
Section 9.03 Compliance with Trust Indenture Act...................................................42
Section 9.04 Revocation and Effect of Consents, Waivers and Actions................................42
Section 9.05 Notation on or Exchange of Debentures.................................................42
Section 9.06 Execution of Supplemental Indentures..................................................42
Section 9.07 Effect of Supplemental Indentures.....................................................43
ARTICLE 10
SUBORDINATION
Section 10.01 Debentures Subordinated to Senior Indebtedness........................................43
Section 10.02 Priority and Payment of Proceeds in Certain Events: Remedies Standstill...............43
Section 10.03 Payments which May Be Made Prior to Notice............................................44
Section 10.04 Rights of Holders of Senior Indebtedness Not to Be Impaired...........................44
Section 10.05 Trustee May Take Action to Effectuate Subordination...................................45
Section 10.06 Subrogation...........................................................................45
Section 10.07 Obligations of Company Unconditional; Reinstatement...................................45
Section 10.08 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice...............46
Section 10.09 Right of Trustee to Hold Senior Indebtedness..........................................46
ARTICLE 11
SINKING FUNDS
Section 11.01 Applicability of Article..............................................................46
Section 11.02 Satisfaction of Sinking Fund Payments with Debentures.................................47
Section 11.03 Redemption of Debentures for Sinking Fund.............................................47
ARTICLE 12
MEETINGS OF DEBENTUREHOLDERS
Section 12.01 Purposes for Which Meetings May Be Called.............................................48
Section 12.02 Call, Notice and Place of Meetings....................................................48
Section 12.03 Persons Entitled to Vote at Meetings..................................................48
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 12.04 Quorum; Action........................................................................48
Section 12.05 Determination of Voting Rights; Conduct and Adjournment of Meetings..................49
Section 12.06 Counting Votes and Recording Action of Meetings.......................................50
ARTICLE 13
MISCELLANEOUS
Section 13.01 Trust Indenture Act Controls..........................................................50
Section 13.02 Notices...............................................................................51
Section 13.03 Communication by Holders with Other Holders...........................................52
Section 13.04 Certificate and Opinion as to Conditions Precedent....................................52
Section 13.05 Statements Required in Certificate or Opinion.........................................52
Section 13.06 Severability Clause...................................................................52
Section 13.07 Rules by Trustee, Paying Agent and Registrar..........................................53
Section 13.08 Legal Holidays........................................................................53
Section 13.09 Governing Law.........................................................................53
Section 13.10 No Recourse Against Others............................................................53
Section 13.11 Successors and Assigns................................................................53
Section 13.12 Counterparts..........................................................................53
Section 13.13 No Adverse Interpretation of Other Agreements.........................................53
Section 13.14 Table of Contents, Headings...........................................................54
Section 13.15 Holders of Preferred Securities as Third Party Beneficiaries..........................54
Section 13.16 Benefits of the Indenture.............................................................54
</TABLE>
iv
<PAGE> 6
Hercules Indenture
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ---------------- ---------------
<S> <C>
Section 310(a)(1) .......................................................... 2.03; 7.07
(a)(2) .......................................................... 2.03; 7.07
(a)(3) .......................................................... Not Applicable
(a)(4) .......................................................... Not Applicable
(a)(5) .......................................................... Not Applicable
(b) .......................................................... 7.07; 7.08
(c) .......................................................... Not Applicable
Section 311(a) .......................................................... Not Applicable
(b) .......................................................... Not Applicable
(c) .......................................................... Not Applicable
Section 312(a) .......................................................... 2.06
(b) .......................................................... 13.03
(c) .......................................................... 13.03
Section 313(a) .......................................................... 7.05
(b)(1) .......................................................... Not Applicable
(b)(2) .......................................................... Not Applicable
(c) .......................................................... 7.05
(d) .......................................................... 7.05
Section 314(a) .......................................................... 4.03; 4.04
(b) .......................................................... Not Applicable
(c)(1) .......................................................... 2.03; 13.04; 13.05
(c)(2) .......................................................... 2.03; 13.04; 13.05
(c)(3) .......................................................... Not Applicable
(d) .......................................................... Not Applicable
(e) .......................................................... 13.05
(f) .......................................................... Not Applicable
Section 315(a) .......................................................... 7.01(b); 7.02
(b) .......................................................... 7.02; 7.04; 13.02
(c) .......................................................... 7.01(a); 7.02
(d) .......................................................... 7.01(c); 7.02
(e) .......................................................... 6.12
Section 316(a)(1)(A) .......................................................... 6.05
(a)(1)(B) .......................................................... 6.02; 6.04
(a)(2) .......................................................... Not Applicable
(a)(last sentence) .......................................................... 2.09
(b) .......................................................... 6.07
(c) .......................................................... 1.05
Section 317(a)(1) .......................................................... 6.09
(a)(2) .......................................................... 6.10
(b) .......................................................... 2.05
Section 318(a) .......................................................... 13.01
(b) .......................................................... Not Applicable
(c) .......................................................... 13.01
</TABLE>
- ----------------------
Note: This reconciliation and tie sheet shall not, for any purpose,
be deemed to be a part of the Indenture.
v
<PAGE> 7
INDENTURE, dated as of November 12, 1998 by and between Hercules
Incorporated, a corporation duly organized and existing under the laws of the
State of Delaware (the "Company"), and The Chase Manhattan Bank, a banking
corporation duly organized and existing under the laws of the State of New York,
as trustee (the "Trustee").
WHEREAS, the Company may from time to time create or establish one or
more statutory business trusts for the purpose of issuing undivided beneficial
interests in the assets thereof (the "Trust Securities") and using the proceeds
thereof to acquire the Company's Debentures (as hereinafter defined).
WHEREAS, all things necessary to make the Debentures, when duly issued
and executed by the Company and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid and binding
agreement of the Company, enforceable in accordance with its terms, have been
done.
NOW THEREFORE:
Each of the Company and the Trustee, intending to be legally bound
hereby, agrees as follows for the benefit of the other party and for the equal
and ratable benefit of the Holders (as hereinafter defined) of the securities
issued hereunder:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. When used with respect to any Person,
"control" means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means either the Board of Directors of the Company
or the Finance Committee of such Board or any other committee of such Board duly
authorized to act generally or in any particular respect for the Company
hereunder.
"Board Resolution" means (i) a copy of a resolution certified by the
Secretary or the Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee or (ii) a certificate signed by the
authorized officer or officers to whom the Board of Directors has delegated its
authority, and in each case, delivered to the Trustee.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banking institutions in the City of New York or Wilmington, Delaware
are authorized or required by law, regulation or executive order to close.
<PAGE> 8
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) corporate stock or similar interests in other types of
entities.
"Company" means Hercules Incorporated, a Delaware corporation, or any
successor thereto.
"Company Order" means a written request or order signed in the name of
the Company by an Officer of the Company and delivered to the Trustee.
"Debentureholder" or "Holder" means a Person in whose name a Debenture
is registered on the Registrar's books.
"Debentures" shall mean any of the junior subordinated debentures of
any series issued, authenticated and delivered under this Indenture.
"Default" means any event which is, or after notice or passage of time,
or both, would be, an Event of Default pursuant to Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extension Period," with respect to any series of Debentures, means any
period during which the Company elects to extend the interest payment period on
such series of Debentures pursuant to Section 4.01(b); provided that an
Extension Period (or any extension thereof) must end on an Interest Payment Date
for such Debentures and may not extend beyond the Stated Maturity Date or the
Redemption Date of any Debenture of such series.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board.
"Guarantee" means each Guarantee Agreement executed by the Company with
respect to the Preferred Securities issued by any Trust pursuant to which the
Company irrevocably and unconditionally agrees to pay the Guarantee Payments (as
defined in such Guarantee Agreement) to the holders of such Preferred
Securities.
"Indebtedness" means, without duplication, (i) every obligation of the
Company for money borrowed; (ii) every obligation of the Company evidenced by
bonds, debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or businesses;
(iii) every reimbursement obligation of the Company with respect to letters of
credit, banker's acceptances or similar facilities issued for the account of the
Company; (iv) every obligation of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
Capital Lease Obligation of the Company; (vi) all indebtedness of the Company,
whether incurred on or prior to the
2
<PAGE> 9
date of this Indenture or thereafter incurred, for claims in respect of
derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; (vii)
every obligation of the type referred to in clauses (i) through (vi) of another
Person and all dividends of another Person the payment of which, in either case,
the Company has guaranteed or is responsible or liable for, directly or
indirectly, as obligor or otherwise; and (viii) obligations of the type referred
to in clauses (i) through (vii) of another Person secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company); and all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the foregoing obligations.
"Indebtedness Ranking on a Parity with the Debentures" means (i)
Indebtedness, whether outstanding on the date of execution of this Indenture or
thereafter created, assumed or incurred, to the extent such Indebtedness
specifically by its terms ranks pari passu with and not prior to the Debentures
in the right of payment upon the happening of the dissolution, winding-up,
liquidation or reorganization of the Company and (ii) all other debt securities,
and guarantees in respect of those debt securities, issued to any other trust,
or a trustee of such trust, partnership or other entity affiliated with the
Company that is a financing vehicle of the Company (a "financing entity") in
connection with the issuance by such financing entity of equity securities or
other securities guaranteed by the Company pursuant to an instrument that ranks
pari passu with or junior in right of payment to the Guarantees. The securing of
any Indebtedness otherwise constituting Indebtedness Ranking on a Parity with
the Debentures shall not be deemed to prevent such Indebtedness from
constituting Indebtedness Ranking on a Parity with the Debentures.
"Indebtedness Ranking Junior to the Debentures" means any Indebtedness,
whether outstanding on the date of execution of this Indenture or thereafter
created, assumed or incurred, to the extent such Indebtedness by its terms ranks
junior to and not pari passu with or prior to the Debentures (and any other
Indebtedness Ranking on a Parity with the Debentures) in right of payment upon
the happening of the dissolution, winding-up, liquidation or reorganization of
the Company. The securing of any Indebtedness otherwise constituting
Indebtedness Ranking Junior to the Debentures shall not be deemed to prevent
such Indebtedness from constituting Indebtedness Ranking Junior to the
Debentures.
"Indenture" means this indenture, as amended or supplemented from time
to time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.
"Interest Payment Date," when used with respect to the Debentures of
any series, means the stated maturity of any installment of interest on the
Debentures of that series.
"Issue Date," with respect to a series of Debentures, means the date on
which the Debentures of such series are originally issued.
"Office" or "Agency," with respect to any Debentures, means an office
or agency of the Company maintained or designated in a Place of Payment for such
Debentures pursuant to Section 2.04 or any other office or agency of the Company
maintained or designated for such Debentures pursuant to Section 2.04 or, to the
extent designated or required by Section 2.04 in lieu of such office or agency,
the Corporate Trust Office of the Trustee.
3
<PAGE> 10
"Officer" means, with respect to any corporation, any Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
such corporation.
"Officers' Certificate" means a certificate signed by either Co-Chief
Executive Officer, the Chief Financial Officer, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, that complies with the requirements of
Sections 13.04 and 13.05 and is delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of the Company, or any other counsel who shall be reasonably acceptable
to the Trustee and provided that the General Counsel and the Assistant General
Counsel of the Company shall be deemed to be reasonably acceptable to the
Trustee, containing the applicable information specified in Sections 13.04 and
13.05.
"Paying Agent" means any Person authorized by the Company to pay the
principal of and premium, if any, and interest on the Debentures of any series
on behalf of the Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Predecessor Debentures" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and for purposes of this definition, any
Debenture authenticated and delivered under Section 2.08 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Debenture shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Debenture.
"Preferred Securities" means the preferred securities of a Trust,
representing undivided beneficial interests in the assets of such Trust.
"Record Date," with respect to any series of the Debentures, means the
Regular Record Date, the Special Record Date or any date set to determine the
Holders of Debentures of such series entitled to vote, consent, make a request
or exercise any other right associated with such Debentures.
"Redemption Date," with respect to the Debentures of any series to be
redeemed, means the date specified for the redemption thereof in accordance with
the terms thereof and pursuant to Article 3 of this Indenture.
"Redemption Price," with respect to the Debentures of any series to be
redeemed, means the price at which such Debenture is to be redeemed in
accordance with the terms thereof and pursuant to Article 3 of this Indenture.
"Regular Record Date," with respect to an Interest Payment Date for the
Debentures of a series, means the date specified for such Debentures for the
determination of Holders entitled to receive the payment of interest on such
Interest Payment Date.
4
<PAGE> 11
"Responsible Officer," when used with respect to the Trustee, means any
Senior Vice President, any Vice President, any Assistant Vice President, any
Trust Officer, or Assistant Trust Officer or any other officer of the Corporate
Trust Department of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, amended.
"Security Exchange," when used with respect to the Debentures of any
series which are held as assets of a Trust pursuant to the Trust Agreement of
such Trust, means the distribution of the Debentures of such series by such
Trust to the holders of the Trust Securities of such Trust in exchange for such
Trust Securities upon certain events described in the applicable Trust Agreement
of such Trust.
"Senior Indebtedness" means all Indebtedness, whether outstanding on
the date of execution of this Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Debentures or
Indebtedness Ranking Junior to the Debentures.
A "series" of Debentures means all Debentures denoted as part of the
same series authorized by or pursuant to a particular Board Resolution or a
supplemental indenture.
"Special Record Date" for the payment of any Defaulted Interest on the
Debentures of any series means the date determined pursuant to Section 2.02.
"Stated Maturity Date," with respect to the Debentures of any series,
means the date specified for such Debentures as the date on which the principal
of such Debenture is due and payable.
"Subsidiary" means any corporation, association, partnership, trust,
limited liability company or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, trustees or the
governing individuals or body thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, (ii) the Company and one or more
Subsidiaries, or (iii) one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended and as in
effect on the date of this Indenture; provided, however, that if such Act is
amended after such date, TIA means, to the extent required by any such
amendment, such Act as so amended.
"Trust" means any statutory business trust created or established by
the Company to issue Trust Securities and to use the proceeds from the sale
thereof to purchase Debentures.
"Trust Agreement" means the Amended and Restated Trust Agreement for a
Trust, among the Company, as sponsor, The Chase Manhattan Bank, as Property
Trustee, the Delaware Trustee named therein and the Administrative Trustees
named therein, as the same may be amended and modified from time to time.
5
<PAGE> 12
"Trust Securities" means the undivided beneficial interests in the
assets of a Trust.
"Trustee" means the Person named as "Trustee" in the first paragraph of
this Indenture, until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor, and if
at any time there is more than one such Person, "Trustee" as used with respect
to Debentures of any series shall mean the Trustee with respect to Debentures of
that series.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by the Company or
another Wholly Owned Subsidiary.
SECTION 1.02 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Term Defined in Section
<S> <C>
"Act".......................................................................... 1.05
"Bankruptcy Law"............................................................... 6.01
"Conversion Agent"............................................................. 2.04
"Custodian".................................................................... 6.01
"Defaulted Interest"........................................................... 2.02
"Depository"................................................................... 2.11
"Direct Action"................................................................ 6.08
"Event of Default"............................................................. 6.01
"Global Debenture"............................................................. 2.11
"Legal Holiday"................................................................ 13.08
"Notice of Default"............................................................ 6.01
"Property Trustee"............................................................. 6.01
"Register"..................................................................... 2.04
"Registrar".................................................................... 2.04
"Successor".................................................................... 5.01
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Debentures.
"indenture security holder" means a Debentureholder or Holder.
"indenture to be qualified" means this Indenture.
6
<PAGE> 13
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the Debentures.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) each capitalized term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including, without limitation;
(e) words in the singular include the plural, and words in the plural
include the singular; and
(f) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
SECTION 1.05 ACTS OF HOLDERS AND HOLDERS OF PREFERRED SECURITIES.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders or by holders of Preferred Securities may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
or holders of Preferred Securities, as applicable, in person or by an agent duly
appointed in writing and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of Holders or holders of
Preferred Securities signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
Without limiting the generality of this Section, unless otherwise
provided in or pursuant to this Indenture, a Holder, including a Depository that
is a Holder of a Global Debenture, may make, give or take, by a proxy, or
proxies, duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other action provided in or pursuant to
this Indenture to be made, given or taken by Holders, and a Depository that is a
Holder of a Global Debenture may provide its proxy or proxies to the beneficial
owners of interests in any such Global Debenture through such Depository's
standing instructions and customary practices.
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(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership of Debentures shall be proved by the Register.
(d) Any Act of the Holder of any Debenture shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Debenture.
(e) If the Company solicits from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other action, the Company
may, at its option, by or pursuant to a resolution of its Board of Directors,
fix in advance a Record Date for the determination of Holders entitled to give
such Act, but the Company shall have no obligation to do so. If such a Record
Date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after such Record Date, but only
Holders of record at the close of business on such Record Date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of outstanding Debentures have authorized or agreed or consented to
such Act, and for that purpose the outstanding Debentures shall be computed as
of such Record Date.
ARTICLE 2
THE DEBENTURES
SECTION 2.01 AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Debentures which may be authenticated
and delivered under this Indenture is unlimited.
The Debentures may be issued in one or more series in an amount not to
exceed the aggregate principal amount of Debentures of that series from time to
time authorized by or pursuant to a Board Resolution, or pursuant to one or more
indentures supplemental hereto, prior to the initial issuance of Debentures of a
particular series.
With respect to any Debentures of each series to be authenticated and
delivered hereunder, there shall be established in or pursuant to a Board
Resolution, and set forth in an Officers' Certificate, or established in one or
more indentures supplemental hereto:
(a) the title of the Debentures of the series (which shall distinguish
the Debentures of the series from all other Debentures);
(b) any limit upon the aggregate principal amount of the Debentures of
that series which may be authenticated and delivered under this Indenture
(except for Debentures authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Debentures of that series);
(c) Stated Maturity Date or Dates, which may be serial and the
Company's option, if any, to change the Stated Maturity Date or Dates;
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(d) the rate or rates (which may be fixed or variable) at which the
Debentures of the series shall bear interest or the manner of calculation of
such rate or rates, if any;
(e) the basis upon which interest shall be computed if other than a
360-day year composed of twelve 30-day months;
(f) the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest will be payable or the manner of
determination and frequency of such Interest Payment Dates and the Regular
Record Dates therefor;
(g) the right, if any, to extend the interest payment periods and the
duration of any such Extension Period, including the maximum consecutive period
during which interest payment periods may be extended;
(h) Issue Date or Dates;
(i) authorized denominations;
(j) the place or places for the payment of principal and premium, if
any, and interest;
(k) the date or dates on which or the period or periods within which,
the price or prices at which, and the terms and conditions upon which,
Debentures of the series may be redeemed, in whole or in part, at the option of
the Company;
(l) the obligation, if any, of the Company to redeem or purchase
Debentures of the series pursuant to any sinking fund or analogous provisions
(including payments made in cash in anticipation of future sinking fund
obligations) or at the option of a Holder and the date or dates on which or the
period or periods within which, the price or prices at which, and the terms and
conditions upon which, Debentures of the series shall be redeemed or purchased,
in whole or in part, pursuant to such obligation;
(m) the form of the Debentures of the series, including the form of the
Certificate of Authentication for such series;
(n) the right or obligation of any Holder or the Company or the
applicable Trust to convert or exchange any Debenture into other securities of
the Company or such Trust and the terms and conditions of any such conversion or
exchange and, if so provided, the terms and conditions upon which such
conversion or exchange will be effected, including, the conversion or exchange
price, the conversion or exchange date(s) or period(s), provisions as to whether
conversion or exchange will be at the option of the Holder or the Company or
such Trust, the events requiring adjustment of the conversion or exchange price
and provisions affecting conversion or exchange in the event of redemption of
the Debenture of any series and any deletions from or modifications or additions
to this Indenture to permit or to facilitate the issuance of such convertible or
exchangeable Debentures or the administration thereof;
(o) whether the Debentures are issuable as a Global Debenture and, in
such case, the identity of the Depository for such series;
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(p) any and all other terms with respect to such series (which terms
shall not be inconsistent with the terms of this Indenture); and
(q) the name of the applicable Trust (which shall distinguish such
statutory business trust from all other Trusts) to which the Debentures of such
series are to be deposited as assets and the date of its Trust Agreement.
The Debentures of any series and the Trustee's Certificate of
Authentication to be borne by such Debentures shall be substantially of the
tenor and purport as set forth in one or more indentures supplemental hereto or
as provided in a Board Resolution and as set forth in an Officers' Certificate,
and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which Debentures of that series may be listed, or to
conform to usage.
All Debentures of any one series shall be substantially identical
except as may otherwise be provided by the Company in or pursuant to the Board
Resolution and set forth in the Officers' Certificate or in any indenture or
indentures supplemental hereto pertaining to such series of Debentures. The
terms of the Debentures of any series may provide, without limitation, that the
Debentures shall be authenticated and delivered by the Trustee on original issue
from time to time upon telephonic or written order of persons designated in the
Officers' Certificate or supplemental indenture (telephonic instructions to be
promptly confirmed in writing by such person) and that such persons are
authorized to determine, consistent with such Officers' Certificate or any
applicable supplemental indenture, such terms and conditions of the Debentures
of such series as are specified in such Officers' Certificate or supplemental
indenture. All Debentures of any one series need not be issued at the same time
and, unless otherwise so provided by the Company, a series may be reopened for
issuances of additional Debentures of such series or to establish additional
terms of such series of Debentures.
If any of the terms of the Debentures of any series shall be
established by action taken by or pursuant to a Board Resolution, the Board
Resolution shall be delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of such series.
SECTION 2.02 PAYMENT OF PRINCIPAL AND INTEREST.
Unless otherwise specified pursuant to Section 2.01(e), interest on the
Debentures shall be computed on the basis of a 360-day year composed of twelve
30-day months.
Unless otherwise provided with respect to a series of Debentures,
(a) the principal and Redemption Price of and interest on each
Debenture shall be payable in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts;
(b) the principal and Redemption Price of any Debenture and interest
payable on the Stated Maturity Date (if other than an Interest Payment Date) or
Redemption Date shall be payable upon surrender of such Debenture at the Office
or Agency of any Paying Agent therefor; and
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(c) interest on any Debenture shall be paid on each Interest Payment
Date therefor to the Holder thereof at the close of business on the Record Date
therefor, such interest to be payable by check mailed to the address of the
Person entitled thereto as such address appears on the Register; provided
however, that (i) at the written request of any Holder of at least $10,000,000
aggregate principal amount of Debentures received by the Registrar not later
than the Regular Record Date for such Interest Payment Date, interest accrued on
such Debentures will be payable by wire transfer within the continental United
States in immediately available funds to the bank account number of such Holder
specified in such request and entered on the Register by the Registrar and (ii)
payments made in respect of Global Debentures shall be made in immediately
available funds to the Depository.
Except as specified pursuant to Section 2.01 or Section 4.01(b),
interest on any Debenture which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Debenture (or one or more Predecessor Debentures) is registered at the
close of business on the Regular Record Date for such interest. Any interest on
any Debenture which is payable, but is not punctually paid or duly provided for,
on any Interest Payment Date (herein called "Defaulted Interest") shall
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in clause (i) and (ii)
below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Debentures (or their
respective Predecessor Debentures) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall, not less than 15 Business Days prior to the date of the proposed
payment, notify the Trustee and the Paying Agent in writing of the
amount of Defaulted Interest proposed to be paid on each Debenture and
the date of the proposed payment, and at the same time the Company
shall deposit with the Paying Agent an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Paying Agent
for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as provided in this clause. The
Special Record Date for the payment of such Defaulted Interest shall be
the close of business not more than 15 nor less than 10 days prior to
the date of the proposed payment. The Trustee shall, in the name and at
the expense of the Company, cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
given to the Holders thereof, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been given, such
Defaulted Interest shall be paid to the Persons in whose names the
Debentures (or their respective Predecessor Debentures) are registered
at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted Interest on
the Debentures in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Debentures may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee and the Paying Agent
of the proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Paying Agent.
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Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Debenture.
If any convertible Debenture of any series is converted after any
Regular Record Date and on or prior to the next succeeding Interest Payment Date
(other than any Debenture with respect to which the Stated Maturity Date is
prior to such Interest Payment Date), interest that is due on such Interest
Payment Date shall be payable on such Interest Payment Date notwithstanding such
conversion, and such interest (whether or not punctually paid or duly provided
for) shall be paid to the Person in whose name that Debenture is registered at
the close of business on such Regular Record Date. Except as otherwise expressly
provided in the immediately preceding sentence, in the case of any Debenture
that is converted, interest shall not be payable if the Regular Record Date is
after the date of conversion of such Debenture.
SECTION 2.03 EXECUTION, AUTHENTICATION AND DELIVERY.
(a) The Debentures shall be executed on behalf of the Company by either
of its Co-Chief Executive Officers, its Chief Financial Officer, its President
or one of its Vice Presidents, its Treasurer or one of its Assistant Treasurers
under its corporate seal imprinted or reproduced thereon and attested by its
Secretary or one of its Assistant Secretaries. The signature of any such Officer
on the Debentures may be manual or facsimile.
(b) Debentures bearing the manual or facsimile signatures of
individuals who were at any time the proper Officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Debentures or
did not hold such offices at the date of such Debentures.
(c) No Debenture shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Debenture
a Certificate of Authentication duly executed by the Trustee by manual signature
of a Responsible Officer, and such Certificate of Authentication upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and made available for delivery hereunder.
(d) The Trustee shall authenticate and deliver Debentures of a series,
for original issue, at one time or from time to time in accordance with the
Company Order referred to below, upon receipt by the Trustee of:
(i) a Board Resolution as required by Section 2.01;
(ii) a Company Order requesting the authentication and
delivery of such Debentures and stating the identity of the applicable
Trust and the aggregate liquidation amount of the Trust Securities to
be issued by such Trust concurrently with such Debentures;
(iii) an Officers' Certificate or, unless previously
delivered, a supplemental indenture hereto setting forth the form of
such Debentures and, except as set forth in a Board Resolution,
establishing the terms thereof;
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(iv) such Debentures, executed on behalf of the Company in
accordance with clause (a) of this Section;
(v) an Opinion of Counsel to the effect that:
(1) the form or forms of such Debentures have been duly
authorized by the Company and have been established in
conformity with the provisions of this Indenture;
(2) such Debentures, when authenticated and delivered
by the Trustee and issued and delivered by the Company in the
manner and subject to any conditions specified in such Opinion
of Counsel, will have been duly issued under this Indenture
and will constitute valid and legally binding obligations of
the Company, entitled to the benefits provided by this
Indenture, and enforceable in accordance with their terms,
subject, as to enforcement to laws relating to or affecting
generally the enforcement of creditors' rights, including,
without limitation, bankruptcy and insolvency laws and to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
(3) that any supplemental indenture referred to in
clause (iii) above has been duly authorized, executed and
delivered by the Company and is a valid instrument legally
binding upon the Company, enforceable in accordance with its
terms, subject as to enforcement to laws relating to or
affecting creditors' rights, including without limitation,
bankruptcy and insolvency laws and to general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and
(4) that all consents, approvals and orders of any
commission, governmental authority or agency required in
connection with the issuance and delivery of such Debentures
have been obtained; and
(vi) an Officers' Certificate certifying that no Default or
Event of Default has occurred and is continuing.
(e) The Trustee shall act as the initial authenticating agent.
Thereafter, the Trustee may appoint an authenticating agent. Each authenticating
agent shall be acceptable to the Company and, except as provided in or pursuant
to this Indenture, shall at all times be a corporation that would be permitted
by the TIA to act as trustee under an indenture qualified under the TIA, is
authorized under applicable law and by its charter to act as an authenticating
agent and has a combined capital and surplus (computed in accordance with
Section 310(a)(2) of the TIA) of at least $50,000,000. If at any time an
authenticating agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect specified in this Section. An authenticating agent may authenticate
Debentures whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by an authenticating
agent. The Trustee shall pay any authenticating agent appointed by the Trustee
reasonable compensation for its services and the Trustee shall be reimbursed for
such payment by the Company pursuant to Section 7.06. The provisions set forth
in Sections 7.02, 7.03 and 7.06 shall be applicable to any authenticating agent.
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(f) If all the Debentures of any series are not to be issued at one
time, it shall not be necessary to deliver an Opinion of Counsel and an
Officers' Certificate at the time of issuance of each Debenture, but such
opinion and certificate, with appropriate modifications, shall be delivered at
or before the time of issuance of the first Debenture of such series. After any
such first delivery, any separate request by the Company that the Trustee
authenticate Debentures of such series for original issue will be deemed to be a
certification by the Company that all conditions precedent provided for in this
Indenture relating to authentication and delivery of such Debentures continue to
have been complied with.
SECTION 2.04 REGISTRAR AND PAYING AND CONVERSION AGENTS.
The Company shall maintain or cause to be maintained, in the City of
New York, an Office or Agency where the Debentures may be presented for
registration of transfer or for exchange ("Registrar"), a Paying Agent at whose
Office the Debentures may be presented or surrendered for payment, a Conversion
Agent at whose Office the Debentures may be presented and surrendered in the
event of a conversion or exchange ("Conversion Agent"), and an Office or Agency
where notices and demands to or upon the Company in respect of the Debentures
and this Indenture may be served. The Registrar shall keep a register (the
"Register") of the Debentures and of their transfer and exchange. The Company
may have one or more co-Registrars and one or more additional Paying Agents and
Conversion Agents. The term Registrar includes any additional registrar, the
term Paying Agent includes any additional paying agent and the term Conversion
Agent includes any additional conversion agent.
Unless otherwise specified in or pursuant to this Indenture or the
Debentures, the Trustee shall be the initial Registrar for each series of
Debentures. The Company shall have the right to remove and replace from time to
time the Registrar for any series of Debentures; provided that no such removal
or replacement shall be effective until a successor Registrar with respect to
such series of Debentures shall have been appointed by the Company and shall
have accepted such appointment by the Company. In the event that the Trustee
shall not be or shall cease to be Registrar with respect to a series of
Debentures, it shall have the right to examine the Register for such series at
all reasonable times. There shall be only one Register for each series of
Debentures.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-Registrar (if not the Company or
the Trustee or an Affiliate of the Trustee). The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall give
prompt written notice to the Trustee and to the Holders of any change of
location of such Office or Agency. If at any time the Company shall fail to
maintain or cause to be maintained any such required Office or Agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.02 hereof. The Company shall notify the Trustee
of the name and address of any such agent. If the Company fails to maintain a
Registrar, Paying Agent, Conversion Agent or agent for service of notices or
demands, the Trustee shall act as such and shall be entitled to appropriate
compensation therefor pursuant to Section 7.06. The Company or any Affiliate of
the Company may act as Paying Agent, Registrar, Conversion Agent or co-Registrar
or agent for service of notices and demands.
The Company may also from time to time designate one or more other
Offices or Agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time
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rescind such designations. The Company will give prompt written notice to the
Trustee and to the Holders of any such designation or rescission and of any
change in location of any such other Office or Agency.
SECTION 2.05 PAYING AGENT TO HOLD MONEY IN TRUST.
Except as otherwise provided herein, prior to or on each due date of
the principal of and premium, if any, and interest on any Debenture, the Company
shall deposit with the Paying Agent a sum of money sufficient to pay such
principal, premium, if any, and interest so becoming due. The Company shall
require each Paying Agent (other than the Trustee or the Company) to agree in
writing that such Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal of
and premium, if any, and interest on the Debentures and shall notify the Trustee
of any default by the Company in making any such payment. At any time during the
continuance of any such default, the Paying Agent shall, upon the request of the
Trustee, pay to the Trustee all money so held in trust and account for any money
disbursed by it. The Company at any time may require the Paying Agent to pay all
money held by it to the Trustee and to account for any money disbursed by it.
Upon doing so, the Paying Agent shall have no further liability for the money so
paid over to the Trustee. If the Company, a Subsidiary or an Affiliate of either
of them acts as Paying Agent, it shall segregate the money held by it as Paying
Agent and hold it as a separate trust fund.
SECTION 2.06 DEBENTUREHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable, the most recent list available to it of the names and addresses of
Debentureholders. If the Trustee is not the Registrar, the Company shall cause
to be furnished to the Trustee on or before the Record Date for each Interest
Payment Date and at such other times as the Trustee may request in writing,
within five Business Days of such request, a list, in such form as the Trustee
may reasonably require of the names and addresses of Debentureholders.
SECTION 2.07 TRANSFER AND EXCHANGE.
When Debentures are presented to the Registrar or a co-Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Debentures of the same series of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if its
reasonable requirements for such transactions are met. To permit registrations
of transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Debentures, all at the Registrar's request.
Every Debenture presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by the Holder or his attorney duly
authorized in writing.
The Company shall not require payment of a service charge for any
registration of transfer or exchange of Debentures, but the Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the registration of the transfer
or exchange of Debentures from the Debentureholder requesting such transfer or
exchange (other than any exchange of a temporary Debenture for a definitive
Debenture not involving any change in ownership).
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The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of (a) any Debenture for a period beginning at
the opening of business 15 days before the mailing of a notice of redemption of
Debentures and ending at the close of business on the day of such mailing or (b)
any Debenture selected, called or being called for redemption, except, in the
case of any Debenture to be redeemed in part, the portion thereof not to be
redeemed.
SECTION 2.08 REPLACEMENT DEBENTURES.
If (a) any mutilated Debenture is surrendered to the Company or the
Trustee, or (b) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Debenture, and there is
delivered to the Company and the Trustee such Debenture or indemnity as may
reasonably be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Debenture has been
acquired by a bona fide purchaser, the Company shall execute in exchange for any
such mutilated Debenture, or in lieu of any such destroyed, lost or stolen
Debenture, a new Debenture of the same series and of like tenor and principal
amount, bearing a number not contemporaneously outstanding, and the Trustee
shall authenticate and make such new Debenture available for delivery.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, or is about to be redeemed by the
Company pursuant to Article 3, the Company in its discretion may, instead of
issuing a new Debenture, pay or purchase such Debenture, as the case may be.
Upon the issuance of any new Debentures under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the reasonable fees and expenses of the Trustee) in
connection therewith.
Every new Debenture issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company (whether or not the mutilated,
destroyed, lost or stolen Debenture shall be at any time enforceable) and shall
be entitled to all benefits of this Indenture equally and ratably with any and
all other Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 2.09 OUTSTANDING DEBENTURES; DETERMINATIONS OF HOLDERS' ACTION.
Debentures outstanding at any time are all the Debentures authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation, those mutilated, destroyed, lost or stolen Debentures referred to
in Section 2.08, those redeemed by the Company pursuant to Article 3, and those
described in this Section as not outstanding. A Debenture does not cease to be
outstanding because the Company or a Subsidiary or Affiliate thereof holds the
Debenture; provided, however, that in determining whether the Holders of the
requisite principal amount of Debentures have given or concurred in any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Debentures owned by the
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Company or a Subsidiary or Affiliate (other than any Trust so long as any of the
Preferred Securities of such Trust are outstanding) shall be disregarded and
deemed not to be outstanding.
Subject to the foregoing, only Debentures outstanding at the time of
such determination shall be considered in any such determination (including
determinations pursuant to Articles 3, 6 and 9).
If a Debenture is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives proof reasonably satisfactory to it that
the replaced Debenture is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds, in accordance with
this Indenture, at the Stated Maturity Date or on a Redemption Date, money
sufficient to pay the Debentures payable on that date, then immediately on the
Stated Maturity Date or such Redemption Date, as the case may be, such
Debentures shall cease to be outstanding, and interest, if any, on such
Debentures shall cease to accrue.
SECTION 2.10 TEMPORARY DEBENTURES.
The Company may execute temporary Debentures, and upon the Company's
Order, the Trustee shall authenticate and make such temporary Debentures
available for delivery. Temporary Debentures shall be printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
in the same series and principal amount and of like tenor as the definitive
Debentures in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the Officers of the
Company executing such Debentures may determine, as conclusively evidenced by
their execution of such Debentures. Such temporary Debentures may be in global
form.
Except in the case of temporary Debentures in global form, which shall
be exchanged in accordance with the provisions thereof, after the preparation of
definitive Debentures, the temporary Debentures shall be exchangeable for
definitive Debentures of the same series upon surrender of the temporary
Debentures at the Office or Agency of the Company designated for such purpose
pursuant to Section 2.04, without charge to the Holders thereof. Upon surrender
for cancellation of any one or more temporary Debentures, the Company shall
execute a like principal amount of definitive Debentures of the same series of
authorized denominations, and the Trustee, upon receipt of a Company Order,
shall authenticate and make such Debentures available for delivery in exchange
therefor. Until so exchanged, the temporary Debentures shall in all respects be
entitled to the same benefits under this Indenture as definitive Debentures.
SECTION 2.11 BOOK-ENTRY SYSTEM.
In order to utilize a book-entry-only system for all or any portion of
the Debentures of any series, all or a portion of the Debentures of any series
may be issued in the form of one or more fully registered Debentures of the same
series for the aggregate principal amount of such Debentures (a "Global
Debenture"), which Global Debenture shall be registered in the name of the
depository (the "Depository") selected by the Company or in the name of such
Depository's nominee. Each Global Debenture shall be delivered by the Trustee to
the Depository or pursuant to the Depository's instruction and shall bear a
legend substantially to the following effect: "This Debenture may be
transferred, in whole but not in part, only to another nominee of the Depository
or to a successor Depository or to a nominee of such successor Depository."
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Notwithstanding any other provision of this Section or of Section 2.07,
a Global Debenture may be transferred in whole but not in part and in the manner
provided in Section 2.07, only by a nominee of the Depository for such series,
or by the Depository or any such nominee of a successor Depository for such
series selected or approved by the Company or to a nominee of such successor
Depository.
If (a) at any time the Depository for Global Debentures of any series
of Debentures notifies the Company that it is unwilling or unable to continue as
Depository for such Global Debentures or if at any time the Depository for such
Global Debentures shall no longer be a clearing agency registered or in good
standing under the Exchange Act or other applicable statute or regulation, and a
successor Depository for such Global Debentures is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware of such
condition, as the case may be, (b) the Company determines in its sole
discretion, that the Debentures of any series shall no longer be represented by
one or more Global Debentures and delivers to the Trustee an Officers'
Certificate evidencing such determination or (c) a Default or an Event of
Default occurs and is continuing, then the provisions of this Section shall no
longer apply to the Debentures of such series. In such event, the Company will
execute and the Trustee, upon receipt of an Officers' Certificate evidencing
such determination by the Company, will authenticate and deliver Debentures of
such series and of like tenor in definitive registered form, in authorized
denominations, and in aggregate principal amount equal to the principal amount
of the Global Debentures of such series in exchange for such Global Debentures.
Upon the exchange of Global Debentures for such Debentures in definitive
registered form without coupons, in authorized denominations, the Global
Debentures shall be canceled by the Trustee. Such Debentures in definitive
registered form issued in exchange for Global Debentures pursuant to this
Section shall be registered in such names and in such authorized denominations
as the Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Debentures to the Persons in whose names such Debentures are so registered.
Except as provided above or as provided in any supplemental indenture,
owners of beneficial interests in a Global Debenture shall not be entitled to
receive physical delivery of Debentures in definitive form and will not be
considered the Holders thereof for any purpose under this Indenture.
Members of or participants in the Depository shall have no rights under
this Indenture with respect to any Global Debenture held on their behalf by the
Depository, and such Depository or its nominee, as the case may be, may be
treated by the Company, the Trustee, and any agent of the Company or the Trustee
as the Holder of such Global Debentures for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee, or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its members or participants, the
operation of customary practices governing exercise of the rights of a Holder of
any Debenture, including without limitation the granting of proxies or other
authorization of participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a Holder
is entitled to give or take under this Indenture.
SECTION 2.12 CANCELLATION.
All Debentures surrendered for payment, redemption, registration of
transfer, exchange or conversion or for credit against any sinking fund payment
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by the Trustee. The Company
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may at any time deliver to the Trustee for cancellation any Debentures
previously authenticated and made available for delivery hereunder which the
Company may have acquired in any manner whatsoever, and all Debentures so
delivered shall be promptly canceled by the Trustee. The Company may not reissue
or issue new Debentures to replace Debentures it has paid or delivered to the
Trustee for cancellation. No Debentures shall be authenticated in lieu of or in
exchange for any Debentures canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Debentures held by the
Trustee shall be destroyed by the Trustee, and the Trustee shall deliver a
certificate of destruction to the Company.
ARTICLE 3
REDEMPTION
SECTION 3.01 REDEMPTION: NOTICE TO TRUSTEE.
(a) The Company may redeem the Debentures of any series issued
hereunder on and after the dates and in accordance with the terms established
for such series pursuant to Section 2.01.
(b) If any or all of the Debentures are to be redeemed pursuant to this
Section, the Company shall deliver to the Trustee no more than 60 and no less
than 45 days prior to the Redemption Date a Company Order specifying the series
and principal amount of Debentures to be redeemed and the Redemption Date and
Redemption Price for such Debentures. Such Company Order shall be accompanied by
a Board Resolution authorizing such redemption. If the Debentures of a series
are held by a Trust, the Company shall also deliver a copy of such Company Order
to the Property Trustee for such Trust.
SECTION 3.02 SELECTION OF DEBENTURES TO BE REDEEMED.
If less than all the outstanding Debentures of a series are to be
redeemed at any time, the Trustee shall select the Debentures of such series to
be redeemed by lot or by any other method the Trustee considers fair and
appropriate. The Trustee shall make the selection at least 30 but not more than
60 days before the Redemption Date from outstanding Debentures of such series
not previously called for redemption. Provisions of this Indenture that apply to
Debentures called for redemption also apply to portions of Debentures called for
redemption. The Trustee shall notify the Company promptly of the Debentures or
portions of Debentures to be redeemed.
SECTION 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before the Redemption Date,
the Trustee, in the Company's name and at the Company's expense, shall mail or
cause to be mailed a notice of redemption by first-class mail, postage prepaid,
to each Holder of Debentures to be redeemed at such Holder's last address as it
appears in the Register.
The notice of redemption shall identify the Debentures to be redeemed,
the provision of the Debentures or this Indenture pursuant to which the
Debentures called for redemption are being redeemed and shall state:
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(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that payment of the Redemption Price of Debentures called for
redemption will be made only upon surrender of such Debentures to the Paying
Agent;
(e) if fewer than all the outstanding Debentures of any series are to
be redeemed, the identification and principal amounts of the particular
Debentures to be redeemed and that, on and after the Redemption Date, upon
surrender of such Debentures, a new Debenture or Debentures of the same series
and of like tenor and in a principal amount equal to the unredeemed portion
thereof will be issued;
(f) that, unless the Company defaults in paying the Redemption Price of
the Debentures called for redemption, including accrued interest thereon to the
Redemption Date, interest will cease to accrue on such Debentures on and after
the Redemption Date;
(g) that the redemption is for a sinking fund, if such is the case; and
(h) in the case of Debentures of any series that are convertible or
exchangeable into Capital Stock, the conversion or exchange price or rate, the
date or dates on which or the period or periods during which the right to
convert or exchange the principal of the Debentures of such series to be
redeemed will commence or terminate and the place or places where such
Debentures may be surrendered for conversion or exchange.
Any notice of redemption given in the manner provided herein shall be
conclusively presumed to have been given, whether or not such notice is actually
received. Failure to mail any notice or defect in the mailed notice or the
mailing thereof in respect of any Debenture shall not affect the validity of the
redemption of any other Debenture.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION.
After notice of redemption has been given, Debentures called for
redemption shall become due and payable on the Redemption Date at the Redemption
Price and from and after the Redemption Date (unless the Company shall default
in the payment of the Redemption Price and accrued interest), such Debentures
shall cease to bear interest. Upon the later of the Redemption Date and the date
such Debentures are surrendered to the Paying Agent, such Debentures shall be
paid at the Redemption Price, plus accrued interest to the Redemption Date,
provided that installments of interest on Debentures with an Interest Payment
Date which is on or prior to the Redemption Date shall be payable to the Holders
of such Debentures, registered as such at the close of business on the Regular
Record Dates therefor according to their terms and provisions.
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SECTION 3.05 DEPOSIT OF REDEMPTION PRICE.
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (or if the Company or an Affiliate is the Paying Agent, shall
segregate and hold in trust or cause such Affiliate to segregate and hold in
trust) money sufficient to pay the Redemption Price of, and accrued interest on,
all Debentures to be redeemed on that Redemption Date. The Paying Agent shall
return to the Company any money in excess of the amount sufficient to pay the
Redemption Price of, and accrued interest on, all Debentures to be redeemed and
any interest accrued on the amount deposited pursuant to this Section.
SECTION 3.06 DEBENTURES REDEEMED IN PART.
Upon surrender of a Debenture that is redeemed in part, the Trustee
shall authenticate for the Holder a new Debenture of the same series and in a
principal amount equal to the unredeemed portion of such Debenture.
ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
(a) The Company shall pay the principal of and premium, if any, and
interest (including interest accruing during any Extension Period and/or on or
after the filing of a petition in bankruptcy or reorganization relating to the
Company, whether or not a claim for post-filing interest is allowed in such
proceeding) on the Debentures on or prior to the dates and in the manner
provided in such Debentures or pursuant to this Indenture. An installment of
principal, premium, if any, or interest shall be considered paid on the
applicable due date if on such date the Trustee or the Paying Agent holds, in
accordance with this Indenture, money sufficient to pay all of such installment
then due. With respect to any Debenture, the Company shall pay interest on
overdue principal and interest on overdue installments of interest (including
interest accruing during any Extension Period and/or on or after the filing of a
petition in bankruptcy or reorganization relating to the Company, whether or not
a claim for post-filing interest is allowed in such proceeding), to the extent
lawful, at the rate accruing on such Debenture, compounded with the same
frequency as interest is payable on such Debentures. Interest on overdue
interest shall accrue from the date such amounts become overdue.
(b) Notwithstanding the provisions of Section 4.01(a) or any other
provision herein to the contrary, the Company shall have the right, as provided
in a Board Resolution or supplemental indenture issued pursuant to Section 2.01,
in its sole and absolute discretion at any time and from time to time while the
Debentures of any series are outstanding, so long as no Event of Default with
respect to such series of Debentures has occurred and is continuing, to defer
payments of interest by extending the interest payment period for such series of
Debentures for the maximum consecutive period, if any, specified for such series
of Debentures, provided that such Extension Period must end on an Interest
Payment Date and shall not extend beyond the Stated Maturity Date or Redemption
Date of any Debenture of such series, and provided further that at the end of
each Extension Period the Company shall pay all interest then accrued and unpaid
(together with interest thereon to the extent permitted by applicable law at the
rate accruing on such Debentures). Prior to the termination of an Extension
Period, the Company may shorten or may further extend the interest payment
period for such series of Debentures, provided that such
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Extension Period together with all such previous and further extensions may not
exceed the maximum consecutive period specified for such series of Debentures,
end on a date other than an Interest Payment Date or extend beyond the Stated
Maturity Date or Redemption Date of any Debenture of such series. The Company
shall give the Trustee notice of the Company's election to begin an Extension
Period for any series of Debentures and any shortening or extension thereof at
least five Business Days prior to: (i) the date notice of payment of interest on
such Debentures is required to be given to any national securities exchange on
which the related Preferred Securities, if any, or Debentures are then listed or
other applicable self-regulatory organization or (ii) the date of the notice of
the record or payment date of the related distribution on the Preferred
Securities issued by the Trust which is the Holder of the Debentures of such
series, but in any event not less than five Business Days prior to the Record
Date fixed by the Company for the payment of such interest. The Company shall
give or cause the Trustee to give notice (a form of which shall be provided by
the Company to the Trustee) of the Company's election to begin an Extension
Period to the Holders by first class mail, postage prepaid.
SECTION 4.02 PROHIBITION AGAINST DIVIDENDS, ETC.
The Company shall not (a) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Company's Capital Stock or (b) make any payment of principal of or
premium, if any, or interest on or repay or repurchase or redeem any debt
securities of the Company (including Debentures) that rank pari passu with or
junior in right of payment to the Debentures or (c) make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
Subsidiary of the Company (including any Guarantee) if such guarantee ranks pari
passu or junior in right of payment to the Debentures (other than (i) dividends
or distributions in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock of the Company, (ii) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (iii) payments under any
Guarantee, (iv) as a result of a reclassification of the Company's Capital Stock
or the exchange or conversion of one class or series of the Company's Capital
Stock for another class or series of the Company's Capital Stock, (v) the
purchase of fractional interests in shares of the Company's Capital Stock
pursuant to the conversion or exchange provisions of such Capital Stock or the
security being converted or exchanged, and (vi) purchases of Common Stock
related to the issuance of Common Stock or rights under any of the Company's
benefit plans for its directors, officers or employees or any of the Company's
dividend reinvestment plans): (X) during any Extension Period, (Y) if at such
time there shall have occurred and is continuing any Default or Event of
Default, or (Z) if the Company shall be in default with respect to its payment
or other obligations under any Guarantee.
SECTION 4.03 SEC REPORTS.
The Company shall file with the Trustee, within 15 days after it files
them with the SEC, copies of its annual report and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company
is not subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Trustee such information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which are specified in
Section 13 or 15(d) of the Exchange Act. The Company shall also comply with the
provisions of Section 314(a) of the TIA.
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SECTION 4.04 COMPLIANCE CERTIFICATES.
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each of the Company's fiscal years, an Officers' Certificate stating
whether or not the signer knows of any Default or Event of Default. Such
certificate shall contain a certification from the Principal Executive Officer,
Principal Financial Officer or Principal Accounting Officer of the Company as to
his or her knowledge of the Company's compliance with all conditions and
covenants under this Indenture. For purposes of this Section, such compliance
shall be determined without regard to any period of grace or requirement of
notice provided under this Indenture. If such Officer does know of such a
Default or Event of Default, the Officers' Certificate shall describe any such
Default or Event of Default, and its status. Such Officers' Certificate need not
comply with Sections 13.04 and 13.05.
(b) The Company shall deliver to the Trustee any information reasonably
requested by the Trustee in connection with the compliance by the Trustee or the
Company with the TIA.
SECTION 4.05 FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee, the Company shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
SECTION 4.06 PAYMENT OF EXPENSES OF EACH TRUST.
The Company covenants for the benefit of the Holders of each series of
Debentures to pay all of the obligations, costs and expenses of such Trust
(other than payments in respect of Trust Securities) in accordance with the
provisions of its Trust Agreement and to pay the taxes of such Trust in
accordance with the provisions of its Trust Agreement in order to permit such
Trust to make distributions on and redemptions of its Preferred Securities in
accordance with such Trust Agreement.
SECTION 4.07 OWNERSHIP OF COMMON SECURITIES.
So long as the Trust Securities of each Trust remain outstanding, the
Company hereby covenants (a) to maintain 100% direct or indirect ownership of
the common securities issued by such Trust (it being understood that any
permitted successor of the Company under this Indenture may succeed to the
Company's ownership of such common securities), (b) to use its best efforts to
cause each Trust (i) to remain a business trust, except in connection with the
distribution of Debentures to the holders of related Trust Securities in
liquidation of such Trust, the conversion, exchange or redemption of all of such
Trust Securities, or certain mergers, consolidations or amalgamations, each as
permitted by the applicable Trust Agreement, and (ii) to otherwise continue to
be classified as a grantor trust for United States federal income tax purposes,
(c) to use its best efforts to cause each holder of each Trust's Trust
Securities to be treated as owning an undivided beneficial interest in the
related Debentures and (d) not to cause, as sponsor of each Trust, or to permit,
as holder of the common securities, the dissolution, liquidation or winding-up
of any Trust, except as provided in the applicable Trust Agreement.
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ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 WHEN THE COMPANY MAY MERGE, ETC.
The Company may not consolidate with or merge with or into, or sell,
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety (either in one transaction or a series of
transactions) to, any Person, and no Person shall consolidate with or merge into
the Company or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to the Company, unless:
(a) the Person formed by or surviving such consolidation or merger or
to which such sale, conveyance, transfer or lease shall have been made (the
"Successor") if other than the Company (i) is organized and existing under the
laws of the United States of America or any state thereof or the District of
Columbia, and (ii) shall expressly assume by a supplemental indenture, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Debentures, this Indenture and the
Guarantees;
(b) immediately prior to and after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the Successor
Person or any Subsidiary as a result of such transaction as having been incurred
by such Person or such Subsidiary at the time of such transaction), no Default
or Event of Default shall have occurred and be continuing; and
(c) the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
conveyance, transfer or lease and such supplemental indenture comply with this
Indenture.
The Successor will be the successor to the Company, and will be
substituted for, and may exercise every right and power and become the obligor
on the Debentures with the same effect as if the Successor had been named as the
Company herein but, in the case of a sale, conveyance, transfer or lease of all
or substantially all of the assets of the Company, the predecessor Company will
not be released from its obligation to pay the principal of and premium, if any,
and interest on the Debentures.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
"Event of Default," wherever used herein with respect to Debentures of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body),
unless such event is specifically deleted or modified in or pursuant to the
supplemental indenture, Board Resolution or Officers' Certificate establishing
the terms of such series pursuant to this Indenture:
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(a) default in the payment, when due, of interest on any Debenture of
that series and the default continues for a period of 30 days; provided, that
during any Extension Period for the Debentures of that series, failure to pay
interest on the Debentures of that series shall not constitute a Default or
Event of Default hereunder, or
(b) default in the payment of the principal of or premium, if any, on
any Debenture of such series when it becomes due, whether at maturity, upon any
redemption, by declaration of acceleration of maturity or otherwise; or
(c) default in the deposit of any sinking fund payment when and as due
by the terms of a Debenture of such series; or
(d) default in the performance or breach of any covenant or agreement
of the Company in this Indenture (other than a covenant or agreement a default
in the performance or the breach of which is elsewhere in this Section
specifically dealt with or which has been expressly included in this Indenture
solely for the benefit of a series of Debentures), and continuance of such
breach or default for a period of 90 days after receipt by the Company of a
"Notice of Default"; or
(e) a court of competent jurisdiction enters:
(i) a decree or order for relief in respect of the Company in
an involuntary proceeding under any applicable Bankruptcy Law and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(ii) a decree or order adjudging the Company to be insolvent,
or approving a petition seeking reorganization, arrangement, adjustment
or composition of the Company and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(iii) a final and non-appealable order appointing a Custodian
of the Company or of any substantial part of the property of the
Company, or ordering the winding up or liquidation of the affairs of
the Company; or
(f) the Company pursuant to or within the meaning of any Bankruptcy
Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of
an order for relief against it in an involuntary case or proceeding; (iii) files
a petition or answer or consent seeking reorganization or relief or consents to
such filing or to the appointment of or taking possession by a Custodian of it
or for all or substantially all of its property, and such Custodian is not
discharged within 60 days; (iv) makes a general assignment for the benefit of
its creditors; or (v) admits in writing its inability to pay its debts generally
as they become due; or
(g) if applicable, failure by the Company to deliver the required
securities or other rights upon an appropriate conversion or exchange election
by Holders of the Debentures or the related Preferred Securities; or
(h) any other Event of Default provided in or pursuant to this
Indenture with respect to Debentures of such series.
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The term "Bankruptcy Law" means Title 11 of the United States Code, or
any similar federal or state bankruptcy, insolvency, reorganization or other law
for the relief of debtors. "Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator, custodian or similar official under any Bankruptcy
Law.
A Default under clause (d) above is not an Event of Default until (i)
the Trustee provides a "Notice of Default" to the Company or the Holders of at
least 25% in aggregate principal amount of the Debentures of that series at the
time outstanding or, if that series of Debentures is held by a Trust, the
holders of at least 25% in aggregate liquidation amount of the outstanding
Preferred Securities of that Trust provide a "Notice of Default" to the Company
and the Trustee and (ii) the Company does not cure such Default within the time
specified in clause (d) above after receipt of such notice. Any such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default."
SECTION 6.02 ACCELERATION.
If any Event of Default with respect to the Debentures of any series
other than an Event of Default under clause (e) or (f) of Section 6.01 occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Debentures of that series then outstanding may declare
the principal of, and any accrued interest on, all the Debentures of that series
due and payable immediately, provided that in the case of a series of Debentures
then held by a Trust, if upon an Event of Default with respect to the Debentures
of that series the Trustee has, or the Holders of at least 25% in aggregate
principal amount of the Debentures of that series then outstanding have, failed
to declare the principal of, and any accrued interest on, the Debentures of that
series to be immediately due and payable, the holders of at least 25% in
aggregate liquidation amount of the outstanding Preferred Securities of that
Trust shall have such right by a notice in writing to the Company and the
Trustee. If an Event of Default specified in clause (e) or (f) of Section 6.01
occurs, the principal of, and any accrued interest on, all the Debentures shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Debentureholders.
The foregoing paragraph, however, is subject to the condition that if,
at any time after the principal of the Debentures of that series shall have been
so declared due and payable, and before any judgment or decree for the payment
of the moneys due shall have been obtained or entered as hereinafter provided,
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all the Debentures of that series and
the principal of and premium, if any, on all Debentures of that series which
shall have become due otherwise than by acceleration (with interest upon such
principal and premium, if any, and, to the extent that such payment is
enforceable under applicable law, upon overdue installments of interest, at the
rate accruing on the Debentures of that series to the date of such payment or
deposit) and the amount payable to the Trustee under Section 7.06, and any and
all Defaults under the Indenture, other than the nonpayment of principal of and
interest on Debentures of that series which shall not have become due by their
terms, shall have been remedied or waived as provided in Section 6.04, then and
in every such case the Holders of at least a majority in aggregate principal
amount of the Debentures of that series then outstanding (subject to, in the
case of any series of Debentures held as assets of a Trust and with respect to
which a Security Exchange has not theretofore occurred, such consent of the
holders of the Preferred Securities and the Common Securities of such Trust as
may be required under the Trust Agreement of such Trust), by written notice to
the Company and to the Trustee, may rescind and annul such declaration and its
consequences with respect to
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that series of Debentures; but no such rescission and annulment shall extend to
or shall affect any subsequent default, or shall impair any right consequent
thereon.
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may, in
its own name or as trustee of an express trust, institute, pursue and prosecute
any proceeding, including without limitation, any action at law or suit in
equity or other judicial or administrative proceeding to collect the payment of
principal of or premium, if any, or interest on the Debentures of the series
that is in default, to enforce the performance of any provision of the
Debentures of that series or this Indenture or to obtain any other available
remedy.
The Trustee may maintain a proceeding even if it does not possess any
of the Debentures or does not produce any of the Debentures in the proceeding. A
delay or omission by the Trustee, any Debentureholder or the holders of
Preferred Securities in exercising any right or remedy accruing upon an Event of
Default shall not impair such right or remedy or constitute a waiver of, or
acquiescence in, such Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
If a Default or Event of Default with respect to a series of Debentures
has occurred and is continuing, the Holders of at least a majority in aggregate
principal amount of the Debentures of that series at the time outstanding, or,
if that series of Debentures is held by a Trust, the holders of at least a
majority in aggregate liquidation amount of the Preferred Securities of that
Trust, in each case by notice to the Trustee and the Company, may waive an
existing Default or Event of Default and its consequences except a Default or
Event of Default in the payment of the principal of or premium, if any, or
interest on any Debenture of that series (unless such Event of Default has been
cured and a sum sufficient to pay all matured installments of interest and
premium, if any and principal due otherwise than by acceleration has been
deposited with the Trustee) or a default in respect of a covenant or provision
which under this Indenture cannot be modified or amended without the consent of
the holder of each outstanding Debenture of that series. When a Default or Event
of Default is waived, it is deemed cured and shall cease to exist, but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any consequent right.
SECTION 6.05 CONTROL BY HOLDERS.
The Holders of at least a majority in aggregate principal amount of the
Debentures of a series or, if that series of Debentures is held by a Trust, the
holders of at least a majority in aggregate liquidation amount of the Preferred
Securities of that Trust, may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or of exercising any
trust or power conferred on the Trustee, in respect of such series of
Debentures. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines in good
faith is unduly prejudicial to the rights of other Debentureholders or may
involve the Trustee in personal liability. The Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such direction,
including withholding notice to the Holders of the Debentures of continuing
default (except in the payment of the principal of (other than any mandatory
sinking fund payment) or premium, if any, or
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interest on any Debentures) if the Trustee considers it in the interest of the
Holders of the Debentures to do so.
SECTION 6.06 LIMITATION ON SUITS.
Except as provided in Section 6.07 or 6.08, no Holder of Debentures of
any series or holder of Preferred Securities of the Trust which is the Holder of
that series of Debentures may pursue any remedy with respect to this Indenture
or the Debentures unless:
(a) the Holders of Debentures of such series or the holders of such
Preferred Securities give to the Trustee written notice stating that an Event of
Default with respect to the corresponding Debentures of such series has occurred
and is continuing;
(b) the Holders of at least 25% in aggregate principal amount of the
outstanding Debentures of that series or the holders of at least 25% in
aggregate liquidation amount of such Preferred Securities make a written request
to the Trustee to pursue a remedy;
(c) the Holders of Debentures of such series or the holders of such
Preferred Securities provide to the Trustee reasonable security and indemnity
against any loss, liability or expense satisfactory to the Trustee;
(d) the Trustee does not comply with the request within 60 days after
receipt of the notice, the request and the offer of security and indemnity; and
(e) during such 60 day period, the Holders of at least a majority in
aggregate principal amount of the Debentures of that series or the holders of at
least a majority in aggregate liquidation amount of such Preferred Securities do
not give the Trustee a direction inconsistent with the request,
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Debenture to affect, disturb or prejudice the rights of
any other such Holders, or to obtain or seek to obtain priority or preference
over any other of such Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all such Holders.
SECTION 6.07 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
AND INTEREST.
Notwithstanding any other provision of this Indenture, the Holder of
any Debenture shall have the right which is absolute and unconditional to
receive payment of the principal of, premium, if any, and (subject to Section
2.02) interest on such Debenture on the respective due dates expressed in such
Debenture (or, in the case of redemption, on the Redemption Date) and to convert
or exchange such Debentures in accordance with its terms, if applicable, and to
institute suit for the enforcement of such payment or conversion or exchange,
and such right shall not be impaired without the consent of such Holder.
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SECTION 6.08 DIRECT ACTION RIGHT OF HOLDERS OF TRUST PREFERRED SECURITIES.
If an Event of Default has occurred and is continuing and is
attributable either to (a) the failure of the Company to pay the principal of or
premium, if any, or interest on the Debentures on the due date therefor or (b)
the failure by the Company to deliver the required securities or other rights
upon an appropriate conversion or exchange right election, and an event of
default has occurred and is continuing under the applicable Trust Agreement, a
holder of the related Preferred Securities, in lieu of any action that may
otherwise be taken hereunder as a Holder of Debentures, may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or premium, if any, or interest on such Debentures
having a principal amount equal to the liquidation amount of the Preferred
Securities held by such holder or for enforcement of such conversion or exchange
rights, as the case may be (a "Direct Action"). Notwithstanding anything
contained herein to the contrary, the Company may not amend this Indenture to
remove the foregoing right to bring a Direct Action without the prior written
consent of the holders of all of the Preferred Securities outstanding.
Notwithstanding any payments made to a holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of and premium, if any, or interest on the related
Debentures, and the Company shall be subrogated to the rights of the holder of
such Preferred Securities with respect to payments on the Preferred Securities
to the extent of any payments made by the Company to such holder in any Direct
Action.
SECTION 6.09 COLLECTION SUITS BY THE TRUSTEE.
The Company covenants that if
(a) default is made in the payment of any interest on any Debenture
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(b) default is made in the payment of the principal of or premium, if
any, on any Debenture on the Stated Maturity Date or Redemption Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holder of such Debenture, the whole amount then due and payable on such
Debenture for principal, premium, if any, and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium, if any, and on any overdue interest, at the rate or rates
prescribed therefor in such Debenture and in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Debenture and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Debenture, wherever
situated.
If an Event of Default with respect to Debentures of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of
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Debentures of such series by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or such Debentures or in aid of the exercise of any power granted
herein, or to enforce any other remedy available under this Indenture or by law.
SECTION 6.10 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or its properties or assets, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of the principal of
and premium, if any, and interest on the Debentures and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Holders of Debentures allowed in such judicial proceeding; and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay the Trustee any amount
due it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.06.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Debenture any plan of reorganization, arrangement, adjustment or composition
affecting the Debentures or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.11 PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall,
subject to Article 10, pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.06;
SECOND: to Holders of Debentures in respect of which or for
the benefit of which such money has been collected
for amounts due and unpaid on such Debentures for the
principal thereof or premium, if any, or interest, if
any, thereon ratably, without preference or priority
of any kind, according to such amounts due and
payable on such Debentures; and
THIRD: the balance, if any, to the Company.
Except as otherwise set forth in the Debentures, the Trustee may fix a
Record Date and payment date for any payment to Debentureholders pursuant to
this Section.
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SECTION 6.12 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant (other than the Trustee) in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a suit by
the Trustee, a suit by a Holder of Debentures or holder of Preferred Securities
pursuant to Section 6.07 or 6.08 or a suit by Holders of Debentures of more than
10% in aggregate principal amount of the outstanding Debentures of any series
or, if a series of Debentures is held by a Trust, the holders of more than 10%
in aggregate liquidation amount of the Preferred Securities of that Trust.
ARTICLE 7
THE TRUSTEE
SECTION 7.01 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE.
(a) If an Event of Default occurs and is continuing with respect to the
Debentures of any series, the Trustee shall exercise the rights and powers
vested in it by this Indenture with respect to that series and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default with respect
to the Debentures of any series, (i) the Trustee need perform only those duties
with respect to that series that are specifically set forth in this Indenture or
the TIA and no others; and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture (but shall not be required to
confirm or investigate the accuracy of mathematical calculations or other facts
stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this clause (c) does not limit the effect of Section 7.01(b);
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
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(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to Section 7.01(a), (b), (c) and (e) and Section 7.02.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives security and indemnity reasonably satisfactory to it
against any loss, liability or expense (including reasonable counsel fees).
(f) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur personal liability in the performance
of any of its duties or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Indenture or
indemnity reasonably satisfactory to the Trustee against such risk or liability
is not reasonably assured to it.
(g) Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall not be
liable for interest on any money held by it hereunder except as otherwise agreed
with the Company.
SECTION 7.02 RIGHTS OF THE TRUSTEE.
Subject to Sections 315(a) through 315(d) of the TIA:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note,
coupon or other paper or document reasonably believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Order (in each case, other than delivery of
any Debenture to the Trustee for authentication and delivery pursuant to Section
2.03 which shall be sufficiently evidenced as provided therein) and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
shall be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by or pursuant to this Indenture at the request or
direction of any of the Holders of Debentures of any series pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
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(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
coupon or other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine, during business hours and upon
reasonable notice, the books, records and premises of the Company, personally or
by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 7.03 NOT RESPONSIBLE FOR RECITALS OR ISSUANCES OF DEBENTURES.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Debentures. The Trustee shall not be accountable for the
Company's use of the proceeds from the Debentures, and the Trustee shall not be
responsible for any statement in this Indenture or the Debentures or any report
or certificate issued by the Company hereunder or any registration statement
relating to the Debentures (other than the Trustee's Certificate of
Authentication and the Trustee's Statement of Eligibility on Form T-1), or the
determination as to which beneficial owners are entitled to receive any notices
hereunder.
SECTION 7.04 NOTICE OF DEFAULTS.
If a Default occurs and is continuing with respect to the Debentures of
any series and if it is known to the Trustee, the Trustee shall mail to each
Holder of a Debenture of that series notice of the Default within 90 days after
it becomes known to the Trustee unless such Default shall have been cured or
waived. Except in the case of a Default described in Section 6.01(a), (b) or
(g), the Trustee may withhold such notice if and so long as a committee of
Responsible Officers in good faith determines that the withholding of such
notice is in the interests of the Holders of the Debentures of that series. The
Trustee shall not be charged with knowledge of any Default unless a Responsible
Officer assigned to the Corporate Trust Department of the Trustee shall have
actual knowledge of the Default. The second sentence of this Section shall be in
lieu of the proviso to TIA Section 315(b). Said proviso is hereby expressly
excluded from this Indenture, as permitted by the TIA.
SECTION 7.05 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each September 1, beginning with the September 1
next following the date of this Indenture, the Trustee shall mail to each
Debentureholder, and such other holders that have submitted their names to the
Trustee for such purpose, a brief report dated as of such September 1 in
accordance with and to the extent required under TIA Section 313.
A copy of each report at the time of its mailing to Debentureholders
shall be filed with the Company, the SEC and any securities exchange on which
the Debentures are listed. The Company agrees to promptly notify the Trustee
whenever the Debentures become listed on any securities exchange and of any
listing thereof.
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SECTION 7.06 COMPENSATION AND INDEMNITY.
The Company covenants and agrees:
(a) to pay to the Trustee from time to time such compensation as shall
be agreed in writing between the Company and the Trustee for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) to reimburse the Trustee upon its request for reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses, and advances of its agents and counsel; provided that, prior to any
Default or Event of Default, the Trustee shall only have one outside counsel),
including all reasonable expenses and advances incurred or made by the Trustee
in connection with any Default or Event of Default or any membership on any
creditors' committee, except any such expense or advance as may be attributable
to its negligence or bad faith; and
(c) to indemnify the Trustee, its officers, employees, directors and
shareholders, for, and to hold it harmless against, any and all loss, liability
or expense, incurred without negligence or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder.
Before, after or during an Event of Default with respect to the
Debentures of a series, the Trustee shall have a claim and lien prior to the
Debentures of that series as to all property and funds held by it hereunder for
any amount owing it for its fees and expenses or any predecessor Trustee
pursuant to this Section, except with respect to funds held by the Trustee or
any Paying Agent in trust for the payment of principal of or premium, if any, or
interest on Debentures pursuant to Section 2.05 or Section 8.01.
The Company's payment and indemnity obligations pursuant to this
Section are not subject to Article 10 of this Indenture and shall survive the
discharge of this Indenture. When the Trustee renders services or incurs
expenses after the occurrence of a Default specified in Section 6.01, the
compensation for services and expenses are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.07 ELIGIBILITY; DISQUALIFICATION.
(a) The Trustee shall at all times satisfy the requirements of the TIA
Sections 310(a)(1) and 310(a)(2). The Trustee (or any Affiliate thereof which
has unconditionally guaranteed the obligations of the Trustee hereunder) shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recently published annual report of condition. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
(b) The Trustee shall comply with TIA Section 310(b). In determining
whether the Trustee has conflicting interests as defined in TIA Section
310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1) and
the Trustee's Statement of Eligibility on Form T-1 shall be deemed incorporated
herein.
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SECTION 7.08 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 7.09.
(b) The Trustee may resign at any time with respect to the Debentures
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 7.09 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Debentures of such series.
(c) If the Trustee has or shall acquire any conflicting interest, as
defined in Section 310(b) of the TIA, with respect to the Debentures of any
series, it shall, within 90 days after ascertaining it has such conflicting
interest, either eliminate the conflicting interest or resign with respect to
the Debentures of that series in the manner set forth in this Section.
(d) The Trustee may be removed at any time with respect to the
Debentures of any series by Act of the Holders of at least a majority in
principal amount of the outstanding Debentures of such series, delivered to the
Trustee and to the Company.
(e) If at any time:
(i) the Trustee shall fail to comply with clause (c) of this
Section after written request therefor by the Company or by any Holder
of a Debenture who has been a bona fide Holder of a Debenture for at
least six months, or
(ii) the Trustee shall cease to be eligible under Section
7.07(a) and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged bankrupt or insolvent, or a receiver of Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case,
(1) the Company by a Board Resolution may remove the Trustee with
respect to all Debentures, or (2) subject to Section 6.12, any Holder
of a Debenture who has been a bona fide Holder of a Debenture for at
least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Debentures of such series and the
appointment of a successor Trustee or Trustees.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Debentures of one or more series, the Company, by or pursuant to
a Board Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to the Debentures of that or those series (it being understood that any
such successor Trustee may be appointed with respect to the Debentures of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Debentures of any particular series) and shall comply with
the applicable requirements of Section 7.09. If, within one year after such
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resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Debentures of any series shall be
appointed by Act of the Holders of at least a majority in principal amount of
the outstanding Debentures of such series, notice of such appointment shall be
delivered to the Company and the retiring Trustee. The successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 7.09, become the successor Trustee
with respect to the Debentures of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Debentures of any series shall have been so appointed by the Company or
the Holders of Debentures and accepted appointment in the manner required by
Section 7.09, any Holder of a Debenture who has been a bona fide Holder of a
Debenture of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Debentures of such
series.
(g) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Debentures of any series and each appointment
of a successor Trustee with respect to the Debentures of any series in the
manner provided in Section 13.02. Each notice shall include the name of the
successor Trustee with respect to the Debentures of such series and the address
of its Corporate Trust Office.
SECTION 7.09 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Debentures, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Debentures of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Debentures of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (i) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and deeds of the Trustee with respect to the Debentures of that or those
series which the appointment of such successor Trustee relates, (ii) if the
retiring Trustee is not retiring with respect to all Debentures, shall contain
such provisions as shall be deemed necessary or desirable to confirm that all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Debentures of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (iii) shall
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees as co-trustees of the same
trust and that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such supplemental indenture
the resignation or removal of the
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retiring Trustee shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Debentures of that or those series to which the
appointment of such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Debentures of that or those series to
which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 7.10 SUCCESSOR TRUSTEE BY MERGER.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets to another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 8.01 SATISFACTION AND DISCHARGE OF INDENTURE.
Upon the direction of the Company by a Company Order, this Indenture
shall cease to be of further effect with respect to any series of Debentures as
specified in such Company Order, and the Trustee, on receipt of a Company Order,
at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture as to such series, when
(a) either
(i) all Debentures of such series theretofore
authenticated and delivered (other than (1) Debentures of such
series which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.08, and
(2) Debentures of such series for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 8.04) have
been delivered to the Trustee for cancellation; or
(ii) all Debentures of such series not theretofore
delivered to the Trustee for cancellation
(1) have become due and payable, or
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(2) will become due and payable at their
stated maturity within one year, or
(3) if redeemable at the option of the
Company, are to be called for redemption within one
year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of (1), (2) or (3) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for such purpose, (a) cash (which may be held
in an interest bearing account insured by the Federal Deposit
Insurance Corporation) in an amount, or (b) U.S. Government
Obligations, maturing as to principal and interest at such
times and in such amounts as will ensure the availability of
cash, or (c) a combination thereof, in an amount sufficient to
pay and discharge the entire indebtedness on such Debentures
not theretofore delivered to the Trustee for cancellation,
including the principal of, and premium, if any, and interest
on such Debentures, to the date of such deposit (in the case
of Debentures which have become due and payable) or to the
Stated Maturity Date or Redemption Date thereof, as the case
may be; and
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company with respect to the outstanding Debentures of such
series.
