<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
LAROCHE INDUSTRIES INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 5169 13-3341472
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
</TABLE>
1100 JOHNSON FERRY ROAD, N.E.
ATLANTA, GEORGIA 30342
(404) 851-0300
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
---------------------
HAROLD W. INGALLS
1100 JOHNSON FERRY ROAD
ATLANTA, GEORGIA 30342
(404) 851-0300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
B. LYNN WALSH, ESQ.
DANIEL O. KENNEDY, ESQ.
HUNTON & WILLIAMS
NATIONSBANK PLAZA
SUITE 4100
600 PEACHTREE ST., N.E.
ATLANTA, GA 30308-2216
(404) 888-4000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM
OF SECURITIES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/2% Senior Subordinated Notes
due 2007, Series B............... $175,000,000 99.552% $174,216,000 $52,792.72
=====================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date under Section 8 of the
Securities Act of 1933. The Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
================================================================================
<PAGE> 2
CROSS REFERENCE TABLE
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR PROSPECTUS CAPTION
-------------------------------- ------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Page of
Prospectus....................................... Inside Front Cover Page; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................ Prospectus Summary; Risk Factors; Selected
Historical Consolidated Financial
Information
4. Terms of Transaction............................... Prospectus Summary; The Exchange Offer;
Certain Federal Income Tax Consequences;
Description of the Exchange Notes
5. Pro Forma Financial Information.................... Not Applicable
6. Material Contracts with the Company Being
Acquired......................................... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters.... Not Applicable
8. Interests of Named Experts and Counsel............. Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Management
10. Information with Respect to S-3 Registrants........ Not Applicable
11. Incorporation of Certain Information by
Reference........................................ Not Applicable
12. Information with Respect to S-2 or S-3
Registrants...................................... Not Applicable
13. Incorporation of Certain Information by
Reference........................................ Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants........................... Business; Management; Financial Statements;
Selected Historical Consolidated Financial
Information; Management's Discussion and
Analysis of Financial Condition and Results
of Operation
15. Information with Respect to S-3 Companies.......... Not Applicable
16. Information with Respect to S-2 or S-3 Companies... Not Applicable
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies............................. Not Applicable
18. Information if Proxies, Consents or Authorizations
are to be Solicited.............................. Not Applicable
19. Information if Proxies, Consents or Authorizations
are not to be Solicited in an Exchange Offer..... Prospectus Summary; Management; Security
Ownership of Certain Beneficial Owners and
Management; Certain Relationships and
Related Transactions
</TABLE>
i
<PAGE> 3
PROSPECTUS
DECEMBER , 1997
LAROCHE INDUSTRIES INC.
OFFER TO EXCHANGE 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING
9 1/2% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
DECEMBER , 1997, UNLESS EXTENDED.
LaRoche Industries Inc., a Delaware corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 9 1/2%
Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"), registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which this prospectus is a part, for each $1,000
principal amount of its outstanding 9 1/2% Senior Subordinated Notes due 2007
(the "Old Notes"), of which $175 million principal amount is outstanding. The
form and terms of the Exchange Notes are the same as the form and terms of the
Old Notes except that (i) the Exchange Notes will bear a Series B designation,
(ii) the Exchange Notes will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof and (iii)
holders of the Exchange Notes will not be entitled to certain rights of holders
of Old Notes under the Registration Rights Agreement (as defined herein). The
Old Notes and the Exchange Notes are referred to herein collectively as the
"Notes." The Exchange Notes will evidence the same debt as the Old Notes (which
they replace) and will be issued under and be entitled to the benefits of the
Indenture dated as of September 23, 1997 (the "Indenture") by and between the
Company and State Street Bank and Trust Company (the "Trustee"), as trustee,
governing the Notes. See "The Exchange Offer" and "Description of the Exchange
Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on December , 1997,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
The Old Notes were sold by the Company on September 23, 1997 to Chase
Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchasers") in a transaction not registered under the Securities Act
in reliance upon an exemption under the Securities Act (the "Initial Offering").
The Initial Purchasers subsequently placed the Old Notes with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act ("Rule
144A"). Accordingly, the Old Notes may not be reoffered, resold or otherwise
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Exchange and
Registration Rights Agreement between the Company and the Initial Purchasers in
connection with the Initial Offering (the "Registration Rights Agreement"). See
"The Exchange Offer."
Interest on the Notes will accrue from their date of original issuance and
will be payable semi-annually in arrears on March 15 and September 15 of each
year, commencing March 15, 1998, at the rate of 9 1/2% per annum. The Notes will
be redeemable, in whole or in part, at the option of the Company on or after
September 15, 2002, at the redemption prices set forth herein plus accrued and
unpaid interest to the date of redemption. In addition, at any time and from
time to time prior to September 15, 2000, the Company may, at its option, redeem
up to 33 1/3% of the initial aggregate principal amount of Notes with the net
proceeds of one or more Public Equity Offerings (as defined herein) by the
Company, at a redemption price equal to 109.5% of the principal amount thereof
plus accrued and unpaid interest to the date of redemption; provided, however,
that after giving effect to any such redemption, at least 66 2/3% of the
aggregate principal amount of the Notes originally issued remains outstanding.
Upon a Change in Control (as defined herein), the Company will be required to
make an offer to repurchase the Notes at a price equal to 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase. In
addition, the Company will be obligated to offer to repurchase the Notes at 100%
of the principal amount thereof plus accrued and unpaid interest to the date of
repurchase in the event of certain Asset Sales (as defined herein). See
"Description of the Exchange Notes."
The Notes will be general unsecured senior subordinated obligations of the
Company and will be subordinated in right of payment to all existing and future
Senior Indebtedness (as defined herein) of the Company. The Notes will rank pari
passu in right of payment with any future Senior Subordinated Indebtedness (as
defined herein) of the Company and will rank senior in right of payment to all
Subordinated Indebtedness (as defined herein) of the Company. As of August 31,
1997, after giving pro forma effect to the Refinancing, including the issuance
of the Old Notes and the application of the net proceeds therefrom, the
aggregate principal amount of the Company's outstanding Senior Indebtedness
would have been approximately $5.3 million (excluding unused commitments) and
the Company would have had no Senior Subordinated Indebtedness outstanding other
than the Notes and approximately $900,000 of outstanding 13% Notes (as defined
herein). See "Description of the Exchange Notes -- Ranking."
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DESCRIPTION OF CERTAIN RISKS
TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 4
Based upon interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer -- Resale of the Exchange
Notes." Holders of Old Notes wishing to accept the Exchange Offer must represent
to the Company, as required by the Registration Rights Agreement, that such
conditions have been met. Each broker-dealer (a "Participating Broker-Dealer")
that receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within" the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented form time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 195 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer. Holders of Old Notes not
tendered and accepted in the Exchange Offer will continue to hold such Old Notes
and will be entitled to all the rights and benefits and will be subject to the
limitations applicable thereto under the Indenture and with respect to transfer
under the Securities Act. See "The Exchange Offer."
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Absence of a Public Market
Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SUBSIDIARY GUARANTORS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM", THE COMPANY EXPECTS
THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTE (AS DEFINED HEREIN), WHICH WILL BE DEPOSITED WITH,
OR ON BEHALF OF, THE DEPOSITORY TRUST COM-
2
<PAGE> 5
PANY ("DTC") AND REGISTERED IN ITS NAME OR IN THE NAME OF CEDE & CO., ITS
NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE REPRESENTING THE EXCHANGE NOTES
WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED THROUGH, RECORDS
MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE INITIAL ISSUANCE OF THE GLOBAL
NOTE, NOTES IN CERTIFICATED FORM WILL BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTE
ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN THE INDENTURE. SEE "BOOK-ENTRY;
DELIVERY AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE
CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR
SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. THE COMPANY DOES
NOT MAKE ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES
REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE
LEGAL INVESTMENT OR SIMILAR LAWS.
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WAS OBTAINED THROUGH COMPANY
RESEARCH, SURVEYS OR STUDIES PURCHASED BY THE COMPANY AND CONDUCTED BY THIRD
PARTIES AND FROM INDUSTRY OR GENERAL PUBLICATIONS. THE COMPANY HAS NOT
INDEPENDENTLY VERIFIED MARKET DATA PROVIDED BY THIRD PARTIES OR INDUSTRY OR
GENERAL PUBLICATIONS. SIMILARLY, INTERNAL COMPANY SURVEYS, WHILE BELIEVED BY THE
COMPANY TO BE RELIABLE, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS AS DESCRIBED IN
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING STATEMENTS UNDER THE CAPTIONS "SUMMARY," "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL
OF THESE FORWARD LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE
BY MANAGEMENT OF THE COMPANY WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE
INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH
ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES
OR STATEMENTS WILL BE REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS
THAT MAY CAUSE SUCH DIFFERENCES INCLUDE: (1) INCREASED COMPETITION; (2)
INCREASED COSTS; (3) LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (4)
INCREASES IN THE COMPANY'S COST OF BORROWINGS OR INABILITY OR UNAVAILABILITY OF
ADDITIONAL DEBT OR EQUITY CAPITAL; (5) SIGNIFICANT INDEBTEDNESS OF THE COMPANY
FOLLOWING THE REFINANCING; (6) ADVERSE STATE OR FEDERAL LEGISLATION OR
REGULATION OR ADVERSE DETERMINATIONS BY REGULATORS; (7) CHANGES IN GENERAL
ECONOMIC CONDITIONS IN THE MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME,
COMPETE; (8) THE SUCCESSFUL INTEGRATION OF THE BUSINESS AND OPERATIONS OF THE
JOINT VENTURE COMPANY AND THE CHLOR-ALKALI JOINT VENTURE TRANSACTIONS INTO THE
COMPANY'S OPERATIONS AND (9) OTHER FACTORS REFERENCED IN THIS PROSPECTUS. MANY
OF SUCH FACTORS WILL BE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT.
FOR FURTHER INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL
RESULTS OF THE COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK FACTORS."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Commission. The Company
has filed with the Commission a Registration Statement on Form S-4 (the
"Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes
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<PAGE> 6
and schedules thereto) pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the Exchange Notes being offered hereby. This Prospectus does not
contain all the information set forth in the Exchange Offer Registration
Statement. For further information with respect to the Company and the Exchange
Offer, reference is made to the Exchange Offer Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. The Exchange Offer
Registration Statement, including the exhibits thereto, and periodic reports and
other information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such site is
http://www.sec.com.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission all
quarterly and annual financial information that would be required to be filed
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or
any successor provision thereto. In addition, for so long as any of the Notes
remain outstanding and prior to the occurrence of certain events, the Company
has agreed to make available to any record holder, in connection with any sale
thereof, the information required by Rule 144A(d)(4) under the Securities Act.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST FROM PHILIP P. GURA, ESQ., EXECUTIVE DIRECTOR OF LEGAL AFFAIRS, LAROCHE
INDUSTRIES INC., 1100 JOHNSON FERRY ROAD, ATLANTA, GEORGIA 30342. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1997 (FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended May 31, 1997 and August 31, 1997.
3. The Company's Current Report on Form 8-K dated November 3, 1997.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus
and prior to the Expiration Date shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of the filing of such reports and
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of his Prospectus to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated or
deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
4
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements, and
the related notes thereto, included elsewhere in this Prospectus. As used in
this Prospectus, unless the context otherwise requires, the term "Company"
includes LaRoche Industries Inc. and all of its subsidiaries and their
respective predecessors and subsidiaries. Certain terms used herein are defined
in "Business Glossary."
THE COMPANY
LaRoche Industries Inc. is a major domestic diversified producer and
distributor of inorganic chemicals. The Company's products are divided into
three business segments: Nitrogen Products, Electrochemical Products and Alumna
Chemicals. The Company produces and distributes various Nitrogen Products,
including nitrogen-based fertilizers essential for crop growth and
nitrogen-based blasting agents for industrial explosives. In Electrochemical
Products, the Company is a merchant producer and marketer of chlor-alkali
chemicals, which are fundamental building blocks for products used in the
construction, pulp and paper, water treatment, detergent, pesticide and
pharmaceutical industries. The Company also produces Alumina Chemicals, which
are used in a variety of catalyst and adsorbent applications, including
environmental protection and abatement processes.
The Company was formed in a 1986 management buyout of the nitrogen, mixed
fertilizers and retail business operations of United States Steel Corporation
("USX") followed by a 1988 acquisition of certain chemical production operations
of Kaiser Aluminum & Chemical Corporation ("Kaiser"). The Company has assembled
and is continuing to develop a platform of three core businesses upon which it
believes it can realize long term growth and improved profitability. The Company
intends to achieve these objectives primarily through capital expenditures to
improve and expand existing facilities, new product development and strategic
acquisitions of attractively priced assets in the Company's core business
segments. Management believes the Company benefits from the sale of diversified
products with relatively independent business cycles and distinct markets. For
the fiscal year ended February 28, 1997, the Company had consolidated net sales
of $379.3 million and EBITDA (as defined herein) of $39.1 million.
NITROGEN PRODUCTS
The Company's Nitrogen Products consist of three product lines: (i)
ammonium nitrate and nitrogen solution fertilizers; (ii) blasting-grade ammonium
nitrate; and (iii) industrial anhydrous and aqua ammonia. The Company's two
primary nitrogen-based fertilizers are high density ammonium nitrate ("HDAN")
and urea-ammonium nitrate solution ("UAN solution"). The Company has total HDAN
production capacity of 280,000 tons per annum ("p.a.") at its Cherokee, Alabama
and Crystal City, Missouri facilities and UAN solution capacity of 250,000 tons
p.a. at its Cherokee facility. The Company believes it is the second largest
North American supplier of HDAN with approximately 11% of industry capacity. The
Company also manufactures blasting-grade low density ammonium nitrate ("LDAN")
and 83% ammonium nitrate solution ("83% Solution") used by the coal mining,
metal mining and quarry industries. The Company has total LDAN capacity of
440,000 tons p.a. at its Crystal City, Seneca, Illinois and Geneva, Utah
facilities. The Company believes it is the fourth largest North American
supplier of LDAN to the blasting products market, representing approximately 16%
of industry capacity. The Company also believes it is the largest merchant
distributor in the United States of premium grade anhydrous and aqua ammonia
used for water treatment and for the manufacture of other chemical products. For
fiscal year 1997, Nitrogen Products accounted for $242.4 million of net sales
(63.9% of Company total) and $26.4 million of EBITDA before unallocated
corporate expenses (59.0% of Company total).
The Company believes it has achieved its leading market positions through
the development of an extensive system of production and distribution facilities
which are located close to their target markets, often in areas where
competitors do not have local operations. Accordingly, due to the high costs
associated with the transportation of certain nitrogen products, the Company
believes it has located its facilities where it enjoys a
5
<PAGE> 8
freight advantage over many other competitors. The Company has also maintained
competitiveness through back-integration into ammonia, efficient management of
natural gas feedstock costs and capacity expansions.
ELECTROCHEMICAL PRODUCTS
The Company's Electrochemical Products consist primarily of chlorine and
caustic soda (collectively referred to as "chlor-alkali") that are produced as
co-products at its Gramercy, Louisiana facility. This facility has chlorine
production capacity of 200,000 tons p.a. and caustic soda production capacity of
224,000 tons p.a. Chlorine is sold for a variety of uses, including the
manufacture of polyvinyl chloride ("PVC"), household and industrial bleach and
titanium dioxide, water treatment and various other end-uses. Caustic soda is
sold to manufacturers of aluminum, organic and inorganic chemicals, detergents
and petrochemicals, pulp and paper processors and water treatment facilities.
For fiscal year 1997, Electrochemical Products accounted for $96.7 million of
net sales (25.5% of Company total) and $14.3 million of EBITDA before
unallocated corporate expenses (31.8% of Company total).
The Company primarily competes in the Gulf Coast chlor-alkali market.
Industry consultants estimate that approximately 70% of Gulf Coast chlorine
capacity is used by integrated producers for captive consumption in the
production of downstream products. As a result, despite accounting for only
approximately 2.0% of overall Gulf Coast chlorine capacity, the Company's
production capacity represents an approximate 7.5% share of the 2.7 million ton
p.a. Gulf Coast merchant chlorine market. The Company has achieved this position
by focusing on chlorine sales to downstream producers of PVC, rigid urethane
foam and titanium dioxide that prefer not to deal with chlorine suppliers that
also produce competing downstream products. The Company believes it has
developed strong customer relationships by capitalizing upon its secure brine
supply, low-cost on-site electric power and close customer proximity to
consistently deliver a competitively priced product. Over 50% of the Company's
chlorine and caustic soda sales are currently made to customers located within a
100-mile radius of the Gramercy facility.
The Company also operates a fluorocarbon business at its Gramercy facility.
Due to the federal government's mandated phaseout of chlorofluorocarbon ("CFC")
production by the end of 1995, the Company has replaced, over the last three
fiscal years, its CFC foam blowing agent product line with the next generation
hydrochlorofluorocarbon ("HCFC") foam blowing agent, HCFC-141b. The Company has
reduced its reliance on its CFC business, and on fluorocarbon products in
general, with new products and more intensive development of markets and
facilities for its existing product segments.
ALUMINA CHEMICALS
The Company's Alumina Chemicals business, located at its Baton Rouge,
Louisiana facility, includes specialty activated aluminas and Versal(R) gel
aluminas. These specialty products are used as desiccants, adsorbents, catalysts
and catalyst support systems. The Company believes it is the world's second
largest producer of activated aluminas, with an estimated annual production
capacity of 50 million pounds, and the world's second largest merchant producer
of gel aluminas, with an estimated annual production capacity of 20 million
pounds. The Company is also an equity investor in two joint ventures related to
its specialty aluminas business. For fiscal year 1997, Alumina Chemicals
accounted for $40.1 million of net sales (10.6% of Company total) and $4.1
million of EBITDA before unallocated corporate expenses (9.2% of Company total).
In specialty aluminas, product performance provides the basis for
competitive advantage and premium pricing. The Company believes it has developed
technically-advanced high-performance custom products in cooperation with its
customers, especially in its Versal(R) product line. The Company believes that
these activities have enabled it to develop strong customer relationships which
are expected to form the basis for continued product improvement and
development.
6
<PAGE> 9
BUSINESS STRATEGY
The Company's goals are to achieve long-term growth and improved
profitability while maintaining stringent criteria for safety, reliability,
advanced technology and product quality. The Company's strategies include:
Continue to Improve Existing Operations. Management believes that it
can lower its cost of production and achieve greater manufacturing
reliability through several identified capital expenditure projects. In
Nitrogen Products, the Company is evaluating the expansion of ammonia
production capacity at the Cherokee plant, which will provide further
vertical integration of its raw material supply. In Electrochemical
Products, in addition to the construction of improved electrical systems
currently underway, additional caustic soda evaporation capacity and
improved brine saturation capabilities projects are under consideration for
the Gramercy facility. In Alumina Chemicals, debottlenecking, capacity
expansions and cost reduction programs are being studied for the Baton
Rouge facility. The estimated total cost of these and other identified
capital expenditure projects under consideration is approximately $100.0
million over the next three to four years. Assuming that all of such
projects are approved and implemented, the Company believes that these
projects could, in the aggregate, contribute approximately $27.0 million to
annual EBITDA. The Company's estimate of the potential contribution to
EBITDA from these projects is based on various assumptions as to costs of
raw materials, demand and prices for the Company's products and other
matters, many of which are beyond the Company's control. There can be no
assurances that any or all of the capital expenditure projects under
consideration will be implemented or that the Company will achieve any or
all of the anticipated operating efficiencies, increase in EBITDA, or other
benefits from such expenditures.
Focus On Product Quality and Customer Service. The Company is seeking
to further improve the quality and performance of its products and the
ability of the Company to consistently satisfy customer requirements
through steps that include implementation of its internal quality
initiative and completion of ISO-9000 certification. These steps, coupled
with programs designed to improve product distribution, develop products
cooperatively with the Company's customers and increase manufacturing
flexibility, are intended to satisfy changing customer product demands and
delivery requirements.
Enhance Core Businesses through Strategic Acquisitions. The Company
continually evaluates acquisition opportunities that would complement and
expand its core businesses while increasing its market position and
distribution strengths. The Company believes it is well-positioned to
acquire low-cost commodity chemical assets in its core businesses from
other large chemical companies, many of which have made strategic decisions
to exit the commodity chemicals business and focus on downstream business
lines that often will continue to require commodity chemical feedstocks.
Management believes such assets often have been underutilized and offer
significant potential for value enhancement when operated, maintained and
developed by a focused commodity chemical producer, such as the Company.
Improve Stability of Cash Flow. Management believes that the diverse
array of the products offered, and distinct markets served by, the Company
mitigate the impact of the cyclicality of any one product or market on the
overall performance of the Company. In an effort to further increase its
cash flow stability, the Company is engaging in: (i) active commodity
hedging activities and vertical integration to help mitigate raw materials
price risk; (ii) product development to expand value-added, less cyclical
businesses such as Alumina Chemicals; and (iii) strategic acquisitions and
business development to acquire or expand businesses which either are less
cyclical, balance the seasonality of the Company's Nitrogen Products
segment, or provide access to new geographic markets.
CHLOR-ALKALI JOINT VENTURE
In October 1997, the Company purchased a 50% interest in the French
chlor-alkali business of Rhone-Poulenc Chimie, S.A. ("RPC"), a subsidiary of
Rhone-Poulenc, S.A. ("Rhone-Poulenc"), and entered into certain related
arrangements with RPC (collectively, the "Chlor-alkali Joint Venture"). The
Company, through its newly formed, wholly owned subsidiary, LII Europe S.A.R.L.
("LII Europe"), purchased a 50%
7
<PAGE> 10
stock interest (the "Initial Purchase") in ChlorAlp S.A.S., a subsidiary of RPC
(the "Joint Venture Company"). The Initial Purchase price represented 42.5% of
the agreed value of the Joint Venture Company, which is approximately 447
million French francs ("FRF") ($76.3 million), resulting in an initial
investment by the Company of FRF 190 million ($32.4 million) excluding
acquisition costs. The Company funded the Initial Purchase by drawing under the
Term Loan (as defined herein).
Prior to the closing date of the Initial Purchase (the "Closing Date"), RPC
contributed to the Joint Venture Company a 265,000 ton p.a. chlor-alkali
production facility located in Pont-de-Claix, France (the "PCL Facility"), as
well as certain other related assets and liabilities. The Company believes that
the Chlor-alkali Joint Venture will: (i) increase its international market share
in chlorine and caustic soda; (ii) provide a significant entry point to the
European chemical markets at an attractive initial investment cost; and (iii)
produce operating efficiencies which may be derived from the operating
similarities between the PCL Facility and the Company's Gramercy facility. In
connection with the Chlor-alkali Joint Venture, the Joint Venture Company
entered into market-priced long term contracts to sell to Rhone-Poulenc (or its
affiliates) chlorine and caustic soda, the amounts of which historically have
been approximately 65% of the PCL Facility's production output. Based on audited
financial information provided by Rhone-Poulenc, in 1996, the PCL Facility
generated net sales of approximately FRF 547.6 million, and based on unaudited
financial information, it generated EBITDA of approximately FRF 100.0 million in
1996.
Certain related agreements entered into in connection with Chlor-alkali
Joint Venture provide each of the Company and RPC with the option to sell to the
other its respective interest in the Joint Venture Company under certain
circumstances. See "Business -- Chlor-alkali Joint Venture" and "Risk
Factors -- Risks Relating to Chlor-alkali Joint Venture."
THE REFINANCING
In September 1997, the Company refinanced its outstanding indebtedness
under its then-outstanding $100 million aggregate principal amount of 13% Senior
Subordinated Notes due 2004 (the "13% Notes") by consummating the Initial
Offering and the Tender Offer and the related Consent Solicitation (each as
defined herein) pertaining to the 13% Notes, and using the net proceeds
therefrom to repurchase approximately 99% of the 13% Notes and repay certain
borrowings under the Revolving Credit Facility (as defined herein). In August
1997, the Company entered into a six year, $160.0 million senior secured credit
facility (the "Credit Facility"), consisting of a $100.0 million revolving
credit facility (the "Revolving Credit Facility") and a $60.0 million term loan,
which was reduced to $35.0 million upon the closing of the Initial Offering (the
"Term Loan"). The Revolving Credit Facility was amended in October 1997 to
increase the maximum availability to $125.0 million. The Company used a portion
of the Revolving Credit Facility to retire its previous credit facility, which
retirement, together with the Initial Offering, the Tender Offer and the Consent
Solicitation are collectively referred to herein as the "Refinancing." All of
the Term Loan was drawn in October 1997 for purposes of closing the Chlor-alkali
Joint Venture.
In the Tender Offer and Consent Solicitation, the Company made a tender
offer to purchase all of its 13% Notes for an amount in cash equal to $1,172.89
per $1,000 aggregate principal amount, plus accrued interest, which was based on
the yield to the earliest redemption date for the 13% Notes, using a specific
reference security, plus a fixed spread (the "Tender Offer"). The Company also
solicited consents from tendering holders to amend the indenture under which the
13% Notes were issued (the "13% Note Indenture") to eliminate substantially all
of the protective covenants contained therein (the "Consent Solicitation"), and
paid a separate consent fee to holders who tendered their 13% Notes and
delivered consents prior to the expiration of the Tender Offer. The Company
received tenders of and consents relating to approximately 99% of the
outstanding principal amount of the 13% Notes. All of the tendered 13% Notes
were retired and the 13% Note Indenture was amended accordingly in September
1997.
The principal executive offices of the Company are located at 1100 Johnson
Ferry Rd., N.E., Atlanta, Georgia 30342, and the Company's telephone number is
(404) 851-0300.
8
<PAGE> 11
THE INITIAL OFFERING
Notes...................... The Old Notes were sold by the Company on September
23, 1997 to the Initial Purchasers pursuant to a
Purchase Agreement dated September 18, 1997 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold the Old Notes to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act.
Registration Rights
Agreement................ Pursuant to the Purchase Agreement, the Company,
and the Initial Purchasers entered into an Exchange
and Registration Rights Agreement dated as of
September 18, 1997 which grants the holder of the
Old Notes certain exchange and registration rights.
The Exchange Offer is intended to satisfy such
exchange and registration rights which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered......... $175,000,000 aggregate principal amount of 9 1/2%
Senior Subordinated Notes due 2007, Series B, of
the Company.
The Exchange Offer......... $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of Old
Notes. As of the date hereof, $175,000,000
aggregate principal amount of Old Notes are
outstanding. The Company will issue the Exchange
Notes to holders on or promptly after the
Expiration Date.
Based on interpretations by the staff of the
Commission set forth in certain no-action letters
issued to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder which an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holder's business and that
such holder does not intend to participate and has
no arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives Exchange
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-
making activities or other trading activities. The
Company has agreed that, for a period of 195 days
after the Expiration Date, they will make
9
<PAGE> 12
this Prospectus available to any Participating
Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in such no-action
letters and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any resale transaction.
Failure to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which the
holder is not indemnified by the Company.
Expiration Date............ 5:00 p.m., New York City time, on December , 1997
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Accrued Interest on the
Exchange Notes and the
Old Notes................ Each Exchange Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the
issuance date of the Exchange Notes. Such interest
will be paid with the first interest payment on the
Exchange Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of
the Exchange Notes.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof (or, in the case of a book-entry transfer,
transmit an Agent's Message (as defined herein) in
lieu thereof), in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile (or Agent's message), together with the
Old Notes and any other required documentation to
the Exchange Agent (as defined herein) at the
address set forth herein. By executing the Letter
of Transmittal (or transmitting an Agent's
Message), each holder will represent to the Company
that, among other things, the Exchange Notes
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or
not such person is the holder, that neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes and that neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company. See
"The Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "-- Procedures for Tendering."
Untendered Old Notes....... Following the consummation of the Exchange Offer
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further exchange or registration rights and such
Old Notes will continue to be subject to certain
restrictions on transfer. Accord-
10
<PAGE> 13
ingly, the liquidity of the market for such Old
Notes could be adversely affected.
Consequences of Failure to
Exchange................. The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange."
Shelf Registration
Statement................ If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company or a
Guarantor within the meaning of Rule 405 under the
Securities Act) is not eligible under applicable
securities laws to participate in the Exchange
Offer, and such holder has satisfied certain
conditions relating to the provision of information
to the Company for use therein, the Company has
agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration
Statement") and to use their reasonable best
efforts to cause it to be declared effective by the
Commission as promptly as practical on or after the
consummation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Old Notes held by any such holders.
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Old Notes, either make appropriate
arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Guaranteed Delivery
Procedures............... Holder of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or
comply with the procedures for book-entry
transfer), the Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent (or transmit an Agent's Message
in lieu thereof) prior to the Expiration Date must
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes and
Delivery of Exchange
Notes.................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
11
<PAGE> 14
City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Use of Proceeds............ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Exchange Agent............. State Street Bank and Trust Company
THE EXCHANGE NOTES
General.................... The form and terms of the Exchange Notes are the
same as the form and terms of the Old Notes (which
they replace) except that (i) the Exchange Notes
bear a Series B designation, (ii) the Exchange
Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting
the transfer thereof, and (iii) the holders of
Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement,
including the provisions providing for an increase
in the interest rate on the Old Notes in certain
circumstances relating to the timing of the
Exchange Offer is consummated. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer."
The Exchange Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits
of the Indenture. See "Description of the Exchange
Notes." The Old Notes and the Exchange Notes are
referred to herein collectively as the "Notes."
Issuer..................... LaRoche Industries Inc., a Delaware corporation.
Notes Offered.............. $175,000,000 aggregate principal amount of 9 1/2%
Senior Subordinated Notes due 2007, Series B.
Maturity Date.............. September 15, 2007.
Interest Payment Dates..... March 15 and September 15 of each year, commencing
on March 15, 1998.
Optional Redemption........ The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or
after September 15, 2002 at the redemption prices
set forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. In
addition, prior to September 15, 2000, the Company
may, at its option, redeem up to 33 1/3% of the
initial aggregate principal amount of Notes with
the net proceeds of one or more Public Equity
Offerings (as defined herein) at a redemption price
equal to 109.5% of the principal amount thereof
plus accrued and unpaid interest, if any, to the
redemption date; provided that, after giving effect
thereto, at least 66 2/3% of the initial aggregate
principal amount of Notes remains outstanding. See
"Description of the Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control, each
holder of Notes may require the Company to purchase
all or a portion of such holder's Notes at a
purchase price equal to 101% of the principal
amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. The
Credit Facility prohibits the Company from
repurchasing any Notes pursuant to a Change of
Control Offer (as defined herein) prior to the
repayment in full of the Senior Indebtedness under
the Credit Facility. Therefore, if a Change of
Control were to occur, there can be no assurance
that the Company will have the financial resources
12
<PAGE> 15
or be permitted under the terms of its indebtedness
to repurchase the Notes. If any Event of Default
(as defined herein) occurs as a result thereof, the
Trustee under the Indenture or holders of at least
25% in principal amount of the Notes then
outstanding may declare the principal of and the
accrued and unpaid interest on such Notes to be due
and payable immediately. However, such repayment
would be subject to certain subordination
provisions in the Indenture. See "Risk Factors --
Limitation on Change of Control," "Description of
the Notes -- Subordination," "-- Change of Control"
and "-- Events of Default and Remedies."
Ranking.................... The Notes will be unsecured senior subordinated
obligations of the Company and will be subordinated
in right of payment to all existing and future
Senior Indebtedness of the Company, including
Indebtedness of the Company under the Credit
Facility. The Notes will rank pari passu with all
senior subordinated Indebtedness of the Company and
will rank senior to all other subordinated
Indebtedness of the Company. As of August 31, 1997,
on a pro forma basis after giving effect to the
Refinancing, the Company would have had
approximately $5.3 million of outstanding Senior
Indebtedness. See "Capitalization" and "Description
of the Notes -- Subordination."
Certain Covenants.......... The Indenture relating to the Notes will contain
certain restrictive covenants, including, but not
limited to, covenants with respect to the following
matters: (i) limitation on indebtedness; (ii)
limitation on restricted payments; (iii) limitation
on transactions with affiliates; (iv) limitation on
liens; (v) limitation on sale of assets; (vi)
limitation on issuance and sale of equity interests
of subsidiaries; (vii) limitation on dividends and
other payment restrictions affecting subsidiaries;
and (viii) restrictions on consolidations, mergers
and the transfer of all or substantially all of the
assets of the Company to another person. See
"Description of the Notes -- Certain Covenants" and
"-- Consolidation, Merger and Sale of Assets."
Use of Proceeds............ The Company used the net proceeds from the Initial
Offering to repurchase the 13% Notes, to repay
certain existing indebtedness and to prefund
certain capital expenditures. See "Use of
Proceeds."
RISK FACTORS
In addition to the other information contained in this Prospectus, the
factors described under "Risk Factors" should be considered before tendering the
Old Notes for the Exchange Notes. These risk factors are generally applicable to
the Old Notes as well as the Exchange Notes.
13
<PAGE> 16
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following table sets forth certain selected historical financial
information of the Company. The historical financial information as of and for
each of the three fiscal years ended February 28, 1995, February 29, 1996 and
February 28, 1997 was derived from the Company's audited consolidated financial
statements. The historical financial information as of and for each of the six
month periods ending August 31, 1996 and August 31, 1997 was derived from the
Company's unaudited condensed consolidated financial statements.
The table should be read in conjunction with the audited and unaudited
consolidated financial statements of the Company and related notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," and other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------------------ -----------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1995 1996(a) 1997(b) 1996 1997
------------ ------------ ------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................................... $420,723 $448,982 $379,285 $201,662 $194,338
Cost of sales....................................... 329,383 350,066 313,871 168,433 160,261
-------- -------- -------- -------- --------
Gross profit........................................ 91,340 98,916 65,414 33,229 34,077
Selling, general and administrative expenses........ 54,135 54,631 54,777 28,388 25,913
-------- -------- -------- -------- --------
Income from operations.............................. 37,205 44,285 10,637 4,841 8,164
Interest and amortization of debt expense........... (13,083) (15,973) (14,881) (7,585) (7,736)
Income from equity investments...................... 2,540 2,647 4,909 2,228 2,104
Other income (loss), net............................ 1,581 1,163 411 27 49
(Provision) benefit for income taxes................ (12,297) (13,170) (417) 258 (1,033)
-------- -------- -------- -------- --------
Income before minority interests and
extraordinary charge..................... $ 15,946 $ 18,952 $ 659 $ (231) $ 1,548
======== ======== ======== ======== ========
Net income (loss).......................... $ 13,023 $ 18,952 $ 659 $ (231) $ 1,548
======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(c)........................................... $ 56,538 $ 67,430 $ 39,099 $ 17,564 $ 23,892
Depreciation and amortization(d).................... 16,067 18,580 22,634 10,308 11,441
Cash received from equity investments............... 2,933 1,332 5,701 2,292 2,625
Capital expenditures(e)............................. 17,651 16,894 35,784 12,686 16,206
Cash interest expense(f)............................ 12,790 15,557 15,314 7,658 8,007
Ratio of EBITDA to cash interest expense............ 4.4x 4.3x 2.6x 2.3x 3.0x
Ratio of EBITDA to pro forma cash interest
expense(g)........................................ -- -- 2.1x -- 2.7x
Ratio of earnings to fixed charges(h)............... 2.4x 2.7x 1.1x 0.9x 1.3x
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents........................... $ 5,900 $ 3,265 $ 1,165 $ 3,316 $ 3,211
Working capital (deficit)........................... 58,307 29,269 6,832 24,263 (3,138)
Total assets........................................ 300,421 305,932 312,365 285,863 307,354
Total debt(i)....................................... 130,500 125,089 145,901 118,459 143,273
Stockholders' equity................................ 34,478 51,296 50,906 50,603 52,027
</TABLE>
See Notes to Summary Historical Financial Information
14
<PAGE> 17
NOTES TO SUMMARY HISTORICAL FINANCIAL INFORMATION
(a) In September 1995, the Company entered into the CRILAR (as defined herein)
joint venture. Since that time, sales related to the assets contributed to
such joint venture have been excluded from the Company's sales, and results
of the Company's interest in the CRILAR joint venture have been accounted
for as income from equity investments. Fiscal year 1996 also reflects the
results of operations of the Company's Seneca facility since December 1995,
the date the Company acquired substantially all of the assets of such
facility.
(b) In April 1996, the Company sold substantially all of the property, plant and
equipment and certain other assets used in its calcined and tabular alumina
chemicals businesses.
(c) EBITDA represents income from operations plus cash received from equity
investments plus depreciation, amortization and non-cash long-term asset
writedowns reflected in income from operations. EBITDA should not be
considered as an alternative measure of net income or cash provided by
operating activities (both as determined in accordance with generally
accepted accounting principles), but is presented to provide additional
information related to the Company's debt service capability. EBITDA should
not be considered in isolation or as a substitute for other measures of
financial performance or liquidity. The primary difference between EBITDA
and cash flows provided by operating activities relates to changes in
working capital requirements, and payments made for interest and income
taxes.
(d) Depreciation and amortization excludes amortization of debt expense
(deferred debt issuance costs), which is included in interest and
amortization of debt expense.
(e) Capital expenditures exclude noncash additions through capital leases.
(f) Cash interest expense represents interest and amortization of debt expense
as derived from the Company's consolidated financial statements, minus
amortization of debt expense of $293,000, $416,000, $427,000, $203,000 and
$203,000, and plus capitalized interest of $0, $0, $860,000, $276,000 and
$474,000 for the fiscal years 1995, 1996, 1997 and for the six months ended
August 31, 1996 and 1997, respectively.
(g) Pro forma cash interest expense for purposes of this calculation is equal to
pro forma interest and amortization of debt expense of $18.6 million and
$8.8 million, minus pro forma amortization of debt expense of $1.2 million
and $600,000; and plus capitalized interest of $860,000 and $474,000 for the
fiscal year ended February 28, 1997 and the quarter ended August 31, 1997,
respectively. Pro forma interest and amortization of debt expense is pro
forma for the Refinancing.
(h) For purposes of calculating the historical ratio of earnings to fixed
charges, earnings consist of income before income taxes, minority interests
and extraordinary charges plus fixed charges, adjusted to exclude the
undistributed earnings from equity investments and the increase in
redemption value of certain stock of a subsidiary held by minority
stockholders included in such fixed charges but not deducted in the
determination of income before minority interests. Fixed charges consist of
interest expense, amortization of debt expense, such portion of rental
expense deemed to be representative of the interest factor and the pretax
earnings required to cover the increase in redemption value of certain stock
of a subsidiary held by minority stockholders. For the six months ended
August 31, 1996, earnings are inadequate to cover fixed charges by
approximately $700,000.
(i) Total debt includes the current and non-current portions of term debt,
capital leases and revolving credit facilities.
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully by prospective investors in
evaluating whether to make an investment in the Notes.
LEVERAGE; RESTRICTIVE COVENANTS
The Company has significant debt service obligations. As of August 31,
1997, after giving pro forma effect to the Refinancing, the Company would have
had outstanding indebtedness of approximately $180.4 million and shareholders'
equity of approximately $39.9 million. For fiscal year 1997, after giving pro
forma effect to the Refinancing, the Company's interest and amortization of debt
expense and net loss before extraordinary charges would have been $18.6 million
and $1.6 million, respectively. See "The Refinancing," "Use of Proceeds" and
"Capitalization."
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including: (i) the Company's ability
to obtain additional financing for working capital, capital expenditures or
acquisitions in the future may be limited; (ii) a substantial portion of the
Company's cash flow from operations will be dedicated to the payment of the
principal of, and interest on, its indebtedness, thereby reducing funds
available for future operations; (iii) certain of the Company's borrowings,
including borrowings under the Credit Facility, are and will continue to be at
variable rates of interest, which exposes the Company to the risk of increased
interest rates; and (iv) the Company may be more vulnerable to economic
downturns and be limited in its ability to withstand competitive pressures.
Certain of the Company's competitors may currently operate on a less leveraged
basis and therefore could have significantly greater operating and financing
flexibility than the Company. The Company's ability to make scheduled payments
of the principal of, or interest on, or to refinance, its indebtedness will
depend on its future operating performance and cash flow, which are subject to
prevailing economic conditions, prevailing interest rate levels, and financial,
competitive, business and other factors, many of which are beyond its control.
If the Company cannot generate sufficient cash flow from operations to meet
its debt service obligations, then the Company might be required to repay or
refinance its indebtedness and may be forced to adopt alternative strategies
that may include actions such as reducing or delaying capital expenditures,
selling assets, restructuring or refinancing its indebtedness, or seeking
additional equity capital. In such case, there is no assurance that repayments
or refinancings and/or the alternative strategies could be effected on
satisfactory terms. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Credit Facility and the Indenture contain numerous restrictive
covenants that limit the discretion of the Company's management with respect to
certain business matters. These covenants place significant restrictions on,
among other things, the ability of the Company to incur additional indebtedness,
to create liens or other encumbrances, to pay dividends or make certain other
payments and investments, to make loans and guarantees, to sell or otherwise
dispose of assets and merge or consolidate with another entity. The Credit
Facility also contains a number of financial covenants that require the Company
to maintain certain ongoing financial ratios and financial condition tests. See
"The Refinancing -- Credit Facility," "Description of the Notes -- Certain
Covenants" and " -- Consolidation, Merger and Sale of Assets." The Company's
ability to meet these financial ratios and financial condition tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet such ratios or such tests. A failure to comply with the
obligations under the Credit Facility or the Indenture could result in an event
of default under the Credit Facility or an Event of Default under the Indenture
which, if not cured or waived, could permit acceleration of the relevant
indebtedness and acceleration of indebtedness under other instruments that may
contain cross-acceleration or cross-default provisions. In the event of an event
of default under the Credit Facility or an Event of Default under the Indenture,
the lenders thereunder could elect to declare all amounts outstanding
thereunder, together with accrued and unpaid interest, to be immediately due and
payable. If the indebtedness under the Credit Facility were to be accelerated,
there can be no assurance that the assets of the Company would be sufficient to
repay in full that indebtedness and the other indebtedness of the Company,
including the Notes. Other indebtedness of the Company and its subsidiaries that
may be incurred in the future may contain financial or other covenants more
restrictive than those applicable to the Notes.
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<PAGE> 19
SUBORDINATION
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Indebtedness of the Company
(including, without limitation, indebtedness incurred under the Credit
Facility). In the event of the bankruptcy, liquidation, dissolution,
reorganization or other winding-up of the Company, the assets of the Company
will be available to pay obligations on the Notes only after all Senior
Indebtedness (including amounts incurred under the Credit Facility) has been so
paid in full; accordingly, there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. In addition, under
certain circumstances, the Company may not pay principal of, premium, if any, or
interest on, or pay other amounts owing in respect of the Notes, or purchase,
redeem or otherwise retire the Notes, in the event of certain defaults with
respect to certain classes of Senior Indebtedness, including Senior Indebtedness
incurred under the Credit Facility. As of August 31, 1997, after giving pro
forma effect to the Refinancing, there would have been approximately $5.3
million of Senior Indebtedness outstanding (excluding unused commitments).
Additional Senior Indebtedness may be incurred by the Company from time to time,
subject to certain restrictions. See "The Refinancing -- The Credit Facility"
and "Description of the Notes -- Certain Covenants -- Limitation on
Indebtedness."
The Notes will be general unsecured obligations of the Company and will be
effectively subordinated in right of payment to all existing and future secured
Indebtedness of the Company, including the Company's obligations under the
Credit Facility, to the extent of the value of the collateral therefor. The
Credit Facility is secured by substantially all of the domestic assets of the
Company and its direct and indirect Subsidiaries and, therefore, claims of
holders of the Notes will be structurally and contractually subordinated to the
Credit Facility. The Notes are also effectively subordinated to all obligations
of the Company's Subsidiaries. In the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding up of any of the Subsidiaries, the
creditors of the Company (including holders of the Notes) will have no right to
proceed against the assets of such Subsidiaries until all their creditors have
been paid in full.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to risks inherent in the chemical
industry, such as explosions, fires, chemical spills or releases, pollution and
other environmental risks. Any significant interruption of operations at the
Company's principal facilities could have a material adverse effect on the
Company. The Company maintains general liability insurance and property and
business interruption insurance with coverage limits it believes are adequate.
Because of the nature of industry hazards, it is possible that liabilities for
pollution and other damages arising from a major occurrence could exceed
insurance coverages or policy limits or that such insurance may not be available
at reasonable rates in the future. Any such liabilities, which could arise due
to injury and/or loss of life, severe damage to and destruction of property and
equipment, pollution and other environmental damage and suspension of
operations, could have a material adverse effect on the Company.
RISKS RELATED TO CHLOR-ALKALI JOINT VENTURE
Although RPC has the right to require the Company to purchase the remaining
50% ownership interest in the Joint Venture Company (the "RPC Put") at any time
with six months prior notice during the four-year period beginning six months
after the Closing Date, the Company cannot require RPC to sell its ownership
interest to the Company, except under very limited circumstances. See
"Business -- Chlor-alkali Joint Venture." To the extent, however, that the Joint
Venture Company performs below expectations, RPC may have an incentive to
require the Company to purchase the remaining ownership interest in the Joint
Venture Company by exercising the RPC Put. Also, the Company has no control over
the timing of, or exercise of, the RPC Put. RPC may exercise the RPC Put at a
time when the Company has undertaken significant capital expenditures for
projects unrelated to the Joint Venture Company or otherwise has insufficient
funds available to satisfy the RPC Put. Additional borrowings may be necessary
to purchase the remaining interest of the Joint Venture Company from RPC if the
RPC Put is exercised. It is possible that the Company may not have sufficient
financial resources in the future or be able to borrow sufficient funds to
purchase RPC's remaining 50% interest in the Joint Venture Company if the RPC
Put is exercised.
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<PAGE> 20
As a result of any such non-payment, subject to the terms and conditions of
the Shareholders Agreement (as defined herein), RPC would have the right to
require the Company to sell its 50% interest to RPC one year after notice of the
RPC Put for 85% of the amount paid by the Company for the Initial Purchase,
subject to certain adjustments. Consequently, there can be no assurance that the
Company will own 100% of the Joint Venture Company in the future, and the
Company may be required to sell its 50% interest.
There also can be no assurance that there will not be any labor action or
disturbance by any of the labor unions that represent certain RPC employees (the
"RPC Unions") after RPC's delivery of notice of exercise of the RPC Put or
otherwise. Any such action or disturbance could have a material adverse effect
on the financial condition or results of operations of the Joint Venture
Company, or cause a delay in the transfer of RPC's ownership interest in the
Joint Venture Company to the Company in the future. Prior to the closing of the
Chlor-alkali Joint Venture, an RPC Union filed a complaint against RPC in a
French court seeking to gain access to documentation pertaining to the
Chlor-alkali Joint Venture and to prevent its consummation (the "RPC Union
Matter"). After hearings on the RPC Union Matter, in September 1997 the French
court denied the relief requested by the RPC Union. See
"Business -- Chlor-alkali Joint Venture."
The Joint Venture Company will be the Company's first significant
investment in Europe, and the Company has not had prior experience operating in
the regulatory and cultural environment of, or managing labor relations in,
Europe. The Joint Venture Company will be subject to a number of special risks,
including certain trade barriers, currency exchange rate fluctuations and
exchange controls that may be imposed from time to time, national and regional
labor strikes, political risks and risks of increases in duties, taxes and
governmental royalties, as well as changes in laws and policies governing
operations of foreign-owned companies. In addition, the Joint Venture Company
will be subject to French regulations governing the conduct of operations at the
PCL Facility, the construction of any new facilities, and the development of new
products or the conduct of new operations, including permitting requirements
related to the PCL Facility, the Hauterives Facility (as defined herein) and the
Powerhouse Complex (as defined herein). It is not possible to predict accurately
the content of or the impact that legislation and regulations might have on the
financial condition or results of operations of the Joint Venture Company.
The Chlor-alkali Joint Venture transactions are denominated in French
francs, and the Joint Venture Company's expenses and sales are primarily
denominated in French francs. Accordingly, the purchase price under the RPC Put
and the Joint Venture Company's distributions to the Company will be affected by
exchange rate fluctuations between the United States dollar and the French
franc. These fluctuations may have a material impact on the purchase price under
the RPC Put and the value of such distributions to the Company.
RISKS ASSOCIATED WITH ACQUISITIONS
In undertaking the Chlor-alkali Joint Venture, several of the Company's
executive management personnel have been and will continue to devote significant
amounts of time and managerial resources in France establishing and maintaining
such business operations. Further, in the future the Company may acquire
additional complementary businesses. Following consummation of the Chlor-alkali
Joint Venture and any other future acquisitions, it will be necessary for the
Company to integrate the business operations of the Joint Venture Company and
any other acquired business with the Company's business operations. Although the
Company believes that its management and other resources are sufficient to
pursue the Chlor-alkali Joint Venture and any additional acquisition
opportunities and successfully integrate such acquired businesses into its
existing operations, there can be no assurances that it will be able to do so
effectively. If the Company fails to successfully integrate the Joint Venture
Company or any other acquired businesses into its existing operations, the
Company's results of operations could be adversely effected. The Company's
continued success will largely depend on the efforts and abilities of its
executive officers and certain other key employees. The Company's operations
could be adversely affected if, for any reason, such officers or key employees
did not remain with the Company. See "Management."
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<PAGE> 21
CONTROL BY PRINCIPAL STOCKHOLDERS
Approximately 97% of the Company's outstanding voting Common Stock is owned
by members of the LaRoche family. Such control enables such stockholders,
through the Board of Directors of the Company (the "Board"), to control the
affairs of the Company, and to prevent mergers, acquisitions, tender offers,
proxy contests or assumptions of control and changes of incumbent management.
LIMITATIONS ON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer for cash to repurchase the Notes at a price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of repurchase. If a Change of Control were to occur, there can be no
assurance that the Company would have sufficient funds to pay the purchase price
for all of the Notes that the Company might be required to purchase. Certain
events involving a Change of Control may result in an event of default under the
Credit Facility or other indebtedness of the Company that may be incurred in the
future. In the event a Change of Control occurs at a time when the Company is
prohibited from purchasing the Notes, the Company could seek the consent of its
lenders to purchase the Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such consent or repay
such borrowings, the Company would remain prohibited from purchasing the Notes.
In such case, the Company's failure to purchase tendered Notes would constitute
an Event of Default under the Indenture which could have adverse consequences
for the Company and the holders of the Notes. If, as a result thereof, a default
occurs with respect to any Senior Indebtedness, payment in full of the Credit
Facility would be required before repurchase of the Notes. The definition of
"Change of Control" in the Indenture includes a sale, lease, conveyance or other
disposition of "all or substantially all" of the assets of the Company and its
Subsidiaries taken as a whole to a person or group of persons. There is little
case law interpreting the phrase "all or substantially all" in the context of an
indenture. Because there is no precise established definition of this phrase,
the ability of a holder of the Notes to require the Company to repurchase such
Notes as a result of a sale, lease, conveyance or transfer of all or
substantially all of the Company's assets to a person or group of persons may be
uncertain. Further, in such circumstances, the Company may not have sufficient
funds available to satisfy such repayment and/or repurchase requirements. Also,
in the event of a change of control of the Company, RPC would be able to
exercise its rights under the RPC Put. See "Description of the
Notes -- Subordination" and "-- Change of Control" and "Business -- Chlor-alkali
Joint Venture."
PHASE-OUT OF FLUOROCARBONS
The Company historically produced the CFC products, R-11 and R-12, but
ceased production on January 1, 1996 pursuant to the Montreal Protocol
Agreements (international environmental treaties) (the "Montreal Protocols") and
the 1990 amendments to the federal Clean Air Act (the "Clean Air Act
Amendments"). In advance of such phase-out, the Company developed commercial
production capabilities for the manufacture of HCFC-141b, a replacement
fluorocarbon used principally in foam-blowing applications. The Clean Air Act
Amendments have further mandated the phase-out of HCFC-141b by January 1, 2003.
In fiscal years 1994, 1995, 1996 and 1997, fluorocarbons accounted for $26.9
million, $11.7 million, $9.8 million and $4.0 million, respectively, of the
Company's income from operations. While the Company continues to research and
develop next generation fluorocarbons and has diversified its sources of income
from operations into other business segments, given the scheduled phase out of
HCFC-141b, there can be no assurance that the Company's results from operations
for fiscal year 1998 and beyond will not be materially affected. It is possible
that additional excise taxes and other regulations may be imposed upon other
fluorocarbon products. Such taxes might decrease the use of these products and
could have a material adverse effect on the Company's results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Electrochemical Products -- Fluorocarbons" and
"Business -- Governmental Regulation."
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CYCLICALITY, SEASONALITY AND VOLATILITY
Certain of the Company's products, particularly in the Electrochemical
Products segment, are supplied primarily to customers involved in industries
that are sensitive to fluctuations in the general business cycles of the United
States and world economies. Consequently, deteriorating economic conditions may
cause a reduction in sales of such products. See "Business -- Electrochemical
Products."
Moreover, demand for the Company's fertilizer products is seasonal. Such
seasonality of demand requires the Company to build its inventory in
anticipation of periods of peak demand and may adversely affect the Company's
cash flow. The Company typically sells larger volumes and realizes higher prices
and margins for fertilizer during the spring and, to a lesser extent, the fall
planting seasons. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Seasonality."
In addition, demand for the Company's fertilizer is primarily dependent on
United States agricultural conditions, which can be volatile as a result of a
number of factors, the most important of which are weather patterns and
conditions (particularly during periods of high fertilizer consumption), current
and projected grain stocks and prices and the United States government's
agricultural policy. Among the governmental policies that influence the markets
for fertilizer are those directly or indirectly influencing the number of acres
planted, the level of grain stocks, the mix of the crops planted and crop
prices. The United States government influences the number of acres of certain
crops planted by removing acres from cultivation through subsidies to farmers
based upon current grain stocks and expected yields. However, under the federal
Agriculture Improvement and Reform Act of 1996 (the "Freedom to Farm Act"), such
subsidy program is being phased out over the next several years. Grain stocks
are, in turn, directly influenced by highly unpredictable weather conditions and
worldwide production and consumption. Weather patterns and conditions in
fertilizer consuming regions during key periods may also affect directly the
type of, and amount of demand for, fertilizer as well as the application rate.
In addition to United States demand factors, fertilizer prices are affected by
world supply, demand and exchange rates. See "Business."
Consequently, the Company's results of operations have been and will
continue to be somewhat volatile as a result of cyclical, seasonal and other
factors not within the Company's control. Such influences and factors could
cause a material adverse change in the Company's results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ENVIRONMENTAL COMPLIANCE
The Company is subject to various environmental laws and regulations in the
United States that regulate certain of the Company's activities, operations and
materials used in the Company's products, or which may impose liability for the
cleanup of environmental contamination. The Company employs three environmental
compliance managers, who, together with the Company's Executive Director of
Legal Affairs, are responsible for monitoring the Company's environmental
compliance efforts. The Company has incurred and will continue to incur
substantial capital expenditures and operating costs as a result of these laws
and regulations. The Company cannot, however, predict the impact of new or
amended laws or regulations, nor can it predict how existing laws and
regulations will be enforced or interpreted. See "Business -- Governmental
Regulation."
The nature of the Company's business requires that it handle certain
hazardous substances. Spills or other unintended releases of such substances
could result in contamination which may require the Company to undertake or fund
potentially costly cleanup activities. The historical use or handling of
hazardous substances and/or fertilizer nutrients has resulted in contamination
at facilities currently or formerly owned or operated by the Company, or by the
Company's predecessors, and continued use or handling of such materials could
result in additional contamination. As of February 28, 1997, the Company had
recorded accruals of $4.5 million to reflect estimated future costs associated
with known environmental matters. The Company may be required to record
additional accruals for future costs related to these and other matters. The
Company cannot predict what level of expenditures, if any, may be required in
the future to remediate contamination from past unknown or future spills or
releases of hazardous substances and/or fertilizer nutrients at its facilities.
See "Business -- Environmental Proceedings."
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The Company from time to time has been, and presently is, the subject of,
or a party to, administrative proceedings and litigation regarding environmental
and related matters. There can be no assurance that the Company will not become
involved in future litigation or other proceedings or that, if the Company were
found to be responsible in any current or future litigation or proceeding,
liabilities resulting therefrom would not be material to the Company. See
"Business -- Environmental Proceedings."
Current environmental regulations limit certain chlorine uses, such as pulp
and paper bleaching, and from time to time environmental special interest groups
have proposed more stringent controls on chlorine use and production. In 1994,
the Clinton Administration recommended amendments to the Clean Water Act which,
among other things, seek funding of a proposed 2 1/2 year study of the impacts
of chlorine and chlorinated compounds. In addition, a bill was introduced in the
United States Congress in 1993 which proposed to eliminate discharges of
chlorine compounds into navigable waters and requires zero discharge limits for
certain toxic substances, including certain chlorinated compounds. Although
neither of these measures were enacted, another bill has been introduced in the
Congress that would prohibit the pulp and paper industry from discharging
chlorine compounds into waters of the United States and would require the EPA to
commission a study to evaluate the feasibility of chlorine-free technology for
the pulp and paper industry. It is impossible to predict whether this
legislation or other initiatives, if any, will be adopted regarding chlorine and
what effect, if any, such action may have on the Company. Any tightening in the
regulations of chlorine production or consumption could have a material adverse
effect on the Company's results of operations.
The Company transports chlorine and ammonia over long distances, which
poses certain dangers if there were an accident or spill. any such incident
could result in litigation or significant environmental clean-up expenses, which
may have a materially adverse impact on the Company. The Company maintains
general liability, property and business interruption insurance with coverage
limits it believes are adequate. See "-- Operating Hazards and Uninsured Risks."
As in the United States, the operations of the Joint Venture Company will
be subject to extensive environmental regulations that govern certain of the
Joint Venture Company's activities, operations, products and materials. Although
RPC generally will indemnify the Company and the Joint Venture Company under the
Stock Purchase Agreement for liabilities arising prior to the transfer of the
PCL Facility and related assets and liabilities to the Joint Venture Company,
subject to agreed limits and deductible amounts, the Joint Venture Company may
be subject to additional environmental liabilities associated with the condition
or operation of the PCL Facility and may incur substantial capital costs to
comply with existing or new environmental regulations or permit conditions in
the future. The operation of the Joint Venture Company, including the
transportation of chlorine over considerable distances, is subject to
significant environmental and health and safety risks. Any spill of hazardous
substances, particularly chlorine, and related contamination could have a
material adverse effect on the financial condition and results of operations of
the joint venture company.
COMPETITION
All of the markets in which the Company operates are highly competitive.