In the event there are Debentures of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Debentures of such series as to which it is Trustee and if the other conditions
thereto are met.
Notwithstanding the satisfaction and discharge of this Indenture, with
respect to any series of Debentures, the obligations of the Company to the
Trustee under Section 7.06 and, if money shall have been deposited with the
Trustee pursuant to clause (a)(ii) of this Section, the following obligations of
the Company and the Trustee with respect to the Debentures of such series, shall
survive: (i) the rights of registration of transfer and exchange of Debentures
of such series, (ii) the replacement of apparently mutilated, defaced,
destroyed, lost or stolen Debentures of such series, (iii) the rights of the
Holders of the Debentures of such series to receive payments of the principal of
and premium, if any, interest on the Debentures of such series, (iv) the rights
of the Holders of the Debentures of such series as beneficiaries hereof with
respect to the property so deposited with the Trustee payable to all or any of
them, (v) the obligation of the Company to maintain an Office or Agency for
payments on and registration of transfer of the Debentures of such series, (vi)
the rights, obligations and immunities of the Trustee hereunder, and (vii) any
rights to convert or exchange the Debentures of such series into other
securities or rights in accordance with their terms.
SECTION 8.02 APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT OF
DEBENTURES.
Subject to Section 8.04, all moneys deposited with the Trustee pursuant
to Section 8.01 shall be held in trust and applied by it to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent), to the Holders of the Debentures of the series for the payment
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or redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest, but such money
need not be segregated from other funds except to the extent required by law.
SECTION 8.03 REPAYMENT OF MONEYS HELD BY PAYING AGENT.
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under this Indenture shall, upon demand
of the Company, be repaid to it or paid to the Trustee, and thereupon such
Paying Agent shall be released from all further liability with respect to such
moneys.
SECTION 8.04 RETURN OF MONEYS HELD BY THE TRUSTEE AND PAYING AGENT
UNCLAIMED FOR TWO YEARS.
Any moneys deposited with or paid to the Trustee or any Paying Agent
for the payment of the principal of and premium, if any, or interest on the
Debentures of any series and not applied but remaining unclaimed for two years
after the date when such principal, premium, if any, or interest shall have
become due and payable shall, unless otherwise required by mandatory provisions
of applicable escheat or abandoned or unclaimed property law, be repaid to the
Company by the Trustee or such Paying Agent, and the Holders of such Debentures
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property laws, thereafter look only to the Company for
any payment which such Holder may be entitled to collect as a general unsecured
creditor, and all liability of the Trustee or any Paying Agent with respect to
such moneys shall thereupon cease.
ARTICLE 9
SUPPLEMENTAL INDENTURES
SECTION 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
From time to time, when authorized by a resolution of the Board of
Directors, the Company and the Trustee, without notice to or the consent of any
Holders of the Debentures, may amend or supplement this Indenture:
(a) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company contained
herein and in the Debentures; or
(b) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Debentures (as shall be specified in such
supplemental indenture or indentures) or to surrender any right or power herein
conferred upon the Company; provided, however, that in respect of any such
additional covenant, or restriction or condition on the Company, such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default; or
(c) to add any additional Events of Default with respect to all or any
series of Debentures (as shall be specified in such supplemental indenture); or
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(d) to change or eliminate any of the provisions of this Indenture,
provided, that any such change or elimination shall become effective only when
there is no Debenture outstanding of any series created prior to the execution
of such supplemental indenture which is entitled to the benefit of such
provision; or
(e) to establish the form or terms of Debentures of any series as
permitted by Section 2.01 or, in lieu of any such supplemental indenture, the
Company may provide the Trustee with an Officers' Certificate with respect to
the form or terms of such Debentures; or
(f) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Debentures of one or more series, and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee; or
(g) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be defective or inconsistent
with any other provision herein or in any supplemental indenture, or to make any
other provisions with respect to matters or questions arising under this
Indenture, which shall not adversely affect the interests of the Holders of
Debentures of any series then outstanding in any material respect; or
(h) to add to, delete from or revise the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of Debentures as herein set forth; or
(i) to maintain qualification of this Indenture under the TIA; or
(j) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Debentures provided that any such action shall not
adversely affect the interests of any Holder of a Debenture of such series or
any other Debenture in any material respect.
SECTION 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
The Company and the Trustee may amend this Indenture in any manner not
permitted by Section 9.01 or may waive future compliance by the Company with any
provisions of this Indenture with the consent of the Holders of at least a
majority in aggregate principal amount of the Debentures of each series affected
thereby then outstanding (and, in the case of any series of Debentures held as
assets of a Trust and with respect to which a Security Exchange has not
theretofore occurred, such consent of holders of the Preferred Securities and
the Common Securities of such Trust as may be required under the Trust Agreement
of such Trust). Such an amendment or waiver may not, without the consent of each
Holder of any Debenture affected thereby:
(a) reduce the principal amount of such Debentures;
(b) reduce the percentage of the principal amount of such Debentures
the Holders of which must consent to an amendment of this Indenture or a waiver;
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(c) change (i) the stated maturity of the principal of or the interest
on such Debentures, except in connection with any Extension Period, (ii) the
rate of interest (or the manner of calculation thereof) on such Debentures, or
(iii) the duration of the maximum consecutive period that payments of interest
on such Debentures may be deferred;
(d) change adversely to the Holders the redemption, conversion or
exchange provisions applicable to such Debentures, if any;
(e) change the currency in respect of which the payments on such
Debentures are to be made;
(f) make any change in Article 10 that adversely affects the rights of
the Holders of the Debentures or any change to any other Section hereof that
adversely affects their rights under Article 10; or
(g) change Section 6.07 or 6.08;
provided that, in the case of the outstanding Debentures of a series then held
by a Trust, no such amendment shall be made that adversely affects the holders
of the Preferred Securities of that Trust, and no waiver of any Event of Default
with respect to the Debentures of that series or compliance with any covenant
under this Indenture shall be effective, without the prior consent of the
holders of at least a majority of the aggregate liquidation amount of the
outstanding Preferred Securities of that Trust or the holder of each such
Preferred Security, as applicable.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Debentures, or which modifies
the rights of the Holders of Debentures of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Debentures of any other series.
It shall not be necessary for the consent of the Holders of Debentures
or holders of Preferred Securities under this Section to approve the particular
form of any proposed amendment, but it shall be sufficient if such consent
approves the substance thereof.
If certain Holders agree to defer or waive certain obligations of the
Company hereunder with respect to Debentures held by them, such deferral or
waiver shall not affect the rights of any other Holder to receive the payment or
performance required hereunder in a timely manner.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notices, or any defect therein,
shall not, however, in any way impair or affect the validity of such amendment
or waiver.
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SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article 9 shall
comply with the TIA.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS.
Until an amendment, waiver or other action by Holders becomes
effective, a consent, waiver or any other action by a Holder of a Debenture
hereunder is a continuing consent by the Holder and every subsequent Holder of
that Debenture or portion of the Debenture that evidences the same obligation as
the consenting Holder's Debenture, even if notation of the consent, waiver or
action is not made on such Debenture. However, any such Holder or subsequent
Holder may revoke the consent, waiver or action as to such Holder's Debenture or
portion of the Debenture if the Trustee receives the notice of revocation before
the consent of the requisite aggregate principal amount of such Debentures then
outstanding has been obtained and not revoked. After an amendment, waiver or
action becomes effective, it shall bind every Holder of the Debentures of the
related series, except as provided in Section 9.02.
The Company may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Persons entitled to consent to any amendment or
waiver. If a Record Date is fixed, then, notwithstanding the first two sentences
of the immediately preceding paragraph, only Holders of Debentures or holders of
Preferred Securities, as applicable, on such Record Date or their duly
designated proxies, and only those Persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be such after such Record Date. No such
consent shall be valid or effective for more than 90 days after such Record
Date.
SECTION 9.05 NOTATION ON OR EXCHANGE OF DEBENTURES.
Debentures of the related series authenticated and made available for
delivery after the execution of any supplemental indenture pursuant to this
Article 9 may, and shall, if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Debentures so modified to
conform, in the opinion of the Trustee and the Board of Directors, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and made available for delivery by the Trustee in exchange for
outstanding Debentures.
SECTION 9.06 EXECUTION OF SUPPLEMENTAL INDENTURES.
The Trustee shall execute any supplemental indenture authorized
pursuant to this Article 9 if the supplemental indenture does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it does,
the Trustee may, but need not, execute it. In executing such supplemental
indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Officers' Certificate and Opinion of Counsel
stating that such supplemental indenture is authorized or permitted by this
Indenture.
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SECTION 9.07 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article 9,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes and every Holder
of Debentures of the related series theretofore or thereafter authenticated and
made available for delivery hereunder shall be bound thereby.
ARTICLE 10
SUBORDINATION
SECTION 10.01 DEBENTURES SUBORDINATED TO SENIOR INDEBTEDNESS.
Notwithstanding the provisions of Section 6.11 or any other provision
herein or in any Debenture, the Company and the Trustee and, by their acceptance
thereof, the Holders of the Debentures (a) covenant and agree that all payments
by the Company of the principal of and premium, if any, and interest on the
Debentures (other than Debentures which have been discharged pursuant to Article
8) shall be subordinated in accordance with the provisions of this Article 10 to
the prior payment in full, in cash or cash equivalents, of all amounts payable
on, under or in connection with Senior Indebtedness, and (b) acknowledge that
holders of Senior Indebtedness are or shall be relying on this Article 10.
Nothing herein or in any Debenture is intended to or shall limit the amount of
Senior Indebtedness the Company may incur.
SECTION 10.02 PRIORITY AND PAYMENT OF PROCEEDS IN CERTAIN EVENTS: REMEDIES
STANDSTILL.
(a) Upon any payment or distribution of assets or securities of the
Company, as the case may be, of any kind or character, whether in cash, property
or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership or other proceedings, all amounts
payable on, under or in connection with Senior Indebtedness (including any
interest accruing on such Senior Indebtedness subsequent to the commencement of
a bankruptcy, insolvency, receivership or similar proceeding) shall first be
paid in full in cash, or payment provided for in cash or cash equivalents,
before the Holders or the Trustee on behalf of the Holders or the holders of
Preferred Securities shall be entitled to receive from the Company any payment
of principal of or premium, if any, or interest on the Debentures or
distribution of any assets or securities.
(b) No direct or indirect payment by or on behalf of the Company of
principal of or premium, if any, or interest on the Debentures (other than
Debentures which have been discharged pursuant to Article 8), whether pursuant
to the terms of the Debentures or upon acceleration or otherwise, shall be made
if, at the time of such payment, there exists (i) a default in the payment of
all or any portion of any Senior Indebtedness and the Trustee has received
written notice thereof from the Company, from holders of Senior Indebtedness or
from any trustee, representative or agent therefor, or (ii) any other default
affecting Senior Indebtedness as a result of which the maturity of Senior
Indebtedness has been accelerated and the Trustee has received written notice
from the Company, from holders of Senior Indebtedness or from any trustee,
representative or agent therefor, and such default shall not have been cured or
waived by or on behalf of the holders of such Senior Indebtedness.
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(c) If, notwithstanding the foregoing provisions prohibiting such
payment or distribution, the Trustee or any Holder shall have received any
payment on account of the principal of or premium, if any, or interest on the
Debentures when such payment is prohibited by this Section and before all
amounts payable on, under or in connection with Senior Indebtedness are paid in
full in cash or cash equivalents, then and in such event (subject to the
provisions of Section 10.08) such payment or distribution shall be received and
held in trust for the holders of Senior Indebtedness and, at the written
direction of the trustee, representative or agent for the holders of the Senior
Indebtedness, shall be paid to the holders of the Senior Indebtedness remaining
unpaid to the extent necessary to pay such Senior Indebtedness in full in cash
or cash equivalents.
Upon any payment or distribution of assets or securities referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, and upon a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making any such payment or distribution, delivered to the
Trustee for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
10.
SECTION 10.03 PAYMENTS WHICH MAY BE MADE PRIOR TO NOTICE.
Nothing in this Article 10 or elsewhere in this Indenture shall prevent
(a) the Company, except under the conditions described in Section 10.02, from
making payments of principal of or premium, if any, or interest on the
Debentures or from depositing with the Trustee any monies for such payments, or
(b) the application by the Trustee of any monies deposited with it for the
purpose of making such payments of principal of or premium, if any, or interest
on the Debentures, to the Holders entitled thereto, unless at least one Business
Day prior to the date when such payment would otherwise (except for the
prohibitions contained in Section 10.02) become due and payable, the Trustee
shall have received the written notice provided for in Section 10.02(b)(i) or
(ii).
SECTION 10.04 RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT TO BE IMPAIRED.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time or in any way be
prejudiced or impaired by any act or failure to act in good faith by any such
holder, or by any noncompliance by the Company with the terms and provisions and
covenants herein regardless of any knowledge thereof any such holder may have or
otherwise be charged with.
The provisions of this Article 10 are intended to be for the benefit
of, and shall be enforceable directly by, the holders of Senior Indebtedness.
Notwithstanding anything to the contrary in this Article 10, to the extent any
Holders or the Trustee have paid over or delivered to any holder of Senior
Indebtedness any payment or distribution received on account of the principal of
or premium, if any, or interest on the Debentures to which any other holder of
Senior Indebtedness shall be entitled to share in accordance with Section 10.02,
no holder of Senior Indebtedness shall have a claim or right against any Holders
or the Trustee with respect to any such payment or distribution or as a result
of the failure to make payments or distributions to such other holder of Senior
Indebtedness.
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SECTION 10.05 TRUSTEE MAY TAKE ACTION TO EFFECTUATE SUBORDINATION.
Each Holder of a Debenture, by his acceptance thereof, authorizes and
directs the Trustee on his behalf to take such action as may be required by the
trustee, representative or agent for holders of Senior Indebtedness or by the
Company to effectuate, as between the holders of Senior Indebtedness and the
Holders, the subordination as provided in this Article 10 and appoints the
Trustee his attorney-in-fact for any and all such purposes.
SECTION 10.06 SUBROGATION.
Upon the payment in full, in cash or cash equivalents, of all Senior
Indebtedness, any Holder shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets of the
Company in respect of such Senior Indebtedness until the Debentures shall be
paid in full; and for the purposes of such subrogation, no payments or
distributions to holders of such Senior Indebtedness of any cash property or
securities to which such Holders of the Debentures would be entitled except for
this Article 10, and no payment pursuant to this Article 10 to holders of such
Senior Indebtedness by such Holders of the Debentures, shall, as between the
Company, its creditors other than holders of such Senior Indebtedness and such
Holders of the Debentures, be deemed to be a payment by the Company to or on
account of such Senior Indebtedness, it being understood that the provisions of
this Article 10 are solely for the purpose of defining the relative rights of
the holders of such Senior Indebtedness, on the one hand, and such Holders of
the Debentures, on the other hand.
If any payment or distribution to which Holders of Debentures would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to this Article 10, to the payment of all Senior
Indebtedness, then and in such case such Holders of the Debentures shall be
entitled to receive from the holders of such Senior Indebtedness at the time
outstanding any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount sufficient to pay, in cash or cash
equivalents, all such Senior Indebtedness in full.
SECTION 10.07 OBLIGATIONS OF COMPANY UNCONDITIONAL; REINSTATEMENT.
Nothing in this Article 10 or elsewhere in this Indenture or in any
Debenture is intended to or shall impair, as between the Company and Holders of
the Debentures, the obligations of the Company, which are absolute and
unconditional, to pay to such Holders the principal of and premium, if any, and
interest on the Debentures as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of such Holders of the Debentures and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Trustee or any Holder of Debentures or holder of Preferred
Securities, as applicable, from exercising all remedies otherwise permitted by
applicable law under this Indenture, subject to the rights, if any, under this
Article 10 of the holders of such Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
The failure to make a scheduled payment of principal of or premium, if
any, or interest on the Debentures by reason of Section 10.02 shall not be
construed as preventing the occurrence of a Default or an Event of Default under
Section 6.01; provided, however, that if (a) the conditions preventing the
making of such payment no longer exist, and (b) such Holders of the Debentures
are made whole with respect to such omitted payments, the Default or Event of
Default relating thereto (including any failure
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to pay any accelerated amounts) shall be automatically waived, and the
provisions of the Indenture shall be reinstated as if no such Event of Default
had occurred.
SECTION 10.08 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN ABSENCE
OF NOTICE.
The Trustee or Paying Agent shall not be charged with the knowledge of
the existence of any default in the payment of all or a portion of any Senior
Indebtedness or any other default affecting Senior Indebtedness as a result of
which the maturity of the Senior Indebtedness has been accelerated, unless and
until the Trustee or Paying Agent shall have received written notice thereof;
from the Company or one or more holders of Senior Indebtedness or from any
trustee, representative or agent therefor; and, prior to the receipt of any such
written notice, the Trustee or Paying Agent may conclusively assume that no such
facts exist.
Unless at least two Business Days prior to the date when by the terms
of this Indenture any monies are to be deposited by the Company with the Trustee
or any Paying Agent for any purpose (including, without limitation, the payment
of the principal of or premium, if any, or interest on any Debenture), the
Trustee or Paying Agent shall have received with respect to such monies the
notice provided for in Section 10.02, the Trustee or Paying Agent shall have
full power and authority to receive and apply such monies to the purpose for
which they were received. Neither of them shall be affected by any notice to the
contrary, which may be received by either on or after such second Business Day.
The foregoing shall not apply to the Paying Agent if the Company is acting as
Paying Agent. Nothing in this Section shall limit the right of the holders of
Senior Indebtedness to recover payments as contemplated by Section 10.02. The
Trustee or Paying Agent shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of such
Senior Indebtedness (or a trustee, representative or agent on behalf of such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee, representative or agent on behalf of any such holder.
The Trustee shall not be deemed to have any duty to the holders (and shall be
fully protected in relying upon such notice) of Senior Indebtedness.
SECTION 10.09 RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.
The Trustee and any Paying Agent shall be entitled to all of the rights
set forth in this Article 10 in respect of any Senior Indebtedness at any time
held by them to the same extent as any other holder of such Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee or any
Paying Agent of any of its rights as such holder.
ARTICLE 11
SINKING FUNDS
SECTION 11.01 APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Debentures of a series, except as otherwise permitted or
required in or pursuant to this Indenture or any Debenture of such series issued
pursuant to this Indenture.
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The minimum amount of any sinking fund payment provided for by the
terms of Debentures of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in excess of such minimum amount provided for by
the terms of Debentures of such series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of Debentures of any series,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 11.02. Each sinking fund payment shall be applied to the
redemption of Debentures of any series as provided for by the terms of
Debentures of such series and this Indenture.
SECTION 11.02 SATISFACTION OF SINKING FUND PAYMENTS WITH DEBENTURES.
The Company may, in satisfaction of all or any part of any sinking fund
payment with respect to the Debentures of any series to be made pursuant to the
terms of such Debentures (a) deliver outstanding Debentures of such series
(other than any of such Debentures previously called for redemption or any of
such Debentures in respect of which cash shall have been released to the
Company), and (b) apply as a credit Debentures of such series which have been
redeemed either at the election of the Company pursuant to the terms of such
series of Debentures or through the application of permitted optional sinking
fund payments pursuant to the terms of such Debentures, provided that such
series of Debentures have not been previously so credited. Such Debentures shall
be received and credited for such purpose by the Trustee at the Redemption Price
specified in such Debentures for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
If as a result of the delivery or credit of Debentures of any series in lieu of
cash payments pursuant to this Section, the principal amount of Debentures of
such series to be redeemed in order to exhaust the aforesaid cash payment shall
be less than $100,000, the Trustee need not call Debentures of such series for
redemption, except upon a Company Order, and such cash payment shall be held by
the Trustee or a Paying Agent and applied to the next succeeding sinking fund
payment on Debentures of such series, provided, however, that the Trustee or
such Paying Agent shall at the request of the Company from time to time pay over
and deliver to the Company any cash payment so being held by the Trustee or such
Paying Agent upon delivery by the Company to the Trustee of Debentures of that
series purchased by the Company having an unpaid principal amount equal to the
cash payment requested to be released to the Company.
SECTION 11.03 REDEMPTION OF DEBENTURES FOR SINKING FUND.
Not less than 60 days prior to each sinking fund payment date for any
series of Debentures, the Company shall deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing mandatory sinking fund
payment for that series pursuant to the terms of that series, the portion
thereof, if any, which is to be satisfied by payment of cash and the portion
thereof, if any, which is to be satisfied by delivering and crediting of
Debentures of that series pursuant to Section 11.02, and the optional amount, if
any, to be added in cash to the next ensuing mandatory sinking fund payment, and
will also deliver to the Trustee any Debentures to be so credited and not
theretofore delivered. If such Officers' Certificate shall specify an optional
amount to be added in cash to the next ensuing mandatory sinking fund payment,
the Company shall thereupon be obligated to pay the amount therein specified.
Not less than 30 days before each such sinking fund payment date the Trustee
shall select the Debentures to be redeemed upon such sinking fund payment date
in the manner specified in Section 3.02 and cause notice of the redemption
thereof to be given in the name of and at the expense of the Company in the
manner provided in Section 3.03. Such notice having been duly given, the
redemption of such Debentures shall be made upon the terms and in the manner
stated in Sections 3.04 and 3.06.
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ARTICLE 12
MEETINGS OF DEBENTUREHOLDERS
SECTION 12.01 PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Debentures of any series may be called at any
time and from time to time pursuant to this Article 12 to make, give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be made, given or taken by Holders of
Debentures of such series.
SECTION 12.02 CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders of Debentures
of any series for any purpose specified in Section 12.01, to be held at such
time and at such place in the Borough of Manhattan, the City of New York, or in
such other place as the Trustee shall determine. Notice of every meeting of
Holders of Debentures of any series, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be given, in the manner provided in Section 13.02, not less than
20 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, by or pursuant to a Board
Resolution, or the Holders of at least 10% in principal amount of the
outstanding Debentures of any series shall have requested the Trustee to call a
meeting of the Holders of Debentures of such series for any purpose specified in
Section 12.01, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed
notice of such meeting within 20 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided herein, then the
Company or the Holders of Debentures of such series in the amount above
specified, as the case may be, may determine the time and the place for such
meeting and may call such meeting for such purposes by giving notice thereof as
provided in clause (a) of this Section.
SECTION 12.03 PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders of Debentures of any
series, a Person shall be (a) a Holder of one or more outstanding Debentures of
such series, or (b) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more outstanding Debentures of such series by such
Holder or Holders. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders of Debentures of any series shall be the Persons
entitled to vote at such meeting and their counsel, any representatives of the
Trustee and its counsel and any representatives of the Company and its counsel.
SECTION 12.04 QUORUM; ACTION.
The Persons entitled to vote at least a majority in principal amount of
the outstanding Debentures of a series shall constitute a quorum for a meeting
of Holders of Debentures of such series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which this
Indenture expressly provides may be given by the Holders of at least 66-2/3% in
principal amount of the outstanding Debentures of a series, the Persons entitled
to vote such percentage in principal amount of the
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<PAGE> 55
outstanding Debentures of such series shall constitute a quorum. In the absence
of a quorum within 30 minutes after the time appointed for any such meeting, the
meeting shall, if convened at the request of Holders of Debentures of such
series, be dissolved. In any other case the meeting may be adjourned for a
period of not less than 10 days as determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a quorum at any such
adjourned meeting, such adjourned meeting may be further adjourned for a period
of not less than 10 days as determined by the chairman of the meeting prior to
the adjournment of such adjourned meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 12.02(a), except that
such notice need be given only once not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned meeting shall state expressly the percentage, as provided above, of
the principal amount of the outstanding Debentures of such series which shall
constitute a quorum.
Except as limited by the proviso to Section 9.02, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted only by the affirmative vote of the Holders
of at least a majority in principal amount of the outstanding Debentures of that
series; provided, however, that, except as limited by the proviso to Section
9.02, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture or any
supplemental indenture expressly provides may be made, given or taken by the
Holders of a specified percentage in principal amount of the outstanding
Debentures of a series may be adopted at a meeting or an adjourned meeting duly
reconvened and at which a quorum is present as aforesaid by the affirmative vote
of the Holders of such specified percentage in principal amount of the
outstanding Debentures of such series.
Any resolution passed or decision taken at any meeting of Holders of
Debentures of any series duly held in accordance with this Section shall be
binding on all the Holders of Debentures of such series, whether or not such
Holders were present or represented at the meeting.
SECTION 12.05 DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF
MEETINGS.
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders of Debentures of a series in regard to proof of the holding of
Debentures of such series and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem appropriate.
Except as otherwise permitted or required by any such regulations, the holding
of Debentures shall be proved in the manner specified in Section 1.05 and the
appointment of any proxy shall be proved in the manner specified in Section
1.05. Such regulations may provide that written instruments appointing proxies,
regular on their face, may be presumed valid and genuine without the proof
specified in Section 1.05 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Debentures as provided in Section 12.02(b), in which
case the Company or the Holders of Debentures of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote at least a majority in principal amount of
the outstanding Debentures of such series represented at the meeting.
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(c) At any meeting each Holder of a Debenture of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of the
outstanding Debentures of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Debenture challenged as not outstanding and ruled by the chairman of the meeting
to be not outstanding. The chairman of the meeting shall have no right to vote,
except as a Holder of a Debenture of such series or proxy.
(d) Any meeting of Holders of Debentures of any series duly called
pursuant to Section 12.02 at which a quorum is present may be adjourned from
time to time by Persons entitled to vote at least a majority in principal amount
of the outstanding Debentures of such series represented at the meeting; and the
meeting may be held as so adjourned without further notice.
SECTION 12.06 COUNTING VOTES AND RECORDING ACTION OF MEETINGS.
The vote upon any resolution submitted to any meeting of Holders of
Debentures of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Debentures of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the outstanding Debentures of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record, at least in
duplicate, of the proceedings of each meeting of Holders of Debentures of any
series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 12.02 and, if
applicable, Section 12.04. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of Section 318(c) of the TIA, the imposed duties
shall control. The provisions of Sections 310 to 317, inclusive, of the TIA that
impose duties on any Person (including provisions automatically deemed included
in an indenture unless the indenture provides that such provisions are excluded)
are a part of and govern this Indenture, except as, and to the extent, they are
expressly excluded from this Indenture, as permitted by the TIA.
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<PAGE> 57
SECTION 13.02 NOTICES.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing and delivered, telecopied or mailed by
first-class mail, postage prepaid, addressed as follows:
if to the Company:
Hercules Incorporated
Hercules Plaza, 1313 North Market Street
Wilmington, Delaware 19894-0001
Facsimile No.: (302) 594-5210
Attention: Vice President and Treasurer, and Corporate Secretary
if to the Trustee:
The Chase Manhattan Bank
One Liberty Place, 52nd Floor
1650 Market Street
Philadelphia, PA 19103
Facsimile No.: (215) 972-8372
Attention: Corporate Trust Department
The Company or the Trustee, by giving notice to the other, may
designate additional or different addresses for subsequent notices of
communications. The Company shall notify the holder, if any, of Senior
Indebtedness of any such additional or different addresses of which the Company
receives notice from the Trustee.
Any notice or communication given to a Debentureholder shall be mailed
or delivered to the Debentureholder at the Debentureholder's address as it
appears on the Register of the Registrar and shall be sufficiently given if
mailed within the time prescribed.
Failure to give a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is given in the manner provided
above, it is duly given, whether or not received by the addressee.
If the Company gives a notice or communication to the Debentureholders,
it shall deliver a copy to the Trustee and each Registrar, Paying Agent or
co-Registrar.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Debentureholders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
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<PAGE> 58
SECTION 13.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Debentureholders may communicate pursuant to Section 312(b) of the TIA
with other Debentureholders with respect to their rights under this Indenture or
the Debentures. The Company, the Trustee, the Registrar, the Paying Agent and
anyone else shall have the protection Section 312(c) of the TIA.
SECTION 13.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (complying with Section 13.05) stating
that, in the opinion of such Officer, all conditions precedent to the taking of
such action have been complied with; and
(b) if applicable, an Opinion of Counsel (complying with Section 13.05)
stating that, in the opinion of such counsel all such conditions precedent to
the taking of such action have been complied with.
SECTION 13.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Officers' Certificate and Opinion of Counsel with respect to
compliance with a covenant or condition provided for in this Indenture shall
include:
(a) a statement that each Person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such Person, such Person
has made such examination or investigation as is necessary to enable such Person
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement that, in the opinion of such Person, such covenant or
condition has been complied with; provided, however, that with respect to
matters of fact not involving any legal conclusion, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 13.06 SEVERABILITY CLAUSE.
If any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
52
<PAGE> 59
SECTION 13.07 RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR.
The Trustee may make reasonable rules for action by or a meeting of
Debentureholders. The Registrar and Paying Agent may make reasonable rules for
their functions.
SECTION 13.08 LEGAL HOLIDAYS.
A "Legal Holiday" is any day other than a Business Day. If any
specified date (including a date for giving notice) is a Legal Holiday, the
action to be taken on such date shall be taken on the next succeeding day that
is not a Legal Holiday, and if such action is a payment in respect of the
Debentures, unless otherwise specified pursuant to Section 2.01 no principal,
premium, if any, or interest shall accrue in respect of such payment for the
intervening period.
SECTION 13.09 GOVERNING LAW.
This Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
principles of conflicts of laws.
SECTION 13.10 NO RECOURSE AGAINST OTHERS.
No director, officer, employee or stockholder, as such, of the Company
shall have any liability for any obligations of the Company under the Debentures
or this Indenture or for any claim based on, in respect of or by reason of such
obligations. By accepting a Debenture, each Debentureholder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issuance and sale of the Debentures.
SECTION 13.11 SUCCESSORS AND ASSIGNS.
All agreements of the Company in this Indenture and Debentures shall
bind its successors and assigns. All agreements of the Trustee in this Indenture
shall bind its successors and assigns.
SECTION 13.12 COUNTERPARTS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement. Any signed copy shall be sufficient proof of this Indenture.
SECTION 13.13 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
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SECTION 13.14 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.15 HOLDERS OF PREFERRED SECURITIES AS THIRD PARTY BENEFICIARIES.
The Company hereby acknowledges that, to the extent specifically set
forth herein, prior to a Security Exchange with respect to the Debentures of any
series held as assets of a Trust, the holders of the Preferred Securities of
such Trust shall expressly be third party beneficiaries of this Indenture. The
Company further acknowledges that, prior to a Security Exchange with respect to
Debentures of any series held as assets of a Trust, if an Event of Default has
occurred and is continuing and is attributable to (i) the failure of the Company
to pay the principal of or premium, if any, or interest on the Debentures or
(ii) the failure by the Company to deliver the required securities or other
rights upon an appropriate conversion or exchange right election, any holder of
the Preferred Securities of such Trust may institute a Direct Action against the
Company.
SECTION 13.16 BENEFITS OF THE INDENTURE.
Except as otherwise expressly provided herein with respect to holders
of Senior Indebtedness and holders of Preferred Securities, nothing in this
Indenture or in the Debentures, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder and the Holders of
the Debentures, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
[remainder of page intentionally left blank]
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<PAGE> 61
SIGNATURES
IN WITNESS WHEREOF, the undersigned, being duly authorized,
have executed this Indenture on behalf of the respective parties hereto as of
the date first above written.
HERCULES INCORPORATED
By: /s/ R K Elliott
Name: R. Keith Elliott
Title: Chairman and Co-Chief
Executive Officer
THE CHASE MANHATTAN BANK,
AS TRUSTEE
By: /s/ J D Heaney
Name: James D. Heaney
Title: Vice President
<PAGE> 62
STATE OF DELAWARE )
: ss.:
COUNTY OF NEWCASTLE )
On the 11th day of November, 1998, before me personally came R. Keith
Elliott, to me known, who, being by me duly sworn, did depose and say
that he is Chairman and Co-Chief Executive Officer of Hercules
Incorporated, one of the corporations described in and which executed
the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
/s/ Jean M. Watkins
Notary Public
(SEAL) Commission expires 2/18/00
<PAGE> 1
Exhibit 4-D
EXECUTION COPY
FIRST SUPPLEMENTAL INDENTURE
between
HERCULES INCORPORATED,
as Issuer
and
THE CHASE MANHATTAN BANK,
as Trustee
Dated as of November 12, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definition of Terms...............................................................2
ARTICLE 2
GENERAL TERMS AND CONDITIONS OF THE SUBORDINATED NOTES
SECTION 2.01. Designation and Principal Amount..................................................8
SECTION 2.02. Maturity..........................................................................8
SECTION 2.03. Form and Payment; Minimum Transfer Restriction....................................8
SECTION 2.04. Exchange and Registration of Transfer of Securities;
Restrictions on Transfers; Depository..........................................9
SECTION 2.05. Interest.........................................................................12
ARTICLE 3
REDEMPTION OF THE SUBORDINATED NOTES
SECTION 3.01. Redemption.......................................................................14
SECTION 3.02. Optional Redemption by Company...................................................15
SECTION 3.03. No Sinking Fund..................................................................15
SECTION 3.04. Mandatory Redemption upon a Failed Remarketing...................................15
ARTICLE 4
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.01. Extension of Interest Payment Period.............................................15
ARTICLE 5
EXPENSES
SECTION 5.01. Payment of Expenses..............................................................15
SECTION 5.02. Payment upon Resignation or Removal..............................................16
ARTICLE 6
NOTICE AND POWER OF ATTORNEY
SECTION 6.01. Notice by the Company............................................................16
SECTION 6.02. Power of Attorney................................................................17
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 7
CONVERSION OF SUBORDINATED NOTES
SECTION 7.01. Conversion Rights................................................................17
ARTICLE 8
FORM OF SUBORDINATED NOTES
SECTION 8.01. Form of Subordinated Note........................................................18
ARTICLE 9
ORIGINAL ISSUE OF SUBORDINATED NOTES
SECTION 9.01. Subordinated Notes...............................................................18
ARTICLE 10
RESET RATE; REMARKETING; MANDATORY REDEMPTION
SECTION 10.01. Effectiveness of this Article; Incorporation of Remarketing Agreement............18
SECTION 10.02. Determination of Reset Date; Remarketing Procedures..............................19
SECTION 10.03. Reset of Interest Rate and Maturity Date.........................................21
SECTION 10.04. Renewed Remarketing..............................................................21
SECTION 10.05. Failed Remarketing; Mandatory Redemption.........................................21
SECTION 10.06. Early Remarketing................................................................21
ARTICLE 11
EVENTS OF DEFAULT; ACCELERATION
SECTION 11.01. Events of Default................................................................23
SECTION 11.02. Acceleration.....................................................................23
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Ratification of Base Indenture; First Supplemental Indenture Controls............23
SECTION 12.02. Trustee Not Responsible for Recitals.............................................23
SECTION 12.03. Governing Law....................................................................23
SECTION 12.04. Severability.....................................................................23
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 12.05. Counterparts....................................................................24
</TABLE>
EXHIBIT A-1 - Form of Subordinated Note
EXHIBIT A-2 - Form of Replacement Note
EXHIBIT B - Form of Remarketing Agreement
iii
<PAGE> 5
FIRST SUPPLEMENTAL INDENTURE, dated as of November 12, 1998 (the "FIRST
SUPPLEMENTAL INDENTURE"), between Hercules Incorporated, a Delaware corporation
(the "COMPANY"), and The Chase Manhattan Bank, a New York banking corporation,
as trustee (the "TRUSTEE") under the Junior Subordinated Debenture Indenture
dated as of November 12, 1998 between the Company and the Trustee (the "BASE
INDENTURE" and together with this First Supplemental Indenture, the
"INDENTURE").
WHEREAS, the Company executed and delivered the Base Indenture to the
Trustee to provide for the future issuance of the Company's unsecured junior
subordinated debentures (the "DEBENTURES") to be issued from time to time in one
or more series as might be determined by the Company under the Indenture, in an
unlimited aggregate principal amount which may be authenticated and delivered as
provided in the Base Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of its Debentures to be known as
its Auction Rate Reset Junior Subordinated Notes Series A (the "SUBORDINATED
NOTES"), the form and substance of such Subordinated Notes and the terms,
provisions and conditions thereof to be set forth as provided in the Base
Indenture and this First Supplemental Indenture;
WHEREAS, Hercules Trust V, a Delaware statutory business trust (the
"TRUST"), has offered to NMS Services, Inc. $200,000,000 aggregate liquidation
amount of its Auction Rate Reset Preferred Securities (the "PREFERRED
SECURITIES"), representing undivided beneficial interests in the assets of the
Trust, and proposes to invest the proceeds from such offering, together with the
proceeds of the issuance and sale by the Trust to the Company of $6,200,000
aggregate liquidation amount of its Common Securities, in $206,200,000 aggregate
principal amount of the Subordinated Notes;
WHEREAS, pursuant to the terms of the Remarketing Agreement dated as of
November 12, 1998, (the "REMARKETING AGREEMENT") by and among the Company, the
Trust, and NationsBanc Montgomery Securities LLC, as remarketing agent (the
"REMARKETING AGENT"), the Preferred Securities or, following any distribution of
Subordinated Notes to the holders of Preferred Securities, such Subordinated
Notes, as the case may be, shall be remarketed in accordance with the terms
hereof by the Remarketing Agent on the Reset Date (as defined herein); and
WHEREAS, the Company has requested that the Trustee execute and deliver
this First Supplemental Indenture, and all requirements necessary to make this
First Supplemental Indenture a valid instrument in accordance with its terms,
<PAGE> 6
and to make the Subordinated Notes, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company, have been performed, and the execution and delivery of this First
Supplemental Indenture has been duly authorized in all respects.
NOW THEREFORE, in consideration of the purchase and acceptance of the
Subordinated Notes by the Holder thereof, and for the purpose of setting forth,
as provided in the Indenture, the form and substance of the Subordinated Notes
and the terms, provisions and conditions thereof, the Company covenants and
agrees with the Trustee as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definition of Terms. For all purposes of this First
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the terms which are defined in the Base Indenture have the
same meanings when used in this First Supplemental Indenture;
(b) the terms defined in this Article have the meaning
assigned to them in this Article and include the plural as well as the
singular;
(c) all other terms used herein which are defined in the Trust
Indenture Act, whether directly or by reference therein, have the
meanings assigned to them therein;
(d) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP, and, except as
otherwise herein expressly provided, the term "GAAP" with respect to
any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted in the United States of
America at the date of such computation;
(e) a reference to a Section or Article is to a Section or
Article of this First Supplemental Indenture;
2
<PAGE> 7
(f) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this First Supplemental Indenture as a
whole and not to any particular Article, Section or other subdivision;
(g) headings are for convenience of reference only and do not
affect interpretation; and
(h) the following terms have the meanings given to them in the
Trust Agreement:
ADMINISTRATIVE TRUSTEE
AFFILIATE
CLOSING PRICE
COMMON SECURITIES
COMMON STOCK
CREDIT AGREEMENT
CROSS DEFAULT
DELAWARE TRUSTEE
FORWARD UNDERWRITING AGREEMENT
LIKE AMOUNT
LIQUIDATION AMOUNT
MANDATORY REDEMPTION PRICE
PERSON
PORTAL MARKET
PRO RATA
PROPERTY TRUSTEE
PURCHASE AGREEMENT
REFERENCE CORPORATE DEALER
REMARKETING FEE
REPLACEMENT SECURITIES
RULE 144A
SECONDARY PURCHASE AGREEMENT
SECURITIES ACT
SPECIAL EVENT
TRADING DAY
TRIGGER PRICE
UNDERWRITER.
"90 DAY PERIOD" has the meaning set forth in Section 3.01.
"ADDITIONAL INTEREST" has the meaning set forth in Section 2.05(f).
3
<PAGE> 8
"BID" means an irrevocable offer to purchase the aggregate outstanding
principal amount of Subordinated Notes at the Remarketing Price with an Interest
Rate equal to the Bid Rate specified in such Bid and with a Maturity Date on the
Maturity Extension Date.
"BID RATE" means the proposed Interest Rate on the Subordinated Notes
specified in a Bid.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banking institutions in The City of New York or Wilmington, Delaware
are authorized or required by law, regulation or executive order to close and,
until the Remarketing Settlement Date, that is also a London Banking Day.
"CALCULATION AGENT" means NationsBanc Montgomery Securities LLC.
"COMMENCEMENT DATE" means November 12, 1999, subject to acceleration
pursuant to Section 7 of the Forward Underwriting Agreement.
"CREDIT AGREEMENT" means the Credit Agreement dated as of October 15,
1998 among the Sponsor, certain subsidiaries of the Company from time to time
parties thereto, the several lenders from time to time parties thereto,
NationsBank, N.A., as Administrative Agent, The Chase Manhattan Bank, Morgan
Guaranty Trust Company of New York and Citibank, N.A., as Co-Syndication Agents,
as amended, supplemented, modified or superseded from time to time.
"CURED DEFAULT TRIGGER EVENT" has the meaning set forth in Section
10.06(b).
"DEFAULT RATE" means the Interest Rate that would be applicable under
Section 2.05 hereof if not for the applicability of the Default Rate plus 75
basis points.
"DEPOSITORY" has the meaning set forth in the Base Indenture.
"DISSOLUTION EVENT" means that, as a result of the occurrence and
continuation of a Special Event or pursuant to Section 8.01 of the Trust
Agreement the Trust is to be dissolved in accordance with the Trust Agreement,
and the Subordinated Notes held by the Property Trustee are to be distributed to
the holders of the Preferred Securities issued by the Trust pro rata in
accordance with the Trust Agreement.
"EXPECTED RESET DATE" has the meaning set forth in Section 10.02(a).
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"FAILED REMARKETING" means any event specified as such, at the time so
specified in Article 10 hereof or in Article 6 of the Trust Agreement.
"FINAL RESET DATE" means the third scheduled Trading Day prior to the
Remarketing Termination Date.
"FORMER HOLDERS" has the meaning set forth in Section 10.02(i).
"GAAP" has the meaning set forth in the Base Indenture.
"GLOBAL DEBENTURE" has the meaning set forth in the Base Indenture.
"GLOBAL SUBORDINATED NOTE" has the meaning set forth in Section
2.04(a)(i).
"GUARANTEE TRUSTEE" means the Preferred Securities Guarantee Trustee as
defined in the Preferred Securities Guarantee Agreement dated as of November 12,
1998 between Hercules Incorporated, as Guarantor, and The Chase Manhattan Bank,
as Preferred Securities Guarantee Trustee.
"HOLDER" has the meaning set forth in the Base Indenture.
"INTEREST PAYMENT DATE" has the meaning set forth in Section 2.05(d).
"INTEREST RATE" has the meaning set forth in Section 2.05(a).
"LIBOR" means the rate determined by the Calculation Agent as the rate
for deposits for a period of three months in U.S. Dollars which appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on the date of determination.
If such rate does not appear on the Telerate Page 3750, the rate on the date of
determination will be determined as if the parties had specified the
LIBOR-Reference Banks Rate as the applicable rate.
"LIBOR-REFERENCE BANKS RATE" means that the rate will be determined on
the basis of the rates which deposits in U.S. Dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on the date of
determination to prime banks in the London interbank market for a period of
three months commencing two London Banking Days following such date of
determination and in the Representative Amount. The Calculation Agent will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, the rate will be the arithmetic mean of the rates quoted
by major
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banks in New York City, selected by the Calculation Agent, at approximately
11:00 a.m., New York City time, on the date of determination for loans in U.S.
Dollars to leading banks for a period of three months commencing two London
Banking Days following such date of determination and in the Representative
Amount.
"LONDON BANKING DAY" means any day on which dealings in deposits in
U.S. Dollars are transacted in the London interbank market.
"MATURITY DATE" means November 10, 1999; provided that in the event of
a successful Remarketing of the Subordinated Notes or the Preferred Securities,
the Maturity Date shall be the Maturity Extension Date.
"MATURITY EXTENSION DATE" means the first anniversary of the
Remarketing Settlement Date on which Replacement Notes are issued.
"MINISTERIAL ACTION" has the meaning set forth in Section 3.01.
"PRE-REMARKETING INTEREST PAYMENT DATE" has the meaning set forth in
Section 2.05(b).
"PRE-REMARKETING REGULAR RECORD DATE" has the meaning set forth in
Section 2.05(d).
"REDEMPTION DATE" has the meaning set forth in the Base Indenture.
"REDEMPTION PRICE" has the meaning set forth in Section 3.01.
"REFERENCE BANKS" means, for the purposes of any LIBOR rate, four major
banks in the London interbank market.
"REGULAR RECORD DATE" has the meaning set forth in Section 2.05(e).
"REMARKETING" means a remarketing of Subordinated Notes pursuant to
Article 10 hereof or Article 6 of the Trust Agreement.
"REMARKETING PRICE" means 100.5% of the aggregate principal amount of
the Subordinated Notes plus accrued and unpaid interest (if any).
"REMARKETING SETTLEMENT DATE" means the third Business Day immediately
following the Reset Date.
"REMARKETING TERMINATION DATE" means November 10, 1999.
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"RENEWED REMARKETING" has the meaning set forth in Section 10.04.
"REPLACEMENT NOTES" has the meaning set forth in Section 10.02(j).
"REPRESENTATIVE AMOUNT" means, for the purposes of any LIBOR rate for
which a Representative Amount is relevant, an amount that is equal to the
aggregate principal amount of all of the Subordinated Notes.
"RESET DATE" means any date established as a Reset Date pursuant to
Article 10 hereof or Article 6 of the Trust Agreement.
"RESTRICTED SECURITY" has the meaning set forth in Section 2.04(c).
"SECONDARY PURCHASER" has the meaning set forth in Section 10.02(c).
"SENIOR BANK DEBT ACCELERATION" means an acceleration under the Credit
Agreement resulting in the obligations of the Company under the Credit Agreement
becoming or having been declared due and payable under Section 6 of the Credit
Agreement before such obligations would otherwise have been due and payable.
"STOCK PRICE TRIGGER EVENT" has the meaning set forth in Section
10.06(a).
"SUBORDINATED NOTE REPAYMENT PRICE" has the meaning set forth in
Section 10.06.
"TRANSFER RESTRICTION TERMINATION DATE" means the first date on which
the Subordinated Notes (other than Subordinated Notes acquired by the Company or
any Affiliate thereof) may be sold pursuant to Rule 144(k).
"TRIGGER EVENT" has the meaning set forth in Section 10.06.
"TRUST AGREEMENT" means the Amended and Restated Trust Agreement of
Hercules Trust V, a Delaware statutory business trust, dated as of November 12,
1998.
"TRUST SECURITIES" means the Preferred Securities and common securities
of the Trust.
"UNDERWRITING TRIGGER EVENT" has the meaning set forth in Section
10.06(c).
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"U.S. DOLLAR," "DOLLAR," "U.S.$," "$" and "USD" means the lawful
currency of the United States of America.
"WINNING BID RATE" has the meaning set forth in Section 10.02(b) hereof
or in Section 6.02(b) of the Trust Agreement.
ARTICLE 2
GENERAL TERMS AND CONDITIONS OF THE SUBORDINATED NOTES
SECTION 2.01. Designation and Principal Amount. There is hereby
authorized a series of Debentures designated the "Auction Rate Reset Junior
Subordinated Notes Series A," limited in aggregate principal amount to
$206,200,000, which amount shall be as set forth in any written order of the
Company for the authentication and delivery of Subordinated Notes pursuant to
Section 2.03 of the Base Indenture except for Subordinated Notes authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Subordinated Notes under the terms of the Indenture.
SECTION 2.02. Maturity. The principal of the Subordinated Notes shall
be due and payable on the Maturity Date.
SECTION 2.03. Form and Payment; Minimum Transfer Restriction. (a)
Except as provided in Section 2.04, the Subordinated Notes shall be issued in
fully registered certificated form without coupons in denominations of $1,000 in
principal amount and integral multiples of $1,000 thereof. Principal and
interest on the Subordinated Notes issued in certificated form will be payable
by check or wire transfer, the transfer of such Subordinated Notes will be
registrable and such Subordinated Notes will be exchangeable for Subordinated
Notes bearing identical terms and provisions at the office or agency of the
Trustee; provided, however, that payment of interest may be made at the option
of the Company by check mailed to the Holder at such address as shall appear in
the Register. Notwithstanding the foregoing, so long as the Holder of any
Subordinated Notes is the Property Trustee, the payment of the principal of and
interest (including any Additional Interest, if any) on such Subordinated Notes
held by the Property Trustee will be made at such place and to such account as
may be designated by the Property Trustee.
(b) The Subordinated Notes may be transferred or exchanged only in
minimum denominations of $100,000 and integral multiples of $1,000 in excess
thereof, and any attempted transfer, sale or other disposition of Subordinated
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Notes in a denomination of less than $100,000 shall be deemed to be void and of
no legal effect whatsoever.
SECTION 2.04. Exchange and Registration of Transfer of Securities;
Restrictions on Transfers; Depository. (a) If distributed to holders of
Preferred Securities in connection with a Dissolution Event, the Subordinated
Notes will be issued in the same form as the Preferred Securities that such
Subordinated Notes replace in accordance with the following procedures.
(i) If the Preferred Securities are held in global form, the
Subordinated Notes shall be presented to the Trustee by the Property
Trustee in exchange for a Global Debenture in an aggregate principal
amount equal to the aggregate principal amount of all outstanding
Subordinated Notes (a "GLOBAL SUBORDINATED NOTE"), to be registered in
the name of the Depository, or its nominee, and delivered by the
Property Trustee to the Depository for crediting to the accounts of its
participants pursuant to the instructions of the Administrative
Trustees. The Company upon any such presentation shall execute a Global
Subordinated Note in such aggregate principal amount and deliver the
same to the Trustee for authentication and delivery in accordance with
the Indenture. Payments on the Subordinated Notes issued as a Global
Subordinated Note will be made to the Depository.
(ii) If the Preferred Securities are held in certificated form,
the Subordinated Notes shall be presented to the Trustee by the
Property Trustee and each outstanding Preferred Security certificate
will be deemed to represent a beneficial interest in such Subordinated
Note in an aggregate principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities represented by such
Preferred Security certificate. When the holder of a Preferred Security
certificate presents such certificate for transfer or reissuance, such
certificate will be canceled and a Subordinated Note, registered in the
name of such holder or such holder's transferee, as the case may be, in
an aggregate principal amount equal to the aggregate Liquidation Amount
of the canceled certificate, will be executed by the Company and
delivered to the Trustee for authentication and delivery in accordance
with the Indenture. On issue of such Subordinated Notes, Subordinated
Notes with an equivalent aggregate principal amount that were presented
by the Property Trustee to the Trustee will be deemed to have been
canceled.
(b) Any Global Subordinated Note may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the
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Depository, by a national securities exchange or by the National Association of
Securities Dealers, Inc. in order for the Subordinated Notes to be tradeable on
the PORTAL Market or as may be required for the Subordinated Notes to be
tradeable on any other market developed for trading of securities pursuant to
Rule 144A or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange upon
which the Subordinated Notes may be listed or traded or to conform with any
usage with respect thereto, or to indicate any special limitations or
restrictions to which any particular Subordinated Notes are subject.
(c) Each Subordinated Note that bears or is required to bear the
legend set forth in this Section 2.04(c) (a "RESTRICTED SECURITY") shall be
subject to the restrictions on transfer provided in the legend set forth in this
Section 2.04(c), unless such restrictions on transfer shall be waived by the
written consent of the Company, and the Holder of each Restricted Security, by
such Holder's acceptance thereof, agrees to be bound by such restrictions on
transfer. As used in this Section 2.04(c) and in Section 2.04(d), the term
"transfer" encompasses any sale, pledge, transfer or other disposition of any
Restricted Security.
Prior to the Transfer Restriction Termination Date, any certificate
evidencing a Subordinated Note shall bear a legend in substantially the
following form, unless otherwise agreed by the Company (with written notice
thereof to the Trustee):
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR
TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
SECURITIES EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY EXCEPT (A) TO HERCULES INCORPORATED OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT OR (C) TO A SECONDARY PURCHASER (AS
DEFINED IN THE
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AMENDED AND RESTATED TRUST AGREEMENT OF HERCULES TRUST V DATED AS OF
NOVEMBER 12, 1998 (AS AMENDED FROM TIME TO TIME, THE "TRUST
AGREEMENT")) THAT HAS ENTERED INTO A SECONDARY PURCHASE AGREEMENT (AS
DEFINED IN THE TRUST AGREEMENT) WITH THE TRUST, (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AT THE
REQUEST OF THE HOLDER, THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION
OF THE HOLDING PERIOD APPLICABLE TO THE SALE OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT AND (4) AGREES WITH
RESPECT TO ANY TRANSFER OCCURRING PRIOR TO THE REMARKETING DATE ON
WHICH REPLACEMENT NOTES ARE ISSUED TO ANY PERSON OTHER THAN THE
PROPERTY TRUSTEE, TO PROVIDE TO THE INDENTURE TRUSTEE A DULY EXECUTED
CERTIFICATE SUBSTANTIALLY TO THE EFFECT OF CLAUSES (1), (2) AND (3),
ABOVE. THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED
STATES FEDERAL INCOME TAX PURPOSE. THE ISSUE PRICE, AMOUNT OF ORIGINAL
ISSUE DISCOUNT, ISSUE DATE, AND YIELD TO MATURITY WILL BE PROMPTLY MADE
AVAILABLE UPON REQUEST TO THE VICE PRESIDENT - TAXES (AT (302)
594-5887) OR THE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (AT
(302) 594-5175), HERCULES INCORPORATED, HERCULES PLAZA, 1313 NORTH
MARKET STREET, WILMINGTON, DE 19894-0001.
Following the Transfer Restriction Termination Date, any Subordinated
Note or security issued in exchange or substitution therefor (other than
Subordinated Notes acquired by the Company or any Affiliate), may upon surrender
of such Subordinated Note or security for exchange to the Trustee in accordance
with the provisions of this Section 2.04, be exchanged for a new Subordinated
Note or Subordinated Notes, of like tenor and aggregate principal amount, which
shall not bear the restrictive legend required by this Section 2.04(c).
(d) Any Subordinated Note that, prior to the Transfer Restriction
Termination Date, is purchased or owned by the Company or any Affiliate thereof
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may not be resold by the Company or such Affiliate unless registered under the
Securities Act or resold pursuant to an exemption from the registration
requirements thereof that results in such Subordinated Note no longer being a
"restricted security" as defined under Rule 144 under the Securities Act.
SECTION 2.05. Interest. (a) Interest on the principal amount of each
Subordinated Note will accrue and be payable at a rate (the "INTEREST RATE") per
annum equal to
(i) from and including the date of issuance to but excluding
the earlier of (A) the Remarketing Settlement Date on which Replacement
Notes are issued and (B) the date such principal amount is paid, LIBOR
plus 175 basis points, compounded quarterly;
(ii) from and including the Remarketing Settlement Date on
which Replacement Notes are issued to but excluding the date such
principal amount is paid, the Winning Bid Rate, compounded quarterly;
and
(iii) notwithstanding clauses (i) and (ii) above, if the Company
fails to pay the principal amount on the date such amount becomes due,
then from and including such due date to but excluding the date such
principal amount is paid, the Default Rate, compounded quarterly, but
only to the extent permitted by applicable law.
Interest that is not paid when due will bear additional interest thereon
compounded quarterly at the applicable periodic Interest Rate specified above
(to the extent permitted by applicable law). The term "INTEREST", as used
herein, includes any such additional interest and Additional Interest unless
otherwise stated.
(b) Until the Remarketing Settlement Date on which Replacement Notes
are issued, interest on the Subordinated Notes will be cumulative, will be
payable quarterly in arrears on February 12, May 12, August 12 and November 12
of each year, commencing February 12, 1999, and on such Remarketing Settlement
Date (each, a "PRE-REMARKETING INTEREST PAYMENT DATE"), will accumulate from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from November 12, 1998, to but excluding the related
Pre-Remarketing Interest Payment Date, except as otherwise described below.
The Interest Rate in effect for the period from and including November
12, 1998 to but excluding February 12, 1999 shall be the rate determined by the
Calculation Agent two London Banking Days prior to November 12, 1998 and
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shall equal LIBOR plus 175 basis points. The Interest Rate in effect thereafter,
for each quarterly period from and including the immediately preceding
Pre-Remarketing Interest Payment Date to but excluding the applicable
Pre-Remarketing Interest Payment Date, shall be determined by the Calculation
Agent two London Banking Days prior to such immediately preceding
Pre-Remarketing Interest Payment Date and shall equal LIBOR plus 175 basis
points. The amount of interest payable for any quarterly period shall be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the last sentence of this paragraph, the amount of interest payable
for any period shorter than a full quarterly period for which interest is
computed will be computed on the basis of the actual number of days elapsed per
30-day month. If a Pre-Remarketing Interest Payment Date is not a Business Day,
then such Pre-Remarketing Interest Payment Date will be the next succeeding
Business Day, except if such Business Day is in the next succeeding calendar
month, such Pre-Remarketing Interest Payment Date will be the immediately
preceding Business Day.
(c) Interest shall be paid to the Person in whose name such
Subordinated Note or any predecessor Subordinated Note is registered on the
books and records of the Company at the close of business on the Regular Record
Date for such interest installment, which shall be fifteen (15) days prior to a
Pre-Remarketing Interest Payment Date (the "PRE-REMARKETING REGULAR RECORD
DATE").
(d) From and including the Remarketing Settlement Date on which
Replacement Notes are issued, interest on the Replacement Notes will be
cumulative, will be payable quarterly in arrears on February 12, May 12, August
12 and November 12 of each year, commencing on the Remarketing Settlement Date,
and on the Maturity Date (each, an "INTEREST PAYMENT DATE"), will accumulate
from the most recent date to which interest has been paid or, if no interest has
been paid, from and including the Remarketing Settlement Date, to but excluding
the related Interest Payment Date, except as otherwise described below. The
amount of interest payable for any quarterly period shall be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the last
sentence of this paragraph, the amount of interest payable for any period
shorter than a full quarterly period for which interest is computed will be
computed on the basis of the actual number of days elapsed per 30-day month. If
an Interest Payment Date is not a Business Day, then such Interest Payment Date
will be the next succeeding Business Day, except if such Business Day is in the
next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day.
(e) Interest shall be paid to the Person in whose name the
Subordinated Note or any predecessor Subordinated Note is registered on the
books and records of the Company, at the close of business on the Regular Record
Date for such
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interest installment, which, in respect of (i) Subordinated Notes of which the
Property Trustee is the Holder and the related Preferred Securities are in
book-entry only form or (ii) a Global Subordinated Note, shall be the close of
business on the Business Day next preceding that Interest Payment Date (the
"REGULAR RECORD DATE"). If the Subordinated Notes are not represented by a
Global Subordinated Note, the Regular Record Date for such interest installment
shall be fifteen (15) days prior to that Interest Payment Date.
(f) If, at any time while the Property Trustee is the Holder of any
Subordinated Notes, the Trust or the Property Trustee is required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as additional interest
("ADDITIONAL INTEREST") on the Subordinated Notes held by the Property Trustee,
such additional amounts as shall be required so that the net amounts received
and retained by the Trust and the Property Trustee after paying such taxes,
duties, assessments or other governmental charges will be equal to the amounts
the Trust and the Property Trustee would have received had no such taxes,
duties, assessments or other government charges been imposed.
ARTICLE 3
REDEMPTION OF THE SUBORDINATED NOTES
SECTION 3.01. Redemption. If at any time a Special Event occurs, the
Company shall have the right (subject to the conditions set forth in the
Indenture) at any time, upon not less than 30 nor more than 60 days notice, to
redeem the Subordinated Notes in whole, but not in part, within the 90 days
following the occurrence of such Special Event (the "90 DAY PERIOD"), and,
simultaneous with such redemption, to cause a Like Amount of the Trust
Securities to be redeemed by the Trust at the Mandatory Redemption Price on a
Pro Rata basis at a redemption price equal to 100% of the principal amount of
the Subordinated Notes plus any accrued and unpaid interest thereon to the date
of such redemption (the "REDEMPTION PRICE"), provided that if at the time there
is available to the Company or the Trust the opportunity to eliminate, within
the 90-Day Period, the Special Event by taking some ministerial action
("MINISTERIAL ACTION"), such as filing a form or making an election, or pursuing
some other similar reasonable measure which has no adverse effect on the
Company, the Trust or the Holders of the Trust Securities issued by the Trust,
the Company shall pursue such Ministerial Action in lieu of redemption, and,
provided, further, that the Company shall have no right to redeem the
Subordinated Notes while the Trust is pursuing
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any Ministerial Action pursuant to its obligations under the Trust Agreement.
The Redemption Price shall be paid prior to 12:00 noon, New York City time, on
the date of such redemption or such earlier time as the Company determines,
provided that the Company shall deposit with the Trustee an amount sufficient to
pay the Redemption Price prior to the Redemption Date.
SECTION 3.02. Optional Redemption by Company. The Subordinated Notes
are not entitled to any optional redemption by the Company.
SECTION 3.03. No Sinking Fund. The Subordinated Notes are not entitled
to the benefit of any sinking fund.
SECTION 3.04. Mandatory Redemption upon a Failed Remarketing. If a
Failed Remarketing occurs, the Company shall redeem the Subordinated Notes in
whole at the Redemption Price on the third Business Day following the date such
Failed Remarketing occurs or is deemed to occur in the manner set forth in
Article 3 of the Base Indenture as though a notice of redemption had been timely
given as required by Sections 3.01 and 3.03 of the Base Indenture. The
Redemption Price shall be paid prior to 12:00 noon, New York City time, on the
date of such redemption or such earlier time as the Company determines, provided
that the Company shall deposit with the Trustee an amount sufficient to pay the
Redemption Price prior to the Redemption Date
ARTICLE 4
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.01. Extension of Interest Payment Period. The Company is not
entitled at any time during the term of the Subordinated Notes to the benefit of
any interest payment deferral or extension.
ARTICLE 5
EXPENSES
SECTION 5.01. Payment of Expenses. In connection with the offering,
sale and issuance of the Subordinated Notes to the Property Trustee and in
connection with the sale of the Trust Securities by the Trust, the Company, in
its capacity as borrower with respect to the Subordinated Notes, shall:
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(a) pay all costs and expenses relating to the offering, sale
and issuance of the Subordinated Notes payable pursuant to the Purchase
Agreement and compensation of the Trustee under the Indenture in
accordance with the provisions of Section 7.06 of the Base Indenture;
(b) pay all costs and expenses of the Trust (other than
payment in respect of Trust Securities) (including, but not limited to,
costs and expenses relating to the organization of the Trust; the fees
and expenses of the Property Trustee and the Delaware Trustee; the
costs and expenses relating to the operation of the Trust, including
without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing, engraving,
computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating and travel; telephone and other
telecommunications expenses; and costs and expenses incurred in
connection with the acquisition, financing, and disposition of Trust
assets);
(c) pay all costs and expenses of the Trust or Property
Trustee related to the enforcement by the Property Trustee of the
rights of the holders of the Preferred Securities;
(d) be primarily liable for any indemnification obligations
arising with respect to the Trust Agreement; and
(e) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of the
Trust.
SECTION 5.02. Payment upon Resignation or Removal. Upon termination of
this First Supplemental Indenture or the Base Indenture or the removal or
resignation of the Trustee pursuant to Section 7.08 of the Base Indenture, the
Company shall pay to the Trustee all amounts accrued to the date of such
termination, removal or resignation. Upon termination of the Trust Agreement or
the removal or resignation of the Delaware Trustee, the Guarantee Trustee or the
Property Trustee, as the case may be, the Company shall pay to the Delaware
Trustee, the Guarantee Trustee or the Property Trustee and their respective
counsel, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.
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ARTICLE 6
NOTICE AND POWER OF ATTORNEY
SECTION 6.01. Notice by the Company. The Company shall give prompt
written notice to the Trustee of any fact known to the Company that would
prohibit the making of any payment of monies to or by the Trustee in respect of
the Subordinated Notes pursuant to the provisions of this Article.
Notwithstanding any of the provisions of the Base Indenture or this First
Supplemental Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Subordinated Notes pursuant to the
provisions of the Base Indenture; provided, however, that if the Trustee shall
not have received the notice provided for in this Article at least two Business
Days prior to the date upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of the
principal of (or premium, if any) or interest on any Subordinated Note), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purposes for which it was received, and shall not be affected by any notice to
the contrary that may be received by it on or after the second Business Day
prior to such date.
SECTION 6.02. Power of Attorney. Each Holder by acceptance of the
Subordinated Notes hereby irrevocably constitutes and appoints the Remarketing
Agent and each of its officers as such Holder's true and lawful representative
and attorney-in-fact, with full power and authority in such person's name, place
and stead to make, execute, acknowledge, deliver, swear to, record and file with
respect to the Subordinated Notes any and all instruments, documents and
certificates which, from time to time, may be required in connection with the
Remarketing and to take any other action which the Remarketing Agent may deem
necessary or appropriate, in its discretion, in connection with Remarketing the
Subordinated Notes. This power of attorney is coupled with an interest and shall
continue in full force and effect and shall not be affected by the subsequent
death, disability, insolvency, bankruptcy, termination or incapacity of a Holder
and may be exercised by an officer of the Remarketing Agent signing individually
for any Holder or for all Holders executing any particular instrument.
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ARTICLE 7
CONVERSION OF SUBORDINATED NOTES
SECTION 7.01. Conversion Rights. The Subordinated Notes are not
convertible at any time.
ARTICLE 8
FORM OF SUBORDINATED NOTES
SECTION 8.01. Form of Subordinated Note. The Subordinated Notes and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1. Following the Remarketing, the Replacement Notes shall be
substantially in the form of Exhibit A-2. Each of Exhibit A-1 and Exhibit A-2 is
hereby incorporated in and expressly made a part of this First Supplemental
Indenture.
ARTICLE 9
ORIGINAL ISSUE OF SUBORDINATED NOTES
SECTION 9.01. Subordinated Notes. Each Subordinated Note shall be
issued in denominations of $1,000 and in integral multiples thereof and may,
upon execution of this First Supplemental Indenture, be executed by the Company
and delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and make available for delivery said Subordinated Notes to or upon
the written order of the Company, signed by either of its Co-Chief Executive
Officers, its President, or any Vice President and its Treasurer or an Assistant
Treasurer, without any further action by the Company.
ARTICLE 10
RESET RATE; REMARKETING; MANDATORY REDEMPTION
SECTION 10.01. Effectiveness of this Article; Incorporation of
Remarketing Agreement. (a) Sections 10.02, 10.04 and 10.06 shall become
effective if and only if the Subordinated Notes have been distributed to the
Holders of the Trust Securities prior to Remarketing. Notwithstanding the
foregoing, on the Remarketing Settlement Date (except in the case of a Failed
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<PAGE> 23
Remarketing), the certificates representing the Subordinated Notes held by the
Property Trustee shall be exchanged for certificates representing Replacement
Notes.
(b) Every Person, by virtue of having become a Holder in accordance
with the terms of this Agreement, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this Indenture, including the
terms of Exhibit B. Exhibit B is hereby incorporated in and expressly made a
part of this First Supplemental Indenture.
SECTION 10.2. Determination of Reset Date; Remarketing Procedures.
(a) Subject to Sections 10.04 and 10.06, the Reset Date shall be
September 28, 1999 (the "EXPECTED RESET DATE"); provided that
(i) the Company may, by notice to the Remarketing Agent,
direct that the Reset Date be delayed if the Company believes it will
be unable to meet the conditions to Remarketing in the absence of such
a delay; and
(ii) the Remarketing Agent may, by notice to the Company,
direct that the Reset Date be delayed if the Remarketing Agent believes
that a Remarketing will not be successful in the absence of such a
delay;
and, in either such event, the Company and the Remarketing Agent will use their
best efforts to establish a delayed Reset Date that is within five Business Days
after the Expected Reset Date, but in no event later than the Final Reset Date;
and provided further, that no Reset Date may be established if any Default (as
defined in the Credit Agreement) has occurred, except in connection with a
Remarketing following a Cured Default Trigger Event pursuant to Section 10.06.
If the Company and the Remarketing Agent have not agreed, on or prior to the
sixth Business Day preceding the Final Reset Date, to a Reset Date that is not
later than the Final Reset Date, no Remarketing shall occur and the Company
shall repay the Subordinated Notes in accordance with their terms.
(b) The Company shall, by notice to the Remarketing Agent no later
than five Business Days prior to the Reset Date, select and specify three
Reference Corporate Dealers. By 3:00 p.m., New York City time, on the Reset
Date, the Remarketing Agent shall request Bids from such Reference Corporate
Dealers. The Remarketing Agent shall determine the lowest Bid Rate (the "WINNING
BID RATE") from among the Bids obtained on the Reset Date. By approximately 4:30
p.m., New York City time, on the Reset Date, the Remarketing Agent shall notify
the Company, the Underwriter and the Trustee of the Winning Bid Rate. If on a
Reset Date, Bids are not submitted by at least two
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<PAGE> 24
Reference Corporate Dealers, or if the lowest Bid submitted would result in a
Winning Bid Rate in excess of the rate permitted by applicable law, such
Remarketing shall be deemed to be a Failed Remarketing on the corresponding
Remarketing Settlement Date. The Winning Bid Rate determined by the Remarketing
Agent, absent manifest error, shall be binding and conclusive upon the Holders
of the Subordinated Notes and the Company.
(c) On the Reset Date, the Remarketing Agent shall designate as the
Secondary Purchaser (the "SECONDARY PURCHASER") the Reference Corporate Dealer
providing the Bid containing the Winning Bid Rate. If the Winning Bid Rate is
specified in the Bids submitted by two or more Reference Corporate Dealers, the
Remarketing Agent shall, in its sole discretion, designate one of such Reference
Corporate Dealers as the Secondary Purchaser.
(d) On the Reset Date, the Secondary Purchaser shall enter into a
Secondary Purchase Agreement for the purchase by such Secondary Purchaser at the
Remarketing Price of the aggregate principal amount of Subordinated Notes, with
an Interest Rate equal to the Winning Bid Rate and with a Maturity Date on the
Maturity Extension Date.
(e) If a Remarketing has occurred pursuant to this Section 10.02 but
settlement of the purchase and sale of the Subordinated Notes does not occur on
the corresponding Remarketing Settlement Date, then, unless the provisions of
Section 10.04 with respect to a Renewed Remarketing shall apply, a Failed
Remarketing shall be deemed to occur on such Remarketing Settlement Date.
(f) At the time and in the manner specified in the Secondary Purchase
Agreement, the Secondary Purchaser shall pay to the Remarketing Agent on behalf
of the Holders of the Subordinated Notes on the Remarketing Settlement Date, an
amount of cash equal to the Remarketing Price.
(g) Unless otherwise agreed among the Remarketing Agent, the Paying
Agent and any Former Holder, the Remarketing Agent shall pay the Remarketing
Price, less the Remarketing Fee, to the Paying Agent, acting solely as agent for
the Former Holders, and the Paying Agent shall promptly pay such amounts to the
Former Holders in the same manner as is specified in Section 2.02 of the Base
Indenture for payments of interest, except that the Record Date therefor shall
be the Business Day immediately preceding the Remarketing Settlement Date.
(h) The obligation of the Remarketing Agent to make payment to the
Former Holders in connection with the Remarketing shall be limited to the extent
that the Secondary Purchaser has delivered the Remarketing Price therefor to the
Remarketing Agent.
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<PAGE> 25
(i) Any outstanding Subordinated Notes purchased on the Remarketing
Settlement Date shall be deemed to be transferred to the Secondary Purchaser and
shall be replaced in the manner provided in Section 10.02(j). On and after the
Remarketing Settlement Date (except in the event of a Failed Remarketing), the
Company shall make no further payments to, and the Company shall have no further
obligations under this First Supplemental Indenture in respect of, the Holders
of such replaced Subordinated Notes (the "FORMER HOLDERS"), the Company shall
only be obligated to make payments to the Holders of Replacement Notes, and the
Subordinated Notes of the Former Holders shall no longer represent an obligation
of the Company but shall only represent a right to receive the proceeds of the
Remarketing from the Paying Agent.
(j) The Company shall cause replacement certificates evidencing the
remarketed Subordinated Notes to be executed by the Company and authenticated by
the Trustee in accordance with the provisions of Section 2.03 of the Base
Indenture (the "REPLACEMENT NOTES"). The Replacement Notes shall be delivered to
the purchaser or purchasers of the remarketed Subordinated Notes in accordance
with the terms of the Secondary Purchase Agreement.
SECTION 10.03. Reset of Interest Rate and Maturity Date. Unless a
Failed Remarketing shall have occurred, from and including the Reset Settlement
Date, the Interest Rate on the Subordinated Notes shall be the Winning Bid Rate
and the Maturity Date shall be the Maturity Extension Date.
SECTION 10.04. Renewed Remarketing. If a Remarketing has occurred
pursuant to Section 10.02 that would be a Failed Remarketing solely pursuant to
Section 10.02(e), but the purchase and sale of the Subordinated Notes does not
take place on the corresponding Remarketing Settlement Date, and the reason for
such failure shall, in the good faith determination of the Remarketing Agent
(made after consultation with the Company), result from facts or circumstances
that are not due to the action or inaction of the Company, then the provisions
of Sections 10.02 and 10.06 shall apply to a second remarketing (a "RENEWED
REMARKETING") of the Subordinated Notes, except that the Expected Reset Date
shall be the sixth Business Day following such corresponding Remarketing
Settlement Date; provided that the provisions of this Section 10.04 shall be
applied only once.
SECTION 10.05. Failed Remarketing; Mandatory Redemption. The
Remarketing Agent shall give notice of any Failed Remarketing on the date such
Failed Remarketing occurs or is deemed to have occurred, by 4:00 p.m., New York
City time, on the date of such Failed Remarketing, to the Company, the Trustee,
the Underwriter and the Paying Agent. In the case of any Failed
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<PAGE> 26
Remarketing, the Company shall redeem the Subordinated Notes in whole, but not
in part, within three Business Days following the date such Failed Remarketing
occurs or is deemed to occur as provided in Section 3.04.
SECTION 10.06. Early Remarketing. If any of the following events (each,
a "TRIGGER EVENT") shall have occurred:
(a) the Closing Price of the Common Stock on any Trading Day, as
determined by the Remarketing Agent, is less than the Trigger Price (a "STOCK
PRICE TRIGGER EVENT");
(b) a Cross Default shall have occurred but such Cross Default shall
have ceased to be continuing (a "CURED DEFAULT TRIGGER EVENT"); or
(c) the Company (i) shall have made a written request to the
Underwriter to enter into a firm commitment underwriting of the Common Stock,
and the Company and the Underwriter shall have substantially agreed to the terms
of such underwriting in the manner described in Section 12 of the Forward
Underwriting Agreement or (ii) shall have given notice to accelerate the
Commencement Date in the manner described in Section 7 of the Forward
Underwriting Agreement (an "UNDERWRITING TRIGGER EVENT");
then a Remarketing shall occur pursuant to Sections 10.02 and, if applicable,
Section 10.04, except that:
(A) the Expected Reset Date shall be the sixth Business Day following
the date such Trigger Event first occurs;
(B) in the case of a Stock Price Trigger Event or a Cured Default
Trigger Event, the Final Reset Date shall be the 15th day following the date
such Trigger Event occurs, or the 20th day in the case of a Renewed Remarketing
to which the provisions of Section 10.04 apply, but in no event later than the
third scheduled Trading Day prior to November 10, 1999;
(C) in the case of an Underwriting Trigger Event, the Final Reset
Date shall be the 45th day following the date such Trigger Event occurs, but in
no event later than the third scheduled Trading Day prior to November 10, 1999;
and
(D) notwithstanding the provisions of clauses (A), (B) and (C) above,
if a Reset Date has already been established or a Remarketing has already taken
place at the time such Trigger Event occurs, the Remarketing shall occur on such
established Reset Date or settled on the corresponding Remarketing Settlement
Date.
22
<PAGE> 27
ARTICLE 11
EVENTS OF DEFAULT; ACCELERATION
SECTION 11.01. Events of Default. A Senior Bank Debt Acceleration shall
be an Event of Default under Section 6.01(h) of the Base Indenture.
SECTION 11.02. Acceleration. Notwithstanding the provisions of Section
6.02 of the Base Indenture, if a Senior Bank Debt Acceleration shall occur, the
principal of, and any accrued interest on, all the Subordinated Notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holders of Subordinated Notes.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Ratification of Base Indenture; First Supplemental
Indenture Controls. The Base Indenture, as supplemented by this First
Supplemental Indenture, is in all respects ratified and confirmed, and this
First Supplemental Indenture shall be deemed part of the Base Indenture in the
manner and to the extent herein and therein provided. The provisions of this
First Supplemental Indenture shall supersede the provisions of the Base
Indenture to the extent the Base Indenture is inconsistent herewith.
SECTION 12.02. Trustee Not Responsible for Recitals. The recitals
herein contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representation as to the validity or sufficiency of this First Supplemental
Indenture.
SECTION 12.03. Governing Law. This First Supplemental Indenture and
each Subordinated Note shall be governed by and construed in accordance with the
laws of the State of New York, as applied to contracts made and performed within
the State of New York, without regard to its principles of conflicts of laws.
SECTION 12.04. Severability. If any provision in the Base Indenture,
this First Supplemental Indenture or in the Subordinated Notes shall be invalid,
illegal
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<PAGE> 28
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 12.05. Counterparts. The parties may sign any number of copies
of this First Supplemental Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. Any signed copy shall be
sufficient proof of this First Supplemental Indenture.
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<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
HERCULES INCORPORATED
By /s/ R. K. Elliott
Name: R. K. Elliott
Title: Chairman and Co-Chief
Executive Officer
THE CHASE MANHATTAN BANK,
as Trustee
By /s/ J D Heaney
Name: James D. Heaney
Title: Vice President
25
<PAGE> 30
EXHIBIT A-1
[FORM OF SUBORDINATED NOTE]
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2)
AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY EXCEPT (A) TO HERCULES INCORPORATED OR ANY SUBSIDIARY THEREOF,
(B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT OR (C) TO A SECONDARY PURCHASER (AS DEFINED IN THE AMENDED AND
RESTATED TRUST AGREEMENT OF HERCULES TRUST V DATED AS OF NOVEMBER 12, 1998 (AS
AMENDED FROM TIME TO TIME, THE "TRUST AGREEMENT")) THAT HAS ENTERED INTO A
SECONDARY PURCHASE AGREEMENT (AS DEFINED IN THE TRUST AGREEMENT) WITH THE TRUST,
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND AND
(4) AGREES WITH RESPECT TO ANY TRANSFER OCCURRING PRIOR TO THE REMARKETING DATE
ON WHICH REPLACEMENT NOTES ARE ISSUED TO ANY PERSON OTHER THAN THE PROPERTY
TRUSTEE, TO PROVIDE TO THE INDENTURE TRUSTEE A DULY EXECUTED CERTIFICATE
SUBSTANTIALLY TO THE EFFECT OF CLAUSES (1), (2) AND (3), ABOVE. AT THE REQUEST
OF THE HOLDER, THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO THE SALE OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT.
FROM AND AFTER THE REMARKETING SETTLEMENT DATE ON WHICH REPLACEMENT NOTES ARE
ISSUED TO ANY PERSON OTHER THAN THE PROPERTY TRUSTEE, THIS CERTIFICATE SHALL
REPRESENT ONLY THE RIGHT TO RECEIVE THE REMARKETING PRICE, AS PROVIDED IN THE
TRUST AGREEMENT, AND SHALL NO LONGER REPRESENT AN OBLIGATION OF THE COMPANY.
A1-1
<PAGE> 31
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE
DATE AND YIELD TO MATURITY WILL BE PROMPTLY MADE AVAILABLE UPON REQUEST TO THE
VICE PRESIDENT - TAXES (AT (302) 594-5887) OR THE SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER (AT (302) 594-5175), HERCULES INCORPORATED, HERCULES
PLAZA, 1313 NORTH MARKET STREET, WILMINGTON, DE 19894-0001.
A1-2
<PAGE> 32
No. CUSIP NO.
HERCULES INCORPORATED
AUCTION RATE RESET JUNIOR SUBORDINATED NOTE SERIES A
Hercules Incorporated, a Delaware corporation (the "COMPANY",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay the principal sum of
_________ Dollars ($ ) on November 10, 1999, or such other date as may be
provided pursuant to the terms of the Indenture.
(a) Interest on the principal amount of this Subordinated Note will
accrue and be payable at a rate (the "INTEREST RATE") per annum equal to
(i) from and including the date of issuance to but excluding
the date on which the principal amount of this Subordinated Note
becomes due upon the maturity, acceleration or redemption thereof,
LIBOR plus 175 basis points, compounded quarterly;
(ii) except as provided in clause (iii) below, from and
including the Remarketing Settlement Date on which Replacement Notes
are issued to but excluding the date on which the principal amount of
the Subordinated Notes becomes due upon the maturity, acceleration or
redemption thereof, the Winning Bid Rate, compounded quarterly; and
(iii) if the Company fails to pay the principal amount due upon
the maturity, acceleration or redemption of this Subordinated Notes on
the date such amount becomes due (other than as a result of an
acceleration pursuant to Section 6.01(e) or (f) of the Base Indenture),
from and including such due date to but excluding the date of actual
payment by the Company, the Default Rate, compounded quarterly.
Interest that is not paid when due will bear additional interest thereon
compounded quarterly at the applicable periodic Interest Rate (to the extent
permitted by applicable law). The term "INTEREST", as used herein, includes any
such additional interest and Additional Interest unless otherwise stated.
A1-3
<PAGE> 33
(b) Until the Remarketing Settlement Date on which Replacement Notes
are issued, interest on this Subordinated Note will be cumulative, will be
payable quarterly in arrears on February 12, May 12, August 12 and November 12
of each year, commencing February 12, 1999, and on such Remarketing Settlement
Date (each, a "PRE-REMARKETING INTEREST PAYMENT DATE"), will accumulate from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from November 12, 1998, to but excluding the related
Pre-Remarketing Interest Payment Date, except as otherwise described below.
The Interest Rate in effect for the period from and including November
12, 1998 to but excluding February 12, 1999 shall be the rate determined by the
Calculation Agent two London Banking Days prior to November 12, 1998 and shall
equal LIBOR plus 175 basis points. The Interest Rate in effect thereafter, for
each quarterly period from and including the immediately preceding
Pre-Remarketing Interest Payment Date to but excluding the applicable
Pre-Remarketing Interest Payment Date, shall be determined by the Calculation
Agent two London Banking Days prior to such immediately preceding
Pre-Remarketing Interest Payment Date and shall equal LIBOR plus 175 basis
points. The amount of interest payable for any quarterly period shall be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the last sentence of this paragraph, the amount of interest payable
for any period shorter than a full quarterly period for which interest is
computed will be computed on the basis of the actual number of days elapsed per
30-day month. If a Pre-Remarketing Interest Payment Date is not a Business Day,
then such Pre-Remarketing Interest Payment Date will be the next succeeding
Business Day, except if such Business Day is in the next succeeding calendar
month, such Pre-Remarketing Interest Payment Date will be the immediately
preceding Business Day.
As used herein, "LONDON BANKING DAY" means any day on which dealings in
deposits in U.S. Dollars are transacted in the London interbank market.
(c) From and including the Remarketing Settlement Date on which
Replacement Notes are issued, interest on the Replacement Notes will be
cumulative, will be payable quarterly in arrears on February 12, May 12, August
12 and November 12 of each year, commencing on the Remarketing Settlement Date,
and on the Maturity Date (each, an "INTEREST PAYMENT DATE"), will accumulate
from the most recent date to which interest has been paid or, if no interest has
been paid, from and including the Remarketing Settlement Date, to but excluding
the related Interest Payment Date, except as otherwise described below. The
amount of interest payable for any quarterly period shall be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the last
sentence of this paragraph, the amount of interest payable for any period
A1-4
<PAGE> 34
shorter than a full quarterly period for which interest is computed will be
computed on the basis of the actual number of days elapsed per 30-day month. If
an Interest Payment Date is not a Business Day, then such Interest Payment Date
will be the next succeeding Business Day, except if such Business Day is in the
next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day.
(d) Interest shall be paid to the Person in whose name this
Subordinated Note or any predecessor Subordinated Note is registered on the
books and records of the Company at the close of business on the Regular Record
Date for such interest installment, which shall be fifteen (15) days prior to a
Pre-Remarketing Interest Payment Date (the "PRE-REMARKETING REGULAR RECORD
DATE"). Notwithstanding the foregoing, so long as the Holder of this
Subordinated Note is the Property Trustee, the payment of the principal of (and
premium, if any) and interest on this Subordinated Note will be made at such
place and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Subordinated Note is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all existing and future Senior Indebtedness, and this
Subordinated Note is issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Subordinated Note, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of
the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
This Subordinated Note shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Subordinated Note are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
A1-5
<PAGE> 35
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed.
HERCULES INCORPORATED
By:
Name:
Title
Attest:
By:
Name:
Title:
A1-6
<PAGE> 36
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Subordinated Notes of the series of Debentures described in
the within-mentioned Indenture.
Dated:
THE CHASE MANHATTAN BANK,
as Trustee or as Authentication Agent
By By
Authorized Signatory Authorized Signatory
A1-7
<PAGE> 37
[FORM OF REVERSE OF NOTE]
This Subordinated Note is one of a duly authorized series of Debentures
of the Company (herein sometimes referred to as the "DEBENTURES"), specified in
the Indenture, all issued or to be issued in one or more series under and
pursuant to a Junior Subordinated Debenture Indenture dated as of November 12,
1998, duly executed and delivered between the Company and The Chase Manhattan
Bank, as Trustee (the "TRUSTEE"), as supplemented by the First Supplemental
Indenture dated as of November 12, 1998, between the Company and the Trustee
(the Indenture as so supplemented, the "INDENTURE"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Subordinated Notes. By the
terms of the Indenture, the Debentures are issuable thereunder in series that
may vary as to amount, date of maturity, rate of interest and in other respects
as provided in the Indenture. This series of Debentures is limited in aggregate
principal amount as specified in said First Supplemental Indenture and herein
sometimes referred to as the "SUBORDINATED NOTES."
Because of the occurrence and continuation of a Special Event or a
Failed Remarketing, in certain circumstances, this Subordinated Note may become
due and payable at the principal amount together with any interest accrued
thereon (the "REDEMPTION PRICE"). The Redemption Price shall be paid prior to
12:00 noon, New York City time, on the date of such redemption or at such
earlier time as the Company determines.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Subordinated Notes may
be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of at least a majority in aggregate
principal amount of the Debentures of each series affected thereby then
outstanding (and, in the case of any series of Debentures held as assets of a
Trust and with respect to which a Dissolution Event has not theretofore
occurred, such consent of holders of the Preferred Securities and the Common
Securities of such Trust as may be required under the Trust Agreement), as
defined in the Indenture, to reduce the principal amount of such Debentures;
reduce the percentage of the principal amount of such Debentures the Holders of
which must consent to an amendment of this Indenture or a waiver; change (i) the
stated maturity of the principal of or the interest on such Debentures, or (ii)
the rate of interest (or the manner of calculation thereof) on such Debentures,
change adversely to the
A1-8
<PAGE> 38
Holders the redemption, conversion or exchange provisions applicable to such
Debentures, if any; change the currency in respect of which the payments on such
Debentures are to be made; make any change in the Subordination provisions of
the Indenture (Article 10) that adversely affects the rights of the Holders of
the Debentures or any change to any other Section hereof that adversely affects
their rights; or change the direct action rights of holders of Preferred
Securities; provided that, in the case of the outstanding Debentures of a series
then held by a Trust, no such amendment shall be made that adversely affects the
holders of the Preferred Securities of that Trust, and no waiver of any Event of
Default with respect to the Debentures of that series or compliance with any
covenant under this Indenture shall be effective, without the prior consent of
the holders of at least a majority of the aggregate liquidation amount of the
outstanding Preferred Securities of that Trust or the holder of each such
Preferred Security, as applicable.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Debentures, or which modifies
the rights of the Holders of Debentures of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Debentures of any other series.
No reference herein to the Indenture and no provision of this
Subordinated Note or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Subordinated Note at the time and place
and at the rate or rates and in the currency herein prescribed.
As provided in the Indenture and subject to certain limitations herein
and therein set forth, this Subordinated Note is transferable by the registered
Holder hereof on the Register of the Company, upon surrender of this
Subordinated Note for registration of transfer at the office or agency of the
Trustee in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the registered Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Subordinated Notes of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Subordinated Note, the Company, the Trustee, any paying agent and the Registrar
may deem
A1-9
<PAGE> 39
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Subordinated Note shall be overdue and notwithstanding any notice of
ownership or writing hereon made by anyone other than the Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Registrar shall be
affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Subordinated Note, or for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Subordinated Notes of this series are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple of
$1,000 thereof. The Subordinated Notes may be transferred or exchanged only in
minimum denominations of $100,000 and integral multiples of $1,000 in excess
thereof, and any attempted transfer, sale or other disposition of Subordinated
Notes in a denomination of less than $100,000 shall be deemed void and of no
legal effect whatsoever.
All terms used in this Subordinated Note that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
A1-10
<PAGE> 40
EXHIBIT A-2
[FORM OF REPLACEMENT NOTE]
IF THE NOTE IS TO BE A GLOBAL NOTE, INSERT THE FOLLOWING--This Note is
a Book-Entry Note within the meaning of the Indenture hereinafter referred to
and is registered in the name of a Depository or a nominee of a Depository. This
Note is exchangeable for Subordinated Notes registered in the name of a person
other than the Depository or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Note (other than a transfer
of this Note as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository) may be registered except in limited circumstances.
Unless this Note is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co.,
has an interest herein.
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2)
AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY EXCEPT (A) TO HERCULES INCORPORATED OR ANY SUBSIDIARY THEREOF
OR (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. AT THE REQUEST OF THE HOLDER, THIS LEGEND
A2-1
<PAGE> 41
WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO THE
SALE OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT
AND (4) AGREES WITH RESPECT TO ANY TRANSFER OCCURRING PRIOR TO THE REMARKETING
DATE ON WHICH REPLACEMENT NOTES ARE ISSUED, TO PROVIDE TO THE INDENTURE TRUSTEE
A DULY EXECUTED CERTIFICATE SUBSTANTIALLY TO THE EFFECT OF CLAUSES (1), (2) AND
(3), ABOVE.
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE
DATE, AND YIELD TO MATURITY WILL BE PROMPTLY MADE AVAILABLE UPON REQUEST TO THE
VICE PRESIDENT - TAXES (AT (302) 594-5887) OR THE SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER (AT (302) 594-5175), HERCULES INCORPORATED, HERCULES
PLAZA, 1313 NORTH MARKET STREET, WILMINGTON, DE 19894-0001.
A2-2
<PAGE> 42
No. CUSIP NO.
HERCULES INCORPORATED
AUCTION RATE RESET JUNIOR SUBORDINATED NOTE SERIES A
REPLACEMENT NOTE
Hercules Incorporated, a Delaware corporation (the "COMPANY", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay the principal sum of _________
Dollars ($ ) on the Maturity Date or such earlier date as may be provided
pursuant to the terms of the Indenture.
Interest on the principal amount of this Subordinated Note will accrue
and be payable at a rate (the "INTEREST RATE") per annum equal to (i) from and
including the date of issuance to but excluding the date such principal amount
is paid, the Winning Bid Rate, compounded quarterly; and (ii) notwithstanding
clause (i) above, if the Company fails to pay the principal amount on the date
such amount becomes due, then from and including such due date to but excluding
the date such principal amount is paid, the Default Rate, compounded quarterly,
but only to the extent permitted by applicable law.
Interest that is not paid when due will bear additional interest thereon
compounded quarterly at the applicable periodic Interest Rate specified above
(to the extent permitted by applicable law). The term "INTEREST", as used
herein, includes any such additional interest and Additional Interest unless
otherwise stated.
From and including the date of issuance, interest on this Replacement
Note will be cumulative, will be payable quarterly in arrears on February 12,
May 12, August 12 and November 12 of each year, commencing on the Remarketing
Settlement Date, and on the Maturity Date (each, an "INTEREST PAYMENT DATE"),
will accumulate from the most recent date to which interest has been paid or, if
no interest has been paid, from and including the date of issuance, to but
excluding the related Interest Payment Date, except as otherwise described
below. The amount of interest payable for any quarterly period shall be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the last sentence of this paragraph, the amount of interest payable for any
period shorter than a full quarterly period for which interest is computed will
be computed on the basis of the actual number of days elapsed per 30-day month.
If an Interest Payment Date is not a Business Day, then such Interest Payment
Date will be the next succeeding Business Day, except if such Business Day is in
the next
A2-3
<PAGE> 43
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day.
Interest shall be paid to the Person in whose name the Subordinated
Note or any predecessor Subordinated Note is registered on the books and records
of the Company at the close of business on the Regular Record Date for such
interest installment, which, in respect of (iii) Subordinated Notes of which the
Property Trustee is the Holder and the related Preferred Securities are in
book-entry only form or (iv) a Global Subordinated Note, shall be the close of
business on the Business Day next preceding that Interest Payment Date (the
"REGULAR RECORD DATE"). If the Subordinated Notes are not represented by a
Global Subordinated Note, the Regular Record Date for such interest installment
shall be fifteen (15) days prior to an Interest Payment Date. Notwithstanding
the foregoing, so long as the Holder of this Subordinated Note is the Property
Trustee, the payment of the principal of (and premium, if any) and interest on
this Subordinated Note will be made at such place and to such account as may be
designated by the Property Trustee.
The indebtedness evidenced by this Subordinated Note is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all existing and future Senior Indebtedness, and this
Subordinated Note is issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Subordinated Note, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of
the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
This Subordinated Note shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Subordinated Note are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
A2-4
<PAGE> 44
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
HERCULES INCORPORATED
By:
Name:
Title
Attest:
By:
Name:
Title:
A2-5
<PAGE> 45
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Subordinated Notes of the series of Debentures described in
the within-mentioned Indenture.
Dated:
THE CHASE MANHATTAN BANK,
as Trustee or as Authentication Agent
By By
Authorized Signatory Authorized Signatory
A2-6
<PAGE> 46
[FORM OF REVERSE OF NOTE]
This Subordinated Note is one of a duly authorized series of Debentures
of the Company (herein sometimes referred to as the "DEBENTURES"), specified in
the Indenture, all issued or to be issued in one or more series under and
pursuant to a Junior Subordinated Debenture Indenture dated as of November 12,
1998, duly executed and delivered between the Company and The Chase Manhattan
Bank, as Trustee (the "TRUSTEE"), as supplemented by the First Supplemental
Indenture dated as of November 12, 1998, between the Company and the Trustee
(the Indenture as so supplemented, the "INDENTURE"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Subordinated Notes. By the
terms of the Indenture, the Debentures are issuable thereunder in series that
may vary as to amount, date of maturity, rate of interest and in other respects
as provided in the Indenture. This series of Debentures is limited in aggregate
principal amount as specified in said First Supplemental Indenture and herein
sometimes referred to as the "SUBORDINATED NOTES."
Because of the occurrence and continuation of a Special Event, in
certain circumstances, this Subordinated Note may become due and payable at the
principal amount together with any interest accrued thereon (the "REDEMPTION
PRICE"). The Redemption Price shall be paid prior to 12:00 noon, New York City
time, on the date of such redemption or at such earlier time as the Company
determines.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Subordinated Notes may
be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of at least a majority in aggregate
principal amount of the Debentures of each series affected thereby then
outstanding (and, in the case of any series of Debentures held as assets of a
Trust and with respect to which a Dissolution Event has not theretofore
occurred, such consent of holders of the Preferred Securities and the Common
Securities of such Trust as may be required under the Trust Agreement), as
defined in the Indenture, to reduce the principal amount of such Debentures;
reduce the percentage of the principal amount of such Debentures the Holders of
which must consent to an amendment of this Indenture or a waiver; change (i) the
stated maturity of the principal of or the interest on such Debentures, or (ii)
the rate of interest (or the manner of calculation thereof) on such Debentures,
change adversely to the
A2-7
<PAGE> 47
Holders the redemption, conversion or exchange provisions applicable to such
Debentures, if any; change the currency in respect of which the payments on such
Debentures are to be made; make any change in the Subordination provisions of
the Indenture (Article 10) that adversely affects the rights of the Holders of
the Debentures or any change to any other Section hereof that adversely affects
their rights; or change the direct action rights of holders of Preferred
Securities; provided that, in the case of the outstanding Debentures of a series
then held by a Trust, no such amendment shall be made that adversely affects the
holders of the Preferred Securities of that Trust, and no waiver of any Event of
Default with respect to the Debentures of that series or compliance with any
covenant under this Indenture shall be effective, without the prior consent of
the holders of at least a majority of the aggregate liquidation amount of the
outstanding Preferred Securities of that Trust or the holder of each such
Preferred Security, as applicable.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Debentures, or which modifies
the rights of the Holders of Debentures of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Debentures of any other series.
No reference herein to the Indenture and no provision of this
Subordinated Note or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Subordinated Note at the time and place
and at the rate or rates and in the currency herein prescribed.
As provided in the Indenture and subject to certain limitations herein
and therein set forth, this Subordinated Note is transferable by the registered
Holder hereof on the Register of the Company, upon surrender of this
Subordinated Note for registration of transfer at the office or agency of the
Trustee in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the registered Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Subordinated Notes of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Subordinated Note, the Company, the Trustee, any paying agent and the Registrar
may deem
A2-8
<PAGE> 48
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Subordinated Note shall be overdue and notwithstanding any notice of
ownership or writing hereon made by anyone other than the Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Registrar shall be
affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Subordinated Note, or for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Subordinated Notes of this series are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple of
$1,000 thereof. The Subordinated Notes may be transferred or exchanged only in
minimum denominations of $100,000 and integral multiples of $1,000 in excess
thereof, and any attempted transfer, sale or other disposition of Subordinated
Notes in a denomination of less than $100,000 shall be deemed void and of no
legal effect whatsoever. This Global Subordinated Note is exchangeable for
Subordinated Notes in definitive form only under certain limited circumstances
set forth in the Indenture.
All terms used in this Subordinated Note that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
A2-9
<PAGE> 1
Exhibit 4-E
EXECUTION COPY
PREFERRED SECURITIES GUARANTEE AGREEMENT
HERCULES INCORPORATED
Dated as of November 12, 1998
HERCULES TRUST V
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions and Interpretation...................................................2
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application.................................................6
SECTION 2.02. Lists of Holders of Securities...................................................6
SECTION 2.03. Reports by the Preferred Securities Guarantee Trustee............................7
SECTION 2.04. Periodic Reports to Preferred Securities Guarantee
Trustee........................................................................7
SECTION 2.05. Evidence of Compliance with Conditions Precedent.................................7
SECTION 2.06. Events of Default; Waiver........................................................7
SECTION 2.07. Event of Default; Notice.........................................................8
SECTION 2.08. Conflicting Interests............................................................8
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF PREFERRED SECURITIES GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Preferred Securities Guarantee
Trustee........................................................................8
SECTION 3.02. Certain Rights of Preferred Securities Guarantee Trustee........................10
SECTION 3.03. Not Responsible for Recitals or Issuance of Preferred
Securities Guarantee..........................................................13
ARTICLE 4
PREFERRED SECURITIES GUARANTEE TRUSTEE
SECTION 4.01. Preferred Securities Guarantee Trustee; Eligibility.............................13
SECTION 4.02. Appointment, Removal and Resignation of Preferred
Securities Guarantee Trustee..................................................14
ARTICLE 5
GUARANTEE
SECTION 5.01. Guarantee.......................................................................15
SECTION 5.02. Waiver of Notice and Demand.....................................................15
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 5.03. Obligations Not Affected........................................................16
SECTION 5.04. Rights of Holders...............................................................16
SECTION 5.05. Guarantee of Payment............................................................17
SECTION 5.06. Subrogation.....................................................................17
SECTION 5.07. Independent Obligations.........................................................17
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. Limitation of Transactions......................................................17
SECTION 6.02. Ranking.........................................................................18
ARTICLE 7
TERMINATION
SECTION 7.01. Termination.....................................................................19
ARTICLE 8
EXCULPATION AND INDEMNIFICATION
SECTION 8.01. Exculpation.....................................................................19
SECTION 8.02. Indemnification.................................................................19
ARTICLE 9
COMPENSATION
SECTION 9.01. Compensation....................................................................20
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Successors and Assigns.........................................................21
SECTION 10.02. Amendments.....................................................................21
SECTION 10.03. Notices........................................................................21
SECTION 10.04. Benefit........................................................................22
SECTION 10.05. Governing Law..................................................................23
</TABLE>
ii
<PAGE> 4
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (the "PREFERRED
SECURITIES GUARANTEE"), dated as of November 12, 1998, is executed and delivered
by Hercules Incorporated, a Delaware corporation (the "GUARANTOR"), and The
Chase Manhattan Bank, a New York banking corporation, as trustee (the "PREFERRED
SECURITIES GUARANTEE TRUSTEE"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
Hercules Trust V, a statutory business trust formed under the laws of the State
of Delaware (the "ISSUER").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"TRUST AGREEMENT"), dated as of November 12, 1998, among the Trustees of the
Issuer, the Guarantor, as sponsor, and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof 200,000 Auction Rate Reset Preferred Securities,
having an aggregate Liquidation Amount of $200,000,000 (collectively, the
"PREFERRED SECURITIES").
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "COMMON SECURITIES GUARANTEE") with substantially identical terms
to this Preferred Securities Guarantee, for the benefit of the holders of the
Common Securities (as defined herein), except that if an event of default under
the Trust Agreement has occurred and is continuing, the rights of holders of the
Common Securities to receive Guarantee Payments under the Common Securities
Guarantee are subordinated, to the extent and in the manner set forth in the
Common Securities Guarantee, to the rights of Holders of Preferred Securities to
receive Guarantee Payments under this Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby acknowledges shall
benefit the Guarantor, the Guarantor executes and delivers this Preferred
Securities Guarantee for the benefit of the Holders.
<PAGE> 5
ARTICLE 1
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions and Interpretation. In this Preferred
Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.01;
(b) terms defined in the Trust Agreement as of the date of execution
of this Preferred Securities Guarantee have the same meaning when used in this
Preferred Securities Guarantee unless otherwise defined in this Preferred
Securities Guarantee;
(c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;
(d) all references to "THE PREFERRED SECURITIES GUARANTEE" or "THIS
PREFERRED SECURITIES GUARANTEE" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless otherwise defined in
this Preferred Securities Guarantee or unless the context otherwise requires;
and
(g) a reference to the singular includes the plural and vice versa.
"AFFILIATE" has the same meaning as given to that term in Rule 405
under the Securities Act of 1933, as amended, or any successor rule thereunder.
"BUSINESS DAY" means any day other than a Saturday or a Sunday, or a
day on which banking institutions in The City of New York or Wilmington,
Delaware are authorized or required by law, regulation or executive order to
close and, until the Remarketing Settlement Date on which Replacement Securities
are issued, that is also a London Banking Day.
2
<PAGE> 6
"COMMON SECURITIES" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"CORPORATE TRUST OFFICE" means the office of the Preferred Securities
Guarantee Trustee for the conduct of corporate trust business at which matters
related to this Preferred Securities Guarantee shall, at any particular time, be
principally administered, which office at the date of execution of this
Preferred Securities Guarantee is located at One Liberty Place, 52nd Floor, 1650
Market Street, Philadelphia, Pennsylvania 19103.
"COVERED PERSON" means any Holder or beneficial owner of Preferred
Securities.
"EVENT OF DEFAULT" means (i) a default by the Guarantor in respect of
any of its payment or other obligations under this Preferred Securities
Guarantee or (ii) if applicable, the failure of the Guarantor to deliver the
required securities upon an appropriate election by any Holder of Preferred
Securities to convert such Preferred Securities into such securities in
accordance with their terms.
"GUARANTEE PAYMENTS" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Issuer: (i) any accumulated and unpaid Distributions that
are required to be paid on such Preferred Securities, to the extent the Issuer
has funds legally available therefor at such time, (ii) the redemption price
(including the Mandatory Redemption Price), including all accumulated and unpaid
Distributions to the date of redemption (the "REDEMPTION PRICE"), to the extent
the Issuer has funds legally available therefor at such time, with respect to
any Preferred Securities called for redemption by the Issuer, and (iii) upon a
voluntary or involuntary dissolution and liquidation of the Issuer (other than
in connection with the distribution of the Subordinated Notes to Holders of the
Preferred Securities or the redemption of the Preferred Securities as provided
in the Trust Agreement, the lesser of (a) the aggregate of the Liquidation
Amount and all accumulated and unpaid Distributions on the Preferred Securities
to the date of payment, to the extent the Issuer has funds legally available
therefor at such time, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "LIQUIDATION DISTRIBUTION"). If an event of default under the Trust
Agreement has occurred and is continuing, no Guarantee Payments under the Common
Securities Guarantee with respect to the Common Securities or any guarantee
payment under any Other Common Securities Guarantees shall be made until the
Holders of Preferred Securities shall be paid in full the Guarantee Payments to
which they are entitled under this Preferred Securities Guarantee.
3
<PAGE> 7
"HOLDER" shall mean any holder, as registered on the books and records
of the Issuer, of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "HOLDER"
shall not include the Guarantor or any Affiliate of the Guarantor.
"INDEMNIFIED PERSON" means the Preferred Securities Guarantee Trustee,
any Affiliate of the Preferred Securities Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Preferred Securities Guarantee Trustee.
"INDENTURE" means the Junior Subordinated Debenture Indenture dated as
of November 12, 1998, between the Hercules Incorporated, as Issuer (the
"DEBENTURE ISSUER"), and The Chase Manhattan Bank, as Trustee, as supplemented
by the First Supplemental Indenture dated as of November 12, 1998, pursuant to
which the Subordinated Notes are to be issued to the Property Trustee of the
Issuer.
"LIQUIDATION AMOUNT" means $1000 per Preferred Security.
"LIST OF HOLDERS" has the meaning set forth in Section 2.02.
"LONDON BANKING DAY" means any day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
"MAJORITY IN LIQUIDATION AMOUNT OF THE PREFERRED SECURITIES" means,
except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the aggregate
Liquidation Amount (including the amount payable on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all Preferred Securities.
"OFFICERS' CERTIFICATE" means, with respect to any person, a
certificate signed by either Co-Chief Executive Officer, the President or a Vice
President, and by the Treasurer, the Secretary or an Assistant Secretary of the
Guarantor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating
thereto; and
4
<PAGE> 8
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"OTHER COMMON SECURITIES GUARANTEES" shall have the same meaning as
"OTHER GUARANTEES" in the Common Securities Guarantee.
"OTHER DEBENTURES" means all junior subordinated debentures issued by
the Guarantor from time to time and sold to trusts established by the Guarantor,
in each case similar to the Issuer.
"OTHER GUARANTEES" means all guarantees issued by the Guarantor with
respect to preferred securities similar to the Preferred Securities issued by
other trusts established by the Guarantor, in each case similar to the Issuer.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PREFERRED SECURITIES GUARANTEE TRUSTEE" means The Chase Manhattan
Bank, a New York banking corporation, until a Successor Preferred Securities
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Preferred Securities Guarantee and thereafter means each
such Successor Preferred Securities Guarantee Trustee.
"RESPONSIBLE OFFICER" means, with respect to the Preferred Securities
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Securities Guarantee Trustee, including any vice-president, any
assistant vice-president, any assistant secretary, the treasurer, any assistant
treasurer or other officer of the Corporate Trust Office of the Preferred
Securities Guarantee Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer of the Preferred
Securities Guarantee Trustee to whom
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such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.
"SUBORDINATED NOTES" means the series of junior subordinated debt
securities of the Guarantor designated the Auction Rate Reset Junior
Subordinated Notes Series A, of the Issuer held by the Property Trustee.
"SUCCESSOR PREFERRED SECURITIES GUARANTEE TRUSTEE" means a successor
Preferred Securities Guarantee Trustee possessing the qualifications to act as
Preferred Securities Guarantee Trustee under Section 4.01.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended.
"TRUST SECURITIES" means, collectively, the Common Securities and the
Preferred Securities.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application. (a) This Preferred
Securities Guarantee is subject to the provisions of the Trust Indenture Act
that are required to be part of this Preferred Securities Guarantee and shall,
to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.02. Lists of Holders of Securities. (a) The Guarantor shall
provide the Preferred Securities Guarantee Trustee (unless the Preferred
Securities Guarantee Trustee is otherwise the registrar of the Preferred
Securities) with a list, in such form as the Preferred Securities Guarantee
Trustee may reasonably require, of the names and addresses of the Holders of the
Preferred Securities ("LIST OF HOLDERS"), (i) within 14 days after each record
date for payment of Distributions, as of such record date and (ii) at any other
time within 30 days of receipt by the Guarantor of a written request for a List
of Holders as of a date no more than 14 days before such List of Holders is
given to the Preferred Securities Guarantee Trustee, provided that the Guarantor
shall not be obligated to provide such List of Holders at any time the List of
Holders does not differ from the most
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recent List of Holders given to the Preferred Securities Guarantee Trustee by
the Guarantor. The Preferred Securities Guarantee Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Securities Guarantee Trustee shall comply with the
obligations set forth under Sections 311(a), 311(b) and Section 312(b) of the
Trust Indenture Act.
SECTION 2.03. Reports by the Preferred Securities Guarantee Trustee.
Within 60 days after September 1 of each year, commencing September 1, 1999, the
Preferred Securities Guarantee Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Preferred Securities Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Preferred Securities Guarantee
Trustee. The Guarantor shall provide to the Preferred Securities Guarantee
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act. Delivery of such
reports, information and documents to the Preferred Securities Guarantee Trustee
is for informational purposes only and the Preferred Securities Guarantee
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Guarantor's compliance with any of its covenants
hereunder (as to which the Preferred Securities Guarantee Trustee is entitled to
rely exclusively on Officers' Certificates).
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Preferred Securities Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
Liquidation Amount of Preferred Securities may, by vote, on behalf of the
Holders of all of the Preferred Securities, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured,
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for every purpose of this Preferred Securities Guarantee, but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon.
SECTION 2.07. Event of Default; Notice. (a) The Preferred Securities
Guarantee Trustee shall, within 90 days after the occurrence of a default with
respect to this Preferred Securities Guarantee, mail by first class postage
prepaid, to all Holders of the Preferred Securities, notices of all defaults
actually known to a Responsible Officer of the Preferred Securities Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, except in the case of default in the payment of any Guarantee
Payment, the Preferred Securities Guarantee Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers of the
Preferred Securities Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Preferred
Securities.
(b) The Preferred Securities Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Preferred Securities Guarantee
Trustee shall have received written notice or a Responsible Officer of the
Preferred Securities Guarantee Trustee shall have obtained actual knowledge of
such Event of Default.
SECTION 2.08. Conflicting Interests. The Indenture shall be deemed to
be specifically described in this Preferred Securities Guarantee for the
purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF PREFERRED SECURITIES GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Preferred Securities Guarantee
Trustee. (a) This Preferred Securities Guarantee shall be held by the Preferred
Securities Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Securities Guarantee Trustee shall not transfer
this Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising his or her rights pursuant to Section 5.04(b) or to a
Successor Preferred Securities Guarantee Trustee on acceptance by such Successor
Preferred Securities Guarantee Trustee of its appointment to act as Successor
Preferred Securities Guarantee Trustee. The right, title and interest of
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the Preferred Securities Guarantee Trustee shall automatically vest in any
Successor Preferred Securities Guarantee Trustee, and such vesting and
succession of title shall be effective whether or not conveyancing documents
have been executed and delivered pursuant to the appointment of such Successor
Preferred Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Preferred Securities Guarantee Trustee has occurred and is continuing, the
Preferred Securities Guarantee Trustee shall enforce this Preferred Securities
Guarantee for the benefit of the Holders of the Preferred Securities. In such
event, any moneys collected shall first be paid to the Preferred Securities
Guarantee Trustee for amounts due under Section 8.03 and then to the Holders of
the Preferred Securities.
(c) The Preferred Securities Guarantee Trustee, before the occurrence
of any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants shall
be read into this Preferred Securities Guarantee against the Preferred
Securities Guarantee Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06) and is actually known to a
Responsible Officer of the Preferred Securities Guarantee Trustee, the Preferred
Securities Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Preferred Securities Guarantee, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Securities Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, its own bad
faith or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Preferred
Securities Guarantee Trustee shall be determined solely by the
express provisions of this Preferred Securities Guarantee, and
the Preferred Securities Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Preferred Securities
Guarantee, and no implied covenants or obligations shall be
read into this Preferred Securities Guarantee against the
Preferred Securities Guarantee Trustee; and
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(B) in the absence of bad faith on the part of the
Preferred Securities Guarantee Trustee, the Preferred
Securities Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished
to the Preferred Securities Guarantee Trustee and conforming
to the requirements of this Preferred Securities Guarantee;
provided, however, that in the case of any such certificates
or opinions that by any provision hereof are specifically
required to be furnished to the Preferred Securities Guarantee
Trustee, the Preferred Securities Guarantee Trustee shall be
under a duty to examine the same to determine whether or not
they conform to the requirements of this Preferred Securities
Guarantee (but shall not be required to confirm or investigate
the accuracy of mathematical calculations or other facts
stated therein);
(ii) the Preferred Securities Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer of the Preferred Securities Guarantee Trustee, unless it shall
be proved that the Preferred Securities Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Preferred Securities Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders of a
Majority in Liquidation Amount of the Preferred Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Preferred Securities Guarantee Trustee, or exercising
any trust or power conferred upon the Preferred Securities Guarantee
Trustee under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Securities Guarantee Trustee to expend or risk
its own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Securities Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity reasonably satisfactory to
the Preferred Securities Guarantee Trustee against such risk or
liability is not reasonably assured to it.
SECTION 3.02. Certain Rights of Preferred Securities Guarantee Trustee.
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(a) Subject to the provisions of Section 3.01:
(i) The Preferred Securities Guarantee Trustee may
conclusively rely and shall be fully protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee may be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Securities Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Securities
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Guarantor.
(iv) The Preferred Securities Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument
(including any financing or any continuation statement or any filing
under tax or securities laws) or any re-recording, refiling or
registration thereof.
(v) The Preferred Securities Guarantee Trustee may consult
with counsel or other experts of its selection, and the advice or
opinion of such counsel and experts with respect to legal matters or
advice within the scope of such experts' area of expertise shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be counsel to
the Guarantor or any of its Affiliates and may include any of its
employees. The Preferred Securities Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration of
this Preferred Securities Guarantee from any court of competent
jurisdiction.
(vi) The Preferred Securities Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Securities
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Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Preferred Securities Guarantee Trustee, against the costs,
expenses (including reasonable attorneys' fees and expenses and the
expenses of the Preferred Securities Guarantee Trustee's agents,
nominees or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Preferred Securities Guarantee
Trustee; provided that, nothing contained in this Section 3.02(a)(vi)
shall be taken to relieve the Preferred Securities Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by the terms of this
Preferred Securities Guarantee.
(vii) The Preferred Securities Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Securities Guarantee Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it
may see fit.
(viii) The Preferred Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Preferred Securities Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Securities Guarantee
Trustee or its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Securities Guarantee
Trustee or its agents alone shall be sufficient and effective to
perform any such action and no third party shall be required to inquire
as to the authority of the Preferred Securities Guarantee Trustee to so
act or as to its compliance with any of the terms and provisions of
this Preferred Securities Guarantee, both of which shall be
conclusively evidenced by the Preferred Securities Guarantee Trustee's
or its agent's taking such action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Securities Guarantee Trustee shall
deem it desirable to receive instructions with respect to enforcing any
remedy or right or taking any other action hereunder, the Preferred
Securities Guarantee Trustee (A) may request instructions from the
Holders of a Majority in Liquidation Amount of the Preferred
Securities, (B) may
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refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (C) shall be protected in
conclusively relying on or acting in accordance with such instructions.
(xi) Except as otherwise expressly provided by this Preferred
Securities Guarantee, the Preferred Securities Guarantee Trustee shall
not be under any obligation to take any action that is discretionary
under the provisions of this Preferred Securities Guarantee Agreement.
(xii) The Preferred Securities Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it in
good faith, without negligence, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Preferred Securities Guarantee.
(b) No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred Securities Guarantee
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Preferred Securities Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Preferred Securities Guarantee
Trustee shall be construed to be a duty.
SECTION 3.03. Not Responsible for Recitals or Issuance of Preferred
Securities Guarantee. The recitals contained in this Preferred Securities
Guarantee shall be taken as the statements of the Guarantor, and the Preferred
Securities Guarantee Trustee does not assume any responsibility for their
correctness. The Preferred Securities Guarantee Trustee makes no representation
as to the validity or sufficiency of this Preferred Securities Guarantee.
ARTICLE 4
PREFERRED SECURITIES GUARANTEE TRUSTEE
SECTION 4.01. Preferred Securities Guarantee Trustee; Eligibility. (a)
There shall at all times be a Preferred Securities Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
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(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section 4.01(a)(ii),
the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Preferred Securities Guarantee Trustee shall
cease to be eligible to so act under Section 4.01(a), the Preferred Securities
Guarantee Trustee shall immediately resign in the manner and with the effect set
out in Section 310(b) of the Trust Indenture.
(c) If the Preferred Securities Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Securities Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.02. Appointment, Removal and Resignation of Preferred
Securities Guarantee Trustee.
(a) Subject to Section 4.02, the Preferred Securities Guarantee
Trustee may be appointed or removed without cause at any time by the Guarantor
except during the occurrence and continuance of an Event of Default.
(b) The Preferred Securities Guarantee Trustee shall not be removed in
accordance with Section 4.02(a) until a Successor Preferred Securities Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Securities Guarantee Trustee and
delivered to the Guarantor.
(c) The Preferred Securities Guarantee Trustee shall hold office until
a Successor Preferred Securities Guarantee Trustee shall have been appointed or
until its removal or resignation. The Preferred Securities Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
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Successor Preferred Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Preferred Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Preferred Securities Guarantee Trustee.
(d) If no Successor Preferred Securities Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.02 within
60 days after delivery of an instrument of removal or resignation, the Preferred
Securities Guarantee Trustee resigning or being removed may petition any court
of competent jurisdiction for appointment of a Successor Preferred Securities
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Preferred Securities Guarantee
Trustee.
(e) No Preferred Securities Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Securities Guarantee
Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Preferred Securities Guarantee Trustee pursuant to this
Section 4.02, the Guarantor shall pay to the Preferred Securities Guarantee
Trustee all amounts due to the Preferred Securities Guarantee Trustee accrued to
the date of such termination, removal or resignation.
ARTICLE 5
GUARANTEE
SECTION 5.01. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Issuer), as and when due, regardless of any
defense, right of set-off or counterclaim that the Issuer may have or assert.
The Guarantor's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of this Preferred Securities Guarantee and of any liability
to which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Issuer or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
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SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Preferred Securities Guarantee
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;
(b) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(d) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(e) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(f) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor; it being the intent of
this Section 5.03 that the obligations of the Guarantor with respect to the
Guarantee Payments shall be absolute and unconditional under any and all
circumstances. There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. Rights of Holders. (a) The Holders of a Majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Preferred Securities Guarantee Trustee in respect of this Preferred
Securities Guarantee or exercising any trust or power conferred upon the
Preferred Securities Guarantee Trustee under this Preferred Securities
Guarantee.
(b) If the Preferred Securities Guarantee Trustee fails to enforce
this Preferred Securities Guarantee, any Holder of Preferred Securities may
institute a legal proceeding directly against the Guarantor to enforce the
rights of such Holder under this Preferred Securities Guarantee, without first
instituting a legal
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proceeding against the Issuer, the Preferred Securities Guarantee Trustee or any
other person or entity. The Guarantor waives any right or remedy to require that
any action be brought first against the Issuer or any other person or entity
before proceeding directly against the Guarantor.
Notwithstanding the foregoing, if the Guarantor has failed to make a
required Guarantee Payment, a Holder of Preferred Securities may directly
institute a proceeding against the Guarantor for enforcement of this Preferred
Securities Guarantee for such Guarantee Payment.
SECTION 5.05. Guarantee of Payment. This Preferred Securities
Guarantee creates a guarantee of payment and not of collection.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders of Preferred Securities against the Issuer in respect
of any amounts paid to such Holders by the Guarantor under this Preferred
Securities Guarantee; provided, however, that the Guarantor shall not (except to
the extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Preferred Securities Guarantee, if, at the time of any such payment, any amounts
are due and unpaid under this Preferred Securities Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities, and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Preferred Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (f), inclusive, of Section 5.03
hereof.
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. Limitation of Transactions. So long as any Preferred
Securities remain outstanding, the Guarantor shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation
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payment with respect to, any of the Guarantor's capital stock (which includes
common and preferred stock), (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of the
Guarantor (including any Other Debentures) that rank pari passu with or junior
in right of payment to the Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Guarantor of the debt securities of any
subsidiary of the Guarantor (including Other Guarantees) if such guarantee ranks
pari passu or junior in right of payment to the Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Guarantor; (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto; (c)
payments under the Preferred Securities Guarantee; (d) as a result of a
reclassification of the Guarantor's capital stock or the exchange or the
conversion of one class or series of the Guarantor's capital stock for another
class or series of the Guarantor's capital stock; (e) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged; and (f) purchases of common stock related to the issuance of common
stock or rights under any of the Guarantor's benefit and compensation plans for
its directors, officers or employees or any of the Guarantor's dividend
reinvestment plans) if at such time (i) there shall have occurred any event of
which the Guarantor has actual knowledge that is, or with the giving of notice
or the lapse of time, or both, would be an Event of Default or (ii) the
Guarantor shall be in default with respect to its payment obligations under this
Preferred Securities Guarantee.
SECTION 6.02. Ranking. This Preferred Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank (i)
subordinate and junior in right of payment to all other liabilities of the
Guarantor except any liabilities (including the Other Guarantees, the Common
Securities Guarantee and the Other Common Securities Guarantees) that may be
pari passu or junior expressly by their terms, and (ii) senior to the
Guarantor's capital stock now or hereafter issued by the Guarantor, if any, and
with any guarantee now or hereafter entered into by the Guarantor in respect of
any preferred or preference stock of any Affiliate of the Guarantor. The
foregoing subordination shall not apply to amounts payable under Article 8.
18
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ARTICLE 7
TERMINATION
SECTION 7.01. Termination. This Preferred Securities Guarantee shall
terminate upon (i) full payment of the Redemption Price of all Preferred
Securities, or (ii) liquidation of the Issuer, the full payment of the amounts
payable in accordance with the Trust Agreement or the distribution of the
Debentures to the Holders of all of the Preferred Securities. Notwithstanding
the foregoing, this Preferred Securities Guarantee will continue to be effective
or will be reinstated, as the case may be, if at any time any Holder of
Preferred Securities must restore payment of any sums paid under the Preferred
Securities or under this Preferred Securities Guarantee.
ARTICLE 8
EXCULPATION AND INDEMNIFICATION
SECTION 8.01. Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Guarantor or any
Covered Person for any loss, damage, liability, expense or claim incurred by
reason of any act or omission performed or omitted by such Indemnified Person in
good faith in accordance with this Preferred Securities Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Preferred
Securities Guarantee or by law, except that this provision shall not be deemed
to modify Section 3.01(d).
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.02. Indemnification. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any and all loss, liability, damage, claim or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or
19
<PAGE> 23
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The obligation
to indemnify as set forth in this Section 8.02 shall survive the termination of
this Preferred Securities Guarantee or the resignation or removal of the
Preferred Securities Guarantee Trustee.
The Preferred Securities Guarantee Trustee will not claim or exact any
lien or charge on any Guarantee Payments as a result of any amount due to it
under this Preferred Securities Guarantee.
ARTICLE 9
COMPENSATION
SECTION 9.01. Compensation. The Guarantor agrees:
(a) to pay to the Preferred Securities Guarantee Trustee from time to
time such compensation as shall be agreed in writing between the Company and the
Preferred Securities Guarantee Trustee for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust); and
(b) to reimburse the Preferred Securities Guarantee Trustee upon its
request for reasonable expenses, disbursements and advances incurred or made by
the Preferred Securities Guarantee Trustee in accordance with any provision of
this Preferred Securities Guarantee (including the reasonable compensation and
the expenses and advances of its agents and counsel), except any such expense or
advance as may be attributable to its negligence or bad faith.
(c) Subject to Section 8.02, the Preferred Securities Guarantee
Trustee shall have a claim and lien prior to the Preferred Securities holders as
to all property and funds held by it hereunder for any amount owing to it or any
predecessor Preferred Securities Guarantee Trustee for fees and expenses
pursuant to this Article.
20
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ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Successors and Assigns. All guarantees and agreements
contained in this Preferred Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the Preferred Securities then
outstanding.
Except in connection with any merger or consolidation of the Guarantor
with or into another entity permitted by the Indenture or any sale, transfer or
lease of the Guarantor's assets to another entity permitted by the Indenture,
the Guarantor may not assign its rights or delegate its obligations under this
Preferred Securities Guarantee.
SECTION 10.02. Amendments. Except with respect to any changes that do
not materially adversely affect the rights of Holders (in which case no approval
of Holders will be required), this Preferred Securities Guarantee may only be
amended with the prior approval of the Holders of a Majority in Liquidation
Amount of the outstanding Preferred Securities (including the amount payable on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined). The provisions of
Section 12.2 of the Trust Agreement with respect to meetings of Holders of the
Securities apply to the giving of such approval. Except in connection with any
permitted merger or consolidation of the Guarantor with or into another entity
or any permitted sale, transfer or lease of the Guarantor's assets to another
entity (as described in Article 5 of the Indenture), the Guarantor may not
assign its rights or delegate its obligations under the Common Securities
Guarantee without the prior approval of the Holders of at least a Majority in
Liquidation Amount of the Common Securities then outstanding.
SECTION 10.03. Notices. All notices provided for in this Preferred
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by first class mail, as
follows:
(a) If given to the Issuer, in care of the Administrative Trustee at
the Issuer's mailing address set forth below (or such other address as the
Issuer may give notice of to the Holders of the Common Securities):
Hercules Trust V
c/o Hercules Incorporated
Hercules Plaza
1313 North Market Street
21
<PAGE> 25
Wilmington, Delaware 19894-0001
Attention: Israel J. Floyd Esq.
Administrative Trustee
Telecopy: (302) 594-7252
(b) If given to the Preferred Securities Guarantee Trustee, at the
Preferred Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Preferred Securities Guarantee Trustee may give notice
of to the Holders of the Preferred Securities):
The Chase Manhattan Bank
One Liberty Place, 52nd Floor
1650 Market Street
Philadelphia, Pennsylvania 19103
Attention: Corporate Trust Department
Telecopy: (215) 972-8372
(c) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Attention: Vice President and Treasurer
Telecopy: (302) 594-5210
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Attention: Corporate Secretary
Telecopy: (302) 594-7252
(d) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice
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<PAGE> 26
or other document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
SECTION 10.04. Benefit. This Preferred Securities Guarantee is solely
for the benefit of the Holders of the Preferred Securities and, subject to
Section 3.01(a), is not separately transferable from the Preferred Securities.
SECTION 10.05. Governing Law.
THIS PREFERRED SECURITIES GUARANTEE AND THE RIGHTS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED
BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
23
<PAGE> 27
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.
HERCULES INCORPORATED,
as Guarantor
By: /s/ R. K Elliott
Name: R. Keith Elliott
Title: Chairman and Co-Chief
Executive Officer
THE CHASE MANHATTAN BANK,
as Preferred Securities Guarantee
Trustee
By: /s/ J D Heaney
Name: James D. Heaney
Title: Vice President
1
<PAGE> 1
Exhibit 4-F
EXECUTION COPY
AMENDED AND RESTATED TRUST AGREEMENT
HERCULES TRUST V
Dated as of November 12, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.01. Definitions......................................................................2
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application................................................16
SECTION 2.02. Lists of Holders of Securities..................................................16
SECTION 2.03. Reports by the Property Trustee.................................................17
SECTION 2.04. Periodic Reports to Property Trustee............................................17
SECTION 2.05. Evidence of Compliance with Conditions..........................................17
SECTION 2.06. Events of Default; Waiver.......................................................17
SECTION 2.07. Event of Default; Notice........................................................19
ARTICLE 3
ORGANIZATION
SECTION 3.01. Name............................................................................20
SECTION 3.02. Office..........................................................................20
SECTION 3.03. Purpose.........................................................................20
SECTION 3.04. Authority.......................................................................20
SECTION 3.05. Title to Property of the Trust..................................................21
SECTION 3.06. Powers and Duties of the Administrative Trustees................................21
SECTION 3.07. Prohibition of Actions by the Trust and the Trustees............................24
SECTION 3.08. Powers and Duties of the Property Trustee.......................................25
SECTION 3.09. Certain Duties and Responsibilities of the Property
Trustee.......................................................................28
SECTION 3.10. Certain Rights of Property Trustee..............................................30
SECTION 3.11. Delaware Trustee................................................................33
SECTION 3.12. Execution of Documents..........................................................34
SECTION 3.13. Not Responsible for Recitals or Issuance of Securities..........................34
SECTION 3.14. Duration of Trust...............................................................34
SECTION 3.15. Mergers.........................................................................34
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 4
SPONSOR
SECTION 4.01. Sponsor's Purchase of Common Securities.........................................36
SECTION 4.02. Covenants of the Common Securities Holder.......................................36
SECTION 4.03. Responsibilities of the Sponsor.................................................37
SECTION 4.04. Right to Proceed................................................................37
ARTICLE 5
TRUSTEES
SECTION 5.01. Number of Trustees; Appointment of Co-Trustee...................................38
SECTION 5.02. Delaware Trustee................................................................38
SECTION 5.03. Property Trustee; Eligibility...................................................39
SECTION 5.04. Certain Qualifications of Administrative Trustees and
Delaware Trustee Generally....................................................40
SECTION 5.05. Administrative Trustees.........................................................40
SECTION 5.06. Delaware Trustee................................................................41
SECTION 5.07. Appointment, Removal and Resignation of Trustees................................41
SECTION 5.08. Vacancies among Trustees........................................................43
SECTION 5.09. Effect of Vacancies.............................................................43
SECTION 5.10. Meetings........................................................................43
SECTION 5.11. Delegation of Power.............................................................44
SECTION 5.12. Merger, Conversion, Consolidation or Succession to
Business......................................................................44
SECTION 5.13. Compensation....................................................................44
ARTICLE 6
DISTRIBUTIONS; RESET RATE; REMARKETING; MANDATORY REDEMPTION
SECTION 6.01. Distributions...................................................................45
SECTION 6.02. Determination of Reset Date; Remarketing Procedures.............................45
SECTION 6.03. Reset of Distribution Rate and Mandatory Redemption
Date..........................................................................48
SECTION 6.04. Renewed Remarketing.............................................................48
SECTION 6.05. Failed Remarketing; Mandatory Redemption........................................48
SECTION 6.06. Early Remarketing...............................................................48
SECTION 6.07. Adjustments to Trigger Price....................................................49
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 7
ISSUANCE OF SECURITIES
SECTION 7.01. General Provisions Regarding Securities.........................................50
SECTION 7.02. Execution and Authentication....................................................50
SECTION 7.03. Form and Dating.................................................................51
SECTION 7.04. Registrar and Paying Agent......................................................53
SECTION 7.05. Paying Agent to Hold Money in Trust.............................................53
SECTION 7.06. Replacement of Securities.......................................................54
SECTION 7.07. Outstanding Preferred Securities................................................54
SECTION 7.08. Preferred Securities in Treasury................................................55
SECTION 7.09. Temporary Securities............................................................55
SECTION 7.10. Cancellation....................................................................55
SECTION 7.11. CUSIP Numbers...................................................................55
ARTICLE 8
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.01. Dissolution and Termination of Trust............................................56
ARTICLE 9
TRANSFER OF INTERESTS
SECTION 9.01. Transfer of Securities..........................................................57
SECTION 9.02. Transfer Procedures and Restrictions............................................59
SECTION 9.03. Deemed Security Holders.........................................................62
SECTION 9.04. Book Entry Interests............................................................63
SECTION 9.05. Notices to Depository...........................................................63
SECTION 9.06. Appointment of Successor Depository.............................................64
ARTICLE 10
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.01. Liability......................................................................64
SECTION 10.02. Exculpation....................................................................64
SECTION 10.03. Fiduciary Duty.................................................................65
SECTION 10.04. Indemnification................................................................66
SECTION 10.05. Outside Businesses.............................................................69
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 11
ACCOUNTING
SECTION 11.01. Fiscal Year....................................................................70
SECTION 11.02. Certain Accounting Matters.....................................................70
SECTION 11.03. Banking........................................................................70
SECTION 11.04. Withholding....................................................................71
ARTICLE 12
AMENDMENTS AND MEETINGS
SECTION 12.01. Amendments.....................................................................71
SECTION 12.02. Meetings of the Holders of Securities; Action by Written
Consent......................................................................73
SECTION 12.03. Power of Attorney..............................................................75
ARTICLE 13
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.01. Representations and Warranties of Property Trustee.............................76
SECTION 13.02. Representations and Warranties of Delaware Trustee.............................76
ARTICLE 14
MISCELLANEOUS
SECTION 14.01. Notices........................................................................77
SECTION 14.02. Governing Law..................................................................79
SECTION 14.03. Intention of the Parties.......................................................79
SECTION 14.04. Headings.......................................................................79
SECTION 14.05. Successors and Assigns.........................................................79
SECTION 14.06. Partial Enforceability.........................................................79
SECTION 14.07. Counterparts...................................................................79
Annex I Terms of Securities......................................................I-1
Exhibit A-1 Form of Preferred Security Certificate..................................A1-1
Exhibit A-2 Form of Common Security Certificate.....................................A2-1
Exhibit A-3 Form of Replacement Security Certificate................................A3-1
Exhibit B Specimen of Subordinated Note............................................B-1
Exhibit C Purchase Agreement.......................................................C-1
Exhibit D Remarketing Agreement....................................................D-1
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED
TRUST AGREEMENT
OF
HERCULES TRUST V
DATED AS OF
NOVEMBER 12, 1998
AMENDED AND RESTATED TRUST AGREEMENT (the "AGREEMENT") dated and
effective as of November 12, 1998, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the Holders (as defined herein), from time to
time, of undivided beneficial interests in the assets of the Trust (as defined
herein) to be issued pursuant to this Agreement;
WHEREAS, the Trustees and the Sponsor established Hercules Trust V (the
"TRUST"), a trust created under the Business Trust Act (as defined herein)
pursuant to a Trust Agreement dated as of October 14, 1998 (the "ORIGINAL
AGREEMENT"), and a Certificate of Trust filed with the Secretary of State of the
State of Delaware on October 14, 1998, for the sole purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain Subordinated
Notes of the Subordinated Note Issuer (each as defined herein) and engaging in
only those activities necessary, advisable or incidental thereto;
WHEREAS, the parties hereto desire to amend and restate each and every
term and provision of the Original Agreement; and
NOW, THEREFORE, it being the intention of the parties hereto that the
Trust continue as a business trust under the Business Trust Act, that the
Original Agreement be amended and restated in its entirety as provided herein
and that this Agreement constitute the governing instrument of such business
trust, the Trustees declare that all assets contributed to the Trust will be
held in trust for the benefit of the Holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Agreement and, in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:
1
<PAGE> 7
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.01. Definitions.
Unless the context otherwise requires:
(a) capitalized terms used in this Agreement but not defined in the
preamble above or elsewhere herein have the respective meanings assigned to them
in this Section 1.01;
(b) a term defined anywhere in this Agreement has the same meaning
throughout;
(c) all references to "THE AGREEMENT" or "THIS AGREEMENT" are to this
Amended and Restated Trust Agreement, as amended from time to time, and each
Annex and Exhibit hereto, as modified, supplemented or amended from time to
time;
(d) all references in this Agreement to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Agreement unless otherwise specified;
(e) a term defined in the Trust Indenture Act (as defined herein) has
the same meaning when used in this Agreement unless otherwise defined in this
Agreement or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"ADMINISTRATIVE TRUSTEE" has the meaning set forth in Section 5.01.
"AFFILIATE" has the same meaning as given to that term in Rule 405
under the Securities Act or any successor rule thereunder.
"AGENT" means any Paying Agent or Registrar.
"ASSOCIATED PERSON" has the meaning set forth in Article 1(ee) of the
ByLaws of the National Association of Securities Dealers, Inc.
"AUTHORIZED OFFICER" of a Person means any other Person that is
authorized to legally bind such former Person.
2
<PAGE> 8
"BID" means an irrevocable offer to purchase the aggregate outstanding
Liquidation Amount of Preferred Securities at the Remarketing Price with a
Distribution Rate equal to the Bid Rate specified in such Bid and with a
Mandatory Redemption Date on the Maturity Extension Date.
"BID RATE" means the proposed Distribution Rate on the Preferred
Securities specified in a Bid.
"BOOK-ENTRY INTEREST" means a beneficial interest in a Global Preferred
Security Certificate registered in the name of a Depository or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Depository as described in Section 9.04.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banking institutions in The City of New York or Wilmington, Delaware
are authorized or required by law, regulation or executive order to close and,
until the Remarketing Settlement Date, that is also a London Banking Day.
"BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Section 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"CALCULATION AGENT" shall mean NationsBanc Montgomery Securities
LLC.
"CLOSING PRICE" of the Common Stock on any Trading Day shall mean the
reported last sale price on such day of such Common Stock as of the end of the
regularly scheduled trading day on the principal securities exchange on which it
is listed, or, in case no such sale takes place on such day, the average of the
reported last bid and asked prices on such day, in either case, as reported on
the Consolidated Tape maintained by the Consolidated Tape Association or, if the
Common Stock is not listed or admitted to trading on any securities exchange
which participates in the Consolidated Tape Association, the average of the
reported last bid and asked prices of Common Stock on the over-the-counter
market on such day as reported by the National Association of Securities Dealers
Automated Quotation System or a similar generally accepted reporting service or,
if not so reported, the average of the closing bid and asked prices as furnished
by any New York Stock Exchange, Inc. member firm selected from time to time by
the Calculation Agent for that purpose or, if not so available in such manner,
as otherwise determined in good faith by the Calculation Agent.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
3
<PAGE> 9
"COMMENCEMENT DATE" means November 12, 1999, subject to acceleration
pursuant to the provisions of Section 7 of the Forward Underwriting Agreement.
"COMMISSION" means the United States Securities and Exchange Commission
as from time to time constituted, or if at any time after the execution of this
Agreement such Commission is not existing and performing the duties now assigned
to it under applicable federal securities laws, then the body performing such
duties at such time.
"COMMON SECURITIES" has the meaning set forth in Section 7.01(a).
"COMMON SECURITIES GUARANTEE" means the Common Securities Guarantee
Agreement, dated as of November 12, 1998 of the Sponsor in respect of the Common
Securities.
"COMMON STOCK" means the common stock, no par value, of the Sponsor.
"COMPANY INDEMNIFIED PERSON" means (a) any Administrative Trustee; (b)
any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, employee or agent of the Trust or
its Affiliates; provided that the term "COMPANY INDEMNIFIED PERSON" shall not
include any Fiduciary Indemnified Person.
"CORPORATE TRUST OFFICE" means the office of the Property Trustee for
the conduct of corporate trust business at which the matters related to this
Agreement shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at One Liberty
Place, 52nd Floor, 1650 Market Street, Philadelphia, Pennsylvania 19103.
"COVERED PERSON" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"CREDIT AGREEMENT" means the Credit Agreement dated as of October 15,
1998 among the Sponsor, certain subsidiaries of the Sponsor from time to time
parties thereto, the several lenders from time to time parties thereto,
NationsBank, N.A., as Administrative Agent, The Chase Manhattan Bank, Morgan
Guaranty Trust Company of New York and Citibank, N.A., as Co-Syndication Agents,
as amended, supplemented, modified or superseded from time to time.
4
<PAGE> 10
"CROSS DEFAULT" means the occurrence or existence of a Event of Default
(as defined in the Credit Agreement).
"CURED DEFAULT TRIGGER EVENT" has the meaning set forth in Section
6.06(b).
"DEFAULT" means an event, act or condition that with notice or lapse of
time, or both, would constitute an Event of Default.
"DEFAULT RATE" means the Distribution Rate that would be applicable
under Section 2 of Annex I hereof if not for the applicability of the Default
Rate plus 75 basis points.
"DEFINITIVE PREFERRED SECURITIES" has the meaning set forth in Section
7.03(a).
"DELAWARE TRUSTEE" has the meaning set forth in Section 5.01.
"DEPOSITORY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act that, in the case of Preferred
Securities held in global form, is acting as depositary for the Preferred
Securities and in whose name or in the name of a nominee of that organization
shall be registered a global certificate and which shall undertake to effect
book-entry transfers and pledges of the Preferred Securities. At the time
Replacement Securities are issued, the initial Depository shall be DTC.
"DIRECT ACTION" has the meaning set forth in Section 3.08(e).
"DISTRIBUTION" means amounts payable to Holders in respect of
Securities as provided in Section 6.01.
"DISTRIBUTION DATE" has the meaning set forth in Section 2(c) of Annex
I hereto.
"DISTRIBUTION RATE" has the meaning specified in Section 2(a) of Annex
I hereto.
"DTC" means The Depository Trust Company.
"EVENT OF DEFAULT" means, with respect to the Securities, an Event of
Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Subordinated Notes.
5
<PAGE> 11
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"EXPECTED RESET DATE" has the meaning set forth in Section 6.02(a).
"FAILED REMARKETING" means any event specified as such, at the time so
specified in Article 6.
"FIDUCIARY INDEMNIFIED PERSON" has the meaning set forth in Section
10.04(b).
"FINAL RESET DATE" means the third scheduled Trading Day prior to the
Remarketing Termination Date.
"FISCAL YEAR" has the meaning set forth in Section 11.01.
"FORMER HOLDERS" has the meaning set forth in Section 6.02(i).
"FORWARD UNDERWRITING AGREEMENT" means the Forward Underwriting
Agreement dated November 12, 1998, between the Sponsor and NationsBanc
Montgomery Securities LLC, as amended, supplemented, modified or superseded from
time to time.
"GLOBAL PREFERRED SECURITY" has the meaning set forth in Section
7.03(a).
"HOLDER" means a Person in whose name a Security or Successor Security
is registered, such Person being a beneficial owner within the meaning of the
Business Trust Act.
"INDEMNIFIED PERSON" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"INDENTURE" means the Junior Subordinated Debenture Indenture dated as
of November 12, 1998, between the Subordinated Note Issuer and the Subordinated
Note Trustee, as supplemented by the Supplemental Indenture and as further
amended, supplemented, modified or superseded from time to time.
"INVESTMENT COMPANY" means an investment company as defined in the
Investment Company Act.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
6
<PAGE> 12
"INVESTMENT COMPANY EVENT" means the receipt by the Administrative
Trustees and the Subordinated Note Issuer of a reasoned Opinion of Counsel of
independent counsel experienced in such matters, to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or regulations thereunder of the United States, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date hereof, there
is more than an insubstantial risk that the Trust is or will be considered an
"Investment Company" which is required to be registered under the Investment
Company Act and such risk cannot be and could not have been avoided either (i)
by dissolution of the Trust and distribution of the Subordinated Notes to
Holders per Section 8.01(a)(iii) or (ii) by the Trust or the Sponsor taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure that has no adverse effect on the Trust,
the Sponsor or the Holders.
"LEGAL ACTION" has the meaning set forth in Section 3.06(h).
"LIBOR" means the rate determined by the Calculation Agent as the rate
for deposits for a period of three months in U.S. Dollars which appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on the date of determination.
If such rate does not appear on the Telerate Page 3750, the rate on the date of
determination will be determined as if the parties had specified the
LIBOR-Reference Banks Rate as the applicable rate.
"LIBOR-REFERENCE BANKS RATE" means that the rate will be determined on
the basis of the rates which deposits in U.S. Dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on the date of
determination to prime banks in the London interbank market for a period of
three months commencing two London Banking Days following such date of
determination and in the Representative Amount. The Calculation Agent will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, the rate will be the arithmetic mean of the rates quoted
by major banks in New York City, selected by the Calculation Agent, at
approximately 11:00 a.m., New York City time, on the date of determination for
loans in U.S. Dollars to leading banks for a period of three months commencing
two London Banking Days following such date of determination and in the
Representative Amount.
"LIKE AMOUNT" has the meaning set forth in Section 4 of Annex I hereto.
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"LIQUIDATION AMOUNT" has the meaning set forth in Section 2(a) of
Annex I hereto.
"LIQUIDATION DISTRIBUTION" has the meaning set forth in Section 4 of
Annex I hereto.
"LIST OF HOLDERS" has the meaning set forth in Section 2.02(a).
"LONDON BANKING DAY" means any day on which dealings in deposits in
U.S. Dollars are transacted in the London interbank market.
"MAJORITY IN LIQUIDATION AMOUNT" means, with respect to the Securities,
except as provided in the terms of the Preferred Securities or by the Trust
Indenture Act, Holders of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate Liquidation
Amount (including the amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.
"MANDATORY REDEMPTION DATE" means November 10, 1999; provided that on
and after the settlement of the sale of the Preferred Securities in a successful
Remarketing, the Mandatory Redemption Date shall be the Maturity Extension Date.
"MANDATORY REDEMPTION PRICE" has the meaning set forth in Section 5(b)
of Annex I hereto.
"MANDATORY REDEMPTION PROCEEDS" has the meaning set forth in Section
6.05.
"MATURITY EXTENSION DATE" means the first anniversary of the
Remarketing Settlement Date on which Replacement Securities are issued.
"90 DAY PERIOD" has the meaning set forth in Section 5(c) of Annex I
hereto.
"OFFERING MEMORANDUM" has the meaning set forth in Section 3.06(b)(i).
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by a co-Chief Executive Officer, the Chief Financial Officer,
the President or a Vice President, and by the Treasurer, an Assistant Treasurer,
the Secretary or
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an Assistant Secretary. Any Officers' Certificate delivered by the Trust shall
be signed by at least one Administrative Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officers' opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"ORIGINAL AGREEMENT" has the meaning set forth in the first recital
hereof.
"OPINION OF COUNSEL" means a written opinion of counsel who shall be
reasonably acceptable to the Property Trustee.
"PARTICIPANTS" has the meaning set forth in Section 7.03(c).
"PAYING AGENT" has the meaning set forth in Section 7.04.
"PAYMENT AMOUNT" has the meaning set forth in Section 6.01.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PORTAL MARKET" means the Private Offerings, Resales and Trading
through Automated Linkages Market operated by the National Association of
Securities Dealers, Inc. or any successor thereto.
"POTENTIAL ADJUSTMENT EVENT" means any of the following:
(i) a subdivision, consolidation or reclassification of the
Common Stock (unless as a result of a merger or other similar event) or
a
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free distribution or dividend of any such Common Stock to existing
holders by way of bonus, capitalization or similar issue;
(ii) a distribution or dividend to existing holders of the
Common Stock of (A) shares of such Common Stock, or (B) other share
capital or securities granting the right to payment of dividends and/or
the proceeds of liquidation of the Sponsor equally or proportionately
with such payments to holders of such Common Stock, or (C) any other
type of securities, rights or warrants or other assets, in any case for
payment (cash or other) at less than the prevailing market price as
determined by the Calculation Agent;
(iii) any dividend paid by the Sponsor on the Common Stock
other than ordinary cash dividends (which ordinary cash dividends
include amounts, sometimes called "dividend equivalents," paid under
the Sponsor's employee benefit and compensation plans on the Common
Stock grants (whether options, restricted stock or other) under such
plans, but only to the extent such amounts do not exceed the amounts of
ordinary cash dividends that would be payable were such Common Stock
grants treated as Common Stock);
(iv) a call by the Sponsor in respect of shares of Common
Stock that are not fully paid;
(v) a repurchase by the Sponsor of shares of Common Stock
whether out of profits or capital and whether the consideration for
such repurchase is cash, securities or otherwise (excluding the
repurchase of up to 8,192,125 shares of Common Stock remaining under
the Sponsor's stock repurchase program authorized by the Board of
Directors of the Sponsor prior to the date hereof); or
(vi) any other similar event that may have a diluting or
concentrative effect on the theoretical value of the Common Stock.
"PREFERRED PURCHASE DATE" has the meaning set forth in the Purchase
Agreement.
"PREFERRED SECURITIES" has the meaning set forth in Section 7.01(a).