Certain of the Company's principal competitors are substantially larger, have
greater financial and operating resources and are less leveraged than the
Company. In certain of the Company's business segments, the Company's principal
competitors have a lower cost structure than the Company. Competition takes
place largely on the basis of price, product quality, deliverability of product
and provision of technical services. Additionally, the relative cost and
availability of transportation for raw materials and finished products to
manufacturing facilities and markets are important competitive factors.
COST AND ACCESS TO RAW MATERIALS
The Company is dependent upon certain raw materials in the manufacture of
its products. Ammonia and natural gas are the feedstocks for all of the
Company's nitrogen-based fertilizers and blasting grade ammonium nitrate
products. The Company purchases ammonia directly from suppliers to meet a
significant portion of its feedstock requirements and manufactures the
remainder. In the manufacture of ammonia,
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natural gas is the primary raw material. Natural gas is also necessary for the
generation of power, the largest cost component in the production of the
Company's chlor-alkali products. Brine is the primary raw material for chlorine
and caustic soda production.
Aluminum trihydrate ("hydrate") is the primary material used in the
production of alumina chemicals. The Company obtains almost all of its hydrate
feedstock requirements from Kaiser. Because Kaiser's Gramercy facility is the
closest hydrate supplier to the Company's Baton Rouge facility, the Company
likely would incur significant additional freight costs if it were to become
necessary to purchase hydrate from another source. See "Business -- Alumina
Chemicals -- Raw Materials."
Consequently, the costs of natural gas, ammonia, brine and hydrate
significantly affect the Company's cost of sales and, accordingly, its profit
margins. The availability and prices of these materials are subject to many
factors beyond the Company's control. A significant increase in the cost of any
of these materials, without a corresponding increase in the Company's product
prices, could have a material adverse effect on the Company's results of
operations. Also, although the Company hedges a portion of its natural gas
requirements, there can be no assurances that the Company will maintain such
arrangements or that the Company will not incur losses on such arrangements.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange Offer,
there has not been any public market for the Old Notes. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for Exchange Notes by
holders who are entitled to participate in this Exchange Offer. The market for
Old Notes not tendered for exchange in the Exchange Offer is likely to be more
limited than the existing market for such notes. The holders of Old Notes (other
than any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who are not eligible to participate in the
Exchange Offer are entitled to certain registration rights, and the Company is
required to file a Shelf Registration Statement with respect to such Old Notes.
The Exchange Notes will constitute a new issue of securities with no established
trading market. The Company does not intent to list the Exchange Notes on any
national securities exchange or seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation System. The
Initial Purchasers have advised the Company that they currently intend to make a
market in the Exchange Notes, but they are not obligated to do so may
discontinue such market making at any time. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer and the pendency of
the Shelf Registration Statement. Accordingly, no assurance can be given that an
active public or other market will develop for the Exchange Notes or as to the
liquidity of the trading market for the Exchange Notes. If a trading market does
not develop or is not maintained, holders of the Exchange Notes may experience
difficulty in reselling the Exchange Notes or may be unable to sell them at all.
If a market for the Exchange Notes develops, any such market may be discontinued
at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from their
principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Old Notes, a properly completed and duly executed Letter of Transmittal (or
Agent Message) and all other required documents. Therefore, holders of the Old
Notes desiring to tender such Old Notes in exchange for Exchange Notes should
allow sufficient time to ensure timely delivery. The Company is under no duty to
give notification of defects or irregularities with
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respect to the tenders of Old Notes for exchange. Old Notes that are not
tendered or are tendered but not accepted will, following the consummation of
the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange offer, certain
registration rights under the Registration Rights Agreement will terminate. In
addition, any holder of Old Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities, and if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus, including those regarding the
Company's financial position, business strategy, projected costs, and plans and
objectives of management for future operations, are forward-looking statements.
These statements by their nature are subject to certain risks, uncertainties and
assumptions and will be influenced by various factors. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are
disclosed herein under "Risk Factors", on page ii hereof ("Forward Looking
Statements") and elsewhere in this Prospectus including, without limitation, in
conjunction with the forward-looking statements included in this Prospectus. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on behalf of the Company are expressly qualified in
their entirety by the Cautionary Statements.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount, the form and terms of which are identical to the forms and
terms of the Exchange Notes (which replace the Old Notes), except as otherwise
described herein. The Old Notes surrendered in exchange for Exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase or decrease in the indebtedness
of the Company. As such, no effect has been given to the Exchange Offer in the
pro forma statements or capitalization tables.
The net proceeds to the Company from the sale of the Old Notes in the
Initial Offering (after deducting discounts and estimated fees and expenses)
were utilized by the Company to consummate the transactions involved in the
Refinancing. See "The Refinancing."
23
<PAGE> 26
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
the Company at August 31, 1997, and the unaudited capitalization of the Company
at August 31, 1997 as adjusted to give effect to (i) issuance of the Old Notes
and application of the net proceeds therefrom, and (ii) repurchase of $99.1
million aggregate principal amount of the 13% Notes. This table should be read
in conjunction with the Company's unaudited condensed consolidated financial
statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
AUGUST 31, 1997
-----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 3,211 $ 16,019
======== ========
Debt, including current portion:
Revolving Credit Facility(a).............................. $ 38,000 $ --
Note to former stockholder................................ 4,441 4,441
13% Senior Subordinated Notes due 2004.................... 100,000 915
9 1/2% Senior Subordinated Notes due 2007 (net of discount
of $784)............................................... -- 174,216
Capital leases............................................ 832 832
-------- --------
Total debt........................................ 143,273 180,404
Redeemable common stock..................................... 3,577 3,577
Stockholders' equity...................................... 52,027 39,888(b)
-------- --------
Total capitalization.............................. $198,877 $223,869
======== ========
</TABLE>
- ---------------
(a) As of the date of this Prospectus, the Revolving Credit Facility provides
for borrowings up to $125.0 million, but as of August 31, 1997, the maximum
borrowing limit thereunder was $100.0 million. The Term Loan has a maximum
principal amount of $35.0 million, all of which, as of the date of this
Prospectus, has been borrowed by the Company for purposes of consummating
the Chlor-alkali Joint Venture transactions.
(b) Gives effect to the reduction in equity resulting from the premium paid to
holders of 13% Notes in the Tender Offer of approximately $17.1 million,
fees and expenses related to the Tender Offer and Consent Solicitation of
approximately $400,000, and the write-off of unamortized issuance costs of
approximately $2.7 million for the 13% Notes, net of related income tax
effects (at an assumed rate of 40%).
24
<PAGE> 27
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain selected historical financial
information of the Company. The selected historical consolidated financial
information for each of the five fiscal years in the period ended February 28,
1997 are derived from the consolidated financial statements, which have been
audited by Ernst & Young LLP, independent auditors, except for the financial
statements of LaRoche Chemicals Inc., a consolidated subsidiary, for the two
fiscal years ended February 28, 1994, which were audited by other independent
auditors. The unaudited selected historical consolidated financial information
for each of the six-month periods ended August 31, 1996 and August 31, 1997 are
derived from unaudited condensed consolidated financial statements of the
Company. The following selected historical consolidated financial information
should be read in conjunction with the consolidated financial statements and
notes thereto for each of the three fiscal years in the period ended February
28, 1997, and the unaudited condensed consolidated financial statements for the
six months ended August 31, 1996 and August 31, 1997 which are included
elsewhere herein. Also see "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In the opinion of management, all
adjustments (consisting of normally recurring accruals) considered necessary for
a fair presentation have been reflected therein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------------------------------------------------ -----------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1993(a) 1994 1995 1996(b) 1997(c) 1996 1997
------------ ------------ ------------ ------------ ------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................... $368,058 $375,511 $420,723 $448,982 $379,285 $201,662 $194,338
Cost of sales................ 292,156 302,075 329,383 350,066 313,871 168,433 160,261
-------- -------- -------- -------- -------- -------- --------
Gross profit................. 75,902 73,436 91,340 98,916 65,414 33,229 34,077
Selling, general and
administrative expenses.... 49,356 50,048 54,135 54,631 54,777 28,388 25,913
-------- -------- -------- -------- -------- -------- --------
Income from operations....... 26,546 23,388 37,205 44,285 10,637 4,841 8,164
Interest and amortization of
debt expense(d)............ (7,158) (7,118) (13,083) (15,973) (14,881) (7,585) (7,736)
Income from equity
investments................ 416 3,257 2,540 2,647 4,909 2,228 2,104
Other income (loss), net..... 659 128 1,581 1,163 411 27 49
(Provision) benefit for
income taxes............... (8,353) (8,499) (12,297) (13,170) (417) 258 (1,033)
-------- -------- -------- -------- -------- -------- --------
Income before minority
interests and
extraordinary
charges............. $ 12,110 $ 11,156 $ 15,946 $ 18,952 $ 659 $ (231) $ 1,548
======== ======== ======== ======== ======== ======== ========
Net income (loss)(e)... $ 11,728 $ 6,853 $ 13,023 $ 18,952 $ 659 $ (231) $ 1,548
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(f).................... $ 40,543 $ 42,525 $ 56,538 $ 67,430 $ 39,099 $ 17,564 $ 23,892
Depreciation and
amortization(g)............ 13,997 16,682 16,067 18,580 22,634 10,308 11,441
Cash received from equity
investments................ -- 2,455 2,933 1,332 5,701 2,292 2,625
Capital expenditures(h)...... 19,596 27,897 17,651 16,894 35,784 12,686 16,206
Cash interest expense(i)..... 7,162 7,095 12,790 15,557 15,314 7,658 8,007
Ratio of EBITDA to cash
interest expense........... 5.7x 6.0x 4.4x 4.3x 2.6x 2.3x 3.0x
Ratio of EBITDA to pro forma
cash interest expense(j)... -- -- -- -- 2.1x -- 2.7x
Ratio of earnings to fixed
charges(k)................. 3.0x 1.9x 2.4x 2.7x 1.1x 0.9x 1.3x
Cash dividends............... $ -- $ -- $ -- $ 233 $ 912 $ 462 $ 439
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents.... $ 2,437 $ 4,096 $ 5,900 $ 3,265 $ 1,165 $ 3,316 $ 3,211
Working capital (deficit).... 20,400 5,521 58,307 29,269 6,832 24,263 (3,138)
Total assets................. 225,328 241,721 300,421 305,932 312,365 285,863 307,354
Total long-term debt(l)...... 46,838 50,639 120,686 113,691 105,036 108,100 103,172
Total debt(m)................ 60,658 79,067 130,500 125,089 145,901 118,459 143,273
Common stock with redemption
features................... 16,107 16,538 15,392 12,246 4,177 7,666 3,577
Stockholders' equity......... 16,982 23,404 34,478 51,296 50,906 50,603 52,027
</TABLE>
See Notes to Selected Historical Consolidated Financial Information.
25
<PAGE> 28
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(a) In January 1993, the Company entered into the Hydrate Partnership (as
defined herein). Since that time, hydrate sales have been excluded from the
Company's sales and results of the Company's interest in the Hydrate
Partnership have been accounted for as income from equity investments.
(b) In September 1995, the Company entered into the CRILAR joint venture. Since
that time, sales related to the assets contributed to such joint venture
have been excluded from the Company's sales, and results of the Company's
interest in the CRILAR joint venture have been accounted for as income from
equity investments. Fiscal year 1996 also reflects the results of
operations of the Company's Seneca facility since December 1995, the date
the Company acquired substantially all of the assets of such facility.
(c) In April 1996, the Company sold substantially all of the property, plant
and equipment and certain other assets used in its calcined and tabular
alumina chemical businesses.
(d) After giving pro forma effect to the Refinancing, for the year ended
February 28, 1997 and for the six months ended August 31, 1997, interest
and amortization of debt expense would have been $18.6 million and $8.8
million, respectively.
(e) After giving pro forma effect to the Refinancing, for the year ended
February 28, 1997 and for the six months ended August 31, 1997, net income
(loss) before extraordinary charges would have been ($1.6) million and
$900,000, respectively.
(f) EBITDA represents income from operations plus cash received from equity
investments plus depreciation, amortization and non-cash long-term asset
writedowns reflected in income from operations. EBITDA should not be
considered as an alternative measure of net income or cash provided by
operating activities (both as determined in accordance with generally
accepted accounting principles), but is presented to provide additional
information related to the Company's debt service capability. EBITDA should
not be considered in isolation or as a substitute for other measures of
financial performance or liquidity. The primary difference between EBITDA
and cash flows provided by operating activities relates primarily to
changes in working capital requirements, and payments made for interest and
income taxes.
(g) Depreciation and amortization excludes amortization of debt expense
(deferred debt issuance costs), which is included in interest and
amortization of debt expense.
(h) Capital expenditures exclude noncash additions through capital leases.
(i) Cash interest expense represents interest and amortization of debt expense
as derived from the Company's consolidated financial statements, minus
amortization of debt expense of $132,000, $112,000, $293,000, $416,000,
$427,000, $203,000 and $203,000, plus capitalized interest of $136,000,
$89,000, $0, $0, $860,000, $276,000 and $474,000 for the fiscal years 1993,
1994, 1995, 1996, 1997 and for the six months ended August 31, 1996 and
1997, respectively.
(j) Pro forma cash interest expense for purposes of this calculation is equal
to pro forma interest and amortization of debt expense of $18.6 million and
$8.8 million, minus pro forma amortization of debt expense of $1.2 million
and $600,000, and plus capitalized interest of $860,000 and $474,000 for
the fiscal year ended February 28, 1997 and the six months ended August 31,
1997, respectively. Pro forma interest and amortization of debt expense is
pro forma for the Refinancing.
(k) For purposes of calculating the historical ratio of earnings to fixed
charges, earnings consist of income before income taxes, minority interests
and extraordinary charges plus fixed charges, adjusted to exclude the
undistributed earnings from equity investments and the increase in
redemption value of certain stock of a subsidiary held by minority
stockholders included in such fixed charges but not deducted in the
determination of income before minority interests. Fixed charges consist of
interest expense, amortization of debt expense, such portion of rental
expense deemed to be representative of the interest factor and the pretax
earnings required to cover the increase in redemption value of certain
stock of a subsidiary held by minority stockholders. After giving pro forma
effect to the Refinancing, for the year ended February 28, 1997, pro forma
earnings are inadequate to cover fixed charges by approximately $2.8
million. The ratio of earnings to fixed charges for the six months ended
August 31, 1997 after giving pro forma effect to the Refinancing is 1.1x.
(l) Total long-term debt includes term debt and capital leases, excluding any
current portion.
(m) Total debt includes the current and non-current portions of term debt,
capital leases, revolving credit facilities, and the premium on LCI's
convertible debt.
26
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's consolidated audited and unaudited financial statements and notes
thereto included in this Prospectus.
SIGNIFICANT DEVELOPMENTS
The Company historically has expanded its business through acquisitions of
other related businesses and investments in joint venture arrangements, and the
Company continues to evaluate acquisition and joint venture opportunities.
Accordingly, in October 1997, the Company purchased a 50% interest in the Joint
Venture Company in connection with the Chlor-alkali Joint Venture, as discussed
elsewhere herein. The Company's Initial Purchase of its interest in the Joint
Venture Company cost approximately FRF 190 million ($32.4 million) excluding
acquisition costs. See "Business -- Chlor-alkali Joint Venture."
In September 1997, the Company refinanced its outstanding indebtedness
under its then-outstanding $100 million aggregate principal amount of 13% Notes
by consummating the Initial Offering and the Tender Offer and the related
Consent Solicitation pertaining to the 13% Notes, and using the net proceeds
therefrom to repurchase approximately 99% of the 13% Notes and repay certain
borrowings under the Revolving Credit Facility. In August 1997, the Company
entered into a six year, $160.0 million senior secured credit facility,
consisting of a $100.0 million revolving credit facility and a $60.0 million
term loan, which was reduced to $35.0 million upon the closing of the Initial
Offering. The Revolving Credit Facility was amended in October 1997 to increase
the maximum availability to $125.0 million. The Company used a portion of the
Revolving Credit Facility to retire its previous credit facility. All of the
Term Loan was drawn in October 1997 for purposes of closing the Chlor-alkali
Joint Venture.
Fiscal year 1997 was a year of significant changes in the operations of the
Company, resulting in decreased financial performance. The Company experienced a
decline in sales volume and income from operations in fluorocarbons resulting
from the government-mandated phase-out of production of CFCs R-11 and R-12. CFCs
contributed $12.4 million, $8.1 million and $2.5 million of total Company income
from operations in fiscal years 1995, 1996 and 1997, respectively. The Company
will continue to sell its remaining bulk CFCs until its inventory is depleted.
In its ongoing operations during fiscal year 1997, the Company experienced
decreased income from operations in both its Nitrogen Products business and the
chlor-alkali operations of its Electrochemical Products business as a result of
increased natural gas costs of approximately $10.3 million and other increased
raw materials costs. In Electrochemical Products, the Company experienced lower
average prices per electrochemical unit ("ECU"), the combined price of one ton
of chlorine and 1.12 tons of caustic soda, and production problems at its
Gramercy facility that resulted in decreased income from operations of $12.5
million for fiscal year 1997. The Company also experienced a decline in net
sales of $21.6 million and in income from operations of $3.5 million in its
Alumina Chemicals business during fiscal year 1997. These declines resulted
primarily from the sale of certain Versal(R) production equipment to CRILAR
Alumina Company LLC ("CRILAR"), a joint venture between the Company and
Criterion Catalyst Company L.P. ("Criterion"), in September 1995 and from
production problems experienced at its Baton Rouge facility.
In order to address the difficulties experienced in fiscal year 1997,
management has implemented several improvements designed to lower costs, improve
reliability and ensure adequate supplies and greater price stability of raw
materials for operations in the foreseeable future. The production difficulties
at the Company's Gramercy facility were due primarily to a rectifier failure in
the electrical distribution system. In response, the Company has repaired the
rectifier and has installed a backup rectifier assembly for the cell rooms in
the chlor-alkali production facility. In an effort to ensure reliable and cost
effective electrical power generation in the future, the Company is in the
process of upgrading the generator turbine units and control systems at the
powerhouse complex, which is expected to be substantially completed by the end
of fiscal year 1998. Also, management is considering construction of a
higher-capacity new brine pipeline to supply the Gramercy facility, in an effort
to ensure an adequate supply of brine.
27
<PAGE> 30
The Company has implemented a natural gas hedging program to reduce the
Company's exposure to natural gas price volatility. Natural gas is the primary
raw material used for the production of ammonia in the Nitrogen Products segment
and electricity in the Electrochemical Products segment. The Company purchases
its natural gas pursuant to market based contracts with natural gas producers.
To protect against the risk of increasing prices, the Company, at its option,
periodically fixes its cost under these contracts in accordance with the pricing
mechanisms included in the contracts. Fixed price purchase commitments pursuant
to the contracts aggregated $15.1 million as of September 30, 1997. The Company
also at times utilizes option spread agreements ("collars") to establish a range
of cost on a portion of its natural gas requirements. No such contracts were in
place as of August 31, 1997. Approximately 80% of the Company's anticipated
natural gas requirements through February 1998 and approximately 18% of such
requirements from March 1998 through August 1998 are subject to fixed price
purchase arrangements.
Consistent with its long-term strategy to increase its market share in
certain of its business segments and decrease operating costs, the Company
intends to undertake various maintenance and discretionary expansion projects
through fiscal year 2000. Discretionary projects now under consideration
include: (i) the expansion of ammonia production capacity at the Cherokee plant
through further vertical integration of its raw material supply; (ii) the HDAN
prill fattening project at its Crystal City facility; (iii) additional caustic
soda evaporation capacity, improved brine saturation capabilities and the
replacement of the brine pipeline at Gramercy and; (iv) debottlenecking,
capacity expansions and cost reduction programs at its active alumina and
Versal(R) production facilities in Baton Rouge. Together, the costs of these and
other identified projects are estimated to aggregate approximately $100.0
million over the next three to four fiscal years. The commencement of these
projects will be evaluated under a number of criteria including projected
contributions to earnings and cash flow and market conditions, and will be
subject to the availability of funding from operations, and borrowings under the
Revolving Credit Facility, as well as compliance with the Indenture. There can
be no assurance that the Company will elect to undertake any of such capital
projects or have sufficient funds available to undertake some or all of these
projects.
SEGMENT INFORMATION
The following table presents business segment information for the three
months and six months ended August 31, 1997 and 1996, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------------- ---------------------------------------------
AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1997 AUGUST 31, 1996
-------------------- -------------------- --------------------- ---------------------
PERCENT PERCENT PERCENT PERCENT
OF OF OF OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
------- ---------- ------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES:
Nitrogen products $51,635 61.7% $51,865 59.3% $131,727 67.8% $127,705 63.3%
Electrochemical products...... 22,446 26.8 25,024 28.6 44,014 22.6 51,445 25.5
Alumina chemicals............. 9,594 11.5 10,552 12.1 18,597 9.6 22,512 11.2
------- ------ ------- ------ -------- ----- -------- -----
Total................ $83,675 100.0% $87,441 100.0% $194,338 100.0% $201,662 100.0%
======= ====== ======= ====== ======== ===== ======== =====
INCOME (LOSS) FROM OPERATIONS:
Nitrogen products............. $ 1,007 203.4% $(4,185) (96.5)% $ 9,407 115.2% $ 3,376 69.7%
Electrochemical products...... 567 114.5 862 19.9 2,238 27.4 3,805 78.7
Alumina chemicals............. 620 125.3 642 14.8 (468) (5.7) 481 9.9
Corporate..................... (1,699) (343.2) (1,655) (38.2) (3,013) (36.9) (2,821) (58.3)
------- ------ ------- ------ -------- ----- -------- -----
Total................ $ 495 100.0% $(4,336) (100.0)% $ 8,164 100.0% $ 4,841 100.0%
======= ====== ======= ====== ======== ===== ======== =====
</TABLE>
28
<PAGE> 31
RESULTS OF OPERATIONS
Comparison of Three Months Ended August 31, 1997 and August 31, 1996
Net Sales. Net sales for the quarter ended August 31, 1997 decreased $3.8
million (4.3%) to $83.7 million from $87.4 million for the quarter ended August
31, 1996.
The Nitrogen Products segment's net sales for the quarter ended August 31,
1997 decreased $0.2 million (0.4%) compared to the corresponding quarter in the
preceding year. The decrease in net sales was primarily due to decreased sales
volume at the Crystal City facility of $1.9 million and decreased sales volume
from the Company's warehousing facilities of $1.3 million both of which resulted
primarily from an earlier planting season as compared to the prior year. Such
decreases were partially offset by (i) increased sales of $2.2 million
experienced in blasting grade ammonium nitrate due to higher prices as a result
of stronger demand from certain coal mining markets and (ii) increased sales
volume in our industrial ammonia distribution facilities of $0.6 million.
The Electrochemical Products segment's net sales for the quarter ended
August 31, 1997 decreased $2.6 million (10.3%) compared to the corresponding
quarter in the preceding year. The decrease reflects reductions of caustic soda
and chlorine net sales of $2.8 million and an increase in fluorocarbon net sales
of $0.2 million. Caustic soda and chlorine net sales decreased $2.8 million
primarily as a result of a decrease in ECU prices.
The Alumina Chemicals segment's net sales for the quarter ended August 31,
1997 decreased $1.0 million (9.4%) compared to the corresponding quarter in the
preceding year. The decline during the quarter was due to reduced net sales of
calcined and tabular alumina products of $0.9 million as a result of the sale of
those production facilities to C-E Baton Rouge, Inc. ("C-E") on April 1, 1996.
In addition, during the quarter, the Company experienced decreased net sales of
$0.6 million in its active alumina products due to decreased sales. Such
decrease was offset by an increase in net sales of $0.6 million in active
alumina products and Versal(R) due to increased sales prices.
Income (Loss) from Operations. Income (loss) from operations for the
quarter ended August 31, 1997 increased $4.8 million (111.4%) to $0.5 million
from ($4.3 million) for the quarter ended August 31, 1996.
The Nitrogen Products segment's income from operations increased by $5.2
million (124.1%) for the quarter ended August 31, 1997 as compared to the
corresponding quarter in the prior year. This increase was primarily due to
increased sales prices of $4.6 million in blasting grade ammonium nitrate and
ammonia, decreased labor, environmental remediation and other costs of $2.3
million and decreased natural gas costs of $0.5 million. Such increases were
partially offset by a loss on disposals of certain assets of $1.6 million and
decreased sales volume of $1.1 million on ammonia.
The Electrochemical Products segment's income from operations decreased by
$0.3 million (34.2%) for the quarter ended August 31, 1997 as compared to the in
the prior year. This decline was a result of decreased income from operations in
chlorine and caustic soda of $1.5 million offset by increased income from
operations in fluorocarbons of $1.2 million. The decrease in chlorine and
caustic soda income from operations was primarily the result of the decline in
ECU prices of $2.7 million and decreased income from operations on chlorine and
caustic soda of $0.8 million primarily due to decreased energy yields. The
offsetting increase in income from operations in chlorine and caustic soda of
$2.0 million resulted primarily from decreased maintenance and other costs as
compared to the corresponding quarter in the prior year when production problems
adversely impacted sales volume and profitability and decreased energy costs of
$0.5 million. The increase in income from operations in fluorocarbons was also
attributable to decreased maintenance and other costs incurred in the current
quarter as compared the corresponding quarter in the prior year.
The Alumina Chemicals segment's income from operations decreased by $22,000
(3.4%) for the quarter ended August 31, 1997 as compared to the corresponding
quarter in the prior year.
Corporate Expenses. Corporate expenses for the quarter ended August 31,
1997 increased $44,000 (2.7%) for the quarter ended August 31, 1996. For the
quarters ended August 31, 1997 and 1996, as a percentage of net sales, these
corporate expenses were 2.0% and 1.9%, respectively.
29
<PAGE> 32
Income From Equity Investments. Income from equity investments for the
quarter ended August 31, 1997 totaled $0.9 million compared to $1.2 million for
the quarter ended August 31, 1996. Income from equity investments reflects
equity income attributable to several joint ventures. The decrease in equity
income was primarily due to a decline in income earned from the Kaiser LaRoche
Hydrate Partnership as a result of increased costs incurred by the partnership.
Other Income (Loss), Net. For the quarter ended August 31, 1997, other
income (loss), net was $88,000 compared to other income (loss), net of ($44,000)
for the quarter ended August 31, 1996.
Interest and Amortization of Debt Expense. For the quarter ended August
31, 1997, interest and amortization of debt expense was $3.8 million compared to
interest and amortization of debt expense of $3.6 million for the quarter ended
August 31, 1996. The increase was due primarily to increased borrowings under
the Company's revolving credit facility.
(Provision) Benefit for Income Taxes. (Provision) benefit for income taxes
for the quarter ended August 31, 1997 was ($0.9 million), a $1.8 million
decrease from the quarter ended August 31, 1996. The decrease reflects the
increase in income before income taxes as compared to the corresponding quarter
in the prior year. The Company's effective tax rate was 40.0% and 41.0% for the
quarters ended August 31, 1997 and August 31, 1996, respectively.
Net Loss. As a result of the factors described above, net loss for the
quarter ended August 31, 1997 was ($1.4 million) as compared to ($4.0 million)
in the quarter ended August 31, 1996.
Comparison of Six Months Ended August 31, 1997 and August 31, 1996
Net Sales. Net sales for the six months ended August 31, 1997 decreased
$7.3 million (3.6%) to $194.3 million from $201.7 million for the six months
ended August 31, 1996.
The Nitrogen Products segment's net sales for the six months ended August
31, 1997 increased $4.0 million (3.1%) compared to the corresponding six months
in the preceding year. The increase in net sales was primarily due to (i)
increased volumes and selling prices (other than at the Crystal City facility,
see below) which resulted in an increase in net sales of $6.4 million in
blasting grade due to stronger demand from certain coal mining markets, (ii)
increased sales volume of $5.6 million from the Company's warehousing facilities
which resulted from better regional weather and planting conditions in the
current year and (iii) increased sales volume of ammonia of $1.6 million. Such
increases were partially offset by decreased net sales of $4.5 million primarily
as a result of decreased prices of ammonia and other products in agricultural
markets experienced during fiscal year 1998. In addition, the Nitrogen Products
segment experienced decreased sales volume at the Crystal City facility of $2.8
million due to the idling of the blasting grade ammonium nitrate plant at the
facility in the spring of 1996 and decreased sales volume at the Cherokee
facility of $1.6 million due to a delay in start up of the Phase II expansion.
The project was completed in February 1997 and is expected to increase the
ammonium nitrate production capacity of the facility.
The Electrochemical Products segment's net sales for the six months ended
August 31, 1997 decreased $7.4 million (14.4%) compared to the corresponding six
months in the preceding year. The decrease reflects reductions of caustic soda
and chlorine net sales of $5.3 million and fluorocarbon net sales of $2.1
million. Caustic soda and chlorine net sales decreased primarily as a result of
a decrease in ECU prices which resulted in a decrease in net sales of $6.5
million. The impact of the decrease in ECU prices was partially offset by
increased sales volumes in caustic and chlorine products of $1.2 million due to
increased market demand and the correction of production problems experienced in
the prior year. The fluorocarbon net sales decrease was due primarily to
decreased net sales of CFCs R-11 and R-12 of $4.3 million resulting from the
federally-mandated withdrawal from production of certain fluorocarbon products
as of January 1, 1996. This impact of the decrease was partially offset by
increased sales volume in R-141b of $1.6 million and increased sales volume at
LaRoche Air Systems Inc. of $0.6 million.
The Alumina Chemicals segment's net sales for the six months ended August
31, 1997 decreased $3.9 million (17.4%) compared to the corresponding six months
in the preceding year. The decline during the six months was due to reduced net
sales of calcined and tabular alumina products of $2.5 million as a result of
the
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<PAGE> 33
sale of those production facilities to C-E Baton Rouge, Inc. ("C-E") on April 1,
1996 and decreased net sales of $2.1 million of active aluminas due to decreased
sales volume.
Income from Operations. Income from operations for the six months ended
August 31, 1997 increased $3.3 million (68.6%) to $8.2 million from $4.8 million
for the six months ended August 31, 1996.
The Nitrogen Products segment's income from operations increased by $6.0
million (178.6%) for the six months ended August 31, 1997 as compared to the
corresponding six months in the prior year. This increase was partially due to
decreased labor, environmental remediation and other costs of $3.6 million and
decreased natural gas costs of $2.0 million. In addition, the Nitrogen Products
segment experienced increased income from operations of $1.3 million as compared
to the prior year in blasting grade ammonium nitrate and ammonia sold at its
distribution facilities. Such increases were primarily as a result of increased
demand from certain coal mining markets and better regional weather and planting
conditions (as discussed above). The Nitrogen Products segment's income from
operations for the six months ended August 31, 1997 also includes approximately
$900,000 as a result of an insurance recovery related to previously disclosed
production problems during fiscal year 1997 and a loss on the disposal of
certain assets of $1.6 million.
The Electrochemical Products segment's income from operations decreased by
$1.6 million (41.2%) for the six months ended August 31, 1997 as compared to the
corresponding six months in the prior year. This decline was a result of
decreased income from operations in chlorine and caustic soda of $1.8 million
offset by increased income from operations in fluorocarbons of $0.2 million.
Income from operations in chlorine and caustic soda includes a decrease of $4.8
million as compared to the prior year which resulted from a decline in ECU
prices that was partially offset by decreased energy cost in the production of
caustic and chlorine products and increased market demand. The offsetting
increase in income from operations in chlorine and caustic soda of $3.0 million
resulted primarily from decreased maintenance and other costs (as discussed
above). In addition, income from operations in fluorocarbons includes decreased
net sales of CFCs R-11 and R-12 of $2.4 million. The offsetting increase in
income from operation in fluorocarbons of $2.6 million was also attributable to
decreased maintenance and other costs incurred as compared to the prior year.
The Alumina Chemicals segment's loss from operations increased by $0.9
million (197.3%) for the six months ended August 31, 1997 as compared to the
corresponding six months in the prior year. This increase is due to increased
repair and maintenance and other costs of $1.9 million. Such increase was offset
partially by the sale of the calcined and tabular alumina production facilities
to C-E Baton Rouge, Inc. ("C-E") on April 1, 1996 which resulted in a decreased
loss of approximately $0.6 million in income from operations.
Corporate Expenses. Corporate expenses for the six months ended August 31,
1997 increased $0.2 million (6.8%) to $3.0 million from $2.8 million for the six
months ended August 31, 1996. For the six months ended August 31, 1997 and 1996,
as a percentage of net sales, these corporate expenses were 1.6% and 1.4%,
respectively.
Income From Equity Investments. Income from equity investments for the six
months ended August 31, 1997 totaled $2.1 million compared to $2.2 million for
the six months ended August 31, 1996. Income from equity investments reflects
equity income attributable to several joint ventures.
Other Income, Net. For the six months ended August 31, 1997, other income,
net was $49,000 compared to other income, net of $27,000 for the six months
ended August 31, 1996.
Interest and Amortization of Debt Expense. For the six months ended August
31, 1997, interest and amortization of debt expense was $7.7 million compared to
interest and amortization of debt expense of $7.6 million for the six months
ended August 31, 1996. The increase was due primarily to increased borrowings
under the Company's revolving credit facility.
(Provision) Benefit for Income Taxes. (Provision) benefit for income taxes
for the six months ended August 31, 1997 was $1.0 million, a $1.3 million
increase from the six months ended August 31, 1996. The increase reflects the
increase in income before income taxes as compared to the corresponding six
months in the prior year. The Company's effective tax rate was 40.0% and 52.8%
for the six months ended August 31, 1997 and August 31, 1996, respectively.
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<PAGE> 34
Net Income (Loss). As a result of the factors described above, net income
(loss) for the six months ended August 31, 1997 was $1.5 million. Net income
(loss) increased $1.8 million from ($0.2 million) in the six months ended August
31, 1996.
The following table presents business segment information for the fiscal
years ended February 28, 1995, February 29, 1996 and February 28, 1997,
respectively:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
FEBRUARY 28, 1995 FEBRUARY 29, 1996 FEBRUARY 28, 1997
------------------- ------------------- -------------------
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
Nitrogen Products.................................. $234,909 55.8% $248,438 55.3% $242,408 63.9%
Electrochemical Products........................... 126,509 30.1 138,775 30.9 96,738 25.5
Alumina Chemicals.................................. 59,305 14.1 61,769 13.8 40,139 10.6
-------- ----- -------- ----- -------- -----
Total..................................... $420,723 100.0% $448,982 100.0% $379,285 100.0%
======== ===== ======== ===== ======== =====
INCOME (LOSS) FROM OPERATIONS:
Nitrogen Products.................................. $ 13,833 37.2% $ 20,468 46.2% $ 11,710 110.1%
Electrochemical Products........................... 24,818 66.7 29,624 66.9 8,562 80.4
Alumina Chemicals.................................. 2,196 5.9 (448) (1.0) (3,897) (36.6)
Corporate.......................................... (3,642) (9.8) (5,359) (12.1) (5,738) (53.9)
-------- ----- -------- ----- -------- -----
Total..................................... $ 37,205 100.0% $ 44,285 100.0% $ 10,637 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
Comparison of Years Ended February 28, 1997 and February 29, 1996
Net Sales. Net sales for the fiscal years 1997 decreased to $379.3 million
$449.0 million in fiscal year 1996, a decrease of $69.7 million (15.5%).
The Nitrogen Products segment's net sales decreased $6.0 million (2.4%) due
primarily to increased internal consumption of ammonia produced by Avondale
Ammonia ("Avondale Ammonia"), an equally-held joint venture between the Company
and Cytec Industries Inc. ("Cytec"), as well as production problems experienced
at the Avondale Ammonia facility, resulting in reduced net sales of $14.4
million. In connection with the formation of Avondale Ammonia in July 1994, the
Company agreed to fulfill certain market-based sales commitments expiring within
approximately one year of the formation of Avondale Ammonia. Approximately
one-half of the sales commitments were renewed on an annual basis. Accordingly,
the Company's ammonia sales declined during 1997 as such sales commitments
expired and the ammonia became available for internal consumption. In addition,
the Company experienced decreased sales volumes at its nitrogen warehouses and
industrial ammonia locations of $13.1 million primarily as a result of poor
regional weather and planting conditions. Such decreases were partially offset
by increased net sales of $26.2 million resulting from the purchase of the
Seneca blasting grade ammonium nitrate facility during December 1995.
The Electrochemical Products segment's net sales decreased $42.0 million
(30.3%) primarily due to a $33.1 million decrease in sales volume of
fluorocarbon products as a result of the federally-mandated withdrawal from
production of CFCs R-ll and R-12 and the Company's exit from packaged
refrigerant products. Also contributing to the decline in net sales were
decreased ECU prices of $6.1 million experienced during fiscal year 1997.
The Alumina Chemicals segment's net sales decreased $21.6 million (35.0%)
which consisted primarily of: (i) $11.9 million from the formation of CRILAR and
the resulting exclusion of certain sales from net sales and production problems
experienced at the remaining Versal(R) facility and (ii) $14.5 million from the
sale of the calcined and tabular alumina production facilities to C-E on April
1, 1996. Such decreases were partially offset by increased activated alumina net
sales of $4.9 million.
Income from Operations. Income from operations for fiscal year 1997
decreased to $10.6 million from $44.3 million in fiscal year 1996, a decrease of
$33.6 million (76.0%).
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<PAGE> 35
The Nitrogen Products segment's income from operations decreased by $8.8
million (42.8%) during fiscal year 1997 as compared to the preceding year. This
decrease was primarily due to increased natural gas costs of $5.8 million (as
discussed above) and increased environmental remediation costs of $1.1 million
as compared to fiscal 1996. The Nitrogen Products segment's income from
operations for fiscal year 1997 also includes a $1.5 million charge to selling,
general and administrative expense as a result of a plea agreement with the
United States Department of Justice. See "Business -- Legal Proceedings."
The Electrochemical Products segment's income from operations decreased by
$21.1 million (71.1%) during fiscal year 1997 as compared to the preceding year.
This decrease consisted primarily of lower income from operations in chlorine
and caustic soda of $14.5 million and fluorocarbons of $5.5 million. The decline
in chlorine and caustic soda profitability resulted from (i) reduced income from
operations of $12.5 million because of lower ECU prices and production problems
and (ii) the $4.5 million effect of increased natural gas prices, which were
partially offset by $2.6 million of lower maintenance and other costs. A $6.3
million decrease in fluorocarbons income from operations, resulting from the
federally-mandated withdrawal from production of certain fluorocarbons and
refrigerant products was partially offset by reduced cost of $800,000 in the
Company's HCFC R-141b operations.
The Alumina Chemicals segment's loss from operations increased by $3.4
million during fiscal year 1997 as compared to the preceding year. The increase
was primarily the result of the formation of CRILAR and the resulting exclusion
of certain gross profits from the segment's income from operations. Income from
operations for the Alumina Chemicals segment was also negatively affected by the
operating agreement entered into with C-E upon the disposition of the calcined
and tabular businesses as the Company incurred costs associated with the
transition of operations to C-E during fiscal year 1997.
Corporate Expenses. Corporate expenses for fiscal year 1997 increased
$379,000 to $5.7 million from $5.3 million for fiscal year 1996. For fiscal
years ended 1997 and 1996, as a percentage of net sales, these corporate
expenses were 1.5% and 1.2%, respectively.
Interest and Amortization of Debt Expense. Interest expense for fiscal
year 1997 decreased to $14.9 million from $16.0 million in fiscal year 1996, a
decrease of $1.1 million (6.8%). The decrease resulted from repayments on higher
rate debt obligations of $11.7 million and interest capitalized on major capital
projects of $860,000. The Company capitalized no interest on major capital
projects in fiscal year 1996.
Income from Equity Investments. Income from equity investments increased
to $4.9 million in fiscal year 1997 from $2.6 million in fiscal year 1996, an
increase of $2.3 million (85.5%). Equity income attributable to CRILAR and
increases in income from the Kaiser LaRoche Hydrate Partnership, a partnership
with Kaiser in which the Company acquired a 45% interest (the "Hydrate
Partnership"), due primarily to increased sales by the partnership, accounted
for the increase.
Other Income, Net. Other income, net, for fiscal year 1997 decreased to
$411,000 from $1.2 million for fiscal year 1996, a decrease of $752,000 (64.7%).
The decrease is primarily attributable to the decrease in interest income earned
in fiscal year 1997.
Provision For Income Taxes. Provision for income taxes for fiscal year
1997 decreased to $417,000 from $13.2 million for fiscal year 1996, a decrease
of $12.8 million (96.8%). The effective tax rates were 38.8% and 41.0% for
fiscal years 1997 and 1996, respectively. The Company's effective tax rate in
fiscal year 1997 was adversely affected by the non-deductible charge relating to
the United States Department of Justice fine, which was offset by certain
one-time benefits from the resolution of federal tax audits and amendments to
prior tax returns.
Net Income. As a result of the factors described above, net income for
fiscal year 1997 was $659,000. Net income decreased $18.3 million from the
preceding year.
Comparison of Years Ended February 29, 1996 and February 28, 1995
Net Sales. Net sales for fiscal year 1996 increased to $449.0 million from
$420.7 million in fiscal year 1995, an increase of $28.3 million (6.7%).
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<PAGE> 36
The Nitrogen Products segment's net sales increased $13.5 million (5.8%)
due to additional sales volume primarily as a result of the purchase of the
Seneca facility and higher sales price of ammonia.
The Electrochemical Products segment's net sales increased $12.3 million
(9.7%) due primarily to increases in chlorine and caustic soda sales of $13.6
million coupled with steady sales of fluorocarbons as compared to the prior
year. A chlorine and caustic plant outage at the Gramercy facility over an
extended period during fiscal year 1995 resulted in increased sales volume
during fiscal year 1996 compared to fiscal year 1995. Also contributing to
greater net sales were higher caustic soda prices during fiscal year 1996. An
increase in HCFC R-141b net sales of $9.4 million partially offset reduced net
sales of $11.0 million which resulted from the decreased sales volume of other
fluorocarbon products and lower CFC R-11 and R-12 sales prices. As of January 1,
1996, the Company completed the phase-out of the production of CFCs R-11 and
R-12.
The Alumina Chemicals segment's net sales increased $2.5 million (4.2%) due
primarily to a change in sales product mix to higher priced alumina chemical
products.
Income From Operations. Income from operations for fiscal year 1996
increased to $44.3 million from $37.2 million in fiscal year 1995, an increase
of $7.1 million (19.0%).
The Nitrogen Products segment's income from operations increased by $6.6
million (48.0%) during fiscal year 1996 as compared to the preceding year. This
increase was primarily due to higher ammonia prices experienced during the year.
The Electrochemical Products segment's income from operations increased by
$4.8 million (19.4%) during fiscal year 1996 as compared to the preceding year.
This increase was primarily due to higher caustic soda prices and increased
sales volumes (as discussed above). The Company's income before income taxes
during fiscal year 1995 was impacted adversely by $1.6 million due to the
temporary outage of the chlor-alkali plant.
The Alumina Chemicals segment's income from operations decreased by $2.6
million (120.4%) during fiscal year 1996 as compared to the preceding year. This
decrease was primarily due to costs associated with the calcined and tabular
businesses disposition coupled with a change in sales product mix to higher cost
alumina chemical products. In fiscal year 1996 and 1995, the calcined and
tabular businesses recognized losses from operations of $4.7 million and $3.0
million, respectively.
Corporate Expenses. Corporate expenses for fiscal year 1996 increased $1.7
million to $5.4 million from $3.6 million for fiscal year 1995. For fiscal years
ended 1996 and 1995, as a percentage of net sales, these corporate expenses were
1.2% and 0.9%, respectively.
Interest and Amortization of Debt Expense. Interest expense for fiscal
year 1996 increased to $16.0 million from $13.1 million in fiscal year 1995, an
increase of $2.9 million (22.1%). The increase was attributable to the
additional interest incurred on the Existing Notes which were outstanding
throughout fiscal year 1996, but only outstanding for a portion of fiscal year
1995.
Income From Equity Investments. Income from equity investments increased
to $2.6 million in fiscal year 1996 from $2.5 million in fiscal year 1995, an
increase of $107,000 (4.2%). Equity income attributable to CRILAR, offset by a
$1.1 million decrease in income attributed to the Hydrate Partnership due to
higher raw material costs, accounted for the increase.
Other Income, Net. Other income, net, for fiscal year 1996 decreased to
$1.2 million from $1.6 million for fiscal year 1995, a decrease of $418,000
(26.4%).
Provision For Income Taxes. Provision for income taxes for fiscal year
1996 increased to $13.2 million from $12.3 million for fiscal year 1995, an
increase of $873,000 (7.1%). The effective tax rates were 41.0% and 43.5% for
fiscal year 1996 and 199S, respectively, a 5.7% decrease.
Minority Interests. Minority interests for fiscal year 1996 decreased to
$0 from $2.1 million in fiscal year 1995 due to the purchase of minority shares
of LaRoche Chemicals Inc. in August 1994 concurrent with the completion of the
sale of the Existing Notes.
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<PAGE> 37
Net Income. As a result of the factors described above, net income for
fiscal year 1996 was $19.0 million. Net income increased $5.9 million from the
preceding year.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Net cash provided by operating activities was $24.2
million and $22.9 million for the six months ended August 31, 1997 and 1996,
respectively. The increase was primarily the result of increased net income
before depreciation and amortization and other non-cash charges offset partially
by less significant reductions in working capital than in the corresponding six
months in the prior year. Net cash provided by operating activities for fiscal
years 1997, 1996 and 1995 was $25.3 million, $60.8 million and $5.5 million,
respectively. The decrease in net income and changes in working capital
requirements contributed primarily to the decrease in net cash provided by
operating activities in fiscal year 1997. The Company experienced a less
significant increase in working capital requirements during fiscal year 1997
compared to a substantial decline in working capital requirements experienced in
fiscal year 1996. Such decreases experienced in fiscal year 1996 resulted
primarily from significant decreases in inventories from fiscal year 1995 due to
a reduction in fluorocarbon inventories resulting from the government-mandated
phase-out of production of CFCs R-11 and R-12 and a decrease in nitrogen
products purchased for resale. Management does not expect the Company to
experience these significant fluctuations in the future.
Investing and Financing Activities. Net cash used in investing activities
was $18.6 million for the six months ended August 31, 1997 compared to $11.6
million in the six months ended August 31, 1996. The primary use of cash for the
six months ended August 31, 1997 was capital expenditures of $16.2 million.
Major capital expenditures included $1.8 million for the Phase II Cherokee
expansion which was completed in February 1997 (as discussed above), $2.5
million for projects to improve the electrical systems at the Gramercy
powerhouse and $3.3 million for the Company's ongoing software implementation
project and other capital projects of $5.2 million. For the six months ended
August 31, 1996, capital expenditures of $12.7 million and plant turnarounds of
$2.6 million, partially offset by proceeds of $4.1 million from the sale to C-E
of certain calcined and tabular alumina production equipment and other assets,
accounted for the majority of net cash used by investing activities. Major
capital expenditures during the six months ended August 31, 1996 included $3.6
million for the Cherokee facility expansion projects and $0.8 million for the
Gramercy powerhouse improvement projects. Phases I and II of the Cherokee
facility projects have been completed and are expected to improve ammonium
nitrate prill production and reduce emissions. The powerhouse projects are
expected to increase the reliability and efficiency of the powerhouse operations
at the Gramercy chlorine and caustic soda facility and are expected to be
substantially completed during fiscal year 1998. The Company intends to use cash
flows from operations, proceeds from the Notes and borrowings under the Credit
Facility as the source of funds for the projects mentioned above.
Net cash used by financing activities was $3.5 million and $11.3 million
for the six months ended August 31, 1997 and 1996, respectively. Cash used by
financing activities of $3.5 million for the six months ended August 31, 1997
included repayments of $2.8 million of long-term debt. During the six months
ended August 31, 1997, the Company made its final payment on the USX Notes. Cash
used by financing activities of $11.3 million for the six months ended August
31, 1996 included the $7.5 million repurchase of common stock with put rights,
net repayments of $1.5 million of outstanding indebtedness under the Company's
revolving credit facility, repayments of $4.8 million of long-term debt,
partially offset by the receipt of $2.9 million on the sale of redeemable common
stock.
Net cash used in investing activities for fiscal years 1997, 1996 and 1995
were $39.7 million, $52.0 million and $32.0 million, respectively. The primary
use of cash for investing activities during fiscal year 1997 was for capital
expenditure projects. Significant fiscal year 1997 capital expenditures related
to the Company's strategic growth plan. Major projects which were in process
during fiscal year 1997 included Phases I and II of the Cherokee facility
expansion and the Gramercy powerhouse improvement projects. The Company also
incurred costs of approximately $1.5 million for its ongoing software
implementation project. The project will replace the Company's existing software
for all software applications, including the financial and manufacturing
systems. The Company expects to complete the implementation of the software
project during fiscal year 1999. Net cash used in investing activities for
fiscal year 1996 included $37.5 million for the purchase of the
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<PAGE> 38
Seneca facility in December 1995. Net cash used in investing activities for
fiscal year 1995 included capital expenditures of $17.7 million and investments
of $13.4 million. Such spending included the acquisition of the Company's
interest in Avondale Ammonia, construction of an active aluminas plant, the
completion of the construction of the HCFC R-141b fluorocarbon plant, and the
purchase of a new fertilizer warehouse.
During fiscal year 1997, proceeds of $3.1 million from the sale of the
Company's calcined and tabular operations and $600,000 from the sale of other
properties contributed cash of $3.7 million. In addition, proceeds from the sale
to CRILAR of the 50% interest in the Versal II plant and $1.0 million from the
sale of other properties contributed to cash of $6.5 million in fiscal year
1996.
Net cash (used)/provided by financing activities for fiscal years 1997,
1996 and 1995 was $12.3 million, ($11.3) million and $28.3 million,
respectively. Cash provided in 1997 was primarily due to borrowings of $32.9
million under the then-existing credit facility. Such amounts were primarily
used to fund the Company's capital expenditures during 1997, as discussed above.
In addition, the Company repaid $11.7 million of long-term debt, including
pre-payments of $5.2 million and scheduled payments of $5.0 million on the USX
Notes. Fiscal year 1997 activity also included payments of $7.5 million to
repurchase common stock of the Company pursuant to rights of a former officer.
Cash used by financing activities in 1996 was primarily due to the repayment of
debt, specifically a pre-payment of $7.4 million and scheduled payments of $4.0
million on the USX Notes. Cash provided by financing activities in 1995 was
primarily the result of the issuance of $100 million of 13% Notes. Proceeds from
the 13% Notes were used for the retirement of debt, the repurchase of
outstanding LCI minority shares and the repurchase of certain shares of stock
from a retiring executive officer. In addition, a portion of the proceeds was
used to retire the bridge financing associated with the acquisition of the
Company's interest in Avondale Ammonia.
Dividend payments of an aggregate of $912,000 and $439,000 were paid during
fiscal year 1997 and the six months ended August 31, 1997, respectively. On
October 10, 1997, the Company's Board approved dividend payments of $328,000 to
all shareholders of record as of September 30, 1997. The Board may or may not
declare additional dividends in the future depending upon the financial
condition of the Company and restrictions pursuant to the Company's debt
instruments.
Management anticipates that the Company's existing capital resources, cash
flow generated from future operations and drawings under the Revolving Credit
Facility will enable it to maintain its planned operations, capital expenditures
and debt service for the foreseeable future.
ENVIRONMENTAL AND LEGAL MATTERS
Due to the nature of the Company's business, it must continually monitor
compliance with all applicable environmental laws and regulations. As of
February 28, 1997, the Company had recorded $1.9 million of current liabilities
and $2.6 million of non-current liabilities to reflect the estimated future
costs associated with environmental matters. A significant portion of the
recorded liabilities is attributable to a soil and groundwater contamination
incident at the Company's Gramercy facility in fiscal year 1990. Remediation at
such facility is being conducted in accordance with a work plan approved by the
Louisiana Department of Environmental Quality. Future expenditures for the
Gramercy facility are anticipated to be approximately $2.2 million and are
anticipated to be paid over the next few years. In addition, the Company has
recorded liabilities attributable to the Greensboro, North Carolina fertilizer
plant contamination. Future expenditures by the Company for the Greensboro
facility are anticipated to be between $1.7 million and $3.0 million. See
"Business -- Legal Proceedings."
Under the asset purchase agreements with USX and Kaiser, both USX and
Kaiser retained liability under certain circumstances for environmental matters
that existed prior to the dates of the respective transactions. In connection
with the Company's sale of certain of the businesses it originally bought from
USX in 1986, the Company retains some degree of liability for environmental
matters that existed prior to the date of sale. See "Business -- Environmental
Proceedings."
Capital expenditures made to address environmental matters were $1.2
million, $1.5 million and $7.8 million in fiscal years 1995, 1996 and 1997,
respectively. Included in fiscal 1997 expenditures is approximately
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<PAGE> 39
$5.9 million related to certain emissions abatement equipment at the Cherokee
facility that allows the Company to operate a nitric acid plant at a
substantially higher capacity than in recent years without exceeding limitations
on certain emissions.
On June 27, 1996, Marathon Oil Company and Marathon Pipe Line Company
(together, "Marathon") initiated litigation against the Company and another
defendant in connection with a 1995 petroleum release near the Company's
Gramercy facility, and in connection therewith a class action lawsuit was filed
against the Company and Marathon. Because the matter is in a preliminary stage,
it is not yet possible to predict whether the Company will incur any liability
for the rupture and release or to reasonably estimate the cost of any possible
liability. See "Business -- Legal Proceedings."
The Company is a participant in certain other legal actions, claims and
remedial activities. Management of the Company believes that, based upon the
information currently available, such other legal actions, claims and remedial
activities are likely to be resolved without a material adverse effect upon the
Company's financial condition and results of operations. However, the aggregate
cost of such legal actions, claims and remedial activities are inherently
impossible to predict and there can therefore be no assurance that this will be
the case. See "Business -- Legal Proceedings."
RECENTLY ISSUED ACCOUNTING STANDARDS
Effective March 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of ("SFAS No. 121"). SFAS No. 121
requires that long-lived assets to be held and used by an entity, certain
identifiable intangibles and goodwill be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The adoption of this accounting standard did not have a
material effect on the Company's operating results or financial condition.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, Environmental Remediation Liabilities ("SOP
96-1"). SOP 96-1 provides guidance with respect to the recognition, measurement
and disclosure of environmental remediation liabilities. The Company adopted SOP
96-1 effective March 1997. Adoption of SOP 96-1 did not have a material effect
on the Company's operating results or financial condition.
In June 1997, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS No. 131"). SFAS No. 131 establishes standards for
disclosures of segment information about products and services, geographic
areas, major customers and certain interim disclosures of segment information
which are not required by accounting standards currently applied by the Company.
The Company will adopt SFAS No. 131 in the first quarter of fiscal 1999.
Currently, the Company is evaluating this standard and is uncertain as to the
impact it will have on the Company's consolidated financial statements.
SEASONALITY
Demand for the Company's fertilizer products is seasonal. Such seasonality
of demand requires the Company to build its inventory in anticipation of periods
of peak demand and may adversely affect the Company's cash flow. The Company
typically realizes higher prices and margins for fertilizer during the spring
and, to a lesser extent, the fall planting seasons. Demand for the Company's
fertilizer is primarily dependent on United States agricultural conditions,
which can be volatile as a result of a number of factors, the most important of
which are weather patterns and conditions, current and projected grain stocks
and prices, and the United States government's agricultural policy. Due to
fertilizer seasonality, interim results of operations may not be indicative of
the results expected for the full fiscal year. In addition, the Company
periodically performs extended major maintenance on its manufacturing facilities
that results in periods of reduced production at such facilities. Due to the
timing of these activities and other factors, interim results of operations may
not be indicative of the results expected for the full fiscal year.
37
<PAGE> 40
BUSINESS
THE COMPANY
LaRoche Industries Inc. is a major domestic diversified producer and
distributor of inorganic chemicals. The Company's products are divided into
three business segments: Nitrogen Products, Electrochemical Products and Alumina
Chemicals. The Company produces and distributes various Nitrogen Products,
including nitrogen-based fertilizers essential for crop growth and
nitrogen-based blasting agents for industrial explosives. In its Electrochemical
Products, the Company is a merchant producer and marketer of chlor-alkali
chemicals, which are fundamental building blocks for products used in the
construction, pulp and paper, water treatment, detergent, pesticide and
pharmaceutical industries. The Company also produces Alumina Chemicals, which
are used in a variety of catalyst and adsorbent applications, including
environmental protection and abatement processes.
The Company was formed in a 1986 management buyout of the nitrogen, mixed
fertilizers and retail business operations of USX followed by a 1988 acquisition
of certain chemical production operations of Kaiser. The Company has assembled
and is continuing to develop a platform of three core businesses upon which it
believes it can realize long term growth and improved profitability. The Company
intends to achieve these objectives primarily through capital expenditures to
improve and expand existing facilities, new product development and strategic
acquisitions of attractively priced assets in the Company's core business
segments. Management believes the Company benefits from the sale of diversified
products with relatively independent business cycles and distinct markets. For
the fiscal year ended February 28, 1997, the Company had consolidated net sales
of $379.3 million and EBITDA of $39.1 million.
INDUSTRY OVERVIEW
NITROGEN PRODUCTS
Ammonia is produced from natural gas and is used primarily as a direct
application fertilizer, as an ingredient in a number of industrial chemicals and
as the basic building block to produce a variety of nitrogen-based products.
Ammonia is upgraded into a number of products including urea, ammonium nitrate,
UAN solution and nitric acid. These upgraded products are used in a variety of
applications including fertilizers and as a key ingredient in industrial
explosives.
In the production of ammonium nitrate, ammonia gas and air are burned in
the presence of a catalyst to form nitric acid. Additional ammonia is then used
to neutralize the nitric acid, forming ammonium nitrate liquor. This liquor is
either solidified and converted into granular pellets (or prilled) to produce
HDAN, a solid fertilizer, or LDAN, a blasting grade ammonium nitrate, or
combined with urea liquor to produce UAN solution, a liquid fertilizer product.
Approximately 60% of total United States ammonium nitrate production is
used in agricultural fertilizers, with the remaining 40% used as the main
component of most industrial explosives and blasting agents. The industry has
historically been relatively stable except for a depressed period between 1985
and 1987 when poor market conditions for both fertilizers and explosives
coincided. Since the early 1990's, the industry has been operating at or near
capacity due to strong demand for fertilizers stemming from tight global and
United States grain supplies and the recent deregulation of United States
farming due to the Freedom to Farm Act. Since ammonia is the critical raw
material in the ammonium nitrate production process, leading producers generally
derive significant profitability and supply reliability benefits from vertical
integration.