"PREFERRED SECURITIES GUARANTEE" means the Preferred Securities
Guarantee Agreement dated as of November 12, 1998, of the Sponsor in respect of
the Preferred Securities as amended, supplemented, modified or superseded from
time to time.
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"PREFERRED SECURITY BENEFICIAL OWNER" means, with respect to a
Book-Entry Interest, a Person who is the beneficial owner of such Book-Entry
Interest, as reflected on the books of the Depository, or on the books of a
Person maintaining an account with such Depository (directly as a Participant or
as an indirect participant, in each case in accordance with the rules of such
Depository).
"PRE-REMARKETING DISTRIBUTION DATE" has the meaning set forth in
Section 2(b) of Annex I hereto.
"PROPERTY TRUSTEE" has the meaning set forth in Section 5.03(a).
"PROPERTY TRUSTEE ACCOUNT" has the meaning set forth in Section
3.08(c).
"PRO RATA" has the meaning set forth in Section 9 of Annex I hereto.
"PURCHASE AGREEMENT" means the Purchase Agreement to be dated as of
November 12, 1998 among NMS Services Inc., the Sponsor and the Trust and sale of
Preferred Securities in the form of Exhibit C.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"QUORUM" means a majority of the Administrative Trustees or, if there
are only two Administrative Trustees, both of them.
"REDEMPTION/DISTRIBUTION NOTICE" has the meaning set forth in Section
5(f)(i) of Annex I hereto.
"REFERENCE BANKS" means, for the purposes of any LIBOR rate, four major
banks in the London interbank market.
"REFERENCE CORPORATE DEALER" means a leading dealer that is a QIB,
which shall not include NationsBanc Montgomery Securities LLC, its Affiliates or
its Associated Persons, of publicly traded debt securities, including debt
securities of the Sponsor, to be selected by the Sponsor.
"REGISTRAR" has the meaning set forth in Section 7.04.
"REMARKETING" means a remarketing of Preferred Securities pursuant to
Article 6.
"REMARKETING AGENT" means a nationally recognized investment banking
firm chosen by the Sponsor to effect the Remarketing. It is currently
anticipated that the Remarketing Agent will be NationsBanc Montgomery Securities
LLC.
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"REMARKETING AGREEMENT" means the Remarketing Agreement to be dated as
of November 12, 1998 among the Sponsor, the Trust and the Remarketing Agent, in
the form of Exhibit D.
"REMARKETING FEE" means the fee specified in the Remarketing
Agreement as the Remarketing Fee.
"REMARKETING PRICE" means 100.5% of the aggregate stated Liquidation
Amount of the Preferred Securities plus accrued and unpaid Distributions (if
any).
"REMARKETING SETTLEMENT DATE" means the third Business Day immediately
following the Reset Date.
"REMARKETING TERMINATION DATE" means November 10, 1999.
"RENEWED REMARKETING" has the meaning set forth in Section 6.04.
"REPLACEMENT SECURITIES" has the meaning set forth in Section 6.02(j).
"REPRESENTATIVE AMOUNT" means, for the purposes of any LIBOR rate for
which a Representative Amount is relevant, an amount that is equal to the
aggregate Liquidation Amount of all of the Trust Securities.
"RESET DATE" means any date established as a Reset Date pursuant to
Section 6.02(a), 6.04 or 6.06.
"RESPONSIBLE OFFICER" means, with respect to the Property Trustee, any
officer within the Corporate Trust Office of the Property Trustee with direct
responsibility for the administration of this Agreement, including any
vice-president, any assistant vice-president, any assistant secretary, any
assistant treasurer or other officer of the Corporate Trust Office of the
Property Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer of the Property Trustee to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"RESTRICTED SECURITY" has the meaning set forth in Section 9.01(d).
"RULE 144A" means Rule 144A as promulgated under the Securities Act, or
any successor rule.
"RULE 144(K)" means Rule 144(k) as promulgated under the Securities
Act, or any successor rule.
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"SECONDARY PURCHASE AGREEMENT" means an agreement to be dated as of the
Reset Date (or such other date permitted by applicable law) among the Sponsor,
the Trust, the Remarketing Agent and the Secondary Purchaser, substantially in
the form of Exhibit A to the Remarketing Agreement, or as otherwise agreed among
the Sponsor, the Trust, the Remarketing Agent and the Secondary Purchaser.
"SECONDARY PURCHASER" has the meaning set forth in Section 6.02(c).
"SECURITIES" or "TRUST SECURITIES" means the Common Securities and the
Preferred Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
"SECURITIES GUARANTEES" means the Common Securities Guarantee and
the Preferred Securities Guarantee.
"SPECIAL EVENT" means a Tax Event or an Investment Company Event.
"SPONSOR" means Hercules Incorporated, a Delaware corporation, or any
successor entity resulting from any merger, consolidation, amalgamation or other
business combination, in its capacity as sponsor of the Trust.
"STOCK PRICE TRIGGER EVENT" has the meaning set forth in Section
6.06(a).
"SUBORDINATED NOTE ISSUER" means Hercules Incorporated, a Delaware
corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Subordinated Notes under the Indenture.
"SUBORDINATED NOTE REPAYMENT PRICE" has the meaning set forth in the
Supplemental Indenture.
"SUBORDINATED NOTES" means the Auction Rate Reset Junior Subordinated
Notes Series A of the Subordinated Note Issuer issued pursuant to the Indenture
in the form of Exhibit B.
"SUBORDINATED NOTE TRUSTEE" means The Chase Manhattan Bank, a New York
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
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"SUCCESSOR DELAWARE TRUSTEE" has the meaning set forth in Section
5.07(b)(ii).
"SUCCESSOR ENTITY" has the meaning set forth in Section 3.15(b)(i).
"SUCCESSOR PROPERTY TRUSTEE" has the meaning set forth in Section
3.08(f)(ii).
"SUCCESSOR SECURITIES" has the meaning set forth in Section
3.15(b)(i)(B).
"SUPER MAJORITY" has the meaning set forth in Section 2.06(a)(ii).
"SUPPLEMENTAL INDENTURE" means the First Supplemental Indenture dated
as of November 12, 1998 between the Subordinated Note Issuer and the
Subordinated Note Trustee pursuant to which the Subordinated Notes are to be
issued, as amended, supplemented, modified or superseded from time to time.
"TAX EVENT" means the receipt by the Administrative Trustees and the
Subordinated Note Issuer of a reasoned Opinion of Counsel of independent counsel
experienced in such matters, to the effect that, (x) as a result of any
amendment to, or change (including any announced prospective change) in, the
laws or any regulations thereunder of the United States or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date hereof, there
is more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date of such opinion, subject to United States Federal income tax
with respect to income received or accrued on the Subordinated Notes, (ii) the
interest payable by the Subordinated Note Issuer on the Subordinated Notes is
not, or within 90 days of the date of such opinion will not be, deductible by
the Subordinated Note Issuer, in whole or in part, for United States Federal
income tax purposes, or (iii) the Trust is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges; and (y) such risk cannot be and could not
have been avoided either (A) by dissolution of the Trust and distribution of the
Subordinated Notes to Holders pursuant to Section 8.01(a)(iii) or (B) by the
Trust or the Sponsor taking some ministerial action, such as filing a form or
making an election, or pursuing some other similar reasonable measure that has
no adverse effect on the Trust, the Sponsor or the Holders.
"10% IN LIQUIDATION AMOUNT" means, with respect to the Securities,
except as provided in the terms of the Preferred Securities or by the Trust
Indenture Act, Holders of outstanding Securities voting together as a single
class
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or, as the context may require, Holders of outstanding Preferred Securities or
Holders of outstanding Common Securities voting separately as a class, who are
the record owners of 10% or more of the aggregate Liquidation Amount (including
the amount that would be paid on redemption, liquidation or otherwise, plus
accumulated and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant class.
"TRADING DAY" shall mean any day, as reasonably determined by the
Remarketing Agent, on which the Common Stock is not suspended from trading at
any time during such day and is traded at least once on the New York Stock
Exchange, Inc., or, if not then admitted for trading on the New York Stock
Exchange, Inc., on the principal securities exchange or quotation system on
which the Common Stock is then listed or admitted for trading.
"TRANSFER RESTRICTION TERMINATION DATE" means the first date on which
the Preferred Securities (other than Preferred Securities acquired by the Trust
or any Affiliate thereof) may be sold pursuant to Rule 144(k).
"TREASURY REGULATIONS" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"TRIGGER EVENT" has the meaning set forth in Section 6.06.
"TRIGGER PRICE" has the meaning set forth in Section 6.07.
"TRUSTEE" or "TRUSTEES" means each Person who has signed this Agreement
as a trustee, so long as such Person shall continue as Trustee of the Trust in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"UNDERWRITER" means NationsBanc Montgomery Securities LLC, as
Underwriter under the Forward Underwriting Agreement.
"UNDERWRITING TRIGGER EVENT" has the meaning set forth in Section
6.06(c)(ii).
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"U.S. DOLLAR," "DOLLAR," "U.S.$," "$" and "USD" means the lawful
currency of the United States of America.
"WINNING BID RATE" has the meaning set forth in Section 6.02(b).
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application. (a) This Agreement is
subject to the provisions of the Trust Indenture Act that are required to be
part of this Agreement in order for this Agreement to be qualified under the
Trust Indenture Act and shall, to the extent applicable, be governed by such
provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Agreement limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Agreement shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.02. Lists of Holders of Securities. (a) Each of the Sponsor
and the Administrative Trustees on behalf of the Trust shall provide the
Property Trustee, unless the Property Trustee is the Registrar for the
Securities, (i) within 14 days after each record date for payment of
Distributions, a list, in such form as the Property Trustee may reasonably
require, of the names and addresses of the Holders of the Securities ("LIST OF
HOLDERS") as of such record date, provided that neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Property Trustee by the Sponsor and the
Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity),
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provided that the Property Trustee may destroy any List of Holders previously
given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with the obligations set forth
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Property Trustee. Within 60 days after
September 1 of each year, commencing September 1, 1999, the Property Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Property
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.04. Periodic Reports to Property Trustee. Each of the Sponsor
and the Administrative Trustees on behalf of the Trust shall provide to the
Property Trustee such documents, reports and information as are required by
Section 314 of the Trust Indenture Act (if any) and the compliance certificate
required by Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.05. Evidence of Compliance with Conditions. Each of the
Sponsor and the Administrative Trustees on behalf of the Trust shall provide to
the Property Trustee such evidence of compliance with any conditions precedent
provided for in this Agreement that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture
Act may be given in the form of an Officers' Certificate.
SECTION 2.06. Events of Default; Waiver. (a) The Holders of a Majority
in Liquidation Amount of Preferred Securities may, by vote, on behalf of the
Holders of all of the Preferred Securities, waive any past Event of Default in
respect of the Preferred Securities and its consequences, provided that, if the
underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under the Agreement shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority
in aggregate principal amount of the holders of the Subordinated Notes
(a "SUPER MAJORITY") to be waived under the Indenture, the Event of
Default under the Agreement may only be waived by the vote of the
Holders of at least the proportion in aggregate Liquidation Amount of
the Preferred
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Securities that the relevant Super Majority represents of the aggregate
principal amount of the Subordinated Notes outstanding.
The foregoing provisions of this Section 2.06(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Agreement and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Agreement, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Agreement without any further act, vote, or
consent of the Holders of the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture (except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under the Agreement as provided below in this Section
2.06(b)), the Event of Default under the Agreement shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to
have waived such Event of Default under the Agreement as provided below
in this Section 2.06(b), the Event of Default under the Agreement may
only be waived by the vote of the Holders of at least the proportion in
aggregate Liquidation Amount of the Common Securities that the relevant
Super Majority represents of the aggregate principal amount of the
Subordinated Notes outstanding;
provided further, each Holder of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and its consequences until all Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated,
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the Property Trustee will be deemed to be acting solely on behalf of the Holders
of the Preferred Securities and only the Holders of the Preferred Securities
will have the right to direct the Property Trustee in accordance with the terms
of the Securities. The foregoing provisions of this Section 2.06(b) shall be in
lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act
and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act
are hereby expressly excluded from this Agreement and the Securities, as
permitted by the Trust Indenture Act. Subject to the foregoing provisions of
this Section 2.06(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising therefrom
shall be deemed to have been cured for every purpose of this Agreement, but no
such waiver shall extend to any subsequent or other default or Event of Default
with respect to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee, at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this Agreement.
The foregoing provisions of this Section 2.06(c) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Agreement and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.07. Event of Default; Notice. (a) The Property Trustee shall,
within 90 days after the occurrence of any default with respect to the
Securities, transmit by mail, first class postage prepaid, to the Holders of the
Securities and to the Sponsor, notices of all such defaults actually known to a
Responsible Officer of the Property Trustee, unless such defaults have been
cured before the giving of such notice (the term "DEFAULTS" for the purposes of
this Section 2.07(a) being hereby defined to be a Default as defined in the
Indenture, not including any periods of grace provided for therein and
irrespective of the giving of any notice provided therein); provided that,
except for a default in the payment of principal of (or premium, if any) or
interest on any of the Subordinated Notes, the Property Trustee shall be
protected in withholding such notice if and so long as a committee of
Responsible Officers of the Property Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have actual knowledge
of any default except:
(i) a default under Sections 6.01(a) and 6.01(b) of the
Indenture; or
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(ii) any default as to which the Property Trustee shall have
received written notice or of which a Responsible Officer of the
Property Trustee charged with the administration of the Agreement shall
have actual knowledge.
(c) Within ten Business Days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Property Trustee, the
Property Trustee shall transmit notice of such Event of Default to the Holders
of the Preferred Securities, the Administrative Trustees and the Sponsor, unless
such Event of Default shall have been cured, waived or otherwise eliminated. The
Sponsor and the Administrative Trustees shall file annually with the Property
Trustee a certification as to whether or not they are in compliance with all the
conditions and covenants applicable to them under this Agreement.
ARTICLE 3
ORGANIZATION
SECTION 3.01. Name. The Trust is named "HERCULES TRUST V" as such name
may be modified from time to time by the Administrative Trustees following
written notice to the Delaware Trustee, the Property Trustee and the Holders of
Securities. The Trust's activities may be conducted under the name of the Trust
or any other name deemed advisable by the Administrative Trustees.
SECTION 3.02. Office. The address of the principal office of the Trust
is c/o Hercules Plaza, 1313 North Market Street, Wilmington, Delaware 19894-
0001. On ten Business Days' prior written notice to the Delaware Trustee, the
Property Trustee and the Holders of Securities, the Administrative Trustees may
designate another principal office.
SECTION 3.03. Purpose. The exclusive purposes and functions of the
Trust are (a) to issue and sell Securities, (b) use the proceeds from the sale
of the Securities to acquire the Subordinated Notes in an aggregate principal
amount equal to the aggregate Liquidation Amount of such Securities, and (c)
except as otherwise limited herein, to engage in only those other activities
necessary, advisable or incidental thereto, including without limitation, those
activities specified in Sections 3.06, 3.08, 3.09, 3.10, 3.11 and/or 3.12.
SECTION 3.04. Authority. Subject to the limitations provided in this
Agreement and to the specific duties of the Property Trustee, the Administrative
Trustees shall have exclusive and complete authority to carry out the purposes
of
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the Trust. An action taken by one or more of the Administrative Trustees in
accordance with their powers shall constitute the act of and serve to bind the
Trust and an action taken by the Property Trustee on behalf of the Trust in
accordance with its powers shall constitute the act of and serve to bind the
Trust. In dealing with the Trustees acting on behalf of the Trust, no Person
shall be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively on the
power and authority of the Trustees as set forth in this Agreement.
SECTION 3.05. Title to Property of the Trust. Except as provided in
Section 3.08 with respect to the Subordinated Notes and the Property Trustee
Account or as otherwise provided in this Agreement, legal title to all assets of
the Trust shall be vested in the Trust. The Holders shall not have legal title
to any part of the assets of the Trust, but shall have an undivided beneficial
interest in the assets of the Trust.
SECTION 3.06. Powers and Duties of the Administrative Trustees. The
Administrative Trustees shall have the exclusive power, duty and authority, and
are hereby authorized and directed, to cause the Trust to engage in the
following activities:
(a) to execute, deliver, issue and sell the Preferred Securities and
the Common Securities in accordance with this Agreement; provided, however, that
(i) the Trust may issue no more than one series of Preferred Securities and no
more than one series of Common Securities, (ii) there shall be no interests in
the Trust other than the Securities, and (iii) the issuance of Securities shall
be limited to a simultaneous issuance of both Preferred Securities and Common
Securities on the Preferred Purchase Date and on the Remarketing Settlement
Date;
(b) in connection with any Remarketing of the Preferred Securities
and, with respect to clause (vi), in connection with the issuance and sale of
the Preferred Securities, at the direction of the Sponsor, to:
(i) prepare and execute, if necessary, an offering memorandum
(the "OFFERING MEMORANDUM") in preliminary and final form prepared by
the Sponsor, in relation to the resale of Preferred Securities to a
Secondary Purchaser, in a transaction exempt from the registration
requirements of the Securities Act and to QIB in reliance on Rule 144A;
(ii) execute and file an application, prepared by the Sponsor,
to qualify the Preferred Securities for trading in the PORTAL Market;
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(iii) execute and file any documents prepared by the Sponsor,
or take any acts as determined by the Sponsor to be necessary in order
to qualify or register all or part of the Preferred Securities in any
State in which the Sponsor has determined to qualify or register such
Preferred Securities for sale;
(iv) execute and deliver letters, documents, or instruments
with DTC and other Depositories relating to the Preferred Securities;
(v) cause the Trust to enter into, and to execute and deliver
and perform on behalf of the Trust, a Secondary Purchase Agreement
providing for the resale of the Preferred Securities upon Remarketing;
and
(vi) execute and file any agreement, certificate or other
document which such Administrative Trustee deems necessary or
appropriate in connection with the issuance and sale or resale of the
Preferred Securities;
(c) to acquire the Subordinated Notes with the proceeds of the sale of
the Preferred Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Subordinated Notes to be
held of record in the name of the Property Trustee for the benefit of the
Holders of the Preferred Securities and the Holders of Common Securities;
(d) to cause the Trust to enter into such agreements and arrangements
as may be necessary or desirable in connection with the sale of Preferred
Securities to the underwriters thereof and the consummation thereof, and to take
all action, and exercise all discretion, as may be necessary or desirable in
connection with the consummation thereof;
(e) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of a Special Event;
(f) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights and redemptions, and to issue relevant notices to
the Holders of Preferred Securities and Holders of Common Securities as to such
actions and applicable record dates;
(g) to take all actions and perform such duties as may be required of
the Administrative Trustees pursuant to the terms of the Securities;
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(h) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("LEGAL ACTION"), unless pursuant to Section 3.08(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(i) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(j) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(k) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;
(l) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(m) to act as, or appoint another Person to act as, Registrar for the
Securities or to appoint a Paying Agent for the Securities as provided in
Section 7.04 except for such time as such power to appoint a Paying Agent is
vested in the Property Trustee;
(n) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(o) to take any action (provided that such action does not materially
adversely affect the interests of Holders), not inconsistent with this Agreement
or with applicable law, that the Administrative Trustees determine in their
discretion to be necessary or desirable in carrying out the activities of the
Trust as set out in this Section 3.06, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States
Federal income tax purposes as a grantor trust; and
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(iii) cooperating with the Subordinated Note Issuer to ensure
that the Subordinated Notes will be treated as indebtedness of the
Subordinated Note Issuer for United States Federal income tax purposes;
(p) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Administrative Trustees, on behalf of
the Trust; and
(q) to execute and deliver and record, file or register, as
applicable, all documents, certificates, agreements or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary, advisable or incidental to the foregoing.
The Administrative Trustees must exercise the powers set forth in this
Section 3.06 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.03, and the Administrative Trustees shall not
take any action that is inconsistent with the purposes and functions of the
Trust set forth in Section 3.03.
Subject to this Section 3.06, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.08.
Any expenses incurred by the Administrative Trustees pursuant to this
Section 3.06 shall be reimbursed by the Subordinated Note Issuer.
SECTION 3.07. Prohibition of Actions by the Trust and the Trustees. (a)
The Trust and the Trustees (including the Property Trustee and the Delaware
Trustee) shall not, and the Administrative Trustees shall not cause the Trust
to, engage in any activity other than as required or authorized by this
Agreement. In particular, the Trust shall not:
(i) invest any proceeds received by the Trust from holding the
Subordinated Notes, but shall distribute all such proceeds to Holders
of Securities pursuant to the terms of this Agreement and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust purpose or
execute any mortgage in respect of, or pledge, any Trust property;
(iv) make any loans or incur any indebtedness other than loans
represented by the Subordinated Notes;
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(v) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) so long as any Subordinated Notes are held by the
Property Trustee, the Trustees shall not (A) direct the time, method
and place of conducting any proceeding with respect to any remedy
available to the Subordinated Note Trustee, or exercise any trust or
power conferred upon the Subordinated Note Trustee with respect to the
Subordinated Notes, (B) waive any past default that is not waivable
under the Indenture, (C) exercise any right to rescind or annul any
declaration of acceleration of the maturity of the principal of the
Subordinated Notes or (D) consent to any amendment, modification or
termination of the Indenture or the Subordinated Notes where such
consent shall be required, without, in each case, obtaining the prior
approval of the Holders of a Majority in Liquidation Amount of all
outstanding Securities of the Trust; provided, however, that where a
consent under the Indenture would require the consent of each holder of
Subordinated Notes affected thereby, no such consent shall be given by
the Property Trustee without (1) the prior approval of each Holder of
Securities and (2) a reasoned Opinion of Counsel delivered to the Trust
from tax counsel experienced in such matters to the effect that the
Trust will not be classified as an association taxable as a corporation
for United States federal income tax purposes on account of such
action;
(viii) shall not revoke any action previously authorized or
approved by a vote of the Holders of Preferred Securities except by
subsequent vote of such Holders; or
(ix) shall not revoke any action previously authorized or
approved by a vote of the Holders of Common Securities except by
subsequent vote of such Holders.
SECTION 3.08. Powers and Duties of the Property Trustee. (a) The legal
title to the Subordinated Notes shall be owned by and held of record in the name
of the Property Trustee in trust for the benefit of the Trust and the Holders of
the Securities. The right, title and interest of the Property Trustee to the
Subordinated Notes shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.07. Such vesting and
cessation of title shall be effective whether or not conveyancing documents with
regard to the Subordinated Notes have been executed and delivered.
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(b) The Property Trustee shall not transfer its right, title and
interest in the Subordinated Notes to the Administrative Trustees or to the
Delaware Trustee (if the Property Trustee does not also act as Delaware
Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "PROPERTY TRUSTEE ACCOUNT") in the name of and under
the exclusive control of the Property Trustee on behalf of the Holders
of the Securities and, upon the receipt of payments of funds made in
respect of the Subordinated Notes held by the Property Trustee, deposit
such funds into the Property Trustee Account and make payments or cause
the Paying Agent to make payments to the Holders of the Preferred
Securities and Holders of the Common Securities from the Property
Trustee Account in accordance with Section 6.01. Funds in the Property
Trustee Account shall be held uninvested until disbursed in accordance
with this Agreement;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Preferred
Securities and the Common Securities to the extent the Subordinated
Notes are redeemed or mature;
(iii) upon written notice of the occurrence of a Special Event
distribution issued by the Administrative Trustees in accordance with
the terms of the Securities, engage in such ministerial activities as
shall be necessary or appropriate to effect the distribution of the
Subordinated Notes to Holders of Securities upon the occurrence of
certain events (as may be defined in the terms of the Securities); and
(iv) take such ministerial action as may be requested by the
Administrative Trustees in connection with the winding up of the
affairs of or liquidation of the Trust in accordance with this
Agreement and the preparation, execution and filing of a certificate of
cancellation or other appropriate certificates with the Secretary of
State of the State of Delaware and other appropriate governmental
authorities.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of this Agreement and the Securities.
(e) Subject to Section 3.09(a), the Property Trustee shall take any
Legal Action which arises out of or in connection with an Event of Default of
which a
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Responsible Officer of the Property Trustee has actual knowledge or the Property
Trustee's duties and obligations under this Agreement or the Trust Indenture Act
and, if the Property Trustee shall have failed to take such Legal Action, the
Holders of the Preferred Securities may, to the fullest extent permitted by law,
take such Legal Action, to the same extent as if such Holders of Preferred
Securities held an aggregate principal amount of Subordinated Notes equal to the
aggregate Liquidation Amount of such Preferred Securities, without first
proceeding against the Property Trustee or the Trust; provided however, that if
an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Subordinated Note Issuer to pay the principal
of or premium, if any, or interest on the Subordinated Notes on the date such
principal, premium, if any, or interest is otherwise payable (or, in the case of
redemption, on the redemption date), then a Holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such Holder of the
principal of or premium, if any, or interest on the Subordinated Notes having a
principal amount equal to the aggregate Liquidation Amount of the Preferred
Securities of such Holder on or after the respective due date specified in the
Indenture or in the Subordinated Notes (a "DIRECT ACTION"). In connection with
such Direct Action, the Subordinated Note Issuer shall remain obligated to pay
the principal of, premium, if any, or interest on such Subordinated Notes, and
the Common Securities Holder shall be subrogated to the rights of such Holder of
Preferred Securities to the extent of any payment made by the Subordinated Note
Issuer to such Holder in such Direct Action. Except as provided in the preceding
sentences, the Holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Subordinated Notes.
(f) The Property Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders of Securities pursuant to
the terms of the Securities and this Agreement; or
(ii) a successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.07 (a "SUCCESSOR
PROPERTY TRUSTEE").
(g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Subordinated Notes under the
Indenture and, if an Event of Default actually known to a Responsible Officer of
the Property Trustee occurs and is continuing, the Property Trustee shall, for
the benefit of Holders of the Securities, enforce its rights as holder of the
Subordinated Notes subject to the rights of the Holders pursuant to the terms of
the Securities and this Agreement.
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(h) The Property Trustee shall be authorized to undertake any actions
set forth in Section 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities and any such Paying Agent
shall comply with Section 317(b) of the Trust Indenture Act. Any such additional
Paying Agent may be removed by the Property Trustee at any time the Property
Trustee remains as Paying Agent and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time by the
Property Trustee while the Property Trustee is acting as Paying Agent.
(j) Subject to this Section 3.08, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.06.
Notwithstanding anything expressed or implied to the contrary in this
Agreement or any Annex or Exhibit hereto, the Property Trustee must exercise the
powers set forth in this Section 3.08 in a manner that is consistent with the
purposes and functions of the Trust set out in Section 3.03.
SECTION 3.09. Certain Duties and Responsibilities of the Property
Trustee. (a) The Property Trustee, before the occurrence of any Event of Default
and after the curing or waiving of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Agreement and in the Securities and no implied covenants or obligations
shall be read into this Agreement against the Property Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to Section
2.06) of which a Responsible Officer of the Property Trustee has actual
knowledge, the Property Trustee shall exercise such of the rights and powers
vested in it by this Agreement, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Agreement shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, its own bad faith or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
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(A) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of this
Agreement and in the Securities and the Property Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement
and in the Securities, and no implied covenants or obligations
shall be read into this Agreement against the Property
Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Property Trustee and conforming to the
requirements of this Agreement; provided, however, that in the
case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to
the Property Trustee, the Property Trustee shall be under a
duty to examine the same to determine whether or not they
conform to the requirements of this Agreement (but shall not
be required to confirm or investigate the accuracy of
mathematical calculations or other facts stated therein);
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in
Liquidation Amount of the Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under this Agreement;
(iv) no provision of this Agreement shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Agreement or
indemnity reasonably satisfactory to the Property Trustee against such
risk or liability is not reasonably assured to it;
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(v) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Subordinated
Notes and the Property Trustee Account shall be to deal with such
property in a similar manner as the Property Trustee deals with similar
property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this
Agreement and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of
the Subordinated Notes or the payment of any taxes or assessments
levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Sponsor. Money held by the Property Trustee need
not be segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant to
Section 3.08(c)(i) and except to the extent otherwise required by law;
and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Sponsor
with their respective duties under this Agreement, nor shall the
Property Trustee be liable for any default or misconduct of the
Administrative Trustees or the Sponsor.
SECTION 3.10. Certain Rights of Property Trustee. (a) Subject to the
provisions of Section 3.09:
(i) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the Administrative
Trustees contemplated by this Agreement may be sufficiently evidenced
by an Officers' Certificate;
(iii) whenever in the administration of this Agreement, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Property Trustee (unless other evidence is herein specifically
prescribed)
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may, in the absence of bad faith on its part, request and conclusively
rely upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Sponsor or the Administrative
Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any re-recording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel or other
experts of its selection and the advice or opinion of such counsel and
experts with respect to legal matters or advice within the scope of
such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any of
its Affiliates, and may include any of its employees; and the Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Agreement from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement at
the request or direction of any Holder, unless such Holder shall have
provided to the Property Trustee security and indemnity, reasonably
satisfactory to the Property Trustee, against the costs, expenses
(including reasonable attorneys' fees and expenses and the expenses of
the Property Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by
the Property Trustee;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, custodians, nominees or attorneys and the Property
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
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(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and
the signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Agreement, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be given by the
Holders of the same proportion in Liquidation Amount of the Securities
as would be entitled to direct the Property Trustee under the terms of
the Securities in respect of such remedy, right or action, (ii) may
refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in
conclusively relying on, or acting in accordance with, such
instructions;
(xi) except as otherwise expressly provided by this Agreement,
the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Agreement;
and
(xii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith, without
negligence, and reasonably believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Agreement.
(b) No provision of this Agreement shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
(c) It is expressly understood and agreed by the parties hereto that
in fulfilling its obligations as Property Trustee hereunder on behalf of the
Trust, (i) any agreements or instruments executed or delivered by The Chase
Manhattan Bank are executed and delivered not in its individual capacity but
solely as Property Trustee under this Agreement in the exercise of the powers
and authority
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conformed and vested in it, (ii) each of the representations, undertakings and
agreements herein made on the part of the Trust is made and intended not as
representations, warranties, covenants, undertakings and agreements by The Chase
Manhattan Bank in its individual capacity but is made and intended for the
purpose of binding only the Trust, and (iii) under no circumstances (except with
respect to funds delivered to it relating to payments in respect of the
Securities) shall The Chase Manhattan Bank in its individual capacity be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty, or covenant made or undertaken by the Trust under this Agreement
except if such breach or failure is due to any negligence, bad faith or wilful
misconduct of the Property Trustee.
SECTION 3.11. Delaware Trustee. (a) Notwithstanding any other provision
of this Agreement other than Section 5.02, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of the Administrative Trustees or the Property
Trustee described in this Agreement (except as required under the Business Trust
Act). Except as set forth in Section 5.02, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Business Trust Act.
(b) It is expressly understood and agreed by the parties hereto that
in fulfilling its obligations as Delaware Trustee hereunder on behalf of the
Trust (i) any agreements or instruments executed or delivered by Chase Manhattan
Bank Delaware are executed and delivered not in its individual capacity but
solely as Delaware Trustee under this Agreement in the exercise of the powers
and authority conferred and vested in it, (ii) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as representations, warranties, covenants, undertakings and
agreements by Chase Manhattan Bank Delaware in its individual capacity but is
made and intended for the purpose of binding only the Trust, and (iii) under no
circumstances shall Chase Manhattan Bank Delaware in its individual capacity be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty, or covenant made or undertaken by the Trust under this Agreement
except if such breach or failure is due to any gross negligence or wilful
misconduct of the Delaware Trustee.
SECTION 3.12. Execution of Documents. Except as otherwise required by
the Business Trust Act or applicable law, each Administrative Trustee,
individually, is authorized to execute and deliver on behalf of the Trust any
documents, agreements, instruments or certificates that the Administrative
Trustees have the power and authority to execute and deliver pursuant to this
Agreement.
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SECTION 3.13. Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Agreement and the Securities shall be taken as
the statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Agreement or the
Securities.
SECTION 3.14. Duration of Trust. The Trust, unless dissolved pursuant
to the provisions of Article 8 hereof, shall exist until November 12, 2010.
SECTION 3.15. Mergers. (a) The Trust may not merge with or into,
convert into, consolidate, amalgamate, or be replaced by, or convey, transfer or
lease its properties and assets as an entirety or substantially as an entirety
to any Person, except as described in Section 3.15(b) and 3.15(c) and except
with respect to the distribution of all Subordinated Notes to Holders of
Securities pursuant to Section 8.01(a)(iii) or Section 4 of Annex I.
(b) The Trust may, at the request of the Sponsor, with the consent of
the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders of the
Securities, the Delaware Trustee or the Property Trustee, merge with or into,
convert into, consolidate, amalgamate, or be replaced by, or convey, transfer or
lease its properties and assets as an entirety or substantially as an entirety
to, a trust organized as such under the laws of any State; provided that:
(i) such successor entity (the "SUCCESSOR ENTITY") either:
(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Securities other securities
having substantially the same terms as the Securities (the
"SUCCESSOR SECURITIES") so long as the Successor Securities
rank the same as the Securities rank with respect to
Distributions and payments upon liquidation, redemption and
otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor
Entity that possesses the same powers and duties as the Property
Trustee with respect to the Subordinated Notes;
(iii) the Successor Securities (excluding any securities
substituted for any Common Securities) are listed, quoted or included
for trading, or
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any Successor Securities will be listed, quoted or included for
trading, upon notification of issuance, on any organization on which
the Preferred Securities are then listed, quoted or included;
(iv) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Preferred
Securities (including any Successor Securities) or the Subordinated
Notes to be downgraded or placed under surveillance or review by any
nationally recognized statistical rating organization that publishes a
rating on the Preferred Securities or the Subordinated Notes;
(v) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect
the rights, preferences and privileges of the Holders of the Securities
(including the Holders of any Successor Securities) in any material
respect (other than with respect to any dilution of the interests of
such Holders or Holder of Successor Securities, as the case may be, in
the Successor Entity);
(vi) the Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) prior to such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Sponsor
has received an opinion of a nationally recognized independent counsel
to the Trust experienced in such matters to the effect that:
(A) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders
of the Securities (including the Holders of any Successor
Securities) in any material respect (other than with respect
to any dilution of the interests of such Holders or Holders of
Successor Securities, as the case may be, in the Successor
Entity); and
(B) following such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor the Successor Entity, if any, will be
required to register as an Investment Company; and
(viii) the Sponsor or any permitted successor or assignee owns
all of the common securities of the Successor Entity and guarantees the
obligations of the Successor Entity under the Successor Securities at
least
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to the extent provided by the Preferred Securities Guarantee and the
Common Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in Liquidation Amount of the Securities, merge
with or into, convert into, consolidate, amalgamate, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other Person or permit any other Person to
merge with or into, consolidate, amalgamate, or replace it if such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease would
cause the Trust or the Successor Entity, if any, not to be classified as a
grantor trust for United States Federal income tax purposes.
ARTICLE 4
SPONSOR
SECTION 4.01. Sponsor's Purchase of Common Securities. At the Closing
Time, the Sponsor will purchase all of the Common Securities then issued by the
Trust, in an amount equal to at least 3% of the total capital of the Trust, at
the same time as the Preferred Securities are issued and sold. The aggregate
Liquidation Amount of Common Securities at any time shall not be less than 3% of
the capital of the Trust.
SECTION 4.02. Covenants of the Common Securities Holder. For so long as
the Preferred Securities remain outstanding, the Holder of the Common Securities
shall covenant (i) to maintain, directly or indirectly, 100% ownership of the
Common Securities; provided, however, that any permitted successor of the Holder
of the Common Securities under the Indenture may succeed to such Holder's
interest in the Common Securities, (ii) to cause the Trust to remain a statutory
business trust, except in connection with a distribution of Subordinated Notes
to the Holders of Securities, the redemption of all of the Securities, or
certain mergers, consolidations, conversions or amalgamations, each as permitted
by this Agreement, and not to voluntarily dissolve, wind up, liquidate or be
terminated, except as permitted by this Agreement, (iii) to use its commercially
reasonable efforts to ensure that the Trust shall not be an investment company
for purposes of the Investment Company Act, and (iv) to take no action which
would be reasonably likely to cause the Trust to be classified as an association
or a publicly traded partnership taxable as a corporation for United States
federal income tax purposes.
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SECTION 4.03. Responsibilities of the Sponsor. In connection with the
initial issuance and sale and the Remarketing of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) prepare and execute, if necessary, the Offering Memorandum in
preliminary and final form, pertaining to the Remarketing of Preferred
Securities to QIBs;
(b) prepare for execution and filing by the Trust of an application,
prepared by the Sponsor, to the PORTAL Market;
(c) if the Preferred Securities are to be held in book-entry form,
prepare for execution and filing by the Trust of documents, or instruments to be
delivered to a Depository for the Preferred Securities;
(d) determine the jurisdictions in which to take appropriate action to
qualify or register for sale all or part of the Preferred Securities and to do
any and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
jurisdictions; and
(e) to negotiate the terms of, execute, enter into, sign on behalf of
the Trust and deliver the Purchase Agreement, in the form of Exhibit C,
providing for the sale of the Preferred Securities, the Remarketing Agreement in
the form of Exhibit D, providing for the Remarketing of the Preferred
Securities, or under certain circumstances, the Subordinated Notes, and the
Secondary Purchase Agreement providing for the resale of the Preferred
Securities.
SECTION 4.04. Right to Proceed. The Sponsor acknowledges the rights of
the Holders of Preferred Securities referred to in Section 3.08(e) and Annex I.
ARTICLE 5
TRUSTEES
SECTION 5.01. Number of Trustees; Appointment of Co-Trustee. The
number of Trustees initially shall be five (5), and:
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(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than
two (2); provided, further, that (1) one Trustee shall be a Person meeting the
requirements of Section 5.02 (the "DELAWARE TRUSTEE"); (2) there shall be at
least one Trustee who is an employee or officer of, or is affiliated with the
Sponsor (an "ADMINISTRATIVE TRUSTEE"); and (3) one Trustee shall be the Property
Trustee, and such Trustee may also serve as Delaware Trustee if it meets the
applicable requirements. Notwithstanding the above, unless an Event of Default
shall have occurred and be continuing, at any time or times, for the purpose of
meeting the legal requirements of the Trust Indenture Act or of any jurisdiction
in which any part of the Trust's property may at the time be located, the
Holders of a Majority in Liquidation Amount of the Common Securities acting as a
class at a meeting of the Holders of the Common Securities, and the
Administrative Trustees shall have power to appoint one or more Persons either
to act as a co-trustee, jointly with the Property Trustee, of all or any part of
the Trust's property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of this Agreement. In case an Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make any such
appointment of a co-trustee.
SECTION 5.02. Delaware Trustee. For so long as required by the Business
Trust Act, the Delaware Trustee shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided, however, if the Property Trustee has its principal place of business
in the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
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SECTION 5.03. Property Trustee; Eligibility. (a) There shall at all
times be one Trustee (the "PROPERTY TRUSTEE") which shall act as Property
Trustee and which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an indenture trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, and
subject to supervision or examination by federal, state, territorial or
District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then for
the purposes of this Section 5.03(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.03(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.07(c).
(c) If the Property Trustee has or shall acquire any "CONFLICTING
INTEREST" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the proviso of Section 310(b) of the Trust Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Agreement for purposes of clause (i) of the first
provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
The Chase Manhattan Bank
One Liberty Place, 52nd Floor
1650 Market Street
Philadelphia, Pennsylvania 19103
Attention: Corporate Trust Department
Telephone: (215) 988-1329
Telecopier: (215) 988-8372
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SECTION 5.04. Certain Qualifications of Administrative Trustees and
Delaware Trustee Generally. Each Administrative Trustee and the Delaware Trustee
(unless the Property Trustee also acts as Delaware Trustee) shall be either a
natural person who is at least 21 years of age or a legal entity that shall act
through one or more Authorized Officers.
SECTION 5.05. Administrative Trustees. The initial Administrative
Trustees shall be:
Israel J. Floyd
Jan M. King
Stuart C. Shears
c/o Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Telephone: (302) 594-5000
Telecopier: (302) 594-5210
(a) Except as expressly set forth in this Agreement and except if a
meeting of the Administrative Trustees is called with respect to any matter over
which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(b) Unless otherwise determined by the Administrative Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Administrative Trustee acting alone is authorized to execute on behalf of the
Trust any documents which the Administrative Trustees have the power and
authority to cause the Trust to execute pursuant to Section 3.06; and
SECTION 5.06. Delaware Trustee. The initial Delaware Trustee shall be:
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Corporate Trust Department
Telecopier: (302) 984-4903
Telephone: (302) 428-3372
SECTION 5.07. Appointment, Removal and Resignation of Trustees. (a)
Subject to Sections 5.07(b) and (c), Trustees may be appointed or removed at any
time:
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(i) without cause until the issuance of any Securities, by
written instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and be
continuing after the issuance of any Securities, without cause by vote
of the Holders of a Majority in Liquidation Amount of the Common
Securities voting as a class at a meeting of the Holders of the Common
Securities;
(iii) whether or not an Event of Default shall have occurred
and be continuing after the issuance of Securities, for cause by vote
of the Holders of a Majority in Liquidation Amount of the Preferred
Securities voting as a class at a meeting of the Holders of the
Preferred Securities (it being understood that in no event will the
Holders of the Preferred Securities have the right to vote, appoint,
remove or replace the Administrative Trustees, which voting rights are
exclusively vested in the Holder of the Common Securities); and
(iv) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to the
Property Trustee or the Delaware Trustee, by vote of Holders of a
Majority in Liquidation Amount of the Preferred Securities voting as a
class at a meeting of Holders of the Preferred Securities.
(b) (i) The Trustee that acts as Property Trustee shall not be removed
in accordance with Section 5.07(a) until a Successor Property Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Property Trustee and delivered to the Administrative Trustees and
the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.07(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections
5.02 and 5.04 (a "SUCCESSOR DELAWARE TRUSTEE") has been appointed and
has accepted such appointment by written instrument executed by such
Successor Delaware Trustee and delivered to the removed Delaware
Trustee, the Property Trustee (if the removed Delaware Trustee is not
also the Property Trustee), the Administrative Trustees and the
Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the other Trustees,
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the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as the Property
Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed
and has accepted such appointment by instrument executed by
such Successor Property Trustee and delivered to the Trust,
the Sponsor, the Delaware Trustee (if the resigning Property
Trustee is not also the Delaware Trustee) and the resigning
Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the Holders
of the Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by
such Successor Delaware Trustee and delivered to the Trust, the
Property Trustee (if the resigning Delaware Trustee is not also the
Property Trustee), the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities or, if an Event of Default
shall have occurred and be continuing after the issuance of the Securities, the
Holders of the Preferred Securities shall use their best efforts to promptly
appoint a Successor Delaware Trustee or Successor Property Trustee, as the case
may be, if the Property Trustee or the Delaware Trustee delivers an instrument
of resignation in accordance with this Section 5.07.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.07 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
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SECTION 5.08. Vacancies among Trustees. If a Trustee ceases to hold
office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01, or if the number of Trustees is increased pursuant to Section
5.01, a vacancy shall occur. A resolution certifying the existence of such
vacancy by the Administrative Trustees or, if there are more than two, a
majority of the Administrative Trustees shall be conclusive evidence of the
existence of such vacancy. The vacancy shall be filled with a Trustee appointed
in accordance with Section 5.07.
SECTION 5.09. Effect of Vacancies. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to dissolve, terminate or
annul the Trust or to terminate this Agreement. Whenever a vacancy in the number
of Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 5.07, the
Administrative Trustees in office, regardless of their number, shall have all
the powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Agreement.
SECTION 5.10. Meetings. If there is more than one Administrative
Trustee, meetings of the Administrative Trustees shall be held from time to time
upon the call of any Administrative Trustee. Regular meetings of the
Administrative Trustees may be held at a time and place fixed by resolution of
the Administrative Trustees. Notice of any in-person meetings of the
Administrative Trustees shall be hand delivered or otherwise delivered in
writing (including by facsimile, with a hard copy by overnight courier) not less
than 24 hours before such meeting. Notice of any telephonic meetings of the
Administrative Trustees or any committee thereof shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before a meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of an Administrative
Trustee at a meeting shall constitute a waiver of notice of such meeting except
where an Administrative Trustee attends a meeting for the express purpose of
objecting to the transaction of any activity on the ground that the meeting has
not been lawfully called or convened. Unless provided otherwise in this
Agreement, any action of the Administrative Trustees may be taken at a meeting
by vote of a majority of the Administrative Trustees present (whether in person
or by telephone) and eligible to vote with respect to such matter, provided that
a Quorum is present, or without a meeting by the majority written consent of the
Administrative Trustees. In the event there is only one Administrative Trustee,
any and all action of such Administrative Trustee shall be evidenced by a
written consent of such Administrative Trustee.
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SECTION 5.11. Delegation of Power. (a) Any Administrative Trustee may,
by power of attorney consistent with applicable law, delegate to any other
natural person over the age of 21 his or her power for the purpose of executing
any documents contemplated in Section 3.06, including any registration statement
or amendment thereto filed with the Commission; and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Agreement.
SECTION 5.12. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee that is not a natural person, as the case may be, may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Property
Trustee or the Delaware Trustee, as the case may be, shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
the Property Trustee or the Delaware Trustee, as the case may be, shall be the
successor of the Property Trustee or the Delaware Trustee, as the case may be,
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto; provided, however, such successor shall
notify the Sponsor and the Trust promptly of its succession.
SECTION 5.13. Compensation. The Sponsor agrees:
(a) to pay to the Property Trustee and the Delaware Trustee from time
to time such compensation as shall be agreed in writing between the Sponsor and
the Property Trustee and the Delaware Trustee, respectively, for all services
rendered by them hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and
(b) to reimburse the Property Trustee and the Delaware Trustee upon
their request for reasonable expenses, disbursements and advances incurred or
made by the Property Trustee or the Delaware Trustee, respectively, in
accordance with any provision of this Agreement (including the reasonable
compensation and the expenses and advances of its agents and counsel), except
any such expense or advance as may be attributable to their negligence, willful
misconduct or bad faith.
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ARTICLE 6
DISTRIBUTIONS; RESET RATE; REMARKETING; MANDATORY REDEMPTION
SECTION 6.01. Distributions. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Securities in accordance with the respective
terms and preferences set forth below and in Annex I. If and to the extent that
the Subordinated Note Issuer makes a payment of interest (including Additional
Interest (as defined in the Indenture)), premium and/or principal on the
Subordinated Notes held by the Property Trustee (the amount of any such payment
being a "PAYMENT AMOUNT"), the Property Trustee shall and is directed, to the
extent funds are available for that purpose, to make a distribution (a
"DISTRIBUTION") of the Payment Amount to Holders.
SECTION 6.02. Determination of Reset Date; Remarketing Procedures. (a)
Subject to Sections 6.04 and 6.06, the Reset Date shall be September 28, 1999
(the "EXPECTED RESET DATE"); provided that
(i) the Sponsor may, by notice to the Remarketing Agent,
direct that the Reset Date be delayed if the Sponsor believes it will
be unable to meet the conditions to Remarketing in the absence of such
a delay; and
(ii) the Remarketing Agent may, by notice to the Sponsor,
direct that the Reset Date be delayed if the Remarketing Agent believes
that a Remarketing will not be successful in the absence of such a
delay;
and, in either such event, the Sponsor and the Remarketing Agent will use their
best efforts to establish a delayed Reset Date that is within five Business Days
after the Expected Reset Date, but in no event later than the Final Reset Date;
and provided further, that no Reset Date may be established if any Default (as
defined in the Credit Agreement) has occurred, except in connection with a
Remarketing following a Cured Default Trigger Event pursuant to Section 6.06. If
the Sponsor and the Remarketing Agent have not agreed, on or prior to the sixth
Business Day preceding the Final Reset Date, to a Reset Date that is not later
than the Final Reset Date, no Remarketing shall occur and the Securities shall
be redeemed at the Mandatory Redemption Price on the Mandatory Redemption Date.
(b) The Sponsor shall, by notice to the Remarketing Agent no later
than five Business Days prior to the Reset Date, select and specify at least
three but no more than five Reference Corporate Dealers. By 3:00 p.m., New York
City time, on the Reset Date, the Remarketing Agent shall request Bids from such
Reference
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Corporate Dealers. The Remarketing Agent shall determine the lowest Bid Rate
(the "WINNING BID RATE") from among the Bids obtained on the Reset Date. By
approximately 4:30 p.m., New York City time, on the Reset Date, the Remarketing
Agent shall notify the Sponsor, the Underwriter, the Indenture Trustee and the
Property Trustee of the Winning Bid Rate. If on a Reset Date, Bids are not
submitted by at least two Reference Corporate Dealers, or if the lowest Bid
submitted would result in a Winning Bid Rate in excess of the rate permitted by
applicable law, such Remarketing shall be deemed to be a Failed Remarketing on
the corresponding Remarketing Settlement Date. The Winning Bid Rate determined
by the Remarketing Agent, absent manifest error, shall be binding and conclusive
upon the Holders of the Trust Securities, the Sponsor and the Trust.
(c) On the Reset Date, the Remarketing Agent shall designate as the
Secondary Purchaser (the "SECONDARY PURCHASER") the Reference Corporate Dealer
providing the Bid containing the Winning Bid Rate. If the Winning Bid Rate is
specified in the Bids submitted by two or more Reference Corporate Dealers, the
Remarketing Agent shall, in its sole discretion, designate one of such
Reference Corporate Dealers as the Secondary Purchaser.
(d) On the Reset Date, the Secondary Purchaser shall enter into a
Secondary Purchase Agreement for the purchase by such Secondary Purchaser at the
Remarketing Price of the aggregate Liquidation Amount of Preferred Securities,
with a Distribution Rate equal to the Winning Bid Rate and with a Mandatory
Redemption Date on the Maturity Extension Date.
(e) If a Remarketing has occurred pursuant to this Section 6.02 but
settlement of the purchase and sale of the Preferred Securities does not occur
on the corresponding Remarketing Settlement Date, then, unless the provisions of
Section 6.04 with respect to a Renewed Remarketing shall apply, a Failed
Remarketing shall be deemed to occur on such Remarketing Settlement Date.
(f) At the time and in the manner specified in the Secondary Purchase
Agreement, the Secondary Purchaser shall pay to the Remarketing Agent on behalf
of the Holders of the Preferred Securities on the Remarketing Settlement Date,
an amount of cash equal to the Remarketing Price.
(g) Unless otherwise agreed among the Remarketing Agent, the Paying
Agent and any Former Holder, the Remarketing Agent shall pay the Remarketing
Price, less the Remarketing Fee, to the Paying Agent, acting solely as agent for
the Former Holders, and the Paying Agent shall promptly pay such amounts to the
Former Holders on the Remarketing Settlement Date in the same manner as is
specified in Section 5(g) of Annex I hereto for payments with respect to
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Redemptions of the Preferred Securities. Any amounts held by the Paying Agent
for payment to the Former Holders shall not be property of the Trust.
(h) The obligation of the Remarketing Agent to make payment to the
Former Holders in connection with the Remarketing shall be limited to the extent
that the Secondary Purchaser has delivered the Remarketing Price therefor to the
Remarketing Agent.
(i) Any outstanding Preferred Securities purchased on the Remarketing
Settlement Date shall be deemed to be transferred to the Secondary Purchaser and
shall be replaced in the manner provided in Section 6.02(j). On and after the
Remarketing Settlement Date (except in the event of a Failed Remarketing), the
Trust shall make no further payments to, and the Trust shall have no further
obligations under this Agreement in respect of, the Holders of such replaced
Preferred Securities (the "FORMER HOLDERS"), the Trust shall only be obligated
to make payments to the Holders of Replacement Securities, and the Preferred
Securities of the Former Holders shall no longer represent an obligation of or
interest in the Trust but shall only represent a right to receive the proceeds
of the Remarketing from the Paying Agent.
(j) The Sponsor shall cause replacement certificates evidencing the
remarketed Preferred Securities to be executed by an Administrative Trustee on
behalf of the Trust and authenticated by the Property Trustee in accordance with
the provisions of Section 7.03 (the "REPLACEMENT SECURITIES"). The Replacement
Securities shall be delivered to the purchaser or purchasers of the remarketed
Preferred Securities in accordance with the terms of the Secondary Purchase
Agreement.
SECTION 6.03. Reset of Distribution Rate and Mandatory Redemption Date.
Unless a Failed Remarketing shall have occurred, from and including the Reset
Settlement Date, the Distribution Rate on the Securities shall be the Winning
Bid Rate and the Mandatory Redemption Date shall be the Maturity Extension Date.
SECTION 6.04. Renewed Remarketing. If a Remarketing has occurred
pursuant to Section 6.02 that would be a Failed Remarketing solely pursuant to
Section 6.02(e), because the purchase and sale of the Preferred Securities does
not take place on the corresponding Remarketing Settlement Date, and the reason
for such failure shall, in the good faith determination of the Remarketing Agent
(made after consultation with the Sponsor), result from facts or circumstances
that are not due to the action or inaction of the Sponsor, then the provisions
of Sections 6.02 and 6.06 shall apply to a second remarketing (a "RENEWED
REMARKETING") of the Preferred Securities, except that the Expected Reset Date
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shall be the sixth Business Day following such corresponding Remarketing
Settlement Date; provided that the provisions of this Section 6.04 shall be
applied only once.
SECTION 6.05. Failed Remarketing; Mandatory Redemption. The Remarketing
Agent shall give notice of any Failed Remarketing on the date such Failed
Remarketing occurs or is deemed to occur, by 4:00 p.m., New York City time, on
the date of such Failed Remarketing, to the Subordinated Note Issuer, the
Property Trustee, the Indenture Trustee, the Underwriter and the Paying Agent
under the Indenture. In the case of any Failed Remarketing, the Subordinated
Notes shall be redeemed by the Subordinated Note Issuer, pursuant to Section
3.04 of the Supplemental Indenture, on the third Business Day following the date
such Failed Remarketing occurs or is deemed to occur, and the proceeds of such
redemption shall be simultaneously applied by the Property Trustee to redeem a
Like Amount of the Securities at the Mandatory Redemption Price on a Pro Rata
basis in the manner provided in Section 5 of Annex I.
SECTION 6.06. Early Remarketing. If any of the following events (each,
a "TRIGGER EVENT") shall have occurred:
(a) the Closing Price of the Common Stock on any Trading Day, as
determined by the Remarketing Agent, is less than the Trigger Price (a "STOCK
PRICE TRIGGER EVENT");
(b) a Cross Default shall have occurred but such Cross Default shall
have ceased to be continuing (a "CURED DEFAULT TRIGGER EVENT"); or
(c) the Sponsor (i) shall have made a written request to the
Underwriter to enter into a firm commitment underwriting of the Common Stock,
and the Sponsor and the Underwriter shall have substantially agreed to the terms
of such underwriting in the manner described in Section 12 of the Forward
Underwriting Agreement or (ii) shall have given notice to accelerate the
Commencement Date in the manner described in Section 7 of the Forward
Underwriting Agreement (an "UNDERWRITING TRIGGER EVENT");
then a Remarketing shall occur pursuant to Section 6.02 and, if applicable,
Section 6.04, except that:
(A) the Expected Reset Date shall be the sixth Business Day following
the date such Trigger Event first occurs;
(B) in the case of a Stock Price Trigger Event or a Cured Default
Trigger Event, the Final Reset Date shall be the 15th day following the date
such Trigger
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Event occurs, or the 20th day in the case of a Renewed Remarketing to which the
provisions of Section 6.04 apply, but in no event later than the third scheduled
Trading Day prior to November 10, 1999;
(C) in the case of an Underwriting Trigger Event, the Final Reset
Date shall be the 45th day following the date such Trigger Event occurs, but in
no event later than the third scheduled Trading Day prior to November 10, 1999;
and
(D) notwithstanding the provisions of clauses (A), (B) and (C) above,
if a Reset Date has already been established or a Remarketing has already taken
place at the time such Trigger Event occurs, the Remarketing shall occur on such
established Reset Date or settled on the corresponding Remarketing Settlement
Date.
SECTION 6.07. Adjustments to Trigger Price. The "TRIGGER PRICE" shall
initially be $22 11/16 (twenty-two and eleven-sixteenths). Following the
determination by the Calculation Agent in its reasonable discretion that a
Potential Adjustment Event has occurred, the Calculation Agent shall determine
(after consultation with the Sponsor) whether such Potential Adjustment Event
has a diluting or concentrative effect on the theoretical value of the Common
Stock and, if so, shall make the corresponding adjustment(s), if any, to the
Trigger Price. The Sponsor shall promptly notify the Calculation Agent of any
Potential Adjustment Event. The Calculation Agent may, but need not, determine
the appropriate adjustment(s) by reference to the adjustment(s) in respect of
such Potential Adjustment Event made by an options exchange to options on the
Common Stock traded on that options exchange. In the event of any merger,
consolidation or reorganization of the Sponsor, the Calculation Agent shall
determine the appropriate Trigger Price as a result of such event.
ARTICLE 7
ISSUANCE OF SECURITIES
SECTION 7.01. General Provisions Regarding Securities. (a) The
Administrative Trustees shall on behalf of the Trust issue one class of
preferred securities representing undivided beneficial interests in the assets
of the Trust having such terms as are set forth in Annex I (the "PREFERRED
SECURITIES") and one class of common securities representing undivided
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I (the "COMMON SECURITIES"). The Trust shall issue no securities
or other interests in the assets of the Trust other than the Preferred
Securities and the Common Securities.
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(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Agreement, the
Securities so issued shall be validly issued, fully paid and non-assessable.
(d) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Agreement, shall
(i) be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Agreement, including the terms of Annex I, Exhibits A-1, A-2,
A-3 and D and (ii) be deemed to have expressly appointed the Remarketing Agent
as its attorney-in-fact with respect to the transactions contemplated by the
Secondary Purchase Agreement.
SECTION 7.02. Execution and Authentication. (a) The Securities shall be
signed on behalf of the Trust by an Administrative Trustee. In case any
Administrative Trustee of the Trust who shall have signed any of the Securities
shall cease to be such Administrative Trustee before the Securities so signed
shall be delivered by the Trust, such Securities nevertheless may be delivered
as though the Person who signed such Securities had not ceased to be such
Administrative Trustee; and any Securities may be signed on behalf of the Trust
by such persons who, at the actual date of execution of such Security, shall be
the Administrative Trustees of the Trust, although at the date of the execution
and delivery of this Agreement any such person was not an Administrative
Trustee.
(b) One Administrative Trustee shall sign the Preferred Securities for
the Trust by manual or facsimile signature.
A Preferred Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Agreement. A Common Security shall be valid upon
execution by an Administrative Trustee without any act of the Property Trustee.
Upon a written order of the Trust signed by one Administrative Trustee,
the Property Trustee shall authenticate the Preferred Securities for original
issue.
The aggregate number of Preferred Securities outstanding at any time
shall not exceed the number set forth in the terms in Annex I hereto except as
provided in Section 7.06.
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The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Preferred Securities. An authenticating agent may
authenticate Preferred Securities whenever the Property Trustee may do so. Each
reference in this Agreement to authentication by the Property Trustee includes
authentication by such agent. An authenticating agent has the same rights as the
Property Trustee hereunder with respect to the Sponsor or an Affiliate.
SECTION 7.03. Form and Dating. The Preferred Securities and the
Property Trustee's certificate of authentication shall be substantially in the
form of Exhibit A-1, the Replacement Securities shall be substantially in the
form of Exhibit A-3 and the Common Securities shall be substantially in the form
of Exhibit A-2, each of which is hereby incorporated in and expressly made a
part of this Agreement. The Preferred Securities shall be issued only in minimum
denominations of $100,000 Liquidation Amount and integral multiples of $1,000 in
excess thereof. The Securities may be in definitive or global form, and may be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to an Administrative Trustee, as evidenced by the
execution thereof. The Securities may have letters, CUSIP or other numbers,
notations or other marks of identification or designation and such legends or
endorsements required by law, stock exchange or quotation system rule,
agreements to which the Trust is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Trust). An
Administrative Trustee, at the direction of the Sponsor, shall furnish any such
legend not contained in Exhibits A-1, A-2 or A-3 to the Property Trustee in
writing. Each Preferred Security shall be dated the date of its authentication.
The terms and provisions of the Securities set forth in Annex I and the forms of
Securities set forth in Exhibits A-1, A-2 and A-3 are part of the terms of this
Agreement and to the extent applicable, the Property Trustee and the Sponsor, by
their execution and delivery of this Agreement, expressly agree to such terms
and provisions and to be bound thereby.
(a) The Preferred Securities shall initially be issued in definitive
form ("DEFINITIVE PREFERRED SECURITIES"). Upon Remarketing, the Preferred
Securities shall be issued as Replacement Securities in the form of one or more
permanent global Securities in definitive, fully registered form with the
appropriate global legends set forth in Exhibit A-3 hereto (a "GLOBAL PREFERRED
SECURITY"), which shall be deposited on behalf of the purchasers of the
Preferred Securities represented thereby with the Property Trustee, as custodian
for the Depository, and registered in the name of the Depository or a nominee of
the Depository, duly executed by an Administrative Trustee on behalf of the
Trust and authenticated by the Property Trustee as hereinafter provided. The
number of Preferred Securities represented by the Global Preferred Security may
from time to time be increased or decreased by adjustments made on the records
of the Property Trustee and the
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Depository or its nominee as hereinafter provided. The Holder of a Global
Preferred Security may grant proxies and otherwise authorize any Person,
including Participants, and Persons that may hold interests through
Participants, to take any action which such Holder is entitled to take under
this Agreement or the Securities.
(b) An Administrative Trustee shall execute and the Property Trustee
shall, in accordance with this Section 7.03, authenticate and make available for
delivery initially one or more Definitive Preferred Securities registered in the
name of the initial Holders or their designees. Upon Remarketing, an
Administrative Trustee shall execute and the Property Trustee shall, in
accordance with this Section 7.03, authenticate and make available for delivery
one or more Global Preferred Securities that (i) shall be registered in the name
of Cede & Co. or other nominee of such Depository and (ii) shall be delivered by
the Property Trustee to such Depository or pursuant to such Depository's written
instructions or held by the Property Trustee as custodian for the Depository.
(c) Members of, or participants in, the Depository ("PARTICIPANTS")
shall have no rights under this Agreement with respect to any Global Preferred
Security held on their behalf by the Depository or by the Property Trustee as
the custodian of the Depository or under such Global Preferred Security, and the
Depository or its nominee may be treated by the Trust, the Property Trustee and
any agent of the Trust or the Property Trustee as the absolute owner of such
Global Preferred Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Trust, the Property Trustee or any
agent of the Trust or the Property Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Participants, the operation of
customary practices of such Depository governing the exercise of the rights of
an owner of a beneficial interest in any Global Preferred Security.
(d) Except in connection with the initial issuance of the Preferred
Securities and as further provided in Section 9.02, owners of beneficial
interests in a Global Preferred Security will not be entitled to receive
physical delivery of Definitive Preferred Securities.
SECTION 7.04. Registrar and Paying Agent. The Trust shall maintain in
the Borough of Manhattan, The City of New York, (i) an office or agency where
Preferred Securities may be presented for registration of transfer ("REGISTRAR")
and (ii) an office or agency where Preferred Securities may be presented for
payment ("PAYING AGENT"). The Registrar shall keep a register of the Preferred
Securities and of their transfer. The Trust may appoint the Registrar and the
Paying Agent and may appoint one or more co-registrars and one or more
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additional paying agents in such other locations as it shall determine. The term
"REGISTRAR" includes any additional registrar and the term "PAYING AGENT"
includes any additional paying agent. The Trust may change any Registrar or
Paying Agent without prior notice to any Holder. The Administrative Trustees
shall notify the Property Trustee of the name and address of any Agent not a
party to this Agreement. If the Trust fails to appoint or maintain another
entity as Registrar or Paying Agent, the Property Trustee shall act as such, and
as Paying Agent the Property Trustee shall have the rights set forth in Section
3.08(i). The Property Trustee or any of its Affiliates may act as Registrar or
Paying Agent. The Trust shall act as Registrar and Paying Agent for the Common
Securities.
Any Paying Agent shall be permitted to resign as Paying Agent upon 30
days' prior written notice to the Property Trustee, the Administrative Trustees
and the Sponsor. In the event that the Property Trustee shall no longer be the
Paying Agent, the Trust shall appoint a successor Paying Agent (which shall be a
bank or trust company acceptable to the Sponsor) to act as Paying Agent. Any
such resignation shall become effective upon the appointment of a successor
paying agent by the Trust to perform the services that would otherwise be
performed hereunder by the Paying Agent and the agreement of any such successor
so to serve.
The Trust initially appoints the Property Trustee as Registrar and
Paying Agent for the Preferred Securities.
SECTION 7.05. Paying Agent to Hold Money in Trust. The Trust shall
require each Paying Agent other than the Property Trustee to agree in writing
that the Paying Agent will hold in trust for the benefit of Holders or the
Property Trustee all money held by the Paying Agent for the payment of
Liquidation Amounts or Distributions on the Securities and will notify the
Property Trustee if there are insufficient funds for such purpose. While any
such insufficiency continues, the Property Trustee may require a Paying Agent to
pay all money held by it to the Property Trustee. The Trust at any time may
require a Paying Agent to pay all money held by it to the Property Trustee and
to account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
SECTION 7.06. Replacement of Securities. If a Holder of a Security
claims that a Security owned by it has been lost, destroyed or wrongfully taken
or if such Security is mutilated and is surrendered to the Trust or, in the case
of the Preferred Securities, to the Property Trustee, an Administrative Trustee
shall execute and
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the Property Trustee shall authenticate and make available for delivery a
replacement of such Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. An indemnity bond must be provided by
the Holder which, in the judgment of the Property Trustee, is sufficient to
protect the Trustees, the Sponsor or any authenticating agent from any loss
which any of them may suffer if a Security is replaced. The Trust may charge
such Holder for its expenses in replacing a Security.
SECTION 7.07. Outstanding Preferred Securities. The Preferred
Securities outstanding at any time are all the Preferred Securities
authenticated by the Property Trustee except for those canceled by it, those
delivered to it for cancellation, and those described in this Section as not
outstanding.
If a Preferred Security is replaced, paid or purchased pursuant to
Section 7.06 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Preferred
Security is held by a bona fide purchaser.
If Preferred Securities are considered paid in accordance with the
terms of this Agreement, including any Preferred Securities replaced by
Replacement Securities in accordance with the provisions of Article 6, they
cease to be outstanding and Distributions thereon shall cease to accumulate.
Except to the extent set forth in the last paragraph of Section 6 of
Annex I and Section 7.08, a Preferred Security does not cease to be outstanding
because the Trust, the Sponsor or an Affiliate of the Sponsor holds such
Preferred Security.
SECTION 7.08. Preferred Securities in Treasury. In determining whether
the Holders of the required amount of Preferred Securities have concurred in any
direction, waiver or consent, Preferred Securities owned by the Trust, the
Sponsor or an Affiliate of the Sponsor, as the case may be, shall be disregarded
and deemed not to be outstanding, except that for the purposes of determining
whether the Property Trustee shall be fully protected in relying on any such
direction, waiver or consent, only Preferred Securities which a Responsible
Officer of the Property Trustee actually knows are so owned shall be so
disregarded.
SECTION 7.09. Temporary Securities. Until Definitive Securities are
ready for delivery, the Administrative Trustees may prepare and, in the case of
the Preferred Securities, the Property Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
Definitive Securities but may have variations that the Trust considers
appropriate for temporary Securities. Without unreasonable delay, the
Administrative Trustees shall prepare
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and, in the case of the Preferred Securities, the Property Trustee shall
authenticate Definitive Securities in exchange for temporary Securities.
SECTION 7.10. Cancellation. The Trust at any time may deliver Preferred
Securities to the Property Trustee for cancellation. The Registrar and Paying
Agent shall forward to the Property Trustee any Preferred Securities surrendered
to them for registration of transfer, redemption, exchange or payment. The
Property Trustee shall promptly cancel all Preferred Securities surrendered for
registration of transfer, redemption, exchange, payment, replacement or
cancellation and shall dispose of canceled Preferred Securities as the Trust
directs, provided that the Property Trustee shall not be obligated to destroy
Preferred Securities. The Trust may not issue new Preferred Securities to
replace Preferred Securities that it has paid or redeemed or that have been
delivered to the Property Trustee for cancellation or that any Holder has
exchanged.
SECTION 7.11. CUSIP Numbers. The Trust, in issuing the Preferred
Securities, may use "CUSIP" numbers (if then generally in use), and, if so, the
Property Trustee shall use "CUSIP" numbers in notices of redemption as a
convenience to Holders of Preferred Securities; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Preferred Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Preferred Securities, and any such redemption shall not
be affected by any defect in or omission of such numbers. The Sponsor will
promptly notify the Property Trustee of any change in the CUSIP numbers.
ARTICLE 8
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.01. Dissolution and Termination of Trust. (a) The Trust shall
automatically dissolve upon the first to occur of the following events:
(i) the bankruptcy of the Sponsor;
(ii) (A) the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor or (B) the
revocation of the Sponsor's charter and the expiration of 90 days after
the date of revocation without a reinstatement thereof;
(iii) the distribution of a Like Amount of the Subordinated
Notes to the Holders of the Securities, provided that the Property
Trustee has
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received written notice from the Sponsor directing the Property Trustee
to dissolve the Trust (which direction is optional and, except as
otherwise expressly provided herein, within the discretion of the
Sponsor), and provided, further, that such dissolution is conditioned
on the receipt by the Administrative Trustees' receipt of an opinion of
an independent tax counsel experienced in such matters to the effect
that the Holders of the Securities will not recognize any gain or loss
for United States Federal income tax purposes as a result of the
dissolution of the Trust and the distribution of the Subordinated
Notes;
(iv) the entry of a decree of judicial dissolution of the
Trust by a court of competent jurisdiction;
(v) the redemption of all of the Securities and the payment to
the Holders of any and all amounts necessary therefor, all in
accordance with the terms of the Securities; or
(vi) the expiration of the term of the Trust provided in
Section 3.14.
(b) As soon as is practicable upon completion of winding up of the
Trust following the occurrence of an event referred to in Section 8.01(a), the
Administrative Trustees shall terminate the Trust by filing a certificate of
cancellation with the Secretary of State of the State of Delaware in accordance
with the Business Trust Act.
(c) The provisions of Section 3.09 and Article 10 shall survive the
termination of the Trust.
ARTICLE 9
TRANSFER OF INTERESTS
SECTION 9.01. Transfer of Securities. (a) Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Agreement and in the terms of the Securities. To the fullest
extent permitted by law, any transfer or purported transfer, sale or other
disposition of any Security not made in accordance with this Agreement shall be
null and void.
(b) Subject to this Article 9, Preferred Securities shall be freely
transferable.
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(c) To the fullest extent permitted by law, the Sponsor may not
transfer the Common Securities except for any transfer (whether voluntarily or
by operation of law) permitted under Article 5 of the Indenture.
(d) Each Security that bears or is required to bear the legend set
forth in this Section 9.01(d) (a "RESTRICTED SECURITY") shall be subject to the
restrictions on transfer provided in the legend set forth in this Section
9.01(d), unless such restrictions on transfer shall be waived by the written
consent of the Administrative Trustees, and the Holder of each Restricted
Security, by such Holder's acceptance thereof, agrees to be bound by such
restrictions on transfer. As used in this Section 9.01(d) and in Section
9.01(f), the terms "transfer" encompasses any sale, pledge, transfer or other
disposition of any Restricted Security.
Prior to the Transfer Restriction Termination Date, any certificate
evidencing a Security shall bear a legend in substantially the following form,
unless otherwise agreed by the Administrative Trustees (with written notice
thereof to the Indenture Trustee):
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2)
AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITIES
EVIDENCED HEREBY EXCEPT (A) TO HERCULES INCORPORATED OR ANY SUBSIDIARY THEREOF,
(B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT OR (C) TO A SECONDARY PURCHASER (AS DEFINED IN THE AMENDED AND
RESTATED TRUST AGREEMENT OF HERCULES TRUST V DATED AS OF NOVEMBER 12, 1998 (AS
AMENDED FROM TIME TO TIME, THE "TRUST AGREEMENT")) THAT HAS ENTERED INTO A
SECONDARY PURCHASE AGREEMENT (AS DEFINED IN THE TRUST AGREEMENT) WITH THE TRUST,
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITIES EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND AND
(4) AGREES, WITH RESPECT TO ANY TRANSFER OCCURRING PRIOR TO THE REMARKETING DATE
ON
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WHICH REPLACEMENT SECURITIES ARE ISSUED, TO PROVIDE TO THE PROPERTY TRUSTEE A
DULY EXECUTED CERTIFICATE SUBSTANTIALLY TO THE EFFECT OF CLAUSES (1), (2) AND
(3), ABOVE. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO THE SALES OF THE SECURITIES EVIDENCED HEREBY UNDER RULE
144(K) UNDER THE SECURITIES ACT.
Following the Transfer Restriction Termination Date, any Security or
Securities issued in exchange or substitution therefor (other than Securities
acquired by the Sponsor or any Affiliate), may upon surrender of such Security
or Securities for exchange to the Trustee in accordance with the provisions of
this Section 9.01(d), be exchanged for a new Security or Securities, as the case
may be, in a like aggregate Liquidation Amount that shall not bear the
restrictive legend required by this Section.
(e) Any Security that, prior to the Transfer Restriction Termination
Date, is purchased or owned by the Sponsor or any Affiliate thereof may not be
resold by the Sponsor or such Affiliate unless registered under the Securities
Act or resold pursuant to an exemption from the registration requirements
thereof that results in such Security no longer being a "restricted security" as
defined under Rule 144 under the Securities Act.
(f) The Preferred Securities may be transferred or exchanged only in
minimum denominations of $100,000 Liquidation Amount and integral multiples of
$1,000 in excess thereof, and any attempted transfer, sale or other disposition
of Preferred Securities in a denomination of less than $100,000 Liquidation
Amount shall be deemed to be void and of no legal effect whatsoever.
(g) The Administrative Trustees shall provide for the registration of
Securities and of the transfer of Securities, which will be effected without
charge but only upon payment (with such indemnity as the Administrative Trustees
may require) in respect of any tax or other governmental charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Securities, the Administrative Trustees shall cause one or more new Securities
to be issued in the name of the designated transferee or transferees. Every
Security surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer in form satisfactory to the
Administrative Trustees duly executed by the Holder or such Holder's attorney
duly authorized in writing. Each Security surrendered for registration of
transfer shall be canceled by the Administrative Trustees. A transferee of a
Security shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Security. By
acceptance of a Security, each transferee shall be deemed to have agreed to be
bound by this Agreement.
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SECTION 9.02. Transfer Procedures and Restrictions. (a) When Definitive
Preferred Securities are presented to the Registrar:
(x) to register the transfer of such Definitive Preferred
Securities; or
(y) to exchange such Definitive Preferred Securities which
became mutilated, destroyed, defaced, stolen or lost, for an equal
Liquidation Amount of Definitive Preferred Securities,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Preferred Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form reasonably satisfactory to the Property Trustee and the Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing and
comply with Section 9.01(d) herein.
(b) Transfer of a Definitive Preferred Security for a Beneficial
Interest in a Global Preferred Security. Upon receipt by the Property Trustee of
a Definitive Preferred Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Property Trustee, and in
compliance with restrictions under Section 9.01(d), together with written
instructions directing the Property Trustee to make, or to direct the Depository
to make, an adjustment on its books and records with respect to the Global
Preferred Security to reflect an increase in the Liquidation Amount of the
Preferred Securities represented by such Global Preferred Security, then the
Property Trustee shall cancel such Definitive Preferred Security and cause, or
direct the Depository to cause, the aggregate Liquidation Amount of Preferred
Securities represented by the appropriate Global Preferred Security to be
increased accordingly. If no Global Preferred Securities are then outstanding,
an Administrative Trustee shall execute on behalf of the Trust shall issue and
the Property Trustee shall authenticate, upon written order of any
Administrative Trustee, a Global Preferred Security representing an appropriate
Liquidation Amount of Preferred Securities.
(c) Transfer and Exchange of Global Preferred Securities. Subject to
Section 9.01(d) and Section 9.02(d), the transfer and exchange of Global
Preferred Securities or beneficial interests therein shall be effected through
the Depository, in accordance with this Agreement and the procedures of the
Depository therefor.
(d) Transfer of a Beneficial Interest in a Global Preferred Security
for a Definitive Preferred Security.
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(i) A Global Preferred Security deposited with the Depository
or with the Property Trustee as custodian for the Depository pursuant
to Section 7.03 shall be transferred to the beneficial owners thereof
in the form of Definitive Preferred Securities only if such transfer
complies with Sections 9.01(d), 9.02(c) and 9.02(e) and (A) the
Depository notifies the Trust that it is unwilling or unable to
continue as Depository for such Global Preferred Security or if at any
time such Depository ceases to be a "clearing agency" registered under
the Exchange Act and, in each case, a depository is not appointed by
the Sponsor within 90 days of receipt of such notice or of becoming
aware of such condition, (B) a Default or an Event of Default has
occurred and is continuing or (C) the Administrative Trustees, on
behalf of the Trust, at its sole discretion elects to cause the
issuance of Definitive Preferred Securities.
(ii) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of Definitive Preferred
Securities pursuant to this Section 9.02(d) shall be surrendered by the
Depository to the Property Trustee to be so transferred, in whole or
from time to time in part, without charge, and the Property Trustee
shall authenticate and make available for delivery, upon such transfer
of each portion of such Global Preferred Security, an equal aggregate
Liquidation Amount of Securities of authorized denominations in the
form of Definitive Preferred Securities. Any portion of a Global
Preferred Security transferred pursuant to this Section shall be
registered in such names as the Depository shall direct.
(iii) In the event of the occurrence of any of the events
specified in Section 9.02(d)(i) above, the Administrative Trustees will
promptly make available to the Property Trustee a reasonable supply of
Definitive Preferred Securities in fully registered form without
Distribution coupons.
(e) Restrictions on Transfer and Exchange of Global Preferred
Securities. Notwithstanding any other provisions of this Agreement (other than
the provisions set forth in Section 9.01(d) and 9.02(d)), a Global Preferred
Security may not be transferred as a whole except by the Depository to a nominee
of the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such successor
Depository.
(f) Cancellation or Adjustment of Global Preferred Security. At such
time as all beneficial interests in a Global Preferred Security have either been
exchanged for Definitive Preferred Securities to the extent permitted by this
Agreement or redeemed, repurchased or canceled in accordance with the terms of
this Agreement, such Global Preferred Security shall be returned to the
Depository for cancellation
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or retained and canceled by the Property Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Preferred Security is
exchanged for Definitive Preferred Securities, Preferred Securities represented
by such Global Preferred Security shall be reduced and an adjustment shall be
made on the books and records of the Property Trustee (if it is then the
custodian for such Global Preferred Security) with respect to such Global
Preferred Security, by the Property Trustee or the Securities Custodian, to
reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of Preferred
Securities.
(i) To permit registrations of transfers and exchanges, an
Administrative Trustee shall execute and the Property Trustee shall
authenticate Definitive Preferred Securities and Global Preferred
Securities at the Registrar's request in accordance with the terms of
this Agreement.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Trust
or the Sponsor may require) in respect of any tax or other governmental
charge that may be imposed in relation to it.
(iii) The Registrar shall not be required to register the
transfer of or exchange of (A) Preferred Securities during a period
beginning at the opening of business 15 days before the day of mailing
of a notice of redemption or any notice of selection of Preferred
Securities for redemption and ending at the close of business on the
day of such mailing; or (B) any Preferred Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Preferred Security being redeemed in part.
(iv) All Preferred Securities issued upon any registration of
transfer or exchange pursuant to the terms of this Agreement shall
evidence the same security and shall be entitled to the same benefits
under this Agreement as the Preferred Securities surrendered upon such
registration of transfer or exchange.
(h) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Preferred Security, a
Participant in the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
Participant thereof, with respect to any ownership interest in the
Preferred Securities or with respect to the delivery to any
Participant, beneficial owner or other Person (other than the
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Depository) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Preferred
Securities. All notices and communications to be given to the Holders
and all payments to be made to Holders under the Preferred Securities
shall be given or made only to or upon the order of the Holders (which
shall be the Depository or its nominee in the case of a Global
Preferred Security). The rights of beneficial owners in any Global
Preferred Security shall be exercised only through the Depository
subject to the applicable rules and procedures of the Depository. The
Property Trustee may conclusively rely and shall be fully protected in
relying upon information furnished by the Depository or any agent
thereof with respect to its Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no obligation or
duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Agreement or under
applicable law with respect to any transfer of any interest in any
Preferred Security (including any transfers between or among
Participants or beneficial owners in any Global Preferred Security)
other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Agreement, and to
examine the same to determine substantial compliance as to form with
the express requirements hereof.
SECTION 9.03. Deemed Security Holders. The Trust, the Trustees, the
Registrar and the Paying Agent may treat the Person in whose name any Security
shall be registered on the books and records of the Trust as the sole owner and
Holder of such Security for purposes of receiving Distributions and for all
other purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Security on the part of any
Person other than such Holder, regardless of any notice to the contrary.
SECTION 9.04. Book Entry Interests. (a) Unless and until Definitive
Preferred Securities have been issued to the Preferred Security Beneficial
Owners pursuant to Section 9.02:
(i) the provisions of this Section 9.04 shall be in full force
and effect;
(ii) the Trust and the Trustees shall be entitled to deal with
the Depository for all purposes of this Agreement (including the
payment of Distributions on the Global Preferred Securities and
receiving approvals, votes or consents hereunder) as the Holder of the
Preferred Securities and the
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sole Holder of the Global Preferred Securities and shall have no
obligation to the Preferred Security Beneficial Owners;
(iii) to the extent that the provisions of this Section 9.04
conflict with any other provisions of this Agreement, the provisions of
this Section 9.04 shall control; and
(iv) the rights of the Preferred Security Beneficial Owners
shall be exercised only through the Depository and shall be limited to
those established by law and agreements between such Preferred Security
Beneficial Owners and the Depository and/or the Participants, including
receiving and transmitting payments of Distributions on the Global
Certificates to such Participants. The Depository will make book entry
transfers among the Participants.
(b) Any Global Preferred Security may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Agreement as may be required by the
Depository, by any exchange or by the National Association of Securities
Dealers, Inc. in order for the Preferred Securities to be tradeable on the
PORTAL Market or as may be required for the Preferred Securities to be tradeable
on any other market developed for trading of securities pursuant to Rule 144A or
required to comply with any applicable law or any regulation thereunder or with
the rules and regulations of any securities exchange upon which the Preferred
Securities may be listed or traded or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any
particular Preferred Securities are subject.
SECTION 9.05. Notices to Depository. Whenever a notice or other
communication to the Holders of Preferred Securities is required to be given by
a Trustee under this Agreement, such Trustee shall give all such notices and
communications specified herein to be given to the Holders of Global Preferred
Securities to the Depository and shall have no notice obligations to the
Preferred Security Beneficial Owners.
SECTION 9.06. Appointment of Successor Depository. If any Depository
elects to discontinue its services as securities depositary with respect to the
Preferred Securities, the Administrative Trustees may, in their sole discretion,
appoint a successor Depository with respect to the Preferred Securities.
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ARTICLE 10
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.01. Liability.
(a) Except as expressly set forth in this Agreement, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and obligations
of the Trust (other than with respect to the Securities) to the extent not
satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of the Preferred Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 10.02. Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Trust or any Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by this
Agreement or by law, except that this provision will not be deemed to modify
Section 3.09.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
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SECTION 10.03. Fiduciary Duty. (a) To the extent that, at law or in
equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Agreement shall not be liable to the Trust
or to any other Covered Person for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity (other than the duties imposed on the Property Trustee under
the Trust Indenture Act), are agreed by the parties hereto to replace such other
duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
any Covered Person and any Indemnified Person; or
(ii) whenever this Agreement or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement, transaction
or situation and the benefits and burdens relating to such interests, any
customary or accepted industry practices, and any applicable generally accepted
accounting practices or principles. In the absence of bad faith by the
Indemnified Person, the resolution, action or term so made, taken or provided by
the Indemnified Person shall not constitute a breach of this Agreement or any
other agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Agreement an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be
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subject to any other or different standard imposed by this Agreement or
by applicable law.
SECTION 10.04. Indemnification.
(a) (i) The Sponsor shall indemnify, to the full extent permitted by
law, any Company Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Trust) by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Company Indemnified Person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Trust to procure a judgment in
its favor by reason of the fact that he is or was a Company Indemnified
Person against expenses (including attorneys' fees and expenses)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust
unless and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such Company Indemnified Person is
fairly and reasonably entitled to indemnity for such expenses which
such Court of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
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liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.04(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to the full
extent permitted by law, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.04(a) (unless ordered by a court) shall be made by the
Sponsor only as authorized in the specific case upon a determination
that indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1)
by the Administrative Trustees by a majority vote of a Quorum
consisting of such Administrative Trustees who were not parties to such
action, suit or proceeding, (2) if such a Quorum is not obtainable, or,
even if obtainable, if a Quorum of disinterested Administrative
Trustees so directs, by independent legal counsel in a written opinion,
or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) incurred
by a Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred to
in Sections 10.04(a)(i) and 10.04(a)(ii) shall be paid by the Sponsor
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Sponsor as
authorized in this Section 10.04(a). Notwithstanding the foregoing, no
advance shall be made by the Sponsor if a determination is reasonably
and promptly made (A) by the Administrative Trustees by a majority vote
of a Quorum of disinterested Administrative Trustees, (B) if such a
Quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Administrative Trustees so directs, by independent legal
counsel in a written opinion or (C) by the Common Security Holder of
the Trust, that, based upon the facts known to the Administrative
Trustees, counsel or the Common Security Holder at the time such
determination is made, such Company Indemnified Person acted in bad
faith or in a manner that such Person did not believe to be in or not
opposed to the best interests of the Trust, or, with respect to any
criminal proceeding, that such Company Indemnified Person believed or
had reasonable cause to believe his conduct was unlawful. In no event
shall any advance be made in instances where the Administrative
Trustees, independent legal counsel or Common Security Holder
reasonably determine that such person deliberately breached his duty to
the Trust or its Common or Preferred Security Holders.
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(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section
10.04(a) shall not be deemed exclusive of any other rights to which
those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Sponsor or Preferred Security Holders of the Trust or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office. All rights to
indemnification under this Section 10.04(a) shall be deemed to be
provided by a contract between the Sponsor and each Company Indemnified
Person who serves in such capacity at any time while this Section
10.04(a) is in effect. Any repeal or modification of this Section
10.04(a) shall not affect any rights or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any Person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or
not the Sponsor would have the power to indemnify him against such
liability under the provisions of this Section 10.04(a).
(viii) For purposes of this Section 10.04(a), references to
"THE TRUST" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person
who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.04(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.04(a) shall, unless
otherwise provided when authorized or ratified, continue as to a Person
who has ceased to be a Company Indemnified Person and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the
Delaware Trustee, (iii) any Affiliate of the Property Trustee and the Delaware
Trustee, and (iv) any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Property
Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being
referred to as a "FIDUCIARY INDEMNIFIED PERSON") for, and to hold each Fiduciary
Indemnified
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Person harmless against, any and all loss, liability, damage, claim or expense
including taxes (other than taxes based on the income of such Fiduciary
Indemnified Person) incurred without gross negligence, bad faith or willful
misconduct on its part (or such other standard otherwise provided, in the case
of the Property Trustee, in the Trust Indenture Act), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder with respect to the Property Trustee, this provision shall not be
deemed to modify Section 3.09(b) or the Trust Indenture Act. The obligation to
indemnify as set forth in this Section 10.04(b) shall survive the resignation or
removal of the Property Trustee or the Delaware Trustee and the satisfaction and
discharge of this Agreement.
SECTION 10.05. Outside Businesses. Any Covered Person, the Sponsor, the
Delaware Trustee and the Property Trustee subject to Section 5.03 may engage in
or possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Securities shall have no rights by
virtue of this Agreement in and to such independent ventures or the income or
profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Property
Trustee shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and any Covered Person, the
Sponsor, the Delaware Trustee and the Property Trustee shall have the right to
take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.
ARTICLE 11
ACCOUNTING
SECTION 11.01. Fiscal Year. The fiscal year ("FISCAL YEAR") of the
Trust shall be the calendar year, or such other year as is required by the Code.
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SECTION 11.02. Certain Accounting Matters. (a) At all times during the
existence of the Trust, the Administrative Trustees shall keep, or cause to be
kept, full books of account, records and supporting documents, which shall
reflect in reasonable detail, each transaction of the Trust. The books of
account shall be maintained on the accrual method of accounting, in accordance
with generally accepted accounting principles, consistently applied. The Trust
shall use the accrual method of accounting for United States Federal income tax
purposes. The books of account and the records of the Trust shall be examined by
and reported upon as of the end of each Fiscal Year of the Trust by a firm of
independent certified public accountants selected by the Administrative
Trustees.
(b) The Administrative Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss.
(c) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders of Securities, any annual United States Federal
income tax information statement, required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Administrative Trustees shall
endeavor to deliver all such information statements within 60 days after the end
of each Fiscal Year of the Trust.
(d) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States Federal
income tax return, as a grantor trust, on a Form 1041 or such other form
required by United States Federal income tax law, and any other annual income
tax returns required to be filed by the Administrative Trustees on behalf of the
Trust with any state or local taxing authority.
SECTION 11.03. Banking. The Trust shall maintain one or more bank
accounts in the name and for the sole benefit of the Trust; provided, however,
that all payments of funds in respect of the Subordinated Notes held by the
Property Trustee shall be made directly to the Property Trustee Account and no
other funds of the Trust shall be deposited in the Property Trustee Account. The
sole signatories for such accounts shall be designated by the Administrative
Trustees; provided, however, that the Property Trustee shall designate the
signatories for the Property Trustee Account.
SECTION 11.04. Withholding. The Trust and the Administrative Trustees
shall comply with all withholding requirements under United States Federal,
state
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and local law. The Administrative Trustees, on behalf of the Trust, shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Administrative Trustees to assist them in determining the extent of, and in
fulfilling, the Trust's withholding obligations. The Administrative Trustees
shall file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the extent
that the Trust is required to withhold and pay over any amounts to any authority
with respect to Distributions or allocations to any Holder, the amount withheld
shall be deemed to be a Distribution in the amount of the withholding to the
Holder. In the event of any claim of excess withholding, Holders shall be
limited to an action against the applicable jurisdiction. If the amount required
to be withheld was not withheld from actual Distributions made, the Trust may
reduce subsequent Distributions by the amount of such withholding.
ARTICLE 12
AMENDMENTS AND MEETINGS
SECTION 12.01. Amendments. (a) Except as otherwise provided in this
Agreement or by any applicable terms of the Securities, this Agreement may only
be amended by a written instrument approved and executed by:
(i) the Sponsor and the Administrative Trustees (or, if there
are more than two Administrative Trustees, a majority of the
Administrative Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property
Trustee; and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
(b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers' Certificate
from each of the Trust and the Sponsor that such amendment is permitted
by, and conforms to, the terms of this Agreement (including the terms
of the Securities);
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(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust and
the Sponsor that such amendment is permitted by, and conforms
to, the terms of this Agreement (including the terms of the
Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust) that such amendment is permitted by, and
conforms to, the terms of this Agreement (including the terms
of the Securities) and that all conditions precedent to the
execution and delivery of such amendment have been satisfied;
and
(iii) to the extent the result of such amendment would:
(A) cause the Trust to fail to be classified for purposes
of United States Federal income taxation as a grantor trust;
(B) reduce or otherwise adversely affect the powers of
the Property Trustee in contravention of the Trust Indenture
Act; or
(C) cause the Trust to be deemed to be an Investment
Company required to be registered under the Investment Company
Act.
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder of the Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
provided, however, that, without the consent of each Holder of the Securities,
this Agreement may not be amended to (i) change the Distribution Rate (or manner
of calculation of the Distribution Rate), amount, timing or currency or
otherwise adversely affect the method of any required payment, (ii) change the
purposes of the Trust, (iii) authorize the issuance of any additional beneficial
interests in the Trust, (iv) change the redemption provisions, (v) change the
conditions precedent for the Sponsor to elect to dissolve the Trust and
distribute the Subordinated Notes to the Holders of the Securities, (vi) change
the Liquidation Distribution or other provisions relating to the distribution of
amounts payable upon the dissolution and liquidation of the Trust, (vii) affect
the limited liability of any Holder of the Securities or (viii) restrict the
right of a Holder of the Securities to institute suit for the enforcement of any
required payment on or after the due date therefor (or, in the case of a
redemption, on the redemption date).
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(d) Article 6, Section 9.01(c) and this Section 12.01 shall not be
amended without the consent of all of the Holders of the Securities.
(e) Article 4 shall not be amended without the consent of the Holders
of a Majority in Liquidation Amount of the Common Securities.
(f) The rights of the Holders of the Common Securities under Article 5
to increase or decrease the number of, and to appoint and remove, Trustees shall
not be amended without the consent of the Holders of a Majority in Liquidation
Amount of the Common Securities.
(g) Notwithstanding Section 12.01(c), this Agreement may be amended by
the Sponsor and the Trustees without the consent of the Holders of the
Securities to:
(i) cure any ambiguity, correct or supplement any provision in
this Agreement that may be inconsistent with any other provision of
this Agreement or to make any other provisions with respect to matters
or questions arising under this Agreement not inconsistent with any
other provisions of this Agreement; and
(ii) modify, eliminate or add to any provisions of this
Agreement to such extent as shall be necessary to ensure that the Trust
will be classified for United States Federal income tax purposes as a
grantor trust at all times that any Securities are outstanding or to
ensure that the Trust will not be required to register as an Investment
Company under the Investment Company Act;
provided, however, that, in each case, such action shall not adversely
affect in any material respect the interests of the Holders of the Securities,
and any such amendments of this Agreement shall become effective when notice
thereof is given to the Holders of the Securities.
SECTION 12.02. Meetings of the Holders of Securities; Action by Written
Consent. (a) Meetings of the Holders of any class of Securities may be called at
any time by the Administrative Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Agreement, the terms of
the Securities or the rules of any stock exchange or quotation system or market
on which the Preferred Securities are listed or admitted for trading. The
Administrative Trustees shall call a meeting of the Holders of such class if
directed to do so by the Holders of at least 10% in Liquidation Amount of the
Securities of such class. Such direction shall be given by delivering to the
Administrative Trustees one or more notices in a writing stating that the
signing Holders of Securities wish to call a meeting and indicating the
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general or specific purpose for which the meeting is to be called. Any Holders
of Securities calling a meeting shall specify in writing the certificates held
by the Holders of Securities exercising the right to call a meeting and only
those Securities specified shall be counted for purposes of determining whether
the required percentage set forth in the second sentence of this paragraph has
been met.
(b) Whenever a vote, consent or approval of the Holders of Securities
is permitted or required under this Agreement or the rules of any stock exchange
or quotation system or market on which the Preferred Securities are listed or
admitted for trading, such vote, consent or approval may be given at a meeting
of the Holders of Securities. Any action that may be taken at a meeting of the
Holders of Securities may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the Holders of Securities owning
not less than the minimum amount of Securities in Liquidation Amount that would
be necessary to authorize or take such action at a meeting at which all Holders
of Securities having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the Holders
of Securities entitled to vote who have not consented in writing.
(c) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least seven
days and not more than 60 days before the date of such meeting. The
Administrative Trustees may specify that any written ballot submitted
to the Security Holders for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by the
Administrative Trustees;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of eleven months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Holder of Securities executing it. Except as otherwise provided
herein, all matters relating to the giving, voting or validity of
proxies shall be governed by the General Corporation Law of the State
of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Holders
of the Securities were stockholders of a Delaware corporation;
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(iii) each meeting of the Holders of the Securities shall be
conducted by the Administrative Trustees or by such other Person that
the Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Agreement, the terms
of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange or quotation system or market on which the Preferred
Securities are then listed or trading, otherwise provides, the
Administrative Trustees, in their sole discretion, shall establish all
other provisions relating to meetings of Holders of Securities,
including notice of the time, place or purpose of any meeting at which
any matter is to be voted on by any Holders of Securities, waiver of
any such notice, action by consent without a meeting, the establishment
of a record date, quorum requirements, voting in person or by proxy or
any other matter with respect to the exercise of any such right to
vote.
SECTION 12.03. Power of Attorney. Each Holder by acceptance of the
Preferred Securities hereby irrevocably constitutes and appoints the Remarketing
Agent and each of its officers as such person's true and lawful representative
and attorney-in-fact, with full power and authority in such person's name, place
and stead to make, execute, acknowledge, deliver, swear to, record and file with
respect to the Preferred Securities any and all instruments, documents and
certificates which, from time to time, may be required in connection with the
Remarketing and to take any other action which the Remarketing Agent may deem
necessary or appropriate, in its discretion, in connection with Remarketing the
Preferred Securities. This power of attorney is coupled with an interest and
shall continue in full force and effect and shall not be affected by the
subsequent death, disability, insolvency, bankruptcy, termination or incapacity
of a Holder and may be exercised by an officer of the Remarketing Agent signing
individually for any Holder or for all Holders executing any particular
instrument.
ARTICLE 13
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.01. Representations and Warranties of Property Trustee. The
Trustee that acts as initial Property Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Agreement, and each Successor
Property Trustee represents and warrants, as applicable, to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
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(a) the Property Trustee is a banking corporation, a national banking
association or a bank or trust company, duly organized, validly existing and in
good standing under the laws of the United States or a State of the United
States, as the case may be, with corporate power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, this
Agreement;
(b) the execution, delivery and performance by the Property Trustee of
the Agreement have been duly authorized by all necessary corporate action on the
part of the Property Trustee. The Agreement has been duly executed and delivered
by the Property Trustee under New York law and constitutes a legal, valid and
binding obligation of the Property Trustee, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);
(c) the execution, delivery and performance of this Agreement by the
Property Trustee do not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee; and
(d) no consent, approval or authorization of, or registration with or
notice to, any federal or New York State banking authority is required for the
execution, delivery or performance by the Property Trustee of this Agreement.
SECTION 13.02. Representations and Warranties of Delaware Trustee. The
Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Agreement, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:
(a) the Delaware Trustee is a banking corporation, a national banking
association or a bank or trust company, duly organized, validly existing and in
good standing under the laws of the United States or the State of Delaware, as
the case may be, with corporate power and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, this Agreement;
(b) the execution, delivery and performance by the Delaware Trustee of
this Agreement have been duly authorized by all necessary corporate action on
the part of the Delaware Trustee. This Agreement has been duly executed and
delivered by the Delaware Trustee under Delaware law and constitutes a legal,
valid and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of
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equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Agreement by the
Delaware Trustee do not conflict with or constitute a breach of the charter or
by-laws of the Delaware Trustee;
(d) no consent, approval or authorization of, or registration with or
notice to, any Federal or Delaware banking authority governing the trust powers
of the Delaware Trustee is required for the execution, delivery or performance
by the Delaware Trustee of this Agreement; and
(e) the Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware, and is a Person that satisfies for
the Trust Section 3807(a) of the Business Trust Act.
ARTICLE 14
MISCELLANEOUS
SECTION 14.01. Notices. All notices provided for in this Agreement
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrative Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders of the Securities):
Hercules Trust V
c/o Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Attention: Vice President and Treasurer of Sponsor
Telephone: (302) 594-5000
Telecopier: (302) 594-5210
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Hercules Trust V
c/o Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Attention: Corporate Secretary of Sponsor
Telephone: (302) 594-5000
Telecopier: (302) 594-7251
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Corporate Trust Department
Telecopier: (302) 984-4903
Telephone: (302) 428-3372
(c) if given to the Property Trustee, at the Property Trustee's
mailing address set forth below (or such other address as the Property Trustee
may give notice of to the Holders of the Securities):
The Chase Manhattan Bank
One Liberty Place, 52nd Floor
1650 Market Street
Philadelphia, Pennsylvania 19103
Attention: Corporate Trust Department
Telecopier: (215) 988-8372
Telephone: (215) 988-1329
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Attention: Vice President and Treasurer of Sponsor
Telephone: (302) 594-5000
Telecopier: (302) 594-5210
Hercules Incorporated
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Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Attention: Corporate Secretary of Hercules
Telephone: (302) 594-5000
Telecopier: (302) 594-7251
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 14.02. Governing Law. This Agreement and the rights of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware and all rights and remedies shall be governed by such
laws without regard to principles of conflict of laws.
SECTION 14.03. Intention of the Parties. It is the intention of the
parties hereto that the Trust be classified for United States Federal income tax
purposes as a grantor trust. The provisions of this Agreement shall be
interpreted to further this intention of the parties.
SECTION 14.04. Headings. The Table of Contents and headings contained
in this Agreement are inserted for convenience of reference only and do not
affect the interpretation of this Agreement or any provision hereof.
SECTION 14.05. Successors and Assigns. Whenever in this Agreement any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Agreement by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether so expressed.
SECTION 14.06. Partial Enforceability. If any provision of this
Agreement, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Agreement, or the application of
such provision to Persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 14.07. Counterparts. This Agreement may contain more than one
counterpart of the signature page and this Agreement may be executed by the
affixing
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of the signature of each of the Trustees to one of such counterpart signature
pages. All of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
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IN WITNESS WHEREOF, the undersigned have caused this Amended and
Restated Trust Agreement to be executed as of the day and year first above
written.
Israel J. Floyd, not in his individual
capacity but solely as
Administrative Trustee of the
Trust
/s/ Israel J. Floyd
Jan M. King, not in her individual
capacity but solely as
Administrative Trustee of the
Trust
/s/ Jan M. King
Stuart C. Shears, not in his
individual capacity but solely as
Administrative Trustee of the
Trust
/s/ Stuart C. Shears
CHASE MANHATTAN BANK
DELAWARE, not in its
individual capacity but solely as
Delaware Trustee of the Trust
By: /s/ Denis Kelly
Name: Denis Kelly
Title: Trust Officer
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THE CHASE MANHATTAN
BANK, not in its individual
capacity but solely as Property
Trustee of the Trust
By: /s/ J D Heaney
Name: James D Heaney
Title: Vice President
HERCULES INCORPORATED,
as Sponsor
By: /s/ R. K Elliott
Name: R. Keith Elliott
Title: Chairman and Co-Chief
Executive Officer
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ANNEX I
TERMS OF
AUCTION RATE RESET PREFERRED SECURITIES
AUCTION RATE RESET COMMON SECURITIES
Pursuant to Section 7.01 of the Amended and Restated Trust Agreement,
dated as of November 12, 1998 (as amended from time to time, the "AGREEMENT"),
the designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Preferred Securities and the Common Securities
(collectively, the "SECURITIES") are set out below (each capitalized term used
but not defined herein has the meaning set forth in the Agreement or, if not
defined in such Agreement, as defined in the Indenture):
1. Designation and Number.
(a) Preferred Securities. 200,000 Auction Rate Reset Preferred
Securities of the Trust, with an aggregate Liquidation Amount with respect to
the assets of the Trust of Two Hundred Million dollars ($200,000,000), and with
a Liquidation Amount with respect to the assets of the Trust of $1,000 per
security, are hereby designated for the purposes of identification only as
"PREFERRED SECURITIES" (the "PREFERRED SECURITIES"). The Preferred Securities
shall be issued only in minimum denominations of $100,000 Liquidation Amount and
in integral multiples of $1,000 in excess thereof. The certificates evidencing
the Preferred Securities shall initially be substantially in the form of Exhibit
A-1 to the Agreement and upon transfer pursuant to a successful Remarketing,
shall be substantially in the form of Exhibit A-3 to the Agreement, with such
changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice or to conform to the rules of any stock
exchange or quotation system on which the Preferred Securities are listed or
quoted.
(b) Common Securities. 6,200 Auction Rate Reset Common Securities of
the Trust with an aggregate Liquidation Amount with respect to the assets of the
Trust of Six Million Two Hundred Thousand dollars ($6,200,000), and with a
Liquidation Amount with respect to the assets of the Trust of $1,000 per
security, are hereby designated for the purposes of identification only as
"COMMON SECURITIES" (the "COMMON SECURITIES"). The certificates evidencing the
Common Securities shall be substantially in the form of Exhibit A-2 to the
Agreement, with such changes and additions thereto or deletions therefrom as may
be required by ordinary usage, custom or practice.
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2. Distributions.
(a) Distributions with respect to the Liquidation Amount of $1,000 per
Security (the "LIQUIDATION AMOUNT") of each Security will accrue and be payable
at a rate (the "DISTRIBUTION RATE") (such rate being the rate of interest
payable on the Subordinated Notes to be held by the Property Trustee) per annum
equal to
(i) from and including the date of issuance to but excluding
the date such Securities are redeemed, LIBOR plus 175 basis points,
compounded quarterly;
(ii) from and including the Remarketing Settlement Date on
which Replacement Securities are issued to but excluding the date such
Securities are redeemed, the Winning Bid Rate, compounded quarterly;
and
(iii) notwithstanding clauses (i) and (ii) above, if the
Securities are not redeemed because the Company fails to pay the
principal amount of the Subordinated Notes on the date such amount
becomes due, then from and including such due date to but excluding the
date the Securities are redeemed, the Default Rate, compounded
quarterly, but only to the extent permitted by applicable law.
Distributions that are not paid when due will bear additional distributions
thereon compounded quarterly at the applicable periodic Distribution Rate
specified above (to the extent permitted by applicable law). Distributions are
payable if and to the extent the Subordinated Note Issuer makes a payment of
Additional Interest (as defined in the Indenture) upon the occurrence of certain
events specified in the Indenture. The term "DISTRIBUTIONS", as used herein,
includes any such additional distributions unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Subordinated Notes held by the Property Trustee and to the extent the
Property Trustee has funds on hand legally available therefor.
(b) Until the Remarketing Settlement Date on which Replacement
Securities are issued, Distributions on the Securities will be cumulative, will
be payable quarterly in arrears on February 12, May 12, August 12 and November
12 of each year, commencing February 12, 1999, and on such Remarketing
Settlement Date (each, a "PRE-REMARKETING DISTRIBUTION DATE"), will accumulate
from and including the most recent date to which Distributions have been paid
or, if no Distributions have been paid, from November 12, 1998, to but excluding
the related Pre-Remarketing Distribution Date, except as otherwise described
below.
The Distribution Rate in effect for the period from and including
November 12, 1998 to but excluding February 12, 1999 shall be the rate
determined by the Calculation Agent two London Banking Days prior to November
12, 1998 and shall equal LIBOR plus 175 basis points. The Distribution Rate in
effect thereafter, for
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each quarterly period from and including the immediately preceding
Pre-Remarketing Distribution Date to but excluding the applicable
Pre-Remarketing Distribution Date, shall be determined by the Calculation Agent
two London Banking Days prior to such immediately preceding Pre-Remarketing
Distribution Date and shall equal LIBOR plus 175 basis points. The amount of
Distributions payable for any quarterly period shall be computed on the basis of
a 360-day year of twelve 30-day months. Except as provided in the last sentence
of this paragraph, the amount of Distributions payable for any period shorter
than a full quarterly period for which Distributions are computed will be
computed on the basis of the actual number of days elapsed per 30-day month. If
a Pre-Remarketing Distribution Date is not a Business Day, then such
Pre-Remarketing Distribution Date will be the next succeeding Business Day,
except if such Business Day is in the next succeeding calendar month, such
Pre-Remarketing Distribution Date will be the immediately preceding Business
Day.
As used herein, "LONDON BANKING DAY" means any day on which dealings in
deposits in U.S. Dollars are transacted in the London interbank market.
(c) From and including the Remarketing Settlement Date on which
Replacement Securities are issued, Distributions on the Replacement Securities
and on the Common Securities will be cumulative, will be payable quarterly in
arrears on February 12, May 12, August 12 and November 12 of each year,
commencing on the Remarketing Settlement Date, and on the Mandatory Redemption
Date (each, a "DISTRIBUTION DATE"), will accumulate from the most recent date to
which Distributions have been paid or, if no Distributions have been paid, from
and including the Remarketing Settlement Date, to but excluding the related
Distribution Date, except as otherwise described below. The amount of
Distributions payable for any quarterly period shall be computed on the basis of
a 360-day year of twelve 30-day months. Except as provided in the last sentence
of this paragraph, the amount of Distributions payable for any period shorter
than a full quarterly period for which Distributions are computed will be
computed on the basis of the actual number of days elapsed per 30-day month. If
a Distribution Date is not a Business Day, then such Distribution Date will be
the next succeeding Business Day, except if such Business Day is in the next
succeeding calendar month, such Distribution Date will be the immediately
preceding Business Day.
(d) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the fifteenth
day prior to each Pre-Remarketing Distribution Date or Distribution Date, as the
case may be. Subject to any applicable laws and regulations and the provisions
of the Agreement, each such payment in respect of the Preferred Securities will
be made in respect of any global certificate representing Securities, to the
Depository (or other applicable Depository), which shall credit the relevant
accounts at the Depository (or such other Depository) on the applicable payment
dates, or in respect of Securities in certified form, by check mailed to the
address of the Holder entitled thereto as such address
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shall appear on the register; provided, however, that at the written request of
any Holder of at least $10,000,000 aggregate Liquidation Amount of Preferred
Securities received by the Property Trustee not later than the fifteenth day
prior to the applicable Pre-Remarketing Distribution Date or Distribution Date,
Distributions accrued on such Preferred Securities will be payable by wire
transfer within the continental United States in immediately available funds to
the bank account number of such holder specified in such request. The relevant
record dates for the Common Securities shall be the same as the record dates for
the Preferred Securities. Distributions payable on any Securities that are not
punctually paid on any Distribution Date, as a result of the Subordinated Note
Issuer having failed to make a payment under the Subordinated Notes, will cease
to be payable to the Holder on the relevant record date, and such defaulted
Distributions will instead be payable to the Person in whose name such
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture.
(e) The Distribution Rate on the Trust Securities (as well as the
interest rate on the Subordinated Notes) shall be reset in the manner provided
in Section 6.03 of the Agreement and in the Indenture.
(f) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. Remarketing.
The Preferred Securities shall be remarketed in accordance with the
provisions of Article 6 of the Agreement.
FROM AND AFTER THE REMARKETING SETTLEMENT DATE ON WHICH REPLACEMENT
SECURITIES ARE ISSUED, THIS CERTIFICATE SHALL REPRESENT ONLY THE RIGHT TO
RECEIVE THE REMARKETING PRICE, AS PROVIDED IN THE TRUST AGREEMENT, AND SHALL NO
LONGER REPRESENT AN OBLIGATION OF OR INTEREST IN THE TRUST.
4. Liquidation Distribution Upon Dissolution.
In the event of any dissolution of the Trust, the Trust shall be
liquidated by the Administrative Trustees as expeditiously as the Administrative
Trustees determine to be possible by distributing pursuant to Section 5, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, to the Holders of the Securities a Like Amount (as defined below) of the
Subordinated Notes, unless such distribution is determined by the Property
Trustee not to be practicable, in which event such Holders will be entitled to
receive out of the assets of the Trust legally available for distribution to
Holders, after satisfaction of liabilities to creditors of the Trust as provided
by applicable law, an amount equal to the aggregate of the
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Liquidation Amount of $1,000 per Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "LIQUIDATION
DISTRIBUTION").
"LIKE AMOUNT" means (i) with respect to a redemption of the Securities,
Securities having a Liquidation Amount equal to the principal amount of
Subordinated Notes to be paid in accordance with their terms and (ii) with
respect to a distribution of Subordinated Notes upon the dissolution of the
Trust, Subordinated Notes having a principal amount equal to the Liquidation
Amount of the Securities of the Holder to whom such Subordinated Notes are
distributed.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets on hand legally available
to pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
5. Redemption and Distribution.
(a) Upon the repayment of the Subordinated Notes in whole or in part,
at maturity or upon acceleration or redemption, the proceeds from such repayment
shall be simultaneously applied by the Property Trustee to redeem a Like Amount
of the Securities at the Mandatory Redemption Price (as defined below). In the
case of an early redemption pursuant to a Special Event, Holders will be given
not less than 30 nor more than 60 days notice of such redemption. Any redemption
of Securities shall be made, and the Mandatory Redemption Price shall be
payable, on the applicable redemption date, and only to the extent that the
Trust has funds legally available for the payment thereof.
(b) The "MANDATORY REDEMPTION PRICE" shall mean a price equal to 100%
of the Liquidation Amount of the Securities to be redeemed plus accumulated and
unpaid Distributions thereon, if any, to the date of redemption.
(c) If at any time a Tax Event or Investment Company Event (each as
defined in the Trust Agreement) (a "SPECIAL EVENT") occurs, the Subordinated
Note Issuer shall have the right (subject to the conditions set forth in the
Indenture) at any time, upon not less than 30 nor more than 60 days notice, to
redeem the Subordinated Notes in whole, but not in part, within the 90 days
following the occurrence of such Special Event (the "90 DAY PERIOD"), and,
simultaneous with such redemption, to cause a Like Amount of the Securities to
be redeemed by the Trust at the Mandatory Redemption Price on a Pro Rata basis.
(d) On and from the date fixed by the Administrative Trustees for any
distribution of Subordinated Notes and liquidation of the Trust: (i) the
Securities will no longer be deemed to be outstanding and (ii) the Depository or
its nominee (or any successor Depository or its nominee), as the Holder of the
Preferred Securities, will
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receive a registered global certificate or certificates representing the
Subordinated Notes to be delivered upon such distribution and any certificates
representing Securities not held by the Depository or its nominee (or any
successor Depository or its nominee) will be deemed to represent beneficial
interests in a Like Amount of Subordinated Notes until such certificates are
presented to the Subordinated Note Issuer or its agent for transfer or reissue.
The Subordinated Notes shall be distributed to the Holders pursuant to Section
2.04 of the Supplemental Indenture.
(e) The Trust may not redeem fewer than all the outstanding
Securities.
(f) The notice procedure with respect to redemptions pursuant to a
Special Event or distributions of Subordinated Notes shall be as follows:
(i) Notice of any such redemption of, or notice of
distribution of Subordinated Notes in exchange for, the Securities (a
"REDEMPTION/DISTRIBUTION NOTICE") will be given by an Administrative
Trustee on behalf of the Trust by mail to each Holder of Securities to
be redeemed or exchanged not fewer than 30 nor more than 60 days before
the date fixed for redemption or exchange thereof which, in the case of
a redemption, will be the date fixed for redemption of the Subordinated
Notes. For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to this
Section 5(f)(i), a Redemption/ Distribution Notice shall be deemed to
be given on the day such notice is first mailed by first-class mail,
postage prepaid, to Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Securities at the address
of each such Holder appearing in the books and records of the Trust. No
defect in the Redemption/Distribution Notice or in the mailing of
either thereof with respect to any Holder shall affect the validity of
the redemption or exchange proceedings with respect to any other
Holder.
(ii) Redemption/Distribution Notices shall be sent by the
Property Trustee on behalf of the Trust to (A) in respect of the
Preferred Securities, the Depository or its nominee (or any successor
Depository or its nominee) if the Global Preferred Securities have been
issued or, if Definitive Preferred Securities have been issued, to the
Holders thereof, and (B) in respect of the Common Securities, to the
Holder thereof.
(g) The payment procedure with respect to all redemptions shall be as
follows:
(i) If Securities are to be redeemed, whether or not the Trust
gives a Redemption/Distribution Notice (which notice will be
irrevocable), then (A) with respect to Preferred Securities issued in
book-entry form, by 12:00 noon, New York City time, on the redemption
date, provided that the
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Subordinated Note Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related redemption or maturity of
the Subordinated Notes by 10:00 a.m., New York City time, on the
maturity date or the date of redemption, as the case requires, the
Property Trustee will deposit irrevocably with the Depository or its
nominee (or successor Depository or its nominee) immediately available
funds sufficient to pay the Mandatory Redemption Price with respect to
such Preferred Securities and will give the Depository irrevocable
instructions and authority to pay the Mandatory Redemption Price to the
relevant Participants, and (B) with respect to Preferred Securities
issued in certificated form and Common Securities, provided that the
Subordinated Note Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related redemption or maturity of
the Subordinated Notes, the Property Trustee will pay the Mandatory
Redemption Price to the Holders of such Securities by check mailed to
the address of the relevant Holder appearing on the books and records
of the Trust on the redemption date; provided, however, that at the
written request of any Holder of at least $10,000,000 aggregate
Liquidation Amount of Preferred Securities received by the Property
Trustee not later than 9:00 a.m. on the redemption date, the Mandatory
Redemption Price payable to such Holder will be payable by wire
transfer within the continental United States in immediately available
funds to the bank account number of such Holder specified in such
request. If a Redemption/Distribution Notice, if necessary, shall have
been given and funds deposited as required, if applicable, then
immediately prior to the close of business on the date of such deposit,
or on the redemption date, as applicable, Distributions will cease to
accumulate on the Securities so called for redemption and all rights of
Holders of such Securities so called for redemption will cease, except
the right of the Holders of such Securities to receive the Redemption
Price, but without interest on such Redemption Price, and such
Securities shall cease to be outstanding.
(ii) Payment of accumulated and unpaid Distributions on the
Redemption Date of the Securities will be subject to the rights of
Holders of Securities on the close of business on a regular record date
in respect of a Distribution Date occurring on or prior to such
redemption date.
(iii) If any date fixed for redemption of Securities is not a
Business Day, then payment of the Mandatory Redemption Price payable on
such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such
delay), with the same force and effect as if made on such date fixed
for redemption. If payment of the Mandatory Redemption Price in respect
of any Securities is improperly withheld or refused and not paid either
by the Property Trustee or by the Sponsor as guarantor pursuant to the
relevant Securities Guarantee, Distributions on such Securities will
continue to accumulate from the original
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redemption date to the actual date of payment, in which case the actual
payment date will be considered the date fixed for redemption for
purposes of calculating the Mandatory Redemption Price.
(h) Neither the Administrative Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any Securities
beginning on the opening of business 15 days before the day of mailing of a
notice of redemption.
(i) Subject to the foregoing, the provisions of the Remarketing
Agreement and applicable law (including, without limitation, United States
Federal securities laws), the Sponsor or any of its subsidiaries may at any time
and from time to time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
6. Voting Rights - Preferred Securities.
(a) Except as provided under Sections 6(b) and 8 and as otherwise
required by law or the Agreement, the Holders of the Preferred Securities will
have no voting rights.
(b) So long as any Subordinated Notes are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding with respect to any remedy available to the
Subordinated Note Trustee, or exercise any trust or power conferred upon the
Subordinated Note Trustee with respect to the Subordinated Notes, (ii) waive any
past default that is waivable under Section 6.04 of the Indenture, (iii)
exercise any right to rescind or annul a declaration of acceleration of the
maturity of the principal of the Subordinated Notes or (iv) consent to any
amendment, modification or termination of the Indenture or the Subordinated
Notes, where such consent shall be required, without, in each case, obtaining
(1) the prior approval of the Holders of a Majority in Liquidation Amount of all
outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of Subordinated Notes
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Preferred Securities and (2) an Opinion
of Counsel delivered to the Trust from independent tax counsel experienced in
such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for United States Federal income tax
purposes on account of such action.
If an Event of Default under the Agreement has occurred and is
continuing and such event is attributable to the failure of the Subordinated
Note Issuer to pay principal of or premium, if any, or interest on the
Subordinated Notes on the date such principal, premium, if any, or interest is
otherwise payable (or in the case of redemption, on the redemption date), then a
Holder of Preferred Securities may directly institute a proceeding against the
Subordinated Note Issuer for enforcement of payment to such Holder of the
principal of or premium, if any, or interest on a
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<PAGE> 96
Like Amount of Subordinated Notes on or after the respective due date specified
herein or in the Subordinated Notes (a "DIRECT ACTION"). In connection with such
Direct Action, the Common Securities Holder will be subrogated to the rights of
such Holder of Preferred Securities to the extent of any payment made by the
Subordinated Note Issuer to such Holder of Preferred Securities in such Direct
Action. Except as provided in the second preceding sentence, the Holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Notes.
Any approval or direction of Holders of Preferred Securities may be
given at a separate meeting of Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Property Trustees will cause a notice of any
meeting at which Holders of Preferred Securities are entitled to vote, to be
mailed to each Holder of record of Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting (ii) a
description of any resolution proposed for adoption at such meeting on which
such Holders are entitled to vote and (iii) instructions for the delivery of
proxies.
No vote or consent of the Holders of the Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or to
distribute the Subordinated Notes in accordance with the Agreement and the terms
of the Securities.
Notwithstanding that Holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Sponsor or any Affiliate of the
Sponsor shall not be entitled to vote or consent and shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under Sections 7(b) and 8 as otherwise required
by law or the Agreement, the Holders of the Common Securities will have no
voting rights.
(b) So long as any Subordinated Notes are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding with respect to any remedy available to the
Subordinated Note Trustee, or exercise any trust or power conferred upon the
Subordinated Note Trustee with respect to the Subordinated Notes, (ii) waive any
past default that is waivable under Section 6.04 of the Indenture, (iii)
exercise any right to rescind or annul a declaration of acceleration of the
maturity of the principal of the Subordinated Notes or (iv) consent to any
amendment, modification or termination of the Indenture or the Subordinated
Notes, where such consent shall be required, without, in each case, obtaining
(A) the
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<PAGE> 97
prior approval of the Holders of a Majority in Liquidation Amount of all
outstanding Common Securities; provided, however, that where a consent under the
Indenture would require the consent of each holder of Subordinated Notes
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Common Securities and (B) an Opinion of
Counsel delivered to the Trust from independent tax counsel experienced in such
matters to the effect that the Trust will not be classified as an association
taxable as a corporation for United States Federal income tax purposes on
account of such action.
If an Event of Default under the Agreement has occurred and is
continuing and such event is attributable to the failure of the Subordinated
Note Issuer to pay principal of or premium, if any, or interest on the
Subordinated Notes on the date such principal, premium, if any, or interest is
otherwise payable (or in the case of redemption, on the redemption date), then a
Holder of Common Securities may institute a Direct Action against the
Subordinated Note Issuer for enforcement of payment to such Holder of the
principal of or premium, if any, or interest on a Like Amount of Subordinated
Notes on or after the respective due date specified in the Subordinated Notes.
Except as provided in the immediately preceding sentence, the Holders of Common
Securities will not be able to immediately exercise directly any other remedy
available to the holders of the Subordinated Notes.
Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Administrative Trustees will cause a notice of any meeting
at which Holders of Common Securities are entitled to vote to be mailed to each
Holder of record of Common Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote and (iii) instructions for
the delivery of proxies.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Subordinated Notes in accordance with the Agreement and these terms of the
Securities.
8. Amendments to Agreement.
In addition to the requirements set out in Section 12.01 of the
Agreement, the Agreement may be amended from time to time by the Sponsor, the
Property Trustee and the Administrative Trustees, with (i) the consent of
Holders representing a Majority in Liquidation Amount of all outstanding
Securities, and (ii) receipt by the Trustees of a reasoned Opinion of Counsel of
independent tax counsel experienced in such matters to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the
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<PAGE> 98
Trust's status as a grantor trust for United States Federal income tax purposes
or the Trust's exemption from status as an Investment Company under the
Investment Company Act, provided that, without the consent of each Holder of
Trust Securities, the Agreement may not be amended to (i) change the amount or
timing of any Distribution on the Trust Securities or otherwise adversely affect
the amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a Holder of
Securities to institute suit for the enforcement of any such payment on or after
such date.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "PRO RATA" shall mean pro rata to each Holder
of Securities according to the aggregate Liquidation Amount of the Securities
held by the relevant Holder in relation to the aggregate Liquidation Amount of
all Securities outstanding unless, in relation to a payment, an Event of Default
under the Agreement has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate Liquidation Amount of
Preferred Securities held by the relevant Holder relative to the aggregate
Liquidation Amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate Liquidation
Amount of Common Securities held by the relevant Holder relative to the
aggregate Liquidation Amount of all Common Securities outstanding.
10. Ranking.
The Preferred Securities rank pari passu with the Common Securities and
payment thereon shall be made Pro Rata with the Common Securities, except that,
if an Event of Default under the Agreement occurs and is continuing, no payments
in respect of Distributions on, or payments upon liquidation, redemption or
otherwise with respect to, the Common Securities shall be made until the Holders
of the Preferred Securities shall be paid in full the Distributions, Mandatory
Redemption Price, Liquidation Distribution and other payments to which they are
entitled at such time.
11. Acceptance of Securities Guarantees and Indenture.
Each Holder of Preferred Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee, the Common Securities Guarantee and the Indenture including the
subordination provisions therein.
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<PAGE> 99
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive or similar
rights to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Agreement.
The Sponsor will provide a copy of the Agreement, the Preferred
Securities Guarantee or the Common Securities Guarantee (as may be appropriate)
and the Indenture (including any supplemental indenture) to a Holder without
charge on written request to the Sponsor at its principal place of business.
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<PAGE> 100
EXHIBIT A-1
[FORM OF PREFERRED SECURITY CERTIFICATE]
(prior to Remarketing Settlement Date)
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2)
AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE SECURITIES EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE
SECURITIES EVIDENCED HEREBY EXCEPT (A) TO HERCULES INCORPORATED OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT OR (C) TO A SECONDARY PURCHASER (AS DEFINED
IN THE AMENDED AND RESTATED TRUST AGREEMENT OF HERCULES TRUST V DATED AS OF
NOVEMBER 12, 1998 (AS AMENDED FROM TIME TO TIME, THE "TRUST AGREEMENT")) THAT
HAS ENTERED INTO A SECONDARY PURCHASE AGREEMENT (AS DEFINED IN THE TRUST
AGREEMENT) WITH THE TRUST, (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE SECURITIES EVIDENCED HEREBY ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND AND (4) AGREES, WITH RESPECT TO ANY TRANSFER OCCURRING
PRIOR TO THE REMARKETING DATE ON WHICH REPLACEMENT SECURITIES ARE ISSUED, TO
PROVIDE TO THE PROPERTY TRUSTEE A DULY EXECUTED CERTIFICATE SUBSTANTIALLY TO THE
EFFECT OF CLAUSES (1), (2) AND (3), ABOVE. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO THE SALES OF THE SECURITIES
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT.
FROM AND AFTER THE REMARKETING SETTLEMENT DATE ON WHICH REPLACEMENT SECURITIES
ARE ISSUED, THIS CERTIFICATE SHALL REPRESENT ONLY THE RIGHT TO RECEIVE THE
REMARKETING PRICE, AS PROVIDED IN THE TRUST AGREEMENT, AND SHALL NO LONGER
REPRESENT AN OBLIGATION OF OR INTEREST IN THE TRUST.
A1-1
<PAGE> 101
Certificate Number Number of Preferred Securities
CUSIP NO. __________
Certificate Evidencing Preferred Securities
of
HERCULES TRUST V
Auction Rate Reset Preferred Securities
(Liquidation Amount $1,000 per Preferred Security)
HERCULES TRUST V, a statutory business trust created under the laws of
the State of Delaware (the "TRUST"), hereby certifies that ______________ (the
"HOLDER") is the registered owner of __________ securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the Auction Reset Rate Preferred Securities (Liquidation Amount
$1,000 per Preferred Security) (the "PREFERRED SECURITIES"). This Preferred
Security is transferable on the books and records of the Trust, in person or by
a duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities
represented hereby are issued and shall in all respects be subject to the
provisions of the Amended and Restated Trust Agreement of the Trust dated as of
November 12, 1998, as the same may be amended from time to time, including the
designation of the terms of the Preferred Securities as set forth in Annex I to
the Agreement (the "AGREEMENT"). Capitalized terms used but not defined herein
shall have the meaning given them in the Agreement. The Sponsor will provide a
copy of the Agreement, the Preferred Securities Guarantee and the Indenture to a
Holder without charge upon written request to the Trust at its principal place
of business.
Upon receipt of this certificate, the Holder is bound by the Agreement
and is entitled to the benefits thereunder and to the benefits of the Preferred
Securities Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States Federal
income tax purposes, the Subordinated Notes as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Subordinated
Notes.
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<PAGE> 102
IN WITNESS WHEREOF, the Trust has executed this certificate this ___
day of ___________, ____.
HERCULES TRUST V
By: __________________________
Name:
Title: Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Agreement.
Dated: __________, ____
THE CHASE MANHATTAN BANK,
as Property Trustee
By: ________________________
Authorized Signatory
A1-3
<PAGE> 103
[FORM OF REVERSE OF SECURITY]
(a) Distributions with respect to the Liquidation Amount of $1,000 per
Preferred Security (the "LIQUIDATION AMOUNT") will accrue and be payable at a
rate (the "DISTRIBUTION RATE") (such rate being the rate of interest payable on
the Subordinated Notes to be held by the Property Trustee) per annum equal to
(i) from and including the date of issuance to but excluding
the date such Securities are redeemed, LIBOR plus 175 basis points,
compounded quarterly;
(ii) from and including the Remarketing Settlement Date on
which Replacement Securities are issued to but excluding the date such
Securities are redeemed, the Winning Bid Rate, compounded quarterly;
and
(iii) notwithstanding clauses (i) and (ii) above, if the
Securities are not redeemed because the Sponsor fails to pay the
principal amount of the Subordinated Notes on the date such amount
becomes due, then, from and including such due date to but excluding
the date the Securities are redeemed, the Default Rate, compounded
quarterly, but only to the extent permitted by applicable law.
Distributions in arrears for more than one quarterly period will bear additional
distributions thereon compounded quarterly at the applicable periodic
Distribution Rate specified above (to the extent permitted by applicable law).
Distributions are payable if and to the extent the Subordinated Note Issuer
makes a payment of Additional Interest (as defined in the Indenture) upon the
occurrence of certain events specified in the Indenture. The term
"DISTRIBUTIONS", as used herein, includes any such additional distributions
unless otherwise stated. A Distribution is payable only to the extent that
payments are made in respect of the Subordinated Notes held by the Property
Trustee and to the extent the Property Trustee has funds on hand legally
available therefor.
(b) Until the Remarketing Settlement Date on which Replacement
Securities are issued, Distributions on this Preferred Security will be
cumulative, will be payable quarterly in arrears on February 12, May 12, August
12 and November 12 of each year, commencing February 12, 1999, and on such
Remarketing Settlement Date (each, a "PRE-REMARKETING DISTRIBUTION DATE"), will
accumulate from and including the most recent date to which Distributions have
been paid or, if no Distributions have been paid, from November 12, 1998, to but
excluding the related Pre-Remarketing Distribution Date, except as otherwise
described below.
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<PAGE> 104
The Distribution Rate in effect for the period from and including
November 12, 1998 to but excluding February 12, 1999 shall be the rate
determined by the Calculation Agent two London Banking Days prior to November
12, 1998 and shall equal LIBOR plus 175 basis points. The Distribution Rate in
effect thereafter, for each quarterly period from and including the immediately
preceding Pre-Remarketing Distribution Date to but excluding the applicable
Pre-Remarketing Distribution Date, shall be determined by the Calculation Agent
two London Banking Days prior to such immediately preceding Pre-Remarketing
Distribution Date and shall equal LIBOR plus 175 basis points. The amount of
Distributions payable for any quarterly period shall be computed on the basis of
a 360-day year of twelve 30-day months. Except as provided in the last sentence
of this paragraph, the amount of Distributions payable for any period shorter
than a full quarterly period for which Distributions are computed will be
computed on the basis of the actual number of days elapsed per 30-day month. If
a Pre-Remarketing Distribution Date is not a Business Day, then such
Pre-Remarketing Distribution Date will be the next succeeding Business Day,
except if such Business Day is in the next succeeding calendar month, such
Pre-Remarketing Distribution Date will be the immediately preceding Business
Day.
As used herein, "LONDON BANKING DAY" means any day on which dealings in
deposits in U.S. Dollars are transacted in the London interbank market.
(c) From and including the Remarketing Settlement Date on which
Replacement Securities are issued, Distributions on the Replacement Securities
will be cumulative, will be payable quarterly in arrears on February 12, May 12,
August 12 and November 12 of each year, commencing on the Remarketing Settlement
Date, and on the Mandatory Redemption Date (each, a "DISTRIBUTION DATE"), will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from and including the Remarketing
Settlement Date, to but excluding the related Distribution Date, except as
otherwise described below. The amount of Distributions payable for any quarterly
period shall be computed on the basis of a 360-day year of twelve 30-day months.
Except as provided in the last sentence of this paragraph, the amount of
Distributions payable for any period shorter than a full quarterly period for
which Distributions are computed will be computed on the basis of the actual
number of days elapsed per 30-day month. If a Distribution Date is not a
Business Day, then such Distribution Date will be the next succeeding Business
Day, except if such Business Day is in the next succeeding calendar month, such
Distribution Date will be the immediately preceding Business Day.
Subject to other conditions set forth in the Agreement and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the Trust and cause the Subordinated Notes to be distributed to
the Holders of the
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<PAGE> 105
Securities in liquidation of the Trust or, simultaneously with any redemption of
the Subordinated Notes, cause a Like Amount of the Securities to be redeemed by
the Trust.
This Preferred Security shall be redeemable as provided in the
Agreement.
A1-6
<PAGE> 106
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to transfer this Preferred Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature Guarantee(1):___________________________________
- --------------
(1) Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities and
Exchange Act of 1934, as amended.
A1-7
<PAGE> 107
EXHIBIT A-2
[FORM OF COMMON SECURITY CERTIFICATE]
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH APPLICABLE LAW
AND THE PROVISIONS OF THE AMENDED AND RESTATED TRUST AGREEMENT OF HERCULES TRUST
V DATED AS OF NOVEMBER 12, 1998, AS AMENDED FROM TIME TO TIME.
A2-1
<PAGE> 108
Certificate Number Number of Common Securities
_______________ 6,200
Certificate Evidencing Common Securities
of
HERCULES TRUST V
Auction Rate Reset Common Securities
(Liquidation Amount $1,000 per Common Security)
HERCULES TRUST V, a statutory business trust created under the laws of
the State of Delaware (the "TRUST"), hereby certifies that Hercules Incorporated
(the "HOLDER") is the registered owner of __________ securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the Auction Rate Reset Common Securities (Liquidation Amount $1,000
per Common Security) (the "COMMON SECURITIES"). Except as set forth in the
Agreement (as defined herein), the Common Securities are not transferable. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities represented hereby are issued and shall in
all respects be subject to the provisions of the Amended and Restated Trust
Agreement of the Trust dated as of November 12, 1998, as the same may be amended
from time to time, including the designation of the terms of the Common
Securities as set forth in Annex I to the Agreement (the "AGREEMENT").
Capitalized terms used but not defined herein shall have the meaning given them
in the Agreement. The Sponsor will provide a copy of the Agreement, the Common
Securities Guarantee and the Indenture to a Holder without charge upon written
request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Agreement
and is entitled to the benefits thereunder and to the benefits of the Common
Securities Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States Federal
income tax purposes, the Subordinated Notes as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Subordinated
Notes.
A2-2
<PAGE> 109
IN WITNESS WHEREOF, the Trust has executed this certificate this ___
day of ___________, 1998.
HERCULES TRUST V
By: __________________________
Name:
Title: Administrative Trustee
A2-3
<PAGE> 110
[FORM OF REVERSE OF COMMON SECURITY]
(a) Distributions with respect to the Liquidation Amount of $1,000 per
Common Security (the "LIQUIDATION AMOUNT") will accrue and be payable at a rate
(the "DISTRIBUTION RATE") (such rate being the rate of interest payable on the
Subordinated Notes to be held by the Property Trustee) per annum equal to
(i) from and including the date of issuance to but excluding
the date such Securities are redeemed, LIBOR plus 175 basis points,
compounded quarterly;
(ii) from and including the Remarketing Settlement Date on
which Replacement Securities are issued, to but excluding the date such
Securities are redeemed, the Winning Bid Rate, compounded quarterly;
and
(iii) notwithstanding clauses (i) and (ii), if the Securities
are not redeemed because the Sponsor fails to pay the principal amount
of the Subordinated Notes on the date such amount becomes due, then
from and including such due date to but excluding the date the
Securities are redeemed, the Default Rate, compounded quarterly but
only to the extent permitted by applicable law.
Distributions that are not paid when due will bear additional distributions
thereon compounded quarterly at the applicable periodic Distribution Rate
specified above (to the extent permitted by applicable law). Distributions are
payable if and to the extent the Subordinated Note Issuer makes a payment of
Additional Interest (as defined in the Indenture) upon the occurrence of certain
events specified in the Indenture. The term "DISTRIBUTIONS", as used herein,
includes any such additional distributions unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Subordinated Notes held by the Property Trustee and to the extent the
Property Trustee has funds on hand legally available therefor.
(b) Until the Remarketing Settlement Date on which Replacement
Securities are issued, Distributions on this Common Security will be cumulative,
will be payable quarterly in arrears on February 12, May 12, August 12 and
November 12 of each year, commencing February 12, 1999, and on such Remarketing
Settlement Date (each, a "PRE-REMARKETING DISTRIBUTION DATE"), will accumulate
from and including the most recent date to which Distributions have been paid
or, if no Distributions have been paid, from November 12, 1998, to but excluding
the related Pre-Remarketing Distribution Date, except as otherwise described
below.
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<PAGE> 111
The Distribution Rate in effect for the period from and including
November 12, 1998 to but excluding February 12, 1999 shall be the rate
determined by the Calculation Agent two London Banking Days prior to November
12, 1998 and shall equal LIBOR plus 175 basis points. The Distribution Rate in
effect thereafter, for each quarterly period from and including the immediately
preceding Pre-Remarketing Distribution Date to but excluding the applicable
Pre-Remarketing Distribution Date, shall be determined by the Calculation Agent
two London Banking Days prior to such immediately preceding Pre-Remarketing
Distribution Date and shall equal LIBOR plus 175 basis points. The amount of
Distributions payable for any quarterly period shall be computed on the basis of
a 360-day year of twelve 30-day months. Except as provided in the last sentence
of this paragraph, the amount of Distributions payable for any period shorter
than a full quarterly period for which Distributions are computed will be
computed on the basis of the actual number of days elapsed per 30-day month. If
a Pre-Remarketing Distribution Date is not a Business Day, then such
Pre-Remarketing Distribution Date will be the next succeeding Business Day,
except if such Business Day is in the next succeeding calendar month, such
Pre-Remarketing Distribution Date will be the immediately preceding Business
Day.
As used herein, "LONDON BANKING DAY" means any day on which dealings in
deposits in U.S. Dollars are transacted in the London interbank market.
(c) From and including the Remarketing Settlement Date on which
Replacement Securities are issued, Distributions on the Replacement Securities
and on this Common Security will be cumulative, will be payable quarterly in
arrears on February 12, May 12, August 12 and November 12 of each year,
commencing on the Remarketing Settlement Date, and on the Mandatory Redemption
Date (each, a "DISTRIBUTION DATE"), will accumulate from the most recent date to
which Distributions have been paid or, if no Distributions have been paid, from
and including the Remarketing Settlement Date, to but excluding the related
Distribution Date, except as otherwise described below. The amount of
Distributions payable for any quarterly period shall be computed on the basis of
a 360-day year of twelve 30-day months. Except as provided in the last sentence
of this paragraph, the amount of Distributions payable for any period shorter
than a full quarterly period for which Distributions are computed will be
computed on the basis of the actual number of days elapsed per 30-day month. If
a Distribution Date is not a Business Day, then such Distribution Date will be
the next succeeding Business Day, except if such Business Day is in the next
succeeding calendar month, such Distribution Date will be the immediately
preceding Business Day.
Subject to other conditions set forth in the Agreement and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the
A2-5
<PAGE> 112
Trust and cause the Subordinated Notes to be distributed to the Holders to the
Securities in liquidation of the Trust or, simultaneously with any redemption of
the Subordinated Notes, cause a Like Amount of the Securities to be redeemed by
the Trust.
This Common Security shall be redeemable as provided in the Agreement.
A2-6
<PAGE> 113
EXHIBIT A-3
[FORM OF REPLACEMENT PREFERRED SECURITY CERTIFICATE]
THESE SECURITIES ARE GLOBAL SECURITIES WITHIN THE MEANING OF THE AGREEMENT
HEREINAFTER REFERRED TO AND ARE REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITORY") OR A NOMINEE OF THE DEPOSITORY. THESE SECURITIES ARE
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
TRUST AGREEMENT AND NO TRANSFER OF THESE SECURITIES (OTHER THAN A TRANSFER OF
THESE SECURITIES AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR
BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THESE SECURITIES ARE PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITIES ISSUED ARE REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2)
AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE SECURITIES EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE
SECURITIES EVIDENCED HEREBY EXCEPT (A) TO HERCULES INCORPORATED OR ANY
SUBSIDIARY THEREOF OR (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (3) AGREES THAT IT WILL
A3-1
<PAGE> 114
DELIVER TO EACH PERSON TO WHOM THE SECURITIES EVIDENCED HEREBY ARE TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND AND (4) AGREES, WITH RESPECT
TO ANY TRANSFER OCCURRING PRIOR TO THE REMARKETING DATE ON WHICH REPLACEMENT
SECURITIES ARE ISSUED, TO PROVIDE TO THE PROPERTY TRUSTEE A DULY EXECUTED
CERTIFICATE SUBSTANTIALLY TO THE EFFECT OF CLAUSES (1), (2) AND (3), ABOVE. THIS
LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
THE SALES OF THE SECURITIES EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT.
A3-2
<PAGE> 115
Certificate Number Number of Preferred Securities
___________________ ______________________________
CUSIP NO. __________
Certificate Evidencing Replacement Preferred Securities
of
HERCULES TRUST V
Replacement Auction Rate Reset Preferred Securities
(Liquidation Amount $1,000 per Preferred Security)
HERCULES TRUST V, a statutory business trust formed under the laws of
the State of Delaware (the "TRUST"), hereby certifies that ______________ (the
"HOLDER") is the registered owner of __________ securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the Auction Preferred Securities (Liquidation Amount $1,000 per
Preferred Security) (the "PREFERRED SECURITIES"). Subject to the terms of the
Agreement (as defined below), this Preferred Security is transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities represented hereby are issued and shall
in all respects be subject to the provisions of the Amended and Restated Trust
Agreement of the Trust dated as of November 12, 1998, as the same may be amended
from time to time, including the designation of the terms of the Preferred
Securities as set forth in Annex I to the Agreement (the "AGREEMENT").
Capitalized terms used but not defined herein shall have the meaning given them
in the Agreement. The Sponsor will provide a copy of the Agreement, the
Preferred Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Agreement
and is entitled to the benefits thereunder and to the benefits of the Preferred
Securities Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States Federal
income tax purposes, the Subordinated Notes as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Subordinated
Notes.
A3-3
<PAGE> 116
IN WITNESS WHEREOF, the Trust has executed this certificate this ___
day of _________, ____.
HERCULES TRUST V
By: __________________________
Name:
Title: Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Agreement.
Dated:
THE CHASE MANHATTAN BANK,
as Property Trustee
By: __________________________
Authorized Signatory
A3-4
<PAGE> 117
[FORM OF REVERSE OF SECURITY]
Distributions with respect to the Liquidation Amount of $1,000 per
Security (the "LIQUIDATION AMOUNT") will accrue and be payable at a rate (the
"DISTRIBUTION RATE", such rate being the rate of interest payable on the
Subordinated Notes to be held by the Property Trustee) per annum equal to
(i) from and including the date of issuance to but excluding
the date such Securities are redeemed, the Winning Bid Rate, compounded
quarterly; and
(ii) notwithstanding clause (i) above, if the Securities are
not redeemed because the Sponsor fails to pay the principal amount of
the Subordinated Notes on the date such amount becomes due, then from
and including such due date to but excluding the date the Securities
are redeemed, the Default Rate, compounded quarterly but only to the
extent permitted by applicable law.
Distributions in arrears for more than one quarterly period will bear additional
distributions thereon compounded quarterly at the applicable periodic
Distribution Rate specified above (to the extent permitted by applicable law).
Distributors are payable if and to the extent the Subordinated Note Issuer makes
a payment of Additional Interest (as defined in the Indenture) upon the
occurrence of certain events specified in the Indenture. The term
"DISTRIBUTIONS", as used herein, includes any such additional distributions
unless otherwise stated. A Distribution is payable only to the extent that
payments are made in respect of the Subordinated Notes held by the Property
Trustee and to the extent the Property Trustee has funds on hand legally
available therefor.
From and including the date of issuance, Distributions on the
Replacement Securities will be cumulative, will be payable quarterly in arrears
on February 12, May 12, August 12 and November 12 of each year, commencing on
the Remarketing Settlement Date, and on the Mandatory Redemption Date (each, a
"DISTRIBUTION DATE"), will accumulate from the most recent date to which
Distributions have been paid or, if no Distributions have been paid, from and
including the date of issuance, to but excluding the related Distribution Date,
except as otherwise described below. The amount of Distributions payable for any
quarterly period shall be computed on the basis of a 360-day year of twelve
30-day months. Except as provided in the last sentence of this paragraph, the
amount of Distributions payable for any period shorter than a full quarterly
period for which Distributions are computed will be computed on the basis of the
actual number of days elapsed per 30-day month. If a Distribution Date is not a
Business Day, then such Distribution Date will be the next succeeding Business
Day, except if such Business Day is in the next succeeding calendar month, such
Distribution Date will be the immediately preceding Business Day.
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<PAGE> 118
Subject to certain conditions set forth in the Agreement and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the Trust and cause the Subordinated Notes to be distributed to
the Holders of the Securities in liquidation of the Trust or, simultaneously
with any redemption of the Subordinated Notes, cause a Like Amount of the
Securities to be redeemed by the Trust.
This Preferred Security shall be redeemable as provided in the
Agreement.
A3-6
<PAGE> 119
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to transfer this Preferred Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature Guarantee(2):___________________________________
- ----------------------
(2) Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities and
Exchange Act of 1934, as amended.
A3-7
<PAGE> 120
INTERSTATE SOLUTIONS LLC
-----------, 1999
State of California
Franchise Tax Board
Corporation Audit Section
P.O. Box 1468
Sacramento, CA 95812
Attn: Tax Clearance Unit
Re: Interstate Solutions LLC
California Corporation No.: 101998002169
Dear Sir or Madam:
The above-referenced corporation is requesting a tax clearance
based upon taxes paid. The corporation's final franchise tax return covering
the period up to date of cessation of business (was filed on ) (is
enclosed herewith).
INTERSTATE SOLUTIONS LLC
By:
------------------------
Authorized Officer
<PAGE> 1
Exhibit 4-G
EXECUTION COPY
REMARKETING AGREEMENT
among
HERCULES INCORPORATED,
HERCULES TRUST V
and
NATIONSBANC MONTGOMERY SECURITIES LLC
Dated as of November 12, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. Definitions...............................................................1
SECTION 2. Representations and Warranties............................................6
SECTION 3. Covenants.................................................................8
SECTION 4. Appointment and Obligations of Remarketing Agent and
Calculation Agent; Secondary Purchaser.................................11
SECTION 5. Determination of Reset Date; Remarketing Procedures......................11
SECTION 6. Reset of Distribution Rate, Mandatory Redemption Date,
Interest Rate and Maturity Date........................................14
SECTION 7. Renewed Remarketing......................................................14
SECTION 8. Remarketing Fee..........................................................14
SECTION 9. Failed Remarketing; Mandatory Redemption.................................15
SECTION 10. Early Remarketing......................................................15
SECTION 11. Adjustments to Trigger Price.............................................16
SECTION 12. Replacement and Resignation of Remarketing Agent.........................16
SECTION 13. Dealing in the Securities................................................17
SECTION 14. Offering Memorandum......................................................17
SECTION 15. Conditions to the Remarketing Agent's Obligations........................17
SECTION 16. Indemnification..........................................................18
SECTION 17. Termination of Remarketing Agreement.....................................18
SECTION 18. Remarketing Agent's Performance: Duty of Care; Power of
Attorney...............................................................18
SECTION 19. Expenses.................................................................18
SECTION 20. Governing Law............................................................18
SECTION 21. Term of Agreement........................................................19
SECTION 22. Successors and Assigns...................................................19
SECTION 23. Headings.................................................................19
SECTION 24. Severability.............................................................19
SECTION 25. Counterparts.............................................................19
SECTION 26. Amendments...............................................................19
SECTION 27. Notices..................................................................19
</TABLE>
Exhibit A - Form of Secondary Purchase Agreement
<PAGE> 3
REMARKETING AGREEMENT
REMARKETING AGREEMENT, dated as of November 12, 1998 (the "AGREEMENT")
by and among Hercules Incorporated, a Delaware corporation (the "COMPANY"),
Hercules Trust V, a Delaware statutory business trust (the "TRUST"), and
NationsBanc Montgomery Securities LLC, as remarketing agent (the "REMARKETING
AGENT").