The United States accounts for approximately 14% of total world ammonium
nitrate capacity and is largely self-sufficient. Total capacity of 4.3 million
tons p.a. in the United States is forecast by industry consultants to increase
by about 3% p.a. through 2000. The market for ammonium nitrate in the United
States is characterized as mature with industry experts forecasting relatively
minimal but steady demand growth of 1% p.a. through 2000, driven by increasing
demand for ammonium nitrate for the fertilizer markets and stable demand for
ammonium nitrate from the coal mining industry. Management believes the
increased demand for
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ammonium nitrate, driven by the factors discussed below, will keep pace with
expected capacity increases, which may help to keep ammonium nitrate prices
relatively stable.
Fertilizer
Fertilizer products supply and enhance the natural fertility of soil by
replacing the essential nutrients that have been taken from the soil by previous
crops. The three primary nutrients in fertilizer that are essential to plant
growth are nitrogen, phosphate and potash. Typically, farmers add various
proportions of all three to the soil as fertilizer. Nitrogen, to a significantly
greater extent than phosphate or potash, must be reapplied each year in areas of
intense agricultural usage, and consequently year-to-year demand for nitrogen
fertilizer tends to be more consistent on a per acre planted basis than the
demand for other fertilizers.
Nitrogen fertilizer demand in the United States depends on a number of
factors, including total planted acreage of corn and wheat, the primary crops
which utilize nitrogen fertilizer, crop mix and fertilizer application rates.
Planted acreage and fertilizer application rates are determined primarily by the
planting decisions of farmers who are influenced by, among other things, the
profit that they expect to make on the investment to plant, grow and harvest
their crops. These profit expectations are in turn influenced by current and
projected grain stocks and prices, United States government agricultural
policies (including subsidy and acreage set-aside programs) and weather. World
grain stocks are currently at or near recent historical lows, which is leading
to an increase in the number of acres planted in the United States, and
subsequently to an increase in demand for nitrogen fertilizers. Nitrogen
fertilizer application rates are also affected by the type of crops planted and
local soil conditions. In recent years, nitrogen application rates have been
relatively stable.
Domestic nitrogen fertilizer producers also compete with foreign importers,
some of whom are able to offset high transportation costs by the direct receipt
of foreign government subsidies or low local natural gas prices. Imports from
Canada, Norway and the former Soviet Union have risen to approximately 500,000
tons p.a. to meet United States demand.
Total North American production capacity for nitrogen-based,
fertilizer-grade ammonium nitrate was approximately 2.55 million tons p.a. at
the end of 1996, as estimated by industry consultants. According to an industry
consultant, Mississippi Chemical Corporation is the leading North American
producer of HDAN with a 28% share of installed capacity followed by the Company
(11%), Unocal Corporation (9%), and El Dorado Chemical Company (9%). Because the
main competitive factor affecting price is cost of transportation, the
geographic area which a production facility can competitively supply tends to be
restricted.
Solid ammonium nitrate and ammonium nitrate solutions, including UAN
solutions, collectively account for approximately 21% of the total United States
nitrogen fertilizer market. Solid ammonium nitrate has historically served as
the primary nitrogen fertilizer for pastures and no-till row crops because it is
less prone to evaporation losses than other fertilizers. Demand for solid
ammonium nitrate has experienced a recent marginal decline due to competition
from ammonia and urea in the solid fertilizer markets. UAN solution, which is
applied as a liquid fertilizer product, has become increasingly popular because
it provides farmers with the flexibility to apply fertilizer to crops at various
stages of the planting cycle. This increase in popularity has led to increased
demand for UAN solution, which has compensated for the marginal decline in
demand for solid ammonium nitrate.
Blasting Grade Ammonium Nitrate
Total North American production capacity for blasting grade ammonium
nitrate was approximately 2.74 million tons p.a. at the end of 1996 as estimated
by industry consultants. Approximately 70% of ammonium nitrate-based blasting
agents and explosive tonnage are used in the mining of coal, the volume of which
is largely determined by electric power demand. Metals mining, quarry and road
construction activity also affect demand for these blasting products. According
to an industry consultant, ICI Explosives USA Inc. is the leading North American
producer of LDAN with a 21% share of industry capacity followed by Potash
Corporation of Saskatchewan Inc. (17%), Dyno Nobel Inc. (16%), and the Company
(16%). Overall demand tends to be cyclical reflecting the economic sensitivity
of industries consuming explosives.
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Freight charges typically account for a significant percentage of the
selling price of blasting grade ammonium nitrate, which limits the geography to
which manufacturers can deliver on a competitive basis. Competition is generally
divided between the eastern and western regions of the United States and is
based on price and product quality.
Producers of blasting grade ammonium nitrate historically sold excess
product as a nitrogen fertilizer. However, the industry has adopted policies
severely restricting sales of blasting-grade ammonium nitrate to the fertilizer
markets following the 1995 Oklahoma City bombing.
Industrial Ammonia
Anhydrous and aqua ammonia have a variety of industrial applications,
including the removal of nitrogen oxide pollutant gases from boiler and
incinerator emissions, refrigeration, fermentation, chemical processing, water
treatment, heat treating and waste acid neutralization. In response to the Clean
Air Act Amendments, which severely restrict the discharge of certain pollutants
into the environment, domestic demand for ammonia used in the treatment of
sulfur and nitrogen oxide gases has grown rapidly. These provisions call for
additional restrictions in the next several years. Measures currently being
discussed by the United States Environmental Protection Agency ("EPA") and
endorsed by the Clinton Administration would further tighten emission limits.
Although approximately 80% of ammonia is used for fertilizer applications,
industrial ammonia holds a growing share of the overall market.
ELECTROCHEMICAL PRODUCTS
Chlor-alkali
Chlorine and caustic soda, most commonly produced as co-products of salt
brine electrolysis in a fixed weight ratio of 1 to 1.12, are the sixth and
seventh most commonly produced chemicals, respectively, in the United States
based on volume. In salt brine electrolysis, an electric current is passed
through a salt crystal dissolved in water between immersed conductors, causing
the brine solution to break down into chlorine, caustic soda and hydrogen
by-product.
Chlorine is a critical intermediate used in the production of several
thousand derivative commercial chemicals, including PVC, polyurethane foams,
titanium dioxide and pesticides. These segments are the largest consumers with
the greatest growth potential for the future. The primary direct-application
uses of chlorine are in municipal water treatment, in the manufacture of
household and industrial bleach, and in the pulp and paper industry. Chlorine is
vital to public well-being given that greater than 85% of all pharmaceuticals,
more than 96% of all crop protection chemicals, and nearly all of North
America's municipal water systems are dependent on chlorine. Caustic soda is a
basic commodity chemical with even more diverse end-market applications than
chlorine. It is sold to manufacturers of aluminum, alumina chemicals, soaps,
detergents and petrochemicals, processors of pulp and paper, and for water
treatment. Caustic soda is most frequently valued for its neutralizing power as
a strong base and as an absorbent, rather than as a source of sodium.
Industry experts expect total United States chlorine demand to grow at an
average annual growth rate ("AAGR") of 2.5% through 2001, driven primarily by
4.5% average annual growth in demand from the PVC industry, which is the largest
end-market for chlorine and which accounts for approximately 29% of United
States consumption. PVC is a versatile thermoplastic used widely by the
construction industry in piping, films, wire and cable insulation, and floor
coverings. Overall chlorine demand growth is being tempered by the decline in
demand from: (i) the pulp and paper industry, as producers complete the
conversion to reduced-chlorine, elemental chlorine-free, or totally
chlorine-free products for bleaching purposes; and (ii) the CFC end-markets due
to those products' phase-out in accordance with the Montreal Protocols. Industry
experts expect the demand for caustic soda to grow at a slightly higher 2.6%
AAGR through 2001, driven by the pulp
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and paper industry for processing purposes, as well as stable demand in various
other chemical processing applications.
US CHLORINE -- DEMAND BY END-USE 1996
[PIE CHART SHOWING U.S. CHLORINE USE IN 1996, BROKEN DOWN INTO EIGHT CATEGORIES
OF USE WITH RESPECTIVE PERCENTAGES FOR EACH CATEGORY].
Source: CMAI, May 1997
US CAUSTIC SODA -- DEMAND BY END-USE 1996
[PIE CHART SHOWING U.S. CAUSTIC SODA USE IN 1996, BROKEN DOWN INTO NINE
CATEGORIES OF USE WITH RESPECTIVE PERCENTAGES FOR EACH CATEGORY].
Source: CMAI, August 1997
Historically, chlorine production in the United States has fluctuated over
the economic cycles, but has experienced a long-term average growth rate of
approximately 1.2% per annum during the period from 1973 to 1997. Chlorine is
difficult and dangerous to store in its elemental form, whereas caustic soda is
comparatively safe and stable and readily capable of being stored in large
quantities. As a result, demand for chlorine, generally dictated by the
construction industry, is the key driver for overall production volume of
chlorine and caustic soda. Generally, when demand for chlorine is high,
production levels and prices increase. This tends to be offset by over-supply of
caustic soda and weak caustic soda pricing. On the contrary, when chlorine
demand is weak, production levels and pricing decrease, causing caustic soda to
be in a tight supply position with attendant rising prices. The volatility in
the caustic soda market tends to be exacerbated by end-users building
inventories ahead of forecast shortages and price increases, and running down
inventories ahead of forecast over-supply and price weakness. As a result, an
inverse, although not perfectly correlated price relationship exists between
chlorine and caustic soda. The price of one ton of chlorine plus the price of
the accompanying 1.12 tons of caustic soda, known as an ECU, therefore tends to
be somewhat less volatile than the price of either commodity individually.
HISTORICAL CHLOR-ALKALI PRICES
[TABLE SHOWING THE HISTORICAL PRICE PER TON FOR CHLORINE, CAUSTIC SODA AND FOR
AN ECU, FROM FIRST QUARTER 1986 THROUGH FIRST QUARTER 1997].
Source: -- CMAI, August 1997
Chlor-alkali pricing decreased from a level of approximately $400 per ECU
ton in 1988 to below $200 per ECU ton by mid-1993 due to general declines in the
economy. The divergent behavior of chlorine and caustic soda prices was
particularly evident in 1991 when caustic soda prices reached a pre-recession
peak of $275 per ton during the second quarter, while chlorine prices dropped
below $50 per ton due to oversupply. The comparatively lower volatility of ECU
price levels during this time period demonstrated the industry's ability to
sustain normalized levels of profitability even with wide price variances for
the individual products. As the economy rebounded from the recession, both
chlorine and caustic soda prices recovered, with pricing eventually topping $400
per ECU at the peak of the commodity chemical cycle in 1995. Caustic soda prices
eased from the second half of 1995 through all of 1996 due to the accumulating
inventory levels caused by strong chlorine demand and reduced caustic soda
demand due to lower pulp and paper operating rates. As a result, prices fell off
to approximately $335-345 per ECU by the end of 1996 even as chlorine prices
remained strong due to the steady demand growth emanating from the PVC industry.
For the third quarter of 1997,
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contract chlorine and caustic soda prices have settled at $205-$225 per ton and
$95-$105 per ton respectively, resulting in prices ranging from $310-$345 per
ECU.
The chlor-alkali industry has consistently achieved operating rates in
excess of 90% since 1991, having recovered from a major period of
rationalization during the early 1980's when operating rates bottomed out at
just over 60%. The industry benefited from significant capacity reductions as
well as major capacity expansions by producers of chlorine derivatives during
that period. Despite recent announcements by a number of chlor-alkali producers,
including integrated producers Dow Chemical Co., Olin Corporation, Formosa
Plastics Corporation, and Shintech, Inc. to expand capacity, annual operating
rates within the chlor-alkali industry are expected by industry experts to
average over 95% through 2001 to meet anticipated demand growth.
UNITED STATES CHLORINE CAPACITY/PRODUCTION
[TABLE SHOWING HISTORICAL AND ESTIMATED U.S. CHLORINE PRODUCTION, CAPACITY AND
OPERATING RATE, FROM 1973 THROUGH 1995 (ESTIMATED FOR 1997).]
Source: CMAI, August 1997
Nearly one-third of the world's chlor-alkali production capacity is located
in North America, with approximately 70% situated along the United States Gulf
Coast. Chlor-alkali producers along the United States Gulf Coast are among the
lowest-cost industry producers, due to excellent feedstock logistics and close
proximity to downstream producers of products that consume chlorine and caustic
soda. According to industry consultants, the three largest chlor-alkali
producers in North America are Dow Chemical Co., Occidental Chemical Corporation
and PPG Industries Inc. with capacity shares of approximately 25%, 21%, and 13%
respectively. Most of the major United States Gulf Coast producers are fully
downstream integrated into products which involve the processing of chlorine. As
a result, there are relatively few merchant producers of chlorine.
Technology used in the manufacture of chlorine and caustic soda is based on
either diaphragm, membrane or mercury cells. Of these, the diaphragm cell
process is predominant in the United States with approximately 66% of total
capacity. Each of the mercury cell and membrane cell processes is used to
manufacture approximately 17% of chlorine in the United States.
The profitability of the industry as a whole and relative profitability
between producers is significantly affected by energy efficiency and the cost of
energy, since energy represents by far the largest cost component in the
production of chlorine and caustic soda (according to industry consultants,
energy accounts for an average of 37% of manufacturing costs for a diaphragm
cell based producer). Historically, market fluctuations in natural gas prices
have had a significant impact on industry profitability. Other key components in
relative profitability between producers are brine costs and logistics and
transport costs, largely driven by proximity to customers.
Fluorocarbons
Fluorocarbons are produced through the reaction of a chlorinated organic
compound with HF in the presence of a catalyst. Fluorocarbons are used as
refrigerants, blowing agents, raw materials for fluoro-
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<PAGE> 45
polymers, elastomers, and aerosol propellants in a wide variety of end-use
applications. In 1987, the United States signed the Montreal Protocols which,
for environmental reasons related to ozone depletion, mandated the total
phase-out of CFCs, their temporary replacement by HCFCs, and their ultimate
replacement by hydrofluorocarbons ("HFCs"), or other products. Fluorocarbon
producers voluntarily accelerated the termination of CFC production and have
since ceased nearly all residual sales of CFC products. In anticipation of the
CFC phase out, producers developed production processes for, and began
manufacture of, replacement fluorocarbon products, such as HCFC-141b, the
replacement fluorocarbon for use as a foam blowing agent in rigid polyurethane
foams. Rigid polyurethane foams serve primarily as insulation in appliances,
piping, buildings, and refrigerated transport containers.
HCFC-141b production is mandated to be phased out in 2003. As a result,
producers are developing proprietary technologies for the production of next
generation fluorocarbons, including HFC-245fa, which industry participants have
targeted as a potential replacement foam blowing agent for HCFC-141b.
ALUMINA CHEMICALS
Industry consultants forecast demand growth of specialty alumina products
of 5%-6% per annum over the next five years. Activated and Versal(R) aluminas
have diverse end-use applications and customer groups. Much of the increased
demand for specialty alumina products is driven by environmental regulation and
the declining quality of crude petroleum feedstocks.
Major specialty aluminas producers include the Company, the Aluminum
Company of America, Societe Francaise de Produits par Catalyse S.A., a 50%-50%
French joint venture between Rhone-Poulenc and Institute de Services Industriels
et Scientifiques, Condea Chemie, GmbH., a large German chemical company, and the
Aluminum Company of Canada.
Activated Alumina Chemicals
The term active or activated alumina refers to several synthetic,
high-surface area alumina products formulated in proprietary activation
processes. Activation is a process or series of processes in which optimum
chemical or surface reactivity is developed in a solid material by using
rehydration and heat to change the physical structure and characteristics of the
material. These activated aluminas are available in various forms and
modifications such as powders, granules or spheres.
Activated alumina is produced by carefully controlled, partial calcination
of hydrate, followed by forming, aging and activation. The conditions of
calcination, aging and activation are all highly proprietary. Uses of activated
alumina include utilization as a specialty adsorbent in a wide variety of
processes within the petroleum and petrochemical industries. Applications
include dehydration of various gases and liquids, hydrofluoric acid alkylation,
catalyst support, chloride removal, Claus catalysts, and as adsorbent materials
used in the manufacture of polyethylene, hydrogen peroxide, petrochemicals and
gasoline additives.
Versal(R)
The name, Versal(R), refers to a family of high performance gel aluminas.
Versal(R) fills a market niche as a raw material in the production of catalyst
supports. The Versal(R) product line provides the breadth required to satisfy a
wide range of properties required by a catalyst manufacturer, such as pore
volume, pore volume distribution, dispersibility and density. Versal(R) products
are used as catalyst supports for a number of applications, including fluid
cracking, desulfurization (removal of sulfurs and metals from sour crude oil),
petrochemical reactions, production of additives used in reformulated gasoline
products and treatment of automotive emissions. The passage of the Clean Air Act
Amendments has resulted in increased demand for Versal(R) products especially
those used as support for desulfurization and oxygenate catalysts.
Hydrate
Hydrate, the key raw material in the production of specialty alumina, is a
constituent of bauxite and is produced in the Bayer process, the nearly
universal process for producing aluminas from bauxite. The three
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largest markets for hydrate are flame retardants, alum and detergent zeolites.
Hydrate is a widely used chemical that retards flame and suppresses smoke.
Hydrate, along with sulfuric acid, is used in the production of alum, which is
primarily used in water treatment systems. Hydrate is also used as a coagulant
and softener in water and sanitation systems. Management projects overall growth
in demand for hydrate to be modest, averaging 1.5% to 2.0% annually over the
next several years.
Producers of hydrate include Kaiser, the Aluminum Company of America, the
Aluminum Company of Canada, Reynolds Metals Co. and Ormet Corporation, a
subsidiary of Oralco, Inc.
BUSINESS STRATEGY
The Company's goals are to achieve long-term growth and improve
profitability while maintaining stringent criteria for safety, reliability,
advanced technology and product quality. The Company's strategies include:
Continue to Improve Existing Operations. Management believes that it
can lower its cost of production and achieve greater manufacturing
reliability through several identified capital expenditure projects. In
Nitrogen Products, the Company is evaluating the expansion of ammonia
production capacity at the Cherokee plant, which will provide further
vertical integration of its raw material supply. In Electrochemical
Products, in addition to the construction of improved electrical systems
currently underway, additional caustic soda evaporation capacity and
improved brine saturation capabilities are projects under consideration for
the Gramercy facility. In Alumina Chemicals, debottlenecking, capacity
expansions and cost reduction programs are being studied for the Baton
Rouge facility. The estimated total cost of these and other identified
capital expenditure projects under consideration is approximately $100.0
million over the next three to four years. Assuming that all of such
projects are approved and implemented, the Company believes that these
projects could in the aggregate contribute approximately $27.0 million to
annual EBITDA. The Company's estimate of the potential contribution to
EBITDA from these projects is based on various assumptions as to costs of
raw materials, demand and prices for the Company's products and other
matters, many of which are beyond the Company's control. There can be no
assurances that any or all of the capital expenditure projects under
consideration will be implemented or that the Company will achieve any or
all of the anticipated operating efficiencies, increase in EBITDA, or other
benefits from such expenditures.
Focus On Product Quality and Customer Service. The Company is seeking
to further improve the quality and performance of its products and the
ability of the Company to consistently satisfy customer requirements
through steps that include implementation of its internal quality
initiative and completion of ISO-9000 certification. These steps, coupled
with programs to improve product distribution, develop products with its
customers and increase manufacturing flexibility are intended to satisfy
changing customer product demands and delivery requirements.
Enhance Core Businesses through Strategic Acquisitions. The Company
continually evaluates acquisition opportunities that would complement and
expand its core businesses while increasing its market position and
distribution strengths. The Company believes it is well-positioned to
acquire low-cost commodity chemical assets in its core businesses from
other large chemical companies, many of which have made strategic decisions
to exit the commodity chemicals business and focus on downstream business
lines that often will continue to require commodity chemical feedstocks.
Management believes such assets often have been underutilized and offer
significant potential for value enhancement when operated, maintained and
developed by a focused commodity chemical producer, such as the Company.
Improve Stability of Cash Flow. Management believes that the diverse
array of the products offered, and distinct markets served by, the Company
mitigate the impact of the cyclicality of any one product or market on the
overall performance of the Company. In an effort to further increase its
cash flow stability, the Company is engaging in: (i) active commodity
hedging activities and vertical integration to help mitigate raw materials
price risk; (ii) product development to expand value-added, less cyclical
businesses such as Alumina Chemicals; and (iii) strategic acquisitions and
business
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development to acquire or expand businesses which either are less cyclical,
balance the seasonality of the Company's Nitrogen Product segment, or
provide access to new geographic markets.
BUSINESS PRODUCT SEGMENTS
Nitrogen Products
The Company's Nitrogen Products consist of three product lines: (i)
ammonium nitrate and nitrogen solution fertilizers; (ii) blasting-grade ammonium
nitrate; and (iii) industrial anhydrous and aqua ammonia. The Company's two
primary nitrogen-based fertilizers are HDAN and UAN solution. The Company has
total HDAN production capacity of 280,000 tons p.a. at its Cherokee and Crystal
City facilities, and UAN solution capacity of 250,000 tons p.a. at its Cherokee
facility. The Company believes it is the second largest North American supplier
of HDAN with approximately 11% of industry capacity. The Company manufactures
blasting-grade LDAN and 83% Solution used by the coal mining, metal mining and
quarry industries. The Company has total LDAN capacity of 440,000 tons p.a. at
its Crystal City, Seneca and Geneva facilities. The Company believes it is the
fourth largest North American supplier of LDAN to the blasting products market,
representing approximately 16% of industry capacity. The Company also believes
it is currently the largest merchant distributor in the United States of premium
grade anhydrous and aqua ammonia used for water treatment and for the
manufacture of other chemical products. For fiscal year 1997, Nitrogen Products
accounted for $242.4 million of net sales (63.9% of Company total) and $26.4
million of EBITDA before unallocated corporate expenses (59.0% of Company
total).
<TABLE>
<CAPTION>
NAMEPLATE CAPACITY (TONS p.a.)
--------------------------------------------------
TYPICAL CRYSTAL
COMPANY PRODUCT APPLICATIONS CHEROKEE CITY SENECA GENEVA FORTIER
- --------------- ------------ -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FERTILIZER
HDAN.............................. Fertilizers 140,000 140,000 -- -- --
UAN solution...................... Fertilizers 250,000 -- -- -- --
EXPLOSIVES
LDAN.............................. Explosives -- 110,000(1) 230,000 100,000 --
83% Solution...................... Explosives 80,000 -- -- -- --
AMMONIA
Anhydrous & Aqua Ammonia.......... Fertilizer, 175,000 -- -- -- 440,000(2)
Feedstock &
Water
Treatment...
</TABLE>
- ---------------
(1) The Company's production of LDAN at Crystal City has been suspended since
March 1996.
(2) The Fortier, Louisiana facility is owned by Avondale Ammonia. The Company is
obligated to purchase at least 220,000 tons p.a. produced at such facility,
and may be required to purchase any excess production not purchased by
Cytec.
The Company has achieved its leading market positions through the
development of an extensive system of production and distribution facilities
which are located close to their target markets, often in areas where
competitors do not have local operations. Accordingly, due to the high costs
associated with the transportation of certain nitrogen products, the Company
believes it has located its facilities where it enjoys a freight advantage over
many other competitors. The Company has maintained competitiveness through back-
integration into ammonia, efficient management of natural gas feedstock costs
and capacity expansions.
Fertilizer Grade Ammonium Nitrate. The Company primarily markets
fertilizer grade HDAN and UAN solution to distributors, dealers, national farm
retail chains, regional farm cooperatives and other fertilizer producers located
near its plants or distribution warehouses for ultimate sale and delivery to
farmers.
The Company believes its fertilizer customers are concentrated mainly in
the midsouth and midwest regions of the United States, where their location
allows the Company to supply its customers with lower freight costs and more
reliable delivery rates than certain of its competitors. The Company
historically has
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<PAGE> 48
sold more fertilizer grade ammonium nitrate and UAN solution than it had the
capacity to produce, thus allowing it to operate its fertilizer plants at or
near capacity year-round. Due to the high fixed costs associated with fertilizer
production, the Company believes this strategy provides it with a delivered cost
advantage over certain competitors. The Company sells its UAN solution in
markets that can be advantageously supplied by its Cherokee facility.
Blasting Grade Ammonium Nitrate. As in its fertilizer business, the
Company is committed to selling a greater volume of blasting grade LDAN than it
produces. Unlike other ammonium nitrate producers that tend to de-emphasize the
blasting market during periods of high fertilizer demand, the Company seeks to
maintain product quality and availability irrespective of conditions in the
fertilizer market.
On December 13, 1995, the Company acquired the Seneca facility, a 230,000
tons p.a. blasting grade LDAN manufacturing facility and related assets for an
aggregate purchase price of approximately $39.5 million. The facility
manufactures and sells LDAN only in the blasting market. Blasting grade LDAN is
also manufactured at the Company's 110,000 ton p.a. Geneva facility. The Company
also purchases blasting grade LDAN on a contract basis from third parties. Sales
to manufacturers, distributors and end users are made through contracts and open
market sales.
In May 1995, as a result of the Oklahoma City bombing and the Company's
commitment to the community as a Responsible Care(R) company, the Company
adopted a new policy severely limiting the sale of blasting grade LDAN to any
entity outside the explosives industry. In accordance with such policy, the
Company announced in May 1996 that it had suspended production of LDAN at the
Crystal City facility due to the lack of demand for explosives from the
surrounding coal mining industry. The Company is investigating options to return
this facility to production, including feasibility studies relating to
production of additional fertilizer grade HDAN at such facility.
Freight charges typically account for a significant percentage of the
selling price of blasting grade LDAN, which somewhat limits the geographic areas
in which manufacturers can compete. Competition generally is divided between the
eastern and western regions of the United States and is based on price and
product quality. Because of the location of its three plants and two
distribution centers, the Company is able to compete in both regions. The
Company believes that no competitor maintains a significant technological or
quality advantage over the others.
Industrial Ammonia. The Company supplies the merchant market for anhydrous
and aqua ammonia through 22 customer service centers located throughout the
country and sells products and services nationally. Approximately 50% of the
Company's industrial ammonia sales are for chemical processing applications and
environmental processes, for which demand has been increasing. The Company is
experiencing an increasing demand for aqua ammonia as a result of new
environmental regulations that restrict sulfur and nitrogen oxide emissions. The
Company converts anhydrous ammonia into aqua ammonia at ten distribution
centers.
The Company's competitors include both ammonia manufacturers and merchant
distributors. The ammonia manufacturers serve primarily the large bulk commodity
users, and the merchant distributors serve the smaller volume specialty users of
anhydrous and aqua ammonia, who are the focus of the Company's marketing
efforts. The Company has only one major competitor, Tanner Industries, who
distributes industrial ammonia products nationally. Other competitors in the
industrial ammonia merchant market distribute only in local market areas.
The Company has its own fleet of trucks and trailers for delivering these
products to customers' locations. Sales are made in cylinders, less than truck
load quantities, full truck load and railcar loads. The Company also sells
equipment, replacement parts, safety seminars and videos, ammonia clean-out
services and other services and equipment rentals, that support the primary sale
of anhydrous and aqua ammonia.
Raw Materials. At the Cherokee facility, anhydrous ammonia is produced and
then upgraded into ammonium nitrate and UAN solutions. The Company purchases
anhydrous ammonia to produce ammonium nitrate at the Seneca, Crystal City and
Geneva facilities. The Company's investment in Avondale Ammonia reflects the
Company's strategy to vertically integrate. The Company obtains approximately
220,000 tons p.a. of ammonia feedstock from Avondale Ammonia, either directly or
through swapping arrangements, for its
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<PAGE> 49
various Nitrogen Products facilities. Ammonia produced by Avondale Ammonia is
transferred at cost to the joint venture partners relative to their respective
ownership interests. In the aggregate, the Company purchases approximately
one-third of its ammonia feedstock requirements from external ammonia
manufacturers. Substantially all of its purchased ammonia requirements are
supplied pursuant to contracts at prices that permit the Company to produce
Nitrogen Products at a competitive cost. The primary material purchased by the
Company in connection with the production of ammonia at its Cherokee and
Avondale Ammonia facilities is natural gas. Natural gas is supplied throughout
the United States by large pipeline companies and local distributors.
ELECTROCHEMICAL PRODUCTS
The Company's Electrochemical Products consist primarily of chlorine and
caustic soda (chlor-alkali) that are produced as co-products at its Gramercy
facility. This facility has chlorine production capacity of 200,000 tons p.a.
and caustic soda production capacity of 224,000 tons p.a. Chlorine is sold for a
variety of uses, including the manufacture of PVC, household and industrial
bleach, water treatment, titanium dioxide, and various other end-uses. Caustic
soda is sold to manufacturers of aluminum, organic and inorganic chemicals,
detergents and petrochemicals, and to pulp and paper processors, and water
treatment facilities. For fiscal year 1997, Electrochemical Products accounted
for $96.7 million of net sales (25.5% of Company total) and $14.3 million of
EBITDA before unallocated corporate expenses (31.8% of Company total).
<TABLE>
<CAPTION>
COMPANY PRODUCT TYPICAL APPLICATIONS NAMEPLATE CAPACITY
- --------------- ---------------------------------------------- ------------------
<S> <C> <C>
Chlorine..................... PVC, fluorocarbons, titanium dioxide, water 200,000 tons p.a.
treatment, rigid urethane foam, pulp and paper
bleaching and the production of a wide variety
of other chemicals and plastics
Caustic Soda................. Soaps, detergents, petrochemicals, pulp and 224,000 tons p.a.
paper processing, aluminum and alumina
chemicals production, water treatment and the
production of a wide variety of other
chemicals
</TABLE>
The Company primarily competes in the Gulf Coast chlor-alkali market.
Industry consultants estimate approximately 70% of Gulf Coast chlorine capacity
is used by integrated producers for captive consumption in the production of
downstream products. As a result, despite accounting for only approximately 2.0%
of overall Gulf Coast chlorine capacity, the Company has developed a niche
position in the Gulf Coast merchant chlorine market. The Company's production
capacity represents an approximate 7.5% share of the 2.7 million ton p.a.
market. The Company has achieved this position by focusing on chlorine sales to
downstream producers of PVC, rigid urethane foam and titanium dioxide that
prefer not to deal with chlorine suppliers that also produce competing
downstream products. The Company believes it has developed strong customer
relationships by capitalizing upon its secure brine supply, low-cost on-site
electric power and close customer proximity to consistently deliver a
competitively priced product. Over 50% of the Company's chlorine and caustic
soda sales are currently made to customers located within a 100-mile radius of
the Gramercy facility.
The Company employs the diaphragm cell technology. The manufacturing
process consists of the electrolysis of sodium chloride brine (salt water),
which produces free hydrogen, chlorine and caustic soda solution. The Company
burns its hydrogen by-product for power, and separates and concentrates the
chlorine and caustic soda. For safety reasons, only small quantities of chlorine
are stored, and production tends to be limited to the amount of chlorine the
plant can sell in a relatively short period of time. Although salt is the basic
raw material used in the production of chlorine and caustic soda, electricity is
the largest production cost component. The Gramercy facility is adjacent to a
Kaiser bauxite processing facility and the two companies share a powerhouse
complex and have certain operating agreements relating to this and other jointly
operated or administered assets. See "-- Kaiser Relationship." During fiscal
year 1996, the Company approved and began implementing certain capital
improvements designed to reduce the electrical costs at its chlorine and caustic
soda plant at Gramercy. These improvements, which included the installation of a
new back-up
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<PAGE> 50
rectifier assembly, refurbishment of generator turbine units and upgrading of
the control systems, are expected to be substantially complete during fiscal
1998.
The Company also operates a fluorocarbon business at its Gramercy facility.
Due to the federal government's mandated phaseout of CFC production by 1996, the
Company has replaced its CFC foam blowing agent product line with the next
generation foam blowing agent, HCFC-141b, over the last three fiscal years. The
Company has reduced its reliance on its CFC business and on fluorocarbon
products in general, with expanded offerings and more intensive development of
markets and facilities for the production of chlorine and caustic soda as well
as products in its Nitrogen Products and Alumina Chemicals segments. As a
result, CFCs contributed $33.4 million, $12.4 million, $8.1 million and $2.5
million, respectively, to the Company's income from operations for fiscal years
1994, 1995, 1996 and 1997.
Raw Materials. The primary raw material used in the production of chlorine
and caustic soda is salt. The Company has a long-term contract with Texaco Inc.
("Texaco"), which gives the Company the right to extract salt from a salt dome
located 15 miles from the Gramercy facility. The contract expires on May 3,
2007, subject to the Company's option to renew the contract until May 3, 2032.
The Company is currently negotiating a new agreement with Texaco that would give
Texaco the right to open additional wells in exchange for a contract extension
and certain other amendments. The Company operates a pipeline through which the
brine is transported from the Texaco salt dome to the Gramercy facility.
Natural gas is the primary cost component in generating electricity for
chlorine and caustic soda production and is sold in the United States on the
spot market, as well as under long-term contracts. The Company makes spot
purchases and has contracts for up to one year; however, the Company also buys
natural gas contracts for future delivery and enters into natural gas hedging
arrangements with financial counterparties to hedge its natural gas price
exposure. Fluctuations in natural gas prices may affect the operating results of
the Electrochemical Products business.
HF and chlorinated organic products are the primary raw materials needed
for the production of fluorocarbons. HF and the required chlorinated organic
products are considered by management to be readily available for purchase
domestically.
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<PAGE> 51
ALUMINA CHEMICALS
The Company's Alumina Chemicals business, located at its Baton Rouge
facility, includes specialty activated aluminas and Versal(R) gel aluminas.
These specialty products are used as desiccants, adsorbents, catalysts and
catalyst support systems. The Company believes it is the world's second largest
producer of activated aluminas, with an estimated annual production capacity of
50 million pounds, and the world's second largest merchant producer of gel
aluminas, with an estimated annual production capacity of 20 million pounds. The
Company is also an equity investor in two joint ventures, (CRILAR and the
Hydrate Partnership), related to its specialty aluminas business. For fiscal
year 1997, Alumina Chemicals accounted for $40.1 million of net sales (10.6% of
Company total) and $4.1 million of EBITDA before unallocated corporate expenses
(9.2% of Company total).
<TABLE>
<CAPTION>
INTERMEDIATE TYPICAL
COMPANY PRODUCT PRODUCTS APPLICATIONS NAMEPLATE CAPACITY
- --------------- -------------- -------------------------- -----------------------
<S> <C> <C> <C>
Activated alumina chemicals... Adsorbent Polyethylene, hydrogen 50 million lbs. p.a.
materials, peroxide, petrochemicals,
catalysts, and gasoline additives and air
desiccants conditioning
Versal(R) alumina chemicals... Catalysts Oil refining, gasoline 20 million lbs. p.a.(1)
additives and automobile
emission control
Hydrate....................... None Detergents, plastics, NA(2)
flame retardant materials,
and specialty aluminas
</TABLE>
- ---------------
(1) The Company also owns, through CRILAR, an interest in a second Versal(R)
facility with annual production capacity of 20 million lbs. p.a.
(2) Hydrate marketed by the Hydrate Partnership is produced at Kaiser's Gramercy
facility. The Company has no direct hydrate capacity.
In specialty aluminas, product performance is the basis for commanding a
pricing premium. The Company believes it has successfully developed superior and
technically advanced custom products for its customers, especially in its
Versal(R) product line. The Company has developed strong relationships due to
the customer-specific nature of its products.
Activated Alumina Chemicals. The Company manufactures activated alumina
chemicals, which are used as catalysts for a variety of industrial applications,
and are all available in different size fractions. Activated alumina chemicals
are marketed to several different industry segments. The Company's major
customers include major polyethylene manufacturers, hydrogen peroxide producers,
petrochemical manufacturers, natural gas processors and gasoline additive
manufacturers.
Versal(R) Alumina Chemicals. The Versal(R) line of alumina chemicals
includes several types of products made using the Company's proprietary
Versal(R) process. The Company's Versal(R) products are produced by the Company
at its owned facility at Baton Rouge and at the CRILAR facility (as described
below).
Versal(R) products are supplied to a wide variety of catalyst producers,
including oil refineries and automobile catalyst manufacturers. As evolving
environmental regulations alter the catalyst requirements of automobile
manufacturers, crude oil refiners and other catalyst users, the Company believes
that the key to increasing market share will be the ability to meet unique
customer demands for product characteristics. The Company believes that the
Versal(R) process allows it to produce a full line of Versal(R) powders to
satisfy the changing needs of its customers. Most of the Company's competitors
produce only one type of alumina powder.
CRILAR. In September 1995, the Company and Criterion formed CRILAR for the
production of Versal(R) aluminas. The Company sold a 50% interest in certain
Versal(R) alumina production equipment for $5.5
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<PAGE> 52
million as part of the joint venture arrangement. CRILAR obtained title to the
Company's Versal(R) II plant. The Company continues to operate the facility
under an operating agreement.
Hydrate. Historically, the Company was a significant distributor of
hydrate, which it purchased from Kaiser. In January 1993, the Company ceased its
distribution of hydrate and entered into the Hydrate Partnership for the
development, operation and management of a marketing operation for the sale of
hydrate. See "-- Kaiser Relationship."
Raw Materials. Hydrate, which is the primary raw material in the
production of alumina chemicals, is generally supplied by aluminum
manufacturers. The Company purchases all of its hydrate raw material
requirements from Kaiser under a long-term contract and, on occasion, from other
third party suppliers. Collectively, the Company and the Hydrate Partnership
purchase a significant portion of Kaiser's hydrate production from its Gramercy
facility. However, the Company does not directly purchase any hydrate from the
Hydrate Partnership, with the exception of certain hydrate purchased by the
CRILAR joint venture. See "-- Kaiser Relationship."
Industrial Alumina Chemicals. The Company sold substantially all plant and
equipment and certain other assets used exclusively in its calcined and tabular
alumina production businesses to C-E on April 1, 1996. In return for operating
fees as specified in the contract, the Company operated the plant and equipment
on behalf of C-E from the effective date of the sale through July 1997 at which
point C-E terminated production of all calcined and tabular products at such
facility.
KAISER RELATIONSHIP
The Company markets hydrate through the Hydrate Partnership. This
partnership was formed in January 1993 for the development, operation and
management of a marketing operation for the sale of hydrate. The Company jointly
manages and has a 45% ownership interest in the partnership. The Hydrate
Partnership purchases hydrate from Kaiser at competitive prices pursuant to a 20
year contract. All of the hydrate purchased by the Hydrate Partnership is sold
to third parties, except for certain sales to CRILAR. In addition, the Company
typically purchases all of its hydrate requirements from Kaiser under a
long-term contract.
Kaiser and the Company share the powerhouse complex at the Gramercy
facility, from which the Company obtains electricity and steam for use in
Electrochemical Products, pursuant to certain lease and operating agreements
that remain in effect (if the Company exercises renewal options) until 2008.
Kaiser owns and operates the powerhouse complex which is located on Kaiser
property. The costs of operating the powerhouse and the utilization of
electricity and steam generated therefrom are shared in accordance with these
agreements. At the Gramercy facility, Kaiser operates its alumina plants
adjacent to the Company's facility that produces Electrochemical Products. The
Company currently is engaged in upgrading the powerhouse facility to increase
its reliability and efficiency which the Company expects will lower power costs.
These lower costs will benefit the Company as it shares in the facility's
output.
Kaiser and the Company also have agreements relating to jointly operated or
administered environmental compliance matters at their Gramercy and Baton Rouge
facilities, other services, such as water, sewage, dock and rail, chemical,
telephone and emergency response services and other matters.
CHLOR-ALKALI JOINT VENTURE
In October 1997, the Company purchased a 50% interest in the French
chlor-alkali business of RPC, a subsidiary of Rhone-Poulenc, and entered into
certain related arrangements with RPC. The Company purchased, through LII
Europe, its newly formed, wholly owned subsidiary, a 50% stock interest in the
Joint Venture Company. The Initial Purchase price is 42.5% of the agreed value
of the Joint Venture Company, which Company is approximately FRF 447 million
($76.3 million), resulting in an initial investment by the Company of FRF 190
million ($32.4 million) excluding acquisition costs. The Company funded the
Initial Purchase by drawing under the Term Loan. Four members of the Company's
executive management serve on the Board of Directors of the Joint Venture
Company.
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<PAGE> 53
Prior to the Closing, RPC contributed to the Joint Venture Company the PCL
Facility, a 265,000 ton p.a. chlor-alkali production facility, as well as
certain other related assets and liabilities. The Company believes that the
Chlor-alkali Joint Venture will: (i) increase its international market share in
chlorine and caustic soda; (ii) provide a significant entry point to the
European chemical markets at an attractive initial investment cost; and (iii)
produce operating efficiencies which may be derived from the operating
similarities between the PCL Facility and the Company's Gramercy facility. In
connection with the Chlor-alkali Joint Venture, the Joint Venture Company
entered into market-priced long term contracts to sell to Rhone-Poulenc (or its
affiliates) chlorine and caustic soda, the amounts of which historically have
been approximately 65% of the PCL Facility's production output. Based on audited
financial information provided by Rhone-Poulenc, in 1996, the PCL Facility
generated net sales of approximately FRF 547.6 million, and based on unaudited
financial information, it generated EBITDA of approximately FRF 100 million.
According to this financial information, for the year ended December 31, 1996,
chlorine and caustic soda represented approximately 32% and 55%, respectively,
while bleach and salt accounted for approximately 4% and 9%, respectively, of
net sales from the business to be contributed to the Joint Venture Company.
Pursuant to the RPC Put, the Company has also agreed to allow RPC to sell
to the Company, through LII Europe, at RPC's option, the remaining 50% of the
stock of the Joint Venture Company for 57.5% of the stipulated total value of
the Joint Venture Company. The RPC Put may be exercised at any time with six
months prior notice during the four-year period beginning six months after the
Closing Date, upon the terms and conditions set forth in a put and call
agreement among RPC, the Joint Venture Company, LII Europe and the Company which
is to become effective upon the closing of the transactions contemplated by the
Stock Purchase Agreement (the "Put and Call Agreement"). If RPC does not
exercise the RPC Put during such four-year period, the Company may "put" its
ownership interest back to RPC (the "Company Put") at a price of FRF 208.8
million, including repayment of certain debt incurred by the Joint Venture
Company and subject to other adjustments, during the following eighteen months.
RPC has the right to exercise the RPC Put within a six-month period following
notice of the Company's exercise of the Company Put. If RPC then chooses to
exercise the RPC Put, it takes precedence over the Company Put, with the effect
that the Company would be required to purchase RPC's interest at a price of FRF
256.8 million, including repayment of certain debt incurred by the Joint Venture
Company and subject to other adjustments.
As a condition precedent to RPC's obligations under the Stock Purchase
Agreement, the Company has agreed to reimburse, on a "stand-by" basis, RPC for
the Company's proportionate share of any amounts that RPC is ultimately required
to pay under its pre-existing guarantee of the obligations of CEVCO, the
provider of electric energy to the Joint Venture Company, in respect of steam
turbines leased by CEVCO under a certain operating lease (the "Turbine Lease").
The Company's proportionate share under such arrangement is limited to a maximum
of FRF 172 million. The remaining term of the Turbine Lease is six years. The
Company's proportionate share of such lease payments, based on current and
expected ownership percentages, will not exceed $2.0 million per year prior to
the exercise of the RPC Put, and will not exceed $4.0 million per year after
exercise of the RPC Put, each based on current currency exchange rates.
If the Company cannot or does not purchase RPC's stock pursuant to the RPC
Put, subject to the terms and conditions of the Put and Call Agreement, RPC
would have the right to require the Company to sell its 50% interest to RPC one
year after notice of the RPC Put for 85% of the amount paid by the Company for
the Initial Purchase, subject to certain adjustments. Consequently, there can be
no assurance that the Company will own 100% of the Joint Venture Company in the
future, and the Company may be required to sell its 50% interest. The Put and
Call Agreement also contains restrictions upon the ability of the shareholders
of the Joint Venture Company to compete with the Joint Venture Company during
the term of the Shareholders' Agreement and, with respect to an exiting
shareholder, for three years thereafter. The Company and RPC have also entered
into a shareholders agreement (the "Shareholder's Agreement") effective as of
the same date as the Put and Call Agreement, which provides for, among other
things, governance of the Joint Venture Company. Neither the Company nor LII
Europe will have the unilateral right to require RPC to "put" its remaining 50%
equity interest in the Joint Venture Company to the Company except under very
limited circumstances, such as a change in control of RPC. Also, in the event of
a change of control of the Company, RPC would be able to invoke the RPC Put.
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<PAGE> 54
As part of the Chlor-alkali Joint Venture, the Joint Venture Company
entered into agreements with RPC and its affiliates and other third parties: (i)
to own and operate jointly a powerhouse complex (the "Powerhouse Complex")
located at the PCL Facility for the generation of electricity, steam and
demineralized water for the PCL Facility's operations; (ii) to own a brine mine,
and the extraction rights thereto, at Hauterives, France (the "Hauterives
Facility"), and to operate a brine pipeline to transport sodium chloride from
the Hauterives Facility to the PCL Facility; (iii) for the supply of certain
products and services by RPC to the Joint Venture Company; and (iv) to sell to
Rhone-Poulenc (or its affiliates) chlorine and caustic soda, the amounts of
which historically have been approximately 65% of the PCL Facility's production
output. In addition, the Joint Venture Company entered into long-term
arrangements with Elf Atochem S.A., France's second largest chemical company and
a wholly owned subsidiary of Elf Acquitaine S.A., which operated the Saint Fons
bleach facility that was transferred to the Joint Venture Company.
Pursuant to the Chlor-alkali Joint Venture, the Joint Venture Company
intends to distribute by dividend to its shareholders, 100% of its net income
annually. Under the terms of the Shareholders Agreement, capital expenditures
will be funded from excess cash provided by operating income of the Joint
Venture Company. There will be no obligation on the Company or RPC to fund any
capital expenditures. It is anticipated that any debt facilities required by the
Joint Venture Company will be borrowed locally by the Joint Venture Company
without support from either RPC or the Company.
Prior to closing of the Chlor-alkali Joint Venture, the RPC Union filed a
complaint against RPC in a French civil court seeking to gain access to
documentation pertaining to the Chlor-alkai Joint Venture and to prevent its
consummation. After hearings on the RPC Union Matter, in September 1997 the
French court denied the relief requested by the RPC Union.
RESEARCH AND DEVELOPMENT
The Company has operated a research and development center at its Baton
Rouge facility since 1989 to develop and test new products and production
methods. The Company had research and development expenditures of approximately
$3.8 million, $3.4 million and $3.1 million in fiscal years 1997, 1996 and 1995,
respectively. The research and development center focuses on both process and
product development. Many of the Company's innovations involve improvements to
processes that allow existing products to be used in new applications. The
research and development center also provides technical support for the
Company's various product lines and is involved in the Company's plant upgrade
projects. Through its research and development center, the Company also conducts
research on a contract basis for third parties, including customers. Particular
areas of emphasis for the research and development effort have been CFC and HCFC
replacement processes and products and the development of new alumina chemical
products to meet the needs of the Company's customers.
PATENTS
The Company owns or has applied for approximately 30 patents and is
licensed under other patents covering certain of its products and processes. The
Company generally applies for patents whenever it develops new products or
processes considered to be commercially viable and, in appropriate
circumstances, seeks licenses when such products or processes are developed by
others. Although in the aggregate the rights under such patents are important to
the Company's operations, no significant segment of the Company's business or
its business as a whole is dependent on any particular patent or license.
SEASONALITY
A portion of the Company's nitrogen business serves the agricultural
fertilizer market, which is seasonal with greater sales of such products
occurring in the spring and, to a lesser extent, in the fall planting seasons.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality."
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<PAGE> 55
GOVERNMENTAL REGULATION
The Company is subject to various federal, state and local environmental
laws and regulations governing the use, discharge, storage, and disposal of
hazardous materials because the Company uses hazardous substances and generates
hazardous waste in the ordinary course of its manufacturing processes.
Environmental laws and regulations have evolved rapidly over the last three
decades typically becoming more restrictive of activities that may impact the
environment, such as emissions of pollutants to air and water, generation and
disposal of wastes and use and handling of chemical substances. The Company
cannot at this time assess with certainty the degree of impact of future
emissions standards and enforcement practices upon its operations or capital
expenditure requirements.
The Company is subject to the Clean Air Act, as amended by the Clean Air
Act Amendments, and comparable state statutes regulating air emissions. The
Clean Air Act Amendments contain provisions that may result in the imposition of
certain pollution control requirements with respect to air emissions from the
Company's operations. Depending upon requirements that may be imposed by state
and local regulatory authorities in the implementation of those provisions and
related regulations, the Company may be required to incur capital expenditures
for air pollution control equipment in connection with maintaining or obtaining
operating permits and approvals. Until such time as the new Clean Air Act
Amendment requirements are fully implemented, the Company is unable to estimate
the effect on earnings or operations or the amount and timing of such required
capital expenditures. At present, the Company does not believe that such
regulations will have a material effect on its financial condition or results of
operations.
The Clean Air Act Amendments provided for the phase-out of the production
of CFCs (R-11 and R-12) as of January 1, 1996, followed by the phase-out of the
production of the HCFC-141b by January 1, 2003. The Clean Air Act also regulates
sulfur and nitrogen oxide removal from emissions and provides certain incentives
for the production of reformulated gasolines. These regulations may increase the
demand for certain of the Company's alumina chemicals and ammonia products.
Chlorine use has been affected and may be affected further by certain
environmental regulations, both final and pending, particularly those relating
to the discharge of dioxins by pulp and paper producers. When chlorine is used
in the pulp bleaching process, dioxins are a by-product. From time to time
legislation is introduced proposing the elimination of discharges of chlorine
compounds into navigable waters and requiring zero discharge limits for certain
toxic substances, including certain chlorinated compounds.
The Company's operations also are governed by extensive federal, state and
local regulatory requirements relating to environmental issues, such as waste
management and chemical handling. Consequently, the Company is required to
obtain various permits for the operation of its plants and related facilities,
and these permits are subject to revocation, modification and renewal.
Governmental authorities enforce compliance with these regulations and permits,
impose excise taxes on certain of the Company's products and implement
environmental plans. Violators of these regulations are subject to civil and
criminal penalties, including civil fines, injunctions or both. Accordingly,
certain governmental regulation compliance costs and potential liabilities are
inherent in the Company's operations and products. The Company's operations also
are governed by laws and regulations relating to workplace safety and worker
health, principally the Occupational Safety and Health Act and regulations
thereunder which, among other things, regulate the use of hazardous chemicals in
the workplace. The Company uses asbestos in the manufacture of its
electrochemical products, and some of its operating facilities contain
structural asbestos that the Company believes is properly contained.
The Company voluntarily adheres to the Guiding Principles of the
Responsible Care(R) initiative of the Chemical Manufacturers Association and its
six Codes of Management Practices. The Company believes that these codes
typically are more stringent than the legal requirements in the areas of process
safety, employee safety, pollution prevention and chemical distribution.
LEGAL PROCEEDINGS
General. The Company and its subsidiaries have been named as defendants in
a number of legal actions arising from normal business activities. Although the
amount of any ultimate liability with respect to such
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<PAGE> 56
matters cannot be precisely determined, and therefore no assurance can be given
with respect to the effect upon the Company's financial condition and results of
operations of any such liability, in the opinion of the Company, any such
liability is not likely to have a material adverse effect on the Company, even
though the resolution of certain matters could be material to the results of
operations of any single fiscal quarter. Additionally, the Company is involved,
to the extent and with the Company's assessment of the effect noted, in the
proceedings set forth below.
Recent Developments. On May 9, 1997, the Company entered into a plea
agreement with the United States Department of Justice, pursuant to which the
Company admitted to participating in an agreement in restraint of competition
for the sale of ammonium nitrate in May 1992. On May 30, 1997, the United States
District Court for the Western District of Pennsylvania approved the plea
agreement. Under the terms of such plea agreement, in which the government does
not contend that the Company implemented the price-fixing agreement, the Company
will pay a fine of $1.5 million in five installments during the next four years.
Such amount has been accrued in the Company's financial statements as of
February 28, 1997. The first installment has been paid. Such payment is believed
to be considerably lower than the fines paid by several other companies in the
industry and is not expected to have a material adverse effect on the financial
condition or operations of the Company.
ENVIRONMENTAL PROCEEDINGS
Gramercy, Louisiana. On July 28, 1989, a 28,000 gallon mixture primarily
consisting of chloroform and carbon tetrachloride was spilled at the Company's
Gramercy plant during the off-loading of a barge. Although immediate corrective
action was initiated, the spill impacted the shallow soils and groundwater.
Expenditures for corrective action and to determine the extent of contamination
through February 28, 1997, have been approximately $3.5 million. The Company
estimates that the remaining cost to complete remediation could be up to an
additional $2.2 million over the next few years.
On June 27, 1996, Marathon filed a complaint against the Company and one
other company in the United States District Court for the Eastern District of
Louisiana alleging that the Company or its agents damaged a gasoline pipeline
causing it to rupture and release gasoline into the Blind River and surrounding
area near Gramercy. Marathon's preliminary claim statement for damages incurred
totals $8.5 million. In connection with the gasoline release, a class action
petition was filed in the 23rd Judicial District Court for the Parish of St.
James, Louisiana against Marathon and the Company on behalf of persons and
entities allegedly sustaining direct and/or consequential damage as a result of
the gasoline release. The Company is continuing a diligent investigation of the
situation in order to evaluate the allegations and the relative responsibility
of the parties involved. Management believes the Company has meritorious
defenses to these claims and is vigorously defending itself against all claims.
Because the matter is in a preliminary stage, it is not yet possible to predict
whether the Company will incur any liability for the rupture and release or to
reasonably estimate the cost of any possible liability.
Greensboro, North Carolina. The Company acquired a Greensboro, North
Carolina fertilizer plant and warehouse that was formerly used by Armour to
produce sulfuric acid as part of the 1986 purchase from USX. After a fire
destroyed the plant and most of the warehouse in 1989, the Company began an
effort to assess the effects of historical contamination at the site. The
original assessment addressed several areas, including a former wastewater
holding pond. USX has retained substantial liability with respect to assessment
and remediation of this site. The Company estimates that its portion of the
remedial costs, including the cost of soil remediation and off-site disposal of
waste material and building debris, will be between $1.7 million and $3.0
million.
Pursuant to the Asset Purchase Agreement dated April 30, 1986 between USX
and the Company, USX generally retains all environmental liabilities relating to
the acquired assets resulting from events occurring prior to the closing date.
The costs of any environmental liabilities arising due to both parties'
ownership or use of the purchased assets will be allocated in accordance with
each parties' contribution to the events or circumstances which gave rise to the
liabilities.
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<PAGE> 57
Other. In addition to the matters described above, the Company is also
involved, to varying degrees, in litigation, as well as remedial activities at
other facilities. Although management believes, based upon information currently
available, that such other litigation and activities are likely to be resolved
without a material adverse effect upon the financial condition and results of
operations of the Company, the aggregate cost of such litigation and remedial
activities cannot be precisely predicted, and there can be no assurance that
this will be the case.
EMPLOYEES
As of September 30, 1997, the Company had approximately 800 full-time
employees, approximately 390 of whom were represented by labor unions under 12
collective bargaining agreements. The collective bargaining agreements for the
Gramercy and Baton Rouge facilities expire in 2001 and 2000, respectively. Since
1986, the Company has had three labor disputes, none of which caused any
material production delays. The Company considers its relations with its
existing union and non-union employees to be satisfactory.
PROPERTIES
The Company has seven facilities where its products are manufactured, 22
customer service centers from which it distributes anhydrous and aqua ammonia
and four warehouses that it uses for delivery and storage of fertilizer. The
Company's manufacturing facilities include the two facilities located in Baton
Rouge and Gramercy which manufacture alumina chemicals and electrochemical
products, the four facilities located in Cherokee, Crystal City, Geneva and
Seneca, which manufacture nitrogen products and the Westwego facility, which
manufactures ammonia.
The Company believes that its primary facilities are in suitable condition
and adequate for its current operations. The following table presents certain
information relating to the principal facilities owned by the Company.
<TABLE>
<CAPTION>
LOCATION DESCRIPTION AND BUSINESS LINE STATUS
- -------- ----------------------------- ------
<S> <C> <C>
Gramercy................... Electrochemical products: hydrochlorofluorocarbons, Caustic Owned
soda and chlorine facility.
Baton Rouge................ Alumina chemicals: activated and Versal(R) alumina chemicals Owned
facility.
Cherokee................... Nitrogen Products: fertilizer and blasting grade ammonium Owned
nitrate facility and distribution center.
Crystal City............... Nitrogen Products: fertilizer and blasting grade ammonium Owned
nitrate facility.
Geneva..................... Nitrogen Products: blasting grade ammonium nitrate facility. Owned
Seneca..................... Nitrogen Products: blasting grade ammonium nitrate facility. Owned
</TABLE>
The Crystal City facility was subject to a mortgage securing a loan from
USX. The Company made certain prepayments of the USX Notes during fiscal year
1996 and 1997 and made its final payment of $1.4 million, plus accrued interest
thereon, on April 30, 1997. The Westwego facility is owned by Avondale Ammonia
and is situated on land leased from Cytec. The Credit Facility is secured by a
security interest in substantially all of the Company's domestic properties and
assets granted to the lenders thereunder.
In addition, the Company owns or leases 22 customer service centers in 18
states, where it stores and distributes anhydrous ammonia. It produces and
distributes aqua ammonia products at nine of these centers. The Company also
sells related storage systems and equipment and provides certain customer
services at those centers. The Company owns the four agricultural warehouses
located in Missouri, Illinois and Indiana, where the Company stores and
distributes phosphate fertilizer (DAP and TSP), solid urea, potash, nitrate, UAN
solutions and ammonium sulfate. The Company also owns several sites that were
once used in the production or distribution of Company products, which currently
are surplus to its needs.
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<PAGE> 58
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position with the Company
of each person who is an executive officer or a director on the Board of
Directors (a "Director") of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
W. Walter LaRoche, III....................... 45 Chairman of the Board
Victoria E. LaRoche.......................... 39 Vice Chairman of the Board
Grant O. Reed................................ 50 President, Chief Executive Officer and Director
Harold W. Ingalls............................ 50 Vice President and Chief Financial Officer
Vincent R. Gurzo............................. 48 Vice President
William G. Osborne, Ph.D..................... 56 Vice President
Richard H. Watts............................. 51 Vice President and Secretary
Paul L. M. Beckwith, Ph.D.................... 40 Director
John R. Hall................................. 64 Director
Johnnie Lou LaRoche.......................... 69 Director
Louanne C. LaRoche........................... 42 Director
C. L. Wagner, Jr............................. 52 Director
George R. Wislar............................. 64 Director
Robert L. Yohe............................... 61 Director
</TABLE>
W. Walter LaRoche, III. Chairman of the Board. Mr. LaRoche joined the
Tennessee Valley Authority in 1976 as an attorney and served in that capacity
until 1988. In August 1988 he joined LaRoche Holdings Inc. ("LHI") as Vice
President of Planning and Business Development. He was appointed Executive Vice
President and Chief Operating Officer of the Company in January 1989 and
President and Chief Operating Officer of the Company and Vice President of
LaRoche Chemicals Inc. ("LCI") in March 1991. Mr. LaRoche was appointed Vice
Chairman of LHI, LCI and the Company in May 1993. He served as a member of the
Board of Directors of LHI, LCI and the Company from July 1988 until the
consolidation of LHI and LCI into the Company (the "Consolidation") and he has
continued to serve as a Director of the Company since the Consolidation. In
October 1994, Mr. LaRoche was appointed Chairman of the Board of the Company.
Mr. LaRoche's mother, Johnnie Lou LaRoche, and his sisters, Victoria E. LaRoche
and Louanne C. LaRoche also serve as directors of the Company.
Victoria E. LaRoche. Vice Chairman of the Board. Ms. LaRoche was elected
as a Director of LHI in August 1993 and has been a Director of the Company since
the Consolidation and Vice Chairman of the Board since October 1994. Ms. LaRoche
began working for the Company in 1987 and held many positions within the Company
in the Accounting, Environmental, Financial Analysis and Market Research
departments until March 1996.
Grant O. Reed. President, Chief Executive Officer and Director. Mr. Reed
joined Monsanto Company in 1969 as a Chemical Engineer and later performed in
various sales, product management and planning positions. He joined Ashland
Chemical Company in 1980 and became Vice President and General Manager of the
Carbon Black Division in 1984. In 1988 the Carbon Black Division of Ashland was
sold to Degussa A.G. of Germany, and Mr. Reed became President of the Degussa
Carbon Black Corporation. In 1990 he was appointed Executive Vice President of
the Pigment Group of Degussa Corporation. Mr. Reed was appointed President and
Chief Operating Officer of LHI and the Company in July 1993 and of LCI in August
1993. He became Chief Executive Officer of LHI, LCI and the Company in April
1994. Mr. Reed remained in those positions and has continued to serve as
President, Chief Executive Officer and Director of the Company since the
Consolidation.
Harold W. Ingalls. Vice President and Chief Financial Officer. Mr. Ingalls
joined the Company as Vice President and Chief Financial Officer in July 1996.
Prior to joining the Company, Mr. Ingalls served for approximately a year as the
Vice President and Chief Financial Officer of OHM Corporation Atlanta, an
56
<PAGE> 59
affiliate of WMX Technologies, Inc., an environmental remediation company
("WMX"). Prior to 1995, Mr. Ingalls served as the Chief Financial Officer,
Treasurer and Vice President of two subsidiaries of WMX and served other
subsidiaries of WMX for over thirteen years in various strategic and managerial
capacities.
Vincent R. Gurzo. Vice President. Mr. Gurzo joined the Company as Vice
President of Specialty Chemicals in August 1996. Prior to joining the Company,
Mr. Gurzo worked for a year with The Mercer Hoyt Group, a group specializing in
training and sales development in the chemical industry and in publishing in the
health care industry. From 1989 to 1995, Mr. Gurzo served as Vice
President -- Business Unit General Manager Industrial Business and in other
sales and marketing positions for International Specialty Products (GAF).
William G. Osborne, Ph.D. Vice President. Dr. Osborne has been responsible
for the Company's merger and acquisition activity since May 1996. Prior to that,
Dr. Osborne was responsible for the Company's purchasing and distribution
functions from March 1994 until May 1996. Dr. Osborne was Vice President of
Corporate Operations and Vice President and General Manager, Performance
Materials for LCI from April 1992 through March 1994, and was Vice President and
General Manager -- Specialty Alumina Chemicals for LCI from July 1988 through
April 1992. He also held a number of positions with Kaiser from 1969 through
LCI's acquisition of Kaiser in 1988. From 1966 to 1969, Dr. Osborne was a
Research Engineer with E.I. du Pont de Nemours and Co.
Richard H. Watts. Vice President. Mr. Watts has been responsible for
Nitrogen Products since April 1995. Prior to that time Mr. Watts was the Vice
President and General Manager of Alumina Chemicals from April 1992 until April
1995. Mr. Watts was Vice President and General Manager -- Gramercy Products for
LCI from 1989 through April 1992. Between 1968 and 1988 Mr. Watts held a number
of supervisory and management positions with Kaiser.
Paul L. M. Beckwith, Ph.D. Director. Dr. Beckwith was elected as a
Director of LCI in 1988 and has been a Director of the Company since the
Consolidation. Dr. Beckwith became a Managing Director of Chase Securities Inc.
in May 1997, where he is the Group Executive of the Global Chemicals Group.
Prior to May 1997, Dr. Beckwith was a Managing Director of The Chase Manhattan
Bank, where he had been employed since 1982.
John R. Hall. Director. Mr. Hall was elected to the Board of Directors of
the Company in September, 1996. Most recently, Mr. Hall was employed by Ashland,
Inc. as Chairman of the Board and Chief Executive Officer. Mr. Hall served as
Ashland Inc.'s Chairman of the Board and Chief Executive Officer since 1981. Mr.
Hall stepped down from his position as Chief Executive Officer of Ashland, Inc.
in October 1996 and retired as Chairman in February 1997. He is a member of the
Board of Directors of Banc One Corporation, the Canada Life Assurance Company,
CSX Corporation, Humana Inc., Reynolds Metals Company and UCAR International
Inc. He is a member of the American Petroleum Institute Board of Directors and
Public Policy Committee and the National Petroleum Counsel. Mr. Hall is past
Chairman of the National Petroleum Refiners Association.
Johnnie Lou LaRoche. Director. Mrs. LaRoche was elected as a Director of
LHI in August 1993 and of LCI in August 1989. She has been a Director of the
Company since the Consolidation. Mrs. LaRoche is the widow of the deceased
founder (and principal) of the Company, William W. LaRoche, Jr. W. Walter
LaRoche, III, Victoria E. LaRoche and Louanne C. LaRoche are siblings and are
the children of Johnnie Lou LaRoche and William W. LaRoche, Jr.
Louanne C. LaRoche. Director. Ms. LaRoche was elected as a Director of LHI
in August 1993 and has been a Director of the Company since the Consolidation.
As well as being an artist, she was owner and director of the Red Piano Art
Gallery in Hilton Head, South Carolina from 1979 to 1995.
C. L. Wagner, Jr. Director. Mr. Wagner was elected as a Director of LCI in
1988 and has been a Director of the Company since the Consolidation. Mr. Wagner
has been a partner in the law firm of Hunton & Williams since 1988. Prior to
that time, Mr. Wagner was a partner with the law firm of Hansell & Post in
Atlanta, Georgia. Hunton & Williams has regularly acted as counsel to LHI, LCI
and the Company.
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<PAGE> 60
Mr. Wagner is also a member of the Board of Directors of Lummus Corporation, a
textile equipment manufacturer, and Alimenta (United States), Inc., an
international food processor and distributor.
George R. Wislar. Director. Mr. Wislar has been a Director of the Company
since the Consolidation. Mr. Wislar is the founder, and retired Chairman of the
Board of Directors and Chief Executive Officer of Fountainhead Water Company,
Inc., Marietta, Georgia. Mr. Wislar's previous experience includes investment
banking at Alex Brown & Sons, Inc., The Robinson-Humphrey Company and Kidder,
Peabody & Co. Incorporated.
Robert L. Yohe. Director. Mr. Yohe has been a Director of the Company
since November 1996. Mr. Yohe retired as Vice Chairman of Olin Corporation in
1994, after 11 years of service. He served in many leadership capacities at Olin
Corporation including President of the Chemicals Group from 1985 to 1993 and
Vice President of Mergers and Acquisitions from 1983 to 1985. Prior to joining
Olin Corporation, Mr. Yohe worked in executive management for Uniroyal, and
Occidental Petroleum's Hooker Chemical Division. Mr. Yohe is a member of the
Board of Directors of Airgas, Inc., Betz Laboratories, Inc., and Calgon Carbon
Corporation. He is also a Trustee of Lafayette College.
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended February 28, 1997,
February 29, 1996 and February 28, 1995, respectively, the compensation paid to
or earned by the Company's Chief Executive Officer and its four other most
highly compensated executive officers who were serving at the end of fiscal year
1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)(3)(4)
- --------------------------- ---- -------- -------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Grant O. Reed.................. 1997 $331,683 $241,704(5) $101,550 $ --
President and Chief 1996 267,963 708,504(6) 372,721 --
Executive Officer 1995 227,087 525,913(7) 262,971 --
W. Walter LaRoche, III......... 1997 244,270 59,968 -- 1,055
Chairman of the Board 1996 200,572 278,736 43,055 45,634
1995 188,792 203,821 23,451 18,958
Harold W. Ingalls.............. 1997 126,089 376,456(9) 274,104 --
Vice President and Chief
Financial Officer(8)
Neil A. Stephansson............ 1997 150,966 11,219 -- 746
Vice President 1996 129,940 118,449 16,403 711
1995 110,376 237,020(10) 178,133 561
Richard H. Watts............... 1997 150,725 11,219 -- 720
Vice President 1996 132,688 196,224(11) 69,109 727
1995 118,508 84,710 -- 14,277
</TABLE>
- ---------------
(1) Amounts shown reflect (i) the tax gross-up amounts paid by the Company in
connection with the bonuses awarded to Mr. Reed, Mr. Ingalls, Mr.
Stephansson and Mr. Watts pursuant to the Company's Management Stock
Purchase Plan, (ii) the tax gross-up amount paid by the Company in
connection with the life insurance policy for Mr. LaRoche and (iii) the tax
gross-up amount paid by the Company in connection with a club membership
fee for Mr. LaRoche. See footnotes 3, 5, 6, 7, 9, 10 and 11 below, and
" -- Management Stock Purchase Plan."
(2) Amounts shown for fiscal year 1997 reflect matching 401(k) contributions
made by the Company to the Company's savings plan of $1,055, $746 and $720
on behalf of Mr. LaRoche, Mr. Stephansson and Mr. Watts.
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<PAGE> 61
(3) Amounts shown for fiscal year 1996 reflect (i) matching 401(k)
contributions made by the Company to the Company's savings plan of $602,
$711 and $727 on behalf of Mr. LaRoche, Mr. Stephansson and Mr. Watts,
respectively, (ii) a life insurance premium of $18,392 paid on behalf of
Mr. LaRoche, for the life insurance policy on his mother, Johnnie Lou
LaRoche, and (iii) a one-time club membership fee of $26,640 paid on behalf
of Mr. LaRoche. The club is utilized for business meetings as well as for
personal use.
(4) Amounts shown for fiscal year 1995 reflect (i) matching 401(k)
contributions made by the Company to the Company's savings plan of $566,
$561 and $700 on behalf of Mr. LaRoche, Mr. Stephansson and Mr. Watts,
respectively, (ii) a life insurance premium of $18,392 paid on behalf of
Mr. LaRoche for the life insurance policy on his mother, Johnnie Lou
LaRoche, and (iii) a resettlement allowance of $13,577 paid to Mr. Watts
resulting from his move to Atlanta, Georgia.
(5) Amount shown reflects (i) a profit sharing bonus of $59,968 and (ii) a
$181,736 bonus granted by the Company in fiscal year 1997 in accordance
with the Company's Management Stock Purchase Plan (as defined).
(6) Amount shown reflects (i) a profit sharing bonus of $307,238, (ii) a
$301,266 bonus granted by the Compensation Committee pursuant to the
Management Stock Purchase Plan as a result of the Company achieving a fixed
ratio coverage exceeding certain annual performance goals in fiscal year
1996, and (iii) a $100,000 bonus constituting matching funds for the
purchase of the Company's common stock.
(7) Amount shown reflects (i) a profit sharing bonus of $224,612, (ii) a
$151,301 bonus at the time of Consolidation in accordance with the
Company's Management Stock Purchase Plan which was immediately applied to
the purchase of the Company's common stock, and (iii) a $150,000 bonus
granted by the Company in fiscal year 1995 in accordance with the Company's
Management Stock Purchase Plan.
(8) Amount shown reflects compensation for the approximately seven months of
Mr. Ingalls employment in fiscal year 1997.
(9) Amount shown reflects (i) a profit sharing bonus of $75,000 and (ii) a
$301,456 signing bonus to purchase shares in accordance with the Company's
Management Stock Purchase Plan.
(10) Amount shown reflects (i) a profit sharing bonus of $84,710 and (ii) a
$152,310 one-time bonus to purchase the Bonus Shares (as defined herein) at
the time of Consolidation in accordance with the Company's Management Stock
Purchase Plan. Mr. Stephansson resigned from the Company in August 1997. In
connection with Mr. Stephansson's resignation from the Company, the Company
repurchased all of his shares of the Company's common stock for a total
purchase price of $750,000.
(11) Amount shown reflects (i) a profit sharing bonus of $118,449 and (ii) a
$77,775 bonus to purchase shares in accordance with the Company's
Management Stock Purchase Plan.
PENSION PLANS
The Company maintains seven 401(k) savings plans ("401(k) plans"), one of
which is for salaried employees not subject to a collective bargaining agreement
and six of which are for employees subject to collective bargaining agreements.
Under each 401(k) plan, participating employees can make pre-tax deferrals.
Where the 401(k) plan has a matching feature, the Company may make a
discretionary contribution from its own funds to match some or all of a
participating employee's pre-tax contributions. Where the 401(k) plan has no
matching feature, the Company does not contribute any of its own funds to the
plan. Under certain of the 401(k) plans, participating employees are able to
make after-tax contributions. All of the 401(k) plans are designed to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and exempt from tax under Code Section 501(a).
The Company also maintains a qualified defined benefit Employee Pension
Benefits Plan (the "Pension Plan"). Under the Pension Plan normal retirement age
is 65, though Participants may retire as early as age 55 with 10 years of
continuous service and receive a reduced benefit. The benefit is reduced five
percent for each year or fraction thereof that retirement precedes age 65. In
addition, a non-qualified defined benefit Supplemental Employee Retirement Plan
is provided to recognize compensation in excess of the IRS limits
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<PAGE> 62
under the qualified plan. The Final Earnings benefit Formula and the Career
Earnings Benefit Formula (each defined therein). The Final Earnings Benefit
Formula is the average of the best five consecutive of the last 10 years of base
monthly salary multiplied by a factor obtained by multiplying the first 30 years
of service by 1.1% and the years of service over 30 by 1.2%. The monthly Career
Earnings Benefit Formula is 1% of the total career compensation, including
bonus, multiplied by 130% and divided by 12. In addition, in lieu of receiving
the first three months of the Final Earnings Benefit, a lump sum special
retirement payment equal to nine weeks of the participant's weekly vacation rate
is paid during the first month of retirement.
The estimated annual benefits payable upon retirement at normal retirement
age for each of the Named Executive Officers is as follows: Mr.
LaRoche -- $306,468; Mr. Reed -- $262,128; Mr. Ingalls -- $129,216; and Mr.
Watts -- $132,024.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company receive no
additional compensation for serving on the Board of Directors. The Company pays
an annual fee to all non-employee Directors of $50,000, plus $1,000 for each
board and committee meeting attended. The Company pays an additional annual fee
to all outside Directors who serve as the Chairman of the Board ($50,000),
Vice-Chairman of the Board ($25,000) and Committee Chairman ($5,000).
Effective June 26, 1995, the Board of Directors approved the 1995 Board of
Directors Stock Purchase Plan (the "Directors Plan"). The Company has authorized
and reserved for issuance under the Directors Plan an aggregate of 5,000 shares
of the Company's common stock. The Directors Plan provides that outside
directors of the Company will be eligible to purchase shares of the Company's
common stock at fair market value (as determined by appraisal). In connection
with the Directors Plan, the Company may agree to guarantee loans used to
finance the purchase of such stock. Upon termination of directorship, the shares
must be sold to the Company at fair market value (based upon an appraisal). All
redemption provisions of the Company's shares expire upon a public offering of
the Company's common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1997, the Company's compensation committee consisted of
C. L. Wagner, Jr. (Chairman), Paul L.M. Beckwith, Ph.D., George R. Wislar,
Robert L. Yohe and John R. Hall. During fiscal year 1997, Hunton & Williams, of
which C. L. Wagner is partner, provided various types of legal services to the
Company for which the Company was billed approximately $648,500. Mr. Beckwith is
the Managing Director of Chase Securities Inc. See "Plan of Distribution."
EMPLOYMENT CONTRACTS, TERMINATIONS OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
In June 1993, LHI entered into an employment and non-competition agreement
(the "Employment Agreement") with Mr. Reed who, at that time, was the President
and Chief Operating Officer of LHI. Although the term of the Employment
Agreement expired on July 18, 1996, Mr. Reed's employment continued on
substantially the same terms and is expected to continue on substantially such
terms unless the Employment Agreement is renegotiated. The Employment Agreement
provided that the term of the agreement may be extended only by the prior
written agreement of the Company and Mr. Reed. The Employment Agreement provided
that Mr. Reed was eligible to participate in certain variable and other
compensation programs. The Employment Agreement provided that Mr. Reed would
receive 25% of his variable compensation plan and stock appreciation plan
earnings in the form of LHI equity. However, pursuant to the terms of the
Employment Agreement, Mr. Reed's equity ownership in the Company may not exceed
five percent of the shares of Company common stock outstanding from time to
time. At the time of the Consolidation, the Employment Agreement was assumed by
the Company. Concurrent with bonuses paid to Mr. Reed over the past three fiscal
years, Mr. Reed has purchased a total of 3,344 shares of the Company's common
stock valued at approximately $1,000,212.
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<PAGE> 63
MANAGEMENT STOCK PURCHASE PLAN
In August 1994, the Company adopted a Management Stock Purchase Plan (the
"1994 Purchase Plan"), pursuant to which certain executive officers and
management employees of the Company (the "Eligible Employees") are, at the
discretion of the Board, eligible to purchase shares of the Company's common
stock at the then current fair market value of such shares as determined by
appraisal. Such Eligible Employees are also eligible to receive bonuses in the
form of cash, a portion of which must be applied to the purchase of shares of
the Company's common stock (the "Purchased Shares"). Certain bonuses were
granted to certain of the Eligible Employees, including Mr. Stephansson, at the
time of the Consolidation to purchase additional shares (the "Bonus Shares").
See "Security Ownership of Certain Beneficial Owners and Management" for
information concerning the aggregate share ownership of the Company's Named
Executive Officers and directors. At the time of the Consolidation certain of
the Eligible Employees acquired shares of the Company's common stock with the
proceeds from the repurchase by LCI of their shares of LCI capital stock. See
"Executive Compensation -- Summary Compensation Table."
The terms of the 1994 Purchase Plan give Mr. Reed the opportunity to
purchase, through bonuses and/or the use of his own funds, up to five percent of
the outstanding shares of the Company's common stock. The Company awarded Mr.
Reed a cash bonus of $150,000 at the time of the Consolidation that was applied
to the purchase of shares. The Company has paid and intends to continue to pay
an annual cash bonus of $150,000 to Mr. Reed for each of the four years
following the Consolidation, contingent upon the Company's achieving a certain
fixed charge coverage ratio for each of such years. Each such bonus will include
an additional amount which represents Mr. Reed's income tax liability for such
bonus. Each such bonus was and shall be applied to the repayment of the loan
used to finance the purchase of his shares of the Company's common stock. See
"Executive Compensation -- Summary Compensation Table."
In August 1995, the Board adopted the 1995 Amended and Restated Stock
Purchase Plan (the "1995 Purchase Plan," and together with the 1994 Purchase
Plan, the "Management Stock Purchase Plan"). The 1995 Purchase Plan eliminated
the distinction between Bonus Shares, Purchased Shares and Conversion Shares and
provides that the repurchase value of all such shares will be the fair market
value. Participants are required to sell and the Company is required to purchase
the shares upon termination of employment. The 1995 Purchase Plan provides that
in the event that an Eligible Employee finances his purchase of shares with a
bank loan, the Company may guarantee the repayment of such loan, such guarantee
to be secured by the shares acquired by the Eligible Employee. The 1995 Purchase
Plan is administered by the Company's Board.
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<PAGE> 64
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership of the Company's common stock
as of September 30, 1997 by directors, Named Executive Officers, persons known
by the Company to own more than 5% of the common stock and all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNED
- ------------------------ ------------------ ----------
<S> <C> <C>
Johnnie Lou LaRoche(1)...................................... 297,500 68.1%
W. Walter LaRoche, III(1)................................... 42,500 9.7
Victoria E. LaRoche(1)...................................... 42,500 9.7
Louanne C. LaRoche(1)....................................... 42,500 9.7
Grant O. Reed............................................... 3,344 *
Richard H. Watts............................................ 2,500 *
William G. Osborne, Ph.D.................................... 2,500 *
Harold W. Ingalls........................................... 1,506 *
Paul L. M. Beckwith, Ph.D................................... 800 *
George R. Wislar............................................ 550 *
C. L. Wagner, Jr............................................ 400 *
Vincent R. Gurzo............................................ 334 *
John R. Hall................................................ 0 *
Robert L. Yohe.............................................. 0 *
------- ----
Directors and executive officers as a group (14) Persons.... 436,934 100%
</TABLE>
- ---------------
* Indicates that the percentage beneficially owned was less than 1.0%.
(1) The LaRoche Family may be deemed to be a "group" for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), although there is no agreement among them with respect to the
acquisition, retention, disposition or voting of the Company's common stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a Salary Continuation Agreement entered into by the Company and
her late husband beginning in 1989, Johnnie Lou LaRoche received death benefit
payments of $438,612 per year through June 1997. A portion of these payments was
funded by the proceeds of an insurance policy on the life of Mr. LaRoche of
which the Company was a beneficiary.
On June 30, 1997, the Company entered into a Consulting Agreement with
Johnnie Lou LaRoche, a Director of the Company, pursuant to which Mrs. LaRoche
will provide various consulting services to the Company in exchange for a
consultant fee of $438,612 per year. The Consulting Agreement has an initial
term of one year expiring June 30, 1998, and is automatically renewed for
successive one year periods, until terminated by either party upon 30 days
notice after May 31, 1998.
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<PAGE> 65
THE REFINANCING
In the Refinancing, the Company refinanced its outstanding indebtedness
under its prior credit facility with borrowings under the Credit Facility, and
refinanced substantially all of its outstanding indebtedness under the 13% Notes
by consummating the Tender Offer, the Consent Solicitation and the Initial
Offering. The Company believes that the Refinancing will provide the Company
with the additional operating and financial flexibility necessary to implement
its business strategy most effectively.
TENDER OFFER AND CONSENT SOLICITATION
Pursuant to an Offer to Purchase and Consent Solicitation Statement (and
related documentation) (the "Tender Documents") dated August 12, 1997, as
amended August 29, 1997, the Company made a tender offer to repurchase all, but
not less than a majority, of its outstanding 13% Notes at a price equal to (i)
the present value on the payment date of $1,065.00 per $1,000 principal amount
of each Existing Note (the amount payable on August 15, 1999, which is the first
date on which the 13% Notes are redeemable) plus interest payable through August
15, 1999, based on a discount factor equal to the sum of (x) 5.97% (the yield on
the 6% United States Treasury Note due August 15, 1999 as of 2:00 p.m., New York
City Time, on August 25, 1997), plus (y) 50 basis points, minus (ii) $10 per
$1,000 principal per Existing Note. Each tendering Holder also received accrued
and unpaid interest up to, but not including, the expiration date of the Tender
Offer. In connection with the Tender Offer, the Company also solicited consents
("Consents") from the tendering holders of 13% Notes to certain proposed
amendments to the 13% Notes Indenture (the "Indenture Amendments") which
amendments eliminated substantially all of the restrictive covenants contained
in the 13% Notes Indenture. Consenting noteholders also received payment equal
to $10 per $1,000 principal amount of the 13% Notes tendered to the Company by
such holder. The Company received tenders of, and consents relating to
approximately 99% of principal amount of the outstanding 13% Notes. The Company
and the trustee under the 13% Note Indenture executed a supplemental indenture
containing the Indenture Amendments. The Company may repurchase some or all of
the outstanding 13% Notes in the future in open market transactions, privately
negotiated purchases or otherwise.
CREDIT FACILITY
As part of the Refinancing, the Company entered into the Credit Facility
with The Chase Manhattan Bank as administrative agent (the "Agent") and certain
other lenders. The Credit Facility provides for aggregate borrowings of up to
$160.0 million on a senior secured basis, consisting of a $60.0 million Term
Loan (which was be reduced to $35.0 million upon the closing of the Initial
Offering) and a $100.0 million Revolving Credit Facility, both maturing six
years after the effective date. The Revolving Credit Facility was amended in
October 1997 to increase the maximum available amount to $125 million.
The initial closing under the Credit Facility occurred on August 27, 1997,
at which time the Company borrowed $36.0 million under the Revolving Credit
Facility, which was used in part to pay off the outstanding principal balance
of, plus all accrued and unpaid interest through the date of payment on, the
Company's then-existing $40.0 million credit facility. The availability of the
Term Loan and the balance of the Revolving Credit Facility are subject to the
terms and conditions set forth below and the other conditions set forth in the
Credit Facility, including, among others, the absence of any material adverse
change in the financial condition and results of operations of the Company.
Standby or documentary letters of credit ("Letters of Credit") are
available under the Revolving Credit Facility in an aggregate amount not to
exceed the lesser of (1) $30.0 million or (2) an amount equal to the total
commitments under the Revolving Credit Facility minus the outstanding aggregate
principal amount of all revolving credit loans. Borrowings under the Term Loan
and Revolving Credit Facility in French francs will be available to the extent
of the equivalent of $75 million. The interest rates applicable to the loans
will, at the Company's option, be the prime commercial lending rate of The Chase
Manhattan Bank (or the federal funds effective rate) plus a margin of up to
0.75%, or LIBOR (adjusted to reflect any required reserves) plus a margin of 1%
to 2%, the applicable margins being determined based on the Company's ratio of
consolidated total debt to Borrower Consolidated EBITDA (as defined in the
Credit Agreement). The Company will also
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pay a commitment fee on the unused portion of the Revolving Credit Facility at
an annual rate of between 0.25% and 0.50%, and fees on the undrawn amounts plus
the amount of outstanding reimbursement obligations, of standby Letters of
Credit at an annual rate of between 0.75% and 1.75%, again depending on the
Company's ratio of consolidated total debt to Borrower Consolidated EBITDA (as
defined in the Credit Agreement). All loans under the Credit Facility will
mature no later than August 26, 2003.
To secure the obligations of the Company under the Credit Facility, The
Chase Manhattan Bank, as agent for itself and the co-lenders, was granted
security interests in substantially all of the domestic assets of the Company
and each of its domestic subsidiaries including, without limitation, accounts,
chattel paper, instruments, general intangibles, inventory, equipment, real
property, and products and proceeds thereof.
The Company and its Subsidiaries are subject to customary secured lending
covenants including those restricting additional liens, incurrence of additional
indebtedness, the sale of assets, the payment of dividends, transactions with
affiliates, the making of certain investments and certain other fundamental
changes and the making of capital expenditures and acquisitions in excess of
specified levels. The Company is also required to maintain certain continuing
financial covenants, on a consolidated basis, at specified levels, including
minimum net worth, minimum interest coverage and maximum leverage. In addition
to the covenants contained in the Credit Facility, the Company's ability to draw
on the Credit Facility will be subject to its compliance with the Indenture.
CURRENCY HEDGING TRANSACTIONS
The Company has committed to enter into a currency swap arrangement with
The Chase Manhattan Bank whereby the Company will swap the notional United
States dollar amount borrowed under the Term Loan under the Credit Facility for
the Initial Purchase in the Chlor-alkali Joint Venture and related fees and
expenses into French francs and the associated interest rate into the
corresponding French franc interest rate.
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes offered hereby will be issued as a separate series under
the Indenture among the Company and the Trustee. The form and terms of the
Exchange Notes are the same as the form and terms of the Old Notes (which they
replace) except that (i) the Exchange Notes bear a Series B designation, (ii)
the Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof, and (iii) the holders of
Exchange Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing for an increase in the
interest rate on the Old Notes in certain circumstances relating to the timing
of the Exchange Offer, which rights will terminate when the Exchange Offer is
consummated. The Old Notes issued in the Initial Offering and the Exchange Notes
offered hereby are referred to collectively as the "Notes."
The Exchange Notes will be issued under the Indenture, dated as of
September 23, 1997, between the Company and State Street Bank and Trust Company,
as trustee, a copy of which is available upon request to the Company. The
definitions of certain capitalized terms used in the following summary are set
forth below under "-- Certain Definitions."
The Notes will be issued only in registered form without coupons, in
denominations of $1,000 and integral multiples of $1,000. The Company will
appoint the Trustee to serve as registrar and paying agent under the Indenture
at its offices at 61 Broadway, New York, NY 10006. No service charge will be
made for any registration of transfer or exchange of the Notes, except for any
tax or other governmental charge that may be imposed in connection therewith. As
of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. Under certain circumstances, however, the Company will
be able to designate current and future Subsidiaries as Unrestricted
Subsidiaries which will not be subject to many of the restrictive covenants set
forth in the Indenture.
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The following summary of certain provision of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and to all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "Certain Definitions." References in this "Description of
the Notes" section to the "Company" mean only LaRoche Industries Inc. and not
any of its Subsidiaries.
RANKING
The Notes will rank junior to, and be subordinated in right of payment to,
all existing and future Senior Indebtedness of the Company, pari passu in right
of payment with all Senior Subordinated Indebtedness of the Company and senior
in right of payment to all Subordinated Indebtedness of the Company. At August
31, 1997, after giving pro forma effect to the Refinancing, including the
issuance of the Notes and the application of the net proceeds therefrom, the
Company would have had approximately $ million of Senior Indebtedness
outstanding (exclusive of unused commitments). All debt incurred under the
Credit Facility will be Senior Indebtedness of the Company and will be secured
by substantially all of the domestic assets of the Company.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited to $175.0 million aggregate principal amount and
will mature on September 15, 2007. Interest on the Notes will accrue at a rate
of 9 1/2% per annum and will be payable semiannually in arrears on each March 15
and September 15, commencing March 15, 1998, to the holders of record of Notes
at the close of business on March 1 and September 1, respectively, immediately
preceding such interest payment date. Interest will accrue from the most recent
interest payment date to which interest has been paid or, if no interest has
been paid, from September 23, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
Except as otherwise described below, the Notes will not be redeemable at
the Company's option prior to September 15, 2002. Thereafter, the Notes will be
redeemable at the option of the Company, in whole or in part, at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the redemption date, if redeemed
during the 12-month period beginning on September 15 of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002........................................................ 104.750%
2003........................................................ 103.167%
2004........................................................ 101.583%
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to September 15,
2000, the Company may redeem in the aggregate up to 33 1/3% of the originally
issued aggregate principal amount of the Notes with the net cash proceeds of one
or more Public Equity Offerings by the Company at a redemption price equal to
109.5% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided, however, that at least
66 2/3% of the originally issued aggregate principal amount of the Notes must
remain outstanding immediately after giving effect to each such redemption
(excluding any Notes held by the Company or any of its Affiliates). Notice of
any such redemption must be given within 60 days after the date of the closing
or the relevant Public Equity Offering of the Company.
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SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an optional redemption, selection of such Notes for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000 or less shall
be redeemed in part. Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption as long as the Company has deposited with the paying agent
for the Notes funds in satisfaction of the applicable redemption price pursuant
to the Indenture.
SUBORDINATION OF THE NOTES
The payment of principal of, premium, if any, and interest on, the Notes
and any other payment obligations of the Company in respect of the Notes
(including any obligation to repurchase the Notes) will be subordinated in
certain circumstances in right of payment, as set forth in the Indenture, to the
prior payment in full in cash of all Senior Indebtedness, whether outstanding on
the date of the Indenture or thereafter incurred.
Upon any payment or distribution of property or securities to creditors of
the Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, or in an assignment for the benefit of creditors or any
marshalling of the Company's assets and liabilities, the holders of Senior
Indebtedness will be entitled to receive payment in full in cash or Cash
Equivalents or otherwise in a form satisfactory to such holders of all
Obligations due in respect of such Senior Indebtedness (including interest
after, or which would accrue but for, the commencement of any such proceeding at
the rate specified in the applicable Senior Indebtedness, whether or not a claim
for such interest would be allowed in a proceeding) before the Holders of the
Notes will be entitled to receive any payment or distribution of any kind or
character with respect to the Notes, and until all Obligations with respect to
Senior Indebtedness are paid in full in cash, any payment or distribution to
which the Holders of the Notes would be entitled shall be made to the holders of
Senior Indebtedness (except that Holders of the Notes may receive payments made
from the trust described under "-- Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment or distribution of any kind or
character (whether by redemption, purchase, retirement, defeasance or otherwise)
upon or in respect of the Notes (except from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if (i) a default in the payment of all or
any portion of the Obligations with respect to any Designated Senior
Indebtedness occurs or (ii) any other default occurs and is continuing with
respect to Designated Senior Indebtedness that permits, or with the giving of
notice or passage of time or both (unless cured or waived) will permit, holders
of the Designated Senior Indebtedness as to which such other default relates to
accelerate its maturity and the Trustee receives a notice of such other default
(a "Payment Blockage Notice") from the Company or the holders of any Designated
Senior Indebtedness. Cash payments on the Notes shall be resumed (a) in the case
of a payment default, upon the date on which such default is cured or waived and
(b) in the case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Indebtedness has been accelerated or a default of the type
described in clause (h) under the caption "Events of Default" has occurred and
is continuing. No new period of payment blockage may be commenced unless and
until 360 days have elapsed since the date of commencement of the payment
blockage period resulting from the immediately prior Payment Blockage Notice. No
nonpayment default in respect of Designated Senior Indebtedness that existed or
was continuing on the date of delivery of any Payment Blockage Notice to
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the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice, unless such default has been cured or waived for a period of not less
than 90 consecutive days.
The Indenture will further require that the Company promptly notify holders
of Senior Indebtedness if payment of the Notes is accelerated because of an
Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency of the Company, Holders of the Notes may recover
less ratably than creditors of the Company who are holders of Senior
Indebtedness. The Indenture will limit, subject to certain financial tests, the
amount of additional Indebtedness, including Senior Indebtedness, that the
Company and its Subsidiaries can incur. See "-- Certain Covenants -- Incurrence
of Indebtedness."
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of the Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount of the Notes plus accrued and
unpaid interest, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offer to repurchase the Notes pursuant to
the procedures required by the Indenture and described in such notice. The
Change of Control Payment shall be made on a business day not less than 30 days
nor more than 60 days after such notice is mailed (the "Change of Control
Payment Date"). The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all the Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the relevant Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of such Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder of
the Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture will not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction. The Company will not be
required to make a Change of Control Offer if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
The Credit Facility will prohibit the Company from repurchasing any Notes
pursuant to a Change of Control Offer prior to the repayment in full of the
Senior Indebtedness under the Credit Facility. Moreover, the occurrence of
certain change of control events identified in the Credit Facility will
constitute a default under the Credit Facility. Any future credit agreements or
agreements relating to the Senior Indebtedness to which the Company becomes a
party may contain similar restrictions and provisions. If a Change of Control
were to occur, the Company may not have sufficient available funds to pay the
Change of Control Payment for all Notes that might be delivered by Holders of
the Notes seeking to accept the Change of Control Offer after first satisfying
its obligations under the Credit Facility or other agreements relating to Senior
Indebtedness, if accelerated. The failure of the Company to make or consummate
the Change of Control Offer or pay the
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Change of Control Payment when due will constitute a Default under the Indenture
and will otherwise give the Trustee and the Holders of the Notes the rights
described under "-- Events of Default."
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of the Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
CERTAIN COVENANTS
Limitation on Indebtedness. The Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness), except for Permitted
Indebtedness; provided, however, that the Company and any Guarantor may Incur
Indebtedness (including Acquired Indebtedness) if, at the time of and
immediately after giving pro forma effect to such incurrence of Indebtedness and
the application of the proceeds therefrom, the Consolidated Fixed Charge
Coverage Ratio for the Company for the four full fiscal quarters immediately
preceding the Incurrence of such Indebtedness taken as one period would be
greater than 2.0 to 1.0.
The foregoing limitations will not apply to the Incurrence of any of the
following (collectively, "Permitted Indebtedness"):
(a) Indebtedness of the Company under the Credit Facility in a maximum
principal amount at any one time outstanding not to exceed (i) $35.0
million under the term loan facility provided therein and (ii) an amount
equal to the Calculated Amount under the revolving credit facility provided
therein;
(b) Indebtedness of the Company pursuant to the Notes;
(c) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date of the Indenture;
(d) Indebtedness of the Company owing to a Restricted Subsidiary,
provided that any Indebtedness of the Company owing to a Restricted
Subsidiary is made pursuant to an intercompany note (the outstanding
principal balance of which may be evidenced by the Company's accounting
records) and is subordinated in right of payment from and after such time
as the Notes shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Notes and any Senior Indebtedness; provided further,
that any disposition, pledge or transfer of any such Indebtedness to a
Person (other than a pledge made in accordance with the provisions of the
Indenture described below under the caption "-- Limitation on Liens" or a
disposition, pledge or transfer to a Wholly Owned Restricted Subsidiary)
shall be deemed to be an incurrence of such Indebtedness by the obligor not
permitted by this clause (d);
(e) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or to another Wholly Owned Restricted Subsidiary and Indebtedness
of a Restricted Subsidiary owing to the Company or to a Wholly Owned
Restricted Subsidiary, in each case that is a Permitted Investment;
provided that any such Indebtedness is made pursuant to an intercompany
note; provided, further, that (i) any disposition, pledge or transfer of
any such Indebtedness to a Person (other than a pledge made in accordance
with the provisions of the Indenture described below under the caption
"-- Limitation on Liens" or a disposition, pledge or transfer to the
Company or a Wholly Owned Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the obligor not permitted by this clause
(e), and (ii) any transaction pursuant to which any Wholly Owned Restricted
Subsidiary, which has Indebtedness owing to the Company or any other Wholly
Owned Restricted Subsidiary, ceases to be a Wholly Owned Restricted
Subsidiary shall be deemed to be the incurrence of Indebtedness by such
formerly Wholly Owned Restricted Subsidiary that is not permitted by this
clause (e) (except to the
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extent such Person remains a Restricted Subsidiary and such Indebtedness
constitutes a Permitted Investment);
(f) guarantees of any Restricted Subsidiary so long as the Company
complies with the provisions of the Indenture described below under the
caption "Future Guarantors";
(g) obligations of the Company or any Wholly Owned Restricted
Subsidiary in respect of Hedging Obligations, provided that in the case of
Interest Rate Agreements, the notional amount thereof is less than or
approximately equal to an amount of Indebtedness outstanding or reasonably
expected by the Company to be outstanding during the term of such Interest
Rate Agreement and as to other Hedging Obligations, the underlying risk
arises in the ordinary course of business of the Company or such Restricted
Subsidiary and such hedging contract bears a reasonable relationship to the
Company's or such Restricted Subsidiary's obligations (or requirements);
(h) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of outstanding Indebtedness
Incurred in compliance with the Consolidated Fixed Charge Coverage Ratio of
the first paragraph of this covenant or any Indebtedness described in
clauses (b), (c) (i) and (j) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the
aggregate principal amount of Indebtedness represented thereby is not
increased by such refinancing plus the lesser of (i) the stated amount of
any premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or
(ii) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
the Company incurred in connection with such refinancing and, in the case
of Senior Subordinated Indebtedness or Subordinated Indebtedness, such
refinancing does not reduce the Average Life to Stated Maturity or the
Stated Maturity of such Indebtedness;
(i) Indebtedness (including Acquired Indebtedness) Incurred to pay,
and in a principal amount not in excess of, the Phase Two Purchase Price
(which Indebtedness may be Incurred under the Credit Facility, in addition
to the Indebtedness permitted by clause (a), or may be Incurred otherwise);
(j) Indebtedness of the Company or a Restricted Subsidiary under its
agreement, as in effect on the date of its original execution, to reimburse
Rhone-Poulenc Chimie S.A. for the Company's proportionate share of amounts
paid by Rhone-Poulenc Chimie S.A. to UFB Locabail under a guarantee of
equipment lease obligations of CEVCO, the provider of electric energy to
ChlorAlp S.A.S., in respect of three steam turbines leased by CEVCO, and
Capital Lease Obligations of the Company or any of its Restricted
Subsidiaries Incurred in connection with such equipment lease obligations
of CEVCO;
(k) Indebtedness Incurred by Foreign Restricted Subsidiaries that in
the aggregate does not exceed $30.0 million at any time outstanding;
provided, however, that at the time of and immediately after giving pro
forma effect to such Incurrence of Indebtedness and the application of the
proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio for the
Company for the four full fiscal quarters immediately preceding the
Incurrence of such Indebtedness taken as one period would be greater than
2.0 to 1.0; and
(l) Indebtedness of the Company in addition to that described in
clauses (a) through (k) above, and any renewals, extensions, substitutions,
refinancings or replacements of such Indebtedness, so long as the aggregate
principal amount of all such additional Indebtedness at any time
outstanding shall not exceed $15.0 million (which Indebtedness may be
Incurred under the Credit Facility or otherwise).
Limitation on Layering. The Company shall not, directly or indirectly,
Incur any Indebtedness that by its terms would expressly rank senior in right of
payment to the Notes and subordinate in right of payment to any other
Indebtedness of the Company.
Limitation on Restricted Payments. The Company shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or make any other payment or distribution
on account of any Equity Interests of the Company or any Restricted Subsidiary
to holders of such Equity Interests in their capacity as such (other than (A)
dividends, distributions and payments to the Company or any Restricted
Subsidiary
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(and, if such Restricted Subsidiary is not a Wholly Owned restricted Subsidiary,
to its other stockholders on a pro rata basis) and (B) dividends or
distributions payable solely in Qualified Equity Interests of the Company or in
options, warrants or other rights to purchase Qualified Equity Interests of the
Company);
(ii) purchase, redeem or otherwise acquire or retire for value, directly or
indirectly, any Equity Interests of the Company or any Restricted Subsidiary
(other than such Equity Interests owned by the Company or a Wholly Owned
Restricted Subsidiary);
(iii) make any principal payment on, or purchase, redeem, defease, retire
or otherwise acquire for value, prior to any scheduled principal payment,
scheduled sinking fund payment or final maturity, any Subordinated Indebtedness;
or
(iv) make any Investment in any Person (other than Permitted Investments)
(any such payment or any other action (other than any exception thereto)
described in (i) through (iv) each, a "Restricted Payment"), unless at the time
of and after giving effect to the proposed Restricted Payment
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions
described under the caption " -- Limitation on Indebtedness" above; and
(c) the aggregate amount of all Restricted Payments declared or made
on or after the date of the Indenture does not exceed an amount equal to
the sum of (1) 50% of Consolidated Net Income of the Company for the period
(taken as one accounting period) beginning on the first fiscal quarter
commencing after the date of the Indenture and ending on the last day of
the most recent fiscal quarter immediately preceding the date of such
Restricted Payment for which internal financial statements are available at
the time of such Restricted Payment (or if such cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss), plus (2) the aggregate
net cash proceeds received by the Company after the date of the Indenture
either (x) as capital contributions to the Company or (y) from the issue
and sale (other than to any of its Restricted Subsidiaries) of its
Qualified Equity Interests (excluding the net proceeds from any issuance
and sale of Qualified Equity Interests financed, directly or indirectly,
using funds borrowed from or guaranteed by the Company or any Restricted
Subsidiary until and to the extent such borrowing is repaid), plus (3) the
principal amount (or accreted amount (determined in accordance with GAAP),
if less) of any Indebtedness of the Company or any Restricted Subsidiary
which has been converted into or exchanged for Qualified Equity Interests
of the Company after the date of the issuance of the Notes, plus (4) in the
case of the disposition or repayment of any Investment constituting a
Restricted Payment made after the date of the Indenture, an amount equal to
the lesser of the initial amount of such Investment and the amount received
by the Company or any Restricted Subsidiary upon such disposition or
repayment, plus (5) with respect to any Unrestricted Subsidiary which has
been redesignated a Restricted Subsidiary after the date of the Indenture,
the amount (measured as of the date of redesignation) equal to the lesser
of (x) the amount of the Company's Investment in such Restricted Subsidiary
or (y) the Fair Market Value of such Restricted Subsidiary, on the date of
redesignation, plus (6) $5.0 million and minus (7) the Designation Amount
(measured as of the date of Designation) with respect to any Subsidiary of
the Company which has been designated an Unrestricted Subsidiary after the
date of the Indenture in accordance with "-- Designation of Unrestricted
Subsidiaries" below.
The foregoing provisions shall not prohibit: (i) the payment of any
dividend or distribution on Equity Interests within 60 days after the date of
declaration of such dividend or distribution if at the date of such declaration
such payment would comply with the provisions of the Indenture; provided,
however, that such dividends shall be included in subsequent calculations of the
amount of Restricted Payments; (ii) the purchase, redemption, retirement or
other acquisition of any Equity Interests of the Company in exchange for, or out
of the net cash proceeds of the substantially concurrent issue and sale (other
than to a Subsidiary) of, Qualified Equity Interests of the Company or a
substantially concurrent capital contribution to the Company;
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provided, however, that (A) such purchase, redemption, retirement or other
acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments and (B) the net cash proceeds from such sale or capital
contribution shall be excluded in subsequent calculations under clauses (c)(2)
of the preceding paragraph; (iii) the purchase, redemption, retirement,
defeasance or other acquisition of Subordinated Indebtedness made in exchange
for, or out of the net cash proceeds of, (x) a substantially concurrent issue
and sale (other than to a Restricted Subsidiary) of Qualified Equity Interests
of the Company; provided, however, that such purchase, redemption, retirement,
defeasance or other acquisition shall be excluded from subsequent calculations
of the amount of Restricted Payments and the net cash proceeds or value from
such transaction shall be excluded from clauses (c)(2) of the preceding
paragraph or (y) Subordinated Indebtedness; permitted to be Incurred pursuant to
clause (h) of the definition of Permitted Indebtedness provided, however, that
such purchase, redemption, retirement, defeasance or other acquisition shall be
excluded in subsequent calculations of clauses (c)(2) of the preceding
paragraph; (iv) the purchase, redemption, or other acquisition or retirement of
any shares of Equity Interests of the Company from employees of the Company and
its Subsidiaries, their heirs, executors, and administrators, pursuant to any
management equity subscription agreement, stock option agreement or shareholders
agreement upon the retirement or termination of employment with the Company of
such employees; provided, however, that the aggregate amount of such purchases,
redemptions, acquisitions and retirements made after the date of the Indenture
shall not exceed $4.0 million and provided, further, that such purchase,
redemption, acquisition or retirement shall be included in subsequent
calculations of the amount of Restricted Payments; (v) the repurchase,
redemption, defeasance, retirement, refinancing or acquisition for value or
payment of principal of Subordinated Indebtedness at a purchase price not
greater than 101% of the principal amount of such Subordinated Indebtedness in
the event of a Change of Control pursuant to a provision similar to the "Offer
to Purchase upon Change of Control" repurchase, the Company has made a Change of
Control Offer as provided in "Offer to Purchase upon Change of Control" above
with respect to the Notes and has repurchased all Notes validly tendered for
payment in connection with such Change of Control Offer; provided, further, that
any such repurchase, redemption, defeasance, retirement, refinancing or
acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments; (vi) the purchase, redemption, retirement or other
acquisition of any Disqualified Equity Interests of the Company in exchange for,
or out of the net cash proceeds of a substantially concurrent issue and sale
(other than to a Subsidiary) of Disqualified Equity Interests of the Company
with substantially similar terms (or terms more favorable to the Company);
provided, however, that (A) such purchase, redemption, retirement or other
acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments and (B) the net cash proceeds from such sale or capital
contribution shall be excluded in subsequent calculations under clauses (c)(2)
of the preceding paragraph; (vii) the use of life insurance proceeds by the
Company to purchase the Equity Interests of Johnnie Lou LaRoche upon her death;
provided, however, that such purchase shall be excluded in subsequent
calculations of the amount of Restricted Payments to the extent of the life
insurance proceeds used for such purpose; and (viii) in any given year,
Restricted Payments by the Company that in the aggregate do not exceed $2.0
million; provided, however, that such Restricted Payments will be included in
subsequent calculations of the amount of Restricted Payments; provided, however,
that in the case of each of clauses (ii) through (viii) no Default or Event of
Default shall have occurred and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under this
covenant, the amount of any non-cash Restricted Payment shall be deemed to be
equal to the Fair Market Value thereof at the date of making such Restricted
Payment.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly create or otherwise cause or
suffer to exist or become effective (other than by application of law) any
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions to the Company or any other
Restricted Subsidiary on its Equity Interests or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (b) make
loans or advances to, or guarantee any Indebtedness or other obligations of, or
make any Investment in, the Company or any other Restricted Subsidiary or (c)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or
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restrictions existing under or by reason of (i) the Credit Facility, or any
other agreement of the Company or the Restricted Subsidiaries outstanding on the
date of the Indenture, in each case as in effect on the date of the Indenture,
and any amendments, restatements, renewals, replacements or refinancings
thereof; provided, however, that any such amendment, abatement, renewal,
replacement or refinancing is no more restrictive in the aggregate with respect
to such encumbrances or restrictions than those contained in the agreement being
amended, restated, reviewed, replaced or refinanced; (ii) applicable law; (iii)
any instrument governing Indebtedness or Equity Interests of an Acquired Person
acquired by the Company or any Restricted Subsidiary as in effect at the time of
such acquisition (except, in the case of Indebtedness, to the extent such
Indebtedness was Incurred by such Acquired Person in connection with, as a
result of or in contemplation of such acquisition); provided, however, that such
encumbrances and restrictions are not applicable to the Company or any
Restricted Subsidiary, or the properties or assets of the Company or any
Restricted Subsidiary other than the Acquired Person and, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred; (iv) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices; (v) Purchase
Money Indebtedness for property acquired in the ordinary course of business that
only imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Restricted Subsidiary; provided, however that such encumbrances and restrictions
described in this clause (vi) are only applicable to such Restricted Subsidiary
or assets, as applicable, and any such sale or disposition is made in compliance
with "Disposition of Proceeds of Asset Sales" below to the extent applicable
thereto; (vii) refinancing Indebtedness permitted under clause (h) of the second
paragraph of "Limitation on Indebtedness" above; provided, however, that such
encumbrances and restrictions contained in the agreements governing such
Indebtedness are no more restrictive in the aggregate than those contained in
the agreements governing the Indebtedness being refinanced immediately prior to
such refinancing; or (viii) the Indenture and the Notes.
Designation of Unrestricted Subsidiaries. The Company may designate after
the date of the Indenture any Subsidiary of the Company as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Fixed Charge Coverage Ratio in the
first paragraph of "Limitation on Indebtedness" above;
(iii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"Limitation on Restricted Payments" above in an amount (the "Designation
Amount") equal to the amount of the Company's Investment in such Subsidiary
on such date; and
(iv) such Subsidiary does not own any Equity Interest or Indebtedness
of, or hold a Lien on any of the property of, the Company or any other
Subsidiary of the Company.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
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Any Unrestricted Subsidiary shall immediately be deemed to be a Restricted
Subsidiary (and the related Liens and Indebtedness thereof shall thereupon be
deemed to be Incurred) if the Company or any Restricted Subsidiary shall at any
time (x) provide credit support for, subject any of its property or assets
(other than the Equity Interests of any Unrestricted Subsidiary) to the
satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary,
except for any non-recourse guarantee given solely to support the pledge by the
Company or any Restricted Subsidiary of the capital stock of any Unrestricted
Subsidiary. For purposes of the foregoing, the Designation of a Subsidiary of
the Company as an Unrestricted Subsidiary shall be deemed to include the
Designation of all of the Subsidiaries of such Subsidiary.
Limitation on Liens. The Company shall not and shall not cause or permit
any Restricted Subsidiary to, directly or indirectly, Incur any Liens of any
kind against or upon any of their respective properties or assets now owned or
hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made to secure the Notes and all other amounts due under
the Indenture and any other class of Senior Subordinated Indebtedness equally
and ratably with such Indebtedness (or, in the event that such Indebtedness is
subordinated in right of payment to the Notes prior to such Indebtedness) with a
Lien on the same properties and assets securing such Indebtedness for so long as
such Indebtedness is secured by such Lien, except for (i) Liens securing Senior
Indebtedness (including, without limitation, Indebtedness incurred under the
Credit Facility) which is permitted to be incurred under the covenant described
above under the caption "-- Limitation on Indebtedness" (provided that
Indebtedness under the Credit Facility shall be deemed not to have been incurred
in violation of such covenant for purposes of this clause (i) if the holders of
such Indebtedness or their agent or representative shall have received a
representation from the Company to the effect that such Indebtedness does not
violate such covenant) and (ii) Permitted Liens.
Disposition of Proceeds of Asset Sales. The Company shall not, and shall
not cause or permit any Restricted Subsidiary to, directly or indirectly, make
any Asset Sale, unless (i) the Company or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of and
(ii) at least 75% of such consideration consists of cash or Cash Equivalents.
The amount of any Indebtedness (other than any Subordinated Indebtedness) of the
Company or any Restricted Subsidiary that is actually assumed by the transferee
in such Asset Sale and from which the Company and the Restricted Subsidiaries
are fully and unconditionally released shall be deemed to be cash for purposes
of determining the percentage of cash consideration received by the Company or
the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i)
apply the Net Cash Proceeds of any Asset Sale within 360 days of receipt thereof
to repay Senior Indebtedness and permanently reduce any related commitment, or
(ii) make an Investment in properties and capital assets that will be used in
the business of the Company and its Restricted Subsidiaries existing on the date
of the Indenture or in businesses reasonably related thereto (as determined in
good faith by the Company's Board of Directors). The Company shall be deemed to
have made an Investment under clause (ii) within 360 days so long as (A) it has
signed a written commitment within 360 days of any Asset Sale to undertake such
an Investment and (B) the Company makes such Investment within two years after
the Asset Sale.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are
not applied within 360 days of such Asset Sale as described in clause (i) or
(ii) of the immediately preceding paragraph (such Net Cash Proceeds not so
applied, the "Excess Proceeds"), the Company shall, within 45 days after such
360th day, make an Asset Sale Offer for all outstanding Notes and other Senior
Subordinated Indebtedness, pro rata up to a maximum principal amount (express as
a multiple of $1,000) of Notes and other Senior Subordinated Indebtedness equal
to such Excess Proceeds, at a purchase price in cash equal to 100% of the
principal amount thereof (or the accreted value of such other Senior
Subordinated Indebtedness, if such other Senior
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Subordinated Indebtedness is issued at a discount), plus accrued and unpaid
interest thereon, if any, to the Purchase Date; provided, however, that the
Asset Sale Offer may be deferred until there are aggregate Excess Proceeds equal
to or in excess of $10.0 million, at which time the entire amount of such Excess
Proceeds, and not just the amount in excess of $10.0 million, shall be applied
as required pursuant to this paragraph. Upon completion of such Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
With respect to any Asset Sale Offer effected pursuant to this covenant,
among the Notes, to the extent the aggregate principal amount of Notes and other
Senior Subordinated Indebtedness tendered pursuant to such Asset Sale Offer
exceeds the Excess Proceeds to be applied to the repurchase thereof, such Notes
and other Senior Subordinated Indebtedness shall be purchased pro rata based on
the aggregate principal amount of such Notes and other Senior Subordinated
Indebtedness tendered (or the accreted value of such other Senior Subordinated
Indebtedness, if such other Senior Subordinated Indebtedness is issued at a
discount) by each holder of Notes and such other Senior Subordinated
Indebtedness. To the extent the Excess Proceeds exceed the aggregate amount of
Notes and other Senior Subordinated Indebtedness tendered pursuant to such Asset
Sale Offer, the Company may retain and utilize any portion of the Excess
Proceeds not applied to repurchase the Notes and other Senior Subordinated
Indebtedness for any purpose consistent with the other terms of the Indenture.
In the event that the Company makes an Asset Sale Offer for the Notes and
other Senior Subordinated Indebtedness, the Company shall comply with any
applicable securities laws and regulations, and any violation of the provisions
of the Indenture relating to such Asset Sale Offer occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
Each Holder shall be entitled to tender all or any portion of the Notes
owned by such Holder pursuant to the Asset Sale Offer, subject to the
requirement that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among tendering
Holders and holders of other Senior Subordinated Indebtedness as described
above.
The Credit Facility will prohibit the Company from purchasing any Notes
from the Net Cash Proceeds of Asset Sales. Any future credit agreements or other
agreements relating to Senior Indebtedness to which the Company becomes a party
may contain similar restrictions and provisions. In the event an Asset Sale
Offer occurs at a time when the Company is prohibited from purchasing the Notes,
the Company could seek the consent of its lenders to the purchase or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such Senior Indebtedness, the
Company may remain prohibited from purchasing the Notes. In such case, the
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which would, in turn, constitute a default under the
Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of the Notes.