WITNESSETH:
WHEREAS, the Trust shall issue 200,000 Auction Rate Reset Preferred
Securities (the "PREFERRED SECURITIES") in an aggregate stated liquidation
amount of $200,000,000 and 6,200 Auction Rate Reset Common Securities (the
"COMMON SECURITIES", and, collectively with the Preferred Securities, the "TRUST
SECURITIES") in an aggregate stated liquidation amount of $6,200,000 under the
Amended and Restated Trust Agreement, dated as of November 12, 1998, by and
among the Company, the Administrative Trustees, the Delaware Trustee and the
Property Trustee (the "TRUST AGREEMENT");
WHEREAS, the sole assets of the Trust, consisting of $206,200,000
aggregate principal amount of Auction Rate Reset Junior Subordinated Notes
Series A (the "SUBORDINATED NOTES") of the Company, shall be purchased by the
Trust from the Company with the proceeds of the sale of the Trust Securities;
WHEREAS, the Preferred Securities or, following any distribution of
Subordinated Notes to holders of Preferred Securities upon the termination of
the Trust, such Subordinated Notes, as the case may be, shall be remarketed in
accordance with the terms hereof by the Remarketing Agent on the Reset Date (as
defined herein);
WHEREAS, the Company and the Trust have requested that NationsBanc
Montgomery Securities LLC ("NMS") act as the Remarketing Agent and, as such, to
perform the services described herein; and
WHEREAS, NMS is willing to act as Remarketing Agent and as such to
perform such duties on the terms and conditions expressly set forth herein;
NOW, THEREFORE, in consideration of the covenants herein made, and
subject to the conditions herein set forth, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined in this
Agreement shall have the meanings assigned to them in the Trust Agreement. In
<PAGE> 4
addition, as used in this Agreement, the following terms shall have the
following definitions:
"1934 ACT REPORTS" has the meaning set forth in Section 2(b)(iv).
"AGREEMENT" has the meaning set forth in the initial paragraph hereto.
"ASSOCIATED PERSON" has the meaning set forth in Article 1(ee) of the
ByLaws of the National Association of Securities Dealers, Inc.
"BID" means an irrevocable offer to purchase the aggregate outstanding
Liquidation Amount of Preferred Securities at the Remarketing Price or,
following any distribution of Subordinated Notes to holders of Preferred
Securities, the aggregate outstanding principal amount of such Subordinated
Notes, as the case may be, with a Distribution Rate or interest rate, as
applicable, equal to the Bid Rate specified in such Bid and with a redemption
date or maturity date, as the case may be, on the Maturity Extension Date.
"BID RATE" means the proposed Distribution Rate on the Preferred
Securities or interest rate on Subordinated Notes specified in a Bid.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banking institutions in the City of New York are authorized or required
by law, regulation or executive order to close.
"CLOSING PRICE" has the meaning set forth in the Forward Underwriting
Agreement.
"COMMENCEMENT DATE" has the meaning set forth in the Forward
Underwriting Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" has the meaning set forth in the Forward Underwriting
Agreement.
"COMPANY" has the meaning set forth in the initial paragraph hereto.
"CREDIT AGREEMENT" means the Credit Agreement dated as of October 15,
1998 among the Company, certain subsidiaries of the Company from time to time
parties thereto, the several lenders from time to time parties thereto,
NationsBank, N.A., as Administrative Agent, The Chase Manhattan Bank, Morgan
Guaranty Trust Company of New York and Citibank, N.A., as Co-Syndication Agents,
as
2
<PAGE> 5
the same may be amended, supplemented, modified or superseded from time to
time.
"CROSS DEFAULT" means an Event of Default as defined in the Credit
Agreement.
"CURED DEFAULT TRIGGER EVENT" has the meaning set forth in
Section 10(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE ACT REGULATIONS" means the rules and regulations promulgated
under the Exchange Act.
"EXPECTED RESET DATE" has the meaning set forth in Section 5.
"FINAL RESET DATE" means the third scheduled Trading Day prior to the
Remarketing Termination Date.
"FORMER HOLDERS" has the meaning set forth in Section 5(i).
"FORWARD UNDERWRITING AGREEMENT" means the Forward Underwriting
Agreement dated November 12, 1998 between the Company and NMS, as amended,
supplemented, modified or superceded from time to time.
"GUARANTEE AGREEMENT" means the Preferred Securities Guarantee
Agreement, dated November 12, 1998, of the Company in respect to the Preferred
Securities, as may be amended, supplemented, modified or superseded from time to
time.
"INDENTURE" means the Junior Subordinated Debenture Indenture dated as
of November 12, 1998 by and between the Company and The Chase Manhattan Bank, as
Indenture Trustee, as supplemented by the First Supplemental Indenture dated as
of November 12, 1998 and as further amended, supplemented, modified or
superceded from time to time.
"INDENTURE TRUSTEE" means the Trustee pursuant to the Indenture.
"INVESTMENT COMPANY ACT" means the Investment Company Act of
1940, as amended.
3
<PAGE> 6
"LIQUIDATION AMOUNT" has the meaning set forth in Section 8.
"MANDATORY REDEMPTION PROCEEDS" has the meaning set forth in
Section 9.
"MATERIAL ADVERSE CHANGE" has the meaning set forth in the Forward
Underwriting Agreement.
"MATURITY EXTENSION DATE" means the first anniversary of the
Remarketing Settlement Date on which Replacement Securities are issued.
"NMS" has the meaning set forth in the fourth recital hereto.
"OFFERING MEMORANDUM" has the meaning set forth in Section 14.
"POTENTIAL ADJUSTMENT EVENT" has the meaning set forth in the Forward
Underwriting Agreement.
"PREFERRED SECURITIES" has the meaning set forth in the first recital
hereto.
"REFERENCE CORPORATE DEALER" means a leading dealer that is a Qualified
Institutional Buyer (as defined in Rule 144A under the Securities Act), which
shall not include NMS, its Affiliates (as such term is defined in Rule 405 under
the Securities Act) or its Associated Person, of publicly traded debt
securities, including debt securities of the Company, to be selected by the
Company.
"REMARKETING" means a remarketing of Preferred Securities or
Subordinated Notes pursuant to Section 5.
"REMARKETING FEE" has the meaning set forth in Section 8.
"REMARKETING PRICE" means a price equal to 100.5% of the aggregate
stated Liquidation Amount of the Preferred Securities plus accrued and unpaid
Distributions (if any) or, in the case of Subordinated Notes, a price equal to
100.5% of the aggregate principal amount of such Subordinated Notes, plus
accrued and unpaid interest (if any).
"REMARKETING SETTLEMENT DATE" means the third Business Day immediately
following the Reset Date.
"REMARKETING TERMINATION DATE" means November 10, 1999.
"RENEWED REMARKETING" has the meaning set forth in Section 7.
4
<PAGE> 7
"REPAYMENT DATE" has the meaning set forth in Section 9.
"REPLACEMENT SECURITIES" has the meaning set forth in Section 5(j).
"REPRESENTATION DATE" has the meaning set forth in Section 2(a).
"RESET DATE" means any date established as a Reset Date pursuant to
Section 5 or 10.
"SECONDARY PURCHASE AGREEMENT" means an agreement to be dated as of the
Reset Date (or such other date permitted by applicable law) among the Company,
the Trust, the Remarketing Agent and the Secondary Purchaser (selected in the
manner provided in Section 5(c)) providing for the purchase of the Preferred
Securities, or the Subordinated Notes, as the case may be, by the Secondary
Purchaser, substantially in the form of Exhibit A hereto, or as otherwise agreed
among the Company, the Trust, the Remarketing Agent and the Secondary Purchaser.
"SECONDARY PURCHASER" has the meaning set forth in Section 5(c).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCK PRICE TRIGGER EVENT" has the meaning set forth in Section 10(i).
"SUBORDINATED NOTES" has the meaning set forth in the second recital
hereto.
"TRADING DAY" has the meaning set forth in the Forward Underwriting
Agreement.
"TRANSACTION AGREEMENTS" means this Agreement, the Purchase Agreement,
the Trust Agreement, the Guarantee Agreement and the Indenture.
"TRANSACTION DOCUMENTS" means the Transaction Agreements, together with
the Common Securities, Preferred Securities and Subordinated Notes.
"TRIGGER EVENT" has the meaning set forth in Section 10.
"TRIGGER PRICE" has the meaning set forth in Section 11.
"TRUST" has the meaning set forth in the initial paragraph hereto.
5
<PAGE> 8
"TRUST AGREEMENT" has the meaning set forth in the initial paragraph
hereto.
"TRUST SECURITIES" has the meaning set forth in the first recital
hereto.
"UNDERWRITER" means NationsBanc Montgomery Securities LLC, as
Underwriter under the Forward Underwriting Agreement.
"UNDERWRITING TRIGGER EVENT" has the meaning set forth in
Section 10(c).
"WINNING BID RATE" has the meaning set forth in Section 5(b).
SECTION 2. Representations and Warranties. (a) Basic Warranties. Each
party represents and warrants to the other party as of the date hereof, the
Reset Date and the Remarketing Settlement Date (each of the foregoing dates
being hereinafter referred to as a "REPRESENTATION DATE") that:
(i) Status. It is a duly and validly existing entity under the
laws of the jurisdiction of its organization or incorporation and, if
relevant under such laws, in good standing.
(ii) Powers. It has the power and authority to execute, enter
into and perform its obligations under, or contemplated under, this
Agreement and consummate the transactions contemplated hereby.
(iii) No Violation or Conflict. The execution, delivery and
performance by such party of this Agreement, the consummation of the
transactions herein contemplated and compliance by such party with its
obligations hereunder (A) do not violate or conflict with (1) any
provision of its constitutional documents, (2) any law applicable to
it, any order or judgment of any court or other agency of government
applicable to it or any of its assets that affects the legality,
validity or enforceability of this Agreement and (B) do not and will
not conflict with or constitute a breach of any contractual restriction
binding on or affecting it or any of its assets.
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to the performance by
each party of its obligations under this Agreement have been obtained
and are in full force and effect and all conditions of any such
consents have been complied with.
6
<PAGE> 9
(v) Obligations Binding. Its obligations under this Agreement
constitute its legal, valid and binding obligations, enforceable
against it in accordance with the terms of this Agreement, except as of
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights or by
general equitable principles.
(vi) Absence of Litigation. There is not pending or, to the
best of its knowledge, threatened against or affecting it or any of its
Affiliates any action, suit or proceeding at law or in equity or before
any court, tribunal, governmental body, agency or official or any
arbitrator that could reasonably be expected to materially affect the
legality, validity or enforceability against it of this Agreement or
its ability to perform its obligations under this Agreement.
(vii) Non-Reliance. It is acting for its own account, and it
has made its own independent decision to enter into this Agreement and
as to whether this Agreement is appropriate or proper for it based upon
its own judgment and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written or oral) of
any other party as investment advice or as a recommendation to enter
into this Agreement; it being understood that information and
explanations related to the terms and conditions of this Agreement
shall not be considered investment advice or a recommendation to enter
into this Agreement. No communication (written or oral) received from
any other party shall be deemed to be an assurance or guarantee as to
the expected results of this Agreement. Each other party is not acting
as a fiduciary for or an adviser to it in respect of this Agreement.
(viii) Assessment and Understanding. It is capable of
assessing the merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the
terms, conditions and risks of this Agreement. It is also capable of
assuming, and assumes, the risks of this Agreement.
(b) Representations and Warranties of the Company and the Trust. Each
of the Company and the Trust further represents and warrants to the Remarketing
Agent as of each Representation Date, as applicable to each such entity, that:
(i) Securities Validly Issued. The Preferred Securities and
Subordinated Notes have been validly authorized and executed by the
Trust and the Company, as the case may be, and authenticated, issued
and
7
<PAGE> 10
delivered in the manner provided for in the Trust Agreement and the
Indenture, respectively, and delivered against payment of the purchase
price therefor as provided in the Purchase Agreement, and constitute
legally binding obligations of the Trust or the Company, as the case
may be, entitled to the benefits of the Trust Agreement and Indenture.
(ii) No Event of Default. No Event of Default under the Trust
Agreement and no Event of Default under the Indenture or Cross Default
has occurred and is continuing and no such event or circumstance would
occur as a result of its entering into or performing its obligations
under this Agreement.
(iii) Compliance with Exchange Act Requirements. The Company
has made all the filings with the Commission that it is required to
make under the Exchange Act and the Exchange Act Regulations, each such
filing complies in all material respects with the requirements of the
Exchange Act and Exchange Act Regulations.
(iv) No Material Misstatements. The Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, its Quarterly
Reports on Form 10-Q for the periods ended March 31, 1998 and June 30,
1998 and its Current Reports on Form 8-K dated July 24, 1998, July 30,
1998 and October 15, 1998 (collectively, the "1934 ACT REPORTS"), as
supplemented by material press releases, at the time they were filed
did not, and, giving effect as of the date hereof to the transactions
contemplated by the Transaction Documents do not, contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(v) No Material Adverse Change. Since the respective dates as
of which information is given in, except as otherwise stated therein,
there has been no Material Adverse Change.
(vi) Not an Investment Company. Neither the Company nor the
Trust is an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment
Company Act.
SECTION 3. Covenants. (a) The Company hereby covenants with the
Remarketing Agent as follows:
8
<PAGE> 11
(i) Maintain Authorizations. The Company shall use all
reasonable efforts to maintain in full force and effect all consents of
any governmental or other authority that are required to be obtained by
it with respect to this Agreement and shall use all reasonable efforts
to obtain any that may become necessary in the future.
(ii) Comply with Laws. The Company shall comply in all
material respects with all applicable laws and orders to which it may
be subject if failure so to comply would materially impair its ability
to perform its obligations under this Agreement.
(iii) Furnish Documentation. The Company will furnish to the
Remarketing Agent: (i) unless available to the Remarketing Agent on
EDGAR or the Company's website, each Exchange Act Document filed after
the date hereof and (ii) in connection with the remarketing of the
Preferred Securities or Subordinated Notes, as the case may be, such
other information as the Remarketing Agent may reasonably request from
time to time. Notwithstanding the foregoing sentence, the Company
agrees to provide the Remarketing Agent with as many copies of the
foregoing written materials and other Company-approved information as
the Remarketing Agent may reasonably request for use in connection with
the remarketing of the Preferred Securities or Subordinated Notes, as
the case may be, and consents to the use thereof for such purpose.
(iv) Notification. If, at any time prior to the Remarketing
Settlement Date, any event or condition known to the Company relating
to or affecting the Company, any Material Subsidiary thereof or the
Preferred Securities or Subordinated Notes shall occur which could
reasonably be expected to cause any of the reports, documents,
materials or information referred to in Section 3(a)(iii) or any
document incorporated therein by reference to contain an untrue
statement of a material fact or omit to state a material fact, the
Company shall promptly notify the Remarketing Agent in writing of the
then-known circumstances and details of such event or condition.
(v) File Exchange Act Documents. At all times prior to the
Remarketing Settlement Date, the Company will file all documents
required to be filed with the Commission pursuant to the Exchange Act
within the time periods required by the Exchange Act and the Exchange
Act Regulations.
(vi) Comply with Securities Laws. The Company will comply with
the Securities Act and the rules and regulations of the Commission
9
<PAGE> 12
thereunder, the Exchange Act and the Exchange Act Regulations so as to
permit the completion of the remarketing of the Preferred Securities or
Subordinated Notes, as the case may be, as contemplated in this
Agreement.
(vii) No Purchase of Securities. The Company agrees that
neither it nor any of its subsidiaries or Affiliates shall purchase or
otherwise acquire, or enter into any agreement to purchase or otherwise
acquire, any of the Preferred Securities or Subordinated Notes prior to
the remarketing thereof by the Remarketing Agent, other than pursuant
to the Trust Agreement or the Indenture.
(viii) Notification of Rating Agency Action. The Company will
provide prompt notice by telephone, confirmed in writing (which may
include facsimile or other electronic transmission), to the Remarketing
Agent of any notification or announcement by a "nationally recognized
statistical rating organization" (as defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act) with regard to a
downgrade to below investment grade or withdrawal of the rating of any
security of the Company or the placement on what is currently called a
"watch list"or a "credit watch" with negative implications of any
security of the Company.
(ix) Restriction on Debt Issuance. During the three Business
Day period ending on the Remarketing Settlement Date, the Company will
not, without the consent of the Remarketing Agent, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any debt securities with a maturity of more
than one year.
(x) Best Efforts. The Company shall use its best efforts to
assist the Remarketing Agent in remarketing the Preferred Securities or
the Subordinated Notes, as the case may be, in the manner contemplated
in this Agreement.
(b) The Remarketing Agent hereby covenants with the Company as
follows:
(i) Maintain Authorizations. The Remarketing Agent will use
all of its reasonable efforts to maintain in full force and effect all
consents of any governmental or other authority that are required to be
obtained by it with respect to this Agreement and shall use all
reasonable efforts to obtain any that may become necessary in the
future.
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(ii) Comply with Laws. The Remarketing Agent shall comply in
all material respects with all applicable laws and orders which it may
be subject if failure so to comply would materially impair its ability
to perform its obligations under this Agreement.
SECTION 4. Appointment and Obligations of Remarketing Agent and
Calculation Agent; Secondary Purchaser. (a) The Company and the Trust hereby
appoint NMS as Remarketing Agent and as Calculation Agent under the Trust
Agreement and the Indenture and NMS hereby accepts such appointments (i) to
determine, pursuant to the process described in Section 5(b), the Reset Rate
that, when applied to the Preferred Securities (and, thus, the Subordinated
Notes), shall result in the resale of all outstanding Preferred Securities (or,
following any distribution of Subordinated Notes, all such Subordinated Notes),
at a sales price equal to 100.5% of the aggregate stated liquidation amount of
such Preferred Securities, or 100.5% of the aggregate principal amount of such
Subordinated Notes (provided that the Reset Rate shall in no event exceed the
rate permitted by applicable law), (ii) as the Remarketing Agent to conduct a
private auction of all outstanding Preferred Securities, or, following the
distribution of Subordinated Notes to holders of the Preferred Securities upon
termination of the Trust, all such Subordinated Notes, as the case may be and
(iii) to enter into a Secondary Purchase Agreement.
(b) Pursuant to the Secondary Purchase Agreement, the Secondary
Purchaser, either as the sole purchaser or as the representative of a syndicate
of purchasers designated by the Remarketing Agent, shall agree, subject to the
terms and conditions set forth therein, that the Secondary Purchaser and any
such other purchasers shall purchase such Preferred Securities or Subordinated
Notes, as the case may be, from the holders thereof at a price equal to the
Remarketing Price.
SECTION 5. Determination of Reset Date; Remarketing Procedures. (a)
Subject to Sections 7 and 10, the Reset Date shall be September 28, 1999 (the
"EXPECTED RESET DATE"); provided that
(i) the Company may, by notice to the Remarketing Agent,
direct that the Reset Date be delayed if the Company believes it will
be unable to meet the conditions to Remarketing in the absence of such
a delay; and
(ii) the Remarketing Agent may, by notice to the Company,
direct that the Reset Date be delayed if the Remarketing Agent believes
that a Remarketing will not be successful in the absence of such a
delay;
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<PAGE> 14
and, in either such event, the Company and the Remarketing Agent will use their
best efforts to establish a delayed Reset Date that is within five Business Days
after the Expected Reset Date, but in no event later than the Final Reset Date;
and provided, further, that no Reset Date may be established if any Cross
Default (as defined in the Credit Agreement) has occurred, except in connection
with a Remarketing following a Cured Default Trigger Event pursuant to Section
10(ii). If the Company and the Remarketing Agent have not agreed, on or prior to
the sixth Business Day preceding the Final Reset Date, to a Reset Date that is
not later than the Final Reset Date, no Remarketing shall occur, the Preferred
Securities (if then outstanding) shall be redeemed at the Mandatory Redemption
Price and the Company shall repay the Subordinated Notes in accordance with
their terms on the Mandatory Redemption Date.
(b) The Company shall, by notice to the Remarketing Agent no later
than five Business Days prior to the Reset Date, select and specify at least
three but not more than five Reference Corporate Dealers. By 3:00 p.m., New York
City time, on the Reset Date, the Remarketing Agent shall request Bids from such
Reference Corporate Dealers. The Remarketing Agent shall determine the lowest
Bid Rate (the "WINNING BID RATE") from among the Bids obtained on the Reset
Date. By approximately 4:30 p.m., New York City time, on the Reset Date, the
Remarketing Agent shall notify the Company, the Underwriter, the Indenture
Trustee and the Property Trustee of the Winning Bid Rate. If on a Reset Date,
Bids are not submitted by at least two Reference Corporate Dealers, or if the
lowest Bid submitted would result in a Winning Bid Rate in excess of the rate
permitted by applicable law, such Remarketing shall be deemed to be a Failed
Remarketing on the corresponding Remarketing Settlement Date. The Winning Bid
Rate determined by the Remarketing Agent, absent manifest error, shall be
binding and conclusive upon the Holders of the Trust Securities, the holders of
the Subordinated Notes, the Company and the Trust.
(c) On the Reset Date, the Remarketing Agent shall designate as the
Secondary Purchaser (the "SECONDARY PURCHASER") the Reference Corporate Dealer
providing the Bid containing the Winning Bid Rate. If the Winning Bid Rate is
specified in the Bids submitted by two or more Reference Corporate Dealers, the
Remarketing Agent shall, in its sole discretion, designate one of such
Reference Corporate Dealers as the Secondary Purchaser.
(d) On the Reset Date, the Secondary Purchaser shall enter into a
Secondary Purchase Agreement for the purchase by such Secondary Purchaser at the
Remarketing Price of the aggregate Liquidation Amount of Preferred Securities,
with a Distribution Rate equal to the Winning Bid Rate (or, if Subordinated
Notes shall have been distributed to Holders of the Trust Securities, the
aggregate principal amount of Subordinated Notes with an interest rate equal
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<PAGE> 15
to the Winning Bid Rate) and with a Mandatory Redemption Date (or, in the case
of Subordinated Notes, a maturity date) on the Maturity Extension Date.
(e) If a Remarketing shall have occurred pursuant to this Section 5
but settlement of the purchase and sale of the Preferred Securities or
Subordinated Notes, as the case may be, does not occur on the corresponding
Remarketing Settlement Date, then, unless the provisions of Section 7 with
respect to a Renewed Remarketing shall apply, a Failed Remarketing shall be
deemed to occur on such Remarketing Settlement Date.
(f) At the time and in the manner specified in the Secondary Purchase
Agreement, the Secondary Purchaser shall pay to the Remarketing Agent on behalf
of the holders of the Preferred Securities or Subordinated Notes, as the case
may be, on the Remarketing Settlement Date, an amount of cash equal to the
Remarketing Price.
(g) Unless otherwise agreed among the Remarketing Agent, the paying
agent (under the Trust Agreement or Indenture as applicable) and any Former
Holder, the Remarketing Agent shall promptly pay the Remarketing Price, less the
Remarketing Fee, to the paying agent, acting solely as agent for the Former
Holders, and the paying agent shall pay such amount to the Former Holders on the
Remarketing Settlement Date in the manner specified in the Trust Agreement or
the Indenture, as the case may be. Any amounts held by the Paying Agent for
payment to the Former Holders shall not be property of the Trust.
(h) The obligation of the Remarketing Agent to make payment to the
Former Holders in connection with the Remarketing shall be limited to the extent
that the Secondary Purchaser has delivered the Remarketing Price therefor to the
Remarketing Agent.
(i) Any outstanding Preferred Securities (or, if Subordinated Notes
shall have been distributed to holders of the Trust Securities, Subordinated
Notes) purchased on the Remarketing Settlement Date shall be deemed to be
transferred to the Secondary Purchaser and shall be replaced in the manner
provided in Section 5(j). On and after the Remarketing Settlement Date (except
in the event of a Failed Remarketing), the Trust (or the Company, in the case of
the Subordinated Notes) shall make no further payments to, and the Trust (or the
Company, in the case of the Subordinated Notes) shall have no further
obligations under the Trust Agreement (or the Indenture in the case of the
Subordinated Notes) in respect of, the Holders of such replaced securities (the
"FORMER HOLDERS"), the Trust (or the Company, in the case of the Subordinated
Notes) shall only be obligated to make payments to the Holders of Replacement
Securities, and the Preferred Securities (or Subordinated Notes) of the Former
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<PAGE> 16
Holders shall no longer represent an obligation of, or interest in, the Trust
(or the Company, in the case of the Subordinated Notes) but shall only represent
a right to receive the proceeds of the Remarketing from the Paying Agent under
the Trust Agreement or the Indenture, as the case may be.
(j) The Company shall cause replacement certificates evidencing the
remarketed Preferred Securities (or Subordinated Notes) to be executed by an
Administrative Trustee (or, in the case of Subordinated Notes, an authorized
signatory) on behalf of the Trust (or, in the case of Subordinated Notes, on
behalf of the Company) and authenticated by the Property Trustee or the
Indenture Trustee in accordance with the provisions of Section 5 (the
"REPLACEMENT SECURITIES"). The Replacement Securities shall be delivered to the
purchaser or purchasers of the remarketed Preferred Securities (or Subordinated
Notes) in accordance with the terms of the Secondary Purchase Agreement.
SECTION 6. Reset of Distribution Rate, Mandatory Redemption Date,
Interest Rate and Maturity Date. Unless a Failed Remarketing or Renewed
Remarketing shall have occurred, from and including the Reset Settlement Date,
the Distribution Rate on the Trust Securities and the interest rate on the
Subordinated Notes shall be the Winning Bid Rate and the mandatory redemption
date of the Trust Securities and the maturity date of the Subordinated Notes
shall be the Maturity Extension Date.
SECTION 7. Renewed Remarketing. If a Remarketing has occurred pursuant
to Section 5 that would be a Failed Remarketing pursuant to Section 5(e),
because the purchase and sale of the Preferred Securities (or, if Subordinated
Notes shall have been distributed to Holders of the Trust Securities,
Subordinated Notes) does not take place on the corresponding Remarketing
Settlement Date, and the reason for such failure shall, in the good faith
determination of the Remarketing Agent (made after consultation with the
Company), result from facts or circumstances that are not due to the action or
inaction of the Company, then the provisions of Section 5 and this Section 7
shall apply to any remarketing (each, a "RENEWED REMARKETING") of the Preferred
Securities (or, if Subordinated Notes shall have been distributed to Holders of
the Trust Securities, Subordinated Notes), except that the Expected Reset Date
shall be the sixth Business Day following such corresponding Remarketing
Settlement Date. The provisions of this Section 7 shall apply successively to
each Renewed Remarketing, provided that no Renewed Remarketing shall occur after
the Final Reset Date.
SECTION 8. Remarketing Fee. With respect to the Remarketing, the
Remarketing Agent shall retain as a remarketing fee (the "REMARKETING FEE") an
amount equal to 25 basis points (.25%) of the aggregate stated liquidation
amount
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<PAGE> 17
(the "LIQUIDATION AMOUNT") of the remarketed Preferred Securities or 25 basis
points (.25%) of the aggregate principal amount of the Subordinated Notes, as
the case may be, from the purchase price received in connection with such
Remarketing.
SECTION 9. Failed Remarketing; Mandatory Redemption. The Remarketing
Agent shall give notice of any Failed Remarketing on the date such Failed
Remarketing occurs, or is deemed to occur, by 4:00 p.m., New York City time, on
the date of such Failed Remarketing, to the Subordinated Note Issuer, the
Property Trustee, the Indenture Trustee, the Underwriter and the Paying Agent
under the Indenture. In the case of any Failed Remarketing, the Company shall
redeem the Subordinated Notes in whole, but not in part, on the third Business
Day following the date such Failed Remarketing occurs or is deemed to occur, and
the proceeds from such repayment shall be simultaneously applied by the Property
Trustee to redeem a like amount of any outstanding Trust Securities at the
Mandatory Redemption Price on a pro rata basis in the manner provided in Section
5 of Annex I to the Trust Agreement.
SECTION 10. Early Remarketing. If any of the following events (each, a
"TRIGGER EVENT") shall have occurred:
(a) the Closing Price of the Common Stock on any Trading Day, as
determined by the Remarketing Agent, is less than the Trigger Price (a "STOCK
PRICE TRIGGER EVENT");
(b) a Cross Default shall have occurred but such Cross Default shall
have ceased to be continuing (a "CURED DEFAULT TRIGGER EVENT"); or
(c) the Company shall have made a written request to the Underwriter to
enter into a firm commitment underwriting of the Common Stock, and the Company
and the Underwriter shall have substantially agreed to the terms of such
underwriting in the manner described in Section 2 of the Forward Underwriting
Agreement or shall have given notice to accelerate the Commencement Date in the
manner described in Section 7(c) of the Forward Underwriting Agreement (an
"UNDERWRITING TRIGGER EVENT");
then a Remarketing shall occur pursuant to Section 5 and, if applicable, Section
7, except that:
(i) the Expected Reset Date shall be the sixth Business Day
following the date such Trigger Event first occurs;
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<PAGE> 18
(ii) in the case of a Stock Price Trigger Event or a Cured
Default Trigger Event, the Final Reset Date shall be the 15th day
following the date such Trigger Event occurs, or the 20th day in the
case of a Renewed Remarketing to which the provisions of Section 7
apply, but in no event later than the third scheduled Trading Day prior
to November 10, 1999;
(iii) in the case of an Underwriting Trigger Event, the Final
Reset Date shall be the 45th day following the date such Trigger Event
occurs, but in no event later than the third scheduled Trading Day
prior to November 10, 1999; and
(iv) notwithstanding the provisions of clauses (A), (B) and
(C) above, if a Reset Date has already been established or a
Remarketing has already taken place at the time such Trigger Event
occurs, the Remarketing shall occur on such established Reset Date or
settled on the corresponding Remarketing Settlement Date.
SECTION 11. Adjustments to Trigger Price. The "TRIGGER PRICE" shall
initially be $22 11/16 (twenty-two and eleven-sixteenths). Following the
determination by the Remarketing Agent in its reasonable discretion that a
Potential Adjustment Event has occurred, the Remarketing Agent shall determine
(after consultation with the Company) whether such Potential Adjustment Event
has a diluting or concentrative effect on the theoretical value of the Common
Stock and, if so, shall make the corresponding adjustment(s), if any, to the
Trigger Price. The Company shall promptly notify the Remarketing Agent of any
Potential Adjustment Event. The Remarketing Agent may, but need not, determine
the appropriate adjustment(s) by reference to the adjustment(s) in respect of
such Potential Adjustment Event made by an options exchange to options on the
Common Stock traded on that options exchange. In the event of any merger,
consolidation or reorganization of the Company, the Remarketing Agent shall
determine the appropriate Trigger Price as a result of such event.
SECTION 12. Replacement and Resignation of Remarketing Agent. (a) The
Company shall not have the right to replace NMS as the Remarketing Agent,
except in the case of bad faith, gross negligence or willful misconduct by NMS.
(b) NMS may resign at any time for good reason (after consultation
with the Company) and, subject to the following sentence, shall be discharged
from its duties and obligations hereunder or as Calculation Agent under the
Trust Agreement and the Indenture by giving no less than 10 days notice. Any
such resignation shall become effective upon the Company's appointment of a
successor to perform the services that would otherwise be performed hereunder by
the Remarketing Agent or the Calculation Agent under the Trust Agreement and
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<PAGE> 19
the Indenture, as the case may be, and the agreement of any such successor so to
serve. Upon receiving notice from the Remarketing Agent that it wishes to resign
hereunder or as Calculation Agent under the Trust Agreement and the Indenture
stating the reasons for such resignation, the Company shall appoint such a
successor and enter into a new remarketing agreement with it as soon as
reasonably practicable.
SECTION 13. Dealing in the Securities. NMS, when acting as Remarketing
Agent hereunder or under the Secondary Purchase Agreement or when acting in its
individual or any other capacity, may, to the extent permitted by law, buy,
sell, hold or deal in any of the Preferred Securities or Subordinated Notes, as
the case may be. With respect to any Preferred Securities or Subordinated Notes,
as the case may be, owned by it, the Remarketing Agent may exercise any vote or
join in any action with like effect as if it did not act in any capacity
hereunder. NMS, in its individual capacity, either as principal or agent, may
also engage in or have an interest in any financial or other transaction with
the Company as freely as if it did not act in any capacity hereunder.
SECTION 14. Offering Memorandum. Promptly following the date hereof,
the Company shall furnish an offering memorandum (the "OFFERING MEMORANDUM") to
the Remarketing Agent, in form and substance reasonably satisfactory to the
Remarketing Agent, to be used in the remarketing by the Secondary Purchaser or
purchasers under the Secondary Purchase Agreement, and shall pay all expenses
relating thereto.
SECTION 15. Conditions to the Remarketing Agent's Obligations. (a) The
obligations of the Remarketing Agent, the Secondary Purchaser and any other
purchasers to perform their respective obligations hereunder and under the
Secondary Purchase Agreement shall be subject to the terms and conditions of the
Secondary Purchase Agreement.
(b) If at any time during the term of this Agreement, any Event of
Default under the Indenture or any Event of Default under the Trust Agreement,
or event that with the passage of time or the giving of notice or both would
become an Event of Default under the Indenture or an Event of Default under the
Trust Agreement, has occurred and is continuing under the Indenture or the Trust
Agreement, then the obligations and duties of the Remarketing Agent under this
Agreement shall be suspended until such default or event has been cured. The
Company shall cause the Indenture Trustee and the Property Trustee to give the
Remarketing Agent notice of all such defaults and events of which the Indenture
Trustee or the Property Trustee is aware.
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SECTION 16. Indemnification. The Company shall indemnify and hold
harmless the Remarketing Agent and its officers and employees from and against
all actions, claims, damages, liabilities and losses, and costs and expenses
related thereto (including reasonable legal fees and costs) relating to or
arising out of actions or omissions in any capacity hereunder and in any
capacity as Calculation Agent under the Trust Agreement and the Indenture,
except actions, claims, damages, liabilities, losses, costs and expenses to the
extent caused by (a) the bad faith, gross negligence or wilful misconduct of
such indemnified party or (b) the breach by the Remarketing Agent of its
representations, warranties and covenants hereunder. This Section 16 shall
survive the termination of the Agreement, the Trust Agreement, the Indenture and
the payment in full of all obligations under the Preferred Securities or the
Subordinated Notes, as the case may be, and this Agreement, whether by purchase,
repurchase, redemption or otherwise.
SECTION 17. Termination of Remarketing Agreement. This Agreement shall
terminate as to any Remarketing Agent that is replaced on the effective date of
its replacement pursuant to Section 12(b). Notwithstanding any such termination,
the obligations of the Company set forth in Section 8 shall survive and remain
in full force and effect until all amounts payable under said Section 8 shall
have been paid in full. In addition, this Agreement shall terminate upon the
earlier of (a) the expiration of the term specified in Section 21 and (b) three
Business Days following the date of any Failed Remarketing.
SECTION 18. Remarketing Agent's Performance: Duty of Care; Power of
Attorney. The duties and obligations of the Remarketing Agent hereunder shall be
determined solely by the express provisions of this Agreement and the Secondary
Purchase Agreement.
The Remarketing Agent hereby accepts the obligation set forth in the
Trust Agreement and the Indenture to act as attorney-in-fact for the holders of
the Preferred Securities or Subordinated Notes, as the case may be.
SECTION 19. Expenses. The Company shall pay the reasonable fees and
disbursements of the Remarketing Agent's counsel incurred in connection with any
remarketing, including any Renewed Remarketing and any Failed Remarketing and
the Company shall pay the reasonable fees, expenses and disbursements of the
Remarketing Agent and its counsel in connection with the execution and delivery
of the Secondary Purchase Agreement.
SECTION 20. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the choice of law rules thereof.
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SECTION 21. Term of Agreement. Unless otherwise terminated in
accordance with the provisions hereof and except as otherwise provided herein,
this Agreement shall remain in full force and effect from the date hereof until
thirty days following the Reset Date.
SECTION 22. Successors and Assigns. The rights and obligations of the
Company hereunder may not be assigned or delegated to any other person without
the prior written consent of the Remarketing Agent. Subject to the provisions of
Section 12, the rights and obligations of the Remarketing Agent hereunder may
not be assigned or delegated to any other person without the prior written
consent of the Company. This Agreement shall inure to the benefit of and be
binding upon the Company and the Remarketing Agent and their respective
successors and assigns. The terms "successors" and "assigns" shall not include
any purchaser of Preferred Securities or Subordinated Notes merely because of
such purchase.
SECTION 23. Headings. Section headings have been inserted in this
Agreement as a matter of convenience of reference only, and it is agreed that
such section headings are not a part of this Agreement and shall not be used in
the interpretation of any provision of this Agreement.
SECTION 24. Severability. If any provision of this Agreement shall be
held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable
as applied in any particular case in any or all jurisdictions because it
conflicts with any provisions of any constitution, statute, rule or public
policy or for any other reason, such circumstances shall not have the effect of
rendering the provision in question invalid, inoperative or unenforceable in any
other case, circumstances or jurisdiction, or of rendering any other provision
or provisions of this Agreement invalid, inoperative or unenforceable to any
extent whatsoever.
SECTION 25. Counterparts. This Agreement may be executed in
counterparts, each of which shall be regarded as an original and all of which
shall constitute one and the same document.
SECTION 26. Amendments. This Agreement may be amended by any instrument
in writing signed by the parties hereto; provided that any amendment to Section
8 shall require, in addition, the consent of all of the holders of the Preferred
Securities or Subordinated Notes to be remarketed, as the case may be.
SECTION 27. Notices. Unless otherwise specified, any notices, requests,
consents or other communications given or made hereunder or pursuant hereto
shall be made in writing or transmitted by any standard form of
telecommunication, including telephone, telegraph or telecopy, and confirmed in
writing. All written notices and confirmations of notices by telecommunication
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<PAGE> 22
shall be deemed to have been validly given or made when delivered or mailed,
registered or certified mail, return receipt requested and postage prepaid. All
such notices, requests, consents or other communications shall be addressed as
follows: if to the Company, to Hercules Incorporated, Hercules Plaza, 1313 North
Market Street, Wilmington, Delaware 19894-0001, Attention: Vice President and
Treasurer, with a copy to Hercules Incorporated, Hercules Plaza, 1313 North
Market Street, Wilmington, Delaware 19894-0001, attention: Corporate Secretary
and a copy to Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st
Floor, Philadelphia, Pennsylvania 19103, Attention: Justin P. Klein, Esq.; if to
the Trust, to c/o Hercules Incorporated, Hercules Plaza, 1313 North Market
Street, Wilmington, Delaware 19894-0001, Attention: Israel J. Floyd, Esq.,
Administrative Trustee; and if to the Remarketing Agent, to NationsBanc
Montgomery Securities LLC, 100 North Tryon Street, Charlotte, North Carolina
28255, Attention: Syndicate or to such other address as any of the above shall
specify to the other in writing.
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<PAGE> 23
IN WITNESS WHEREOF, each of the Company, the Trust and the Remarketing
Agent has caused this Remarketing Agreement to be executed in its name and on
its behalf by one of its duly authorized officers as of the date first above
written.
HERCULES INCORPORATED
By: /s/ R. K Elliott
Name: R. Keith Elliott
Title: Chairman and Co-Chief
Executive Officer
HERCULES TRUST V
By: /s/ Jan M. King
Name: Jan M. King
Title: Administrative Trustee
CONFIRMED AND ACCEPTED:
NATIONSBANC MONTGOMERY
SECURITIES LLC,
not individually, but solely as
Remarketing Agent
By: /s/ Russell F. Hackman
Name: Russell F. Hackman
Title: Principal
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<PAGE> 24
Exhibit A to
Remarketing Agreement
SECONDARY PURCHASE AGREEMENT (the "AGREEMENT") dated _________, 199_
among HERCULES INCORPORATED, a Delaware corporation (the "COMPANY"), HERCULES
TRUST V, a Delaware statutory business trust (the "TRUST")(1), NATIONSBANC
MONTGOMERY SECURITIES, LLC, a ___________ limited liability company, as
Remarketing Agent (the "REMARKETING AGENT") and attorney-in-fact for the holders
from time to time of the Preferred Securities, and _________________, a
__________ corporation (the "SECONDARY PURCHASER").
SECTION 1. Definitions. Capitalized terms used and not defined in this
Agreement shall have the meanings assigned to them in the Remarketing Agreement,
the Trust Agreement and the Junior Subordinated Debenture Indenture (as
supplemented by the First Supplemental Indenture, the "INDENTURE") and the
Guarantee Agreement, each as identified in Schedule I hereto. In addition, as
used in this Agreement, the following terms shall have the following meanings:
"AFFILIATE" has the meaning set forth in Section 3(v).
"AGREEMENT" has the meaning set forth in the initial paragraph hereto.
"BUSINESSES" has the meaning set forth in Section 3(t)(i)(A).
"COMMON STOCK" means the common stock, no par value, of the
company.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the initial paragraph hereto.
- -----------------------
(1) Delete Trust as a party, delete references to Trust Agreement and
Guarantee Agreement and replace references to "Preferred Securities"
with "Subordinated Notes" where appropriate if the Subordinated Notes
are being purchased.
A-1
<PAGE> 25
"CREDIT AGREEMENT" means the Credit Agreement dated as of October 15,
1998 among the Company, certain subsidiaries of the Company from time to time
parties thereto, the several lenders from time to time parties thereto,
NationsBank, N.A., as Administrative Agent, The Chase Manhattan Bank, Morgan
Guaranty Trust Company of New York and Citibank, N.A., as Co-Syndication Agents,
as the same may be amended, supplemented, modified or superseded from time to
time.
"DEBT REPAYMENT TRIGGER EVENT" means any event or condition that gives,
or with the giving of notice or lapse of time would give, the holder of any
note, debenture or other evidence of indebtedness for borrowed money in excess
of $25,000,000 (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its Material Subsidiaries or the Trust.
"DEFAULT" has the meaning set forth in Section 3(f).
"DEPOSITORY" has the meaning set forth in the Trust Agreement.
"ENVIRONMENTAL LAWS" means any and all lawful and applicable Federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the environment or to
emissions, discharges, releases or threatened releases including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE ACT REGULATIONS" means the rules and regulations promulgated
under the Exchange Act.
"EXISTING INSTRUMENT" has the meaning set forth in Section 3(f).
"GAAP" has the meaning set forth in Section 3(k).
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GOVERNMENTAL LICENSES" has the meaning set forth in Section 3(q).
A-2
<PAGE> 26
"GUARANTEE TRUSTEE" shall mean the Preferred Securities Guarantee
Trustee as defined in the Guarantee Agreement.
"HAZARDOUS MATERIALS" means any substance, material or waste defined or
regulated in or under any Environmental Laws.
"INCORPORATED DOCUMENTS" has the meaning set forth in Section 3(j).
"INDENTURE" has the meaning set forth in the initial paragraph of
Section 1.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 3(p).
"INVESTMENT COMPANY ACT" means the Investment Company Act of
1940, as amended.
"MATERIAL ADVERSE CHANGE" has the meaning set forth in Section 3(m).
"MATERIAL SUBSIDIARY" has the meaning set forth in Section 3(b).
"OFFERING MEMORANDUM" has the meaning set forth in Section 2.
"PREFERRED SECURITIES" means the 200,000 Auction Rate Reset Preferred
Securities in an aggregate amount of $200,000,000, issued under the Trust
Agreement.
"QIB" has the meaning set forth in Section 8.
"REAL PROPERTIES" has the meaning set forth in Section 3(t)(i)(A).
"RELEVANT EXCHANGE" means the principal national securities exchange or
automated quotation system on which the Common Stock is listed or quoted.
"REMARKETING AGREEMENT" means the Remarketing Agreement identified
in Schedule I hereto.
"REMARKETING AGENT" has the meaning set forth in the initial paragraph
hereto.
"REMARKETING FEE" has the meaning set forth in the Remarketing
Agreement.
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<PAGE> 27
"REMARKETING PRICE" has the meaning set forth in the Remarketing
Agreement.
"REMARKETING SETTLEMENT DATE" has the meaning set forth in the
Remarketing Agreement.
"RENEWED REMARKETING" has the meaning set forth in the Remarketing
Agreement.
"REPLACEMENT SECURITIES" has the meaning set forth in the Trust
Agreement.(2)
"SECONDARY PURCHASER" has the meaning set forth in the initial
paragraph hereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES ACT REGULATIONS" means the rules and regulations
promulgated under the Securities Act.
"SUBORDINATED NOTES" means the $206,200,000 aggregate principal amount
of Auction Rate Reset Junior Subordinated Notes Series A of the Company.
"TRANSACTION AGREEMENTS" means, collectively, this Agreement, the
Remarketing Agreement, the Trust Agreement, the Guarantee Agreement and the
Indenture.
"TRUST" has the meaning set forth in the initial paragraph hereto.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor Legislation.
"TRUSTEES" means any of the Trustees pursuant to the Trust Agreement,
the Guarantee Agreement and the Indenture, as appropriate.
"TRUST AGREEMENT" has the meaning specified in Schedule I hereto.
- --------
(2) Replace with the following definition of Replacement Notes if
Subordinated Notes are being purchased: "Replacement Notes" has the
meaning set forth in the Indenture.
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<PAGE> 28
SECTION 2. Offering Memorandum. The Company and the Trust have
furnished an offering memorandum, in form and substance reasonably satisfactory
to each of the Remarketing Agent and the Secondary Purchaser, (an "OFFERING
MEMORANDUM") relating to the Securities and the purchase and resale thereof.
SECTION 3. Representations and Warranties. The Company represents,
warrants and agrees that:
(a) Good Standing of Company. The Company is a duly and validly
existing corporation in good standing under the laws of the State of Delaware.
The Company is duly qualified as a foreign corporation and is in good standing
under the laws of each other jurisdiction where its ownership, lease, licensing
or operation of property or the conduct of its business requires such
qualification, other than in such jurisdiction or jurisdictions where the
failure to be so qualified and in good standing could not reasonably be expected
to result in a Material Adverse Change.
(b) Good Standing of Material Subsidiaries. Each subsidiary of the
Company that (i) is listed on Schedule II hereto , (ii) together with its
subsidiaries on a consolidated basis during the 12 months preceding the date
hereof accounts for (or to which may be attributed) 5% or more of the net income
or assets (determined on a consolidated basis) of the Company and its
subsidiaries or (iii) is otherwise necessary for the ongoing business operations
of the Company and its subsidiaries taken as a whole (each, a "MATERIAL
SUBSIDIARY"), is a duly and validly existing entity and is in good standing
under the laws of the jurisdiction of its incorporation or organization, has all
corporate power and authority to own, lease, license and operate its properties
and conduct its business as currently conducted and is duly qualified as a
foreign entity in good standing in each other jurisdiction where its ownership,
lease, license or operation of property or the conduct of its business requires
such qualification, other than in such jurisdiction or jurisdictions where the
failure to be so qualified or be in good standing could not reasonably be
expected to result in a Material Adverse Change. All of the issued and
outstanding capital stock of each Material Subsidiary have been duly authorized
and validly issued, are fully paid and non-assessable and are owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien (other than the liens created by or
contemplated in the Credit Agreement as in effect on the date hereof),
encumbrance or claim. None of the outstanding shares of capital stock of any
Material Subsidiary were issued in violation of preemptive or other similar
rights of any securityholder of such Material Subsidiary.
(c) Power and Authority. The Company has all corporate power and
authority and the legal right to (i) own, lease, license and operate its
properties,
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<PAGE> 29
(ii) conduct the business in which it is currently engaged and (A) enter into
and perform its obligations under, or as contemplated under, this Agreement and
consummate the transactions contemplated hereby.
(d) Valid and Binding Agreements. Each of the Transaction Agreements
has been duly authorized, executed and delivered by, and is a valid and binding
agreement of, the Company (assuming, in the case of the Indenture, due execution
and delivery by the Indenture Trustee; in the case of the Trust Agreement, due
execution and delivery by the Property Trustee and the Delaware Trustee; in the
case of the Guarantee Agreement, due execution and delivery by the Guarantee
Trustee (the "GUARANTEE TRUSTEE"); and, in the case of the Remarketing
Agreement, due execution and delivery by the Remarketing Agent), enforceable in
accordance with its terms, except as rights to indemnification hereunder and
thereunder may be limited by applicable law and except as the enforcement hereof
and thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting the enforcement of
creditors' rights or by general equitable principles.
(e) Valid and Binding Obligations. The Subordinated Notes have been
duly authorized, executed, authenticated and issued and delivered as provided in
the Indenture against payment of the purchase price therefor as provided in the
Indenture, and are validly issued and outstanding, and constitute valid and
legally binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights or by general equitable
principles.
(f) Non-Contravention of Existing Instruments. Neither the Company nor
any of its Material Subsidiaries is in default or, with the giving of notice or
lapse of time, would be in default ("DEFAULT") under any indenture, mortgage,
loan or credit agreement, note, contract, franchise, lease or other instrument
to which the Company or any of its Material Subsidiaries is a party or by which
it or any of them may be bound, or to which any of the property or assets of the
Company or any of its Material Subsidiaries is subject (each, an "EXISTING
INSTRUMENT"), except for such Defaults as could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Change. The
execution, delivery and performance by the Company of this Agreement and the
Remarketing Agreement, the consummation of the transactions herein and therein
contemplated and the compliance by the Company with its obligations hereunder
and thereunder (i) do not and will not result in any violation of the provisions
of the Certificate of Incorporation or By-Laws or other constitutive documents
of the Company or any Material Subsidiary, (ii) do not and will not conflict
with or
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<PAGE> 30
constitute a breach of, Default or a Debt Repayment Trigger Event under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
assets, properties or operations of the Company or any of its Material
Subsidiaries pursuant to, or require the consent of any other party to, any
Existing Instrument, except for such conflicts, breaches, Defaults, liens (other
than liens created by or contemplated in the Credit Agreement as in effect on
November 12, 1998), charges, encumbrances or failure to obtain consents as would
not, individually or in the aggregate, result in a Material Adverse Change and
(iii) will not result in any violation of any applicable law or statute or any
order, rule, regulation or judgment of any court or governmental agency or body
having jurisdiction over the Company or any of its Material Subsidiaries or any
of their respective assets, properties or operations the result which could be a
Material Adverse Change.
(g) No Further Consents or Approvals Required. No consent, approval,
authorization, order of, registration qualification, or filing of or with any
court or governmental agency or body having jurisdiction over the Company, any
of its Material Subsidiaries or any of their respective properties is required
for the due authorization, execution and delivery by the Company of, and the
compliance by the Company with all the terms of, this Agreement and the
consummation by the Company of the transactions contemplated hereby, except such
as have been obtained or made by the Company, as may be required by the
securities or blue sky laws of the various States in connection with the
purchase of the Preferred Securities by the Secondary Purchaser or where the
failure to obtain such consent, approval, authorization, order, registration,
qualification, or make such filing will not adversely affect such authorization,
execution or delivery of this Agreement, the compliance with the terms hereof or
the consummation by the Company of the transactions contemplated hereby.
(h) Compliance with Exchange Act Requirements. The Company has made
all the filings with the Commission that it is required to make under the
Exchange Act and the Exchange Act Regulations and each such filing complies in
all material respects with the requirements of the Exchange Act and Exchange Act
Regulations.
(i) Offering Memorandum Furnished to Secondary Purchaser. The Company
has furnished to the Secondary Purchaser an Offering Memorandum. The Offering
Memorandum did not at the time of delivery to the Secondary Purchaser and, as of
the Remarketing Settlement Date will not, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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<PAGE> 31
(j) Incorporated Documents. The documents incorporated or deemed to be
incorporated by reference in the Offering Memorandum, at the time they were or
hereafter are filed with the Commission (collectively, the "INCORPORATED
DOCUMENTS"), except to the extent amended or modified on a subsequent date prior
to the date of the Offering Memorandum, complied and will comply in all material
respects with the requirements of the Exchange Act and Exchange Act Regulations,
at the date of the Offering Memorandum and at the Remarketing Settlement Date.
(k) Financial Statements. The financial statements of the Company, as
well as those financial statements, schedules and notes of any other entity
included therein, included or incorporated by reference in the Offering
Memorandum together with the related notes and schedules, present fairly the
financial position of the Company and its consolidated subsidiaries, or such
other entity, as the case may be, as of and at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries or such other entity, as the case may be, for the
period specified. Such financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. Any pro forma financial statements
included in the Offering Memorandum have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial statements
and have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein but the pro forma financial statements may
differ from actual results.
(l) Independent Accountants. Each of the accountants who certified the
financial statements and any supporting schedules thereto included or
incorporated in the Offering Memorandum, are independent public or certified
public accountants as required by the Exchange Act and the Exchange Act
Regulations.
(m) No Material Adverse Change in Business. Since the respective dates
as of which information is given in the Offering Memorandum, except as otherwise
stated therein, (i) there has been no material adverse change, or development
that could reasonably be expected to result in a material adverse change in the
condition, financial or otherwise, in or affecting the earnings, business,
operations, financial position or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (a "MATERIAL ADVERSE CHANGE"), (ii) there
have been no transactions entered into by the Company or any of its Material
A-8
<PAGE> 32
Subsidiaries other than those arising in the ordinary course of business which
are, individually or in the aggregate, material with respect to the Company and
its subsidiaries, considered as one enterprise and (iii) except for regular
dividends on the Company's Common Stock or preferred stock (which dividends
include amounts, sometimes called "dividend equivalents," paid under the
Company's employee benefit and compensation plans on the Common Stock grants
(whether options, restricted stock or other) under such plans, but only to the
extent such amounts do not exceed the amounts of ordinary cash dividends that
would be payable were such Common Stock grants treated as Common Stock), in
amounts per share that are consistent with past practice, or the applicable
charter document or supplement thereto, respectively, there has been no dividend
or distribution of any kind declared, paid or made by the Company on any class
of its capital stock.
(n) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth or incorporated by reference in the
Offering Memorandum under the caption ["CAPITALIZATION"] (other than for
subsequent issuances, if any, pursuant to employee benefit and compensation
plans described in the Offering Memorandum or any Incorporated Document or upon
exercise of outstanding options or warrants described in the Offering Memorandum
or any Incorporated Document). Such shares of capital stock have been duly
authorized and validly issued by the Company and are fully paid and
non-assessable and have been issued in compliance with federal and state
securities laws. The capital stock conforms in all material respects to the
description thereof contained in the Offering Memorandum. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the Company or any
of its subsidiaries other than those accurately described or incorporated by
reference in the Offering Memorandum.
(o) No Material Actions or Proceedings. There are no actions, suits,
proceedings, inquiries or investigations before or brought by any legal or
governmental agency or body now pending or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its Material Subsidiaries
that are not disclosed in the Offering Memorandum or in any Incorporated
Document. The aggregate of all pending legal or governmental proceedings to
which the Company or any of its Material Subsidiaries is a party or of which any
of their respective assets, properties or operations is the subject that are not
described in the Offering Memorandum or any Incorporated Documents, including
ordinary routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Change.
(p) Intellectual Property Rights. Except as otherwise disclosed or
incorporated by reference in the Offering Memorandum, the Company and each
A-9
<PAGE> 33
Material Subsidiary owns, leases, licenses or otherwise possesses adequate
trademarks, service marks, trade names, patents, patent rights, copyrights,
licenses, inventions, approvals, and other intellectual property rights
(collectively, "INTELLECTUAL PROPERTY") necessary to conduct its business as now
conducted. Neither the Company nor any of its Material Subsidiaries has received
any written notice of any infringement of or conflict with, asserted rights of
others with respect to any Intellectual Property which infringement or conflict,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Change.
(q) Possession of Licenses and Permits. Each of the Company and its
Material Subsidiaries possesses such permits, licenses, approvals, consents and
other authorizations (collectively, "GOVERNMENTAL LICENSES") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by it. The Company and its
Material Subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure to so comply could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change. All of the Governmental Licenses are valid and in full force and
effect, except where the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect could not
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change. Neither the Company nor any of its Material Subsidiaries has
received any written notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, individually or in the
aggregate (if the subject of an unfavorable decision, ruling or finding), would
result in a Material Adverse Change.
(r) Company Not "Investment Company". The Company is not an
"investment company" within the meaning of the Investment Company Act and the
rules and regulations of the Commission thereunder.
(s) Related Party Transactions. There are no business relationships or
related party transactions involving the Company or any subsidiary or any other
person required to be described in the Offering Memorandum or in any
Incorporated Document that have not been described as required.
(t) Environmental Laws.
(i) Except as would not have or be reasonably expected to
result in a Material Adverse Change or as is otherwise described in the
Exchange Act Reports:
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<PAGE> 34
(A) Each of the real properties owned by the Company or
any of its Material Subsidiaries (the "REAL PROPERTIES") and
all operations at the Real Properties are in compliance with
all applicable Environmental Laws, and there is no violation
of any Environmental Law with respect to the Real Properties
or the businesses operated by the Company or any of its
Material Subsidiaries (the "BUSINESSES"), and there are no
conditions relating to the Businesses or Real Properties that
would be reasonably expected to give rise to liability under
any applicable Environmental Laws.
(B) Neither the Company nor any of its Material
Subsidiaries has received any written notice of, or inquiry
from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential
liability regarding Hazardous Materials (as defined herein) or
compliance with Environmental Laws (as defined herein) with
regard to any of the Real Properties or the Businesses, nor
does the Company or any of its Material Subsidiaries have
knowledge or reason to believe that any such notice is being
threatened.
(C) Hazardous Materials have not been transported or
disposed of from the Real Properties, or generated, treated,
stored or disposed of at, on or under any of the Real
Properties or any other location, in each case by, or on
behalf or with the permission of, the Company or any of its
Material Subsidiaries.
(D) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Company, threatened, under any Environmental Law to which the
Company or any of its Material Subsidiaries is or, to the best
knowledge of the Company, will be named as a party, nor are
there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental
Law with respect to the Company or any of its Material
Subsidiaries, the Real Properties or the Businesses.
(E) There has been no release or, to the best knowledge
of the Company, threat of release of Hazardous Materials at or
from the Real Properties, or arising from or related to the
operations (including, without limitation, disposal) of the
Company or any of its Material Subsidiaries in connection with
the Real Properties or
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<PAGE> 35
otherwise in connection with the Businesses, in violation of,
or in amounts or in a manner that could give rise to liability
under, Environmental Laws.
(F) None of the Real Properties contains, or has
previously contained, any Hazardous Materials at, on or under
the Real Properties in amounts or concentrations that, if
released, constitute or constituted a violation of, or would
give rise to liability under, Environmental Laws.
(G) Neither the Company, nor any of its Material
Subsidiaries, has assumed any liability of any person (other
than the Company or one of its Material Subsidiaries) under
any Environmental Law.
(ii) The Company has adopted procedures that are designed to
(A) ensure that for the Company and each of its Material Subsidiaries,
each of their respective operations and each of the properties owned or
leased by the Company and each of its Material Subsidiaries remains in
compliance with applicable Environmental Laws, to the extent that the
failure to comply with such Environmental Laws would result in or would
be reasonably expected to result in a Material Adverse Change, and (B)
manage, to the same extent as and in accordance with the practices of
companies engaged in the same or a similar business, any liabilities or
potential liabilities that the Company and each of its Material
Subsidiaries, any of its respective operations and each of the
properties owned or leased by the Company and each of its Material
Subsidiaries may have under applicable Environmental Laws.
(u) Securities Laws; Trust Indenture Act. Assuming the accuracy of the
Secondary Purchaser's representations, warranties and agreements set forth in
Section 7 hereof, registration of the Preferred Securities, the Subordinated
Notes or the Guarantee Agreement under the Securities Act is not required in
connection with the offer, sale and delivery of the Preferred Securities to the
Secondary Purchaser and qualification of the Trust Agreement, the Guarantee
Agreement or the Indenture under the Trust Indenture Act of 1939, as amended
(the "TRUST INDENTURE ACT"), is not required.
(v) No Integration. Neither the Company nor any of its Affiliates (as
defined in Rule 501(b) of Regulation D under the Securities Act) has directly,
or through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the Securities
Act) which is or
A-12
<PAGE> 36
will be integrated with the sale of the Preferred Securities in a manner that
would require the registration under the Securities Act of the Preferred
Securities.
(w) No Solicitation. No form of general solicitation or general
advertising was used by the Company, the Trust or, to the best of its knowledge,
any other person acting on behalf of the Company or the Trust in respect of the
Preferred Securities or in connection with the remarketing and sale of the
Preferred Securities (as those terms are used in Regulation D under the
Securities Act), or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act. Neither the Company, the Trust nor any
person acting on behalf of the Company or the Trust has, either directly or
indirectly, sold or offered for sale to any person any of the Preferred
Securities or any other similar security of the Company or the Trust except for
the Secondary Purchaser, so as thereby to bring the issuance or sale of any of
the Securities within the provisions of Section 5 of the Securities Act or any
Blue Sky law of any state or the provincial securities laws of Canada.
SECTION 4. Representations and Warranties and Agreements of the Company
and the Trust. The Company and the Trust, jointly and severally, represent,
warrant and agree that:
(a) The Trust has been duly created and is validly existing in good
standing as a statutory business trust organized under the Business Trust Act of
the State of Delaware (chapter 38, Title 12, of the Delaware Code, 12 Del. C.
Sec. 3801 et seq.) (the "BUSINESS TRUST ACT"), is a "grantor trust" or
pass-through entity and not an association or publicly traded partnership
subject to taxation as a corporation for Federal income tax purposes under
existing law, has the business trust power and authority to own property,
conduct its business and enter into and perform the obligations under the
Transaction Agreements and is not required to be authorized to do business in
any other jurisdiction. All filings required under the laws of the State of
Delaware with respect to the creation and valid existence of the Trust as a
business trust have been made.
(b) The Trust has conducted and will conduct no business other than
the transactions contemplated by this Agreement, the Remarketing Agreement and
the Trust Agreement; the Trust is not a party to or bound by any agreement or
instrument other than this Agreement, the Remarketing Agreement and the Trust
Agreement; the Trust has no liabilities or obligations other than those arising
out of the transactions contemplated by this Agreement, the Remarketing
Agreement, the Subscription Agreement, the Subordinated Note Purchase Agreement
and such Trust Agreement; and the Trust is not a party to or subject to any
action, suit or proceeding of any nature.
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<PAGE> 37
(c) The Trust Agreement has been duly authorized, executed and
delivered by the Company, as Sponsor, and the Trustees, and assuming due
authorization, execution and delivery of the Trust Agreement by the Delaware
Trustee (as defined in the Trust Agreement), constitutes a valid and binding
obligation of the Trust, enforceable against the Trust in accordance with its
terms, subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and other laws of general application relating to or affecting the
enforcement of creditors' rights or by general equitable principles.
(d) The Preferred Securities have been duly authorized by, and
executed and delivered in accordance with the Trust Agreement and represent
validly issued, fully paid and non-assessable undivided beneficial interests in
the assets of the Trust. Holders of the Preferred Securities are entitled to the
same limitation of liability extended to stockholders of private corporations
for profit under the General Corporation Law of the State of Delaware. The
Common Securities have been duly authorized by, and executed and delivered in
accordance with, the Trust Agreement and represent validly issued undivided
beneficial interests in the assets of the Trust. The remarketing of Preferred
Securities(3) will not be subject to any preemptive or similar rights.
(e) Each of this Agreement and the Remarketing Agreement has been duly
authorized, executed and delivered by, and is a valid and binding obligation of,
the Trust, enforceable against the Trust in accordance with its terms, subject
to the effects of bankruptcy, insolvency, reorganization, moratorium and other
laws of general application relating to or affecting the enforcement of
creditors' rights or by general equitable principles.
(f) The execution and delivery by the Trust and the performance by the
Trust of its obligations under, this Agreement, the Remarketing Agreement and
the Trust Agreement will not result in a violation of any existing statute or
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Trust or any of its assets, the Trust Agreement or any
agreement or other instrument binding upon the Trust; and except for such
consents, approvals, authorizations, registrations or qualifications as may be
required under applicable state securities laws in connection with the purchase
of the Preferred Securities by the Secondary Purchaser, no consent, approval,
authorization or order of, or filing or registration with, any such court or
governmental agency or body is required for the performance by the Trust under
this Agreement, the Remarketing Agreement and the Trust Agreement.
- --------
(3) Replace with Subordinated Notes if Subordinated Notes are being
purchased.
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<PAGE> 38
(g) The Trust is not, will not be an "investment company" within the
meaning of such term under the Investment Company Act and the rules and
regulations of the Commission thereunder.
SECTION 5. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Secondary Purchaser agrees to purchase from the registered holder or holders of
the Preferred Securities in the manner specified in Section 6 hereof, such
Preferred Securities at a purchase price equal to the Remarketing Price plus any
accrued and unpaid distributions(4) on the Preferred Securities.
SECTION 6. Delivery and Payment; Remarketing Fee. Delivery of
certificates for the Preferred Securities purchased by the Secondary Purchaser
and payment therefor shall be made on the Remarketing Settlement Date at the
location and time specified in Schedule I hereto, which date and time may be
postponed by agreement among the Secondary Purchaser, the Company, the Trust and
the Remarketing Agent on behalf of the registered holder or holders thereof.
Payment for the Preferred Securities shall be made by wire transfer of
immediately available funds by 1:00 p.m., New York City time, on the Remarketing
Settlement Date, to the order of the Remarketing Agent. The Remarketing Agent
shall be entitled to retain from such funds the Remarketing Fee. On the
Remarketing Settlement Date, the Remarketing Agent shall deliver a proportional
amount of the Remarketing Price (net of the Remarketing Fee) to the holders of
the Preferred Securities.
Delivery of the remarketed Preferred Securities shall be made to the
Secondary Purchaser as follows: certificates for the Replacement Securities(5)
shall be registered in such names and denominations as the Secondary Purchaser
may request not less than two full Business Days in advance of the Remarketing
Settlement Date, and the Company and the Trust agree to have such certificates
available for inspection, packaging and checking by the Secondary Purchaser in
New York, New York not later than 1:00 p.m., New York City time, on the Business
Day prior to the Remarketing Settlement Date.
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(4) Replace with "accrued and unpaid interest" if Subordinated Notes are
being remarketed.
(5) Replace with "Replacement Notes" if Subordinated Notes are being
remarketed.
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<PAGE> 39
SECTION 7. Additional Covenants of the Company and the Remarketing
Agent. (a) None of the Company, the Remarketing Agent or any Affiliate of the
Company will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) which
could be integrated with the sale of the Securities to the Secondary Purchaser
in a manner that would require the registration under the Securities Act of the
Securities.
(b) None of the Company, the Remarketing Agent or any Affiliate of the
Company shall solicit any offer to buy or offer to sell the Securities by means
of any form of general solicitation or general advertising (as those terms are
defined in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.
(c) So long as either the Preferred Securities or the Subordinated
Notes are outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act during any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act, to furnish to holders of the
Preferred Securities and prospective purchasers of Preferred Securities
designated by such holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act, if applicable.
(d) The Company shall include in any Offering Memorandum information
substantially in the form set forth in Exhibit I.
(e) The Company shall advise the Secondary Purchaser promptly and, if
requested by the Secondary Purchaser, to confirm such advice in writing, of (i)
the issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Preferred Securities for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purpose by the Commission or any state securities commission or other
regulatory authority, and (ii) the happening of any event that makes any
statement of a material fact made in the Offering Memorandum or incorporated by
reference therein untrue or that requires the making of any additions to or
changes in the Offering Memorandum or any Incorporated Document in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company shall use every reasonable effort to prevent
the issuance of any stop order or order suspending the qualification or
exemption of the Preferred Securities under any state securities or blue sky
laws and, if at any time any state securities commission shall issue any stop
order suspending the qualification or exemption of the Securities under any
state securities or blue sky laws, the Company shall use every reasonable effort
to obtain the withdrawal or lifting of such order at the earliest possible time.
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<PAGE> 40
(f) So long as either the Preferred Securities or the Subordinated
Notes are outstanding, the Company shall furnish to the Secondary Purchaser
copies of all materials furnished by the Company to its stockholders and, to the
extent not otherwise available to the Secondary Purchaser on the Electronic Data
Gathering, Analysis and Retrieval Service or the Company's website, all public
reports and all reports and financial statements furnished by the Company to the
principal national securities exchange or automatic quotation system upon which
its common stock may be listed or quoted pursuant to requirements of or
agreements with such exchange or system or to the Commission pursuant to the
Exchange Act or any Exchange Act Regulation.
(g) Until the expiration of two years after the last date of issuance
of the Preferred Securities, the Company shall not, and shall cause its
Affiliates not to, resell any Preferred Securities that were acquired
beneficially or of record by the Company or such affiliate if such Preferred
Securities were "restricted securities" (as such term is defined under Rule
144(a)(3) under the Securities Act) when so acquired unless such resale is
registered pursuant to the Securities Act.
(h) The Company shall take such steps as shall be necessary to ensure
that neither the Company, any Material Subsidiary of the Company nor the Trust
shall become an "investment company" within the meaning of such term under the
Investment Company Act and the rules and regulations of the Commission
thereunder.
SECTION 8. Offering of Securities; Restrictions on Transfer,
Representations and Warranties of the Secondary Purchaser. The Secondary
Purchaser represents and warrants that it is a qualified institutional buyer as
defined in Rule 144A under the Securities Act (a "QIB"). The Secondary Purchaser
agrees with the Company that (a) it will not solicit offers for, or offer or
sell, the Preferred Securities by any form of general solicitation or general
advertising (as those terms are defined in Regulation D under the Securities
Act) or in any manner involving a public offering within the meaning of Section
4(2) of the Securities Act and (b) it will solicit offers for the Preferred
Securities only from, and will offer and resell the Preferred Securities only
to, persons that it reasonably believes to be QIBs.
The Secondary Purchaser further represents and warrants as follows:
(a) The Secondary Purchaser is acting for its own account, and it has
made its own independent decision to enter into this Agreement and as to whether
this Agreement is appropriate or proper for it based upon its own judgment and
upon advice from counsel and other such advisers as it has deemed necessary; and
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(b) The Secondary Purchaser is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of this Agreement,
and of assuming, and assumes, the risks of this Agreement.
SECTION 9. Payment of Expenses. The Company shall pay all costs, fees
and expenses incurred in connection with the performance of its obligations
under this Agreement and the transactions contemplated hereby, including without
limitation (a) the costs of reproducing and distributing this Agreement, and
such other documents as may be required in connection with the remarketing,
purchase, sale, issuance or delivery of Preferred Securities, (b) the delivery
of any certificates for the Preferred Securities, to the Secondary Purchaser,
including any transfer taxes and any stamp or other duties payable upon the sale
or delivery of the Preferred Securities to the Secondary Purchaser, (c) the fees
and disbursements of the Company's and the Trust's counsel, independent public
or certified public accountants and other advisors or agents (including transfer
agents and registrars), as well as the fees and expenses of the Trustees, any
Depository and their respective counsel and (d) the printing and delivery to the
Secondary Purchaser of copies of each preliminary and final Offering Memorandum.
The Company shall pay the reasonable fees, expenses and disbursements of the
Remarketing Agent and its counsel in connection with the execution and delivery
of this Agreement. These amounts shall be in addition to any expenses to be paid
by the Company in connection with Section 19 of the Remarketing Agreement.
SECTION 10. Conditions of Secondary Purchaser's Obligations. The
obligations of the Secondary Purchaser to pay for the Preferred Securities are
subject to the accuracy of the representations and warranties of the Company and
the Trust contained in Sections 3 and 4 hereof or in certificates of any officer
of the Company or the Trust delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each Transaction Document and all other
legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to the
Secondary Purchaser, and the Company and the Trust shall have furnished to the
Secondary Purchaser all documents and information that it may reasonably
request.
(b) Ballard Spahr Andrews & Ingersoll, LLP, shall have furnished to the
Secondary Purchaser its written opinion, as special counsel to the Company,
addressed to the Secondary Purchaser and dated the Remarketing
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Settlement Date, in form and substance reasonably satisfactory to the Secondary
Purchaser, to the effect that:
(i) The statements in the Company's Exchange Act Reports under
the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operation" and "[ ]" insofar as such
statements constitute matters of law, summaries of legal matters, the
Company's Certificate of Incorporation or By-Law, documents or legal
proceedings, or legal conclusions, has been reviewed by such counsel
and fairly present and summarize, in all material respects, the matters
referred to therein;
(ii) Each Transaction Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding
obligation of the Company and each of this Agreement and the
Remarketing Agreement is a valid and binding obligation of the Company
(assuming, in the case of the Remarketing Agreement, due execution and
delivery by NationsBanc Montgomery Securities LLC, and in the case of
this Agreement, due execution and delivery by the Remarketing Agent and
the Secondary Purchaser), enforceable in accordance with its terms,
except as the enforcement hereof and thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application relating to or affecting the enforcement of
creditors' rights or by general equitable principles;
(iii) The Subordinated Notes have been duly authorized and
established in conformity with the provisions of the Indenture and are
validly issued and outstanding;
(iv) No consent, approval, authorization, order of,
registration, qualification, or filing of or registration with, any
court or Governmental Authority or agency is required for the Company's
execution, delivery and performance of this Agreement, the Company's
performance of the Remarketing Agreement, the Guarantee Agreement, the
Indenture and the Subordinated Notes and consummation of the
transactions contemplated hereby and thereby;
(v) (A) The Company is not an "INVESTMENT COMPANY" within the
meaning of the Investment Company Act and the rules and regulations of
the Commission thereunder; and (B) the Trust is not an "investment
company" within the meaning of the Investment Company Act and the rules
and regulations of the Commission thereunder;
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(vi) Assuming the accuracy of the Secondary Purchaser's
representations, warranties and agreements set forth in Section 8
hereof, registration of the Preferred Securities, the Subordinated
Notes or the Guarantee Agreement under the Securities Act is not
required in connection with the offer, sale and delivery of the
Preferred Securities to the Secondary Purchaser and qualification of
the Trust Agreement, the Guarantee Agreement or the Indenture under the
Trust Indenture Act is not required;
(vii) To the best of such counsel's knowledge after due
inquiry, neither the Company nor any of its Affiliates has directly, or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the
Preferred Securities in a manner that would require the registration
under the Securities Act of the Preferred Securities.