Merger, Sale of Assets, etc. The Company shall not consolidate with or
merge with or into (whether or not the Company is the Surviving Person) any
other entity and the Company shall not and shall not cause or permit any
Restricted Subsidiary to, sell, convey, assign, transfer, lease or otherwise
dispose of all or substantially all of the Company's and the Restricted
Subsidiaries' properties and assets (determined on a consolidated basis for the
Company and the Restricted Subsidiaries) to any entity in a single transaction
or series of related transactions, unless: (i) either (x) the Company shall be
the Surviving Person or (y) the Surviving Person (if other than the Company)
shall be a corporation organized and validly existing under the laws of the
United States of America or any State thereof or the District of Columbia and
shall expressly assume by a supplemental indenture, the due and punctual payment
of the principal of, premium, if any, and interest on all the Notes and the
performance and observance of every covenant of the Indenture and the
Registration Rights Agreement to be performed or observed on the part of the
Company; (ii) immediately before and after giving effect to the transaction or
series of transactions, no Default or Event of Default shall have occurred and
be continuing; and (iii) immediately after giving effect to any such transaction
or series of transactions involving the incurrence by the Company or any
Restricted Subsidiary, directly or indirectly, of additional Indebtedness (and
treating any Indebtedness not previously an obligation of the Company or any
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Restricted Subsidiary in connection with or as a result of such transaction as
having been incurred at the time of such transaction), the Surviving Person (A)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (B) could
incur, on a pro forma basis after giving effect to such transaction as if it had
occurred at the beginning of the four quarter period immediately preceding such
transaction for which consolidated financial statements of the Company are
available, at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Fixed Charge Coverage Ratio of the first
paragraph of "-- Limitation on Indebtedness" above. Notwithstanding the
foregoing clause (iii) of the immediately preceding sentence, any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
property and assets to the Company and any Wholly Owned Restricted Subsidiary
may consolidate with, merge into or transfer all or part of its property and
assets to another Wholly Owned Restricted Subsidiary. For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or substantially all the
properties and assets of one or more Restricted Subsidiaries the Equity Interest
of which constitutes all or substantially all the properties and assets of the
Company shall be deemed to be the transfer of all or substantially all the
properties and assets of the Company.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which the Company is not the Surviving Person and the Surviving Person is to
assume all the Obligations of the Company under the Notes the Indenture and the
Registration Rights Agreement, pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company and the Company shall be discharged from
its Obligations under the Indenture and the Notes.
Transactions with Affiliates. The Company shall not, and shall not cause
or permit any Subsidiary to, directly or indirectly, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of any of its Affiliates or any officer, director or employee of the
Company or any Subsidiary (each an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms which are no less favorable to the Company or
such Subsidiary, as the case may be, than would be available in a comparable
transaction with an unaffiliated third party and (ii) (A) if such Affiliate
Transaction (or series of related Affiliate Transactions) involves aggregate
payments or the transfer of other consideration between the Company and an
Affiliate of the Company having a Fair Market Value in excess of $1.0 million,
other than sales or purchases of goods and services in the ordinary course of
business at prices and on terms at least as favorable to the Company as then
prevailing in the market, such Affiliate Transaction is in writing and the
Company delivers an officer's certificate to the trustee certifying that such
Affiliate Transaction (or series of Affiliate Transactions) complies with the
foregoing provisions or (B) if such Affiliate Transaction (or series of related
Affiliate Transactions) involves aggregate payments or the transfer of other
consideration between the Company and an Affiliate of the Company having a Fair
Market Value in excess of $3.0 million, other than sales or purchases of goods
and services in the ordinary course of business at prices and on terms at least
as favorable to the Company as then prevailing in the market, such Affiliate
Transaction is in writing and a majority of the disinterested members of the
Board of Directors of the Company shall have approved such Affiliate Transaction
and determined that such Affiliate Transaction complies with the foregoing
provisions. In addition, any Affiliate Transaction involving aggregate payments
or the transfer of other consideration between the Company and an Affiliate of
the Company having a Fair Market Value in excess of $10.0 million, other than
sales or purchases of goods and services in the ordinary course of business at
prices and on terms at least as favorable to the Company as then prevailing in
the market, will also require a written opinion from an Independent Financial
Advisor (filed with the Trustee) stating that the terms of such Affiliate
Transaction are fair from a financial point of view, to the Company or the
Restricted Subsidiary involved in such Affiliate Transaction, as the case may
be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and any Wholly
Owned Restricted Subsidiary or between or among Wholly Owned Restricted
Subsidiaries; (ii) any transaction with an officer, director of the Company
entered into in the ordinary course of business and consistent with past
practice (including compensation or
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employee benefit arrangements with any officer, director or employee of the
Company); (iii) transactions pursuant to agreements in existence on the date of
the Indenture, as described in the Prospectus and renewals and replacements
thereof on substantially similar terms (or on terms more favorable to the
Company); (iv) indemnification payments made to officers, directors and
employees of the Company or any Subsidiary pursuant to charter, bylaw, statutory
or contractual provisions; or (v) transactions otherwise permitted by the
Indenture.
Limitation on the Sale or Issuance of Equity Interests of Restricted
Subsidiaries. The Company shall not sell any Equity Interest of a Restricted
Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly or
indirectly, to issue or sell any Equity Interests, except: (i) to the Company or
a Wholly Owned Restricted Subsidiary; or (ii) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would continue to be
a Restricted Subsidiary. Notwithstanding the foregoing, the Company is permitted
to sell all the Equity Interest of a Restricted Subsidiary as long as the
Company is in compliance with the terms described above in "Certain
Covenants -- Disposition of Proceeds of Asset Sales" and, if applicable,
"Certain Covenants -- Merger, Sale of Assets, etc." above.
Future Guarantors. After the original issue date of the Notes, the Company
will cause each Domestic Restricted Subsidiary which Incurs Indebtedness
(including guarantees of Indebtedness Incurred pursuant to "Certain
Covenants -- Limitation on Indebtedness" above) to execute and deliver to the
Trustee a Guarantee pursuant to which such Domestic Restricted Subsidiary will
guarantee payment of the Notes on a senior subordinated basis. Each Guarantee
will be limited to an amount not to exceed the maximum amount that can be
guaranteed, as it relates to such Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
Business Activities. The Company and its Restricted Subsidiaries may not
engage, to any material extent, in any businesses which are not the same,
similar, related or ancillary to the businesses in which the Company and its
Restricted Subsidiaries are engaged on the date of the Indenture.
Provision of Financial Information. Whether or not the Company is subject
to Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) the annual reports, quarterly reports and other
documents which the Company would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
the Company were so subject, such documents to be filed with the SEC on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company shall also in any event (a) within 15 days of each Required Filing Date
(whether or not permitted or required to be filed with the SEC) (i) transmit (or
cause to be transmitted) by mail to all Holders, as their names and addresses
appear in the Note register, without cost to such Holders upon their request and
(ii) file with the Trustee copies of the annual reports, quarterly reports and
proxy statements which the Company is required to file with the SEC pursuant to
the preceding sentence, or, if such filing is not so permitted, information and
data of a similar nature, and (b) if, notwithstanding the preceding sentence,
filing such documents by the Company with the SEC is not permitted by SEC
practice or applicable law or regulations, promptly upon written request supply
copies of such documents to any Holder. In addition, for so long as any Notes
remain outstanding and prior to the later of the consummation of the Exchange
Offer and the filing of an initial shelf registration statement, if required,
the Company will furnish to the Holders, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
The occurrence of any of the following will be defined as an "Event of
Default" under the Indenture: (a) failure to pay principal of (or premium, if
any, on) any Note when due (whether or not prohibited by the provisions of the
Indenture described under "Subordination of the Notes" above); (b) failure to
pay any interest on any Note when due, continued for 30 days or more (whether or
not prohibited by the provisions of the Indenture described under "Subordination
of the Notes" above); (c) default in the payment of principal of or interest on
any Note required to be purchased pursuant to any Asset Sale Offer required by
the Indenture
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when due and payable or failure to pay on the Purchase Date the Offer Amount for
any Note validly tendered pursuant to any Asset Sale Offer required by the
Indenture (whether or not prohibited by the provisions of the Indenture
described under "Subordination of the Notes" above); (d) failure to perform or
comply with any of the provisions described under "Certain Covenants -- Merger,
Sale of Assets, etc." above; (e) failure to perform any other covenant, warranty
or agreement of the Company under the Indenture or in the Notes or of any future
Guarantor under the Indenture or in any future Guarantee continued for 30 days
or more after written notice to the Company by the Trustee or Holders of at
least 25% in aggregate principal amount of the outstanding Notes; (f) default or
defaults under the terms of one or more instruments evidencing or securing
Indebtedness of the Company or any of its Restricted Subsidiaries having an
outstanding principal amount of $5.0 million or more individually or in the
aggregate that has resulted in the acceleration of the payment of such
Indebtedness or failure by the Company or any of its Restricted Subsidiaries to
pay principal, premium, if any, or interest when due at the stated maturity of
any such Indebtedness and such default or defaults shall have continued after
any applicable grace period; (g) the rendering of a final judgment or judgments
(not subject to appeal) against the Company or any of its Restricted
Subsidiaries in an amount of $5.0 million or more (net of any amounts covered by
reputable and creditworthy insurance companies) which remains undischarged or
unstayed for a period of 60 days after the date on which the right to appeal has
expired; or (h) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any of its Restricted Subsidiaries.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
such Trustee.
If an Event of Default with respect to the Notes (other than an Event of
Default with respect to the Company described in clause (h) of the preceding
paragraph) occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the outstanding Notes, by notice in writing to
the Company may declare the unpaid principal of (and premium, if any) and
accrued interest to the date of acceleration on all the outstanding Notes to be
due and payable immediately and, upon any such declaration, such principal
amount (and premium, if any) and accrued interest, notwithstanding anything
contained in the Indenture or the Notes to the contrary, will become immediately
due and payable (i) so long as there shall be any outstanding Indebtedness under
the Credit Facility, upon the first to occur of an acceleration of such
Indebtedness under the Credit Facility or five business days after receipt by
the Company and the administrative agent under the Credit Facility of such
notice, or (ii) if no Indebtedness is outstanding under the Credit Facility,
upon receipt by the Company of such notice. If an Event or Default specified in
clause (h) of the preceding paragraph with respect to the Company occurs under
the Indenture, the Notes will ipso facto become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder of
the Notes.
Any such declaration with respect to the Notes may be annulled by the
Holders of a majority in aggregate principal amount of the outstanding Notes
upon the conditions provided in the Indenture. For information as to waiver of
defaults, see "Modification and Waiver" below.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes
outstanding, give the Holders of the Notes thereof notice of all uncured
Defaults or Events of Default thereunder known to it; provided, however, that,
except in the case of a Default or an Event of Default in payment with respect
to the Notes or a Default or Event of Default in complying with "Certain
Covenants -- Merger, Sale of Assets, etc." above, the Trustee shall be protected
in withholding such notice if and so long as a committee of its trust officers
in good faith determines that the withholding of such notice is in the interest
of the Holders of the Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a
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continuing Event of Default thereunder and unless the Holders of at least 25% of
the aggregate principal amount of the outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as the Trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of such outstanding Notes a
direction inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of such a Note for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by it of certain of its obligations under the Indenture
and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any of its Affiliates, as such, shall have any liability for any obligations
of the Company or any of its Affiliates under the Notes or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
SATISFACTION AND DISCHARGE OF INDENTURE: DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of such outstanding Notes to
receive payments in respect of the principal of, premium, if any, interest on
such Notes when such payments are due from the trust referred to below, (ii) the
Company's obligations with respect to such Notes concerning issuing temporary
Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes
and the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee, and the Company's obligations in connection therewith and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Company may,
at its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to such Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to such Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from
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bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit: (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the Indenture) to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound; (vi) the Company must have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Company must deliver to the Trustee an officer's
certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Notes over the other creditors of the Company,
or with the intent of defeating, hindering, delaying or defrauding creditors of
the Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws to the extent that the application of the law
of another jurisdiction would be required thereby.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes); provided,
however, that no such modification or amendment to the Indenture may, without
the consent of the Holder of each Note affected thereby, (a) change the maturity
of the principal of or any installment of interest on any such Note or alter the
optional redemption or repurchase provisions of any such Note or the Indenture
(which are described above under "-- Optional Redemption," "-- Offer to Purchase
Upon Change of Control" and "-- Disposition of Proceeds of Asset Sales") in a
manner adverse to the Holders of the Notes; (b) reduce the principal amount of
(or the premium) of any such Note; (c) reduce the rate of or extend the time for
payment of interest on any such Note; (d) change the currency of payment of
principal of (or premium) or interest on any such Note; (e) modify any
provisions of the Indenture relating to the waiver of past defaults or the right
of the Holders of Notes to receive payments of principal of, or premium, if any,
or interest on the Notes or to institute suit for the enforcement of any payment
on or with respect to any such Note or the modification and amendment provisions
of the Indenture and the Notes (other than to add sections of the Indenture or
the Notes which may not be amended, supplemented or waived without the consent
of each Holder therein affected); (f) reduce the percentage of the principal
amount of outstanding Notes necessary for amendment to or waiver of compliance
with any provision of the Indenture or the Notes or for waiver of any Default in
respect thereof; (g) waive a default in the payment of principal of, interest
on, or redemption payment with respect to, the Notes (except a rescission of
acceleration of the Notes by the Holders thereof as provided in the Indenture
and a waiver of the payment default that resulted from such acceleration); (h)
modify the ranking or priority of any Note amend or modify the subordination
provisions of the Indenture in any manner adverse to the Holders of the Notes or
(i) make any change in the foregoing amendment and waiver provisions.
The Holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. Subject to certain rights
of the Trustee, as provided in the Indenture, the Holders of a majority in
aggregate principal amount of the Notes, on behalf of all Holders, may waive any
past default under the Indenture (including any such waiver obtained in
connection with a tender offer or exchange offer for the Notes), except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Notes tendered pursuant to an Asset Sale Offer, or
a default in respect of a provision that under the Indenture cannot be modified
or amended without the consent of the Holder of each Note that is affected.
Notwithstanding the foregoing, without the consent of any Holder of the
Notes the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency,
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to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
the Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the Holders of the Notes or
that does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
THE TRUSTEE
Except during the continuance of a Default, the Trustee will perform only
such duties as are specifically set forth in the Indenture. During the existence
of a Default, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company or any other obligor upon the Notes, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claim as security or otherwise. The Trustee is
permitted to engage in other transactions with the Company or an Affiliate of
the Company; provided, however, that if it acquires any conflicting interest (as
defined in the Indenture or in the Trust Indenture Act), it must eliminate such
conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Notes will be issued in the form of one or
more fully registered Global Notes (each, a "Global Note"). Each Global Note
will be deposited on the date of the closing of the sale of the Notes offered
hereby (the "Closing Date") with, or on behalf of, The Depository Trust Company,
New York, New York (the "Depositary" or "DTC") and registered in the name of
Cede & Co., as nominee of the Depositary, or will remain in the custody of the
Trustee pursuant to the FAST Balance Certificate Agreement between DTC and the
Trustee.
On the date of the issuance of the Notes, interests in the Global Note will
be available for purchase only by "qualified institutional buyers" as defined in
Rule 144A under the Securities Act ("QIBS"). Secondary sales to "institutional
accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act (an "Institutional Accredited Investor"), who are not QIBs will
be reflected in a separate Global Note.
Notes that were issued as described under "Certificated Securities," will
be issued in registered definitive form without coupons (the "Certificated
Securities"). Upon the transfer to a QIB or Institutional Accredited Investor of
Certificated Securities, such Certificated Securities may, unless the Global
Note has previously been exchanged for Certificated Securities, be exchanged for
an interest in the relevant Global Note representing the principal amount of
Notes being transferred. For a description of the restrictions on the transfer
of Certificated Securities, see "Transfer Restrictions."
The Depositary has advised the Company that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depositary was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. The Depositary's Participants include securities
brokers and dealers (including the Initial Purchasers), banks and trust
companies, clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants") that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly. QIBs and Institutional Accredited Investors may elect to
hold Notes purchased by them through the Depositary. QIBs who are not
Participants may beneficially own securities held by or on behalf of the
Depositary only through Participants or Indirect Participants. Institutional
Accredited Investors may beneficially own securities held by or on behalf of the
Depositary only through Participants or Indirect Participants.
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So long as the Depositary or its nominee is the registered owner of the
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or Holder of the Notes represented by the Global Note
for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in a Global Note will not be entitled to have Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Securities, and will
not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to giving of any directions, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in Notes represented by a Global Note to pledge such
interest to persons or entities that do not participate in the Depositary's
system or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Accordingly, each QIB and Institutional Accredited Investor owning a
beneficial interest in a Global Note must rely on the procedures of the
Depositary and, if such QIB or Institutional Accredited Investor is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such QIB or Institutional Accredited Investor owns its interest,
to exercise any rights of a Holder under the Indenture or such Global Note. The
Company understands that under existing industry practice, in the event the
Company requests any action of holders or a QIB or Institutional Accredited
Investor that is an owner of a beneficial interest in a Global Note desires to
take any action that the Depositary, as the Holder of such Global Note, is
entitled to take, the Depositary would authorize the Participants to take such
action and the Participant would authorize QIBs and Institutional Accredited
Investors owning through such Participants to take such action or would
otherwise act upon the instruction of such QIBs and Institutional Accredited
Investors. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on
any Notes represented by a Global Note registered in the name of the Depositary
or its nominee on the applicable record date will be payable by the Trustee to
or at the direction of the Depositary or its nominee in its capacity as the
registered Holder of the Global Note representing such Notes under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payment and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if
any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in the principal amount of the beneficial interest in the Global Note
as shown on the records of the Depositary. Payments by the Participants and the
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Participants or the Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with an interest
in the Global Note and (ii) ownership of the Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the Depositary (with respect to the interest of Participants), the
Participants and the Indirect Participants. The laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes or to pledge the Notes as collateral
will be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Transfer Restrictions."
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, or (iii) upon the occurrence of certain
other events, then, upon surrender by the Depositary of its Global Notes,
Certificated Securities will be issued to each person that the Depositary
identifies as the
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beneficial owner of the Notes represented by the Global Note. In addition,
subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of such person or persons (or
the nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the related Notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. So
long as the Notes are represented by a permanent Global Note or Notes, all
payments of principal, premium, if any, and interest will be made by the Company
in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. So long as the Notes are
represented by a permanent Global Note or Notes registered in the name of the
Depositary or its nominee, the Notes will trade in the Depositary's Same-Day
Funds Settlement System, and secondary market trading activity in the Notes will
therefore be required by the Depositary to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on the trading activity in the Notes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms which are used in the Indenture.
Although certain of such defined terms are similar to defined terms used
elsewhere in this Prospectus, the following definitions pertain only to this
Description of the Notes. Reference is made to the Indenture for a full
definition of all such terms, as well as any other capitalized terms used herein
for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person is merged with or into such Person or becomes a Subsidiary of
such Person or (ii) assumed in connection with the acquisition of assets from
such Person, in each case, other than Indebtedness incurred in connection with
or in contemplation of, such Person becoming a Subsidiary or such acquisition. A
reasonable allocation of existing Indebtedness by the corporate parent (direct,
intermediate or ultimate) of such Person or by such Person, at or around the
time such Person becomes a Subsidiary or such assets are acquired, to the Person
becoming a Subsidiary or to the acquired assets, shall not be deemed to be an
incurrence of Indebtedness in connection with or in contemplation of such
transaction. Acquired Indebtedness shall be deemed to be incurred on the date of
the related acquisition of assets from any Person or the date the acquired
Person becomes a Subsidiary.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"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; provided, however, that for purposes of the
"Transactions with Affiliates" covenant, the term "Affiliate" shall not include
Chase Securities Inc. or its affiliates or Hunton & Williams. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale/leaseback transaction) to any
Person other than the Company or a Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Subsidiary (other than
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directors' qualifying shares, to the extent mandated by applicable law) or (ii)
any assets of the Company or any Restricted Subsidiary (excluding cash and Cash
Equivalents and inventory disposed of in the ordinary course of business). For
the purposes of this definition, the term "Asset Sale" shall not include (a) any
transaction consummated in compliance with "Certain Covenants -- Merger, Sale of
Assets, etc." above and the creation of any Lien not prohibited by "Certain
Covenants -- Limitation on Liens" above; (b) sales of property or equipment that
has become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Company or any Restricted Subsidiary, as the
case may be; (c) any transfers of properties and assets between Wholly Owned
Restricted Subsidiaries; and (d) assets of the Company held for sale on the date
of the Indenture with an aggregate sale price not in excess of $5.0 million. In
addition, solely for purposes of "Certain Covenants -- Disposition of Proceeds
of Asset Sales" above, (x) any transaction consummated in compliance with
"Certain Covenants -- Limitation on Restricted Payments" above and (y) any sale,
conveyance, transfer, lease or other disposition of any property or asset,
whether in one transaction or a series of related transactions, involving assets
with a Fair Market Value not in excess of $3.0 million in any fiscal year shall
be deemed not to be an Asset Sale.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Calculated Amount" means, as of the date of determination, 85% of the net
book value of accounts receivable (as determined in accordance with GAAP) of the
Company and its Restricted Subsidiaries plus 50% of the net book value of
inventories (as determined in accordance with GAAP and adjusted to include LIFO
reserves) of the Company and its Restricted Subsidiaries, each as set forth on
the most recently available consolidated balance sheet of the Company and its
Restricted Subsidiaries.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be properly capitalized on the balance sheet in accordance with
GAAP.
"Cash Equivalents" means: (a) securities issued or directly and fully
guaranteed or insured by the U.S. government or any agency or instrumentality
thereof having maturities of not more than one year from the date of
acquisition; (b) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (c) repurchase obligations with a term of not
more than 30 days for underlying securities of the types described in clauses
(b) and (c) above entered into with any financial institution meeting the
qualifications specified in clause (c) above; (d) commercial paper rated P-1,
A-1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group, respectively, and in each case maturing within 270 days
after the date of acquisition; and (e) corporate securities having a rating
equal to or higher than BBB- and Baa3, or the equivalents thereof, by both
Standard & Poor's Ratings Group and Moody's Investor Service, Inc.,
respectively, if both such entities rate the securities, or having such rating
from one of such entities if only one such entity is rating such Securities.
"Change of Control" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than one or more Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time, upon the happening of an event or otherwise),
directly or indirectly of more than 35% of the total voting power of the
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then outstanding Voting Equity Interests of the Company; (ii) the Company
consolidates with, or merges with or into, another Person (other than the
Company or a Wholly Owned Restricted Subsidiary) or the Company or any of its
Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of the assets of the Company and its Subsidiaries
(determined on a consolidated basis) to any Person (other than the Company or
any Wholly Owned Restricted Subsidiary), other than any such transaction where
immediately after such transaction the Person or Persons that "beneficially
owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) immediately prior to such
transaction, directly or indirectly, a majority of the total voting power of the
then outstanding Voting Equity Interests of the Company "beneficially own" (as
so determined), directly or indirectly, a majority of the total voting power of
the then outstanding Voting Equity Interests of the surviving or transferee
Person; (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution other than in a transaction which complies with the provisions
described under "-- Merger, Sale of Assets, etc."
"Change of Control Offer" has the meaning set forth under "Offer to
Purchase upon Change of Control."
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio
of (a) the sum of Consolidated Net Income (Loss), plus Consolidated Interest
Expense, Consolidated Income Tax Expense and Consolidated Non-Cash Charges
deducted in computing Consolidated Net Income (Loss), in each case for such
period, of the Company and its Subsidiaries on a consolidated basis, all
determined in accordance with GAAP, plus amounts received during such period in
repayment or prepayment of principal of the RP Loan, to (b) the sum of
Consolidated Interest Expense for such period and cash and non-cash dividends
paid on any Preferred Equity Interest of the Company during such period;
provided that such computation shall be after giving pro forma effect to (i) the
incurrence of the Indebtedness with respect to which the computation is being
made and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness was incurred,
and the application of such proceeds occurred, at the beginning of the
applicable period; (ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day of the
applicable period as if such Indebtedness was incurred, repaid or retired at the
beginning of the applicable period; (iii) in the case of Acquired Indebtedness,
the related acquisition, as if such acquisition occurred at the beginning of the
applicable period; and (iv) any acquisition or disposition by the Company and
its Subsidiaries of any company or any business or any assets out of the
ordinary course of business, whether by merger, stock purchase or sale or asset
purchase or sale or any related repayment of Indebtedness, in each case since
the first day of the applicable period, assuming such acquisition or disposition
had been consummated on the first day of the applicable period and after giving
pro forma effect to net cost savings that the Company reasonably believes in
good faith could have been achieved during the applicable period as a result of
such acquisition or disposition and which cost savings could then be reflected
in pro forma financial statements under GAAP (provided that both (A) such cost
savings were identified and quantified in an officer's certificate delivered to
the Trustee at the time of the consummation of the acquisition or disposition
and (B) with respect to each acquisition or disposition completed prior to the
90th day preceding such date of determination, actions were commenced or
initiated by the Company within 90 days of such acquisition or disposition to
effect such cost savings identified in such officer's certificate) and provided
further that (x) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis and
(A) bearing a floating interest rate shall be computed as if the rate in effect
on the date of computation had been the applicable rate for the entire period
and (B) which was not outstanding during the period for which the computation is
being made but which bears, at the option of the Company, a fixed or floating
rate of interest shall be computed by applying, at the option of the Company,
either the fixed or floating rate, and (y) in making such computation, the
Consolidated Interest Expense of the Company attributable to interest on any
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Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the pro forma average daily balance of such
Indebtedness during the applicable period.
"Consolidated Income Tax Expense" means, with respect to the Company for
any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Subsidiaries for such period, on a consolidated basis, including, without
limitation, (i) amortization of debt discount (but excluding amortization or
write-off of financing costs), (ii) the net cost (benefit) under Interest Rate
Agreements (including amortization of discounts), (iii) the interest portion of
any deferred payment obligation (other than interest on deferred payment
obligations relating to pension and post retirement benefits as required by SFAS
87 and SFAS 106) and (iv) accrued interest, plus (b)(i) the interest component
of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person during such period and (ii) all capitalized interest of
such Person and its Subsidiaries on a consolidated basis, in each case as
determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and the Restricted Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any Person if such person is not a Restricted Subsidiary,
except (A) to the extent of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution and (B) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income; (ii) any net income (loss) of any
person acquired by the Company or a Restricted Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income (but not loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company to the extent of such
restrictions; (iv) any gain or loss realized upon the sale or other disposition
of any asset of the Company or the Restricted Subsidiaries (including pursuant
to any sale/leaseback transaction) outside of the ordinary course of business;
(v) any extraordinary gain or loss and (vi) the cumulative effect of a change in
accounting principles.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Equity
Interests of such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period the sum of (i) depreciation, (ii) amortization (including, without
limitation, amortization of financing costs) and (iii) other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding, for purposes of clause
(iii) only, such charges which require an accrual of or a reserve for cash
charges for any future period).
"Credit Facility" means the Credit Agreement dated as of August 26, 1997
between the Company, the lenders party thereto from time to time, and The Chase
Manhattan Bank, as agent, as such agreement may be amended, increased, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified from time to time (including, without limitation, any
successive renewals, extensions, substitutions, refinancing, restructurings,
replacements, supplementations or other modifications of the foregoing).
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means (a) any Indebtedness outstanding
under the Credit Facility and (b) any other Senior Indebtedness which, at the
time of determination, has an aggregate principal amount outstanding, together
with any commitments to lend additional amounts, of at least $30.0 million, if
the
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instrument governing such Senior Indebtedness expressly states that such
Indebtedness is "Designated Senior Indebtedness" for purposes of the Indenture
and a Board Resolution setting forth such designation by the Company has been
filed with the Trustee.
"Designation" has the meaning set forth under "Certain
Covenants -- Designation of Unrestricted Subsidiaries" above.
"Designation Amount" has the meaning set forth under "Certain
Covenants -- Designation of Unrestricted Subsidiaries" above.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof
(except, in each case, upon the occurrence of a Change of Control), in whole or
in part, or exchangeable into Indebtedness on or prior to the date which is 91
days prior to the maturity date of the Notes. Equity Interests issued to
employees or directors of the Company shall not be deemed Disqualified Equity
Interests merely because such Equity Interests are subject to a shareholders
agreement or plan providing for the repurchase thereof by the Company upon the
termination of employment of such person.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary of the
Company organized under the laws of the United States or any political
subdivisions thereof or the operations of which are located substantially within
the United States.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary of the
Company not organized under the laws of the United States or any political
subdivision thereof and the operations of which are located substantially
outside of the United States.
"GAAP" means generally accepted accounting principles in effect in the
United States as in effect on the date of the Indenture.
"Government Securities" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Security
or a specific payment of principal of or interest on any such Government
Security held by such custodian for the account of the holder of such depository
receipt;
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provided, that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Security or the specific payment of principal of or interest on the Government
Security evidenced by such depository receipt.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee which may from time to time be executed by
a Restricted Subsidiary of the Company pursuant to the provisions of the
covenant described under "Certain Covenants -- Future Guarantors." Each such
Guarantee will have subordination provisions equivalent to those contained in
the Indenture.
"Guarantor" means any Restricted Subsidiary that is required to provide a
Guarantee pursuant to "Certain Covenants -- Future Guarantors" above.
"Hedging Agreement" means, with respect to any Person, all Interest Rate
Agreements or foreign currency or commodity hedge, exchange or similar
agreements of such Person.
"Hedging Obligations" means, with respect to any Person, the Obligations of
such Person under Hedging Agreements.
"Holders" means the registered holders of the Notes.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, in respect of such Indebtedness or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the
foregoing). Indebtedness of any Acquired Person or any of its Subsidiaries
existing at the time such Acquired Person becomes a Restricted Subsidiary (or is
merged into or consolidated with the Company or any Restricted Subsidiary),
whether or not such Indebtedness was Incurred in connection with, as a result
of, or in contemplation of, such Acquired Person becoming a Restricted
Subsidiary (or being merged into or consolidated with the Company or any
Restricted Subsidiary), shall be deemed Incurred at the time any such Acquired
Person becomes a Restricted Subsidiary or merges into or consolidates with the
Company or any Restricted Subsidiary.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Equity Interests, now or hereafter outstanding, (ii) all obligations of
such Person evidenced by bonds, notes, debentures or other similar instruments,
(iii) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
if the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables arising in the ordinary course of business, (iv)
Hedging Obligations of such Person, (v) all Capital Lease Obligations of such
Person, (vi) all Indebtedness referred to in clauses (i) through (v) above of
other Persons and all dividends of other Persons, the payment of which is
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien, upon or with respect to
property (including, without limitation, accounts and contract rights) owned by
such Person, even though
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such Person has not assumed or become liable for the payment of such
Indebtedness, (vii) all guaranteed debt of such Person, (viii) all Disqualified
Equity Interests valued at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends, and (ix) any
amendment, supplement, modification, deferral, renewal, extension, refunding or
refinancing of any liability of the types referred to in clauses (i) through
(viii) above. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Equity Interest which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Equity Interest
as if such Disqualified Equity Interest were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Disqualified Equity Interest, such Fair Market Value to be determined in good
faith by the board of directors of the issuer of such Disqualified Equity
Interest. Indebtedness of a Person does not include performance by such Person
of its obligations, including payment obligations, under leases, licenses or
permits in the ordinary course of its business or any guarantee of such
obligations and does not include regulatory guarantees incurred by the Company
in order to secure permits from governmental authorities or agencies that are
necessary for the operation of the Company's business.
"Independent Financial Advisor" means a nationally recognized, accounting,
appraisal, investment banking firm or consultant which, in the judgment of the
Board of Directors of the Company, is independent and qualified to perform the
task for which it is to be engaged.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"interest" means, with respect to the Notes, the sum of any cash interest
and any Additional Interest (as defined under "Registration Rights" below) on
the Notes.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. For
purposes of the "Limitation on Restricted Payments" covenant above, the amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, but without any other adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment; reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income.
"Lien" means any lien, pledge, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest in and
any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction) whether or not
filed, recorded or otherwise perfected under applicable law.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Restricted Subsidiary in respect
of any Asset Sale, including all cash or Cash Equivalents received upon any
sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred
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as a result thereof; (b) taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; and (d) amounts deemed, in good faith, appropriate by the Board
of Directors of the Company to be provided as a reserve, in accordance with
GAAP, against any liabilities associated with such assets which are the subject
of such Asset Sale.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Permitted Holder" means one or more of the following: (i) Johnnie Lou
LaRoche, W. Walter LaRoche, III, Victoria E. LaRoche, Louanne C. LaRoche and
Grant O. Reed, (ii) spouses or lineal descendants of the Persons described in
clause (i), (iii) in the event of incompetence or death of any of the Persons
described in clauses (i) or (ii), such Person's estate, executor, administrator,
committee or other personal representative or beneficiaries and (iv) any trusts
created for the benefit of the Persons described in clause (i), (ii) or (iii).
"Permitted Indebtedness" has the meaning set forth in the second paragraph
of "Certain Covenants -- Limitation on Indebtedness" above.
"Permitted Investments" means (i) Investments in any Wholly Owned
Restricted Subsidiary or any Person which, as a result of such Investment,
becomes a Wholly Owned Restricted Subsidiary; (ii) Indebtedness of the Company
or a Restricted Subsidiary described under clause (d) of the definition of
"Permitted Indebtedness"; (iii) Cash Equivalents; (iv) Investments acquired by
the Company or any Restricted Subsidiary in connection with an Asset Sale
permitted by the covenant described in "Certain Covenants -- Disposition of
Proceeds of Asset Sales" to the extent such Investments are non-cash proceeds as
permitted under such covenant; (v) Investments in such amounts and in such
Persons outstanding on the date of the Indenture (as increased from time to time
by the Company's share of undistributed earnings or profits); (vi) loans or
guarantees up to an aggregate of $1.0 million outstanding at any time to
employees of the Company and its Restricted Subsidiaries in the ordinary course
of business; (vii) any guarantees which are otherwise permitted to be Incurred
by the Company pursuant to the covenant "Limitation on Indebtedness"; (viii) any
guarantee by the Company of loans made by other Persons to employees of the
Company and its Restricted Subsidiaries in connection with such employees'
purchase of Equity Interests of the Company, provided that such Equity Interests
are pledged to the Company as security for such guarantee; (ix) without limiting
any other provision of this Indenture, Investments pursuant to the RP Joint
Venture Agreements in an aggregate amount outstanding at any time up to the
Phase One Purchase Price; (x) Hedging Agreements; (xi) in addition to the
foregoing, Investments in joint ventures, corporations or partnerships engaged
in businesses substantially similar to or related to the businesses of the
Company and its Restricted Subsidiaries, provided that the aggregate amount of
such Investments made after the date of the Indenture shall not exceed $5.0
million at any time outstanding; and (xii) further in addition to the foregoing,
Investments made after the date of the Indenture that do not exceed $5.0 million
at any time outstanding.
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to such merger or consolidation;
(b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith and by appropriate proceedings; (c) Liens existing on
the date of the Indenture; (d) Liens securing only the Notes; (e) Liens in favor
of the Company or any Restricted Subsidiary (including any such Liens securing
Indebtedness, to the extent and for so long as such Indebtedness is pledged to
secure Senior Indebtedness); (f) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided, however, that any reserve or
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other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (g) easements, reservation of rights of way,
restrictions and other similar easements, licenses, restrictions on the use of
properties, or minor imperfections of title that in the aggregate do not in any
case materially detract from the properties subject thereto or interfere with
the ordinary conduct of the business of the Company and the Restricted
Subsidiaries; (h) Liens resulting from the deposit of cash or notes in
connection with contracts, tenders or expropriation proceedings, or to secure
workers' compensation, surety or appeal bonds, costs of litigation when required
by law and public and statutory obligations or obligations under franchise
arrangements entered into in the ordinary course of business; (i) Liens securing
Indebtedness consisting of Capital Lease Obligations, Purchase Money
Indebtedness, mortgage financings, industrial revenue bonds or other monetary
obligations, in each case incurred solely for the purpose of financing all or
any part of the purchase price or cost of construction or installation of assets
used in the business of the Company or the Restricted Subsidiaries, or repairs,
additions or improvements to such assets, provided, however, that (I) such liens
secure Indebtedness in an amount not in excess of the original purchase price or
the original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in correction with the
incurrence of such Indebtedness), (II) such Liens do not extend to any other
assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the incurrence of such Indebtedness is permitted by "Certain
Covenants -- Limitation on Indebtedness" above and (IV) such Liens attach within
90 days of such purchase, construction, installation, repair, addition or
improvement; (j) Liens granted to secure any Permitted Indebtedness and (k)
Liens to secure any refinancings, renewals, extensions, modifications or
replacements (collectively, "refinancing") (or successive refinancings), in
whole or in part, of any Indebtedness secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property (other
than improvements thereto).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Phase One Purchase Price" means an amount equal to FRF 196.2 million
(subject to adjustment as provided in the Stock Purchase Agreement), which is
the sum of (i) FRF 129.9 million (subject to adjustment as provided in the Stock
Purchase Agreement) attributable to the acquisition by LII Europe S.A.R.L., a
Wholly Owned Subsidiary, of 50% of the equity of ChlorAlp S.A.S., and (ii) FRF
66.3 million (subject to adjustment as provided in the Stock Purchase Agreement)
attributable to the refinancing by the Company or a consolidated Subsidiary of
the Company of certain Indebtedness owing by ChlorAlp S.A.S. to Rhone-Poulenc
Chimie S.A., which Indebtedness may be further refinanced by ChlorAlp S.A.S.,
plus up to $5 million attributable to costs and expenses incurred after the date
of the Indenture related to the RP Joint Venture incurred by the Company and its
Subsidiaries prior to the payment of the Phase One Purchase Price (including
related hedging costs).
"Phase Two Purchase Price" means an amount equal to FRF 290.0 million
attributable to the acquisition by LII Europe S.A.R.L., a Wholly Owned
Subsidiary and, at the time of payment of the Phase Two Purchase Price, the
owner of 50% of the equity of ChlorAlp S.A.S., of the remaining 50% of the
equity of ChlorAlp S.A.S., including reasonable costs and expenses related
thereto and the value of inventory then on hand.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after, or which
would accrue but for, the commencement of any Insolvency or Liquidation
Proceeding against such Person in accordance with and at the contract rate
(including, without limitation, any rate applicable upon default) specified in
the agreement or instrument creating, evidencing or governing such Indebtedness,
whether or not, pursuant to applicable law or otherwise, the claim for such
interest is allowed as a claim in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest", in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
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"Public Equity Offering" means, with respect to the Company, an
underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price, or the cost of construction or improvement, of any property;
provided, however, that the aggregate principal amount of such Indebtedness does
not exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as
of the date of refinancing.
"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution of the
Board of Directors of the Company delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to "Certain Covenants -- Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of the
Board of Directors of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"RP Joint Venture" means the transactions contemplated by the RP Joint
Venture Agreements.
"RP Joint Venture Agreements" means the Stock Purchase Agreement dated as
of August 1, 1997 by and among Rhone-Poulenc Chimie S.A., LII Europe S.A.S.,
ChlorAlp S.A.S. and the Company and the Shareholders Agreement dated as of
August 1, 1997 by and among Rhone-Poulenc Chimie S.A., ChlorAlp S.A.S. and the
Company, together with the other contracts and agreements contemplated by said
Stock Purchase Agreement and Shareholders Agreement.
"RP Loan" means the loan made by the Company or a consolidated Subsidiary
of the Company to ChlorAlp S.A.S. as a part of the Phase One Purchase Price,
which loan shall not exceed FRF 66.3 million in original principal amount, shall
be repayable as to principal in approximately equal periodic installments over a
four-year period beginning on the date of payment of the Phase One Purchase
Price, shall be repayable at intervals not longer than three months, and shall
bear interest at a rate not higher than the greater of the prevailing rate of
interest for loans of the same type and tenor in France on the date the Phase
One Purchase Price is paid and the rate payable by the Company from time to time
on Indebtedness outstanding under the long-term facility included in the Credit
Facility.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, at any date, (a) all Obligations of the
Company under the Credit Facility; (b) all Hedging Obligations of the Company;
(c) all Obligations of the Company under stand-by letters of credit; and (d) all
other Indebtedness of the Company for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such
Indebtedness, unless the instrument under which such Indebtedness of the Company
for money borrowed is Incurred expressly provides that such Indebtedness for
money borrowed is not senior or superior in right of payment to the Notes, and
all renewals, extensions, modifications, amendments or refinancings thereof.
Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the
extent that it may constitute Indebtedness, any Obligation for Federal, state,
local or other taxes; (b) any Indebtedness among or between the Company and any
Subsidiary of the Company or any Affiliate of the Company or any of such
Affiliate's Subsidiaries; unless and for so long as such Indebtedness has been
pledged to secure obligations under or in respect of Senior Indebtedness; (c) to
the extent that it may constitute Indebtedness, any Obligation in respect of any
trade payable Incurred for the purchase of goods or materials, or for services
obtained, in the ordinary course of business; (d) that portion of any
Indebtedness that is Incurred in violation of the Indenture (provided that
Indebtedness under the Credit Facility shall be deemed not to have been incurred
in violation of the Indenture for purposes of this clause (d) if the holders of
such Indebtedness or their agent or representative shall have received a
representation from the Company to the effect that such Indebtedness does not
violate the Indenture); (e) Indebtedness evidenced by the Notes; (f)
Indebtedness of the Company that is expressly subordinate or junior in right of
payment to any other
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Indebtedness of the Company; (g) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements; (h) any obligation that by operation of
law is subordinate to any general unsecured obligations of the Company; (i)
Indebtedness represented by the 13% Notes; and (j) Indebtedness of the Company
to the extent such Indebtedness is owed to and held by any Federal, state, local
or other governmental authority, other than Indebtedness relating to the plea
agreement entered into by the Company with the U.S. Department of Justice on May
9, 1997.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu in right of payment with the Notes and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable.
"Subordinated Indebtedness" means, with respect to the Company, any
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes.
"Subsidiary" means, with respect to any Person, unless such Person would
otherwise not be permitted to be consolidated with the Company in accordance
with GAAP, (a) any corporation of which the outstanding Voting Equity Interests
having at least a majority of the votes entitled to be cast in the election of
directors shall at the time be owned, directly or indirectly, through one or
more Persons by such Person, or (b) any other Person of which at least a
majority of Voting Equity Interests are at the time, directly or indirectly,
owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to "Certain Covenants -- Designation of Unrestricted Subsidiaries"
above. Any such designation may be revoked by a resolution of the Board of
Directors of the Company delivered to the Trustee, subject to the provisions of
such covenant.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all
(or, in the case of a Foreign Restricted Subsidiary, the maximum amount
permitted by law) of the outstanding capital stock of which is at the time
owned, directly or indirectly, by the Company and/or one or more other Wholly
Owned Restricted Subsidiaries.
"Wholly Owned Subsidiary" means any Subsidiary all (or, in the case of a
Foreign Restricted Subsidiary, the maximum amount permitted by law) of the
outstanding capital stock of which is at the time owned, directly or indirectly,
by the Company and/or one or more other Wholly Owned Subsidiaries.
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EXCHANGE OFFER AND REGISTRATION RIGHTS AGREEMENT
The Company and the Initial Purchasers entered into the Registration Rights
Agreement concurrently with the issuance of the Old Notes. Pursuant to the
Registration Rights Agreement, the Company agreed to (i) file with the
Commission on or prior to 45 days after the date of issuance of the Old Notes
(the "Issue Date") a Registration Statement relating to a registered exchange
offer for the Old Notes under the Securities Act and (ii) use its reasonable
best efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 165 days after the Issue Date. As soon
as practicable after the effectiveness of the Exchange Offer Registration
Statement, the Company will offer to the holders of the Old Notes who are not
prohibited by any law or policy of the Commission from participating in the
Exchange Offer the opportunity to exchange their Old Notes for an issue of a
second series of notes (the Exchange Notes), identical in all material respects
to the Old Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions) that were registered under the Securities Act.
The Company will keep the Exchange Offer open for not less than 30 days (or
longer, if required by law) after the date notice of the Exchange Offer is
mailed to the holders of the Old Notes. If (i) applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer
as contemplated thereby or (ii) for any other reason the Exchange Offer is not
consummated within 195 days after the Issue Date or (iii) any holder either (A)
is not eligible to participate in the Exchange Offer or (B) participates in the
Exchange Offer and does not receive freely transferable Exchange Notes in
exchange for tendered Old Notes, the Company will file with the Commission a
shelf registration statement (the "Shelf Registration Statement") to cover
resales of Transfer Restricted Securities (as defined below) by such holders who
satisfy certain conditions relating to, among other things, the provision of
information in connection with the Shelf Registration Statement. For purposes of
the foregoing, "Transfer Restricted Securities" means each Old Note until (i)
the date on which such Old Note has been exchanged for a freely transferable
Exchange Note in the Exchange Offer, (ii) the date on which such Old Note has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) the date on which such
Old Note is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
The Company will use its reasonable best efforts to have the Exchange Offer
Registration Statement and, if applicable, the Shelf Registration Statement
(each a "Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission or interpretations by its
staff, the Company will commence the Exchange Offer and will use its reasonable
best efforts to consummate the Exchange Offer as promptly as practicable, but in
any event prior to 195 days after the Issue Date. If applicable, the Company
will use its reasonable best efforts to keep the Shelf Registration Statement
effective for a period of two years after the Issue Date, subject to certain
exceptions, including suspending the effectiveness thereof for certain valid
business reasons. If (i) the applicable Registration Statement is not filed with
the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 165 days after the Issue Date (or in
the case of a Shelf Registration Statement required to be filed in response to a
change in law or the applicable interpretations of the Commission's staff, if
later, within 45 days after publication of the change in law or interpretation),
(iii) the Exchange Offer is not consummated on or prior to 195 days after the
Issue Date or (iv) the Shelf Registration Statement is filed and declared
effective within 165 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of the Commission's staff, if later, within 45
days after publication of the change in law or interpretation), but shall
thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 30 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will generally be obligated to pay liquidated damages to each holder of Transfer
Restricted Securities, during the period of such Registration Default in an
amount equal to $0.192 per week per $1,000 principal amount of the Old Notes
constituting Transfer Restricted Securities held by such holder until the
applicable Registration Statement is filed or declared effective, the Exchange
Offer is consummated or the Shelf Registration Statement again becomes
effective, as the case may be; provided, however, no
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liquidated damages shall be payable for a Registration Default under clause
(iii) above if a Shelf Registration Statement covering resales of the Transfer
Restricted Securities for which the Exchange Offer was intended shall have been
declared effective. All accrued liquidated damages shall be paid to holders in
the same manner as interest payments on the Notes on semi-annual payment dates
which correspond to interest payment dates for the Old Notes. Following the cure
of all Registration Defaults, the accrual of liquidated damages will cease.
The Registration Rights Agreement also provides that the Company (i) shall
make available for a period of 195 days after the consummation of the Exchange
Offer a prospectus meeting the requirements of the Securities Act to any
broker-dealer for use in connection with any resale of any such Exchange Notes
and (ii) shall pay all expenses incident to the Exchange Offer (including the
expenses of one counsel to the holders of the Old Notes) and will indemnify
certain holders of the Old Notes (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act, and will be bound by the provisions of the Exchange and
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of Old Notes that wishes to exchange such Old Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
Exchange Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
If a holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If a holder is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
Holders of the Old Notes will be required to make certain representations
to the Company (as described above) in order to participate in the Exchange
Offer and will be required to deliver information to be used in connection with
the Shelf Registration Statement in order to have their Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
liquidated damages set forth in the preceding paragraphs. A holder who sells Old
Notes pursuant to the Shelf Registration Statement generally will be required to
be named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations).
For so long as the Old Notes are outstanding, the Company will continue to
provide to holders of the Old Notes and to prospective purchasers of the Old
Notes the information required by paragraph (d)(4) of Rule 144A. The Company
will provide a copy of the Exchange and Registration Rights Agreement to
prospective purchasers of Old Notes identified to the Company by the Initial
Purchasers upon request.
The foregoing description of the Registration Rights Agreement is a summary
only, does not purport to be complete and is qualified in its entirety by
reference to all provisions of the Registration Rights Agreement.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on September 23, 1997 to
the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes to qualified institutional buyers
in reliance on Rule 144A under the Securities Act. As a condition to the
Purchase
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Agreement, the Company and the Initial Purchasers entered into the Registration
Rights Agreement on the same date. Certain terms of the Registration Rights
Agreement are summarized as follows:
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a Series B designation
and a different CUSIP Number from the Old Notes, (ii) the Exchange Notes have
been registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the Exchange Notes
will not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for liquidated damages in certain
circumstances relating to the timing of the Exchange Offer, all of which rights
will terminate when the Exchange Offer is terminated. The Exchange Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $175 million aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under
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"-- Conditions" shall not have been satisfied, by giving oral or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on March 15, 1998. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each March 15
and September 15, commencing on March 15, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
For a holder to validly tender Old Notes pursuant to the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantee, or (in the case of a book-entry
transfer) an Agent's Message in lieu of the Letter of Transmittal, and any other
required documents must be received by the Exchange Agent at the address set
forth under "Exchange Agent" prior to 5:00 p.m., New York time, on the
Expiration Date. In addition, prior to 5:00 p.m., New York City time, on the
Expiration Date, either (a) certificates for tendered Old Notes must be received
by the Exchange Agent at such address or (b) such Old Notes must be transferred
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such tender received by the Exchange Agent, including an Agent's
Message if the tendering holder has not delivered a Letter of Transmittal). The
term "Agent's Message" means a message, transmitted by the book-entry transfer
facility, the Depository Trust Company (the "Book-Entry Transfer Facility"), to
and received by the Exchange Agent and forming a party of a book-entry
confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from the tendering participant that such participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce such Letter of Transmittal against such participant.
By executing the Letter of Transmittal (or transmitting an Agent's Message
in lieu thereof), each holder will make to the Company the representations set
forth above in the third paragraph under the heading "-- Purpose and Effect of
the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered
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Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a recognized participant in the Securities
Transfer Agent of Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchange Medallion Program (each a "Medallion
Signature Guarantor"), unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of a member firm of a registered national securities exchange, a member
of the NASD or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by a Medallion Signature Guarantor.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or other acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company to their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the Book-Entry Transfer Facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing such
Book-Entry Transfer Facility to transfer such Old notes into the Exchange
Agent's account with respect to the Old Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility, and appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee (or, in the case of book-entry transfer, an Agent's Message in lieu
thereof) and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agents that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal (or, in the case of book-entry transfer, an Agent's Message) or any
other required documents to the Exchange Agent or (iii) who cannot complete the
procedures for book-entry transfer (including delivery of an Agent's Message),
prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's
Message), as well as the certificate(s) representing all tendered Old Notes
in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date. Upon request to the Exchange Agent,
a Notice of Guaranteed Delivery will be sent to holders who wish to tender
their Old Notes according to the guaranteed delivery procedures set forth
above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer
and retain all Old Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Old Notes (see
"-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have been withdrawn.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<C> <C> <C>
By Mail or Hand By Facsimile for By Mail or Hand in New York
State Street Bank Eligible Institutions State Street Bank
and Trust Company and Trust Company, N.A.
Corporate Trust Department (617) 664-5739 61 Broadway
Two International Place Corporate Trust Window
4th Floor Concourse Level
Boston, MA 02110 New York, NY 10006
</TABLE>
For Information Telephone:
(617) 664-5314
Attention: Sandra Szczsponik
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
99
<PAGE> 102
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying values as the Old
Notes, which is face value, less the original issue discount (net of
amortization) as reflected in the Company's accounting records on the date of
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. Certain expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Old Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letter or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
As contemplated by such no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or
100
<PAGE> 103
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose of distributing the Exchange
Notes it must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale of the Exchange Notes and
cannot rely on such no-action letters. As indicated above, each Participating
Broker-Dealer that receives an Exchange Note for its own account in exchange for
Old Notes must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. For a description of the procedures for such
resales by Participating Broker-Dealers, see "Plan of Distribution."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. The Company recommends that each holder consult such holder's own tax
advisor as to the particular tax consequences of exchanging such holder's Old
Notes for Exchange Notes, including the applicability and effect of any state,
local or foreign tax laws.
The Company believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for federal
income tax purposes because the Exchange Notes will not be considered to differ
materially in kind or extent from the Old Notes. Rather, the Exchange Notes
received by a holder will be treated as a continuation of the Old Notes in the
hands of such holder. As a result, there should be no federal income tax
consequences to holders exchanging Old Notes for Exchange Notes pursuant to the
Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 195 days after the Expiration Date, they will make
this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997 (90 days after the commencement of the Exchange Offer), all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes
101
<PAGE> 104
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that is an
"underwriter" within the meaning of the Securities Act.
For a period of 195 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Hunton & Williams, Atlanta, Georgia. C.L. Wagner, Jr., a Director
of the Company, is a partner at Hunton & Williams.
EXPERTS
The consolidated financial statements of LaRoche Industries Inc. included
herein and appearing in the LaRoche Industries Inc. Annual Report (Form 10-K) as
of February 28, 1997 and February 29, 1996 and for each of the three years in
the period ended February 28, 1997 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included herein and
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
102
<PAGE> 105
BUSINESS GLOSSARY
83% ammonium nitrate liquor -- Ammonia reacted with nitric acid forms
ammonium nitrate liquor (83% solution), which is used to make blasting products.
activated alumina chemical -- A type of specialty alumina chemical that
removes certain substances from a chemical mixture or serves to catalyze certain
reactions due to its physical and chemical characteristics. For example, Claus
catalyst is used in refineries to convert hydrogen sulfide from petrochemical
streams into sulfur which is a commercial product.
adsorbent -- A process (adsorption) by which an extremely thin layer of
molecules (for example, gases) adhere to the surface of a substance such as an
alumina chemical.
ammonia clean-out service -- Tanks and systems containing or using ammonia
become contaminated with oil or a build up of water. This clean out service
restores these systems or makes the system ready for removal.
anhydrous ammonia -- Anhydrous means without water. Ammonia in its pure
form readily absorbs water. Commercial and premium grade ammonia contain varying
minute quantities of water.
anhydrous hydrofluoric acid -- A raw material used in the manufacture of
141b and other fluorocarbons. Its elemental components are hydrogen and
fluorine.
aqua ammonia -- Ammonium hydroxide -- a mixture of anhydrous ammonia
(usually 30%) and water.
catalyst -- A chemical substance, whose physical or chemical
characteristics speed up a chemical reaction without the catalyst becoming part
of the reaction.
catalyst support -- A high strength substance on which a catalyst such as
platinum is deposited.
CFC -- See fluorocarbons.
caustic soda -- Sodium hydroxide -- a strong chemical base whose formula is
NaOH.
Claus catalyst -- An activated alumina chemical that is used to remove
sulfur from petrochemical streams.
ECU -- Electrochemical unit -- a way of measuring the production of
chlorine and caustic soda from the electrolytic conversion of common salt. One
ECU is the equivalent of a proportional amount of chlorine and caustic soda (1
to 1.12). One ECU ton equals one ton of chlorine and 1.12 tons of caustic soda.
feedstock -- A chemical substance used in the manufacture of another.
Natural gas is the feedstock of ammonia. Salt (or brine) is the feedstock for
caustic soda and chlorine. Hydrate is the feedstock for alumina chemicals.
fluid cracking (fluid catalytic cracking) -- A refinery process that
produces various hydrocarbon chemicals from petrochemical feedstocks. For
instance, it is a primary step in producing gasoline.
fluorocarbons -- Hydrocarbon chemicals that have certain properties making
them suitable for uses such as foam blowing, air conditioning and refrigeration.
Fluorocarbons include chlorofluorocarbons (CFCs), hydrochlorofluorocarbons
(HCFCs) and hydrofluorocarbons (HFCs).
HCFC -- See fluorocarbons.
HFC -- See fluorocarbons.
HDAN (high density ammonium nitrate) -- A solid, dense form of ammonium
nitrate that contains about 34% nitrogen by weight and is used primarily for
agricultural purposes.
hydrate -- Alumina trihydrate -- A form of industrial alumina chemicals
that contain water and is used in flame retardants and as a feedstock for other
industrial and specialty alumina chemicals.
103
<PAGE> 106
industrial alumina chemicals -- Alumina chemicals for basic industrial
uses, such as calcined and tabular alumina chemicals, which are used as raw
materials in refractories and ceramics.
leaching -- The process of percolating water or other liquids to dissolve
out chemical substances from solids such as soils.
LDAN (low density ammonium nitrate) -- Chemically the same as high density
ammonium nitrate. A solid pelletized (prilled) form of ammonium nitrate capable
of absorbing fuels in the manufacture of blasting agents. It also is often
referred to as blasting grade ammonium nitrate.
petrochemicals -- Hydrocarbon chemicals (organic chemical compounds) made
from refinery gases, natural gas liquids or other organic sources.
polyurethane -- A hydrocarbon substance, often in plastic form, used
typically for insulation.
PVC -- Poly vinyl chloride -- A chlorine-containing petrochemical feedstock
for certain plastics.
rigid urethane foam -- A type of insulating polyurethane foam which uses a
propellant gas such as R-11 or R-141b to form insulating pockets within the
hardened foam.
tabular alumina chemical -- An alumina chemical made from ground calcined
alumina that is heated to very high temperatures and sintered to make heat
resistant ceramics.
titanium dioxide -- A compound of oxygen and titanium metal for uses such
as paint and the production of hydrogen peroxide.
UAN solution -- A liquid urea ammonium nitrate mixture in water, typically
containing 28-32% nitrogen by weight for fertilizer uses.
Urea -- A chemically combined form of ammonia and carbon dioxide which
contains 46% nitrogen by weight. Urea liquor is the liquid form of the substance
which solidifies at room temperature.
Versal(R) alumina chemicals -- A Company trade name for a type of specialty
alumina chemical made under special conditions to provide certain physical and
chemical characteristics.
104
<PAGE> 107
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LAROCHE INDUSTRIES INC.
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets as of February 28, 1997 and
February 29, 1996......................................... F-3
Consolidated Statements of Income for the fiscal years ended
February 28, 1997, February 29, 1996 and February 28,
1995...................................................... F-4
Consolidated Statements of Stockholders Equity for the
fiscal years ended February 28, 1997, February 29, 1996
and February 28, 1995..................................... F-5
Consolidated Statements of Cash Flows the fiscal years ended
February 28, 1997, February 29, 1996 and February 28,
1995...................................................... F-6
Notes to Consolidated Financial Statements for the fiscal
years ended February 28, 1997, February 29, 1996 and
February 28, 1995......................................... F-7
Condensed Consolidated Balance Sheets as of August 31, 1997
and February 28, 1997 (unaudited)......................... F-22
Condensed Consolidated Statements of Income for the three
months and six months ended August 31, 1997 and August 31,
1996 (unaudited).......................................... F-23
Condensed Consolidated Statements of Cash Flows for the six
months ended August 31, 1997 and August 31, 1996
(unaudited)............................................... F-24
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-25
</TABLE>
F-1
<PAGE> 108
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
LaRoche Industries Inc.
We have audited the accompanying consolidated balance sheets of LaRoche
Industries Inc. as of February 28, 1997 and February 29, 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended February 28, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of LaRoche
Industries Inc. at February 28, 1997 and February 29, 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended February 28, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Atlanta, Georgia
April 30, 1997
F-2
<PAGE> 109
LAROCHE INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,165 $ 3,265
Receivables (Note 6):
Trade, net of allowances of $776 and $849 in 1997 and
1996, respectively.................................... 43,393 57,153
Refundable income taxes................................ 6,649 1,453
Other.................................................. 7,159 3,395
Inventories (Notes 4 and 6)............................... 39,924 46,004
Other current assets...................................... 2,513 4,878
-------- --------
Total current assets.............................. 100,803 116,148
Investments (Note 5)........................................ 17,886 17,165
Property, plant and equipment, at cost (Note 6):
Land and land improvements................................ 12,234 12,039
Buildings................................................. 19,547 12,388
Machinery and equipment................................... 220,613 195,872
Capital leases............................................ 4,902 5,226
Construction in progress.................................. 14,208 20,195
-------- --------
271,504 245,720
Less accumulated depreciation............................. (90,417) (81,108)
-------- --------
Net property, plant and equipment........................... 181,087 164,612
Other assets................................................ 12,589 8,007
-------- --------
Total assets...................................... $312,365 $305,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility (Note 6)........................ $ 37,605 $ 4,755
Accounts payable.......................................... 35,992 37,770
Accrued compensation...................................... 8,595 14,408
Other accrued liabilities................................. 8,944 16,481
Common stock with put rights (Note 11).................... -- 7,475
Current portion of long-term debt (Note 6)................ 2,835 5,990
-------- --------
Total current liabilities......................... 93,971 86,879
Long-term debt (Note 6)..................................... 104,441 112,940
Deferred income taxes (Note 9).............................. 22,335 15,668
Other noncurrent liabilities (Notes 7 and 8)................ 36,535 34,378
Commitments and contingencies (Note 8)
Redeemable common stock (Note 11)........................... 4,177 4,771
Stockholders' equity:
10% cumulative, voting preferred stock, $.01 par value,
200,000 shares authorized, no shares outstanding....... -- --
Common stock, $.01 par value, 1,200,000 shares authorized,
425,000 non-redeemable shares issued................... 4 4
Capital in excess of par value............................ 630 630
Retained earnings......................................... 50,409 50,662
Minimum pension liability................................. (137) --
-------- --------
Total stockholders' equity........................ 50,906 51,296
-------- --------
$312,365 $305,932
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 110
LAROCHE INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................... $379,285 $448,982 $420,723
Cost of sales............................................... 313,871 350,066 329,383
-------- -------- --------
Gross profit................................................ 65,414 98,916 91,340
Selling, general and administrative expenses................ 54,777 54,631 54,135
-------- -------- --------
Income from operations...................................... 10,637 44,285 37,205
Interest and amortization of debt expense................... (14,881) (15,973) (13,083)
Income from equity investments (Note 5)..................... 4,909 2,647 2,540
Other income, net........................................... 411 1,163 1,581
-------- -------- --------
Income before income taxes, minority interests and
extraordinary charge...................................... 1,076 32,122 28,243
Provision for income taxes (Note 9)......................... (417) (13,170) (12,297)
-------- -------- --------
Income before minority interests and extraordinary
charges................................................... 659 18,952 15,946
Minority interests (Note 10)................................ -- -- (2,063)
-------- -------- --------
Income before extraordinary charges......................... 659 18,952 13,883
Extraordinary charge from debt extinguishment............... -- -- (860)
-------- -------- --------
Net income.................................................. 659 18,952 13,023
Adjustment to estimated fair value of common stock with put
rights (Note 11).......................................... -- (1,901) (1,949)
-------- -------- --------
Income attributable to non-redeemable common stockholders... $ 659 $ 17,051 $ 11,074
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 111
LAROCHE INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN
EXCESS OF MINIMUM
COMMON PAR RETAINED PENSION
STOCK VALUE EARNINGS LIABILITY TOTAL
------ ---------- -------- --------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balance at February 28, 1994..................... $4 $630 $22,770 $ -- $23,404
Net income..................................... -- -- 13,023 -- 13,023
Adjustment to estimated fair value of common
stock with put rights....................... -- -- (1,949) -- (1,949)
-- ---- ------- ----- -------
Balance at February 28, 1995..................... 4 630 33,844 -- 34,478
Net income..................................... -- -- 18,952 -- 18,952
Dividends paid, $.50 per share................. -- -- (233) -- (233)
Adjustment to estimated fair value of common
stock with put rights....................... -- -- (1,901) -- (1,901)
-- ---- ------- ----- -------
Balance at February 29, 1996..................... 4 630 50,662 -- 51,296
Net income..................................... -- -- 659 -- 659
Dividends paid, $2.00 per share................ -- -- (912) -- (912)
Pension adjustments............................ -- -- -- (137) (137)
-- ---- ------- ----- -------
Balance at February 28, 1997..................... $4 $630 $50,409 $(137) $50,906
== ==== ======= ===== =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 112
LAROCHE INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 659 $ 18,952 $ 13,023
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 23,061 18,996 16,360
Deferred income taxes................................. 6,667 (495) 1,358
Equity income, net of distributions................... 792 (1,315) 28
Minority interests.................................... -- -- 1,870
Net (gain) loss on disposal of assets................. (349) 3,021 112
Extraordinary charges................................. -- -- 860
Changes in operating assets and liabilities (excluding
acquisition):
Receivables........................................ 4,800 4,749 (20,429)
Inventories........................................ 5,946 17,129 (22,662)
Other assets....................................... (2,880) 1,874 2,036
Accounts payable and accrued liabilities........... (15,198) (2,288) 9,136
Noncurrent liabilities and other................... 1,834 128 3,803
-------- -------- --------
Net cash provided by operating activities............... 25,332 60,751 5,495
INVESTING ACTIVITIES
Capital expenditures.................................... (35,784) (16,894) (17,651)
Acquisition of a business............................... -- (37,504) --
Investments in joint ventures........................... (2,631) (1,451) (13,357)
Plant turnarounds....................................... (5,038) (2,672) (2,589)
Proceeds from sale of facilities........................ 3,708 6,484 1,628
-------- -------- --------
Net cash used by investing activities................... (39,745) (52,037) (31,969)
FINANCING ACTIVITIES
Net borrowings (repayments) under revolving credit
facility.............................................. 32,850 (1,350) (10,306)
Additions to long-term debt............................. -- -- 100,000
Repayments of long-term debt............................ (11,654) (11,352) (38,156)
Costs of refinancing.................................... -- -- (4,408)
Repurchase of minority interest in LaRoche Chemicals
Inc................................................... -- -- (14,490)
Sales of common stock with redemption features.......... 3,187 1,918 1,214
Purchases of common stock with redemption features...... (11,158) (332) (5,576)
Dividends paid.......................................... (912) (233) --
-------- -------- --------
Net cash provided (used) by financing activities........ 12,313 (11,349) 28,278
-------- -------- --------
Net (decrease) increase in cash......................... (2,100) (2,635) 1,804
Cash at beginning of year............................... 3,265 5,900 4,096
-------- -------- --------
Cash at end of year..................................... $ 1,165 $ 3,265 $ 5,900
======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 113
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(FEBRUARY 28, 1997)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
LaRoche Industries Inc. ("LII") is engaged in the manufacture,
distribution, and sale of agricultural and industrial nitrogen products and bulk
fertilizer materials, certain specialty aluminas, and electrochemical products.
These consolidated financial statements include the accounts of LaRoche
Industries Inc. and all majority-owned subsidiaries. Investments in 50%-or-less
owned entities are accounted for by the equity method. All significant
intercompany transactions and balances have been eliminated in consolidation.
On August 17, 1994, LaRoche Holdings Inc. ("LHI") and LaRoche Chemicals
Inc. ("LCI") were merged into LaRoche Industries Inc. (collectively, the
"Company"). Prior to this date, LII was a wholly-owned subsidiary of LHI, and
LCI was a majority-owned subsidiary of LHI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements.
REVENUE RECOGNITION AND TRADE RECEIVABLES
The Company generally recognizes revenue upon shipment to customers. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Terms on trade receivables
are granted in accordance with industry practice. The Company serves a variety
of customers, and therefore, the Company believes that it has limited exposure
to credit loss. The carrying amount of accounts receivable approximates fair
value due to the short settlement period of these instruments.
INVENTORIES
Inventories are valued at the lower of cost or market. The cost of
approximately 20% and 37% of total inventories was determined using the last in,
first out (LIFO) method at February 28, 1997 and February 29, 1996,
respectively. Cost for all other inventories are determined on a first-in,
first-out (FIFO) or average cost basis.
TURNAROUND COSTS
Costs related to the periodic, scheduled major maintenance of continuous
process production facilities ("turnaround costs") are capitalized when incurred
and are amortized on a straight-line basis over the period until the next
scheduled related turnaround, generally ranging from one to five years.
Expenditures for routine repair and maintenance are charged to current
operating expenses.
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment, including amounts under capital leases
(Note 8), are depreciated over their estimated useful lives using the
straight-line method for financial reporting purposes and accelerated methods
for tax purposes. Depreciation expense aggregated approximately $16,076,000,
$14,421,000 and $13,610,000 for fiscal years ended February 28, 1997, February
29, 1996 and February 28, 1995, respectively. Costs of construction of certain
long-term assets include capitalized interest which is amortized over the
F-7
<PAGE> 114
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimated useful life of the related asset. The Company capitalized interest
costs of $860,000 on eligible projects during fiscal 1997. No amounts of
interest were capitalized in fiscal years 1996 or 1995.
OTHER ASSETS
The Company amortizes its deferred debt issuance costs, goodwill,
non-compete agreements and other assets using the straight-line method over
lives ranging from two to twenty years. Accumulated amortization of other assets
aggregated $4,276,000 and $1,037,000 at February 28, 1997 and February 29, 1996,
respectively.
INCOME TAXES
The Company accounts for income taxes in accordance with the liability
method of accounting. Accordingly, deferred tax liabilities and assets are
established based on the difference between the financial statement and income
tax bases of assets and liabilities using enacted tax rates. Deferred tax assets
are recognized to the extent that realization of the benefits therefrom are more
likely than not.
RESEARCH AND DEVELOPMENT COSTS
Costs incurred in connection with research and development of new
technologies are charged to expense as incurred. Included in the accompanying
consolidated statements of income are approximately $3,762,000, $3,388,000 and
$3,148,000 of such costs for the years ending February 28, 1997, February 29,
1996 and February 28, 1995, respectively.
EARNINGS PER SHARE
Earnings per share have not been presented since such data provides no
useful information as the shares of the Company are closely held.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with current
year presentation. Consistent with the 1997 presentation, the Company has
reflected the 1996 and 1995 amortization of turnaround costs in depreciation and
amortization on the accompanying consolidated statements of cash flows.
NEW ACCOUNTING STANDARDS
Effective March 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121). The
statement standardizes the accounting for impairment of long-lived assets,
certain identifiable intangibles and goodwill. The adoption of this accounting
standard did not have a material effect on the Company's operating results or
financial condition.
In October 1996, the AICPA issued SOP 96-1, Environmental Remediation
Liabilities. The SOP provides guidance with respect to the recognition,
measurement and disclosure of environmental remediation liabilities. The Company
will adopt SOP 96-1 in the first quarter of fiscal 1998. Based on current
information, the Company believes that the adoption of this accounting standard
will not have a material impact on its operating results or financial condition.
F-8
<PAGE> 115
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CASH FLOWS
The Company considers all liquid investments with initial maturities of
three months or less to be cash equivalents. Additional cash flow and non-cash
investing and financing information follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information
(in thousands):
Cash paid (received) during the year for:
Interest, net of amounts capitalized........... $15,192 $16,469 $12,607
Income taxes, net of refunds................... (809) 18,155 3,706
Non-cash investing and financing activities (in
thousands):
Capital leases for new equipment.................. 90 545 644
Contribution of assets to a joint venture at
cost........................................... -- 1,243 600
Note issued to purchase Company stock (Note 11)... -- 7,401 --
</TABLE>
3. DISPOSITIONS, ACQUISITION AND OTHER MATTERS
During fiscal 1996, the Company re-evaluated portions of its alumina
chemicals segment. In connection with the re-evaluation of its alumina chemicals
business, effective April 1, 1996, the Company sold substantially all property,
plant and equipment and certain other assets used exclusively in its calcined
and tabular alumina production businesses to C-E Baton Rouge, Inc., an
unaffiliated entity. The sale price of the assets was $3 million, plus $300,000
for raw material inventory. The Company operates the plant and equipment on
behalf of the purchaser for an annual operating fee of $500,000, subject to
reduction based on the volume of production and the production of nonconforming
product. Net sales and operating (losses) of the calcined and tabular alumina
business aggregated $3,659,000 and ($389,000) in fiscal 1997, $18,801,000 and
($4,670,000) in fiscal 1996, $20,708,000 and ($3,024,000) in fiscal 1995,
respectively. In fiscal 1996, the Company recorded equipment writedowns of
approximately $3.8 million in connection with the determination to sell or
otherwise dispose of its calcined and tabular aluminas business. In addition,
during fiscal 1996 the Company recorded inventory selling costs of $0.4 million
pursuant to an inventory consignment arrangement.
Effective September 1, 1995, the Company sold a 50% interest in certain
Versal alumina production equipment to CRILAR Alumina Company ("CRILAR") for
$5.5 million, consisting of $2.2 million in cash and $3.3 million in a note
which has been collected. The remaining 50% interest in such equipment (with a
net carrying value of approximately $1,243,000) was contributed by the Company
to CRILAR. CRILAR is equally owned by the Company and by Criterion Catalyst
Company LP, an unaffiliated entity. In connection with the sale of the 50%
interest to CRILAR, the Company recognized a gain of approximately $3.4 million.
The Company operates the facility under an agreement with CRILAR and the owners
of CRILAR purchase substantially all of the production of the facility. The
Company's net sales and operating profits prior to the transaction from the
assets associated with the CRILAR transaction were not material to the Company's
consolidated net sales or operating profits.
On December 13, 1995, the Company acquired an ammonium nitrate
manufacturing facility located near Seneca, Illinois and related assets for an
initial purchase price of approximately $37.5 million (the "Seneca
Acquisition"). The transaction was accounted for under the purchase method of
accounting; accordingly, the consolidated statements of income include the
results of operations of the Seneca plant since the acquisition date. The
Company used available cash to fund the acquisition. During fiscal 1997, the
Company recorded an
F-9
<PAGE> 116
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustment of approximately $2,055,000 to the purchase price of the business as
a result of certain additional consideration. The total purchase price was
allocated as follows (in thousands):
<TABLE>
<S> <C>
Property, plant and equipment............................... $31,014
Inventory................................................... 2,259
Non-compete agreement, goodwill and other................... 6,286
-------
$39,559
=======
</TABLE>
Unaudited pro forma results of operations as if the Seneca Acquisition had
been consummated as of March 1, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 29,
1996
------------
(UNAUDITED)
<S> <C>
Net sales................................................... $473,774
Income before extraordinary charges......................... 16,827
Net income.................................................. 16,827
</TABLE>
Certain of the Company's fluorocarbon products (CFC R-11 and R-12)
previously manufactured by the electrochemical products segment (Note 12) are
subject to federal regulations which provided for the phase out of production by
January 1, 1996. These products accounted for 1%, 4% and 6% of net sales and
23%, 18% and 33% of income from operations for the fiscal years ended February
28, 1997, February 29, 1996 and February 28, 1995, respectively.
As a result of the mandated phase-out of CFC R-11 and R-12 and the
inability to remain profitable in HCFC R-22 and other packaged refrigerant
products, in fiscal 1996 the Company elected to exit the packaged fluorocarbon
business and consequently, the Company closed its packaging facility.
Accordingly, the Company recorded a writedown of the related property, plant and
equipment of approximately $1,255,000.
In July 1994 the Company purchased a 50% interest in an ammonia production
facility for $13.3 million from Cytec Industries Inc. ("Cytec"). The Company and
Cytec each contributed their 50% interest to a new partnership, Avondale
Ammonia. The ammonia production facility is operated by Cytec pursuant to a
services agreement with the partnership. Ammonia produced is transferred at
production cost to the partners relative to their respective ownership
interests. The Company is required to purchase from Cytec, at market related
prices, that amount of Cytec's 50% share of production in excess of Cytec's
internal ammonia needs up to a maximum amount.
4. INVENTORIES
Components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C>
Finished goods and in-progress.............................. $21,019 $28,339
Inventory purchased for resale.............................. 11,931 13,215
Raw materials............................................... 637 873
Supplies and catalysts...................................... 7,483 7,989
------- -------
41,070 50,416
Less LIFO reserve........................................... (1,146) (4,412)
------- -------
$39,924 $46,004
======= =======
</TABLE>
F-10
<PAGE> 117
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal 1997, certain inventory quantities were reduced resulting in
the liquidation of inventory quantities valued under the LIFO method. The effect
of this liquidation was to increase income from operations during the year ended
February 28, 1997 by approximately $1,086,000.
5. EQUITY INVESTMENTS
The Company participates in several investment arrangements which it
accounts for under the equity method of accounting. The primary investees
include CRILAR (50% owned), Kaiser LaRoche Hydrate Partnership ("KLHP", 45%
owned), and Avondale Ammonia (50% owned). KLHP is a partnership with Kaiser
Aluminum and Chemical Corporation ("Kaiser") to jointly distribute hydrate, a
product manufactured by Kaiser.
All income generated by the equity investees, except Avondale Ammonia, is
distributed to the partners relative to their respective partnership interests.
Avondale Ammonia does not generate income or loss because all production is
transferred to the partners at production cost.
Summarized financial information for unconsolidated entities (excluding
Avondale Ammonia) is as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Summary of operations:
Net sales......................................... $52,136 $35,674 $27,984
Gross profit...................................... 11,353 5,799 7,420
Net income........................................ 10,280 4,871 6,385
Company's equity in earnings...................... 4,909 2,647 2,540
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C> <C>
Summary of financial position:
Current assets.................................................. $13,854 $ 9,228
Noncurrent assets............................................... 16,532 15,891
------- -------
Total................................................... $30,386 $25,119
======= =======
Current liabilities............................................... $ 8,948 $ 5,073
======= =======
</TABLE>
Purchases from Avondale Ammonia aggregated approximately $8.8 million, $6.9
million, and $6.7 million for the years ended February 28, 1997, February 29,
1996, and February 28, 1995, respectively. Purchases from CRILAR aggregated
approximately $2.3 million and $2.8 million for the years ended February 28,
1997 and February 29, 1996, respectively. Amounts due from CRILAR amounted to
approximately $4,338,000 and $1,374,000 at February 28, 1997 and February 29,
1996, respectively.
F-11
<PAGE> 118
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. BORROWING ARRANGEMENTS
The Company's borrowings include the following (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C>
Revolving credit facility................................... $ 37,605 $ 4,755
======== ========
Term debt:
13% senior subordinated notes............................. $100,000 $100,000
Notes payable to USX Corporation.......................... 1,355 11,529
Note to former stockholder................................ 5,921 7,401
-------- --------
Total............................................. 107,276 118,930
Less current portion........................................ (2,835) (5,990)
-------- --------
Long-term debt.............................................. $104,441 $112,940
======== ========
</TABLE>
The Company's $100 million 13% senior subordinated notes are due in 2004
(the "Notes"). Semi-annual, interest only payments are due February 15 and
August 15 of each year. The Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after August 15, 1999 at redemption
prices set out in the Notes' indenture. The Notes are unsecured obligations of
the Company, and the indenture contains limitations on stock redemptions,
dividends, borrowings and investments, and it restricts the Company from
entering into certain transactions, all as defined. At February 28, 1997, the
Company is in compliance with such covenants; however, based upon currently
available information, it is possible that in fiscal 1998 the Company will not
achieve a minimum required fixed charge coverage ratio. If the minimum ratio is
not achieved the payment of dividends, stock redemptions, the incurrence of
certain indebtedness and certain investments in less than wholly-owned
subsidiaries would be precluded.
Concurrent with the sale of the Notes, the Company prepaid all existing
term notes (except the USX Notes), plus accrued interest thereon outstanding as
of August 17, 1994, and incurred a loss on the early extinguishment of debt
amounting to $860,000 (net of income tax benefit of $561,000). Such loss is
reflected in the accompanying 1995 consolidated statement of income as an
extraordinary charge.
The USX notes bear fixed interest rates of 10% and 12% and are senior to
the Notes and are secured by the Company's Crystal City, Missouri plant. These
agreements contain restrictions relating to changes in control, entering into
certain transactions, paying dividends and have cross-default provisions with
other debt. The Company made certain prepayments of the USX Notes during fiscal
1996 and 1997 and made its final payment of $1,355,000 plus accrued interest
thereon on April 30, 1997.
In July 1995, the Company executed an unsecured promissory note in favor of
a stockholder (the former chairman and chief executive officer of the Company)
in the principal amount of $7,401,250, bearing interest equal to the prime rate,
plus 1% per annum for the purchase of common stock owned by the stockholder. The
promissory note provides for the payment of the principal balance in five equal
annual installments beginning June 30, 1996, and the payment of quarterly
installments of interest, over a five year period, beginning September 30, 1995.
At February 28, 1997, approximately $11 million of the Company's retained
earnings was available for payment of dividends or distribution under the most
restrictive provisions of the above agreements.
Annual maturities of long-term debt are as follows: $2,835,000 in 1998;
$1,480,000 in 1999; $1,480,000 in 2000; $1,480,000 in 2001; none in 2002 and
$100,000,000 thereafter.
The Company maintains a $40 million revolving credit facility that is
senior to the Notes and secured by accounts receivable and inventory. Borrowings
are based on eligible accounts receivable and inventory, as
F-12
<PAGE> 119
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
defined. Interest is based on either the prime rate or LIBOR, plus up to 1.25%.
At February 28, 1997 and February 29, 1996, $37,605,000 and $4,755,000,
respectively, were outstanding under the revolving credit facility and at
February 28, 1997, $594,000 was available. Amounts available are net of
approximately $1,800,000 committed for letters of credit outstanding at February
28, 1997. The weighted average borrowing rates were 7.63% and 6.73% at February
28, 1997 and February 29, 1996, respectively. The agreement terminates on August
1, 1998. Under terms of the agreement, the Company pays commitments fees, on a
quarterly basis ranging from 0.125% to 0.25% per annum of average unused
balances. The Company is required, among other things, to maintain certain
working capital, debt to equity, and net worth levels under the agreement.
The carrying amount of the Company's variable rate debt approximates its
fair value. At February 28, 1997 and February 29, 1996, the fair values of the
Notes and the USX Notes is $113,354,000 and $121,418,000, respectively, based
primarily on market prices.
7. EMPLOYEE BENEFITS
The Company has a defined benefit pension plan covering substantially all
of its employees. Salaried participant benefits are based on years of service
and the average of the highest five years of compensation earned during a ten
year consecutive period of employment. Hourly participant benefits are based on
years of service. Pension costs are funded in amounts determined by management,
but not less than the minimum funding required by the Employee Retirement Income
Security Act of 1974 (ERISA). Salaried employees are required to contribute 1%
of their annual salaries to the plan. The assets of the plan primarily consist
of investments in insurance company general investment accounts and pooled
separate accounts invested in marketable equity securities and government and
corporate debt securities.
The following table sets forth the funded status of the plan and amounts
recognized in the Company's consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C>
Actuarial present value of projected benefit obligation:
Accumulated benefit obligation:
Vested................................................. $25,326 $21,687
Nonvested.............................................. 1,807 2,155
------- -------
27,133 23,842
Additional amounts related to projected compensation
levels.................................................... 6,861 6,429
------- -------
Total projected benefit obligation.......................... 33,994 30,271
Plan assets at fair value................................... 24,188 19,195
------- -------
Projected benefit obligation in excess of plan assets....... 9,806 11,076
Unrecognized net loss....................................... 2,723 3,626
Unrecognized prior service cost............................. 851 787
------- -------
Pension liability recognized in balance sheets.............. $ 6,232 $ 6,663
======= =======
</TABLE>
F-13
<PAGE> 120
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net pension costs for the plan include the following components (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost.................................... $ 2,229 $ 1,814 $2,063
Interest on projected benefit obligation........ 2,240 1,987 1,783
Actual return on plan assets.................... (2,575) (2,921) (110)
Net amortization and deferral................... 1,007 1,713 (794)
------- ------- ------
Net periodic pension cost....................... $ 2,901 $ 2,593 $2,942
======= ======= ======
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% as of February 28, 1997 and February 29,
1996. The expected increase in compensation levels used in determining the
actuarial present value of the projected benefit obligation was 5.5% as of
February 28, 1997 and February 29, 1996. The expected long-term rate of return
on assets was 8.5% for each of the three years in the period ended February 28,
1997.
The Company also provides unfunded supplemental retirement benefits to
certain executives which provides for incremental pension payments so that total
pension payments equal amounts that would have been payable from the Company's
principal pension plan if it were not for limitations imposed by federal tax
regulations. The accrued liability for this plan totals $1,338,000 and
$1,265,000 at February 28, 1997 and February 29, 1996, respectively. The accrued
liability at February 28, 1997 includes an additional minimum liability of
$303,000 of which $137,000 has been charged to a separate component of
stockholders' equity. Pension expense related to the arrangement was $178,000 in
1997, $187,000 in 1996 and $175,000 in 1995, respectively.
In addition, the Company maintains defined contribution savings plans in
which substantially all salaried and hourly employees are eligible to
participate. Employee contributions to the plans are on a voluntary basis and
may range from 1/2% to 16% of the employee's compensation, as defined in the
plans. Under the plan for salaried employees, the Company matches 10% of the
employees' qualified contributions up to a defined amount, and at the discretion
of the Board of Directors, contributions may be made to the account of employees
who are employed on the last valuation date in each year in an amount which
cannot exceed 15% of the annual salaries of the employees who are eligible to
receive contributions. The Company made contributions to these plans of
approximately $79,000, $68,000 and $63,000 during fiscal 1997, 1996 and 1995,
respectively.
The Company has a salary continuation agreement with a former executive
which provides for the continuation of all of the executive's salary payable to
the executive's spouse. The Company charges to expense the expected amounts to
be paid when such payments become probable. As of February 28, 1997 and February
29, 1996, $146,000 and $585,000, respectively, was accrued in connection with
this agreement.
The Company funds healthcare and life insurance benefits for retired
employees on a pay-as-you-go basis with the retiree paying a portion of the
costs, except that individuals who were not employed by the prior owners of
certain acquired businesses pay 100% of their allocated premium. The Company's
plans cover substantially all employees of the Company and provide for life and
health coverage upon retirement.
F-14
<PAGE> 121
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summary information on the Company's post retirement health and life
insurance plans follows (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees.................................................. $ 7,728 $ 8,130
Fully eligible active plan participants................... 5,657 6,457
Other active plan participants............................ 7,466 8,925
------- -------
Total accumulated postretirement benefit obligation......... 20,851 23,512
Unrecognized net actuarial gain............................. 6,121 2,166
Unrecognized prior service cost asset....................... 406 608
------- -------
Accrued postretirement benefit cost......................... $27,378 $26,286
======= =======
</TABLE>
The components of net periodic postretirement benefit costs follow (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost.................................... $ 426 $ 426 $ 529
Interest on accumulated postretirement benefit
obligation.................................... 1,707 1,758 1,677
Net amortization and deferral................... (241) (221) (69)
------ ------ ------
Net periodic postretirement benefit cost........ $1,892 $1,963 $2,137
====== ====== ======
</TABLE>
The discount rate used in determining the APBO was 7.5% as of February 28,
1997 and February 29, 1996. At February 28, 1997, the assumed healthcare cost
trend rates range from 7.60% to 8.00 in fiscal 1998, declining gradually to 6%
after 13 years and remaining at that level thereafter. At February 29, 1996, the
assumed healthcare cost trend rates range from 7.68% to 10.00% in fiscal 1997,
declining gradually to 6% after 14 years and remaining at that level thereafter.
The Company amortizes significant actuarial gains and losses over the estimated
average remaining service periods.
If the healthcare cost trend rate assumptions were increased by 1%, the
APBO at February 28, 1997 would be increased by approximately $2,554,000. The
effect of this change on the aggregate of the service and interest components of
net periodic postretirement benefit cost for fiscal 1997 would be an increase of
approximately $283,000.
8. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL AND LEGAL MATTERS
The Company is subject to numerous federal, state and local environmental
laws and regulations. The Company is currently involved in the assessment,
removal and/or mitigation of chemical substances at various sites. Environmental
expenditures which relate to an existing condition caused by past operations and
which have no significant future economic benefit to the Company are expensed.
Future environmental related expenditures cannot be reliably determined in many
circumstances due to the early stages of investigations, the uncertainty of
specific remediation methods, changing environmental laws and interpretations
and other matters. Such environmental costs are accrued at the time the
expenditure becomes probable and the costs can be reasonably estimated. Costs
are accrued based upon estimates determined by management and in some cases with
the assistance of external consultants. At sites where a range of costs to be
incurred is determined and no amount within the range is more likely than
another, the lower amount of the range is recorded. As assessments and cleanups
proceed, these accruals are reviewed periodically and adjusted, if necessary, as
F-15
<PAGE> 122
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
additional information becomes available. These accruals can change
substantially due to such factors as additional information on the nature or
extent of contamination, methods of remediation required, and other actions by
governmental agencies or private parties.
The Company owns a variety of sites which may or will likely require
remediation. Under the provisions of the acquisition agreements for the
businesses of LII and LCI, the former owners retained the obligations for any
potential liabilities arising from conditions or events occurring or
attributable to periods prior to the acquisition of properties acquired by the
Company pursuant to those agreements. At LCI, such items must be identified by
July 26, 1998 for the former owner to remain obligated. Management believes that
it is probable the former owners will fulfill their obligations under the
agreements.
In connection with all sites, the Company charged to expense approximately
$1.1 million and $1.4 million during fiscal year 1997 and 1995, and an
immaterial amount was charged to expense in 1996 in connection with remediation
and related activities. Other accrued liabilities includes $1.9 million and $2.3
million for the current portion of estimated clean-up expenditures and related
accruals at February 28, 1997 and February 29, 1996. The balance of spending
identifiable to future years is included in other non-current liabilities at
February 28, 1997 and February 29, 1996 and amounts to $2.6 million for each
year then ended.
While the Company believes that the recorded amounts represent the
Company's best estimate of the costs of such matters, it is reasonably possible
that additional costs may be incurred. Based on currently available information
and analysis, the Company believes that it is reasonably possible that costs
associated with these sites may exceed current accruals by amounts that may
prove insignificant or that could range, in the aggregate, up to approximately
$1.7 million. This estimate of the range of reasonably possible additional costs
is less certain than the estimates upon which accruals are based, and in order
to establish the upper limit of such range, assumptions least favorable to the
Company among the range of reasonably possible outcomes were used. In estimating
both its current accruals for environmental remediation and the possible range
of additional costs, the Company has not assumed it will bear the entire cost of
remediation of every site to the exclusion of the former owners of such sites.
The ability of the former owners to participate has been taken into account,
based generally on their financial condition and probable contribution on a per
site basis. No amounts have been recorded for potential recoveries from
insurance carriers.
In May 1997, the Company reached a plea agreement with the U.S. Department
of Justice in connection with a government investigation relating to a price
fixing conspiracy among U.S. ammonium nitrate producers during May 1992. On May
9, 1997, the Company and the federal government reached a plea agreement
pursuant to which the Company agreed to pay a fine to settle the matter for $1.5
million, plus interest from May 1997, to be paid during the succeeding four year
period. Such amount has been accrued in the Company's financial statements as of
February 28, 1997. The plea agreement is subject to final approval by a federal
court. Management believes that it is remote that the terms of the existing
agreement would change.
The Company is named as a defendant in a suit alleging the Company's
contractor struck and damaged a gasoline pipeline owned by the plaintiff while
the contractor was performing work on an adjacent Company owned facility. The
pipeline later ruptured, resulting in the release of gasoline into the Blind
River and surrounding area near Gramercy, Lousiana. In addition, the Company has
been named in a class-action petition filed on behalf of persons allegedly
harmed by the rupture of the pipeline. The Company is continuing a diligent
investigation of the situation in order to evaluate the allegations and the
relative responsibility of the parties involved. The Company is also responding
to inquiries from regulatory authorities of the State of Louisiana related to
the gasoline release. Management believes the Company has meritorious defenses
to these claims and is vigorously defending itself against them. Because the
matter is in a preliminary stage, it is not yet possible to predict whether the
Company will incur any liability for the rupture and release or to reasonably
estimate the cost of any possible liability. Accordingly, the Company has not
recorded any losses related to such claims. Should the Company be found to have
any liability, the amounts could be material.
F-16
<PAGE> 123
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company is involved in certain other legal actions and
claims arising in the ordinary course of business. The amounts asserted in these
matters are material to the Company's financial statements, and certain
claimants have not yet asserted an amount. Although it is inherently impossible
to predict with any degree of certainty the outcome of such legal actions and
claims, in the opinion of management (based on advice of the Company's corporate
and other legal counsel) such litigation and claims will be resolved without
material effect on the Company's financial position and results of operations.
It is possible, however, that the resolution of certain matters could be
material to the results of operations of any single fiscal quarter.
LEASES AND OTHER
The Company leases facilities and equipment consisting primarily of its
corporate office, electric power co-generation systems, transportation and
computer equipment. Some of the leases provide that the Company pay taxes,
maintenance, insurance and other occupancy expenses applicable to the leased
premises and certain leases provide for periodic renewals at the Company's
option.
Minimum future obligations on leases that have initial or remaining
non-cancelable lease terms in excess of one year as of February 28, 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Fiscal years ending February,
1998...................................................... $ 480 $ 7,769
1999...................................................... 358 6,115
2000...................................................... 212 5,601
2001...................................................... 63 4,959
2002...................................................... 3 4,562
Thereafter................................................ -- 18,588
------ -------
Total minimum lease payments................................ 1,116 $47,594
=======
Less estimated executory costs and imputed interest costs... 96
------
Present value of minimum lease payments..................... $1,020
======
</TABLE>
Total rental expense under operating leases aggregated approximately
$7,504,000, $7,519,000 and $5,893,000 during fiscal years 1997, 1996 and 1995,
respectively.
The Company enters into fixed price forward purchase contracts to establish
fixed prices for certain natural gas purchases. At February 28, 1997, the
Company has commitments outstanding under these arrangements to purchase
approximately $15,638,000 of natural gas during the subsequent year. In
addition, the Company buys call options and sells put options to effectively
establish a range of natural gas prices to hedge anticipated natural gas
purchases against rising prices. The contracts are entered into with a financial
counter-party. The Company is exposed to loss in the event of nonperformance by
the counter-party to the contracts. However, the Company does not anticipate
nonperformance by the counter party.
The following sets forth the open option positions and the fair value of
such positions as of February 28, 1997:
<TABLE>
<CAPTION>
QUANTITY FAIR VALUE CARRYING VALUE
----------- ---------- --------------
(IN MMBTUS)
<S> <C> <C> <C>
Purchased Call Options.......................... 4,575,000 $ 366,000 $ --
Written Put Options............................. 4,575,000 (154,000) --
</TABLE>
The fair values are based on quoted market prices. There were no material
open option positions as of February 29, 1996.
F-17
<PAGE> 124
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's Gramercy facility is integrated with both an alumina
production facility and a calcined coke operation, neither of which are owned by
the Company. In addition, the production equipment of some of the Company's
joint ventures are integrated with other operations of the other partners to the
ventures. As a result, the companies involved share certain common facilities
and services, including power generation. Further, the Company maintains certain
long-term supply contracts with Kaiser.
The Company's joint venture partner, Kaiser, maintains control of the
operating assets of KLHP, and another joint venture partner, Cytec, maintains
control of the operating assets of Avondale Ammonia.
9. INCOME TAXES
The provision for income taxes includes income taxes currently payable and
those deferred because of temporary differences between the financial statement
and tax bases of assets and liabilities.
Significant components of the Company's deferred tax liabilities and assets
are as follows (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment............................. $32,819 $30,445
Other..................................................... 8,846 4,377
------- -------
Total deferred tax liabilities.................... 41,665 34,822
Deferred tax assets:
Employee benefit obligations.............................. 15,005 14,506
AMT credit carryforward................................... 875 --
Other..................................................... 4,050 4,971
------- -------
Total deferred tax assets......................... 19,930 19,477
------- -------
Valuation allowance for deferred tax assets................. (600) (323)
------- -------
Net deferred tax liabilities................................ $22,335 $15,668
======= =======
</TABLE>
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Federal:
Current........................................... $(5,456) $11,317 $ 9,126
Deferred.......................................... 5,432 (317) 1,133
------- ------- -------
(24) 11,000 10,259
State:
Current........................................... (794) 2,348 1,813
Deferred.......................................... 1,235 (178) 225
------- ------- -------
441 2,170 2,038
------- ------- -------
Provision for income taxes before extraordinary
charges........................................... 417 13,170 12,297
Tax benefit for extraordinary charges............... -- -- (561)
------- ------- -------
Total provision for income taxes.......... $ 417 $13,170 $11,736
======= ======= =======
</TABLE>
F-18
<PAGE> 125
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between income taxes provided and the amount computed by
applying the federal income tax rate (35%) to income before income taxes follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Computed amount based on federal statutory rate...... $ 377 $11,243 $ 9,885
State income taxes, net of federal income tax
benefit............................................ 45 1,357 1,237
Increase in valuation allowance...................... 277 -- 969
Percentage depletion................................. (886) -- --
Other, principally non-deductible items.............. 604 570 206
----- ------- -------
$ 417 $13,170 $12,297
===== ======= =======
</TABLE>
10. MINORITY INTERESTS
In connection with the merger discussed in Note 1, during fiscal 1995 the
minority interests in LCI were repurchased by the Company or exchanged for
shares of the Company's stock. The Company agreed to repurchase the shares held
by former LCI institutional shareholders (the "LCI Formula Shares") for
$14,337,000 contingent upon the sale of the Notes. Such amount was $1,898,000
less than the carrying value of such shares. This excess (after consideration of
deferred taxes) was applied to reduce the carrying value of LCI property, plant
and equipment.
The following table outlines the activity in the minority interests (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28,
1995
------------
<S> <C>
Balance at beginning of year................................ $ 15,432
Adjustment in value of LCI Formula Shares................... 2,063
Adjustment in value of LCI management shares................ 81
Repurchase of LCI Formula Shares............................ (14,337)
Excess of carrying value over purchase price of formula
shares.................................................... (1,898)
Repurchase of LCI shares held by LCI management............. (152)
Interest on prepayment...................................... (275)
Conversion of certain LCI shares to Company shares (Note
11)....................................................... (914)
--------
Balance at end of year...................................... $ --
========
</TABLE>
11. REDEEMABLE COMMON STOCK AND COMMON STOCK WITH PUT RIGHTS
The Company allows certain of its executive officers, management employees
and directors to own common stock. At February 28, 1997 and February 29, 1996,
13,934 and 15,433 shares were outstanding pursuant to its 1995 Stock Purchase
Plan (the "1995 Plan," successor to the 1994 Stock Purchase Plan) and the Board
of Directors Stock Purchase Plan (the "Directors Plan"). Shares were originally
issued under the 1995 Plan, among other ways, by providing bonuses to purchase
such stock and by conversion of certain previously issued LCI common stock (Note
10). Generally participants in the 1995 Plan must use 25% of any annual bonuses
to purchase stock. The 1995 Plan and the Directors Plan provide that certain
executive officers, management employees and directors of the Company will be,
at the discretion of the Board of Directors, eligible to purchase shares of the
Company's common stock at fair value (as determined by independent appraisal).
In connection with the 1995 Plan and the Directors Plan, the Company may agree
to guarantee loans used to finance the purchase of such stock. Upon termination
of employment or directorship, the shares must be sold to the Company. The
purchase price is fair value (based upon an independent
F-19
<PAGE> 126
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
appraisal). All redemption provisions of the Company's shares expire upon a
public offering of the Company's common stock. The Company has guaranteed
indebtedness of certain executive officers, management employees and directors
pursuant to the 1995 Plan and the Directors Plan aggregating $455,000 and
$1,567,000 as of February 28, 1997 and February 29, 1996, respectively.
The Company has estimated the value of such stock outstanding under the
1995 Plan and the Directors Plan and reflected the estimated full redemption
value as redeemable common stock in the accompanying consolidated balance
sheets. The final settlement prices for any shares may differ from the estimated
amounts.
The Company originally had shareholder agreements with two of the Company's
founding stockholders who were executive officers. Such holders originally held
15% (75,000 shares) of the Company's outstanding common stock. As of February
28, 1997, none (25,000 at February 29, 1996) of these shares were outstanding.
Such agreements provided the holders the option to sell their stock at any time
to the Company for at least fair market value as determined by independent
appraisal and required the Company to repurchase such stock upon the occurrence
of certain conditions, such as death or termination of employment. The Company
estimated the value of such stock and reflected the estimated full redemption
value as common stock with put rights in the accompanying 1996 consolidated
balance sheet. Changes in the value of these shares were charged directly to
retained earnings as "Adjustment to estimated fair value of common stock with
put rights." During fiscal 1995, the Company's former chairman put 25,000 of his
shares to the Company for $5,512,500. During fiscal 1996, the Company and its
former chairman mutually agreed to a repurchase of his remaining 25,000 shares
in exchange for a $7,401,250 promissory note (see Note 6). Finally, during
fiscal 1997, the holder of the remaining 25,000 shares put his shares to the
Company for $7,475,000 in cash.
The following table summarizes activity in the Company shares that have
redemption features (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996 FEBRUARY 29, 1995
----------------------- ----------------------- -----------------------
REDEEMABLE COMMON REDEEMABLE COMMON REDEEMABLE COMMON
COMMON STOCK WITH COMMON STOCK WITH COMMON STOCK WITH
STOCK PUT RIGHTS STOCK PUT RIGHTS STOCK PUT RIGHTS
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
year........................ $ 4,771 $ 7,475 $2,417 $12,975 $ -- $16,538
Adjustment in value........... (98) -- 768 1,901 354 1,949
Shares issued in conversion of
LCI common stock............ -- -- -- -- 914 --
Other shares issued........... 3,187 -- 1,918 -- 1,213 --
Repurchases................... (3,683) (7,475) (332) (7,401) (64) (5,512)
------- ------- ------ ------- ------ -------
Balance at end of year........ $ 4,177 $ -- $4,771 $ 7,475 $2,417 $12,975
======= ======= ====== ======= ====== =======
</TABLE>
12. SEGMENT INFORMATION
The Company operates principally in three business segments. The
electrochemical products segment consists of caustic soda, chlorine and
fluorocarbons. (See Note 3). The nitrogen products segment consists of
facilities which manufacture and distribute agricultural and industrial nitrogen
products and distribute non-nitrogenous agricultural fertilizers. The alumina
chemicals segment consists of specialty aluminas and related products.
Intersegment sales are not material.
Operating profit includes all costs and expenses directly related to the
segment involved. The corporate portion of operating profit includes corporate
general and administrative expenses.
Assets are assigned to segments based on use. Corporate assets primarily
consist of cash and other assets.
F-20
<PAGE> 127
LAROCHE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following is a tabulation of business segment information for each of the
past three fiscal years (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 29,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales:
Electrochemical products.......................... $ 96,738 $138,775 $126,509
Nitrogen products................................. 242,408 248,438 234,909
Alumina chemicals................................. 40,139 61,769 59,305
-------- -------- --------
Total..................................... $379,285 $448,982 $420,723
======== ======== ========
Income (loss) from operations:
Electrochemical products.......................... $ 8,562 $ 29,624 $ 24,818
Nitrogen products................................. 11,710 20,468 13,833
Alumina chemicals................................. (3,897) (448) 2,196
Corporate expense................................. (5,738) (5,359) (3,642)
-------- -------- --------
Income from operations.............................. 10,637 44,285 37,205
Interest expense.................................... (14,881) (15,973) (13,083)
Income from equity investments...................... 4,909 2,647 2,540
Other income, net................................... 411 1,163 1,581
-------- -------- --------
Income before income taxes and other items.......... $ 1,076 $ 32,122 $ 28,243
======== ======== ========
Identifiable assets:
Electrochemical products.......................... $ 68,956 $ 79,794 $ 99,823
Nitrogen products................................. 178,179 160,346 130,130
Alumina chemicals................................. 47,627 52,291 59,003
Corporate......................................... 17,603 13,501 11,465
-------- -------- --------
Total..................................... $312,365 $305,932 $300,421
======== ======== ========
Depreciation and amortization:
Electrochemical products.......................... $ 5,665 $ 4,493 $ 4,641
Nitrogen products................................. 14,693 10,425 7,965
Alumina chemicals................................. 2,276 3,662 3,461
Corporate......................................... 427 416 293
-------- -------- --------
Total..................................... $ 23,061 $ 18,996 $ 16,360
======== ======== ========
Capital expenditures (including acquisitions and
plant turnarounds):
Electrochemical products.......................... $ 10,773 $ 6,062 $ 5,598
Nitrogen products................................. 26,922 40,866 8,871
Alumina chemicals................................. 3,127 3,652 5,771
-------- -------- --------
Total..................................... $ 40,822 $ 50,580 $ 20,240
======== ======== ========
</TABLE>
F-21
<PAGE> 128
LAROCHE INDUSTRIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1997 1997
---------- ------------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 3,211 $ 1,165
Receivables:
Trade, net of allowances of $514 and $776 as of August
31, 1997 and February 28, 1997, respectively.......... 37,592 43,393
Other.................................................. 9,726 13,808
Inventories (Note 3)...................................... 29,135 39,924
Other current assets...................................... 4,764 2,513
-------- --------
Total current assets.............................. 84,428 100,803
Investments................................................. 17,336 17,886
Property, plant and equipment, at cost...................... 284,614 271,504
Less accumulated depreciation............................. (96,995) (90,417)
-------- --------
Net property, plant and equipment........................... 187,619 181,087
Other assets................................................ 17,971 12,589
-------- --------
Total assets...................................... $307,354 $312,365
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility (Note 4)........................ $ 38,000 $ 37,605
Accounts payable.......................................... 31,659 35,992
Accrued compensation...................................... 6,973 8,595
Other accrued liabilities................................. 9,454 8,944
Current portion of long-term debt (Note 4)................ 1,480 2,835
-------- --------
Total current liabilities......................... 87,566 93,971
Long-term debt (Note 4)..................................... 102,961 104,441
Deferred income taxes....................................... 22,592 22,335
Other noncurrent liabilities................................ 38,631 36,535
Commitments and contingencies
Redeemable common stock..................................... 3,577 4,177
Stockholders' equity:
10% cumulative, voting preferred stock, $.01 par value,
200,000 shares authorized, no shares outstanding....... -- --
Common stock, $.01 par value, 1,200,000 shares authorized,
425,000 non-redeemable shares issued................... 4 4
Capital in excess of par value............................ 630 630
Retained earnings......................................... 51,530 50,409
Minimum pension liability................................. (137) (137)
-------- --------
Total stockholders' equity........................ 52,027 50,906
-------- --------
$307,354 $312,365
======== ========
</TABLE>
See accompanying notes.
F-22
<PAGE> 129
LAROCHE INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- -----------------------
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales............................................. $83,675 $87,441 $194,338 $201,662
Cost of sales......................................... 69,749 77,016 160,261 168,433
------- ------- -------- --------
Gross profit.......................................... 13,926 10,425 34,077 33,229
Selling, general and administrative expenses.......... 13,431 14,761 25,913 28,388
------- ------- -------- --------
Income (loss) from operations......................... 495 (4,336) 8,164 4,841
Interest and amortization of debt expense............. (3,803) (3,566) (7,736) (7,585)
Income from equity investments........................ 856 1,160 2,104 2,228
Other income (expense), net........................... 88 (45) 49 27
------- ------- -------- --------
Income (loss) before income taxes..................... (2,364) (6,787) 2,581 (489)
(Provision) benefit for income taxes.................. 945 2,782 (1,033) 258
------- ------- -------- --------
Net income (loss)..................................... $(1,419) $(4,005) $ 1,548 $ (231)
======= ======= ======== ========
</TABLE>
See accompanying notes.
F-23
<PAGE> 130
LAROCHE INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
AUGUST 31, AUGUST 31,
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 1,548 $ (231)
Depreciation and amortization............................... 11,644 10,511
Net change in operating assets and liabilities.............. 8,580 13,098
Equity income, net of distributions......................... 521 64
Deferred income taxes....................................... 257 --
Loss (gain) on disposition of assets and other.............. 1,614 (504)
-------- --------
Net cash provided by operating activities................... 24,164 22,938
INVESTING ACTIVITIES
Capital expenditures........................................ (16,206) (12,686)
Investments in joint ventures............................... (603) (339)
Plant turnarounds........................................... (1,830) (2,594)
Proceeds from sale of assets................................ -- 4,054
-------- --------
Net cash used by investing activities....................... (18,639) (11,565)
FINANCING ACTIVITIES
Net borrowings (repayments) under revolving credit
facility.................................................. 395 (1,520)
Sale of redeemable common stock............................. 150 2,936
Purchase of redeemable common stock......................... (750) (7,516)
Repayments of long-term debt................................ (2,835) (4,760)
Dividends paid.............................................. (439) (462)
-------- --------
Net cash used by financing activities....................... (3,479) (11,322)
-------- --------
Net increase in cash........................................ 2,046 51
Cash at beginning of period................................. 1,165 3,265
-------- --------
Cash at end of period....................................... $ 3,211 $ 3,316
======== ========
</TABLE>
See accompanying notes.
F-24
<PAGE> 131
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
AUGUST 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All significant
intercompany transactions and balances have been eliminated in consolidation.
Operating results for the three months and six months ended August 31, 1997 may
not be indicative of the results that may be expected for the full fiscal year.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended February 28, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements.
EARNINGS PER SHARE
Earnings per share have not been presented since such data provides no
useful information as the shares of the Company are closely held.
2. NEW ACCOUNTING STANDARDS
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, Environmental Remediation Liabilities ("SOP
96-1"). SOP 96-1 provides guidance with respect to the recognition, measurement
and disclosure of environmental remediation liabilities. The Company adopted SOP
96-1 effective March 1, 1997. The adoption of SOP 96-1 did not have a material
effect on the Company's operating results or financial condition.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for disclosures of segment information about products and services,
geographic areas, major customers and certain interim disclosures of segment
information which are not required by accounting standards currently applied by
the Company. The Company will adopt SFAS No. 131 in the first quarter of fiscal
1999. Currently, the Company is evaluating this standard and is uncertain as to
the impact it will have on the Company's consolidated financial statements.
F-25
<PAGE> 132
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. INVENTORIES
Components of inventory are as follows:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1997 1997
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods and in-progress.............................. $17,604 $21,019
Inventory purchased for resale.............................. 3,448 11,931
Raw materials............................................... 987 637
Supplies and catalysts...................................... 7,928 7,483
------- -------
29,967 41,070
Less LIFO reserve........................................... (832) (1,146)
------- -------
$29,135 $39,924
======= =======
</TABLE>
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on management's
estimates of expected year-end inventory levels and costs and are subject to
change based on the final year-end LIFO inventory valuation.
4. BORROWING ARRANGEMENTS
The Company's borrowings include the following:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1997 1997
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit facilities................................. $ 38,000 $ 37,605
======== ========
Term debt:
13% senior subordinated notes............................. $100,000 $100,000
Other notes payable....................................... 4,441 7,276
-------- --------
Total............................................. 104,441 107,276
Less current portion........................................ (1,480) (2,835)
-------- --------
Long term debt.............................................. $102,961 $104,441
======== ========
</TABLE>
The Company's $100.0 million 13% senior subordinated notes (the "Existing
Notes") are unsecured obligations of the Company. The indenture governing the
Existing Notes contains limitations on stock redemptions, dividends, borrowings
and investments, and it restricts the Company from entering into certain
transactions, all as defined therein. In September 1997, the Company completed a
tender offer and repurchased $99.1 million of its Existing Notes. The Company
repurchased the Existing Notes out of the proceeds of the issuance of $175.0
million principal amount of 9 1/2% senior subordinated notes (the "Notes") due
2007 issued on September 23, 1997. A portion of the remaining proceeds of the
Notes were used to repay a portion of the outstanding borrowings under the
Credit Facility (as defined) and to pay fees and expenses in connection with the
Notes and the tender offer and consent solicitation. In connection with issuing
the Notes and redeeming the Existing Notes, the Company paid a call premium and
other costs of $17,331,000 and expensed unamortized issuance costs associated
with the Existing Notes of $2,700,000. The total loss recognized as a result of
this early extinguishment of debt amounted to $12,019,000 (net of income tax
benefit of $8,012,000) and will be reflected in the Company's consolidated
statement of income as an extraordinary charge.
F-26
<PAGE> 133
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
On August 26, 1997, the Company entered into a six year, $160.0 million
senior secured credit facility ("Credit Facility"), which provides for a $100.0
million revolving credit facility ("Revolving Credit Facility") and $60.0
million term loan ("Term Loan") (the commitments under the Term Loan were
subsequently reduced to $35.0 million upon issuance of the Notes in September
1997). Interest is based on either the prime rate or LIBOR, plus up to 2.00%. At
August 31, 1997, $38,000,000 was outstanding under the Credit Facility. The
weighted average borrowing rate was 7.96% at August 31, 1997. Under terms of the
agreement, the Company pays commitment fees, on a quarterly basis ranging from
0.25% to 0.50% per annum of average unused balances. The Company is required,
among other things, to maintain certain working capital, debt to equity, and net
worth levels under the agreement. The Company has since sought from the lenders
under the Credit Facility an increase in the committed amount of the Revolving
Credit Facility to $125.0 million. The Credit Facility replaced and was drawn
upon to pay the entire balance of the Company's previously existing $40.0
million revolving credit facility that was secured by accounts receivable and
inventory. At February 28, 1997, $37,605,000 was outstanding under the
previously existing $40.0 million credit facility and the weighted average
borrowing rate was 7.63% at February 28, 1997.
5. ENVIRONMENTAL AND LEGAL MATTERS
The Company is subject to numerous federal, state and local environmental
laws and regulations and is currently involved in the assessment, removal and/or
mitigation of chemical substances at various sites.
The Company is named as a defendant in a suit alleging the Company's
contractor struck and damaged a gasoline pipeline owned by the plaintiff while
the contractor was performing work on an adjacent Company-owned facility. The
pipeline later ruptured, resulting in the release of gasoline into the Blind
River and surrounding area near Gramercy. In addition, the Company has been
named in a class-action petition and in one other individual suit filed on
behalf of persons allegedly harmed by the rupture of the pipeline. The Company
is continuing a diligent investigation of the situation in order to evaluate the
allegations and the relative responsibility of the parties involved. The Company
is also responding to inquiries from regulatory authorities of the State of
Louisiana related to the gasoline release. Management believes the Company has
meritorious defenses to these claims and is vigorously defending itself against
them. Because the matter is in a preliminary stage, it is not yet possible to
predict whether the Company will incur any liability for the rupture and release
or to reasonably estimate the cost of any possible liability. Accordingly, the
Company has not recorded any losses related to such claims.
In addition to the matters discussed above, the Company is involved in
certain other legal actions and claims arising in the ordinary course of
business. The amounts asserted in these matters are material to the Company's
financial statements, and certain claimants have not yet asserted an amount.
Although it is inherently impossible to predict with any degree of certainty the
outcome of such legal actions and claims, in the opinion of management (based on
advice of the Company's corporate and other legal counsel) such litigation and
claims are likely to be resolved without material adverse effect on the
Company's financial position and results of operations. It is possible, however,
that the resolution of certain matters could be material to the results of
operations of any single fiscal quarter.
6. SEASONALITY
A portion of the Company's nitrogen business serves the agricultural
fertilizer market. The business is seasonal with greater sales of such products
occurring in the spring and, to a lesser extent, the fall planting seasons.
F-27
<PAGE> 134
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
7. RECENT DEVELOPMENTS
In August 1997, the Company entered into a stock purchase agreement with
Rhone-Poulenc Chimie S.A., pursuant to which the Company, through a subsidiary,
agreed to purchase a 50% stock interest in ChlorAlp S.A.S. ("ChlorAlp") for
approximately $34.0 million. ChlorAlp will be a joint venture that owns and
operates a chlorine, caustic soda and bleach manufacturing and distribution
facility in Pont-de-Claix, France. In connection with such transactions, the
Company also has entered into a shareholders' agreement and a put and call
agreement providing for certain rights of each party to require the other to buy
or sell its respective interest in ChlorAlp under certain circumstances. Certain
other agreements relating the facility's power supply and other operating
agreements are expected to be executed at the closing of the stock purchase
agreement. The Company expects to close such transactions within the third
quarter of fiscal year 1998, and intends to fund the stock purchase with funds
drawn from the Term Loan.
F-28
<PAGE> 135
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the General Corporation Law of Delaware ("Delaware
Law") enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
a corporation or its stockholders for violations of the director's fiduciary
duty, except (i) for any breach of a director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware Law (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction which a director derived an improper
personal benefit. The Certificate of Incorporation, as amended, of the Company,
provides for the elimination of the liability of directors to the extent
permitted by Delaware Law.
Section 145 of the Delaware Law provides, in summary, that directors and
officers of Delaware corporations are entitled, under certain circumstances, to
be indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudications of liability but in view of all the circumstances of the case,
they are fairly and reasonably entitled to indemnity for such expenses which the
court deem proper. Any such indemnification may be made by the corporation only
as authorized in each specific case upon a determination by the stockholders or
disinterested directors that indemnification is proper because the indemnitee
has met the applicable standard of conduct. The Company's Bylaws entitles
officers of the Company to indemnification to the fullest extent permitted by
Section 145 of the Delaware Law, as the same may be supplemented from time to
time.
Reference is made to the Certificate of Incorporation, as amended, of the
Company, filed as Exhibit 3.1 hereto, and the Bylaws of the Company, filed as
Exhibit 3.2 hereto.
ITEM 21. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <C> <S>
3.1 -- Certificate of Incorporation of the Company, together with
amendments thereto(1).
3.2 -- Bylaws of the Company(1).
4.1 -- Indenture, dated as of August 17, 1994, between NationsBank
of Georgia, National Association, as Trustee, and the
Company(4).
4.2 -- Form of Note (included in Exhibit 4.1)(4).
4.3 -- Indenture, dated as of September 23, 1997, by and between
the Company and State Street Bank and Trust Company, as
Trustee.
4.4 -- Form of Note (included in Exhibit 4.3).
5.1* -- Opinion of Hunton & Williams.
10.1 -- Stock Purchase Agreement (and amendments thereto), dated
August 1, 1997, by and among the Company, LII Europe
S.A.R.L., Rhone-Poulenc Chimie S.A. and Rhone L S.A.S.
10.2 -- Exchange and Registration Rights Agreement, dated September
23, 1997, by and among the Company, Chase Securities Inc.
and Donaldson, Lufkin & Jenrette.