(viii) The Trust is classified as a grantor trust or other
pass-through entity for United States federal income tax purposes and
not as an association or publicly traded partnership taxable as a
corporation; and
(ix) The Subordinated Notes are classified as indebtedness for
United States federal income tax purposes;
In rendering the opinions set forth above, counsel may state that its opinion is
limited to matters governed by the federal laws of the United States of America,
the laws of the State of New York and the General Corporation Law of the State
of Delaware and that such counsel is not admitted in the state of Delaware.
(c) Opinion of Company Counsel. Company Counsel or Assistant Company
Counsel shall have furnished to the Secondary Purchaser his written opinion, as
counsel to the Company, addressed to the Secondary Purchaser and dated the
Remarketing Settlement Date, in form and substance reasonably satisfactory to
the Secondary Purchaser, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware;
(ii) The Company has all corporate power and authority and
the legal right to (A) own, lease, license and operate its
properties, (B) to conduct the business in which it is currently
engaged and (C) to enter into and perform its obligations under this
Agreement and the
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Remarketing Agreement and to consummate the transactions
contemplated thereby;
(iii) No stockholder of the Company or any other person
has any preemptive right, right of first refusal or other similar
right to subscribe for or purchase securities of the Company arising
(AQ) by operation of the charter or By-Laws of the Company or the
General Corporation Law of the State of Delaware or (B) to the best
knowledge of such counsel, otherwise;
(iv) The Company is duly qualified as a foreign
corporation and is in good standing under the laws of each other
jurisdiction where its ownership, lease, license or operation of
property or its conduct of business requires such qualification,
other than in such jurisdiction or jurisdictions where the failure to
be so qualified and in good standing could not reasonably be expected
to result in a Material Adverse Change;
(v) Each Material Subsidiary of the Company has been duly
incorporated or formed and is validly existing in good standing under
the laws of the jurisdiction of its incorporation or organization,
has all corporate power and authority to own, lease, license and
operate its properties and conduct its business as currently
conducted. Each Material Subsidiary is duly qualified as a foreign
entity, to transact business and is in good standing in each other
jurisdiction or jurisdictions in which such qualification is
required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure to so qualify or
be in good standing could not reasonably be expected to result in a
Material Adverse Change. All of the issued and outstanding capital
stock of each Material Subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable and is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien (other than those created
by or contemplated in the Credit Agreement as of November 12, 1998),
encumbrance or, to the best of such counsel's knowledge, any pending
or threatened claim;
(vi) Neither the Company nor any of its Material
Subsidiaries is in violation of its charter or by-laws or is in
Default under any Existing Instrument, except for such Defaults as
could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Change. The execution, delivery and
performance by the Company of its obligations under the Transaction
Documents, the
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purchase of the Common Securities by the Company from the Trust and
the consummation by the Company of the transactions contemplated in
the Transaction Documents (A) do not and will not result in any
violation of the provisions of the Certificate of Incorporation or
ByLaws or other constitutive documents of the Company or any
Subsidiary, (B) do not and will not conflict with or constitute a
breach of, Default or a Debt Repayment Trigger Event under, or result
in the creation or imposition of any lien, charge or encumbrance upon
any assets, properties or operations of the Company or any of its
Material Subsidiaries pursuant to, or require the consent of any
other party to, any Existing Instrument, except for such conflicts,
breaches Defaults, liens (other than liens created by or contemplated
in the Credit Agreement as in effect on November 12, 1998), charges
or encumbrances as would not, individually or in the aggregate,
result in a Material Adverse Change and (C) will not result in any
violation of any applicable law or statute or any order, rule,
regulation or judgment of any court or governmental agency or body
having jurisdiction over the Company or any of its Material
Subsidiaries or any of their respective assets, properties or
operations the result of which could be a Material Adverse Change;
(vii) Other than as set forth in the Exchange Act Reports,
there are no legal or governmental actions, suits or proceedings
pending or, to the best of such counsel's knowledge, threatened (A)
against or affecting the Company or any of its subsidiaries, or (B)
that have as the subject thereof any officer or director of, or
property owned or leased by, the Company or any of its subsidiaries,
where in any such case (I) there is a reasonable possibility that
such action, suit or proceeding might be determined adversely to the
Company or such subsidiary and (II) any such action, suit or
proceeding, if so determined adversely, could reasonably be expected
to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement;
(viii) Except as permitted by the Securities Act and
requested by the Purchaser, the Company has not distributed and,
prior to the Remarketing Settlement Date, will not distribute any
offering material in connection with the offering and sale of the
Preferred Securities; and
(ix) To the best of such counsel's knowledge, the Exchange
Act Reports, as supplemented by material press releases, at the time
they were filed did not, and giving effect on the date hereof to the
transactions contemplated by the Transaction Documents do not,
contain
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any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering such opinions, such counsel may state that his opinion is limited
to matters governed by Delaware law and that such counsel is not admitted in the
State of New York.
(d) Opinion of Delaware Counsel. Richards, Layton & Finger, P.A.,
Delaware counsel for the Company and the Trust, shall have furnished to
the Purchaser their written opinion addressed to the Secondary
Purchaser and dated the Remarketing Settlement Date, in form and
substance reasonably satisfactory to the Secondary Purchaser, to the
effect that:
(i) The Trust has been duly created and is validly
existing in good standing as a business trust under the Business
Trust Act and under the Business Trust Act, and the Trust Agreement
has the trust power and authority to own property and to conduct its
business, all as described in the Trust Agreement, and to enter into
and perform its obligations under the Agreement and to perform its
obligations under each of the Remarketing Agreement, the Preferred
Securities and the Common Securities;
(ii) The Common Securities have been duly authorized by
the Trust Agreement and are validly issued undivided beneficial
ownership interests in the assets of the Trust;
(iii) The Preferred Securities have been duly authorized
by the Trust Agreement and, the Preferred Securities are validly
issued and (subject to qualifications set forth in this paragraph)
fully paid and non-assessable undivided beneficial interests in the
assets of the Trust. The holders of the Preferred Securities are, and
will be entitled to the benefits of the Trust Agreement and, as
beneficial owners of the Trust, are, and will be entitled to the same
limitation of personal liability as extended to stockholders of
private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the holders of
the Preferred Securities may be obligated, pursuant to the Trust
Agreement, to (i) provide indemnity and/or security in connection
with and pay taxes or governmental charges arising from transfers or
exchanges of Preferred Securities certificates and the issuance of
replacement Preferred Securities certificates, and (ii) provide
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security or indemnity in connection with requests of or directions to
the Property Trustee to exercise its rights and powers under the
Trust Agreement;
(iv) Under the Trust Agreement and the Business Trust Act,
all necessary trust action has been taken to duly authorize the
execution and delivery by the Trust of this Agreement and the
Remarketing Agreement;
(v) The Trust Agreement constitutes a valid and binding
obligation of the Company and the Administrative Trustees, and is
enforceable against the Company and the Administrative Trustees in
accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency, moratorium,
receivership, reorganization, liquidation, fraudulent conveyance or
transfer and other similar laws relating to or affecting the rights
and remedies of creditors generally, (ii) principles of equity,
including applicable law relating to fiduciary duties (regardless of
whether considered and applied in a proceeding in equity or at law),
and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or
contribution.
(vi) The Subordinated Notes are validly issued and
outstanding and will constitute valid and legally binding obligations
of the Company and the Administrative Trustees in accordance with
their terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance or transfer and
other similar laws relating to or affecting the rights and remedies
of creditors generally, (ii) principles of equity, including
applicable law relating to fiduciary duties (regardless of whether
considered and applied in a proceeding in equity or at law), and
(iii) the effect of applicable public policy on the enforceability of
provisions relating to indemnification or contribution.
(vii) Each of the Guarantee Agreement, the Indenture, the
Supplemental Indenture (assuming in the case of the Indenture, due
execution and delivery by the Company and Indenture Trustee, in the
case of the Guarantee Agreement, due execution and delivery by the
Company and the Guarantee Trustee and assuming in the case of the
First Supplemental Indenture, due execution and delivery by the
Company and the Indenture Trustee) constitutes a valid and binding
obligation of the Company and the Administrative Trustees, and is
enforceable against the Company and the Trustees in accordance with
its
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terms, except to the extent that enforcement thereof may be limited
by (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance or transfer and
other similar laws relating to or affecting the rights and remedies
of creditors generally, (ii) principles of equity, including
applicable law relating to fiduciary duties (regardless of whether
considered and applied in a proceeding in equity or at law), and
(iii) the effect of applicable public policy on the enforceability of
provisions relating to indemnification or contribution.
(viii) The Remarketing of the Preferred Securities, the
purchase by the Trust of the Subordinated Notes, the execution,
delivery and performance by the Trust of this Agreement and the
performance by the Trust of the Remarketing Agreement, the
consummation by the Trust of the transactions contemplated by this
Agreement and compliance by the Trust with its obligations hereunder
and thereunder (A) did and do not violate (I) any of the provisions
of the Certificate of Trust or the Trust Agreement or (II) any
applicable Delaware law or administrative regulation; and (B) do not
require any filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any
Delaware court or Delaware governmental authority or agency.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the laws of the State of Delaware.
(e) Opinion of Counsel for the Secondary Purchaser. On the Remarketing
Settlement Date, the Secondary Purchaser shall have received the written
opinion, dated as of the Remarketing Settlement Date, of counsel selected by the
Secondary Purchaser (and reasonably acceptable to the Company), with respect to
the matters set forth. Such counsel may state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and the Trust and certificates of public
officials.
(f) Officer's Certificate. The Company shall have furnished to the
Secondary Purchaser a certificate, dated the Remarketing Settlement Date, of any
of its Co-Chief Executive Officers, its President or any Senior Vice President
stating that (i) the representations, warranties and agreements of the Company
and the Trust in Sections 3 and 4 are true and correct as of such Remarketing
Settlement Date; (ii) the Company has complied with all its agreements contained
herein; and (iii) there has been no Material Adverse Change.
(g) Accountants' Comfort Letters. On the Remarketing Settlement Date,
the Secondary Purchaser shall have received from the independent public
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accountants for the Company and any other accountants as appropriate, letters,
dated such date, in form and substance satisfactory to the Secondary Purchaser,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained or incorporated by
reference in the Offering Memorandum.
(h) No Adverse Rating Agency Action. Subsequent to the execution and
delivery of this Agreement (i) no downgrading shall have occurred in the rating
accorded the Company's debt securities or preferred stock by any "nationally
recognized statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)(2) of the Securities Act Regulations and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's debt securities.
(i) No Market Disruption Event. Subsequent to the execution and
delivery of this Agreement and prior to the Remarketing Settlement Date there
shall not have occurred any of the following: (i) trading or quotation in any of
the Company's securities shall have been, or continue to be, suspended or
limited by the Commission or by the Relevant Exchange, or trading in securities
generally on the New York Stock Exchange, Inc. shall have been, or continue to
be, suspended or limited, or minimum or maximum prices shall have been generally
established on the New York Stock Exchange Inc. by the Commission; (ii) a
general banking moratorium shall have been declared by federal, New York,
Delaware or London authorities and continue to be in effect; (iii) there shall
have occurred, or continue to be, any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in the United States' or
international political, financial or economic conditions affecting the
securities markets generally, as in the reasonable judgment of the Secondary
Purchaser is material and adverse and makes it impracticable to sell Preferred
Securities(6) in the manner and on the terms provided herein or to enforce
contracts for the sale of securities; (iv) since the most recent dates as of
which information is given in the Offering Memorandum, in the reasonable
judgment of the Secondary Purchaser, there shall have occurred any Material
Adverse Change; or (v) the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as in the
reasonable judgment of the Secondary Purchaser may interfere materially with
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(6) Insert "Subordinated Notes" if Subordinated Notes are being sold.
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the conduct of the business and operations of the Company regardless of whether
or not such loss shall have been insured.
(j) Additional Documents. On the Remarketing Settlement Date, counsel
for the Secondary Purchaser shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
Remarketing and sale of the Preferred Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the sale of the Preferred Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
the Secondary Purchaser.
(k) Form of Documents. All opinions, letters, evidence and
certificates mentioned above or elsewhere in this Agreement shall be deemed to
be in compliance with the provisions hereof only if they are in form and
substance satisfactory to the Secondary Purchaser.
SECTION 11. Purchase Default. If, on the Remarketing Settlement Date,
the Secondary Purchaser fails to purchase the liquidation amount of Preferred
Securities or principal amount of Subordinated Notes, as the case may be, such
failure shall constitute either a Renewed Remarketing or a Failed Remarketing,
as determined in accordance with Section 7 of the Remarketing Agreement.
SECTION 12. Indemnification. (a) Indemnification of the Secondary
Purchaser and Remarketing Agent. The Company agrees to indemnify and hold
harmless each of the Secondary Purchaser and Remarketing Agent, its officers and
employees, and each person, if any, who controls the Secondary Purchaser and
Remarketing Agent within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which the
Secondary Purchaser and Remarketing Agent or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in any preliminary Offering Memorandum or the final Offering
Memorandum (or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (ii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iii) in
whole
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or in part upon any failure of the Company to perform its obligations hereunder
or under law; or (iv) any act or failure to act or any alleged act or failure to
act by the Secondary Purchaser and Remarketing Agent in connection with, or
relating in any manner to, the Securities or the remarketing contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon any matter covered by
clause (i) above, provided that the Company shall not be liable under this
clause (iv) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by the Secondary Purchaser or the Remarketing Agent, as the
case may be, through its bad faith, gross negligence or willful misconduct; and
to reimburse each of the Secondary Purchaser and Remarketing Agent, as the case
may be, and each such controlling person for any and all expenses (including the
fees and disbursements of counsel chosen by the Secondary Purchaser or the
Remarketing Agent and reasonably acceptable to the Company) as such expenses are
reasonably incurred by the Secondary Purchaser or the Remarketing Agent, as the
case may be, or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Secondary Purchaser or the Remarketing Agent, as the case may be,
expressly for use in any preliminary Offering Memorandum or final Offering
Memorandum (or any amendment or supplement thereto); and provided, further, that
with respect to any preliminary Offering Memorandum, the foregoing indemnity
agreement shall not inure to the benefit of the Secondary Purchaser and
Remarketing Agent from whom the person asserting any loss, claim, damage,
liability or expense purchased Securities, or any person controlling the
Secondary Purchaser or the Remarketing Agent, as the case may be, if copies of
the final Offering Memorandum were timely delivered to the Secondary Purchaser
or the Remarketing Agent, as the case may be, pursuant to Section 2 and a copy
of the final Offering Memorandum (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of the Secondary Purchaser or the Remarketing Agent, as
the case may be, to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Securities to such
person, and if the final Offering Memorandum (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The indemnity agreement set forth in this Section 12 shall be in
addition to any liabilities that the Company may
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otherwise have and shall be in addition to the Company's indemnification
obligations pursuant to the Remarketing Agreement.
(b) Indemnification of the Company, its Directors and Officers. Each
of the Secondary Purchaser and Remarketing Agent agrees, severally and not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Secondary Purchaser and
Remarketing Agent), insofar as such loss, claim, damage, liability or expense
(or actions in respect thereof as contemplated below) arises out of or is based
upon any untrue or alleged untrue statement of a material fact contained in any
preliminary Offering Memorandum or the final Offering Memorandum (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any preliminary
Offering Memorandum, the final Offering Memorandum (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by the Secondary Purchaser and the Remarketing Agent
expressly for use therein; and to reimburse the Company, or any such director,
officer or controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by any such Person) as such expenses are
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 12 shall be in addition to any liabilities
that the Secondary Purchaser and Remarketing Agent may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 12 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 12,
notify the indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section 12 or to
the extent it is not prejudiced as a proximate result of such failure. In case
any such action is
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brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 12 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party), or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) Settlements. The indemnifying party under this Section 12 shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
12(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such
A-30
<PAGE> 54
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement, compromise or consent to the entry
of judgment in any pending or threatened action, suit or proceeding in respect
of which any indemnified party is or could have been a party and indemnity was
or could have been sought hereunder by such indemnified party, unless such
settlement, compromise or consent includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
SECTION 13. Contribution. If the indemnification provided for in
Section 12 is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by each of the Company, the Secondary Purchaser and
Remarketing Agent, from the offering of the Securities pursuant to this
Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the Company, the Secondary Purchaser and the Remarketing Agent
in connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by each of the Company, the
Secondary Purchaser and the Remarketing Agent in connection with the remarketing
of the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the remarketing of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company, and the total underwriting discount received by the Secondary
Purchaser, the Remarketing Fee received by the Remarketing Agent, bear to the
Remarketing Price. The relative fault of each of the Company, the Secondary
Purchaser and the Remarketing Agent shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact or any such
inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company or the Secondary Purchaser or the
Remarketing Agent, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 12(c), any legal or
other fees or
A-31
<PAGE> 55
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 12(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 13; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 12(c) for purposes of indemnification.
Each of the Company, the Secondary Purchaser and the Remarketing Agent
agree that it would not be just and equitable if contribution pursuant to this
Section 13 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 13.
Notwithstanding the provisions of this Section 13, the Secondary
Purchaser shall not be required to contribute any amount in excess of the
underwriting commissions received by it in connection with the Securities
underwritten by it and distributed to the public and the Remarketing Agent shall
not be required to contribute any amount in excess of the Remarketing Fee
received by it in connection with the Securities remarketed by it. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
13, each officer and employee of the Secondary Purchaser or the Remarketing
Agent, as the case may be, and each person, if any, who controls the Secondary
Purchaser or the Remarketing Agent, as the case may be, within the meaning of
the Securities Act and the Exchange Act shall have the same rights to
contribution as the Secondary Purchaser or the Remarketing Agent, as the case
may be and each director of the Company and each person, if any, who controls
the Company with the meaning of the Securities Act and the Exchange Act shall
have the same rights to contribution as the Company.
SECTION 14. Termination. The obligations of the Secondary Purchaser
hereunder may be terminated by it by notice given to and received by the Company
prior to delivery of and payment for the Preferred Securities if, prior to that
time, any of the events described in Sections 10(h) and 10(i) shall have
occurred or if the Secondary Purchaser shall decline to purchase the Preferred
Securities for any reason permitted under this Agreement.
SECTION 15. Survival. The respective indemnities, representations,
warranties and agreements of the Company, the Trust, the Secondary Purchaser and
the Remarketing Agent contained in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall survive the delivery of
and payment for the Securities and shall remain in full force and effect,
regardless
A-32
<PAGE> 56
of any investigation made by or on behalf of any of them or any person
controlling any of them.
SECTION 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK WITHOUT REFERENCE TO
THE CHOICE OF LAW RULES THEREOF.
SECTION 17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
SECTION 18. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
SECTION 19. Notices. Unless otherwise specified, any notices, requests,
consents or other communications given or made hereunder or pursuant hereto
shall be made in writing or transmitted by any standard form of
telecommunication, including telephone, telegraph or telecopy, and confirmed in
writing. All written notices and confirmations of notices by telecommunication
shall be deemed to have been validly given or made when delivered or mailed,
registered or certified mail, return receipt requested and postage prepaid. All
such notices, requests, consents or other communications shall be addressed as
follows: if to the Company, to Hercules Incorporated, Hercules Plaza, 1313 North
Market Street, Wilmington, Delaware 19894-0001, Attention: Vice President and
Treasurer with a copy to the Corporate Secretary, and to Ballard Spahr Andrews &
Ingersoll, LLP, 1735 Market Street, 51st Floor, Philadelphia, Pennsylvania
19103, Attention: Justin P. Klein, Esq.; if to the Remarketing Agent (if NMS is
the Remarketing Agent), to c/o NationsBanc Montgomery Securities LLC, 100 North
Tryon Street, Charlotte, North Carolina 28255, Attention: Syndicate, or to such
other address as any of the above shall specify to the other in writing.
A-33
<PAGE> 57
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Trust, the Remarketing Agent and the Secondary Purchaser.
Very truly yours,
HERCULES INCORPORATED
By:
--------------------------------
Name:
Title:
HERCULES TRUST V
By:
--------------------------------
Name:
Title: Administrative Trustee
CONFIRMED AND ACCEPTED:
- ------------------------,
as Secondary Purchaser
By:
--------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY
SECURITIES LLC
not individually, but solely as Remarketing
Agent and as attorney-in-fact for the holders
of the Preferred Securities
By:
--------------------------------
Name:
Title:
A-34
<PAGE> 58
EXHIBIT I
Each preliminary and final Offering Memorandum shall contain language
to the following effect:
Each purchaser of the Preferred Securities will be deemed to:
(1) represent that it is purchasing the Preferred
Securities for its own account or an account with respect to
which it exercises sole investment discretion and that it and
any such account is a QIB;
(2) acknowledge that the Preferred Securities have
not been registered under the Securities Act and may not be
offered or sold except as set forth below; and
(3) agree that if it should resell or transfer the
Preferred Securities prior to the expiration of the holding
period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision), it will do so
only (a) to the Company or any subsidiary thereof, (b) to a
QIB in compliance with Rule 144A or (c) a Secondary Purchaser.
Each purchaser of the Preferred Securities will be required to furnish
to the Secondary Purchaser such certifications, legal opinions or other
information as the Secondary Purchaser may reasonably require to confirm that
the proposed sale is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
Until sold in a transaction that is registered under the Securities Act
or that is exempt from such registration requirements pursuant to Rule 144 under
the Securities Act, each certificate representing a Preferred Security will bear
the following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2)
AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE SECURITIES EVIDENCED
I-1
<PAGE> 59
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION)
RESELL OR OTHERWISE TRANSFER THE SECURITIES EVIDENCED HEREBY EXCEPT (A) TO
HERCULES INCORPORATED OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT OR (C)
TO A SECONDARY PURCHASER (AS DEFINED IN THE AMENDED AND RESTATED TRUST AGREEMENT
OF HERCULES TRUST V DATED AS OF NOVEMBER 12, 1998 (THE "TRUST AGREEMENT") THAT
HAS ENTERED INTO A SECONDARY PURCHASE AGREEMENT (AS DEFINED IN THE TRUST
AGREEMENT) WITH THE TRUST, (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND AND (4) AGREES, WITH RESPECT TO ANY TRANSFER OCCURRING
PRIOR TO THE REMARKETING DATE ON WHICH REPLACEMENT SECURITIES ARE ISSUED, TO
PROVIDE TO THE PROPERTY TRUSTEE A DULY EXECUTED CERTIFICATE SUBSTANTIALLY TO THE
EFFECT OF CLAUSES (1), (2) AND (3), ABOVE. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO THE SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT.
FROM AND AFTER THE REMARKETING SETTLEMENT DATE ON WHICH REPLACEMENT
SECURITIES ARE ISSUED, THIS CERTIFICATE SHALL REPRESENT ONLY THE RIGHT TO
RECEIVE THE REMARKETING PRICE, AS PROVIDED IN THE TRUST AGREEMENT, AND SHALL NO
LONGER REPRESENT AN OBLIGATION OF OR INTEREST IN THE TRUST.
Each preliminary and final Offering Memorandum shall also contain
language to the following effect:
"Each person receiving this Offering Memorandum acknowledges
that (i) such person has been afforded an opportunity to request from
the Company and to review all additional information considered by it
to be necessary to verify the accuracy of or to supplement the
information herein, (ii) it has not relied on the Secondary Purchaser
or any person affiliated with the Secondary Purchaser in connection
with its investigation of the accuracy of such information or its
investment decision and (iii) no person has been authorized to give any
information or to make any representation concerning the Company or the
Preferred Securities offered hereby other than as contained herein and
information given by duly authorized officers and employees of the
Company in
I-2
<PAGE> 60
connection with investors' examination of the Company and the terms of
the offering, and, if given or made, such other information or
representations should not be relied upon as having been authorized by
the Company or the Secondary Purchaser."
I-3
<PAGE> 1
Exhibit 10-R
EXECUTION COPY
FORWARD UNDERWRITING AGREEMENT
dated
November 12, 1998
between
NATIONSBANC MONTGOMERY SECURITIES LLC
and
HERCULES INCORPORATED
<PAGE> 2
November 12, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
INTRODUCTORY. Hercules Incorporated (the "COMPANY"), a Delaware
corporation, proposes to issue and sell to NationsBanc Montgomery Securities
LLC, as underwriter (the "UNDERWRITER"), an aggregate number of shares (the
"PURCHASE SHARES") of its common stock, no par value (the "COMMON STOCK"), with
an aggregate Public Offering Price (as defined herein) equal to $200,000,000
(the "AGGREGATE PUBLIC OFFERING PRICE").
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-3 (No. 333-63423) and
Pre-effective Amendment No. 1 thereto for the registration of, among other
securities, the Purchase Shares under the Securities Act of 1933, as amended
(the "1933 ACT"), and the offering thereof from time to time in accordance with
Rule 415 of the rules and regulations of the Commission under the 1933 Act (the
"1933 ACT REGULATIONS"). Such registration statement has been declared effective
by the Commission, and the Company has filed and will file such post-effective
amendments and supplements thereto as may be required prior to the sale of
Purchase Shares pursuant thereto, and each such post-effective amendment has
been or will be declared effective by the Commission. Such registration
statement (as so amended or supplemented, if applicable), including the
information, if any, deemed to be a part thereof pursuant to Rule 430A(b) of the
1933 Act Regulations (the "RULE 430A INFORMATION") or Rule 434(d) of the 1933
Act Regulations (the "RULE 434 INFORMATION"), is referred to herein as the
"REGISTRATION STATEMENT"; and the final prospectus and the final prospectus
supplement relating to the offering of the Purchase Shares, in the form
furnished to the Underwriter by the Company for use in connection with each
offering of the Purchase Shares, are collectively referred to herein as the
"PROSPECTUS"; provided, however, that all
<PAGE> 3
references to the "REGISTRATION STATEMENT" and the "PROSPECTUS" shall also be
deemed to include all documents incorporated therein by reference pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 ACT"), prior to the
time the applicable final prospectus and the final prospectus supplement with
respect to the offering of Purchase Shares on each Pricing Date are furnished to
the Underwriter by the Company; provided, further, that if the Company files a
registration statement with the Commission pursuant to Rule 462(b) of the 1933
Act Regulations (the "RULE 462(B) REGISTRATION STATEMENT"), then, after such
filing, all references to "REGISTRATION STATEMENT" shall also be deemed to
include the Rule 462(b) Registration Statement; and provided, further, that if
the Company elects to rely upon Rule 434 of the 1933 Act Regulations, then all
references to "PROSPECTUS" shall also be deemed to include the final or
preliminary prospectus and the applicable term sheet or abbreviated term sheet
(the "TERM SHEET"), as the case may be, in the forms first furnished to the
Underwriter by the Company for use in connection with each offering of the
Purchase Shares in reliance upon Rule 434 of the 1933 Act Regulations, and all
references in this Forward Underwriting Agreement to the date of the Prospectus
shall mean the date of the Term Sheet. A "PRELIMINARY PROSPECTUS" shall be
deemed to refer to any prospectus used before the Registration Statement became
effective and any prospectus that omitted, as applicable, the Rule 430A
Information, the Rule 434 Information or other information to be included upon
pricing in a form of prospectus filed with the Commission pursuant to Rule
424(b) of the 1933 Act Regulations that was used after such effectiveness but
prior to the delivery of the applicable final prospectus and the final
prospectus supplement in the forms first furnished to the Underwriter by the
Company. For purposes of this Forward Underwriting Agreement, all references to
the Registration Statement, Prospectus, Term Sheet or preliminary prospectus or
to any amendment or supplement to any of the foregoing shall be deemed to
include any copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Forward Underwriting Agreement to financial
statements and schedules and other information which is "contained," "included"
or "stated" (or other references of like import) in the Registration Statement,
Prospectus or preliminary prospectus shall be deemed to mean and include all
such financial statements and schedules and other information which are
incorporated by reference in the Registration Statement, Prospectus or
preliminary prospectus, as the case may be, prior to the delivery of the
applicable final prospectus and the final prospectus supplement in the forms
furnished to the Underwriter by the Company with respect to any sales hereunder;
and all references in this Forward Underwriting Agreement to amendments or
supplements to the Registration Statement, Prospectus or preliminary prospectus
shall be deemed to mean and include the filing of any document under the 1934
2
<PAGE> 4
Act which is incorporated by reference in the Registration Statement, Prospectus
or preliminary prospectus, as the case may be, after the delivery of the
applicable final prospectus and the final prospectus supplement in the forms
first furnished to the Underwriter by the Company with respect to each sale of
Purchase Shares hereunder.
The Company hereby confirms its agreement with the Underwriter as
follows:
SECTION 1. Certain Definitions.
As used in this Forward Underwriting Agreement, the following terms
shall have the following meanings:
"ADJUSTED EXTRAPOLATED AMOUNT" as of any Trading Day shall mean the
amount expressed in dollars obtained by dividing (x) the Settlement Balance as
of the Close of Business on the immediately preceding day by (y) the number of
scheduled Trading Days from and including such Trading Day to and including the
Completion Target Date.
"AGGREGATE NET SALE PRICE" shall mean, with respect to any Pricing
Date, the sum of the Net Sale Prices of all shares of Common Stock sold pursuant
to Section 2(b) on such Pricing Date.
"AGGREGATE PUBLIC OFFERING PRICE" shall mean $200,000,000.
"BLACKOUT DAY" shall have the meaning specified in Section 2(b)(i).
"BONUS DAY" means any Trading Day on which the difference obtained by
subtracting (x) the Extrapolated Amount from (y) $3,000,000 is greater than
zero.
"BRING-DOWN DATE" shall mean, collectively, each date during the
Dribble-out Period on which any amendment to the Registration Statement or the
Prospectus is declared effective by the Commission or any supplement to the
Registration Statement or the Prospectus is filed with the Commission and each
date on which the Company shall have filed with the Commission any report
required or permitted to be filed pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the 1934 Act.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or a day
on which banking institutions or trust companies in The City of New York are
authorized or obligated by law or executive order to close.
3
<PAGE> 5
"CLOSE OF BUSINESS" on any day shall mean the later of (x) 5:00 P.M.,
New York City time, on such day and (y) if such day is a scheduled Trading Day,
the time of closing of regular trading on the Relevant Exchange on such day.
"CLOSING PRICE" of the Common Stock on any Trading Day shall mean the
reported last sale price on such day of such Common Stock as of the end of the
regular session on the NYSE or such other principal securities exchange on which
it is listed, or, in case no such sale takes place on such day, the average of
the reported last bid and asked prices on such day as of such time, in either
case, as reported on the Consolidated Tape maintained by the Consolidated Tape
Association or, if the Common Stock is not listed or admitted to trading on any
securities exchange which participates in the Consolidated Tape Association, the
average of the reported last bid and asked prices of Common Stock on the
over-the-counter market on such day as reported by the National Association of
Securities Dealers Automated Quotation System or a similar generally accepted
reporting service or, if not so reported, the average of the closing bid and
asked prices as furnished by any New York Stock Exchange member firm selected
from time to time by the Underwriter for that purpose or, if not so available in
such manner, as otherwise determined in good faith by the Underwriter.
"COMFORT BRING-DOWN DATE" shall mean, collectively, each date during
the Dribble-out Period on which any amendment to the Registration Statement or
the Prospectus is declared effective by the Commission or any supplement to the
Registration Statement or the Prospectus is filed with the Commission (which
amendment or supplement includes additional financial information) and each date
on which the Company shall have filed with the Commission any report required or
permitted to be filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934
Act (which report includes additional financial information).
"COMMENCEMENT DATE" shall mean November 12, 1999, subject to
acceleration pursuant to the provisions of Section 7.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMMON STOCK" shall have the meaning set forth in the First
Introductory paragraph of this Agreement.
"COMPANY" shall have the meaning specified in the First Introductory
paragraph of this Agreement.
"COMPANY ACCELERATION" shall have the meaning set forth in Section
7(b).
4
<PAGE> 6
"COMPLETION TARGET DATE" shall mean the 67th consecutive scheduled
Trading Day from and including the Commencement Date.
"CREDIT AGREEMENT" shall mean the Credit Agreement dated as of October
15, 1998 among the Company, the subsidiaries of the Company from time to time
parties thereto, the several lenders from time to time parties thereto,
NationsBank, N.A., as Administrative Agent, and The Chase Manhattan Bank, Morgan
Guaranty Trust Company of New York, and Citibank, N.A., as Co-Syndication
Agents, as amended, supplemented, modified or superseded from time to time.
"DAILY NUMBER" shall have the meaning specified in Section 2(b).
"DAILY QUOTA" shall mean, for any Trading Day, the greater of
$3,000,000 and the Extrapolated Amount as of such Trading Day, provided that if
the Adjusted Extrapolated Amount as of such Trading Day is less than $3,000,000,
then the Daily Quota for such day shall be such Adjusted Extrapolated Amount, or
any greater amount up to $3,000,000 as the Company may advise the Underwriter by
9:15 A.M., New York City time, on such day, provided, however, that,
notwithstanding any of the foregoing, if any such Trading Day is an Illiquidity
Day, then the Daily Quota for such day may be reduced by such amount as the
Underwriter in its reasonable discretion may determine.
"DEBT REPAYMENT TRIGGER EVENT" means any event or condition that gives,
or with the giving of notice or lapse of time would give, the holder of any
note, debenture or other evidence of indebtedness for borrowed money in excess
of $25,000,000 (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its Material Subsidiaries.
"DEFAULT" shall have the meaning specified in Section 3(a)(iv).
"DRIBBLE-OUT PERIOD" shall mean the period consisting of 140
consecutive days, commencing on the Commencement Date.
"EDGAR" shall have the meaning set forth in the Second Introductory
paragraph of this Agreement.
"EFFECTIVENESS PERIOD" shall have the meaning specified in Section
5(a).
"ENVIRONMENTAL LAWS" shall mean any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, concessions, grants, franchises,
licenses,
5
<PAGE> 7
agreements or other governmental restrictions relating to the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"EXTRAPOLATED AMOUNT" as of any Trading Day shall mean the amount
expressed in dollars obtained by dividing (x) the Settlement Balance as of the
Close of Business on the immediately preceding day by (y) the number of
scheduled Trading Days from and including such Trading Day to and including the
last day of the Dribble-Out Period.
"EXISTING INSTRUMENT" shall have the meaning specified in Section
3(a)(iv).
"GAAP" shall have the meaning specified in Section 3(d).
"GOVERNMENTAL LICENSES" shall have the meaning set forth in Section
3(m).
"HAZARDOUS MATERIALS" shall mean any substance, material or waste
defined or regulated in or under any Environmental Laws.
"ILLIQUIDITY DAY" shall mean any Trading Day with respect to which the
Underwriter, in its sole discretion, determines that there has been a material
decline in the liquidity of the Common Stock from the liquidity of the Common
Stock on the date hereof; provided that, without limiting the generality of the
foregoing, if at any time during the Dribble-out Period the Underwriter shall
have designated an aggregate of fifteen Trading Days to be Illiquidity Days, the
Underwriter shall consult with the Company prior to designating any additional
Trading Day to be an Illiquidity Day.
"INDENTURE" shall mean the Junior Subordinated Debenture Indenture
dated as of November 12, 1998 by and between the Company and The Chase Manhattan
Bank, as trustee, as supplemented by the First Supplemental Indenture dated as
of November 12, 1998, in each case as amended, supplemented, modified or
superseded from time to time.
"INITIAL PRICING DATE" shall mean the first Pricing Date to occur
hereunder.
6
<PAGE> 8
"INVESTMENT COMPANY ACT" shall have the meaning specified in Section
3(n).
"INTELLECTUAL PROPERTY" shall have the meaning specified in Section
3(l).
"MARKET-OUT DAY" shall mean any scheduled Trading Day during the
Dribble-out Period on which one or more of the following events occurs or is
continuing: (i) trading or quotation in any of the Company's securities shall
have been, or continue to be, suspended or limited by the Commission or by the
Relevant Exchange, or trading in securities generally on the New York Stock
Exchange, Inc. shall have been, or continue to be, suspended or limited, or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange, Inc. by the Commission; (ii) a general banking moratorium shall
have been declared by federal, New York or Delaware authorities and continue to
be in effect; (iii) there shall have occurred, or continue to be, any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective substantial
change in the United States' or international political, financial or economic
conditions affecting the securities markets generally, as in the reasonable
judgment of the Underwriter is material and adverse and makes it impracticable
to sell Purchase Shares in the manner and on the terms provided herein or to
enforce contracts for the sale of securities; (iv) since the most recent dates
as of which information is given in the Registration Statement and the
Prospectus, in the reasonable judgment of the Underwriter, there shall have
occurred any Material Adverse Change; or (v) the Company shall have sustained a
loss by strike, fire, flood, earthquake, accident or other calamity of such
character as in the reasonable judgment of the Underwriter may interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured.
"MARKET SALE" of Purchase Shares shall mean a sale of such Purchase
Shares made on the Relevant Exchange or in such other manner as may be agreed by
the Company and the Underwriter.
"MATERIAL ADVERSE CHANGE" shall have the meaning specified in Section
3(h).
"MATERIAL SUBSIDIARY" shall mean every subsidiary of the Company that
(i) is listed on Schedule I hereto, (ii) together with its subsidiaries on a
consolidated basis during the 12 months preceding the date hereof accounts for
(or to which may be attributed) 5% or more of the net income or assets
(determined
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on a consolidated basis) of the Company and its subsidiaries or (iii) is
otherwise necessary for the ongoing business operations of the Company or its
subsidiaries.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NATIONSBANK GROUP" shall mean the Underwriter and its Affiliates (as
such term is defined in Rule 405 under the 1933 Act).
"NET SALE PRICE" shall mean, with respect to each share of Common Stock
sold pursuant to Section 2 hereof, the sale price of such share, net of any
discounts or commissions payable to any persons outside the NationsBank Group
incurred in connection with such sale.
"NYSE" shall mean the New York Stock Exchange, Inc.
"POTENTIAL ADJUSTMENT EVENT" means any of the following:
(i) a subdivision, consolidation or reclassification of the
Common Stock (unless as a result of a merger or other similar event) or
a free distribution or dividend of any such Common Stock to existing
holders by way of bonus, capitalization or similar issue;
(ii) a distribution or dividend to existing holders of the
Common Stock of (A) shares of such Common Stock, (B) other share
capital or securities granting the right to payment of dividends and/or
the proceeds of liquidation of the Company equally or proportionately
with such payments to holders of such Common Stock or (C) any other
type of securities, rights or warrants or other assets, in any case for
payment (cash or other) at less than the prevailing market price as
determined by the Underwriter;
(iii) any dividend paid by the Company on the Common Stock
other than ordinary cash dividends (which ordinary cash dividends
include amounts, sometimes called "dividend equivalents", paid under
the Company's employee benefit and compensation plans on the Common
Stock grants (whether options, restricted stock or other) under such
plans, but only to the extent such amounts do not exceed the amounts of
ordinary cash dividends that would be payable were such Common Stock
grants treated as Common Stock);
(iv) a call by the Company in respect of shares of Common
Stock that are not fully paid;
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(v) a repurchase by the Company of shares of Common Stock
whether out of profits or capital and whether the consideration for
such repurchase is cash, securities or otherwise (excluding the
repurchase of up to 8,192,125 shares of Common Stock remaining under
the Company's stock repurchase program authorized by the Board of
Directors of the Company prior to the date hereof).
(vi) any other similar event that may have a diluting or
concentrative effect on the theoretical value of the Common Stock.
"PRELIMINARY PROSPECTUS" shall have the meaning set forth in the Second
Introductory paragraph of Agreement.
"PRICING DATE" shall have the meaning specified in Section 2(b)(i).
"PROSPECTUS" shall have the meaning set forth in the Second
Introductory paragraph of Agreement.
"PUBLIC OFFERING PRICE" shall have the meaning specified in Section
2(b)(ii).
"PURCHASE DATE" shall have the meaning specified in Section 2(c).
"PURCHASE PRICE" shall have the meaning specified in Section 2(a).
"PURCHASE SHARES" shall have the meaning specified in the First
Introductory paragraph of this Agreement.
"REGISTRATION STATEMENT" shall have the meaning set forth in the
Secondary Introductory paragraph of this Agreement.
"RELEVANT DATE" shall have the meaning specified in Section 3(r).
"RELEVANT EXCHANGE" shall have the meaning specified in Section 3(k).
"REMARKETING AGREEMENT" shall mean the Remarketing Agreement dated as
of November 12, 1998 among the Company, Hercules Trust V and NationsBanc
Montgomery Securities LLC.
"RESERVE NUMBER" shall have the meaning specified in Section 6(f).
"RULE 424(b) REGISTRATION STATEMENT" shall have the meaning set forth
in the Second Introductory paragraph of this Agreement.
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"RULE 430A INFORMATION" shall have the meaning set forth in the Second
Introductory paragraph of this Agreement.
"RULE 434 INFORMATION" shall have the meaning set forth in the Second
Introductory paragraph of this Agreement.
"SENIOR BANK DEBT ACCELERATION" shall mean an acceleration under the
Credit Agreement resulting in the obligations of the Company under the Credit
Agreement becoming or having been declared due and payable under Section 6 of
the Credit Agreement before such obligations would otherwise have been due and
payable.
"SETTLEMENT BALANCE" shall mean, initially, the Aggregate Public
Offering Price and shall be (x) reduced at the Close of Business on each Pricing
Date by an amount equal to the Aggregate Net Sale Price on such Pricing Date and
(y) increased at the Close of Business on each Purchase Date by the amount of
the purchase price of Purchase Shares (if any) that were to have been delivered
by the Company and paid for by the Underwriter on such Purchase Date but that
have not been so delivered or paid for, for any reason whatsoever.
"STOCK PRICE ACCELERATION EVENT" shall have the meaning specified in
Section 7(a).
"SUBORDINATED NOTES" shall mean the Auction Rate Reset Junior
Subordinated Notes Series A issued by the Company to Hercules Trust V.
"TERM SHEET" shall have the meaning specified in the Second
Introductory paragraph of this Agreement.
"TRADING DAY" shall mean any day, as reasonably determined by the
Underwriter, on which the Common Stock is not suspended from trading at any time
during such day and is traded at least once on the NYSE or, if not then admitted
for trading on the NYSE, on the principal securities exchange or quotation
system on which the Common Stock is then listed or admitted for trading.
"TRIGGER PRICE" shall mean, initially, $22 11/16 per share of Common
Stock, as adjusted from time to time pursuant to the provisions of Section 8.
"TRUST AGREEMENT" shall mean the Amended and Restated Trust Agreement
of Hercules Trust V dated and effective as of November 12, 1998 among the
Company, as sponsor, the trustees of Hercules Trust V and the holders, from time
to time, of undivided beneficial interest in the assets of the Trust.
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"TRUST PREFERRED SECURITIES" shall mean the Auction Rate Reset
Preferred Securities issued by Hercules Trust V.
"UNDERWRITER" shall have the meaning specified in the First
Introductory paragraph of this Agreement.
"UNDERWRITING COMMISSION" shall have the meaning specified in Section
2(a).
"1933 ACT" shall have the meaning specified in the Second Introductory
paragraph of this Agreement.
"1933 ACT REGULATIONS" shall have the meaning specified in the Second
Introductory paragraph of this Agreement.
"1934 ACT" shall have the meaning specified in the Second Introductory
paragraph of this Agreement.
SECTION 2. Purchase of Shares.
(a) Purchase and Sale. The Company agrees, upon the terms herein set
forth, to issue and sell to the Underwriter on each Pricing Date the Daily
Number of Purchase Shares. On the basis of the representations, warranties and
agreements herein contained, and upon the terms but subject to the conditions
herein set forth, the Underwriter agrees to purchase from the Company on each
Pricing Date such Daily Number of Purchase Shares. The purchase price per
Purchase Share to be paid by the Underwriter to the Company shall be the Public
Offering Price of such Purchase Share, as determined in the manner set forth in
Section 2(b)(ii), minus an amount (the "UNDERWRITING COMMISSION") equal to 0.75%
of such Public Offering Price per Purchase Share.
(b) Daily Number of Purchase Shares; Public Offering Prices.
(i) Subject to the provisions of Sections 4 and 12, on each
Trading Day during the Dribble-out Period, the Underwriter shall sell
in Market Sales, and the Company shall sell to the Underwriter, a
number (which may be increased or decreased by up to 10% of such number
by the Underwriter in its sole discretion) (the "DAILY NUMBER") of
Purchase Shares with an Aggregate Net Sale Price equal to the Daily
Quota (or such greater amount as the parties may agree) for such
Trading Day; provided that the Company may, by telephonic notice given
no later than 9:15 A.M., New York City time, on such Trading Day to the
Underwriter, confirmed in writing, designate any such Trading Day to be
a "BLACKOUT
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DAY" or, if the applicable requirements therefor are met, a Bonus Day,
provided that the total number of days designated as Blackout Days may
not exceed 18. On any Blackout Day, Market-Out Day, or Bonus Day, the
Underwriter shall not sell or purchase, and the Company shall not be
obligated to sell, Purchase Shares. Each Trading Day on which sales of
Purchase Shares have been made pursuant to the second immediately
preceding sentence shall be a "PRICING DATE."
(ii) The "PUBLIC OFFERING PRICE" with respect to Purchase
Shares sold on any Pricing Date shall be the amount obtained by
dividing the Aggregate Net Sale Price of Common Stock on such Pricing
Date by the Daily Number of Purchase Shares on such Pricing Date, each
as reported by the Underwriter in accordance with Section 2(b)(iii).
(iii) At the Close of Business on each Pricing Date, the
Underwriter shall deliver to the Company, by telecopy (with telephonic
confirmation), a certificate (in the form of Exhibit C), setting forth
the Aggregate Net Sale Price and the Daily Number of Purchase Shares
for such Pricing Date.
(c) Purchase Date; Payment and Delivery. By 9:00 A.M., New York City
time, on the third Trading Day immediately succeeding each Pricing Date, or such
later time and date as the Underwriter shall designate by notice to the Company
(the time and date of each such closing, together, a "PURCHASE DATE"), the
Company shall deliver, or cause to be delivered, through the Depository Trust
Company to the Underwriter, certificates for the Purchase Shares sold by the
Company to the Underwriter on such Pricing Date (or security entitlements in
respect thereof) against the irrevocable release of a wire transfer of
immediately available funds to the order of the Company for the amount of the
purchase price therefor.
SECTION 3. Representations, Warranties and Agreements.
The Company represents and warrants to and agrees with the Underwriter
as follows:
(a) Basic Representations. (i) The Company is a duly and validly
existing corporation in good standing under the laws of the State of
Delaware. The Company is duly qualified as a foreign entity and is in
good standing under the laws of each other jurisdiction where its
ownership, lease, licensing or operation of property or the conduct of
its business requires such qualification, other than in such
jurisdiction or
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<PAGE> 14
jurisdictions where the failure to be so qualified and in good standing
could not reasonably be expected to result in a Material Adverse
Change.
(ii) The Company has all corporate power and authority and the
legal right to (A) own, lease, license and operate its properties, (B)
conduct the business in which it is currently engaged and (C) enter
into, and perform its obligations under, or as contemplated under, this
Forward Underwriting Agreement and consummate the transactions
contemplated hereby.
(iii) This Forward Underwriting Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting the enforcement of
creditors' rights or by general equitable principles.
(iv) Neither the Company nor any of its Material Subsidiaries
is in default or, with the giving of notice or lapse of time, would be
in default ("DEFAULT") under any indenture, mortgage, loan or credit
agreement, note, contract, franchise, lease or other instrument to
which the Company or any of its Material Subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property
or assets of the Company or any of its Material Subsidiaries is subject
(each, an "EXISTING INSTRUMENT"), except for such Defaults as could
not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Change. The execution, delivery and performance
by the Company of this Forward Underwriting Agreement, the consummation
of the transactions herein contemplated and the compliance by the
Company with its obligations hereunder (A) do not and will not result
in any violation of the provisions of the Certificate of Incorporation
or By-laws or other constitutive documents of the Company or any
Material Subsidiary, (B) do not and will not conflict with or
constitute a breach of, Default or a Debt Repayment Trigger Event (as
defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any assets, properties or operations
of the Company or any of its Material Subsidiaries pursuant to, or
require the consent of any other party to, any Existing Instrument,
except for such conflicts, breaches, Defaults, liens (other than liens
created by or contemplated in the Credit Agreement as in effect on the
date hereof), charges or encumbrances or failure to obtain consent as
would not, individually or in the aggregate, result in a Material
Adverse
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Change and (C) will not result in any violation of any applicable law
or statute or any order, rule, regulation or judgment of any court or
governmental agency or governmental body having jurisdiction over the
Company or any of its Material Subsidiaries or any of their respective
assets, properties or operations the result of which could be a
Material Adverse Change.
(v) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or governmental agency or
body having jurisdiction over the Company or any of its Material
Subsidiaries or any of their respective properties is required for the
due authorization, execution and delivery by the Company of, and the
compliance by the Company with all the terms of, this Forward
Underwriting Agreement or the consummation by the Company of the
transactions contemplated hereby except such as have been obtained or
made by the Company, as may be required by the securities or Blue Sky
laws of the various States in connection with the offer and sale of the
Purchase Shares or where the failure to obtain such consent, approval,
authorization, order, registration, qualification or make such filing
will not adversely affect such authorization, execution or delivery of
this Forward Underwriting Agreement, the compliance with the terms
hereof or the consummation by the Company of the transactions
contemplated hereby.
(b) Compliance with Registration Requirements. (i) The Company meets
the requirements for use of Form S-3 under the 1933 Act. The Registration
Statement has been declared effective by the Commission under the 1933 Act. The
Company has complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order suspending
the effectiveness of the Registration Statement is in effect and no proceedings
for such purpose have been instituted or are pending or, to the best knowledge
of the Company, are contemplated or threatened by the Commission.
(ii) Each preliminary prospectus and each Prospectus when
filed complied in all material respects with the 1933 Act, and each
preliminary prospectus and each Prospectus delivered to the Underwriter
for use in connection with the offering of the Purchase Shares pursuant
to this Forward Underwriting Agreement will, at the time of such
delivery, be identical to any electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except such variation as
may be permitted or required by Regulation S-T under the 1933 Act. The
Registration Statement and any post-effective amendment thereto, at the
time it became effective and at all subsequent times, complied and will
comply in all material respects with the 1933 Act and the 1933 Act
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<PAGE> 16
Regulations and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all
subsequent times, did not and will not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If the Company elects to rely
upon Rule 434 of the 1933 Act Regulations, the Company will comply with
the requirements of Rule 434. Notwithstanding the foregoing, the
representations and warranties set forth in this subsection do not
apply to statements in or omissions from any Registration Statement or
any post-effective amendment thereto or any Prospectus or any
amendments or supplements thereto made in reliance upon and in
conformity with information furnished to the Company in writing by the
Underwriter expressly for use therein.
(iii) The documents incorporated or deemed to be incorporated
by reference in the Registration Statement and the Prospectus, at the
time they were or hereafter are filed with the Commission, complied and
will comply in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission thereunder (the
"1934 ACT REGULATIONS").
(iv) There are no actions, suits, proceedings, inquiries or
investigations before or brought by any legal or governmental agency or
body, now pending, or to the knowledge of the Company threatened,
against or affecting the Company or any of its Material Subsidiaries
that are required to be disclosed in the Registration Statement and the
Prospectus (other than as stated therein), or which could reasonably be
expected to result in a Material Adverse Change, or adversely affect
the consummation of the transactions contemplated under this Forward
Underwriting Agreement. The aggregate of all pending legal or
governmental proceedings to which the Company or any of its Material
Subsidiaries is a party or of which any of their respective assets,
properties or operations is the subject, which are not described in the
Registration Statement and the Prospectus, including ordinary routine
litigation incidental to the business, could not reasonably be expected
to result in a Material Adverse Change.
(c) Offering Materials Furnished to Underwriters. The Company has
delivered to the Underwriter one complete manually signed copy of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of such Registration Statement (without
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<PAGE> 17
exhibits) and preliminary prospectuses and the related Prospectus, as amended or
supplemented, in such quantities and at such places as the Underwriter has
reasonably requested.
(d) Financial Statements. The financial statements of the Company
included in the Registration Statement and the Prospectus, together with the
related schedules and notes, as well as those financial statements, schedules
and notes of any other entity included therein, present fairly the financial
position of the Company and its consolidated subsidiaries, or such other entity
as the case may be as of and at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries, or such other entity, as the case may be, for the
periods specified. Such financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement and the Prospectus present fairly in
accordance with GAAP the information required to be stated therein. The selected
financial data and the summary financial information included in the Prospectus
present fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement and the Prospectus. In addition, any pro forma financial
statements of the Company and its consolidated subsidiaries and the related
notes thereto included in the Registration Statement and the Prospectus have
been prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and have been properly compiled on the
bases described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions and circumstances referred to therein but the pro forma
financial statements may differ from actual results. The financial data, if any,
set forth in the Prospectus under the captions "Prospectus Summary--Summary
Selected Financial Data," "Selected Financial Data" and "Capitalization" (or
similar captions) fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
related Registration Statement.
(e) Authorization of the Common Stock. Any shares of Common Stock to
be delivered by the Company under this Forward Underwriting Agreement have been
or, prior to such delivery, will be duly authorized for issuance and delivery
pursuant to this Forward Underwriting Agreement and, when issued and delivered
by the Company pursuant to this Forward Underwriting Agreement, will be validly
issued, fully paid and non-assessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
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securities registered for sale under the Registration Statement, except for such
rights as have been duly waived.
(g) Independent Accountants. Each of the accountants who certified
financial statements and any supporting schedules thereto filed as part of the
Registration Statement and included in the Prospectus are independent public or
certified public accountants as required by the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations.
(h) No Material Adverse Change in Business. Since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, (A) there has been no material
adverse change, any development that could reasonably be expected to result in a
material adverse change in the condition, financial or otherwise, in or
affecting the earnings, business, operations, financial position or prospects,
whether or not arising from transactions in the ordinary course of business, of
the Company and its subsidiaries, considered as one entity (a "MATERIAL ADVERSE
CHANGE"), (B) there have been no transactions entered into by the Company or any
of its Material Subsidiaries, other than those arising in the ordinary course of
business, which are, individually or in the aggregate, material with respect to
the Company and its subsidiaries, considered as one enterprise and (C) except
for regular dividends on the Company's Common Stock or preferred stock (which
dividends include amounts, sometimes called "dividend equivalents," paid under
the Company's employee benefit and compensation plans on the Common Stock grants
(whether options, restricted stocks or other) under such plans on the Common
Stock, but only to the extent such amounts do not exceed the amounts of ordinary
cash dividends that would be payable were such Common Stock grants treated as
Common Stock) in amounts per share that are consistent with past practice or the
applicable charter document or supplement thereto, respectively, there has been
no dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock.
(i) Good Standing of Material Subsidiaries. Each Material Subsidiary
is a duly and validly existing corporation or entity and is in good standing
under the laws of the jurisdiction of its incorporation or organization, has all
corporate power and authority to own, lease, license and operate its properties
and to conduct its business as currently conducted and is duly qualified as a
foreign entity in good standing in each other jurisdiction where its ownership,
lease, license or operation of property or the conduct of its business requires
such qualification, other than in such jurisdiction or jurisdictions where the
failure to be so qualified and in good standing could not reasonably be expected
to result in a Material Adverse Change. All of the issued and outstanding
capital stock of each Material Subsidiary have been duly authorized and validly
issued, is fully paid
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and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien
(other than those created by or contemplated in the Credit Agreement as in
effect on the date hereof), encumbrance or claim. None of the outstanding shares
of capital stock of any Material Subsidiary were issued in violation of
preemptive or other similar rights of any securityholder of such Material
Subsidiary.
(j) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption,
"Capitalization" (or any other similar caption) (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). Such shares of capital stock have been duly authorized and validly
issued by the Company and are fully paid and non-assessable and have been issued
in compliance with federal and state securities laws. The Common Stock
(including the Purchase Shares) conforms in all material respects to the
description thereof contained in the Prospectus. None of the outstanding shares
of Common Stock was issued in violation of preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities of the
Company. There are no authorized or outstanding options, warrants, preemptive
rights, rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital
stock of the Company or any of its subsidiaries other than those accurately
described in the Registration Statement and the Prospectus.
(k) Stock Exchange Listing. All shares of Common Stock to be issued
hereunder have been or, prior to such issuance, will be approved for inclusion
or listing on the principal national securities exchange or automated quotation
system on which the Common Stock is listed or quoted (the "RELEVANT EXCHANGE"),
subject only to official notice of issuance.
(l) Intellectual Property Rights. Except as otherwise disclosed in the
Prospectus, the Company and each Material Subsidiary owns, leases, licenses or
otherwise possesses adequate trademarks, service marks, trade names, patents,
patent rights, copyrights, licenses, inventions, approvals and other
intellectual property (collectively, "INTELLECTUAL PROPERTY") necessary to
conduct its business as now conducted. Neither the Company nor any of its
Material Subsidiaries has received any written notice of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property which infringement or conflict, individually or in the aggregate, could
be reasonably expected to result in a Material Adverse Change.
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<PAGE> 20
(m) Possession of Licenses and Permits. Each of the Company and its
Material Subsidiaries possesses such permits, licenses, approvals, consents and
other authorizations (collectively, "GOVERNMENTAL LICENSES") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies as
are necessary to conduct the business now operated by it except as could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change. The Company and its Material Subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except where the
failure so to comply could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Change. All of the Governmental
Licenses are valid and in full force and effect, except where the invalidity of
such Governmental Licenses or the failure of such Governmental Licenses to be in
full force and effect could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Change. Neither the Company nor any of
its Material Subsidiaries has received any written notice of proceedings
relating to the revocation or modification of any such Governmental Licenses
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected to result in a
Material Adverse Change.
(n) Company Not an "Investment Company." The Company is not, and upon
the issuance and sale of the Purchase Shares as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus will
not be, an "investment company" within the meaning of the Investment Company Act
of 1940, as amended (the "INVESTMENT COMPANY ACT") and the rules and regulations
of the Commission thereunder.
(o) Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that could be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of any shares of
Common Stock delivered hereunder. Notwithstanding the foregoing, the repurchase
by the Company from time to time pursuant to a share repurchase program
authorized by the Board of Directors of the Company, if conducted in accordance
with applicable law (including without limitation Regulation M under the 1934
Act), shall not be deemed or considered to be such stabilization or
manipulation.
(p) Related Party Transactions. There are no business relationships or
related party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus that have not been described
as required.
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(q) Environmental Laws.
(i) Except as would not have or could not be reasonably expected to
result in a Material Adverse Change, or as is not otherwise disclosed in the
Prospectus:
(A) Each of the real properties owned by the Company or any of its
Material Subsidiaries (the "REAL PROPERTIES") and all operations at the
Real Properties are in compliance with all applicable Environmental
Laws, and there is no violation of any Environmental Law with respect
to the Real Properties or the businesses operated by the Company or any
of its Material Subsidiaries (the "BUSINESSES"), and there are no
conditions relating to the Businesses or Real Properties that could be
reasonably expected to give rise to liability under any applicable
Environmental Laws.
(B) Neither the Company nor any of its Material Subsidiaries has
received any written notice of, or inquiry from any governmental
authority regarding, any violation, alleged violation, non-compliance,
liability or potential liability regarding Hazardous Materials or
compliance with Environmental Laws with regard to any of the Real
Properties or the Businesses, nor does the Company or any of its
Material Subsidiaries have knowledge or reason to believe that any such
notice is being threatened.
(C) Hazardous Materials have not been transported or disposed of from
the Real Properties, or generated, treated, stored or disposed of at,
on or under any of the Real Properties or any other location, in each
case by, or on behalf or with the permission of, the Company or any of
its Material Subsidiaries.
(D) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Company, threatened, under any
Environmental Law to which the Company or any Material Subsidiary, is
or, to the best knowledge of the Company, will be named as a party, nor
are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with
respect to the Company or any of its Material Subsidiaries, the Real
Properties or the Businesses.
(E) There has been no release or, to the best knowledge of the Company
or any Material Subsidiary, threat of release of Hazardous Materials at
or from the Real Properties, or arising from or related to the
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operations (including, without limitation, disposal) of the Company or
any of its Material Subsidiaries in connection with the Real Properties
or otherwise in connection with the Businesses, in violation of, or in
amounts or in a manner that could give rise to liability under,
Environmental Laws.
(F) None of the Real Properties contains, or has previously contained,
any Hazardous Materials at, on or under the Real Properties in amounts
or concentrations that, if released, constitute or constituted a
violation of, or would give rise to liability under, Environmental
Laws.
(G) Neither the Company nor any of its Material Subsidiaries, has
assumed any liability of any Person (other than the Company or one of
its Material Subsidiaries) under any Environmental Law.
(ii) The Company has adopted procedures that are designed to
(A) ensure that for the Company and each of the its Material
Subsidiaries, each of their respective operations and each of the
properties owned or leased by each such entity remains in compliance
with applicable Environmental Laws, to the extent that the failure to
comply with such Environmental Laws would result in or could be
reasonably expected to result in a Material Adverse Change and (B)
manage, to the same extent as and in accordance with the practices of
companies engaged in the same or a similar business, any liabilities or
potential liabilities that each such entity, any of its respective
operations and each of the properties owned or leased by such entity
may have under applicable Environmental Laws.
(r) Bring-Down of Representations. The Company shall reaffirm the
representations and warranties set forth in this Section 3 as of each Pricing
Date and Purchase Date (each such day, a "RELEVANT DATE").
SECTION 4. Conditions to Pricing and Purchase.
The obligations of the Underwriter to purchase and pay for Purchase
Shares as provided herein on any Pricing Date or Purchase Date, respectively,
shall be subject to the accuracy of the representations and warranties on such
date on the part of the Company referred to in Section 3(r), to the timely
performance by the Company of its covenants and other obligations hereunder, and
to each of the following additional conditions:
(a) Opinion of Company Counsel. The Company shall have caused to be
delivered to the Underwriter by the General Counsel of the Company or the
Assistant Counsel of the Company and Ballard Spahr Andrews & Ingersoll, LLP,
Special Counsel for the Company (or such other counsel for the Company as shall
be designated by the Company and shall be reasonably acceptable to the
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Underwriter), on the date hereof, the Initial Pricing Date and each Bring-down
Date, the opinions of such counsel for the Company, dated as of the date hereof,
and the Initial Pricing Date and each Bring-down Date, respectively, to the
effect set forth in Exhibits A and B, respectively, provided that, in his
opinion to be delivered on the date hereof, Israel J. Floyd need express no
opinion with respect to the matters referred to in paragraph (vii) of Exhibit A,
and in its opinion to be delivered on the date, hereof Ballard Spahr Andrews &
Ingersoll, LLP (x) need express no opinion with respect to the matters referred
to in paragraph (vi) of Exhibit B and (y) with respect to the opinion called for
in paragraph (v) of Exhibit B, need express no opinion with respect to the
captions, "Risk Factors," "Description of Capital Stock," "Shares Eligible for
Future Sale," "Certain United States Income Tax Considerations," or
"Underwriting.".
(b) Opinion of Underwriter's Counsel. The Underwriter shall have
received the opinion or opinions of counsel for the Underwriter (x) on the date
hereof, dated as of the date hereof, covering the matters set forth in paragraph
(i) of Exhibit A and paragraph (i) of Exhibit B and (ii) on the Initial Pricing
Date and each Bring-down Date, dated as of such date, covering the matters set
forth in paragraphs (i) (vi) (with respect to subparagraph (E)(i) only) and
(vii) of Exhibit A and paragraphs (ii) and (v) (with respect to the captions
"Description of Capital Stock" and "Underwriting" under subparagraph (A) only)
and the penultimate paragraph of Exhibit B.
(c) Officer's Certificate. As of the date hereof, the Initial Pricing
Date and each Bring-down Date, the Underwriter shall have received a certificate
of any Co-Chief Executive Officer, President or Senior Vice President of the
Company, dated on or prior to such date, to the effect that
(i) since the respective dates as of which information is
given in the Prospectus, (A) there has been no Material Adverse Change
and (B) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted, are pending or, to the best of such officer's knowledge,
are threatened by the Commission;
(ii) the representations and warranties of the Company set
forth in this Forward Underwriting Agreement are true and correct as of
such date; and
(iii) the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to such date.
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(d) Effectiveness of Registration Statement. As of each Relevant Date,
the Registration Statement shall be effective under the 1933 Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act and no proceedings for that purpose shall have been
instituted or be pending or threatened by the Commission, and any request on the
part of the Commission for additional information shall have been complied with
to the reasonable satisfaction of the Underwriter. The Prospectus shall contain
information relating to the description of the Common Stock, the specific method
of distribution and similar matters and shall be filed with the Commission in
accordance with Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or any
required post-effective amendment providing such information shall have been
filed and declared effective), or, if the Company has elected to rely upon Rule
434 of the 1933 Act Regulations, a Term Sheet including the Rule 434 Information
shall have been filed with the Commission in accordance with Rule 424(b)(7).
(e) Opportunity for Due Diligence. As of each Relevant Date, the
Underwriter shall have been afforded a reasonable opportunity to conduct a due
diligence investigation with respect to the Company customary in scope for
underwritten offerings of equity securities and the results of such
investigation shall be satisfactory to the Underwriter, in its sole discretion.
(f) No Senior Bank Debt Default. As of each Relevant Date, no Event of
Default (as defined in the Credit Agreement) shall have occurred and be
continuing.
(g) The Company shall cause to be delivered to the Underwriter on the
Initial Pricing Date and each Comfort Bring-down Date letters from the
independent public accountants for the Company and any independent public
accountants who reported or performed other procedures (in any relevant prior
period) on the financial statements of the Company or any company acquired by
the Company for which financial statements are required under the applicable
1933 Act or 1934 Act Regulations, each dated such date, in form and substance
satisfactory to the Underwriter, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters,
delivered according to Statement of Auditing Standards No. 72 (or any successor
bulletin), with respect to the financial statements and certain financial
information (including without limitation any pro forma financial information)
contained in the Registration Statement and the Prospectus and with a "cut-off
date" referred to therein, a date not more than three Business Days prior to
such date.
(h) Successful Remarketing or Redemption of Trust Preferred
Securities. On or prior to the Initial Pricing Date, the Trust Preferred
Securities (or, if Subordinated Notes shall have been distributed with respect
to the Trust Preferred
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Securities, such Subordinated Notes) shall have been either (i) remarketed
pursuant to the terms of the Remarketing Agreement or (ii) mandatorily redeemed
or matured in accordance with their terms pursuant to the applicable provisions
of the Trust Agreement and Indenture and, in each case, the holders of the Trust
Preferred Securities or Subordinated Notes, as the case may be, shall have
received the proceeds of such remarketing or mandatory redemption (or maturity),
as the case may be.
(i) Effect of Failure of Conditions. If any condition specified in
this Section 4 is not satisfied with respect to the purchase and settlement of
Purchase Shares on any Pricing Date or Purchase Date when and as required to be
satisfied, the Underwriter shall be released from its obligations hereunder with
respect thereto.
(j) Ratification. The Board of Directors of the Company shall have
ratified this Agreement and actions to be taken by the Company in connection
herewith.
SECTION 5. Registration Agreements.
The Company covenants and agrees with the Underwriter as follows:
(a) Without limiting the generality of the provisions of Sections 4(d)
and 5(c), during the period beginning on the date hereof and ending on the date
all Purchase Shares have been sold pursuant to the Registration Statement (the
"EFFECTIVENESS PERIOD"), prior to amending or supplementing the Registration
Statement or the Prospectus, the Company shall furnish to the Underwriter for
review a copy of each such proposed amendment or supplement that could
reasonably relate to the offer and sale of Purchase Shares, and the Company
shall not file any such proposed amendment or supplement to which the
Underwriter reasonably objects within 5 days of receipt thereof.
(b) During the Effectiveness Period, the Company shall promptly advise
the Underwriter in writing (A) of the receipt of any comments of, or requests
for additional or supplemental information from, the Commission regarding the
Registration Statement, (B) of the time and date of any filing of any
post-effective amendment to the Registration Statement or any amendment or
supplement to any related preliminary prospectus or the Prospectus, (C) of the
time and date that any post-effective amendment to the Registration Statement
becomes effective, (D) of the occurrence of any event or the existence of any
condition as a result of which it is necessary to amend or supplement the
Prospectus so that such Prospectus does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the
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circumstances when the Prospectus is delivered to a purchaser of Common Stock,
not misleading, and (E) of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or any
post-effective amendment thereto or of any order preventing or suspending the
use of any related preliminary prospectus or the Prospectus, or of any
proceedings to remove, suspend or terminate from listing or quotation the Common
Stock from the Relevant Exchange, or, to the best knowledge of the Company, of
the threatening or initiation of any proceedings for any of such purposes. If
the Commission shall enter any such stop order at any time, the Company shall
use its best efforts to obtain the lifting of such order at the earliest
possible moment. Additionally, the Company agrees that it shall comply with the
provisions of Rules 424(b), 430A and 434, as applicable, under the 1933 Act and
will use its reasonable efforts to confirm that any filings made by the Company
under such Rule 424(b) were received in a timely manner by the Commission.
(c) If, during the Effectiveness Period for any Registration
Statement, any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the related Prospectus so that such Prospectus
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances when the Prospectus is delivered to a purchaser of Common
Stock, not misleading, or if in the opinion of the Underwriter it is otherwise
necessary to amend or supplement such Prospectus to comply with law, the Company
agrees to prepare promptly, file (subject to Section 5(a)) with the Commission
and furnish at its own expense to the Underwriter, amendments or supplements to
such Prospectus so that the Prospectus as so amended or supplemented will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser of Common Stock,
not misleading or so that such Prospectus, as so amended or supplemented, will
comply with law.
(d) The Company agrees to furnish the Underwriter, without charge,
during the Effectiveness Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Underwriter may reasonably request.
(e) The Company shall cooperate with the Underwriter to qualify or
register the Purchase Shares registered pursuant to the Registration Statement
for sale under (or obtain exemptions from the application of) the state
securities or blue sky laws of those jurisdictions designated by the
Underwriter, shall comply with such laws and shall continue such qualifications,
registrations and exemptions in effect so long as required for the distribution
of the Purchase Shares. The Company shall not be required to qualify as a
foreign corporation or to take any action that would subject it to general
service of process in any such
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jurisdiction where it is not presently qualified or where it would as a result
of such action be subject to taxation as a foreign corporation. The Company will
advise the Underwriter promptly of the suspension of the qualification or
registration of (or any exemption therefrom with respect to) such Purchase
Shares for offering, sale or trading in any jurisdiction or any initiation or
threat of any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption, the
Company shall use its best efforts to obtain the withdrawal thereof at the
earliest possible moment.
SECTION 6. Additional Covenants of the Company.
The Company further covenants and agrees with the Underwriter as
follows:
(a) During the Effectiveness Period, the Company shall continue to
engage and maintain, at its expense, a registrar and transfer agent for the
Common Stock.
(b) During the Effectiveness Period, the Company will timely file such
reports pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings statement
for the purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(c) During the Effectiveness Period, the Company shall file, on a
timely basis, with the Commission and the Relevant Exchange all reports and
documents required to be filed under the 1934 Act or the rules of the Relevant
Exchange.
(d) During the Effectiveness Period, the Company shall furnish to the
Underwriter (A) at the time delivered to stockholders, copies of the Annual
Report of the Company containing the balance sheet of the Company as of the
close of such fiscal year and statements of income, stockholders' equity and
cash flows for the year then ended and the opinion thereon of the Company's
independent public or certified public accountants; (B) as soon as practicable
after the filing thereof, unless available to the Underwriter on EDGAR or the
Company's website, copies of each proxy statement, Annual Report on Form 10- K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed
by the Company with the Commission or any securities exchange or automated
quotation system; and (C) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its capital stock.
(e) At all times during the Effectiveness Period, if requested by the
Underwriter, the Company shall cause to be delivered to the Underwriter such
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information, documents and opinions as they may reasonably require for the
purposes of enabling it to pass upon the issuance and delivery of the Purchase
Shares as contemplated herein or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements herein contained.
(f) The Company will reserve and keep available at all times, free of
preemptive or other similar rights, a sufficient number (the "RESERVE NUMBER")
of shares (which, in any event, shall not be less than 20,000,000 (as may be
adjusted from time to time pursuant to Section 8)) of Common Stock and capacity
on the Registration Statement for the purpose of enabling the Company to satisfy
its obligations to issue and deliver the Purchase Shares hereunder.
(g) During the period from the date hereof until the earlier of the
final day of the Dribble-out Period or any earlier termination of this Forward
Underwriting Agreement, the Company will not, without the prior written consent
of the Underwriter (which consent may be withheld at the reasonable discretion
of the Underwriter) sell or offer or announce the offering of, or file any
registration statement under the 1933 Act in respect of, or enter into any
agreement or arrangement providing for the offer or sale of, any shares of
Common Stock, except in the case of a merger of the Company; provided, however,
that the Company may issue shares of its Common Stock pursuant to any stock
option, stock bonus or other stock plan or arrangement described in the
Prospectus and may issue securities convertible into Common Stock and the Common
Stock underlying such securities.
SECTION 7. Acceleration of Commencement Date.
(a) Subject to Section 4(h), if the Closing Price of the Common Stock,
as determined by the Underwriter, on any day prior to the Commencement Date is
less than the Trigger Price (a "STOCK PRICE ACCELERATION EVENT"), then
Commencement Date shall be accelerated to the date that is the earliest to occur
of (x) the nineteenth day immediately succeeding the date on which such Stock
Price Acceleration Event shall have occurred, (y) the Trading Day immediately
following the Remarketing Settlement Date, (as defined in the Remarketing
Agreement) on which the Remarketing Agent (as defined in the Remarketing
Agreement) shall have received the proceeds of the related Remarketing (as
defined in the Remarketing Agreement), but in no event later than the third
Scheduled Trading Day prior to November 10, 1999.
(b) If the Company shall redeem the Subordinated Notes as a result of
a Failed Remarketing (as defined in the Remarketing Agreement) prior to the
Commencement Date, then the Commencement Date shall be accelerated to the
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Trading Day immediately following the date of such redemption (a "COMPANY
ACCELERATION").
(c) The Company may, upon three Business Days' written notice to the
Underwriter, elect to accelerate the Commencement Date to any scheduled Trading
Day after the conditions set forth in Section 4(h) have been satisfied.
This Section 7 shall be subject in all respects to the provisions of Section 12.
SECTION 8. Adjustments to Trigger Price and Reserve Number.
Following the declaration of any Potential Adjustment Event, the
Underwriter shall determine (after consultation with the Company) whether such
Potential Adjustment Event has a diluting or concentrative effect on the
theoretical value of the Common Stock and, if so, shall make the corresponding
adjustment(s), if any, to the Trigger Price and the Reserve Number. The
Underwriter may, but need not, determine the appropriate adjustment(s) by
reference to the adjustment(s) in respect of such Potential Adjustment Event
made by an options exchange to options on the Common Stock traded on that
options exchange. In the event of any merger, consolidation or reorganization of
the Company, the Underwriter shall determine the appropriate Trigger Price and
Reserve Number as a result of such event.
SECTION 9. Expenses.
The Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (a) all
costs and expenses incident to the authorization, issuance, sale and delivery of
the Purchase Shares (including all printing and engraving costs), (b) all fees
and expenses of the registrar and transfer agent of the Common Stock, (c) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and delivery of the Purchase Shares to the Underwriter, (d) all fees and
expenses of the Company's counsel, independent public or certified public
accountants and other advisors, (e) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
any Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), each related preliminary prospectus and
the related Prospectus, and all amendments and supplements thereto, and this
Forward Underwriting Agreement, (f) all filing fees and other expenses incurred
by the Company or the Underwriter in connection with qualifying or registering
(or obtaining exemptions from the qualification or registration of) any Common
Stock delivered hereunder for offer and sale under the state securities or blue
sky
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laws and, if requested by the Underwriter, preparing and printing a "BLUE SKY
SURVEY" or memorandum, and any supplements thereto, advising the Underwriter of
such qualifications, registrations and exemptions, (g) the fees and expenses
associated with listing or including any shares of Common Stock delivered
hereunder on the Relevant Exchange, (h) the fees and expenses of counsel for the
Underwriter and its Affiliates incurred in connection with the transactions
contemplated by this Forward Underwriting Agreement and (i) all other fees,
costs and expenses referred to in Item 13 or Item 14, as the case may be, of
Part II of the Registration Statement.
SECTION 10. Indemnification.
(a) Indemnification of the Underwriter. The Company agrees to
indemnify and hold harmless the Underwriter, its officers and employees, and
each person, if any, who controls the Underwriter within the meaning of the 1933
Act and the 1934 Act against any loss, claim, damage, liability or expense, as
incurred, to which the Underwriter or such controlling person may become
subject, under the 1933 Act, the 1934 Act or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or actions
in respect thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the 1933
Act, or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not misleading;
or (ii) upon any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by the Underwriter in connection with, or
relating in any manner to, the Common Stock or the offerings contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon any matter covered by
clause (i) or (ii) above, provided that the Company shall not be liable under
this clause (v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by the Underwriter
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through its bad faith, gross negligence or willful misconduct; and to reimburse
the Underwriter and each such controlling person for any and all expenses
(including the fees and disbursements of counsel chosen by the Underwriter) as
such expenses are reasonably incurred by the Underwriter or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to the extent,
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by the Underwriter expressly for
use in the Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto); and provided, further, that with
respect to any preliminary prospectus, the foregoing indemnity agreement shall
not inure to the benefit of the Underwriter from whom the person asserting any
loss, claim, damage, liability or expense purchased Purchase Shares, or any
person controlling the Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 5(d) and a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
the Underwriter to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Purchase Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or expense. The
indemnity agreement set forth in this Section 10 shall be in addition to any
liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. The
Underwriter agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer or controlling
person may become subject, under the 1933 Act, the 1934 Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Underwriter), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or arises out of or is
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the
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extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by the Underwriter expressly for use therein; and to
reimburse the Company, or any such director, officer or controlling person for
any and all expenses (including the fees and disbursements of counsel chosen by
any such person) as such expenses are reasonably incurred by the Company, or any
such director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. The indemnity agreement set forth in this Section
10 shall be in addition to any liabilities that the Underwriter may otherwise
have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 10 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 10,
notify the indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section 10 or to
the extent it is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it shall elect, jointly with all other indemnifying parties similarly notified,
by written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel reasonably acceptable to the indemnifying party to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
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defense thereof unless (i) the indemnified party shall have employed separate
counsel in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with local counsel),
approved by the indemnifying party, or (ii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 10 shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
10(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 11. Contribution.
If the indemnification provided for in Section 10 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other hand, from the offering of the Purchase Shares pursuant to this Agreement
or (ii) if the allocation provided by
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clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand, and the
Underwriter, on the other hand, in connection with the statements or omissions
or inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriter, on the other hand, in connection
with the offering of the Common Stock pursuant to this Agreement shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of the Purchase Shares pursuant to this Agreement (before deducting
expenses) received by the Company, and the total Underwriting Commission
received by the Underwriter, bear to the Aggregate Public Offering Price. The
relative fault of the Company, on the one hand, and the Underwriter, on the
other hand, shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact or any such inaccurate or alleged
inaccurate representation or warranty relates to information supplied by the
Company, on the one hand, or the Underwriter, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 10, any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 10 with respect to notice of commencement of any action shall apply if a
claim for contribution is to be made under this Section 11; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 10 for purposes of indemnification.
The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 11 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in this Section 11.
Notwithstanding the provisions of this Section 11, the Underwriter
shall not be required to contribute any amount in excess of the Underwriting
Commissions received by the Underwriter in connection with the Purchase Shares
underwritten by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 11, each officer and employee of
33
<PAGE> 35
the Underwriter and each person, if any, who controls the Underwriter within the
meaning of the 1933 Act and the Exchange Act shall have the same rights to
contribution as the Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the 1933 Act and the 1934 Act shall
have the same rights to contribution as the Company.
SECTION 12. Termination of this Forward Underwriting Agreement.
(a) Execution of Terms Agreement. If at any time the parties enter
into a firm commitment underwriting agreement, with respect to Purchase Shares
(whether evidenced by a written agreement substantially in the form of a Terms
Agreement (as defined in the Underwriting Agreement between the Company and
NationsBanc Montgomery Securities, LLC attached as an exhibit to, or
incorporated by reference in, the Registration Statement) or any other form of
underwriting agreement) at an aggregate public offering price equal to the
Settlement Balance as of the date of such underwriting agreement, then this
Forward Underwriting Agreement shall terminate without any liability (except as
provided in Section 12(f)) on the part of either party, except that all
obligations of the parties with respect to any Purchase Shares purchased and
sold on any Pricing Date prior to the date of such termination shall remain in
effect.
(b) Cross Acceleration Termination Event. Notwithstanding anything
herein to the contrary, if at any time a Senior Bank Debt Acceleration has
occurred, then this Forward Underwriting Agreement shall terminate and the
parties shall have no liability hereunder (except as provided in Section 12(f))
including any obligation of the Underwriter or the Company to pay for and
deliver, as the case may be, Purchase Shares sold on any Pricing Date prior to
the date of such Senior Bank Debt Acceleration.
(c) Failure of Company to Sell and Deliver Purchase Shares. If the
Company shall fail to deliver to the Underwriter the Purchase Shares to be
delivered by the Company on any Purchase Date pursuant to this Forward
Underwriting Agreement (except as permitted hereby), then the Underwriter may at
its option, by written notice to the Company, terminate this Forward
Underwriting Agreement without any liability on the part of the Underwriter,
except that all obligations of the parties with respect to any Purchase Shares
purchased and sold prior to the date of such failure shall remain in effect.
(d) The obligations of the Underwriter to purchase and pay for
Purchase Shares on any Purchase Date may be terminated by the Underwriter by
notice given to the Company if at any time since the corresponding Pricing Date
(i) trading or quotation in any of the Company's securities shall have been, or
34
<PAGE> 36
continue to be suspended or limited by the Commission or by the Relevant
Exchange, or trading in securities generally on the New York Stock Exchange,
Inc. shall have been, or continue to be, suspended or limited, or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange, Inc. by the Commission; (ii) a general banking moratorium shall have
been declared by federal, New York or, Delaware authorities and continues to be
in effect; (iii) there shall have occurred, or continue to be, any outbreak or
escalation of national or international hostilities or any crisis or calamity,
or any change in the United States or international financial markets, or any
substantial change or development involving a prospective substantial change in
United States' or international political, financial or economic conditions
affecting the securities markets generally, as in the reasonable judgment of the
Underwriter is material and adverse and makes it impracticable to sell the
Purchase Shares in the manner and on the terms described in the Prospectus or to
enforce contracts for the sale of securities; (iv) in the reasonable judgment of
the Underwriter there shall have occurred any Material Adverse Change; or (v)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the reasonable judgment of
the Underwriter may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured.
(e) Unless otherwise terminated pursuant to the terms hereof, this
Forward Underwriting Agreement will terminate on the third Business Day
immediately following the final day of the Dribble-out Period.
(f) Liability on Termination. Any termination pursuant to this Section
12 shall be without liability, other than as expressly provided herein, on the
part of (i) the Company to the Underwriter, except that the Company shall be
obligated to reimburse the expenses of the Underwriter pursuant to Section 13,
(ii) the Underwriter to the Company, or (iii) of any party hereto to any other
party except that the provisions of Section 10 and Section 11 shall at all times
be effective and shall survive such termination.
SECTION 13. Reimbursement of Underwriter's Expense. If this Forward
Underwriting Agreement is terminated by the Underwriter pursuant to paragraphs
(b), (c) or (d) (except for (d)(i) with respect to minimum or maximum prices or
(d)(v) of Section 12), the Company agrees to reimburse the Underwriter, upon
demand for all out-of-pocket expenses that shall have been reasonably incurred
by the Underwriter in connection with the proposed purchase and the offering and
sale of the Purchase Shares, including but not limited to travel expenses,
postage, facsimile and telephone charges.
35
<PAGE> 37
SECTION 14. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and of its officers and of the Underwriter set forth
in or made pursuant to this Forward Underwriting Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter or the Company or any of its partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Purchase Shares and any termination of this Forward Underwriting
Agreement.
SECTION 15. Governing Law.
THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF
NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW RULES THEREOF.
SECTION 16. Assignment and Transfer.
The rights and duties under this Forward Underwriting Agreement may not
be assigned or transferred by either party hereto without the prior written
consent of the other party hereto; provided that the Underwriter may assign any
of its rights or duties hereunder to any of its Affiliates without the prior
written consent of the Company but with prompt notice of the identity, addresses
and contact person of the assignee to the Company.
SECTION 17. Confidentiality.
Except as required by law (including the public announcement of this
transaction following its consummation) or judicial or administrative process,
or as requested by a regulatory authority or self-regulatory organization, each
party hereto agrees to keep this Forward Underwriting Agreement and the
transactions contemplated hereby and thereby confidential. The Underwriter
acknowledges that the Company intends to publish a press release describing the
principal terms of the transactions described in this Agreement, the Remarketing
Agreement and a Purchase Agreement dated the date hereof among the Company,
Hercules Trust V and NMS Services, Inc. (the "PURCHASE AGREEMENT"). Such press
release may be filed with the Commission in the sole discretion of the Company.
In addition, the Underwriter acknowledges that the Company intends to file this
Agreement, the Remarketing Agreement, the Purchase Agreement, the Trust
Agreement, the Indenture, as supplemented, as well as any other agreements
related thereto as exhibits to its next annual report on Form 10-K. The
Underwriter hereby agrees that the foregoing do not constitute violations of
this Section 17.
36
<PAGE> 38
In the event disclosure is permitted pursuant to the immediately
preceding sentence, the disclosing party shall (i) provide prior notice of such
disclosure to the other party, (ii) use its best efforts to minimize the extent
of such disclosure and (iii) comply with all reasonable requests of the other
party to minimize the extent of such disclosure. This Section 17 shall not
prevent either party from disclosing information as necessary to third-party
advisors in connection with the transactions contemplated hereby; provided that
such advisors agree in writing (unless obligated by its professional
responsibilities to do so) to be bound by this Section 17 as if a party hereto.
SECTION 18. Notices.
Unless otherwise specified, notices under this Forward Underwriting
Agreement may be made by telephone, to be confirmed in writing to the address
below. Changes to the information below must be made in writing.
(a) If to the Company:
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
Attn: Vice President and Treasurer
Telephone: (302) 594-5000
Facsimile: (302) 594-5210
with copy to each of the following:
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
Attn: Corporate Secretary
Telephone: (302) 594-5000
Facsimile: (302) 594-7252
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA
Attn: Justin P. Klein, Partner
Telephone: (215) 665-8500
Facsimile: (215) 864-8999
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<PAGE> 39
(b) If to the Underwriter:
NationsBanc Montgomery Securities LLC
9 West 57th Street
New York, NY 10019
Attn: Russell Hackmann
Telephone: (212) 583-8173
Facsimile: (212) 583-8457
SECTION 19. Change in Law.
The parties agree that if there shall occur any amendment to, or change
in, the federal securities laws, or any regulations thereunder, relating to the
content, filing or delivery of the Registration Statement or the Prospectus,
including any change in the 1933 Act, the 1933 Act Regulations, the 1934 Act or
the 1934 Act Regulations, that has an effect on the obligations of the parties
hereunder, then the parties shall negotiate in good faith to modify the terms of
this Forward Underwriting Agreement to preserve the ability of the Company to
issue and sell to the Underwriter, and the Underwriter to sell in Market Sales,
the Purchase Shares in the manner contemplated hereby.
38
<PAGE> 40
Please confirm your agreement to the foregoing by signing and returning
to us the enclosed duplicate of this Forward Underwriting Agreement.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Russell F. Hackman
--------------------------
Name: Russell F. Hackman
Title: Principal
Acknowledged and agreed to as of
the date first above written,
HERCULES INCORPORATED
By: /s/ R. K Elliott
---------------------
Name: R. Keith Elliott
Title: Chairman and Co-Chief
Executive Officer
39
<PAGE> 41
EXHIBIT A
FORM OF OPINION OF COMPANY COUNSEL
Opinion of Company Counsel to be delivered pursuant to Section 4(a) of
the Forward Underwriting Agreement shall be to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(ii) The Company is duly qualified as a foreign corporation
and is in good standing under the laws of each other jurisdiction where
its ownership, lease, licensing or operation of property or the conduct
of business requires such qualification, other than in such
jurisdiction or jurisdictions where the failure to be so qualified and
be in good standing could not reasonably be expected to result in a
Material Adverse Change.
(iii) The Company has all corporate power and authority and
the legal right to (x) own, lease and operate its properties, (y)
conduct the business in which it is currently engaged and (z) enter
into, and perform its obligations under, or as contemplated under, the
Forward Underwriting Agreement and consummate the transactions
contemplated thereby.
(iv) Neither the Company nor any of its Material Subsidiaries
is in violation of its charter or by-laws or is in default or, with the
giving of notice or lapse of time, would be in default ("DEFAULT")
under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or
any of its Material Subsidiaries is a party or by which it or any of
them may be bound, or to which any of the property or assets of the
Company or any of its Material Subsidiaries is subject (each, an
"EXISTING INSTRUMENT"), except for such Defaults as could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Change. The execution, delivery and performance by the
Company of this Forward Underwriting Agreement, the consummation of the
transactions herein contemplated and the compliance by the Company with
its obligations hereunder do not and will not result in any violation
of the provisions of the Certificate of Incorporation or By-Laws or
other constitutive documents of the Company or any Material Subsidiary,
do not and will not conflict with or constitute a breach of, Default or
a Debt Repayment Trigger Event under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
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assets, properties or operations of the Company or any of its Material
Subsidiaries pursuant to, or require the consent of any other party to,
any Existing Instrument, except for such conflicts, breaches, Defaults,
liens (other than liens created by or contemplated in the Credit
Agreement as in effect of the date hereof), charges or encumbrances or
failure to obtain consent as would not, individually or in the
aggregate, result in a Material Adverse Change and will not result in
any violation of any applicable law or statute or any order, rule,
regulation or judgment of any court or governmental agency or
governmental body having jurisdiction over the Company or any of its
Material Subsidiaries or any of their respective assets, properties or
operations the result of which could be a Material Adverse Change.
(v) Each Material Subsidiary of the Company is a duly and
validly existing entity and is in good standing under the laws of the
jurisdiction of its incorporation, has all corporate power and
authority to own, lease, license and operate its properties and conduct
its business as currently conducted and is duly qualified as a foreign
entity in good standing in each other jurisdiction, where its
ownership, lease, license or operation of property or the conduct of
its business requires such qualification, other than in such
jurisdiction or jurisdictions where the failure to be so qualified and
or be in good standing could not reasonably be expected to result in
Material Adverse Change. All of the issued and outstanding capital
stock of each Material Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company,
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien (other than those created by or
contemplated in the Credit Agreement as on November 12, 1998),
encumbrance or claim, to the best of such counsel's knowledge. None of
the outstanding shares of capital stock of any Material Subsidiary was
issued in violation of preemptive or other similar rights of any
securityholder of such Material Subsidiary.
(vi) (A) The authorized, issued and outstanding capital stock
of the Company is set forth in the Prospectus under the caption
"Capitalization" (other than for subsequent issuances, if any, pursuant
to employee benefit plans described in the Prospectus or upon exercise
of outstanding options or warrants described in the Prospectus). (B)
Such shares of capital stock have been duly authorized and validly
issued by the Company and are fully paid and non-assessable and, to the
best of such counsel's knowledge, have been issued in compliance with
federal and state securities laws. (C) The Common Stock (including the
Purchase Shares) conforms in all material respects to the description
thereof
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<PAGE> 43
contained in the Prospectus. (D) None of the outstanding shares of
Common Stock was issued in violation of preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase
securities of the Company. (E) No stockholder of the Company or any
other person has any preemptive right, right of first refusal or other
rights to subscribe for or purchase, securities of the Company (except
for any such rights granted pursuant to the Credit Agreement as in
effect on November 12, 1998) arising (i) by operation of the
Certificate of Incorporation or By-Laws of the Company or the General
Corporation Law of the State of Delaware or (ii) to the best of such
counsel's knowledge, otherwise.
(vii) No holder of the Common Stock is or will be subject to
personal liability by reason of being such a holder. The form of
certificate used to evidence the Purchase Shares is in due and proper
form and complies with all applicable requirements of the charter and
By-Laws of the Company and the General Corporation Law of the State of
Delaware.
(viii) The Company meets the requirements for use of Form S-3
under the 1933 Act. The Registration Statement (including any Rule
462(b) Registration Statement, if any) has been declared effective by
the Commission under the 1933 Act. To the best knowledge of such
counsel, the Company has complied to the Commission's satisfaction with
all requests of the Commission for additional or supplemental
information. No stop order suspending the effectiveness of the
Registration Statement is in effect and no proceedings for such purpose
have been instituted or are pending or, to the best of such counsel's
knowledge are contemplated or threatened by the Commission. Based on
the advice of the Division of Corporation Finance of the Commission,
any required filing of the Prospectus and any supplement thereto
pursuant to Rule 424(b) under the 1933 Act has been made in the manner
and within the time period required by such Rule 424(b).
(ix) The documents incorporated or deemed to be incorporated
by reference in the Registration Statement and the Prospectus, at the
time they were filed with the Commission, complied in all material
respects with the requirements of the 1934 Act and the 1934 Act
Regulations.
(x) To the best knowledge of such counsel, there are no
actions, suits, proceedings, inquiries or investigations before or
brought by any legal or governmental agency or body now pending or, to
the best of such counsel's knowledge, threatened against or affecting
the Company or any of its Material Subsidiaries which are required to
be disclosed in the
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<PAGE> 44
Registration Statement and the Prospectus, other than those disclosed
therein.
(xi) To the best knowledge of such counsel, there are no
Existing Instruments required to be described or referred to in the
Registration Statement or the Prospectus or to be filed as exhibits
thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto; and the descriptions
thereof and references thereto are correct in all material respects.
(xii) No consent, approval, authorization, order registration
qualification, of or with filing any court or governmental agency or
body having jurisdiction over the Company or any of its Material
Subsidiaries or any of their respective properties is required for the
due authorization, execution and delivery by the Company of, and the
compliance by the Company with, all the terms of this Forward
Underwriting Agreement and the consummation by the Company of the
transactions contemplated thereby except such as have been obtained or
made by the Company, as may be required by the securities or Blue Sky
laws of the various States in connection with the offer and sale of the
Purchase Shares or where the failure to obtain such consent, approval,
authorization, order, registration, qualification, or make such filing
will not adversely affect such authorization, execution or delivery of
the Forward Underwriting Agreement, the compliance with the terms
thereof or the consummation by the Company of the transactions
contemplated hereby.
(xiii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse
change, or development that could reasonably be expected to result in a
material adverse change in the condition, financial or otherwise, in or
affecting the earnings, business, operations, financial position or
prospects, whether or not arising from transactions in the ordinary
course of business, of the Company and its subsidiaries, considered as
one entity, (B) there have been no transactions entered into by the
Company or any of its Material Subsidiaries, other than those arising
in the ordinary course of business, which are, individually or in the
aggregate, material with respect to the Company and its subsidiaries,
considered as one enterprise and (C) except for regular dividends on
the Company's Common Stock or preferred stock (which dividends include
amounts, sometimes called "dividend equivalents," paid under the
Company's employment benefit compensation plans on the Common Stock
grants (whether options, restricted stock or other) under such plans,
but only to the extent such amounts do not exceed the amounts of
ordinary
A-4
<PAGE> 45
cash dividends that would be payable were such Common Stock grants
treated as Common Stock) or the applicable charter document or
supplement thereto, respectively, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(xiv) There are no persons with registration or other similar
rights to have any equity or debt securities registered for sale under
the Registration Statement, except for such rights as have been duly
waived.
(xv) The statements (A) in the Prospectus under the caption
(or analagous caption) "Business-Litigation", insofar as such
statements constitute matters of law, summaries of legal matters, the
Company's charter or By-Law provisions, documents or legal proceedings,
or legal conclusions, has been reviewed by such counsel and fairly
present and summarize, in all material respects, the matters referred
to therein.
In addition, such counsel shall state that he has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriter at which the contents of
the Registration Statement and the Prospectus, and any supplements or amendments
thereto, and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus (other than as specified above), and any supplements
or amendments thereto, on the basis of the foregoing, nothing has come to his
attention which would lead him to believe that either the Registration Statement
or any amendments thereto, at the time the Registration Statement or such
amendments became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus, as of its
date or as of the date of such opinion contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief as to the financial statements or schedules or other financial or
statistical data derived therefrom, included or incorporated by reference in the
Registration Statement or the Prospectus or any amendments or supplements
thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Delaware, or the federal law of the United States, to the extent he deems proper
A-5
<PAGE> 46
and specified in such opinion, upon the opinion (which shall be dated the date
of such opinion, shall be satisfactory in form and substance to the Underwriter,
shall expressly state that the Underwriter may rely on such opinion as if it
were addressed to the Underwriter and shall be furnished to the Underwriter) of
other counsel of good standing whom he believes to be reliable and who are
satisfactory to the Underwriter; provided, however, that such counsel shall
further state that he believes that he and the Underwriter are justified in
relying upon such opinion of other counsel, and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and public officials.
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EXHIBIT B
FORM OF OPINION OF SPECIAL COUNSEL TO THE COMPANY
Opinion of Special Counsel to the Company to be delivered pursuant to
Section 4(a) of the Forward Underwriting Agreement shall be to the effect that:
(i) The Forward Underwriting Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms,
except as rights to indemnification thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting the enforcement of
creditors' rights or by general equitable principles (except that the
opinion to be delivered on the date hereof may state that they are
subject to ratification of this Agreement and of actions to be taken by
the Company in connection therewith by the Board of Directors of the
Company).
(ii) The Purchase Shares to be purchased by the Underwriter
from the Company have been duly authorized for issuance and sale
pursuant to the Forward Underwriting Agreement (except that the opinion
to be delivered on the date hereof may state that they are subject to
ratification of this Agreement and of actions to be taken by the
Company in connection therewith by the Board of Directors of the
Company) and, when issued and delivered by the Company pursuant to the
Forward Underwriting Agreement against payment of the consideration set
forth therein, will be validly issued, fully paid and non-assessable.
(iii) The Company meets the requirements for use of Form S-3
under the 1933 Act. The Registration Statement (including any Rule
462(b) Registration Statement, if any) has been declared effective by
the Commission under the 1933 Act. To the best knowledge of such
counsel, the Company has complied to the Commission's satisfaction with
all requests of the Commission for additional or supplemental
information. No stop order suspending the effectiveness of the
Registration Statement is in effect and no proceedings for such purpose
have been instituted or are pending or, to the best of such counsel's
knowledge are contemplated or threatened by the Commission. To the
extent related to the offer and sale of Purchase Shares, each required
filing, if any, of the Prospectus and any supplement thereto pursuant
to Rule 424(b) under the 1933 Act has been
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<PAGE> 48
made in the manner and within the time period required by such Rule
424(b).
(iv) Based on advice from the Division of Corporate Finance of
the Commission, the Registration Statement, the Prospectus therein and
each amendment or supplement to the Registration Statement and the
Prospectus as of its effective or issue date, as applicable, (other
than the financial statements and supporting schedules included or
incorporated by reference therein or in exhibits to or excluded from
the Registration Statement, as to which no opinion need be expressed)
comply as to form in all material respects with the applicable
requirements of the 1933 Act and the 1933 Act Regulations.
(v) The statements (A) in the Prospectus under the captions
"Risk Factors--[___]," "Description of Capital Stock," "Management's
Discussion and Analysis and Results of Operations--Liquidity," "Certain
Relationships and Related Transactions," "Shares Eligible for Future
Sale," "Certain United States Income Tax Considerations" and
"Underwriting" or analogous captions and (B) in Item 14 and Item 15] of
the Registration Statement, insofar as such statements constitute
matters of law, summaries of legal matters, the Company's charter or
By-Law provisions, documents or legal proceedings, or legal
conclusions, has been reviewed by such counsel and fairly present and
summarize, in all material respects, the matters referred to therein.
(vi) The Company is not, and upon the issuance and sale of the
Purchase Shares as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus will not be, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriter at which the contents of
the Registration Statement and the Prospectus, and any supplements or amendments
thereto, and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus (other than as specified above), and any supplements
or amendments thereto, on the basis of the foregoing, nothing has come to their
attention which would lead them to believe that either the Registration
Statement
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<PAGE> 49
or any amendments thereto, at the time the Registration Statement or such
amendments became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus, as of its
date or as of the date of such opinion contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief as to the financial statements or schedules or other financial or
statistical data derived therefrom, included or incorporated by reference in the
Registration Statement or the Prospectus or any amendments or supplements
thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the State of New York or the federal
law of the United States, to the extent they deem proper and specified in such
opinion, upon the opinion (which shall be dated the date of such opinion, shall
be satisfactory in form and substance to the Underwriter, shall expressly state
that the Underwriter may rely on such opinion as if it were addressed to the
Underwriter and shall be furnished to the Underwriter) of other counsel of good
standing whom they believe to be reliable and who are satisfactory to the
Underwriter; provided, however, that such counsel shall further state that they
believe that they and the Underwriter are justified in relying upon such opinion
of other counsel, and (B) as to matters of fact, to the extent they deem proper,
on certificates of responsible officers of the Company and public officials.
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EXHIBIT C
[FORM OF] PRICING CERTIFICATE
Date of Certificate
-----------------------------------------------
Settlement Balance as of Close of Business
on day immediately preceding the date hereof
-----------------------
Aggregate Net Sale Price*
------------------------------------------
Daily Number of Purchase Shares
------------------------------------
Settlement Balance as of the Close of Business
on the date hereof
-------------------------------------------------
*Net of Commissions paid to persons outside the NationsBank Group
Capitalized terms used herein have the meaning set forth in the Forward
Underwriting Agreement, dated as of November 12, 1998, between Hercules
Incorporated and NationsBanc Montgomery Securities LLC.
--------------------------------------
Authorized Signatory of
NationsBanc Montgomery Securities LLC
C-1
<PAGE> 1
EXHIBIT 10-T
AGREEMENT
VINCENT J. CORBO
Purpose and Term of Agreement:
In anticipation of the consummation of the BetzDearborn transaction, this is to
confirm Vincent J. Corbo's (VJC) agreement to remain as an employee of Hercules
Incorporated as President and Chief Operating Officer, or any other position
which may be mutually agreed upon, from July 29, 1998 through January 1, 2001.
During this term, the following conditions will apply.
Position/Title:
President and Chief Operating Officer of Hercules Incorporated and a member of
Hercules Incorporated Board of Directors.
Base Salary:
Effective August 1, 1998, his annualized base salary will be increased by
$100,000 to $550,000. At closing, his base salary will be set at no less than
75% of the highest annualized rate then in effect for the Chief Executive
Officer or co-Chief Executive Officer(s). Until this agreement expires his
annualized base salary will be increased as required to ensure that his rate is
no less than 75% of the highest annualized rate in effect for the Chief
Executive Officer or co-Chief Executive Officer(s).
Incentive Payments:
If VJC remains as an active employee of Hercules Incorporated as described above
through January 1, 2001, the following incentive payments will be provided:
A. Restricted Stock
A grant of Restricted Stock Units with a value of $2,000,000 on the
grant date and at the grant price hereinafter defined. The grant price
used to determine the actual number of units will be the closing price
of one share of Hercules Common Stock on August 4, 1998, as reported on
the Composite Tape for New York Stock Exchange Listed Companies and
published in the Eastern Edition of The Wall Street Journal. Such units
will accrue dividend equivalents and interest, payable at vesting.
These units will vest to you on January 1, 2001, and be payable, at
your option, in shares of Hercules Incorporated Common Stock or cash,
net of applicable taxes.
<PAGE> 2
B. Cash
If still employed on January 1, 2001 as stipulated above, a cash award
of $1,000,000 will be earned and will be paid, net of applicable taxes.
Change of Control:
In the event of a solicited or unsolicited change of control of Hercules
Incorporated as defined in your Employment Contract dated June 29, 1995, the
provisions for payment of the following elements of this Agreement will be
applicable:
- Restricted Stock Incentive
- Cash Incentive
Where provisions may be made to provide for payment of Employment Contracts for
certain HPC individuals as a result of the Bluenose transaction, this
opportunity will not apply to you.
Pension Adjustments:
If still employed on January 1, 2001 as stipulated above, you will earn the
right to the following enhancements of pension benefit credits when you elect to
retire:
1. You shall be given credit for three additional years of
service for purposes of calculating pension benefits.
2. You shall be given credit for the number of additional years
of age for purposes of calculating pension benefits to the
extent needed to provide that you had attained age 60.
No additional credit for years of age shall be accounted for beyond the actual
attainment of age 60 if you remain an active employee of Hercules Incorporated,
but you will be eligible to earn additional years of service for purposes of
calculating pension benefits. However, under no circumstances will service
credit be applied beyond your attainment of age 65.
Mega Grant Stock Option Agreements:
1. For the PASO awards made under the LTICP on October 29, 1996,
it will be determined that all minimum vesting date(s)
requirements will be satisfied if you are still employed on
January 1, 2001.
2. For the PASO awards made under the LTICP on February 7, 1997,
it will be determined that all minimum vesting date(s)
requirements will be satisfied if you are still employed on
January 1, 2001.
The provisions for Accelerated Vesting as provided for in the Award Commitment
notices will remain applicable.
2
<PAGE> 3
At the times when William R. Cook receives Performance Accelerated Stock Options
(PASO's), otherwise known as Mega Grants, per the terms of his Employment
Agreement, then VJC will receive PASO's, otherwise known as Mega Grants, such
that the total PASO's, including those awarded on October 29, 1996 (300,000
shares), and February 7, 1997 (150,000 shares), are 75% of the total number of
shares granted to Mr. Cook. Terms and conditions for vesting will be the same as
applied for Mr. Cook under the conditions of the LTICP. Provision for
acceleration of vesting under special circumstances as described in this
agreement will not apply to these extra awards.
Matching Grant:
For the record, under the terms of the Matching Grant included in your
confirmation letter of February 28, 1997, the Restricted Stock Units and
Restricted Stock, with accrued dividend equivalents and interest, will vest to
you on May 1, 2000, and all other terms of the letter will apply.
At the time when William R. Cook has the opportunity to participate in the
Hercules Matching Grant Program, VJC will have the opportunity to extend his
participation in the Program such that the multiplier for determining the
matching Restricted Stock is 75% of the multiplier in effect for Mr. Cook. Terms
and conditions for vesting of Restricted Stock will be the same as applied to
Mr. Cook under the conditions of the LTICP. Provisions for acceleration of
vesting under special circumstances as described in this agreement will not
apply to this extra grant feature.
Special Circumstances:
If because of extraordinary events VJC decides that it is in his best interests
and the best interests of HPC to resign with at least 60 days advance notice
prior to January 1, 2001, and with the agreement of the Compensation Committee
of the Board of Directors, then certain considerations will be provided:
1. At the time of the effective date of resignation you will be
paid in cash an amount equal to two (2) times the base annual
salary in effect at that time, less applicable taxes.
2. At the time of the effective date of resignation you will earn
the right to the enhancements of pension benefit credits when
you elect to retire as set forth in the Pension Adjustments
section above.
Accelerated vesting for the Mega Grants and vesting of Restricted Stock under
the Matching Grants will be determined by the terms of the Long Term Incentive
Plan, or any special action which may be authorized by the Compensation
Committee of the Board of Directors
3
<PAGE> 4
Perquisites:
In determining the perquisites which will be provided through January 1, 2001,
you will have the option to elect whatever benefits you choose, as would be
reasonably made available to a senior HPC executive, up to a dollar value that
is 75% of the amount provided for perquisites for the Chief Executive Officer or
co-Chief Executive Officer(s). These perquisites may include such items as
automobile, country club memberships, eating club memberships, etc. but
specifically excludes the use of company-owned or leased aircraft for business
or personal travel. Any tax liabilities for perquisite payments will be
grossed-up.
Director's Charitable Award Program:
If VJC remains an active employee of Hercules Incorporated as described above
through January 1, 2001, and remains as a Director of Hercules Incorporated for
the same period, then he will become fully vested in the Program.
Company-owned Leased Aircraft:
VJC will have the authority to utilize company-owned or leased aircraft for
business travel only within the continental U.S. during a calendar year (or
pro-rata portion thereof) up to a value of $200,000. Rates for aircraft
utilization will be actual charges for leased equipment and for the calculated
effective operating rate for company-owned aircraft.
Death:
If, prior to the expiration of this agreement, VJC dies or becomes permanently
and totally disabled as determined under the provisions of the Long Term
Disability Plan, then his designated beneficiaries will receive the greater of
the base salary and pension considerations contained in the Special
Circumstances section, or the pro-rated value of the Incentive Payments and
Pension Adjustments set forth above.
For Hercules Incorporated
Reviewed and agreed: Reviewed and agreed:
/S/ R. Keith Elliott /S/ Vincent J. Corbo
- ---------------------------------- ---------------------------
R. Keith Elliott Vincent J. Corbo
Chairman and Chief Executive Officer
August 12, 1998 August 12, 1998
- ------------------------------------ ---------------------------
Date Date
4
<PAGE> 1
EXHIBIT 10-U
EMPLOYMENT AGREEMENT
THIS Employment Agreement ("Agreement") is entered into as of October
15, 1998, by and BETWEEN HERCULES INCORPORATED (the "Company"), a Delaware
corporation, and WILLIAM R. COOK ("EXECUTIVE").
RECITALS
WHEREAS, pursuant to the Agreement and Plan of Merger among Hercules
Incorporated, Water Acquisition Co. and BetzDearborn Inc. dated as of July 30,
1998 (the "Merger Agreement"), the Company has agreed to purchase all the issued
and outstanding stock of BetzDearborn Inc., a Pennsylvania Corporation;
WHEREAS, Executive is currently employed by BetzDearborn Inc. subject
to an employment agreement dated March 20, 1998, and as amended effective as of
March 6, 1998 (the "BetzDearborn Employment Agreement");
WHEREAS, the Company and Executive intend that Executive's transition
from employment by BetzDearborn Inc. to employment by the Company not constitute
a termination of his employment by BetzDearborn Inc. under his BetzDearborn
Employment Agreement;
WHEREAS, the Company and Executive desire that this Agreement
constitute an assumption, cancellation of, and replacement for, his BetzDearborn
Employment Agreement in its entirety;
WHEREAS, the Company and Executive desire that Executive provide,
following the Acquisition, employment services to the Company upon the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows.
<PAGE> 2
1. EFFECTIVE DATE OF AGREEMENT. This Agreement constitutes an
assumption, cancellation, and replacement of the BetzDearborn Employment
Agreement in its entirety and will be effective, and Executive's employment by
the Company pursuant hereto will commence, at the Effective Time (as defined in
the Merger Agreement) on the date which includes the Effective Time (the
"Effective Date").
2. TERM OF EMPLOYMENT. This Agreement, and Executive's employment by
the Company pursuant hereto, will be for the period commencing on the Effective
Date and continuing for the three (3) year period commencing on such date (the
"Term"), unless sooner terminated pursuant to the terms hereof. Executive agrees
that his transition from employment by BetzDearborn Inc. to employment by the
Company under this Agreement shall not constitute, and shall not be treated as,
a termination of his employment under his BetzDearborn Employment Agreement.
3. DUTIES OF EXECUTIVE. During the Term, Executive will be employed as
the Company's Co-Chief Executive Officer and shall (pursuant to and subject to
the Merger Agreement) serve as the Vice-Chairman of the Company's Board of
Directors (the "Board of Directors"). Executive will have and fulfil1 (i) all of
the duties and responsibilities ordinarily associated with such status as
Co-Chief Executive Officer at an organization comparable to the Company and (ii)
any duties and responsibilities established for the Company's Co-Chief Executive
Officer in the Company's charter or bylaws or other organizational documents or
by the Board of Directors that are consistent with his position and status as
Co-Chief Executive Officer. The Board of Directors will have the right to assign
to Executive such other or additional duties and responsibilities, or reduce
Executive's duties and responsibilities (provided such reductions do not
materially diminish his position, authority or responsibilities at the
<PAGE> 3
Company) as the Board of Directors deems in the Company's best interest, and
Executive will fulfill such duties and responsibilities as directed by the Board
of Directors. Executive will devote substantially all of his working time,
attention, and energy to the Company's business and will not during the term of
this Agreement engage in any substantial outside business or other activity
unrelated to serving the Company's interest, unless he receives prior approval
for such activities from the Board of Directors; provided, however, that
Executive may continue to occupy, without Board approval, a seat on the Board of
Directors of Teleflex Corporation. Executive will fulfill his duties and
responsibilities as described in this Paragraph 3 in a reasonable and
appropriate manner in light of the Company's policies and practices as
established by the Board of Directors and the laws and regulations and policies
which apply to the Company's operation and administration. Executive agrees
(and, under Section 6(c)(4) of the BetzDearborn Employment Agreement consents
to) perform his duties and responsibilities under this Agreement primarily at
the Company's headquarters in Wilmington, Delaware and to commute to such
headquarters to perform his duties and responsibilities at such headquarters.
4. BASE SALARY. Subject to the provisions of Paragraph 6, the Company
will pay Executive a base salary ("Base Salary"), which will be paid in
accordance with the Company's standard payroll practices and policies as in
effect from time to time for salaried employees, as follows:
(a) Beginning on the Effective Date, Executive's Base Salary
will be $700,000 per year, less applicable withholding;
(b) Beginning on the nine month anniversary of the Effective
Date, Executive's Base Salary will be increased to $750,000 per year,
less applicable withholding; and
<PAGE> 4
(c) Beginning on the eighteen month anniversary of the Effective Date,
Executive will be paid a Base Salary, less applicable withholding, that the
Board of Directors determines is consistent with the competitive market value of
the duties performed by Executive under Paragraph 3 of this Agreement; provided,
however, that Executive's Base Salary shall in no event be less than $750,000
per year, less applicable withholding. In reaching its determination, the Board
of Directors will take into account comparative data concerning the salaries of
individuals with similar duties and responsibilities in the industry in which
the Company operates. Such comparative data will be obtained from one, or more
than one, nationally recognized compensation consulting firms selected by the
Board of Directors.
5. BENEFITS.
(a) MICP. Executive shall be eligible to participate in the Company's
Management Incentive Compensation Plan ("MICP") in 1998, 1999, 2000 and 2001
subject to all the terms and conditions in such plan except that (i) his target
for each such year shall be set under this Agreement and (ii) if Executive's
employment terminates for any reason other than by the Company for Good Cause
(as defined in Paragraph 6(a)(3)) after 1998, he shall be treated under Section
14.1 of the MICP as if he had retired. A copy of the MICP as in effect as of the
Effective Date is attached to this Agreement as Exhibit A. Executive's target
under the MICP for 1998 shall be (i) $490,000, pro rated for the period from the
Effective Date through December 31, 1998 but reduced for the portion of any
bonus payable under any BetzDearborn Inc. bonus program which is attributable to
such proration period; (ii) $490,000 for 1999; (iii) $600,000 for 2000; and (iv)
90% of his Base Salary in effect on January 1, 2001 for 2001; provided, however,
<PAGE> 5
that if Executive terminates employment on or after the expiration of the Term
but prior to December 31, 2001, payments made to him under MICP for 2001 shall
be pro rated.
(b) Restricted Stock.
(1) Sign Up Restricted Stock Grant. Executive shall receive a
restricted stock grant under the Company's Long Term Incentive
Compensation Plan ("LTICP") equal to the number of whole shares of the
Company's common stock determined by dividing (i) $2,967,000 by (ii)
the average closing price for a share of the Company's common stock as
reported in the Eastern Edition of The Wall Street Journal for the five
(5) consecutive trading days before the Effective Date (the "Sign Up
Restricted Stock Grant"). The Company shall pay to Executive cash in
lieu of a fractional share of common stock based on such average
closing price.
(2) Vesting. One third of the number of shares subject to the
Sign Up Restricted Stock Grant shall have a Restricted Period (as
defined under the LTICP) ending on the eight month anniversary of the
Effective Date, one third of the number of such shares shall have a
Restricted Period ending on the sixteen month anniversary of the
Effective Date, and the remaining one third shall have a Restricted
Period ending on the twenty four month anniversary of the Effective
Date. Executive in addition will vest 100% in the Sign Up Restricted
Stock Grant (without regard to the Restricted Period) upon (i) the date
of his termination of employment (A) by the Company other than for Good
Cause or (B) by Executive for Good Reason; (ii) the date the
Compensation Committee of the Board of Directors approves Executive's
request to retire at any time following the eight month anniversary of
the Effective Date on account of an unforeseen financial emergency or
other family circumstances which Executive believes will render him no
longer able to perform the essential
<PAGE> 6
functions of his job, which approval shall not be withheld if the
Compensation Committee determines that such belief on the part of Executive
is reasonable; (iii) the death of Executive; or (iv) the date that the
Board of Directors reasonably determines that because of a mental or
physical impairment Executive has been unable for a period of at least six
(6) consecutive months to perform the essential functions of his job with
or without reasonable accommodation (a "Disability"). A retirement which is
approved under Paragraph 5(b)(2)(ii) shall be treated under this Agreement
as a termination by Executive without Good Reason under Paragraph 6(b)(2)
except as provided in this Paragraph 5(b)(2).
(3) Supplemental Grants. The Company shall make a grant of
nonforfeitable, nonrestricted stock to Executive as of the date, or on each
date, that Executive's interest in all or a part of the Sign Up Restricted
Stock Grant vests (the "Vest Date") under Paragraph 5(b)(2) (a
"Supplemental Grant") if (i) the total Vested Date Value of the number of
shares of the Company's common stock subject to the Sign Up Restricted
Stock Grant in which Executive's interest vests on the Vest Date is less
than (ii) the total value attributable to such shares as determined under
Paragraph 5(b)(I)(ii) on the date of the grant of the Sign Up Restricted
Stock Grant (as adjusted by the Company to account for any stock splits,
stock dividends or other changes in the Company's capital structure). Such
Supplemental Grant, or each such Supplemental Grant, shall equal the number
of whole shares of the Company's common stock determined by dividing the
difference between the value under this Paragraph 5(b)(3)(i) and
5(b)(3)(ii) by the Vest Date Value of a share of the Company's common stock
on the Vest Date. The term Vest Date Value under this Paragraph 5(b)(3)
shall mean the average closing price for a share of the Company's common
stock as
<PAGE> 7
reported in the Eastern Edition of The Wall Street Journal for the five (5)
consecutive trading days ending on the Vest Date. The Company shall pay to
Executive cash in lieu of a fractional share of common stock based on the
Vest Date Value.
(4) LTICP Terms. Except as provided in this Paragraph 5(b), the Sign
Up Restricted Stock Grant shall be made subject to the same terms and
conditions as standard restricted stock grants made under the LTICP. (c)
Unrestricted Stock. Executive (as soon as practicable after Executive
receives the cash from the Acquisition attributable to his BetzDearborn
Inc. restricted stock grants and stock options) shall purchase a number of
shares of common stock of the Company equal to (i) $1,700,000 divided by
(ii) the average closing price of a share of the Company's common stock as
reported in the Eastern Edition of The Wall Street Journal for the three
trading days immediately following the Effective Date. Such purchase may be
made from the Company or in the open market, as agreed upon between the
Company and Executive.
(c) Stock Ownership Guidelines. Executive shall purchase such common
stock of the Company as required to satisfy the Company's Stock Ownership
Guidelines in full within the three year period starting on the Effective Date
in accordance with the terms of such guidelines. The stock awarded under
Paragraphs 5(b) and 5(c) shall be counted towards the satisfaction of such
guidelines together with his other Company stock holdings, direct or indirect,
which are of a kind taken into account for other executives under such
guidelines.
(d) Matching Grant Program. Executive shall have a one-time right to
elect to participate in the Company's Matching Grant Program pursuant to the
terms of such program. Such election shall be made in writing no later than 3
business days following the first date after the Effective Date that the
<PAGE> 8
Company makes a public announcement of its quarterly earnings and shall be
delivered to the Company's Vice President, Human Resources and, if Executive
makes such election by such deadline, the Company match in restricted stock
under the program will vest at the end of the Term if Executive remains employed
under this Agreement through the end of the Term. The program as currently in
effect requires the purchase of Hercules restricted stock units outright or
through salary and/or annual bonus deferral up to 65% of the present value of
four years salary in effect at the time of election. The Company will match any
purchase of Hercules restricted stock units with a grant of restricted stock
equal to two times the number of restricted stock units purchased. The Company
match of restricted stock normally is restricted for three years, but in the
case of Executive shall be restricted until the third anniversary of the
Effective Date and, in the event of voluntary resignation within that period for
any reason, including retirement, will be forfeited. The Company shall provide
such additional information to Executive regarding the program as he shall
reasonably request from the Company.
(f) Stock Options. Executive shall be granted a "performance
accelerated stock option" under the LTICP (i) as of the Effective Date, for
500,000 shares of common stock, (ii) as of September 30, 1999, for 250,000
shares of common stock, and (iii) as of June 30, 2000, for 250,000 shares of
common stock, each as adjusted by the Company to account for stock splits, stock
dividends and other changes in the Company's capital structure. Each such grant
shall be made only if Executive is employed by the Company on the date as of
which such grant is called for under this Agreement. Each such option shall be
granted at fair market value option price on the date of grant (as determined
under the LTICP) and shall be evidenced by an agreement in substantially the
same form as the form agreement for each grant which is attached to this
Agreement as Exhibit B-I through B-3. The Compensation Committee of the Board of
Directors may, at its discretion, grant additional stock options to Executive
during the Term.
<PAGE> 9
(g) Other Benefits.
(I) Supplemental Pension Benefit
(A) Formula. A benefit shall be payable to, or on behalf of,
Executive under this Paragraph 5(g)(l) upon his termination of employment for
any reason. The amount of such benefit shall (subject to the other provisions of
this Paragraph 5(g)(1)) be determined under the benefit formula in effect under
the BetzDearborn Inc. Employees Retirement Plan as in effect on the Effective
Date (the "BD Plan") without regard to (i) any reduction otherwise required
under the BD Plan as a result of the application of the Section 415 Limitation
(as defined in the BD Plan) and (ii) any reduction otherwise required under the
BD Plan by reason of the compensation exclusion called for under Section
401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code").
(B) Special Benefit Calculation Rules. Executive's benefit under
Paragraph 5(g)(l)(A) shall be calculated subject to the following special rules:
(i) Age. If Executive is less than 65 years old at the time
his employment terminates, he shall be treated as if he was 65 years old.
(ii) Compensation.
(1) Any Base Salary and MICP bonus actually
paid to Executive by the Company or any successor to the Company shall be taken
into account on the same basis that such compensation would have been taken into
account if paid by BetzDearborn Inc.
(2) If Executive's employment with the Company
terminates before the end of the Term, the Base Salary and MICP target bonus
which would have been payable to Executive through the remainder of the Term but
for such termination of employment shall be
<PAGE> 10
taken into account as if Executive's employment had continued for the remainder
of the Term on the same basis that such compensation would have been taken into
account if actually paid by BetzDearborn Inc. over the remainder of the Term. If
Executive's employment terminates before his actual Base Salary is set under
Paragraph 4(c), his Base Salary under Paragraph 4(c) shall be treated as equal
to $750,000 and his MICP target bonuses under Paragraph 5(a)(iv) shall be
treated as equal to $675,000.
(iii) Service. All service actually completed by Executive
with the Company or any successor to the Company shall be treated as service
completed with BetzDearborn Inc. and, further, Executive's actual number of
years of service shall be increased by three full years.
(C) Payment Form. Executive's benefit under this Paragraph
5(g)(l) shall be paid in accordance with the benefit payment form and timing and
joint annuitant and/or beneficiary designation rules set forth in Article V of
the BetzDearborn Inc. Pension Restoration Plan as in effect on the Effective
Date (the "BD Restoration Plan") based on the benefit payment form and timing
and joint annuitant and/or beneficiary designations made by Executive with
respect to the payment of his benefits under the BD Plan or, if the BD Plan is
merged into another plan (a "'Successor Plan"), with respect to the payment of
his benefit under such Successor Plan which is attributable to his benefit
accrued under the BD Plan.
(D) Offset. The benefit described in Paragraph 5(g)(1)(A) shall
be offset (i) by the benefit actually payable to, or on behalf of, Executive
under the BD Plan or any successor to such plan, the BD Restoration Plan or any
successor to such plan and any defined benefit plan (as defined in Section
414(j) of the Code) maintained by the Company or any successor to the Company or
(ii) by the actuarial equivalent of the benefit payable under any such plan
described in
<PAGE> 11
Paragraph 5(g)(l)(D)(i) if the benefit paid under such plan is paid
in a form or at a time or to a person or persons different from the form or time
or person or persons described in Paragraph 5(g)(C). Any actuarial equivalent
calculations required under this Paragraph 5(g)( l )(D) shall be made in
accordance with the actuarial equivalent factors, tables and interest rate and
other assumptions in the BD Plan.
(E) No Assignment. Neither Executive nor any other person shall have
any right whatsoever to transfer, alienate, or assign his or her right to the
benefit described in this Paragraph 5(g)(l) and attempt to do so shall be null
and void.
(F) General Creditor Status. Neither Executive nor any other person
shall have a claim to the benefit described in this Paragraph 5(g)(l) which is
superior to the right of a claim of a general and unsecured creditor of the
Company or any successor to the Company, and neither Executive nor any other
person shall have the right to look to any assets except the general assets of
the Company or any successor to the Company for the payment of such benefit.
(G) Rabbi Trust. The Company has established a trust under the Hercules
Incorporated Compensation Benefits Grantor Trust Agreement for Management
Employees (the "Rabbi Trust") to provide a mechanism through which the Company
can (subject to the terms of the Rabbi Trust and the conditions set forth in the
Rabbi Trust related to the funding of the Rabbi Trust) satisfy the Company's
obligation to pay certain benefits to the Company's executives, including
benefits under Hercules Incorporated Nonqualified Supplemental Retirement Plan,
and the Company as of the Effective Date shall add the Company's obligation to
pay the benefit described in this Paragraph 5(g)(l) to the list of the Company's
obligations furnished to the Trustee for the Rabbi Trust which shall (subject to
<PAGE> 12
the terms of the Rabbi Trust and the conditions set forth in the Rabbi Trust
related to the funding of the Rabbi Trust) be satisfied through the Rabbi Trust
or any successor to such Trust.
(2) Company Automobile. Executive shall have his choice while
employed by the Company of the use of (i) an automobile comparable to that
provided to the Company's other Co-Chief Executive Officer (which currently is a
Mercedes Benz S420) or (ii) an appropriate car (such as a Lincoln Town Car) and
driver only for business use. Executive shall maintain appropriate records of
his business and personal use of an automobile and shall make such records
available to the Company to account for such use in accordance with the income
tax laws
(3) Other Executive Benefits. The Company shall make available to
Executive the same plans, programs and benefits as the Company generally makes
available to the members of the Hercules Management Committee, as long as such
committee includes the Company's Chief Executive Officer or Co-Chief Executive
Officer or, if it does not, to the other most senior executives of the Company,
except to the extent like-kind plans, programs or benefits are otherwise
expressly called for elsewhere in this Paragraph 5.
(4) Chief Executive Officer Perks. Executive while employed by
the Company shall have his choice of appropriate executive officer perquisites,
such as social and dining club memberships, routine physical examinations,
financial counseling, a special entertainment allowance, and a home security
system; provided, the aggregate annual value of such perquisites shall not
exceed S17,600 a calendar year (which figure shall be pro-rated for any part of
a calendar year) or such other
<PAGE> 13
figure as provided to the Company's other Co-Chief Executive Officer for such
calendar year as determined by the Company for financial reporting purposes.
(5) Tax Protection. If the Company or the Company's accountants
determine that the payments and other benefits called for under this Agreement
or any other payments or benefits to or for the benefit of Executive either
pursuant to the Merger Agreement or from the Company after the Effective Date
will result in Executive being subject to an excise tax under Section 4999 of
the Code and/or if such an excise tax is assessed against Executive as a result
of such payments or other benefits, the Company shall make a Gross Up Payment
(as defined in this Paragraph 5(g)(5)) to or on behalf of Executive as and when
such determination(s) and assessment(s), as appropriate, are made, provided
Executive takes such action as the Company reasonably requests under the
circumstances to mitigate or challenge, or to mitigate and challenge, such tax
and the Company complies with its obligations under this Paragraph 5(g)(5). A
"Gross Up Payment" means a payment to or on behalf of Executive which shall be
sufficient to pay (i) any such excise tax in full, (ii) any federal, state and
local income tax and social security or other employment tax on the payment made
to pay Executive's excise tax as well as any additional excise tax on such
payment and (iii) any interest or penalties assessed by the Internal Revenue
Service on Executive if such interest or penalties are attributable to the
Company's failure to comply with its obligations under this Paragraph 5(g)(5) or
applicable law. Any determination under this Paragraph 5(g)(5) by the Company or
the Company's accountants shall be made in accordance with Section 280G of the
Code and any applicable related regulations (whether proposed, temporary or
final) and any related Internal Revenue Service rulings and any related case law
and, if the Company reasonably requests that
<PAGE> 14
Executive take action to mitigate or challenge, or to mitigate and challenge,
any such tax or assessment and Executive complies with such request, the Company
shall provide Executive with such information and such expert advice and
assistance from the Company's accountants, lawyers and other advisors as he may
reasonably request and shall pay for all expenses incurred in effecting such
compliance and any related fines, penalties, interest and other assessments.
6. TERMINATION. This Agreement, and Executive's employment by the
Company hereunder, may be terminated early as follows:
(a) By the Company.
(1) For Good Cause. If the Company terminates Executive's employment
for Good Cause (as defined in Paragraph 6(a)(3)) at any time during the Term of
this Agreement, the payment of Executive's Base Salary under Paragraph 4 will
stop and the accrual of additional benefits and rights under Paragraph 5 will
Stop as of the date his employment so terminates. Thereafter, Executive will be
eligible to receive only (i) any Base Salary which he had earned but which was
unpaid on the date his employment terminated, (ii) any benefits which are
payable as of such date or thereafter under the terms of the benefit plans,
programs and other agreements described in Paragraph 5 based exclusively on the
terms and conditions set forth in such plans, programs and other agreements
except to the extent such terms and conditions are expressly modified by the
terms of Paragraph 5 and (iii) any payments called for under Paragraph 5(g)(5).
(2) Without Good Cause.
(A) If the Company terminates Executive's employment without
Good Cause (as defined in Paragraph 6(a)(3)) at any time before the
first anniversary of the Effective Date, during the three consecutive
year period starting on the date of such termination, the Company will
in
<PAGE> 15
each year in such period pay Executive the sum of (i) the Base Salary
in effect under Paragraph 4 as of the date of such termination, less
applicable withholding, and (ii) the MICP target in effect under
Paragraph 5(a) as of the date of such termination, less applicable
withholding.
(B) If the Company terminates Executive's employment without
Good Cause (as defined in Paragraph 6(a)(3)) at any time on or after
the first anniversary of the Effective Date and before the second
anniversary of the Effective Date, during the two consecutive year
period starting on the date of such termination, the Company will in
each year in such period pay Executive the sum of (i) the Base Salary
in effect under Paragraph 4 as of the date of such termination, less
applicable withholding, and (ii) the MICP target in effect under
Paragraph 5(a) as of the date of such termination, less applicable
withholding.
(C) If the Company terminates Executive's employment without
Good Cause (as defined in Paragraph 6(a)(3)) at any time on or after
the second anniversary of the Effective Date and before the third
anniversary of the Effective Date, during the one year period starting
on the date of such termination, the Company will pay Executive the sum
of (i) the Base Salary in effect under Paragraph 4 as of the date of
such termination, less applicable withholding, and (ii) the MICP target
in effect under Paragraph 5(a) as of the date of such termination, less
applicable withholding.
(D) The Base Salary and MICP target payments under Paragraphs
6(a)(2)(A), 6(a)(2)(B) or 6(a)(2)(C) shall be made in accordance with
the Company's standard payroll practices and policies in effect from
time to time for salaried employees, but in no event less than monthly.
<PAGE> 16
(E) Other than any payments to Executive under Paragraphs
6(a)(2)(A), 6(a)(2)(B) or 6(a)(2)(C), following the termination of his
employment, Executive will be eligible to receive only (i) any benefits
Which are payable as of the date of such termination or thereafter
under the terms of the benefit plans, programs and other agreements
described in Paragraph 5 based exclusively on the terms and conditions
set forth in such plans, programs and other agreements except to the
extent such terms and conditions are expressly modified by the terms of
Paragraph 5 and (ii) any payments called for under Paragraph 5(g)(5).
(3) Good Cause. The term "Good Cause" for purposes of this Agreement
will mean:
(A) Executive commits any felony or any misdemeanor involving
moral turpitude, as determined by the Board of Directors in good
faith;
(B) Executive engages in a fraudulent or dishonest act that
damages or prejudices the Company or any affiliate of the Company or
engages in conduct or activities damaging to the property, business or
reputation of the Company or any affiliate of the Company, all as
determined by the Board of Directors in good faith;
(C) Any material act or omission by Executive involving gross
malfeasance or gross negligence in the performance of his duties and
responsibilities as set forth in this Agreement to the detriment of
the Company or an affiliate of the Company, as determined by the Board
of Directors in good faith, which has not been corrected by Executive
(as determined by the Board of Directors in good faith) within thirty
(30) days after written notice from the Board of Directors of any such
act or omission;
(D) A failure by Executive to comply in any material respect with
the terms of this Agreement or any written policies or directives of
the Company, which failure has a material and
<PAGE> 17
adverse effect on the business or reputation of the Company, all as
determined by the Board of Directors in good faith, which has not been
corrected by Executive (as determined by the Board of Directors in
good faith) within thirty (30) days after written notice from the
Board of Directors of such failure;
(E) Executive's habitual insobriety or substance abuse, as
determined by the Board of Directors in good faith;
(F) Any diversion by Executive of any business opportunity
from the Company (other than with the prior written consent of the
Board of Directors); or
(G) Any breach by Executive of Paragraphs 7, 8, 9, or 10 of
this Agreement, as determined by the Board of Directors in good faith.
(b) By Executive.
(1) For Good Reason. If Executive terminates his employment with the
Company at any time during the Term of this Agreement for Good Reason (as
defined in Paragraph 6(b)3)), Executive will be treated as if the Company had
terminated Executive's employment without Good Cause under Paragraph 6(a)(2) of
this Agreement.
(2) Without Good Reason. If Executive terminates his employment with
the Company at any time during the Term of this Agreement without Good Reason
(as defined in Paragraph 6(b)(3)), the Company will have the right to treat
Executive as if his employment had been terminated for Good Cause by the Company
under Paragraph 6(a)(1) of this Agreement.
(3) Good Reason. The term "Good Reason" for purposes of this Agreement
will mean Executive's resignation as an employee of the Company (A) within the
180-day period immediately following the appointment by the Board of Directors
of an individual (other than the individual who is his
<PAGE> 18
Co-Chief Executive Officer on the Effective Date) as his Co-Chief Executive
Officer or (B) after the Company Commits any of the following acts or failures
to act and fails to correct such act or failure to act within thirty (30) days
after written notice thereof by Executive to the Board of Directors:
(i) The Company changes Executive's title, position,
authority, or responsibilities in a manner that violates Paragraph 3;
(ii) The Company at any time reduces Executive's Base Salary
below the amount required at that time by Paragraph 4, other than upon
the termination of his employment;
(iii) The Company after the Effective Date transfers
Executive, without his express written consent, to a location that is
more than thirty (30) miles from (a) the city limits of Wilmington,
Delaware, or (b) the city limits of such other city in which Executive
maintains his principal place of business for the Company because he
has previously provided his written consent to the Company to transfer
to such other city; or
(iv) The Company otherwise fails to comply in any material
respect with the terms of this Agreement.
(c) Death or Disability. If Executive's employment terminates as a
result of (l) his death or (2) a Disability, the Company will have the right to
treat Executive as if his employment had been terminated for Good Cause by the
Company under Paragraph 6(a)(1) of this Agreement.
(d) Change in Control. Executive and the Company will execute the
change in control agreement that is attached to this Agreement as Exhibit C and,
if the Company in the future revises the form of such change in control
agreement for other members of the Hercules Management Committee, Executive
shall have the same opportunity as the other members of such Committee to
execute such revised agreement. If a "Change in Control" (as that term is
<PAGE> 19
defined in the change in control agreement in Exhibit C) occurs and the change
in control agreement in Exhibit C remains in effect for Executive, (i)
Executive's position and duties shall continue to be governed by Paragraph 3,
(ii) Executive's right to receive his Base Salary under Paragraph 4 and his
various rights and benefits under Paragraph 5 shall be determined exclusively
under the terms of such change in control agreement or under this Agreement, as
elected by the Executive in writing delivered to the Company's Vice President,
Human Resources, on or after such a change in control and (iii) any violation by
the Company or its successors in the change in control transaction of any
provision of this Agreement that continues to be applicable pursuant to this
Paragraph 6(d) shall be treated as a breach of such change in control agreement
by the Company and such successor.
7. CONFIDENTIALITY. Executive acknowledges that during the course of
his employment with the Company he has received or will receive and has had or
will have access to Confidential Information and Trade Secrets of the Company,
including but not limited to confidential and secret business and marketing
plans, strategies, and studies, detailed customer and/or client lists and
information relating to the operations and business requirements of those
customers and/or clients, and accordingly, he is willing to enter into the
covenants contained in this Agreement in order to provide the Company with what
he considers to be reasonable protection for its interests.
(a) Trade Secrets. Executive agrees and covenants that, both during
the term of this Agreement and after the termination of this Agreement,
Executive will hold in a fiduciary capacity for the benefit of the Company, and
will not directly or indirectly use or disclose, except as authorized by the
Company in connection with the performance of Executive's duties, any Trade
secret, as defined
<PAGE> 20
hereinafter, that Executive may have or acquire during the term of this
Agreement for so long as the such information remains a Trade Secret.
(1) The term "Trade Secret" as used in this
Agreement will mean information including, but not limited to,
technical or non-technical data, a formula, pattern,
compilation, program, device, method, technique, drawing,
product, system or process, design, prototype, procedure, code
or financial data, or a list of actual or potential customers
or suppliers, including without limitation, information
received by the Company or Executive from any client or
potential client of the Company, that:
(A) derives economic value, actual or
potential, from not being generally known to, and not
being readily ascertainable by proper means by the
public or any other person who can obtain economic
value from its disclosure or use; and
(B) is the subject of reasonable efforts by
the Company or the client from which the information
was received to maintain its secrecy or
confidentiality.
These rights of the Company are in addition to those rights the Company has
under the common law or applicable statute for protection of trade secrets.
(b) Confidential Information. In addition to the foregoing and
not in limitation thereof, Executive agrees that, during the Term of
this Agreement and for a term of three (3) years after termination of
his employment, Executive will hold in a fiduciary capacity for the
benefit of the Company and will not directly or indirectly use or
disclose, except
<PAGE> 21
as authorized by the Company in connection with the performance of
Executive's duties, any confidential or proprietary information; as defined
hereinafter, that Executive may have or acquire (whether or not developed
or compiled by Executive and whether or not Executive has been authorized
to have access to such confidential or proprietary information) during the
term of this Agreement. The term "Confidential Information" as used in this
Agreement means any secret, confidential or proprietary information of the
Company, including information received by the Company or Executive from
any customer or client or potential customer or client of the Company, not
otherwise included in the definition of "Trade Secret" in Paragraph
7(a)(l). The term "Confidential Information" does not include information
that has become generally available to the public other than by Executive
in violation of this Agreement or his violating any right of the customer
or client to which such information pertains.
8. NON-COMPETITION. The Company and Executive agree that the Company's
customer and/or client contacts and relations are established and maintained at
great expense and that Executive will, by virtue of his employment with the
Company, have unique and extensive exposure to and personal contact with the
Company's customers and/or clients and that he will be able to establish a
unique relationship with those customers and/or clients. Moreover, the Company
and Executive agree that during the course of his employment with the Company he
has received or will receive and has had or will have access to Confidential
Information and Trade Secrets of the Company, which Executive agrees would be
inevitably used or disclosed if Executive leaves the Company for employment with
a competitor of the Company. Accordingly, in order to protect the Company from
unfair competition, Executive covenants and agrees that he
<PAGE> 22
will not, while employed by the Company (including employment continuing beyond
the expiration of the Term) and continuing thereafter for the longer of (a) any
period during which Executive receives any payments under Paragraph 6(a)(2) of
this Agreement or (b) one year from the date of termination of Executive's
employment, collectively the "Non-competition Period," directly or indirectly,
(whether as owner, partner, stockholder, investor, officer, director, agent,
independent contractor, associate, employee, consultant or licensor (other than
of the Company) carry on, or be engaged, concerned or take part in the executive
management of any corporation, partnership, venture or other business entity
which competes with the Company in the manufacture and sale of (a) chemical
additives for the pulp and paper industry, b) rosin, hydrocarbon or terpene
resins, (c) water soluble polymers, (d) food gums, (e) polypropylene fibers for
the nonwoven or fabricated textile industry, or (f) water treatment chemicals
("Company Business") anywhere in the United States, Europe, Latin America, South
America, or Asia ("Territory"), which is the geographic area in which the
Company engages in this business and, as such, where Executive will be
performing his responsibilities under this Agreement. Executive further
covenants that during the Non-competition Period he will not own or share in the
earnings of or invest in the capital stock of any corporation, partnership,
venture or other business entity which competes with the Company in the
Territory in the Company Business ("Competitor"). Provided, however, that
Executive may passively invest in stocks, bonds or other securities of any
Competitor if:
(a) such stock, bonds or other securities are listed on a national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, and
(b) Executive's investment in any class of securities does not exceed
5% of the aggregate amount of such class outstanding, as the case may be.
<PAGE> 23
9. NON-SOLICITATION OF EMPLOYEES. Executive agrees and covenants that
during the Non-competition Period he will not, for any reason, either
individually, or as an owner, partner, employee, agent, consultant, advisor,
contractor, salesman, stockholder, investor, officer, director, or other member
of any corporation, partnership, venture or other business entity, solicit any
employee of the Company with whom Executive had material Contact during
Executive's employment with the Company to leave his or her employment with the
Company.
10. NON-SOLICITATION OF CUSTOMERS AND/OR CLIENTS. Executive agrees and
covenants that during the Non-competition Period he will not, for any reason,
either individually, or as an owner, partner, employee, agent, consultant,
advisor, contractor, salesman, stockholder, investor, officer, director, or
other member of any corporation, partnership, venture, or other business entity,
solicit any customer and/or client, or any actively sought prospective customer
and/or client, of the Company with whom Executive had material business contact
during Executive's employment with the Company for the purpose of competing with
the Company in the Company Business.
11. REASONABLENESS. Executive acknowledges and agrees that the
restrictions, prohibitions and covenants in Paragraphs 7, 8, 9 and 10 are
reasonable, fair and equitable in scope, terms and duration, are necessary to
protect the legitimate business interests of the Company.
12. REFORMATION. If any of the covenants in Paragraphs 7, 8, 9 and 10
of this Agreement are determined by any court of law or equity, with
jurisdiction over this matter, to be unreasonable or unenforceable, in whole or
in part, as written, Executive hereby consents to and affirmatively requests
that said court reform the covenant or promise so as to be reasonable and
enforceable and that said court enforce the covenant or promise as reformed.
<PAGE> 24
13. LEGAL AND EQUITABLE REMEDIES. Executive agrees that for any breach
or threatened breach of any of Paragraphs 7 through 10 of this Agreement, a
restraining order and/or an injunction may issue against Executive or the
Company to prevent or restrain any such breach, in addition to any other rights
the Company may have.
14. RIGHTS TO MATERIALS. All records, files, memoranda, reports, price
lists, customer lists, drawings, plans, sketches, documents, and the like
(together with all copies thereof) relating to the Company Business, which
Executive shall use or prepare or come in contact with in the course of, or as a
result of, his employment shall, as between the parties hereto, remain the sole
property of the Company. Upon the termination of his employment or upon the
prior demand of the Company, he shall immediately return all such materials and
thereafter shall not remove or cause to be removed such materials from the
premises of the Company.
15. MISCELLANEOUS.
(a) Assignment. This Agreement is for the personal services of
Executive, and the rights and obligations of Executive under this
Agreement are not assignable or delegable in whole or in part by
Executive without the prior written consent of the Company. This
Agreement is assignable in whole or in part to any parent,
subsidiaries, or affiliates of the Company, but only if (i) such person
or entity is financially capable of fulfilling the obligations of the
Company and (ii) all the other members of the Hercules Management
Committee are also assigned to work for such person or entity.
b) Governing Law. This Agreement will be governed by and
construed under the laws of the State of Delaware (without reference to
the choice of law principles thereof). Executive consents to
jurisdiction and venue in the state and federal courts of the State of
<PAGE> 25
Delaware for any action arising from a dispute under this Agreement,
and for any such action brought in such a court, expressly waives any
defense he might otherwise have based on lack of personal jurisdiction
or improper venue, or that the action has been brought in an
inconvenient forum.
(c) Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
(d) Headings, References. The headings and captions used in
this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All references
in this Agreement to Paragraphs will, unless otherwise provided, refer
to Paragraphs hereof.
(e) Attorneys Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, each
party will bear his or its own attorneys' fees.
(f) Amendments and Waivers. Except as otherwise specified
herein, this Agreement may be amended, and the observance of any term
of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the
written consent of the Company and Executive.
(g) Severability. Any provision of this Agreement held to be
unenforceable under applicable law will be enforced to the maximum
extent possible, and the balance of this Agreement will remain in full
force and effect.
<PAGE> 26
(h) No Third-Party Beneficiaries. Nothing herein, expressed or
implied, is intended or will be construed to confer upon or give to any
person, firm, corporation or legal entity, other than the parties
hereto and the parent of the Company and its subsidiaries or affiliates
any rights, remedies or other benefits under or by reason of this
Agreement.
(i) Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the
transactions contemplated herein, and supersedes all prior
understandings and agreements between the parties hereto with respect
to such transactions.
(j) Notices. Any notice required hereunder to be given by
either party will be in writing and will be deemed effectively given
upon personal delivery to the party to be notified or five (5) days
after deposit with the United States Post office by registered or
certified mail, postage prepaid, to the other party at the address set
forth below or to such other address as either party may from time to
time designate by ten (10) days advance written notice pursuant to this
Paragraph 15(j) All such written communication will be directed as
follows:
If to the Company;
Hercules Incorporated
c/o Vice President, Human Resources
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
If to Executive:
William R. Cook
937 Macclesfield Road
Furlong, PA 18925
<PAGE> 27
(k) Binding Effect This Agreement shall be for the benefit of,
and shall be binding upon, the Company and Executive and their
respective heirs, personal representatives, legal representatives,
successors and assigns, subject, however, to the provisions in
Paragraph 15(a).
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
HERCULES INCORPORATED
BY: /S/ R. KEITH ELLIOTT
--------------------
R. KEITH ELLIOTT
CHIEF EXECUTIVE OFFICER
EXECUTIVE
/S/ WILLIAM R. COOK
---------------------
WILLIAM R. COOK
<PAGE> 1
EXHIBIT 23-A. CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Hercules Incorporated on Form S-8 [Registration No. 33-37279 (which includes
Registration No. 33-21668), No. 33-14912, No. 33-15052, No. 33-21667, No.
33-47664, No. 33-51178, No. 33-52621, No. 33-66136, No. 33-62314, No. 33-65352,
No. 333-38795, and No. 333-38797] and on Form S-3 (Registration No.333-63423) of
our report, which includes an explanatory paragraph regarding a change, in 1997,
in the company's method of accounting for costs incurred in connection with an
enterprise software installation, dated February 19, 1999, on our audits of the
consolidated financial statements and financial statement schedule of Hercules
Incorporated and subsidiary companies as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998, which report is
included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HERCULES
INCORPORATED'S CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 68,000
<SECURITIES> 0
<RECEIVABLES> 676,000
<ALLOWANCES> 13,000
<INVENTORY> 416,000
<CURRENT-ASSETS> 1,240,000
<PP&E> 3,037,000
<DEPRECIATION> 1,599,000
<TOTAL-ASSETS> 5,833,000
<CURRENT-LIABILITIES> 1,317,000
<BONDS> 0
0
0
<COMMON> 81,000
<OTHER-SE> 478,000
<TOTAL-LIABILITY-AND-EQUITY> 5,833,000
<SALES> 2,145,000
<TOTAL-REVENUES> 2,145,000
<CGS> 1,287,000
<TOTAL-COSTS> 1,953,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,000
<INCOME-PRETAX> 77,000
<INCOME-TAX> 68,000
<INCOME-CONTINUING> 9,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,000
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