</TABLE>
II-1
<PAGE> 136
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <C> <S>
10.3 -- Purchase Agreement, dated September 18, 1997, by and among
the Company and Chase Securities Inc. and Donaldson, Lufkin
& Jenrette.
10.4 -- Shareholders Agreement (and amendment thereto), dated August
1, 1997, by and among the Company, LII Europe S.A.R.L.,
Rhone-Poulenc Chimie S.A. and Rhone L S.A.S.
10.5 -- Put and Call Agreement (and amendment thereto), dated August
1, 1997, by and among the Company, LII Europe S.A.R.L.,
Rhone-Poulenc Chimie S.A. and Rhone L S.A.S.
10.6* -- Agreement for Purchase and Supply of Electricity, Steam and
Other Products, dated October 17, 1997, by and among
ChlorAlp S.A.S., CEVCO G. I.E., and Rhone-Poulenc Chimie
S.A.
10.7* -- Supply and Purchase Agreement (Chlorine), dated October 17,
1997, by and between Rhone-Poulenc Chimie and ChlorAlp
S.A.S.
10.8* -- Chlorine Side Letter, dated October 17, 1997, by and among
ChlorAlp S.A.S., Rhone-Poulenc Chimie and the Company.
10.9* -- Supply and Purchase Agreement (Caustic Soda), dated October
17, 1997, by and between Rhone-Poulenc Chimie and ChlorAlp
S.A.S.
10.10* -- Supply and Purchase Agreement (Hydrochloric Acid), dated
October 17, 1997, by and between Rhone-Poulenc Chimie and
ChlorAlp S.A.S.
10.11* -- Supply and Purchase Agreement (Hydrogene), dated October 17,
1997, by and between Rhone-Poulenc Chimie and ChlorAlp
S.A.S.
10.12* -- Supply and Purchase Agreement (Sulfuric Acid), dated October
17, 1997, by and between Rhone-Poulenc Chimie and ChlorAlp
S.A.S.
10.13* -- Supply and Purchase Agreement (Sodium Hypochlorite), dated
October 17, 1997, by and between Rhone-Poulenc Agro Chimie
and ChlorAlp S.A.S.
10.14* -- Supply and Purchase Agreement (Gazeous Chlorine-Caustic
Soda), dated October 17, 1997, by and between Rhone-Poulenc
Agro Chimie and ChlorAlp S.A.S.
10.15+ -- Employment Agreement, dated as of June 1993, between LHI and
Grant O. Reed(1).
10.16 -- Credit Agreement, dated as of August 17, 1994, among the
Company, Bank South, N.A. (now known as NationsBank, N.A.
South), as Agent, and the Lenders listed therein(4).
10.17 -- First Amendment to Credit Agreement dated as of May 17, 1995
and effective as of March 1, 1995 among the Company, Bank
South, N.A. (now known as NationsBank, N.A. South), as
Agent, and the lenders listed therein(7).
10.18 -- Letter Agreement dated as of July 17, 1995 extending the
Credit Agreement dated as of August 17, 1994 among the
Company, Bank South (formerly known as Bank South, N.A.), as
Agent, and the lenders listed therein(7).
10.19 -- Letter Agreement dated as of December 16, 1996 amending the
Credit Agreement dated as of August 17, 1994 among the
Company, NationsBank N.A., South (successor to Bank South),
as Agent, and the lenders listed therein(6).
10.20 -- Second Amendment to Credit Agreement and Waiver dated March
14, 1997 among the Company, NationsBank, N.A. (South), as
Agent, and the lenders listed therein(8).
10.21 -- Credit Agreement, dated as of August 26, 1997, among the
Company, the Lenders party hereto and the Chase Manhattan
Bank, as Administrative Agent(9).
10.22 -- First Amendment to Credit Agreement, dated as of August 26,
1997, among the Company, the Lenders party hereto and the
Chase Manhattan Bank, as Administrative Agent.
10.23+ -- Consulting Agreement, dated as of June 30, 1997, between the
Company and Johnnie Lou LaRoche(9).
10.24+ -- LaRoche Chemicals Inc. 1989 Key Management Stock
Appreciation Bonus Plan(1).
10.25+ -- LaRoche Holdings Inc. Supplemental Employee Retirement
Plan(1).
</TABLE>
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<PAGE> 137
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <C> <S>
10.26+ -- LaRoche Executive Management Health Program(1).
10.27+ -- Management Stock Purchase Plan and forms of related
agreements with executive officers(3).
10.28+ -- LaRoche Industries Inc. 1995 Board of Directors Stock
Purchase Plan and form of agreement(5).
10.29 -- Hydrate Partnership Agreement, dated as of January 1, 1993,
between Kaiser and LCI(1).
10.30 -- Amended and Restated Hydrate Sales Agreement, dated as of
May 27, 1997 and effective as of August 1, 1995, between
Kaiser and the Hydrate Partnership(8).
10.31 -- Powerhouse Operating Agreement, dated as of July 26, 1988,
between Kaiser and LCI, as amended January 8, 1994(1).
10.32 -- Powerhouse Lease, dated as of July 26, 1988, between Kaiser
and LCI(1).
10.33 -- Specialty Aluminas Sales Agreement, dated as of July 26,
1988, between Kaiser and LCI(1).
10.34 -- Amendment No. 1 to Specialty Aluminas Sales Agreement, dated
as of February 1, 1993, between Kaiser and LCI(1).
10.35 -- Salt Agreement, dated as of May 3, 1957, between Texaco and
Kaiser, as amended May 15, 1968(1).
10.36 -- Supply Agreement, dated as of April 1994, between
AlliedSignal Inc. and LCI (portions redacted pursuant to a
confidentiality request)(1).
10.37 -- Joint Venture Agreement, dated as of July 26, 1994, between
Cytec Ammonia, Inc. and LaRoche Fortier Inc.(2).
12 -- Statement regarding Computation of Ratios of Earnings to
Fixed Charges.
21 -- Subsidiaries of the Registrant.
23.1* -- Consent of Hunton & Williams (included in opinion at Exhibit
5.1).
23.2 -- Consent of Ernst & Young LLP.
24 -- Powers of Attorney of Directors and Officers of the Company
(contained in signature pages).
25.1 -- Form T-1: Statement of Eligibility of State Street Bank and
Trust Company, as Trustee of the Exchange Notes.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
+ Denotes a management contract or compensatory plan required to be filed
pursuant to Item 601(b)(10)(iii) of Regulation S-K.
* To be filed by amendment
(1) Previously filed as an exhibit to Registration Statement No. 33-79532 filed
May 31, 1994 and incorporated herein by reference.
(2) Previously filed as an exhibit to Amendment No. 3 to Registration Statement
No. 33-79532 filed August 3, 1994 and incorporated herein by reference.
(3) Previously filed as an exhibit to Amendment No. 4 to Registration Statement
No. 33-79532 filed August 9, 1994 and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended August 31, 1994 and incorporated herein by
reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended August 31, 1995 and incorporated herein by
reference.
(6) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended November 30, 1996 and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the period ended February 28, 1997 and incorporated herein by
reference.
II-3
<PAGE> 138
(8) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended May 31, 1997 and incorporated herein by
reference.
(9) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended August 31, 1997 and incorporated herein by
reference.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to director, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to request for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction that was not
the subject of and included in the Registration Statement when it became
effective.
II-4
<PAGE> 139
POWER OF ATTORNEY
The Company and each person whose signature appears below hereby appoints
Grant O. Reed and Harold W. Ingalls, and each of them, as attorneys-in-fact with
full power of substitution, to execute in their respective names and on behalf
of the Company and each such person, individually and in each capacity stated
below, one or more amendments (including post-effective amendments) to the
Registration Statement as the attorney-in-fact and to file any such amendment to
the Registration Statement with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Atlanta, State of Georgia
on October 31, 1997.
LAROCHE INDUSTRIES, INC.
By: /s/ HAROLD W. INGALLS
------------------------------------
Harold W. Ingalls
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 31, 1997.
<TABLE>
<C> <S>
/s/ GRANT O. REED President, Chief Executive Officer and
- ----------------------------------------------------- Director (principal executive officer)
Grant O. Reed
/s/ HAROLD W. INGALLS Vice President and Chief Financial Officer
- ----------------------------------------------------- (principal financial and accounting officer)
Harold W. Ingalls
/s/ W. WALTER LAROCHE, III Chairman of the Board
- -----------------------------------------------------
W. Walter LaRoche, III
/s/ VICTORIA E. LAROCHE Vice Chairman of the Board
- -----------------------------------------------------
Victoria E. LaRoche
/s/ JOHNNIE LOU LAROCHE Director
- -----------------------------------------------------
Johnnie Lou LaRoche
/s/ LOUANNE C. LAROCHE Director
- -----------------------------------------------------
Louanne C. LaRoche
/s/ GEORGE R. WISLAR Director
- -----------------------------------------------------
George R. Wislar
/s/ ROBERT L. YOHE Director
- -----------------------------------------------------
Robert L. Yohe
/s/ C.L. WAGNER, JR. Director
- -----------------------------------------------------
C.L. Wagner, Jr.
/s/ PAUL L. M. BECKWITH Director
- -----------------------------------------------------
Paul L. M. Beckwith, Ph.D.
/s/ JOHN R. HALL Director
- -----------------------------------------------------
John R. Hall
</TABLE>
II-5
<PAGE> 1
EXHIBIT 4.3
===============================================================================
LAROCHE INDUSTRIES INC.
As Issuer
9 1/2% SENIOR SUBORDINATED NOTES DUE 2007
------------------
INDENTURE
Dated as of September 23, 1997
----------------
STATE STREET BANK AND TRUST COMPANY
As Trustee
------------------
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C> <C>
310 (a)(1)............................................ 7.10
(a)(2)............................................ 7.10
(a)(3)............................................ N.A.
(a)(4)............................................ N.A.
(a)(5)............................................ 7.10
(b)............................................... 7.10
(c)............................................... N.A.
311 (a)............................................... 7.11
(b)............................................... 7.11
(c)............................................... N.A.
312 (a)............................................... 2.5
(b)............................................... 11.3
(c)............................................... 11.3
313 (a)............................................... 7.6
(b)(1)............................................ N.A.
(b)(2)............................................ 7.6; 7.7
(c)............................................... 7.6; 11.2
(d)............................................... 7.6
314 (a)............................................... 11.5
(b)............................................... N.A.
(c)(1)............................................ 11.4
(c)(2)............................................ 11.4
(c)(3)............................................ N.A.
(d)............................................... 10.3-10.5
(e)............................................... 11.5
(f)............................................... N.A.
315 (a)............................................... N.A.
(b)............................................... 11.2
(c)............................................... N.A.
(d)............................................... N.A.
(e)............................................... N.A.
316 (a)(last sentence)................................ N.A.
(a)(1)(A)......................................... N.A.
(a)(1)(B)......................................... N.A.
(a)(2)............................................ N.A.
(b)............................................... N.A.
(c)............................................... 2.12
317 (a)(1)............................................ N.A.
(a)(2)............................................ N.A.
(b)............................................... 2.4
318 (a)............................................... 11.1
(b)............................................... N.A.
(c)............................................... 11.1
</TABLE>
- -------------
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE................................................. 1
Section 1.1. Definitions....................................................... 1
Section 1.2. Other Definitions................................................. 18
Section 1.3. Incorporation By Reference of Trust Indenture Act................. 18
Section 1.4. Rules of Construction............................................. 19
ARTICLE 2
THE NOTES................................................... 19
Section 2.1. Form and Dating................................................... 19
Section 2.2. Execution and Authentication...................................... 21
Section 2.3. Registrar and Paying Agent........................................ 21
Section 2.4. Paying Agent to Hold Money in Trust............................... 22
Section 2.5. Holder Lists...................................................... 22
Section 2.6. Transfer and Exchange............................................. 22
Section 2.7. Replacement Notes................................................. 29
Section 2.8. Outstanding Notes................................................. 29
Section 2.9. Temporary Notes................................................... 30
Section 2.10. CUSIP Number...................................................... 30
Section 2.11. Cancellation...................................................... 30
Section 2.12. Defaulted Interest................................................ 30
ARTICLE 3
REDEMPTION AND PREPAYMENT......................................... 31
Section 3.1. Notices to Trustee................................................ 31
Section 3.2. Selection of Notes to Be Redeemed................................. 31
Section 3.3. Notice of Redemption.............................................. 31
Section 3.4. Effect of Notice of Redemption.................................... 32
Section 3.5. Deposit of Redemption Price....................................... 33
Section 3.6. Notes Redeemed in Part............................................ 33
Section 3.7. Optional Redemption............................................... 33
Section 3.8. Mandatory Redemption.............................................. 34
Section 3.9. Offer to Purchase By Application of Excess Proceeds............... 34
ARTICLE 4
COVENANTS................................................... 36
Section 4.1. Payment of Notes.................................................. 36
Section 4.2. Maintenance of Office or Agency................................... 37
Section 4.3. Provision of Financial Information................................ 37
Section 4.4. Compliance Certificate............................................ 38
Section 4.5. Taxes............................................................. 39
Section 4.6. Stay, Extension and Usury Laws.................................... 39
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.7. Restricted Payments................................................................ 39
Section 4.8. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries............................................... 42
Section 4.9. Limitation on Indebtedness......................................................... 43
Section 4.10. Disposition of Proceeds of Asset Sales............................................. 46
Section 4.11. Transactions with Affiliates....................................................... 47
Section 4.12. Limitation on Liens................................................................ 48
Section 4.13. Offer to Repurchase Upon Change of Control......................................... 48
Section 4.14. Future Guarantors.................................................................. 50
Section 4.15. Corporate Existence................................................................ 50
Section 4.16. Limitation on Layering............................................................. 50
Section 4.17. Business Activities................................................................ 50
Section 4.18. Designation of Unrestricted Subsidiaries........................................... 51
Section 4.19. Limitation on the Sale or Issuance of Equity Interests
of Restricted Subsidiaries...................................................... 52
ARTICLE 5
SUCCESSORS.................................................................... 52
Section 5.1. Merger, Consolidation, or Sale of Substantially All Assets......................... 52
Section 5.2. Successor Corporation Substituted.................................................. 53
ARTICLE 6
DEFAULTS AND REMEDIES............................................................ 53
Section 6.1. Events of Default.................................................................. 53
Section 6.2. Acceleration....................................................................... 55
Section 6.3. Other Remedies..................................................................... 56
Section 6.4. Waiver of Past Defaults............................................................ 56
Section 6.5. Control by Majority................................................................ 56
Section 6.6. Limitation on Suits................................................................ 56
Section 6.7. Rights of Holders of Notes to Receive Payment...................................... 57
Section 6.8. Collection Suit by Trustee......................................................... 57
Section 6.9. Trustee May File Proofs of Claim................................................... 57
Section 6.10. Priorities......................................................................... 58
Section 6.11. Undertaking for Costs.............................................................. 58
ARTICLE 7
TRUSTEE..................................................................... 59
Section 7.1. Duties of Trustee.................................................................. 59
Section 7.2. Rights of Trustee.................................................................. 60
Section 7.3. Individual Rights of Trustee....................................................... 61
Section 7.4. Trustee's Disclaimer............................................................... 61
Section 7.5. Notice of Defaults................................................................. 62
Section 7.6. Reports by Trustee to Holders of the Notes......................................... 62
Section 7.7. Compensation and Indemnity......................................................... 62
Section 7.8. Replacement of Trustee............................................................. 63
Section 7.9. Successor Trustee by Merger, etc. ................................................. 64
Section 7.10. Eligibility; Disqualification...................................................... 64
Section 7.11. Preferential Collection of Claims Against Company.................................. 64
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE...................................................... 65
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance........................... 65
Section 8.2. Legal Defeasance and Discharge..................................................... 65
Section 8.3. Covenant Defeasance................................................................ 65
Section 8.4. Conditions to Legal or Covenant Defeasance......................................... 66
Section 8.5. Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions........................................ 67
Section 8.6. Repayment to Company............................................................... 68
Section 8.7. Reinstatement...................................................................... 68
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER........................................................ 68
Section 9.1. Without Consent of Holders of Notes................................................ 68
Section 9.2. With Consent of Holders of Notes................................................... 69
Section 9.3. Compliance with Trust Indenture Act................................................ 71
Section 9.4. Revocation and Effect of Consents.................................................. 71
Section 9.5. Notation on or Exchange of Notes................................................... 71
Section 9.6. Trustee to Sign Amendment, etc. ................................................... 71
ARTICLE 10
SUBORDINATION................................................................. 72
Section 10.1. Agreement to Subordinate........................................................... 72
Section 10.2. Certain Definitions................................................................ 72
Section 10.3. Liquidation; Dissolution; Bankruptcy............................................... 72
Section 10.4. Default on Designated Senior Indebtedness.......................................... 74
Section 10.5. Acceleration of Notes.............................................................. 74
Section 10.6. When Distribution Must Be Paid Over................................................ 75
Section 10.7. Notice by Company.................................................................. 75
Section 10.8. Subrogation........................................................................ 75
Section 10.9. Relative Rights.................................................................... 76
Section 10.10. Subordination May Not Be Impaired by Company....................................... 76
Section 10.11. Payment, Distribution or Notice to Representative.................................. 76
Section 10.12. Rights of Trustee and Paying Agent................................................. 77
Section 10.13. Authorization to Effect Subordination.............................................. 77
Section 10.14. Amendments......................................................................... 77
Section 10.15. No Waiver of Subordination Provisions.............................................. 77
ARTICLE 11
MISCELLANEOUS................................................................. 78
Section 11.1. Trust Indenture Act Controls....................................................... 78
Section 11.2. Notices............................................................................ 78
Section 11.3. Communication by Holders of Notes with Other Holders of
Notes........................................................................... 79
Section 11.4. Certificate and Opinion as to Conditions Precedent................................. 79
Section 11.5. Statements Required in Certificate or Opinion...................................... 80
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 11.6. Rules by Trustee and Agents........................................................ 80
Section 11.7. No Personal Liability of Directors, Officers, Employees
and Stockholders................................................................ 80
Section 11.8. Governing Law...................................................................... 80
Section 11.9. No Adverse Interpretation of Other Agreements...................................... 81
Section 11.10. Successors......................................................................... 81
Section 11.11. Severability....................................................................... 81
Section 11.12. Counterpart Originals.............................................................. 81
Section 11.13. Table of Contents, Headings, Etc. ................................................. 81
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A FORM OF INITIAL NOTE
Exhibit B FORM OF EXCHANGE NOTE
Exhibit C FORM OF TRANSFEREE LETTER OF REPRESENTATION
Exhibit D FORM OF SUPPLEMENTAL INDENTURE
</TABLE>
-iv-
<PAGE> 7
INDENTURE dated as of September 23, 1997 between LaRoche
Industries Inc., a Delaware corporation (the "Company"), as issuer, and State
Street Bank and Trust Company, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 9
1/2% Senior Subordinated Notes due 2007 of the Company (the "Initial Notes"),
and if and when issued in exchange for Initial Notes as provided in the
Registration Rights Agreement (as hereinafter defined), the Company's 9 1/2%
Senior Subordinated Notes due 2007 (the "Exchange Notes" and, together with the
Initial Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person is merged with or into such Person or becomes
a Subsidiary of such Person or (ii) assumed in connection with the acquisition
of assets from such Person, in each case, other than Indebtedness incurred in
connection with or in contemplation of, such Person becoming a Subsidiary or
such acquisition. A reasonable allocation of existing Indebtedness by the
corporate parent (direct, intermediate or ultimate) of such Person or by such
Person, at or around the time such Person becomes a Subsidiary or such assets
are acquired, to the Person becoming a Subsidiary or to the acquired assets,
shall not be deemed to be an incurrence of Indebtedness in connection with or
in contemplation of such transaction. Acquired Indebtedness shall be deemed to
be incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Subsidiary.
"Acquired Person" means, with respect to any specified
Person, any other Person which merges with or into or becomes a Subsidiary of
such specified Person.
"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; provided, however, that for purposes
of Section 4.11 hereof, the term "Affiliate" shall not include Chase Securities
Inc. or its affiliates or Hunton & Williams . For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease (that has the effect of a disposition) or other disposition
(including, without limitation, any merger, consolidation or sale/leaseback
transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary, in one transaction or a series of related transactions, of (i) any
Equity Interest of any Subsidiary (other than directors' qualifying shares, to
the extent mandated by applicable law); or (ii) any assets of the Company or
any Restricted Subsidiary (excluding cash and Cash Equivalents and inventory
disposed of in the ordinary course of business). For the purposes of this
definition, the term "Asset Sale" shall not include (a) any transaction
consummated in compliance with Section 5.1 hereof and the creation of any Lien
not prohibited
<PAGE> 8
2
by Section 4.12 hereof; (b) sales of property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or any Restricted Subsidiary, as the case may be; and
(c) any transfers of properties and assets between Wholly Owned Restricted
Subsidiaries and (d) assets of the Company held for sale on the date of the
Indenture with an aggregate sale price not in excess of $5.0 million. In
addition, solely for purposes of Section 4.10 hereof, (x) any transaction
consummated in compliance with Section 4.7 hereof and (y) any sale, conveyance,
transfer, lease or other disposition of any property or asset, whether in one
transaction or a series of related transactions, involving assets with a Fair
Market Value not in excess of $3 million in any fiscal year shall be deemed not
to be an Asset Sale.
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date
of determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Bankruptcy Code" means Title 11 of the United States Code,
as amended.
"Board of Directors" means the Board of Directors of the
Company or any authorized committee of such Board of Directors.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Business Day" means any day other than a Legal Holiday.
"Calculated Amount" means, as of the date of determination,
85% of the net book value of accounts receivable (as determined in accordance
with GAAP) of the Company and its Restricted Subsidiaries plus 50% of the net
book value of inventories (as determined in accordance with GAAP and adjusted
to include LIFO reserves) of the Company and its Restricted Subsidiaries, each
as set forth on the most recently available consolidated balance sheet of the
Company and its Restricted Subsidiaries.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be properly capitalized on the balance
sheet in accordance with GAAP.
"Cash Equivalents" means (a) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition; (b) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank, including the
Trustee, having capital and surplus in excess of $500 million; (c) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (b) and (c) above entered into with any
financial institution meeting the qualifications specified in clause (b) above;
(d) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group, respectively, and
in each case maturing within 270 days after the date of acquisition; and (e)
corporate securities having a rating equal to or higher than BBB- and Baa3, or
the equivalents thereof, by both Standard & Poors Ratings Group and Moody's
Investor Service, Inc., respectively, if both such entities rate the
securities, or having such rating from one of such entities if only one such
entity is rating such securities.
"Change of Control" means the occurrence of any of the
following events
<PAGE> 9
3
(whether or not approved by the Board of Directors of the Company):
(i) any Person (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act, including any group acting for the
purpose of acquiring, holding or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or
more Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all shares
that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the
happening of an event or otherwise), directly or indirectly of more
than 35% of the total voting power of the then outstanding Voting
Equity Interests of the Company;
(ii) the Company consolidates with, or merges with or
into, another Person (other than the Company or a Wholly Owned
Restricted Subsidiary) or the Company or any of its Subsidiaries
sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of the assets of the Company and its
Subsidiaries (determined on a consolidated basis) to any Person (other
than the Company or any Wholly Owned Restricted Subsidiary), other
than any such transaction where immediately after such transaction the
Person or Persons that "beneficially owned" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed
to have "beneficial ownership" of all securities that such Person has
the right to acquire, whether such right is exercisable immediately or
only after the passage of time) immediately prior to such transaction,
directly or indirectly, a majority of the total voting power of the
then outstanding Voting Equity Interests of the Company "beneficially
own" (as so determined), directly or indirectly, a majority of the
total voting power of the then outstanding Voting Equity Interests of
the surviving or transferee Person;
(iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election
by the shareholders of the Company was approved by a vote of a
majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the
Company then in office; or
(iv) the Company is liquidated or dissolved or adopts a
plan of liquidation or dissolution other than in a transaction which
complies with the provisions described under Section 5.1 hereof.
"Closing Date" means the date of the closing of the sale of
the Notes offered pursuant to the Offering.
"Code" means the Internal Revenue Code of 1986, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" or "SEC" means the Securities and Exchange
Commission.
"Consolidated Fixed Charge Coverage Ratio" means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss), plus
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-Cash Charges deducted in computing Consolidated Net Income (Loss), in each
case for such period, of the Company and its Subsidiaries on a consolidated
basis, all determined in accordance with GAAP, plus amounts received during
such period in repayment or prepayment of principal of the RP Loan, to (b) the
<PAGE> 10
4
sum of Consolidated Interest Expense for such period and cash and non-cash
dividends paid on any Preferred Equity Interest of the Company during such
period; provided that such computation shall be after giving pro forma effect
to (i) the incurrence of the Indebtedness with respect to which the computation
is being made and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred, and the application of such proceeds occurred, at the beginning
of the applicable period; (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company and its Subsidiaries since the first day of
the applicable period as if such Indebtedness was incurred, repaid or retired
at the beginning of the applicable period; (iii) in the case of Acquired
Indebtedness, the related acquisition, as if such acquisition occurred at the
beginning of the applicable period; and (iv) any acquisition or disposition by
the Company and its Subsidiaries of any company or any business or any assets
out of the ordinary course of business, whether by merger, stock purchase or
sale or asset purchase or sale or any related repayment of Indebtedness, in
each case since the first day of the applicable period, assuming such
acquisition or disposition had been consummated on the first day of the
applicable period and after giving pro forma effect to net cost savings that
the Company reasonably believes in good faith could have been achieved during
the applicable period as a result of such acquisition or disposition and which
cost savings could then be reflected in pro forma financial statements under
GAAP (provided that both (A) such cost savings were identified and quantified
in an Officers' Certificate delivered to the Trustee at the time of the
consummation of the acquisition or disposition and (B) with respect to each
acquisition or disposition completed prior to the 90th day preceding such date
of determination, actions were commenced or initiated by the Company within 90
days of such acquisition or disposition to effect such cost savings identified
in such Officers' Certificate) and provided further that (x) in making such
computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness computed on a pro forma basis and (A) bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period and (B) which was not
outstanding during the period for which the computation is being made but which
bears, at the option of the Company, a fixed or floating rate of interest shall
be computed by applying, at the option of the Company, either the fixed or
floating rate, and (y) in making such computation, the Consolidated Interest
Expense of the Company attributable to interest on any Indebtedness under a
revolving credit facility computed on a pro forma basis shall be computed based
upon the pro forma average daily balance of such Indebtedness during the
applicable period.
"Consolidated Income Tax Expense" means, with respect to the
Company for any period, the provision for Federal, state, local and foreign
income taxes payable by the Company and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without
duplication, for any period, the sum of (a) the interest expense of such Person
and its Subsidiaries for such period, on a consolidated basis, including,
without limitation, (i) amortization of debt discount (but excluding
amortization or write-off of financing costs), (ii) the net cost (benefit)
under Interest Rate Agreements (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation (other than interest on
deferred payment obligations relating to pension and post retirement benefits
as required by SFAS 87 and SFAS 106) and (iv) accrued interest, plus (b) (i)
the interest component of the Capital Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person during such period and (ii) all
capitalized interest of such Person and its Subsidiaries on a consolidated
basis, in each case as determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the
consolidated net income (loss) of the Company and the Restricted Subsidiaries;
provided, however, that there shall not be included in such Consolidated Net
Income: (i) any net income (loss) of any Person if such person is not a
Restricted Subsidiary, except (A) to the extent of cash actually distributed by
such
<PAGE> 11
5
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution and (B) the Company's equity in a net loss of
any such Person (other than an Unrestricted Subsidiary) for such period shall
be included in determining such Consolidated Net Income; (ii) any net income
(loss) of any person acquired by the Company or a Restricted Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (but not loss) of any Restricted Subsidiary
if such Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company to the extent of
such restrictions; (iv) any gain or loss realized upon the sale or other
disposition of any asset of the Company or the Restricted Subsidiaries
(including pursuant to any sale/leaseback transaction) outside of the ordinary
course of business; (v) any extraordinary gain or loss and (vi) the cumulative
effect of a change in accounting principles.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Equity Interests of such Person.
"Consolidated Non-Cash Charges" means, with respect to any
Person, for any period the sum of (i) depreciation, (ii) amortization
(including, without limitation, amortization of financing costs) and (iii)
other non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (excluding,
for purposes of clause (iii) only, such charges which require an accrual of or
a reserve for cash charges for any future period).
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.2 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facility" means the Credit Agreement dated as of
August 26, 1997 between the Company, the lenders party thereto from time to
time, and The Chase Manhattan Bank, as agent, as such agreement may be amended,
increased, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancing,
restructurings, replacements, supplementations or other modifications of the
foregoing).
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another
Person designated as Depositary by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness" means (a) any Indebtedness
outstanding under the Credit Facility and (b) any other Senior Indebtedness
which, at the time of determination, has an aggregate principal amount
outstanding, together with any commitments to lend additional amounts, of at
least $30.0 million, if the instrument governing such Senior Indebtedness
expressly states that such Indebtedness is "Designated Senior Indebtedness" for
purposes of the Indenture and a Board Resolution setting forth such designation
by the Company has been filed with the Trustee.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
<PAGE> 12
6
"Disqualified Equity Interest" means any Equity Interest
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable,
at the option of the holder thereof (except, in each case, upon the occurrence
of a Change of Control), in whole or in part, or exchangeable into Indebtedness
on or prior to the date which is 91 days prior to the maturity date of the
Notes. Equity Interests issued to employees or directors of the Company shall
not be deemed Disqualified Equity Interests merely because such Equity
Interests are subject to a shareholders agreement or plan providing for the
repurchase thereof by the Company upon the termination of employment of such
person.
"Domestic Restricted Subsidiary" means a Restricted
Subsidiary of the Company organized under the laws of the United States or any
political subdivisions thereof or the operations of which are located
substantially within the United States.
"Equity Interests" in any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, in such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Existing Notes" means the Company's 13% Senior Subordinated
Notes due 2004, issued under an indenture dated as of August 17, 1994 between
the Company and NationsBank of Georgia National Association, which was
succeeded as trustee by The Bank of New York.
"Fair Market Value" means, with respect to any asset, the
price (after taking into account any liabilities relating to such assets) which
could be negotiated in an arm's length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of which is
under any compulsion to complete the transaction; provided, however, that the
Fair Market Value of any such asset or assets shall be determined conclusively
by the Board of Directors of the Company acting in good faith, and shall be
evidenced by resolutions of the Board of Directors of the Company delivered to
the Trustee.
"FRF" means French francs, the legal tender currency of
France.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary
of the Company not organized under the laws of the United States or any
political subdivision thereof and the operations of which are located
substantially outside of the United States.
"GAAP" means generally accepted accounting principles in
effect in the United States as in effect on the date of this Indenture.
"Government Securities" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such
Government Security or a specific payment of principal of or interest on any
such Government Security held by such custodian for the account of the holder
of such depository receipt; provided, that (except as required by law) such
custodian is not authorized to
<PAGE> 13
7
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Security or the specific payment of principal of or interest on the Government
Security evidenced by such depository receipt.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection
in the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee which may from time to time
be executed and delivered by a Restricted Subsidiary of the Company pursuant to
Section 4.14 hereof. Each such Guarantee will have subordination provisions
equivalent to those contained in this Indenture.
"Guarantor" means any Restricted Subsidiary that is required
to provide a Guarantee in accordance with Section 4.14 hereof and its
respective successors and assigns.
"Hedging Agreement" means, with respect to any Person, all
Interest Rate Agreements or foreign currency or commodity hedge, exchange or
similar agreements of such Person.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Person under Hedging Agreements.
"Holders" means the registered holders of the Notes.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet of
such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of
its Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any
Restricted Subsidiary), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Restricted Subsidiary (or being merged into or consolidated with the
Company or any Restricted Subsidiary), shall be deemed Incurred at the time any
such Acquired Person becomes a Restricted Subsidiary or merges into or
consolidates with the Company or any Restricted Subsidiary.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit issued under
letter of credit facilities, acceptance facilities or other similar facilities
and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Equity Interests of such Person, or any
warrants, rights or options to acquire such Equity Interests, now or hereafter
outstanding, (ii) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, (iii) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited
to
<PAGE> 14
8
repossession or sale of such property), but excluding trade payables arising in
the ordinary course of business, (iv) Hedging Obligations of such Person, (v)
all Capital Lease Obligations of such Person, (vi) all Indebtedness referred to
in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
guaranteed debt of such Person, (viii) all Disqualified Equity Interests valued
at the greater of its voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends, and (ix) any amendment, supplement,
modification, deferral, renewal, extension, refunding or refinancing of any
liability of the types referred to in clauses (i) through (viii) above. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Equity Interest which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Equity Interest as
if such Disqualified Equity Interest were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Disqualified Equity Interest, such Fair Market Value to be determined in good
faith by the board of directors of the issuer of such Disqualified Equity
Interest. Indebtedness of a Person does not include performance by such Person
of its obligations, including payment obligations, under leases, licenses or
permits in the ordinary course of its business or any guarantee of such
obligations and does not include regulatory guarantees incurred by the Company
in order to secure permits from governmental authorities or agencies that are
necessary for the operation of the Company's business.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Independent Financial Advisor" means a nationally
recognized, accounting, appraisal, investment banking firm or consultant which,
in the judgment of the Board of Directors of the Company, is independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Chase Securities Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation, as initial purchasers of
the Notes.
"Insolvency or Liquidation Proceeding" means, with respect to
any Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institutional
"accredited investor" within the meaning of Rules 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Rate Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance, guarantee or other extension of credit or capital
contribution to (by means of transfers of cash or other property or assets to
others or payments for property or services for the account or use of others,
or otherwise), or purchase or acquisition of capital stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any
other Person. For purposes of Section 4.7 hereof, the amount of any Investment
shall be the original cost of such Investment, plus the cost of all additions
thereto, but without any other adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment;
<PAGE> 15
9
reduced by the payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such Investment;
provided, however, that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or Boston, Massachusetts or at a
place of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
"Lien" means any lien, pledge, mortgage, charge, security
interest, hypothecation, assignment for security or encumbrance of any kind
(including any conditional sale or capital lease or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction) whether or not filed, recorded or otherwise perfected under
applicable law.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means the aggregate proceeds in the form
of cash or Cash Equivalents received by the Company or any Restricted
Subsidiary in respect of any Asset Sale, including all cash or Cash Equivalents
received upon any sale, liquidation or other exchange of proceeds of Asset
Sales received in a form other than cash or Cash Equivalents, net of (a) the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof; (b) taxes paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements); (c) amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that were the subject of such Asset Sale; and (d) amounts deemed, in
good faith, appropriate by the Board of Directors of the Company to be provided
as a reserve, in accordance with GAAP, against any liabilities associated with
such assets which are the subject of such Asset Sale.
"Note Custodian" means the Trustee or the Registrar, as
custodian with respect to the Notes in global form, or any successor entity
thereto or any entity acting as custodian with respect to Notes in global form.
"Obligations" means any principal, interest (including,
without limitation, Post-Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary, the Assistant Secretary or any Vice-President of
such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company, by two Officers of the Company, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company, that meets the requirements of
Section 11.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably
<PAGE> 16
10
acceptable to the Trustee, that meets the requirements of Section 11.5 hereof.
The counsel may be an employee of or counsel to the Company or the Trustee.
"Permitted Holder" means one or more of the following: (i)
Johnnie Lou LaRoche, W. Walter LaRoche III, Victoria E. LaRoche, Louanne C.
LaRoche and Grant O. Reed, (ii) spouses or lineal descendants of the Persons
described in clause (i), (iii) in the event of incompetence or death of any of
the Persons described in clauses (i) or (ii), such Person's estate, executor,
administrator, committee or other personal representative or beneficiaries and
(iv) any trusts created for the benefit of the Persons described in clause (i),
(ii) or (iii).
"Permitted Indebtedness" has the meaning given in the
covenant in Section 4.9 hereof.
"Permitted Investments" means (i) Investments in any Wholly
Owned Restricted Subsidiary or any Person which, as a result of such
Investment, becomes a Wholly Owned Restricted Subsidiary; (ii) Indebtedness of
the Company or a Restricted Subsidiary described under clause (d) of the
definition of "Permitted Indebtedness"; (iii) Cash Equivalents; (iv)
Investments acquired by the Company or any Restricted Subsidiary in connection
with an Asset Sale permitted by Section 4.10 hereof to the extent such
Investments are non-cash proceeds as permitted under such section; (v)
Investments in such amounts and in such Persons outstanding on the date of the
Indenture (as increased from time to time by the Company's share of
undistributed earnings or profits); (vi) loans or guarantees up to an aggregate
of $1.0 million outstanding at any time to employees of the Company and its
Restricted Subsidiaries in the ordinary course of business; (vii) any
guarantees which are otherwise permitted to be Incurred by the Company pursuant
to Section 4.9 hereof; (viii) any guarantee by the Company of loans made by
other Persons to employees of the Company and its Restricted Subsidiaries in
connection with such employees' purchase of Equity Interests of the Company,
provided that such Equity Interests are pledged to the Company as security for
such guarantee; (ix) without limiting any other provision of this Indenture,
Investments pursuant to the RP Joint Venture Agreements in an aggregate amount
outstanding at any time up to the Phase One Purchase Price; (x) Hedging
Agreements; (xi) in addition to the foregoing, Investments in joint ventures,
corporations or partnerships engaged in businesses substantially similar to or
related to the businesses of the Company and its Restricted Subsidiaries,
provided that the aggregate amount of such Investments made after the date of
the Indenture shall not exceed $5.0 million at any time outstanding; and (xii)
further in addition to the foregoing, Investments made after the date of this
Indenture that do not exceed $5.0 million at any time outstanding.
"Permitted Liens" means (a) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary; provided, however, that such Liens were
in existence prior to the contemplation of such merger or consolidation and do
not secure any property or assets of the Company or any Restricted Subsidiary
other than the property or assets subject to the Liens prior to such merger or
consolidation; (b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith and by appropriate proceedings; (c)
Liens existing on the date of this Indenture; (d) Liens securing only the
Notes; (e) Liens in favor of the Company or any Restricted Subsidiary
(including any such Liens securing Indebtedness, to the extent and for so long
as such Indebtedness is pledged to secure Senior Indebtedness); (f) Liens for
taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded; provided, however, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (g) easements, reservation of rights of
way, restrictions and other similar easements, licenses, restrictions on the
use of properties, or minor imperfections of title that in the aggregate do not
in any case materially detract from the properties subject thereto or interfere
with the
<PAGE> 17
11
ordinary conduct of the business of the Company and the Restricted
Subsidiaries; (h) Liens resulting from the deposit of cash or notes in
connection with contracts, tenders or expropriation proceedings, or to secure
workers' compensation, surety or appeal bonds, costs of litigation when
required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business; (i)
Liens securing Indebtedness consisting of Capital Lease Obligations, Purchase
Money Indebtedness, mortgage financings, industrial revenue bonds or other
monetary obligations, in each case incurred solely for the purpose of financing
all or any part of the purchase price or cost of construction or installation
of assets used in the business of the Company or the Restricted Subsidiaries,
or repairs, additions or improvements to such assets, provided, however, that
(I) such liens secure Indebtedness in an amount not in excess of the original
purchase price or the original cost of any such assets or repair, addition or
improvement thereto (plus an amount equal to the reasonable fees and expenses
in correction with the incurrence of such Indebtedness), (II) such Liens do not
extend to any other assets of the Company or the Restricted Subsidiaries (and,
in the case of repair, addition or improvements to any such assets, such Lien
extends only to the assets (and improvements thereto or thereon) repaired,
added to or improved), (III) the incurrence of such Indebtedness is permitted
by Section 4.9 hereof and (IV) such Liens attach within 90 days of such
purchase, construction, installation, repair, addition or improvement; (j)
Liens granted to secure any Permitted Indebtedness and; and (k) Liens to secure
any refinancings, renewals, extensions, modifications or replacements
(collectively, "refinancing") (or successive refinancings), in whole or in
part, of any Indebtedness secured by Liens referred to in the clauses above so
long as such Lien does not extend to any other property (other than
improvements thereto).
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability company,
limited liability limited partnership, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Phase One Purchase Price" means an amount equal to FRF 196.2
million (subject to adjustment as provided in the Stock Purchase Agreement),
which is the sum of (i) FRF 129.9 million (subject to adjustment as provided in
the Stock Purchase Agreement) attributable to the acquisition by LII Europe
S.A.R.L., a Wholly Owned Subsidiary, of 50% of the equity of ChlorAlp S.A.S.,
and (ii) FRF 66.3 million (subject to adjustment as provided in the Stock
Purchase Agreement) attributable to the refinancing by the Company or a
consolidated Subsidiary of the Company of certain Indebtedness owing by
ChlorAlp S.A.S. to Rhone-Poulenc Chimie S.A., which Indebtedness may be further
refinanced by ChlorAlp S.A.S., plus up to $5.0 million attributable to costs
and expenses incurred after the date of the Indenture related to the RP Joint
Venture incurred by the Company and its Subsidiaries prior to the payment of
the Phase One Purchase Price (including related hedging costs).
"Phase Two Purchase Price" means an amount equal to FRF 290.0
million attributable to the acquisition by LII Europe S.A.R.L., a Wholly Owned
Subsidiary and, at the time of payment of the Phase Two Purchase Price, the
owner of 50% of the equity of ChlorAlp S.A.S., of the remaining 50% of the
equity of ChlorAlp S.A.S., including reasonable costs and expenses related
thereto and the value of inventory then on hand.
"Post-Petition Interest" means, with respect to any
Indebtedness of any Person, all interest accrued or accruing on such
Indebtedness after, or which would accrue but for, the commencement of any
Insolvency or Liquidation Proceeding against such Person in accordance with and
at the contract rate (including, without limitation, any rate applicable upon
default) specified in the agreement or instrument creating, evidencing or
governing such Indebtedness, whether or not, pursuant to applicable law or
otherwise, the claim for such interest is allowed as a claim in such Insolvency
or Liquidation Proceeding.
"Preferred Equity Interest", in any Person, means an Equity
Interest of any class
<PAGE> 18
12
or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"Public Equity Offering" means, with respect to the Company,
an underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"Purchase Agreement" means the agreement, dated as of
September 18, 1997, among the Company and the Initial Purchasers relating to
the Offering.
"Purchase Money Indebtedness" means Indebtedness of the
Company or any Restricted Subsidiary Incurred for the purpose of financing all
or any part of the purchase price, or the cost of construction or improvement
of any property; provided, however, that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the Fair Market Value of such
property or such purchase price or cost, including any refinancing of such
Indebtedness that does not increase the aggregate principal amount (or accreted
amount, if less) thereof as of the date of refinancing.
"QIB" means any "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act).
"Qualified Equity Interest" in any Person means any Equity
Interest in such Person other than any Disqualified Equity Interest.
"Registered Exchange Offer" means the offer to exchange the
Initial Notes for the Exchange Notes issued under a registration statement
filed pursuant to the terms of the Registration Rights Agreement.
"Registration Rights Agreement" means the exchange and
registration rights agreement, dated as of September 23, 1997, among the
Company and the Initial Purchasers.
"Repurchase Offer" means an offer made by the Company to
purchase all or any portion of a Holder's Notes pursuant to Section 4.10 or
4.13 hereof.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the Corporate Trust Department of the Trustee (or any
successor group of the Trustee) or any other officer 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 his knowledge of
and familiarity with the particular subject.
"Restricted Subsidiary" means any Subsidiary of the Company
that has not been designated by the Board of Directors of the Company, by a
resolution of the Board of Directors of the Company delivered to the Trustee,
as an Unrestricted Subsidiary pursuant to Section 4.18 hereof. Any such
designation may be revoked by a resolution of the Board of Directors of the
Company delivered to the Trustee, subject to the provisions of such covenant.
"RP Joint Venture" means the transactions contemplated by the
RP Joint Venture Agreements.
"RP Joint Venture Agreements" means the Stock Purchase
Agreement and the Shareholders Agreement, together with the other contracts and
agreements contemplated by said Stock Purchase Agreement and Shareholders
Agreement.
<PAGE> 19
13
"RP Loan" means the loan made by the Company or a
consolidated Subsidiary of the Company to ChlorAlp S.A.S. as a part of the
Phase One Purchase Price, which loan shall not exceed FRF 66.3 million in
original principal amount, shall be repayable as to principal in approximately
equal periodic installments over a four-year period beginning on the date of
payment of the Phase One Purchase Price, shall be repayable at intervals not
longer than three months, and shall bear interest at a rate not higher than the
greater of the prevailing rate of interest for loans of the same type and tenor
in France on the date the Phase One Purchase Price is paid and the rate payable
by the Company from time to time on Indebtedness outstanding under the
long-term facility included in the Credit Facility.
"S&P" means Standard & Poor's Ratings Group and its
successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means, at any date, (a) all Obligations
of the Company under the Credit Facility; (b) all Hedging Obligations of the
Company; (c) all Obligations of the Company under stand-by letters of credit;
and (d) all other Indebtedness of the Company for borrowed money, including
principal, premium, if any, and interest (including Post-Petition Interest) on
such Indebtedness, unless the instrument under which such Indebtedness of the
Company for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of payment
to the Notes, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall
not include (i) to the extent that it may constitute Indebtedness, any
Obligation for Federal, state, local or other taxes; (ii) any Indebtedness
among or between the Company and any Subsidiary of the Company or any Affiliate
of the Company or any of such Affiliate's Subsidiaries; unless and for so long
as such Indebtedness has been pledged to secure obligations under or in respect
of Senior Indebtedness; (iii) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary
course of business; (iv) that portion of any Indebtedness that is incurred in
violation of the Indenture (provided that Indebtedness under the Credit
Facility shall be deemed not to have been incurred in violation of this
Indenture for purposes of this clause (iv) if the holders of such Indebtedness
or their agent or representative shall have received a representation from the
Company to the effect that such Indebtedness does not violate the Indenture);
(v) Indebtedness evidenced by the Notes; (vi) Indebtedness of the Company that
is expressly subordinate or junior in right of payment to any other
Indebtedness of the Company; (vii) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capital Lease
Obligations) or management agreements; (viii) any obligation that by operation
of law is subordinate to any general unsecured obligations of the Company; (ix)
Indebtedness represented by the Existing Notes; and (x) Indebtedness of the
Company to the extent such Indebtedness is owed to and held by any Federal,
state, local or other governmental authority, other than Indebtedness relating
to the plea agreement entered into by the Company with the U.S. Department of
Justice on May 9, 1997.
"Senior Subordinated Indebtedness" means the Notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu in right of payment with the Notes and is
not subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Shareholders Agreement" means the shareholders agreement
dated as of August 1, 1997, among ChlorAlp S.A.S., Rhone-Poulenc Chimie S.A.,
LII Europe S.A.R.L. and the Company.
"Shelf Registration Statement" has the meaning ascribed to
such term in the Registration Rights Agreement.
<PAGE> 20
14
"Stated Maturity" means, when used with respect to any Note
or any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable.
"Stock Purchase Agreement" means the stock purchase agreement
dated as of August 1, 1997, among LII Europe S.A.R.L., the Company,
Rhone-Poulenc Chimie S.A. and ChlorAlp S.A.S.
"Subordinated Indebtedness" means, with respect to the
Company, any Indebtedness of the Company which is expressly subordinated in
right of payment to the Notes.
"Subsidiary" means, with respect to any Person, unless such
Person would otherwise not be permitted to be consolidated with the Company in
accordance with GAAP, (a) any Person of which the outstanding Voting Equity
Interests having at least a majority of the votes entitled to be cast in the
election of directors shall at the time be owned, directly or indirectly,
through one or more Persons by such Person, or (b) any other Person of which at
least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved
in or that makes any Disposition, the Person formed by or surviving such
Disposition or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Transfer Restricted Securities" means Securities that bear
or are requested to bear the legend set forth in Section 2.6 hereof.
"Trustee" means the party named as such in the preamble to
this Indenture until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to Section 4.18 hereof. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of Section 4.18 hereof.
"Voting Equity Interests" means Equity Interests in a
corporation or other Person with voting power under ordinary circumstances
entitling the holders thereof to elect the Board of Directors or other
governing body of such corporation or Person.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary all (or, in the case of a Foreign Restricted Subsidiary, the maximum
amount permitted by law) of the outstanding capital stock of which is at the
time owned, directly or indirectly, by the Company and/or one or more other
Wholly Owned Restricted Subsidiaries.
"Wholly Owned Subsidiary" means any Subsidiary all (or, in
the case of a Foreign Restricted Subsidiary, the maximum amount permitted by
law) of the outstanding capital stock of which is at the time owned, directly
or indirectly, by the Company and/or one or more other Wholly Owned
Subsidiaries.
Section 1.2. Other Definitions.
<PAGE> 21
15
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction" 4.11
"Asset Sale Offer" 3.9
"Bankruptcy Law" 10.2
"Change of Control Offer" 4.13
"Change of Control Payment" 4.13
"Change of Control Payment Date" 4.13
"Change of Control Redemption Payment" 3.7
"Closing Date" 2.1
"Covenant Defeasance" 8.3
"Custodian" 6.1
"DTC" 2.3
"Definitive Notes" 2.1
"Event of Default" 6.1
"Excess Proceeds" 4.10
"Global Note" 2.1
"Global Note Holder" 2.1
"Legal Defeasance" 8.2
"Notice of Default" 6.1
"Offer Amount" 3.9
"Offer Period" 3.9
"Paying Agent" 2.3
"Payment Blockage Notice" 10.4
"Payment Default" 6.1
"Permitted Indebtedness" 4.9
"Purchase Date" 3.9
"Registrar" 2.3
"Restricted Payments" 4.7
</TABLE>
Section 1.3. Incorporation By Reference of Trust Indenture.
Whenever this Indenture refers to a provision of the TIA, the
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 Notes;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" with respect to the Notes means the Company and any
successor obligor upon the Notes.
All other terms used in this indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by rule enacted
by the Commission under the TIA have the meanings so assigned to them.
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
<PAGE> 22
16
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the Commission from time to time.
ARTICLE 2
THE NOTES
Section 2.1. Form and Dating.
The Initial Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto, the
terms of which are incorporated hereof and made part of this Indenture. Any
Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B, the terms of which are incorporated
hereof and made part of this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange rule or usage. Each Note shall
be dated the date of its issuance and shall show the date of its
authentication. The Notes will be fully registered as to principal and interest
in minimum denominations of $1,000 and integral multiples of $1,000 in excess
thereof.
(a) Global Notes. The Initial Notes are being offered and
sold by the Company pursuant to the Purchase Agreement.
Initial Notes offered and sold to QIBs in accordance with
Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase
Agreement, shall be issued initially in the form of one or more permanent
Global Notes in definitive, fully registered form without interest coupons with
the Global Securities Legend and Restricted Securities Legend called for by
Exhibit A hereto (each, a "Global Note"), which shall be deposited on behalf of
the Initial Purchasers with the Trustee, as custodian for the Depositary, and
registered in the name of Cede & Co., as nominee of the Depositary, or will
remain in the custody of the Trustee pursuant to the FAST Balance Certificate
Agreement between DTC and the Trustee. The Global Note or Notes will be duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Secondary sales to Institutional Accredited Investors who are not
QIBs will be reflected in a separate Global Note. The aggregate principal
amount of the Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as Note Custodian, and the
Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to Global Notes deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in
accordance with this Section 2.1(b), authenticate and deliver initially one or
more Global Notes that (i) shall be registered in
<PAGE> 23
17
the name of the Depositary for such Global Note or Global Notes or the nominee
of such Depositary and (ii) shall be held by the Trustee as custodian for the
Depositary. After the issuance of Exchange Notes under a Registered Exchange
Offer, the Trustee shall have no duty to hold any Global Note as custodian for
the Depositary or any other Security registered in the name of the Depositary
or a nominee of the Depositary.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary or by the Trustee as the custodian
of the Depositary or under such Global Note, and the Depositary may be treated
by the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing hereof shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
a holder of a beneficial interest in any Global Note.
(c) Certificated Securities. Except as otherwise provided
herein, owners of beneficial interests in Global Notes will not be entitled to
receive physical delivery of certificated securities. Purchasers of Initial
Notes who are not QIBs or Institutional Accredited Investors (referred to
hereof as the "Non-Global Purchasers") will receive certificated Initial Notes
bearing the Restricted Securities Legend set forth in Exhibit A hereto
("Definitive Notes"); provided, however, that upon transfer of such
certificated securities to a QIB or Institutional Accredited Investor, such
certificated Securities will, unless the relevant Global Note has previously
been exchanged, be exchanged for an interest in a Global Note pursuant to the
provisions of Section 2.6 hereof. Definitive Notes will include the Restricted
Securities Legend unless removed in accordance with Section 2.6(g) hereof.
Section 2.2. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual
or facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall authenticate and make available for
delivery (1) Initial Notes for original issue in an aggregate principal amount
of $175.0 million, and (2) Exchange Notes for issue only in a Registered
Exchange Offer, pursuant to the Registration Rights Agreement, in exchange for
Initial Notes of an equal principal amount, in each case upon a written order
of the Company signed by two Officers. Such order shall specify the amount of
the Notes to be authenticated, the date on which the original issue of Notes is
to be authenticated and whether the Notes are to be Initial Notes or Exchange
Notes. The aggregate principal amount of Notes outstanding at any time may not
exceed $175.0 million.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate of the Company.
<PAGE> 24
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Section 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough
of Manhattan, The City of New York where (i) Notes may be presented for
registration of transfer or for exchange ("Registrar") and (ii) Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Notes and of their transfer and exchange (the "Register"). The Company may
appoint one or more co-registrars and one or more additional paying agents. The
term "Registrar" includes any co-registrar and the term "Paying Agent" includes
any additional paying agent. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company shall enter into an
appropriate agency agreement with any Registrar, Paying Agent or co-registrar
not a party to this Indenture, which shall incorporate the terms of the TIA.
The agreement shall implement the provisions of this Indenture that relate to
such agent. The Company shall notify the Trustee in writing of the name and
address of any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company or any of its Subsidiaries may act as Paying
Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
Section 2.4. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent, including the
Trustee (who shall be deemed to have agreed by its execution of this
Indenture), to agree in writing that the Paying Agent shall hold in trust for
the benefit of Holders or the Trustee (unless the Paying Agent is the Trustee,
in which case it shall hold in trust for the Holders) all money held by the
Paying Agent for the payment of principal, premium, if any, or interest, on the
Notes, and shall notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company
or a Subsidiary) shall have no further liability for the money. If the Company
or a Subsidiary 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.
Upon any bankruptcy or reorganization proceedings relating to the Company or a
Subsidiary, the Trustee shall serve as sole Paying Agent for the Notes.
Section 2.5. Holder 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 all Holders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee at least seven Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of the Holders of Notes.
Section 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When
Definitive Notes are presented to the Registrar or a co-registrar with a
request:
<PAGE> 25
19
(x) to register the transfer of such Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal
amount of Definitive Notes of other authorized denominations,
the Registrar or co-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 Notes surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form and substance reasonably
satisfactory to the Company and the Registrar or co-registrar, duly
executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) are Transfer Restricted Securities or such
Definitive Notes, accompanied by the following additional information
and documents, as applicable:
(A) if such Transfer Restricted Securities are
being delivered to the Registrar by a Holder for registration
in the name of such Holder, without transfer, a certification
from such Holder to that effect (in substantially the form set
forth on the reverse of the Security); or
(B) if such Transfer Restricted Securities are
being transferred to the Company or to a QIB in accordance with
Rule 144A under the Securities Act, a certification to that
effect (in substantially the form set forth on the reverse of
the Security); or
(C) if such Transfer Restricted Securities are
being transferred (w) pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under
the Securities Act; or (x) to an Institutional Accredited
Investor that is acquiring the security for its own account, or
for the account of such an Institutional Accredited Investor,
with respect to which it exercises sole discretion, in each
case in a minimum principal amount of the Notes of $250,000 for
investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of the
Securities Act; or (y) in reliance on another exemption from
the registration requirements of the Securities Act: (i) a
certification to that effect (in substantially the form set
forth on the reverse of the Security), (ii) if the Company or
Registrar so requests, an Opinion of Counsel reasonably
acceptable to the Company and to the Registrar to the effect
that such transfer is in compliance with the Securities Act and
(iii) in the case of clause (x), a signed letter substantially
in the form of Exhibit C hereto.
(b) Restrictions on Transfer of a Definitive Note for a
Beneficial Interest in a Global Note. A Definitive Note may not be exchanged
for a beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by appropriate instruments of transfer, in form
and substance satisfactory to the Trustee and the Company, together with:
(i) if such Definitive Note is a Transfer
Restricted Security, certification, substantially in the form
set forth on the reverse of the Security, that such Definitive
Note is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Definitive Note is a
Transfer Restricted
<PAGE> 26
20
Security, written instructions directing the Trustee to make,
or to direct the Note Custodian to make, an adjustment on its
books and records with respect to such Global Note to reflect
an increase in the aggregate principal amount of the Notes
represented by the Global Note,
then the Trustee shall cancel such Definitive Note and cause, or direct the
Note Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Note Custodian, the
aggregate principal amount of Notes represented by the Global Note to be
increased accordingly. If no Global Notes are then outstanding, the Company
shall issue and the Trustee shall authenticate, upon written order of the
Company in the form of an Officer's Certificate, a new Global Note in the
appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note.
(i) Any person having a beneficial interest in a
Global Note that is being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant to
clause (A),(B) or (C) below may upon request, and if accompanied by the
information specified below, exchange such beneficial interest for a
Definitive Note of the same aggregate principal amount. Upon receipt by
the Trustee of written instructions or such other form of
instructions as is customary for the Depositary from the Depositary or
its nominee on behalf of any Person having a beneficial interest in a
Global Note and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the Depositary or the
Person designated by the Depositary as having such a beneficial interest
in a Transfer Restricted Security only, the following additional
information and documents:
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary as being
the owner of a beneficial interest in a Global Note, a
certification from such Person to that effect (in substantially
the form set forth on the reverse of the Note); or
(B) if such beneficial interest is being
transferred (x) to a QIB in accordance with Rule 144A under the
Securities Act or (y) pursuant to an effective registration
statement under the Securities Act, a certification from such
Person to that effect (in substantially the form set forth on
the reverse of the Note); or
(C) if such beneficial interest is being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities
Act; or (x) to an Institutional Accredited Investor that is
acquiring the Note for its own account, or for the account of
such an Institutional Accredited Investor, with respect to
which it exercises sole discretion, in each case in a minimum
principal amount of the Notes of $250,000 for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Notes; or
(y) in reliance on another exemption from the registration
requirements of the Securities Act: (i) a certification to that
effect from the transferee or transferor (in substantially the
form set forth on the reverse of the Note), (ii) if the Company
or Registrar so requests, an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company
and to the
<PAGE> 27
21
Registrar to the effect that such transfer is in compliance
with the Securities Act, and (iii) in the case of clause (x), a
signed letter substantially in the form of Exhibit C hereto,
then the Trustee or the Note Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Note Custodian, the
aggregate principal amount of the Global Note to be reduced on its
books and records and, following such reduction, the Company will
execute and the Trustee will authenticate and make available for
delivery to the transferee a Definitive Note.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee
shall make such Definitive Notes available for delivery to the persons
in whose names such Notes are so registered in accordance with the
instructions of the Depositary.
(e) Restrictions on Transfer and Exchange of
Global Notes. Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in subsection (f) of this Section 2.6), a Global
Note may not be transferred as a whole except by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Notes in Absence
of Depositary. If at any time:
(i) the Depositary for the Notes notifies the
Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Notes and a successor Depositary for the
Global Notes is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, in its sole discretion, notifies
the Trustee in writing that it elects to cause the issuance of
Definitive Notes under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Notes to
the Persons designated by the Company, will authenticate and make available for
delivery Definitive Notes, in an aggregate principal amount equal to the
principal amount of Global Notes, in exchange for such Global Notes.
(g) Legend.
(i) Except as permitted by the following paragraph
(ii), each Note certificate evidencing the Global Notes and the
Definitive Notes (and all Notes issued in exchange therefor or
substitution thereof) shall bear a legend (the "Restricted Securities
Legend") in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS
<PAGE> 28
22
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH
SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT, THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
THE SECURITIES OF $250,000 FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, (E) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, OR (F) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE
(D), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE."
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted Security
represented by a Global Note) pursuant to Rule 144 under the
Securities Act or an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Note, the Registrar shall permit
the Holder thereof to exchange such Transfer Restricted
Security for a Definitive Note that does not bear the legend
set forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) any such Transfer Restricted Security
represented by a Global Note
<PAGE> 29
23
shall not be subject to the provisions set forth in clause (i)
of this Section 2.6(g) (such sales or transfers being subject
only to the provisions of Section 2.6(c) hereof); provided,
however, that with respect to any request for an exchange of a
Transfer Restricted Security that is represented by a Global
Note for a Definitive Note that does not bear a legend, which
request is made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form set forth on the reverse of the
Note).
(h) Cancellation and/or Adjustment of Global Note. At such
time as all beneficial interests in a Global Note have either been exchanged
for Definitive Notes, redeemed, repurchased or canceled, such Global Note shall
be returned to the Depositary for cancellation or retained and canceled by the
Trustee. At any time prior to such cancellation, if any beneficial interest in
a Global Note is exchanged for Definitive Notes, redeemed, repurchased or
canceled, the principal amount of Notes represented by such Global Note shall
be reduced and an adjustment shall be made on the books and records of the
Trustee (if it is then the Note Custodian for such Global Note) or the Note
Custodian with respect to such Global Note, by the Trustee or the Note
Custodian, to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
Notes.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate
Definitive Notes and Global Notes at the Registrar's or co-registrar's
request.
(ii) No service charge shall be made for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax, assessments, or
similar governmental charge payable in connection therewith.
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of (a) any Definitive
Note selected for redemption in whole or in part pursuant to Article 3,
except the unredeemed portion of any Definitive Note being redeemed in
part, or (b) any Note for a period beginning 15 Business Days before
the mailing of a notice of an offer to repurchase or redeem Notes or 15
Business Days before an interest payment date.
(iv) Prior to the due presentation for registration
of transfer of any Note, each of the Company, the Trustee, the Paying
Agent, the Registrar and any co-registrar may deem and treat the person
in whose name a Note is registered as the absolute owner of such Note
for the purpose of receiving payment of principal of and interest on
such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and none of the Company, the Trustee, the Paying
Agent, the Registrar and any co-registrar shall be affected by notice
to the contrary.
(v) All Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Notes surrendered upon such transfer or exchange.
(j) No Obligation of the Trustee. (i) The Trustee shall
have no responsibility or obligation to any beneficial owner of a Global Note,
a member of, or a participant in the Depositary or other Person with respect to
the accuracy of the records of the Depositary or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Notes or with respect to the delivery to any participant, member, beneficial
owner or other
<PAGE> 30
24
Person (other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such Notes.
All notices and communications to be given to the Holders and all payments to
be made to Holders under the Notes shall be given or made only to or upon the
order of the registered Holders (which shall be the Depositary or its nominee
in the case of a Global Note). The rights of beneficial owners in any Global
Note in global form shall be exercised only through the Depositary subject to
the applicable rules and procedures of the Depositary. The Trustee may
conclusively rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Note (including, without limitation, any
transfers between or among Depositary participants, members or beneficial
owners in any Global Note) other than to require delivery of such certificates
and other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to examine
the same to determine substantial compliance as to form with the express
requirements hereof.
Section 2.7. Replacement Notes.
If any mutilated Note is surrendered to the Registrar, or if
the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken, the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Note, the Company shall
issue and the Trustee, upon the receipt of a written authentication order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company and the Trustee may
charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
Section 2.8. Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. A Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.7 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay Notes payable on that date, then on and after that date
such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.9. Temporary Notes.
<PAGE> 31
25
Until Definitive Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of Definitive Notes but may have variations
that the Company considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Notes and make them available for delivery in exchange
for temporary Notes.
Section 2.10. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number,
and if so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes and that reliance may be placed
only on the other identification numbers printed on the Notes.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be
delivered to the Company. The Company may not issue new Notes to replace Notes
that it has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Notes, it shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.1 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Note and the date of the proposed payment. The Company shall fix or cause
to be fixed each such special record date and payment date, provided that no
such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to
be mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.1. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the
optional redemption provisions of Section 3.7 hereof, then it shall furnish to
the Trustee, at least 30 days but not more than 60 days before a redemption
date, an Officers' Certificate setting forth (i) the paragraph of the Notes
and/or Section of this Indenture pursuant to which the redemption shall occur,
(ii) the redemption date, (iii) the principal amount of Notes to be redeemed
and (iv) the redemption price.
<PAGE> 32
26
Section 3.2. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption shall be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed, or, if the Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000 or less shall
be redeemed in part. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than 30 nor more than 60 days prior to the redemption date by the Trustee
from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof shall be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
unless the Company defaults in payment of the redemption price, interest ceases
to accrue on Notes or portions of them called for redemption. Except as
provided in this Section 3.2, provisions of this Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption.
The provisions of the two preceding paragraphs of this
Section 3.2 shall not apply with respect to any redemption affecting only a
Global Note, whether such Global Note is to be redeemed in whole or in part. In
case of any such redemption in part, the unredeemed portion of the principal
amount of the Global Note shall be in an authorized denomination.
Section 3.3. Notice of Redemption.
Subject to the provisions of Section 3.9 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder of Notes to be redeemed at such Holder's registered address, provided,
however, that, unless a shorter period is acceptable to the Trustee, the
Company shall provide notice to the Trustee in accordance with Section 3.1
hereof at least ten days prior to the mailing of the notice pursuant to this
Section 3.3.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
<PAGE> 33
27
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice
or printed on the Notes.
If any of the Notes to be redeemed is in the form of a Global
Note, then such notice shall be modified in form but not substance to the
extent appropriate to accord with the procedures of the Depositary applicable
to redemptions.
At the Company's request and expense, the Trustee shall give
the notice of redemption in the Company's name; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, a notice signed by two Officers requesting that the Trustee
give such notice and setting forth the information to be stated in such notice
as provided in the preceding paragraph.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with
Section 3.3 hereof, Notes called for redemption become irrevocably due and
payable on the redemption date at the redemption price. A notice of redemption
may not be conditional.
Section 3.5. Deposit of Redemption Price.
Prior to 10:00 A.M., New York time on the redemption date,
the Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest on all Notes to
be redeemed on that date. The Trustee or the Paying Agent shall promptly return
to the Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of and
accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.1 hereof.
Section 3.6. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the
Company shall issue and, upon the receipt of a written authentication order of
the Company signed by two Officers of the Company, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
<PAGE> 34
28
Section 3.7. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.7,
the Company shall not have the option to redeem the Notes pursuant to this
Section 3.7 prior to September 15, 2002. From and after September 15, 2002, the
Company shall have the option to redeem the Notes, in whole or in part, upon
not less than 30 nor more than 60 days notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on September 15 of each of the years
indicated below:
<PAGE> 35
29
<TABLE>
<CAPTION>
Percentage of
Year Principal Amount
---- ----------------
<S> <C>
2002................................. 104.750%
2003................................. 103.167%
2004 ................................ 101.583%
2005 and thereafter.................. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Section 3.7, at any time prior to September 15, 2000, the Company may, at its
option, on any one or more occasions, redeem up to 33_% of the originally
issued aggregate principal amount of Notes with the net cash proceeds of one or
more Public Equity Offerings by the Company at a redemption price of 109.5% of
the principal amount thereof, plus accrued and unpaid interest, if any, thereon
to the redemption date; provided that at least 66_% of the originally issued
aggregate principal amount of Notes remains outstanding immediately after the
occurrence of such redemption (excluding any Notes held by the Company or any
of its Affiliates); and provided, further, that notice of any such redemption
must be given within 60 days after the closing of the relevant Public Equity
Offering of the Company.
(c) Any redemption pursuant to this Section 3.7 shall be
made pursuant to the provisions of Sections 3.1 through 3.6 hereof.
Section 3.8. Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.13 hereof, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Section 3.9. Offer to Purchase By Application of Excess
Proceeds.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders of Notes and, to
the extent required by the terms thereof, to all holders or lenders of other
Senior Subordinated Indebtedness, to purchase Notes and any such Senior
Subordinated Indebtedness (an "Asset Sale Offer"), it shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of 45
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof, giving effect to any
related offer for Senior Subordinated Indebtedness pursuant to Section 4.10,
(the "Offer Amount") or, if less than the Offer Amount has been tendered, all
Notes tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first
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30
class mail, a notice to the Trustee and each of the Holders. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the Asset Sale
Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to
this Section 3.9 and Section 4.10 hereof and the length of time the
Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the
Purchase Date;
(c) that any Note not tendered or accepted for payment
shall continue to accrue interest;
(d) that, unless the Company defaults in making such
payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased
pursuant to an Asset Sale Offer may only elect to have all of such
Note purchased and may not elect to have only a portion of such Note
purchased;
(f) that Holders electing to have a Note purchased
pursuant to any Asset Sale Offer shall be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Note completed, or transfer by book-entry transfer,
to the Company, the Trustee, a Depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice at
least three Business Days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their
election if the Company, the Depositary or the Paying Agent or the
Trustee, as the case may be, receives, not later than the expiration
of the Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased) in the manner provided in Section 4.10; and
(i) that Holders whose Notes were purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry
transfer).
If any of the Notes subject to an Asset Sale Offer is in the
form of a Global Note, then such notice may be modified in form but not
substance to the extent appropriate to accord with the procedures of the
Depositary applicable to repurchases.
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.9. The Company, the Depositary or
the Paying Agent, as the case
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31
may be, shall promptly (but in any case not later than five days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
purchase price of the Notes tendered by such Holder and accepted by the Company
for purchase, and the Company shall promptly issue a new Note, and the Trustee,
upon receipt of a written authentication order of the Company signed by two
Officers of the Company shall authenticate and mail or deliver such new Note to
such Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.9, any
purchase pursuant to this Section 3.9 shall be made pursuant to the provisions
of Sections 3.1 through 3.6 hereof.
ARTICLE 4
COVENANTS
Section 4.1. Payment of Notes.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated
for and sufficient to pay all such amounts then due.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where principal,
premium, if any, and interest on the Notes will be paid and where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. State Street Bank and Trust Company, N.A., 61 Broadway, New York,
New York is appointed the initial agent for this purpose. The Company shall
give prompt written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
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The Company hereby designates the following office of an
Affiliate of the Trustee as one such office or agency of the Company in
accordance with Section 2.3: State Street Bank and Trust Company, 61 Broadway,
New York, NY 10006.
Section 4.3. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto, the Company
shall file with the SEC (if permitted by SEC practice and applicable law and
regulations) the annual reports, quarterly reports and other documents which
the Company would have been required to file with the SEC pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if the Company were
so subject, such documents to be filed with the SEC on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so subject. The
Company shall also in any event (a) within 15 days of each Required Filing Date
(whether or not permitted or required to be filed with the SEC) (i) transmit
(or cause to be transmitted) by mail to all Holders, as their names and
addresses appear in the Note register, without cost to such Holders upon their
request and (ii) file with the Trustee copies of the annual reports, quarterly
reports and proxy statements which the Company is required to file with the SEC
pursuant to the preceding sentence, or, if such filing is not so permitted,
information and data of a similar nature, and (b) if, notwithstanding the
preceding sentence, filing such documents by the Company with the SEC is not
permitted by SEC practice or applicable law or regulations, promptly upon
written request supply copies of such documents to any Holder. In addition, for
so long as any Notes remain outstanding and prior to the later of the
consummation of the Exchange Offer and the filing of the Initial Shelf
Registration Statement, if required, the Company will furnish to the Holders,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act. The Trustee shall not be required to
examine any such statements, information or data other than any accountants
statements delivered pursuant to Section 4.4(b) to determine whether the
Company is in compliance with any of the covenants as set forth in the
Indenture.
Section 4.4. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of, premium, if any, or interest on the Notes is prohibited or if
such event has occurred, a description of the event and what action the Company
is taking or proposes to take with respect thereto. As of the date hereof, the
Company's fiscal year ends on February 28 of each calendar year. In the event
the Company changes its fiscal year, it shall promptly notify the Trustee of
such change.
(b) So long as not contrary to the then current professional
standards of the American Institute of Certified Public Accountants as set
forth in an officer's certificate delivered to the Trustee, the fiscal year-end
financial statements delivered pursuant to Section 4.3 above shall be
accompanied by a written statement (which statement may be limited to the
extent
<PAGE> 39
33
required by professional standards) of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
performing their audit of such financial statements, nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, within five Business Days of any Officer
becoming aware of any Default or Event of Default, a certificate of two
officers specifying such Default or Event of Default and what action the
Company is taking or proposes to take with respect thereto.
Section 4.5. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
Section 4.6. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power hereof granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.7. Restricted Payments.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, (i) declare or pay any
dividend or make any other payment or distribution on account of any Equity
Interests of the Company or any Restricted Subsidiary to holders of such Equity
Interests in their capacity as such (other than (A) dividends, distributions
and payments to the Company or any Restricted Subsidiary (and if such
Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, to its other
stockholders on a pro rata basis) and (B) dividends or distributions payable
solely in Qualified Equity Interests of the Company or in options, warrants or
other rights to purchase Qualified Equity Interests of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value, directly or
indirectly, any Equity Interests of the Company or any Restricted Subsidiary
(other than such Equity Interests owned by the Company or a Wholly Owned
Restricted Subsidiary); (iii) make any principal payment on, or purchase,
redeem, defease, retire or otherwise acquire for value, prior to any scheduled
principal payment, scheduled sinking fund payment or final maturity, any
Subordinated Indebtedness; or (iv) make any Investment in any Person (other
than Permitted Investments) (any such payment or any other action (other than
any exception thereto) described in (i) through (iv) each, a "Restricted
Payment"), unless, at the time of and after giving effect to the proposed
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
<PAGE> 40
34
(b) the Company would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions described
under Section 4.9 below; and
(c) the aggregate amount of all Restricted Payments
declared or made on or after the date of the Indenture does not exceed an
amount equal to the sum of (1) 50% of Consolidated Net Income of the Company
for the period (taken as one accounting period) beginning on the first fiscal
quarter commencing after the date of the Indenture and ending on the last day
of the most recent fiscal quarter immediately preceding the date of such
Restricted Payment for which internal financial statements are available at the
time of such Restricted Payment (or if such cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss), plus (2) the aggregate net cash
proceeds received by the Company after the date of the Indenture either (x) as
capital contributions to the Company or (y) from the issue and sale (other than
to any of its Restricted Subsidiaries) of its Qualified Equity Interests
(excluding the net proceeds from any issuance and sale of Qualified Equity
Interests financed, directly or indirectly, using funds borrowed from or
guaranteed by the Company or any Restricted Subsidiary until and to the extent
such borrowing is repaid), plus (3) the principal amount (or accreted amount
(determined in accordance with GAAP), if less) of any Indebtedness of the
Company or any Restricted Subsidiary which has been converted into or exchanged
for Qualified Equity Interests of the Company after the date of the issuance of
the Notes, plus (4) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the date of the
Indenture, an amount equal to the lesser of the initial amount of such
Investment and the amount received by the Company or any Restricted Subsidiary
upon such disposition or repayment, plus (5) with respect to any Unrestricted
Subsidiary which has been redesignated a Restricted Subsidiary after the date
of the Indenture, the amount (measured as of the date of redesignation) equal
to the lesser of (x) the amount of the Company's Investment in such Restricted
Subsidiary or (y) the Fair Market Value of such Restricted Subsidiary, on the
date of redesignation, plus (6) $5.0 million and minus (7) the Designation
Amount (measured as of the date of Designation) with respect to any Subsidiary
of the Company which has been designated an Unrestricted Subsidiary after the
date of the Indenture in accordance with Section 4.18 hereof.
The foregoing provisions shall not prohibit:
(i) the payment of any dividend or distribution on
Equity Interests within 60 days after the date of declaration of such dividend
or distribution if at the date of such declaration such payment would comply
with the provisions of the Indenture; provided, however, that such dividends
shall be included in subsequent calculations of the amount of Restricted
Payments;
(ii) the purchase, redemption, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the substantially concurrent issue and sale (other
than to a Subsidiary) of, Qualified Equity Interests of the Company or a
substantially concurrent capital contribution to the Company; provided,
however, that (A) such purchase, redemption, retirement or other acquisition
shall be excluded in subsequent calculations of the amount of Restricted
Payments and (B) the net cash proceeds from such sale or capital contribution
shall be excluded in subsequent calculations under clauses (c)(2) of the
preceding paragraph;
(iii) the purchase, redemption, retirement,
defeasance or other acquisition of Subordinated Indebtedness made in exchange
for, or out of the net cash proceeds of, (x) a substantially concurrent issue
and sale (other than to a Restricted Subsidiary) of Qualified Equity Interests
of the Company; provided, however, that such purchase, redemption, retirement,
defeasance or other acquisition shall be excluded from
<PAGE> 41
35
subsequent calculations of the amount of Restricted Payments and the net cash
proceeds or value from such transaction shall be excluded from clauses (c)(2)
of the preceding paragraph or (y) Subordinated Indebtedness permitted to be
Incurred pursuant to clause (h) of the definition of Permitted Indebtedness;
provided, however, that such purchase, redemption, retirement, defeasance or
other acquisition shall be excluded in subsequent calculations of clauses
(c)(2) of the preceding paragraph;
(iv) the purchase, redemption, or other acquisition or
retirement of any shares of Equity Interests of the Company from employees of
the Company and its Subsidiaries, their heirs, executors, and administrators,
pursuant to any management equity subscription agreement, stock option
agreement or shareholders agreement upon the retirement or termination of
employment with the Company of such employees; provided, however, that the
aggregate amount of such purchases, redemptions, acquisitions and retirements
made after the date of the Indenture shall not exceed $4.0 million and
provided, further, that such purchase, redemption, acquisition or retirement
shall be included in subsequent calculations of the amount of Restricted
Payments;
(v) the repurchase, redemption, defeasance, retirement,
refinancing or acquisition for value or payment of principal of Subordinated
Indebtedness at a purchase price not greater than 101% of the principal amount
of such Subordinated Indebtedness in the event of a Change of Control pursuant
to a provision similar to the "Offer to Purchase upon Change of Control"
provisions above; provided, however, that prior to any such repurchase, the
Company has made a Change of Control Offer as provided in "Offer to Purchase
upon Change of Control" above with respect to the Notes and has repurchased all
Notes validly tendered for payment in connection with such Change of Control
Offer; provided, further, that any such repurchase, redemption, defeasance,
retirement, refinancing or acquisition shall be excluded in subsequent
calculations of the amount of Restricted Payments;
(vi) the purchase, redemption, retirement or other
acquisition of any Disqualified Equity Interests of the Company in exchange
for, or out of the net cash proceeds of a substantially concurrent issue and
sale (other than to a Subsidiary) of Disqualified Equity Interests of the
Company with substantially similar terms (or terms more favorable to the
Company); provided, however, that (A) such purchase, redemption, retirement or
other acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments and (B) the net cash proceeds from such sale or capital
contribution shall be excluded in subsequent calculations under clauses (c)(2)
of the preceding paragraph;
(vii) the use of life insurance proceeds by the Company to
purchase the Equity Interests of Johnnie Lou LaRoche upon her death; provided,
however, that such purchase shall be excluded in subsequent calculations of the
amount of Restricted Payments to the extent of the life insurance proceeds used
for such purpose; and
(viii) in any given year, Restricted Payments by the Company
that in the aggregate do not exceed $2.0 million; provided, however, that such
Restricted Payments will be included in subsequent calculations of the amount
of Restricted Payments; provided, however, that in the case of each of clauses
(ii) through (viii) no Default or Event of Default shall have occurred and be
continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible
under this covenant, the amount of any non-cash Restricted Payment shall be
deemed to be equal to the Fair Market Value thereof at the date of making such
Restricted Payment.
In computing Consolidated Net Income for purposes of this
Section 4.7, (i) the
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Company shall use audited financial statements for the portion of the relevant
period for which audited financial statements are available on the date of
determination and unaudited financial statements and other current financial
data based on the books and records of the Company for the remaining portion of
such period and (ii) the Company shall be permitted to rely in good faith on
the financial statements and other financial data derived from the books and
records of the Company that are available on the date of determination. If the
Company makes a Restricted Payment which, at the time of the making of such
Restricted Payment, would on the good faith determination of the Company be
permitted under the requirements of this Indenture, such Restricted Payment
shall be deemed to have been made in compliance with this Indenture
notwithstanding any subsequent adjustments made in good faith to the Company's
financial statements affecting Consolidated Net Income of the Company for any
period.
Section 4.8. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective (other than by application of law) any
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions to the Company or any other
Restricted Subsidiary on its Equity Interests or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (b) make
loans or advances to, or guarantee any Indebtedness or other obligations of, or
make any Investment in, the Company or any other Restricted Subsidiary or (c)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) the Credit Facility, or any other agreement of the Company or the
Restricted Subsidiaries outstanding on the date of this Indenture, in each case
as in effect on the date hereof, and any amendments, restatements, renewals,
replacements or refinancings thereof; provided, however, that any such
amendment, abatement, renewal, replacement or refinancing is no more
restrictive in the aggregate with respect to such encumbrances or restrictions
than those contained in the agreement being amended, restated, reviewed,
replaced or refinanced; (ii) applicable law; (iii) any instrument governing
Indebtedness or Equity Interests of an Acquired Person acquired by the Company
or any Restricted Subsidiary as in effect at the time of such acquisition
(except, in the case of Indebtedness, to the extent such Indebtedness was
Incurred by such Acquired Person in connection with, as a result of or in
contemplation of such acquisition); provided, however, that such encumbrances
and restrictions are not applicable to the Company or any Restricted
Subsidiary, or the properties or assets of the Company or any Restricted
Subsidiary other than the Acquired Person and, in the case of Indebtedness,
such Indebtedness was permitted by the terms of this Indenture to be incurred;
(iv) customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices; (v) Purchase Money
Indebtedness for property acquired in the ordinary course of business that only
imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Restricted Subsidiary; provided, however, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Restricted Subsidiary or assets, as applicable, and any such sale or
disposition is made in compliance with Section 4.10 below to the extent
applicable thereto; (vii) refinancing Indebtedness permitted under Section
4.9(h) hereof; provided, however, that such encumbrances and restrictions
contained in the agreements governing such Indebtedness are no more restrictive
in the aggregate than those contained in the agreements governing the
Indebtedness being refinanced immediately prior to such refinancing; or (viii)
this Indenture and the Notes.
Section 4.9. Limitation on Indebtedness.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary
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37
to, directly or indirectly, Incur any Indebtedness (including Acquired
Indebtedness), except for Permitted Indebtedness; provided, however, that the
Company and any Guarantor may Incur Indebtedness (including Acquired
Indebtedness) if, at the time of and immediately after giving pro forma effect
to such incurrence of Indebtedness and the application of the proceeds
therefrom, the Consolidated Fixed Charge Coverage Ratio for the Company for the
four full fiscal quarters immediately preceding the Incurrence of such
Indebtedness taken as one period would be greater than 2.0 to 1.0.
The foregoing limitations will not apply to the Incurrence of any of
the following (collectively, "Permitted Indebtedness"):
(a) Indebtedness of the Company under the Credit Facility in
a maximum principal amount at any one time outstanding not to exceed
(i) $35.0 million under the term loan facility provided therein and
(ii) an amount equal to the Calculated Amount under the revolving
credit facility provided therein;
(b) Indebtedness of the Company pursuant to the Notes;
(c) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date of the Indenture;
(d) Indebtedness of the Company owing to a Restricted
Subsidiary, provided that any Indebtedness of the Company owing to a
Restricted Subsidiary is made pursuant to an intercompany note (the
outstanding principal balance of which may be evidenced by the
Company's accounting records) and is subordinated in right of payment
from and after such time as the Notes shall become due and payable
(whether at Stated Maturity, acceleration or otherwise) to the payment
and performance of the Company's obligations under the Notes and any
Senior Indebtedness; provided further, that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a pledge
made in accordance with the provisions of the Indenture described in
Section 4.12 hereof or a disposition, pledge or transfer to a Wholly
Owned Restricted Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by the obligor not permitted by this clause (d);
(e) Indebtedness of a Wholly Owned Restricted Subsidiary
owing to the Company or to another Wholly Owned Restricted Subsidiary
and Indebtedness of a Restricted Subsidiary owing to the Company or to
a Wholly Owned Restricted Subsidiary, in each case that is a Permitted
Investment; provided that any such Indebtedness is made pursuant to an
intercompany note; provided, further, that (i) any disposition, pledge
or transfer of any such Indebtedness to a Person (other than a pledge
made in accordance with the provisions of Section 4.12 hereof or a
disposition, pledge or transfer to the Company or a Wholly Owned
Restricted Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (e), and (ii)
any transaction pursuant to which any Wholly Owned Restricted
Subsidiary, which has Indebtedness owing to the Company or any other
Wholly Owned Restricted Subsidiary, ceases to be a Wholly Owned
Restricted Subsidiary shall be deemed to be the incurrence of
Indebtedness by such formerly Wholly Owned Restricted Subsidiary that
is not permitted by this clause (e) (except to the extent such Person
remains a Restricted Subsidiary and such Indebtedness constitutes a
Permitted Investment);
(f) guarantees of any Restricted Subsidiary so long as the
Company complies with the provisions of Section 4.14 hereof;
(g) obligations of the Company or any Wholly Owned Restricted
Subsidiary in respect of Hedging Obligations, provided that in the
case of Interest Rate Agreements, the notional amount thereof is less
than or approximately equal to an amount of
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Indebtedness outstanding or reasonably expected by the Company to be
outstanding during the term of such Interest Rate Agreement and as to other
Hedging Obligations, the underlying risk arises in the ordinary course of
business of the Company or such Restricted Subsidiary and such hedging contract
bears a reasonable relationship to the Company's or such Restricted
Subsidiary's obligations (or requirements);
(h) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
Indebtedness Incurred in compliance with the Consolidated Fixed Charge Coverage
Ratio of the first paragraph of this covenant or any Indebtedness described in
clauses (b), (c), (i) and (j) of this definition of "Permitted Indebtedness,"
including any successive refinancings so long as the aggregate principal amount
of Indebtedness represented thereby is not increased by such refinancing plus
the lesser of (i) the stated amount of any premium or other payment required to
be paid in connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (ii) the amount of premium or other payment
actually paid at such time to refinance the Indebtedness, plus, in either case,
the amount of expenses of the Company incurred in connection with such
refinancing and, in the case of Senior Subordinated Indebtedness or
Subordinated Indebtedness, such refinancing does not reduce the Average Life to
Stated Maturity or the Stated Maturity of such Indebtedness;
(i) Indebtedness (including Acquired Indebtedness) Incurred to
pay, and in a principal amount not in excess of, the Phase Two Purchase Price
(which Indebtedness may be Incurred under the Credit Facility, in addition to
the Indebtedness permitted by clause (a) or otherwise);
(j) Indebtedness of the Company or a Restricted Subsidiary under
its agreement, as in effect on the date of its original execution, to reimburse
Rhone-Poulenc Chimie S.A. for the Company's proportionate share of amounts paid
by Rhone-Poulenc Chimie S.A. to UFB Locabail under a guarantee of equipment
lease obligations of CEVCO, the provider of electric energy to ChlorAlp S.A.S.,
in respect of three steam turbines leased by CEVCO, and Capital Lease
Obligations of the Company or any of its Restricted Subsidiaries Incurred in
connection with such equipment lease obligations of CEVCO;
(k) Indebtedness Incurred by Foreign Restricted Subsidiaries that
in the aggregate does not exceed $30.0 million at any time outstanding;
provided, however, that at the time of and immediately after giving pro forma
effect to such Incurrence of Indebtedness and the application of the proceeds
therefrom, the Consolidated Fixed Charge Coverage Ratio for the Company for the
four full fiscal quarters immediately preceding the Incurrence of such
Indebtedness taken as one period would be greater than 2.0 to 1.0; and
(l) Indebtedness of the Company in addition to that described in
clauses (a) through (k) above, and any renewals, extensions, substitutions,
refinancings or replacements of such Indebtedness, so long as the aggregate
principal amount of all such Indebtedness at any time outstanding shall not
exceed $15.0 million (which Indebtedness may be Incurred under the Credit
Facility or otherwise);
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Section 4.10. Disposition of Proceeds of Asset Sales.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless
(i) the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) at least 75% of such
consideration consists of cash or Cash Equivalents. The amount of any
Indebtedness (other than any Subordinated Indebtedness) of the Company or any
Restricted Subsidiary that is actually assumed by the transferee in such Asset
Sale and from which the Company and the Restricted Subsidiaries are fully and
unconditionally released shall be deemed to be cash for purposes of determining
the percentage of cash consideration received by the Company or the Restricted
Subsidiaries.
The Company or such Restricted Subsidiary, as the case may
be, may (i) apply the Net Cash Proceeds of any Asset Sale within 360 days of
receipt thereof to repay Senior Indebtedness and permanently reduce any related
commitment, or (ii) make an Investment in properties and capital assets that
will be used in the business of the Company and its Restricted Subsidiaries
existing on the date of the Indenture or in businesses reasonably related
thereto (as determined in good faith by the Company's Board of Directors). The
Company shall be deemed to have made an Investment under clause (ii) within 360
days so long as (A) it has signed a written commitment within 360 days of any
Asset Sale to undertake such an Investment and (B) the Company makes such
Investment within two years after the Asset Sale.
To the extent all or part of the Net Cash Proceeds of any
Asset Sale are not applied within 360 days of such Asset Sale as described in
clause (i) or (ii) of the immediately preceding paragraph (such Net Cash
Proceeds not so applied, the "Excess Proceeds"), the Company shall, within 45
days after such 360th day, make an Asset Sale Offer for all outstanding Notes
and other Senior Subordinated Indebtedness, pro rata up to a maximum principal
amount (expressed as a multiple of $1,000) of Notes and other Senior
Subordinated Indebtedness equal to such Excess Proceeds, at a purchase price in
cash equal to 100% of the principal amount thereof (or the accreted value of
such other Senior Subordinated Indebtedness, if such other Senior Subordinated
Indebtedness is issued at a discount), plus accrued and unpaid interest
thereon, if any, to the Purchase Date; provided, however, that the Asset Sale
Offer may be deferred until there are aggregate Excess Proceeds equal to or in
excess of $10.0 million, at which time the entire amount of such Excess
Proceeds, and not just the amount in excess of $10.0 million, shall be applied
as required pursuant to this paragraph. Upon completion of such Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
With respect to any Asset Sale Offer effected pursuant to
this covenant, among the Notes, to the extent the aggregate principal amount of
Notes and other Senior Subordinated Indebtedness tendered pursuant to such
Asset Sale Offer exceeds the Excess Proceeds to be applied to the repurchase
thereof, such Notes and other Senior Subordinated Indebtedness shall be
purchased pro rata based on the aggregate principal amount of such Notes and
other Senior Subordinated Indebtedness tendered (or the accreted value of such
other Senior Subordinated Indebtedness, if such other Senior Subordinated
Indebtedness is issued at a discount) by each holder of Notes and such other
Senior Subordinated Indebtedness. To the extent the Excess Proceeds exceed the
aggregate amount of Notes and other Senior Subordinated Indebtedness tendered
pursuant to such Asset Sale Offer, the Company may retain and utilize any
portion of the Excess Proceeds not applied to repurchase the Notes and other
Senior Subordinated Indebtedness for any purpose consistent with the other
terms of this Indenture.
In the event that the Company makes an Asset Sale Offer for
the Notes and other Senior Subordinated Indebtedness, the Company shall comply
with any applicable securities
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laws and regulations, and any violation of the provisions of this Indenture
relating to such Asset Sale Offer occurring as a result of such compliance
shall not be deemed an Event of Default or an event that with the passing of
time or giving or notice, or both, would constitute an Event of Default.
Each Holder shall be entitled to tender all or any portion of
the Notes owned by such Holder pursuant to the Asset Sale Offer, subject to the
requirement that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among
tendering Holders and holders of other Senior Subordinated Indebtedness as
described above.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not cause or permit any
Subsidiary to, directly or indirectly, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of any of its Affiliates or any officer, director or employee of the
Company or any Subsidiary (each an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms which are no less favorable to the Company or
such Subsidiary, as the case may be, than would be available in a comparable
transition with an unaffiliated third party and (ii) (A) if such Affiliate
Transaction (or series of related Affiliate Transactions) involves aggregate
payments or the transfer of other consideration between the Company and an
Affiliate of the Company having a Fair Market Value in excess of $1.0 million,
other than sales or purchases of goods and services in the ordinary course of
business at prices and on terms at least as favorable to the Company as then
prevailing in the market, such Affiliate Transaction is in writing and the
Company delivers an Officers' Certificate to the Trustee certifying that such
Affiliate Transaction (or series of Affiliate Transactions) complies with the
foregoing provisions, or (B) if such Affiliate Transaction (or series of
related Affiliate Transactions) involves aggregate payments or the transfer of
other consideration between the Company and an Affiliate of the Company having
a Fair Market Value in excess of $3.0 million, other than sales or purchases of
goods and services in the ordinary course of business at prices and on terms at
least as favorable to the Company as then prevailing in the market, such
Affiliate Transaction is in writing and a majority of the disinterested members
of the Board of Directors of the Company shall have approved such Affiliate
Transaction and determined that such Affiliate Transaction complies with the
foregoing provisions. In addition, any Affiliate Transaction involving
aggregate payments or the transfer of other consideration between the Company
and an Affiliate of the Company having a Fair Market Value in excess of $10.0
million, other than sales or purchases of goods and services in the ordinary
course of business at prices and on terms at least as favorable to the Company
as then previously in the market, will also require a written opinion from an
Independent Financial Advisor (filed with the Trustee) stating that the terms
of such Affiliate Transaction are fair from a financial point of view, to the
Company or the Restricted Subsidiary involved in such Affiliate Transaction, as
the case may be.
Notwithstanding the foregoing, the restrictions set forth in
this covenant shall not apply to (i) transactions with or among the Company and
any Wholly Owned Restricted Subsidiary or between or among Wholly Owned
Restricted Subsidiaries; (ii) any transaction with an officer, director of the
Company entered into in the ordinary course of business and consistent with
past practice (including compensation or employee benefit arrangements with any
officer, director or employee of the Company), (iii) transactions pursuant to
agreements in existence on the date of this Indenture and renewals and
replacements thereof on substantially similar terms (or on terms more favorable
to the Company), (iv) indemnification payments made to officers, directors and
employees of the Company or any Subsidiary pursuant to charter, bylaw,
statutory or contractual provisions or (v) transactions otherwise permitted by
this Indenture.
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Section 4.12. Limitation on Liens.
The Company shall not and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, Incur any Liens of any kind
against or upon any of their respective properties or assets now owned or
hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made to secure the Notes and all other amounts due under
this Indenture and any other class of Senior Subordinated Indebtedness equally
and ratably with such Indebtedness (or, in the event that such Indebtedness is
subordinated in right of payment to the Notes prior to such Indebtedness) with
a Lien on the same properties and assets securing such Indebtedness for so long
as such Indebtedness is secured by such Lien, except for (i) Liens securing
Senior Indebtedness (including, without limitation, Indebtedness incurred under
the Credit Facility) which is permitted to be incurred under the covenant
described in Section 4.9 hereof (provided that Indebtedness under the Credit
Facility shall be deemed not to have been incurred in violation of such
covenant for purposes of this clause (i) if the holders of such Indebtedness or
their agent or representative shall have received a representation from the
Company to the effect that such Indebtedness does not violate such covenant)
and (ii) Permitted Liens.
Section 4.13. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each
Holder of the Notes will have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount of the Notes plus accrued and unpaid interest, if any, thereon to the
date of purchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company shall mail a notice to each Holder stating:
(1) a description of the transaction or transactions that constitute the Change
of Control; (2) that the Change of Control Offer is being made pursuant to this
Section 4.13 and that all Notes tendered shall be accepted for payment; (3) the
purchase price and the purchase date described below (the "Change of Control
Payment Date"); (4) that any Note not tendered shall continue to accrue
interest, if any; (5) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest, if any, after the
Change of Control Payment Date; (6) that Holders electing to have any Notes
purchased pursuant to a Change of Control Offer shall be required to surrender
the Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (7) that Holders shall be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Notes
purchased; and (8) that Holders whose Notes are being purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company will comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
(b) On a Business Day that is no earlier than 30 days
nor later than 60 days from the date that the Company mails or causes to be
mailed notice of the Change of
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Control to the Holders (the "Change of Control Payment Date"), the Company
shall, to the extent lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent an amount equal to the Change of Control Payment in
respect of all the Notes or portions thereof so tendered and (iii) deliver or
cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of such Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to each Holder of the Notes so tendered the Change of Control
Payment for such Notes, and the Trustee shall promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
provided that each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof. The Company shall publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(c) The Company will not be required to make a Change of
Control Offer if a third party makes the Change of Control Offer in the manner,
at the times and otherwise in compliance with the requirements set forth in
this Section 4.13 applicable to a Change of Control Offer made by the Company
and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Section 4.14. Future Guarantors.
After the date hereof, the Company shall cause each Domestic
Restricted Subsidiary which Incurs Indebtedness (including guarantees of
Indebtedness Incurred pursuant to Section 4.9 hereof) to execute and deliver to
the Trustee a supplemental indenture evidencing such Guarantee, pursuant to
which such Domestic Restricted Subsidiary will guarantee payment of the Notes
subject to prior payments of Senior Indebtedness as provided herein. Each
Guarantee will be limited in amount to an amount not to exceed the maximum
amount that can be Guaranteed without rendering the Guarantee, as it relates to
such Guarantor, voidable under applicable law relating to fraudulent conveyance
or fraudulent transfer or similar laws affecting the rights of creditors
generally. Such Guarantee may be substantially in the form of Exhibit D hereto
or in such other form as may be reasonably satisfactory to the Trustee and the
Company.
Section 4.15. Corporate Existence.
Subject to Article 5 hereof, the Company and the Subsidiaries
shall do or cause to be done all things necessary to preserve and keep in full
force and effect (i) its corporate existence, and the corporate, partnership or
other existence of each of the Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any such Subsidiary and (ii) the rights (charter, partnership
agreement and statutory), licenses and franchises of the Company and the
Subsidiaries; provided, however, that the Company and the Subsidiaries shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of the Subsidiaries, if the
Board of Directors of the relevant Person shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and the Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders of the Notes.
Section 4.16. Limitation on Layering.
Notwithstanding the provisions of Section 4.9 hereof, the
Company shall not, directly or indirectly, Incur any Indebtedness that by its
terms would expressly rank senior in right of payment to the Notes and
subordinate in right of payment to any other Indebtedness of the Company.
Section 4.17. Business Activities.
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The Company and its Restricted Subsidiaries shall not engage,
to any material extent, in any businesses which are not the same, similar,
related or ancillary to the businesses in which the Company and its Restricted
Subsidiaries are engaged on the date hereof.
Section 4.18. Designation of Unrestricted Subsidiaries
The Company may designate after the date hereof any
Subsidiary of the Company as an "Unrestricted Subsidiary" under this Indenture
(a "Designation") only if:
(i) no Default or Event of Default shall have
occurred and be continuing at the time of or after giving effect to
such Designation;
(ii) at the time of and after giving effect to
such Designation, the Company could Incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the
Consolidated Fixed Charge Coverage Ratio in Section 4.9 hereof;
(iii) the Company would be permitted to make an
Investment (other than a Permitted Investment) at the time of
Designation (assuming the effectiveness of such Designation) pursuant
to Section 4.7 hereof in an amount (the "Designation Amount") equal to
the amount of the Company's Investment in such Subsidiary on such
date; and
(iv) such Subsidiary does not own any Equity
Interest or Indebtedness of, or hold a Lien on any of the property of,
the Company or any other Subsidiary of the Company.
Neither the Company nor any Restricted Subsidiary (and any
Unrestricted Subsidiary shall immediately be deemed to be a Restricted
Subsidiary (and the related Liens and Indebtedness thereof shall thereupon be
deemed to be Incurred) if the Company or any Restricted Subsidiary) shall at
any time (x) provide credit support for, subject any of its property or assets
(other than the Equity Interests of any Unrestricted Subsidiary) to the
satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the
occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary, except for any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the capital stock of any
Unrestricted Subsidiary. For purposes of the foregoing, the Designation of a
Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to
include the Designation of all of the Subsidiaries of such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) no Default or Event of Default shall have occurred
and be continuing at the time of and after giving effect to such
Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation would, if
Incurred at such time, have been permitted to be incurred for all
purposes of the Indenture.
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All Designations and Revocations must be evidenced by
resolutions of the Board of Directors of the Company, delivered to the Trustee
certifying compliance with the foregoing provisions.
Section 4.19. Limitation on the Sale or Issuance of Equity
Interests of Restricted Subsidiaries.
The Company shall not sell any Equity Interest of a
Restricted Subsidiary, and shall not cause or permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any Equity Interests, except: (i) to
the Company or a Wholly Owned Restricted Subsidiary; or (ii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
continue to be a Restricted Subsidiary. Notwithstanding the foregoing, the
Company is permitted to sell all the Equity Interest of a Restricted Subsidiary
as long as the Company is in compliance with the terms of Section 4.10 hereof
and, if applicable, Section 5.1 hereof.
ARTICLE 5
SUCCESSORS
Section 5.1. Merger, Consolidation, or Sale of Substantially
All Assets.
The Company shall not consolidate with or merge with or into
(whether or not the Company is the Surviving Person) any other entity and the
Company shall not and shall not cause or permit any Restricted Subsidiary to,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Company's and the Restricted Subsidiaries' properties
and assets (determined on a consolidated basis for the Company and the
Restricted Subsidiaries) to any entity in a single transaction or series of
related transactions, unless: (i) either (x) the Company shall be the Surviving
Person or (y) the Surviving Person (if other than the Company) shall be a
Person organized and validly existing under the laws of the United States of
America or any State thereof or the District of Columbia and shall expressly
assume by a supplemental indenture, the due and punctual payment of the
principal of, premium, if any, and interest on all the Notes and the
performance and observance of every covenant of this Indenture and the
Registration Rights Agreement to be performed or observed on the part of the
Company; (ii) immediately before and after giving effect to the transaction or
series of transactions, no Default or Event of Default shall have occurred and
be continuing; and (iii) immediately after giving effect to any such
transaction or series of transactions involving the incurrence by the Company
or any Restricted Subsidiary, directly or indirectly, of additional
Indebtedness (and treating any Indebtedness not previously an obligation of the
Company or any Restricted Subsidiary in connection with or as a result of such
transaction as having been incurred at the time of such transaction), the
Surviving Person (A) shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Company immediately prior to such
transaction and (B) could incur, on a pro forma basis after giving effect to
such transaction as if it had occurred at the beginning of the four quarter
period immediately preceding such transaction for which consolidated financial
statements of the Company are available, at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the Consolidated Fixed
Charge Coverage Ratio of the first paragraph in Section 4.9 hereof.
Notwithstanding the foregoing clause (iii) of the immediately preceding
sentence, any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its property and assets to the Company and any Wholly
Owned Restricted Subsidiary may consolidate with, merge into or transfer all or
part of its property and assets to another Wholly Owned Restricted Subsidiary.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interest of which constitutes all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of
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the Company.
Section 5.2. Successor Person Substituted.
(a) In the event of any transaction (other than a lease)
described in and complying with the conditions listed in Section 5.1 hereof in
which the Company is not the Surviving Person and the Surviving Person is to
assume all the Obligations of the Company under the Notes, the Indenture and
the Registration Rights Agreement, pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company, and the Company shall be discharged from
its Obligations under the Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
The occurrence of any of the following will be defined as an
"Event of Default" under the Indenture:
(a) failure to pay principal of (or premium, if any, on) any
Note when due (whether or not prohibited by the provisions of Article
10 hereof);
(b) failure to pay any interest on any Note when due,
continued for 30 days or more (whether or not prohibited by Article 10
hereof);
(c) default in the payment of principal of or interest on any
Note required to be purchased pursuant to any Asset Sale Offer or
Change of Control Offer required by this Indenture when due and
payable or failure to pay on the Purchase Date the Offer Amount for
any Note validly tendered pursuant to any Asset Sale Offer required by
this Indenture (whether or not prohibited by Article 10 hereof);
(d) failure to perform or comply with any covenant, condition
or agreement pursuant to Article 5 hereof;
(e) failure to perform or comply with any other covenant,
warranty or agreement of the Company hereunder or in the Notes or of
any future Guarantor hereunder or in any future Guarantee and the
Default continues for the period and after the notice specified below;
(f) default or defaults under the terms of one or more
instruments evidencing or securing Indebtedness of the Company or any
of its Restricted Subsidiaries having an outstanding principal amount
of $5.0 million or more individually or in the aggregate that has
resulted in the acceleration of the payment of such Indebtedness or
failure by the Company or any of its Restricted Subsidiaries to pay
principal, premium, if any, or interest when due at the stated
maturity of any such Indebtedness and such default or defaults shall
have continued after any applicable grace period;
(g) the rendering of a final judgment or judgments (not
subject to appeal) against the Company or any of its Restricted
Subsidiaries in an amount of $5.0 million or more (net of any amounts
covered by reputable and creditworthy insurance companies) which
remains undischarged or unstayed for a period of 60 days after the
date on which the right to appeal has expired;
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(h) the Company or any Restricted Subsidiary:
(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) consents to the appointment of a Custodian
of it or for all or substantially all of its property or
(iv) makes a general assignment for the benefit
of its creditors; or
(i) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company
or any Restricted Subsidiary in an involuntary case or proceeding,
(ii) appoints a Custodian of the
Company or any Restricted Subsidiary or for all or substantially all
of the property of the Company or any Restricted Subsidiary, or
(iii) orders the liquidation of the
Company or any Restricted Subsidiary, and in each case the order or
decree remains unstayed and in effect for 60 consecutive days.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
A Default under clause (e) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal
amount of the then outstanding Notes notify the Company and the Trustee, of the
Default and the Company does not cure the Default within 30 consecutive days
after receipt of the notice. Each notice must specify the Default, demand that
it be remedied and state that the notice is a "Notice of Default."
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Section 6.2. Acceleration.
If an Event of Default with respect to the Notes (other than
an Event of Default with respect to the Company described in Sections 6.1(h)
and (i) hereof) occurs and is continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Notes, by notice in
writing to the Company, may declare the unpaid principal of (and premium, if
any) and accrued interest to the date of acceleration on all the outstanding
Notes to be due and payable immediately and, upon any such declaration, such
principal amount (and premium, if any) and accrued interest, notwithstanding
anything contained in this Indenture or the Notes to the contrary, will become
immediately due and payable upon receipt by the Company of such notice. If an
Event of Default specified in Sections 6.1(h) and (i) hereof with respect to
the Company occurs under this Indenture, the Notes will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of the Notes. If payment of the Notes is accelerated
because of an Event of Default, the Company or the Trustee shall notify the
holders of Senior Indebtedness of such acceleration. Upon such declaration the
principal and interest shall be due and payable immediately; provided, however,
that so long as any Senior Indebtedness or any commitment therefor is
outstanding, any such notice or declaration shall not become effective until
the earlier of (a) five Business Days after such notice is delivered to the
representative for the Designated Senior Indebtedness or (b) the acceleration
of any Designated Senior Indebtedness and thereafter, payments on the Notes
pursuant to this Article 6 shall be made only to the extent permitted pursuant
to Article 10 hereof.
After a declaration of acceleration under this Indenture, but
before a judgment or decree for payment of principal, premium, if any, and
interest on the Notes due under this Article 6 has been obtained by the
Trustee, Holders of a majority in principal amount of the then outstanding
Notes by written notice to the Company and the Trustee may rescind an
acceleration and its consequences if (i) the Company has paid or deposited with
the Trustee a sum sufficient to pay (a) all sums paid or advanced by the
Trustee under this Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and (b) all
overdue interest on the Notes, if any, (ii) the rescission would not conflict
with any judgment or decree of a court of competent jurisdiction and (iii) all
existing Events of Default (except nonpayment of principal, premium, if any, or
interest that has become due solely because of the acceleration) have been
cured or waived.
Section 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium,
if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.4. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal
amount of the Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of principal of, premium and liquidated damages, if
<PAGE> 54
48
any, or interest on, the Notes (including in connection with an offer to
purchase) (provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Notes may rescind an acceleration and
its consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.5. Control by Majority.
Holders of a majority in aggregate principal amount of the
then outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability it being understood that (subject to
Section 7.1) the Trustee shall have no duty to ascertain whether or not such
actions or forebearances are unduly prejudicial to such holders.
Section 6.6. Limitation on Suits.
A Holder of a Note may institute any proceeding with respect
to this Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% of the aggregate
principal amount of the then outstanding Notes make a written request
to the Trustee to institute such proceeding as the Trustee;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to the Trustee reasonable indemnity against any
loss, liability or expense;
(d) the Trustee fails to institute such proceeding
within 60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and
(e) during such 60-day period the Holders of a majority
in aggregate principal amount of the then outstanding Notes do not
give the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice
the rights of another Holder of a Note or to obtain a preference or priority
over another Holder of a Note.
Section 6.7. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium, if any,
and interest on the Note, on or after the respective due dates expressed in the
Note (including in connection with an offer to purchase), or to bring suit for
the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
Section 6.8. Collection Suit by Trustee.
<PAGE> 55
49
If an Event of Default specified in Section 6.1(a) or (b)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium, if any, and interest remaining unpaid on
the Notes and interest on overdue principal and, to the extent lawful, interest
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
Section 6.9. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents and to take any other action as it may deem 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 the Holders of the Notes allowed in any
judicial proceedings relative to the Company, its Subsidiaries or their
respective creditors or property and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims 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 to the Trustee any amount due to 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 7.7 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 7.7 hereof out of the
estate in any such proceeding, shall be denied for any reason, payment of the
same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing hereof
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding provided, however, that the Trustee may, on
behalf of the Holders, vote for the election of a trustee in bankruptcy or
similar official and may be a member of the creditors' committee.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall, subject to the provisions of Article 10, pay out the money in the
following order:
First: to the Trustee, its agents and attorneys for amounts
due under Sections 6.8 and 7.7 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Senior Indebtedness to the extent required by
Article 10;
Third: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and accrued interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal, premium, if any, and accrued interest, as the case may
be, respectively; and
Fourth: to the Company or to such party as a court of
competent jurisdiction shall direct.
<PAGE> 56
50
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.7 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, 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 such person's own affairs.
(b) Except during the continuance of an Event of
Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; 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 any notices,
requests, statements, certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(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 6.5 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), and (c) of this
<PAGE> 57
51
Section.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers under
this Indenture at the request of any Holders, unless such Holder shall have
furnished to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
Section 7.2. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. 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 from
liability in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
(other than any agent who is an employee of the Trustee) appointed with due
care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or
within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have furnished to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) Except with respect to Sections 4.1 and 4.4 hereof,
the Trustee shall have no duty to inquire as to the performance of the
Company's covenants in Article 4 hereof. In addition, the Trustee shall not be
deemed to have knowledge of any Default or Event of Default except (i) any
Event of Default occurring pursuant to Sections 4.1, 4.4 and 6.1(a) or (b)
hereof or (ii) any Default or Event of Default of which the Trustee shall have
received written notification. For purposes of determining the Trustee's
responsibility hereunder, whenever reference is made in this Indenture to a
Default or Event of Default, such reference shall be construed to refer only to
a Default or Event of Default of which the Trustee is deemed to have notice
pursuant to this Section 7.2(g).
(h) The Trustee shall not be required to give any bond
or surety in respect of the
<PAGE> 58
performance of its powers and duties hereunder.
(i) the Trustee shall not be bound to ascertain or
inquire as to the performance or observance of any covenants, conditions, or
agreements on the part of the Company, except as otherwise set forth herein,
but the Trustee may require of the Company full information and advice as to
the performance of the covenants, conditions and agreements contained hereof
and shall be entitled in connection herewith to examine the books, records and
premises of the Company.
(j) The permissive rights of the Trustee to perform the
acts enumerated in this Indenture shall not be construed as a duty and the
Trustee shall not be answerable for other than its gross negligence or willful
misconduct.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may otherwise deal with the Company or
its Affiliates with the same rights it would have if it were not Trustee.
However, in the event that the Trustee acquires any conflicting interest (as
defined in the TIA) it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as trustee or resign. Any Agent may
do the same with like rights and duties. The Trustee is also subject to
Sections 7.10 and 7.11 hereof.
Section 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital hereof or in any
certificate delivered pursuant hereto or any statement in the Notes or any
other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.5. Notice of Defaults.
The Trustee shall, within 30 days after the occurrence of any
Default or Event of Default with respect to the Notes outstanding, give the
Holders of the Notes notice of all uncured Defaults or Events of Default known
to it; provided, however, that, except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on, any Note
or a Default or Event of Default in complying with Section 5.1 hereof, the
Trustee may withhold the notice if and so long as a committee of its trust
officers in good faith determines that withholding such notice is in the
interests of the Holders of the Notes.
Section 7.6. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b)(2) and transmit by mail all reports as
required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the Commission
and each stock exchange on which the
<PAGE> 59
53
Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly
notify the Trustee when the Notes are listed on any stock exchange.
Section 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder, including, without limitation, extraordinary services such as
default administration. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon demand for all reasonable disbursements, advances
and expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the
Company (including this Section 7.7) and investigating or defending itself
against any claim (whether asserted by the Company or any Holder or any other
person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its gross negligence or bad faith. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(h) or (i) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
Section 7.8. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10
hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent
or an order for relief is
<PAGE> 60
54
entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7
hereof shall continue for the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50.0 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
Section 7.11. Preferential Collection of Claims Against
Company.
The Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated
therein.
<PAGE> 61
55
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. Option to Effect Legal Defeasance or Covenant
Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
Section 8.2. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.2, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.5 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due from the trust
fund described in Section 8.4 hereof, and as more fully set forth in such
Section, (b) the Company's obligations with respect to such Notes under Article
2 and Section 4.2 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in connection therewith
and (d) this Article 8. Subject to compliance with this Article 8, the Company
may exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 hereof.
Section 8.3. Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.3, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be released from
its obligations under the covenants contained in Sections 4.7, 4.8, 4.9, 4.10,
4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18 and 4.19 hereof and in clause (iii) of
Section 5.1 hereof (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any compliance
certificate, direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
hereof to any such covenant or by reason of any reference in any such covenant
to any other provision hereof or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.1
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.1 hereof of the option applicable to this Section 8.3 hereof,
subject to the satisfaction of the conditions set forth in Section 8.4 hereof,
<PAGE> 62
56
Sections 6.1(d) (but only with respect to the Company's failure to observe or
perform the covenants, conditions and agreements of the Company under clause
(iv) of Section 5.1), 6.1(e), 6.1(f) and 6.1(g) hereof shall not constitute
Events of Default.
Section 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Notes, cash in United States
dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Section 6.1(h) or 6.1(i) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Notes over the other creditors of the Company,
or with the intent of defeating, hindering, delaying or defrauding creditors of
the Company or others; and
<PAGE> 63
57
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.5. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.5, the "Trustee") pursuant to Section 8.4 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.4 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.6. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
Section 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.2 or 8.3 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the obligations of the Company under this Indenture and
the Notes shall be revived and reinstated as though no deposit had occurred
<PAGE> 64
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pursuant to Section 8.2 or 8.3 hereof, as the case may be; provided, however,
that if the Company makes any payment of principal of, premium, if any, or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1. Without Consent of Holders of Notes.
Notwithstanding Section 9.2 of this Indenture, the Company, and
the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided, however, that the uncertificated
Notes are issued in registered form for purposes of section 163(f) of
the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code);
(c) to provide for the assumption of the Company's obligations
to the Holders of the Notes in the case of a merger or consolidation
pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights
or benefits to the Holders of the Notes or that does not adversely
affect the legal rights hereunder of any Holder of the Notes;
(e) to secure the Notes; or
(f) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
the Board of Directors of the Company, authorizing the execution of any such
amended or supplemental indenture, and upon receipt by the Trustee of the
documents described in Section 7.2 hereof, the Trustee shall join with the
Company in the execution of any amended or supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
Section 9.2. With Consent of Holders of Notes.
Except as provided below in this Section 9.2, the Company and
the Trustee may amend or supplement this Indenture and the Notes, and, subject
to Sections 6.4 and 6.7 hereof, any past Default or Event of Default (other than
a Default or Event of Default in the payment of the principal of, premium, if
any, or interest on the Notes, or a default arising from failure to purchase any
Notes tendered pursuant to an Asset Sale Offer, or a default in respect of a
provision that under this Indenture cannot be modified or amended without the
consent of the Holder of each Note that is affected) may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Notes, on behalf of all Holders (including, without limitation, any such waiver
obtained in connection with a tender offer or exchange offer for the Notes).
Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate
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principal amount of the Notes then outstanding may waive compliance in a
particular instance by the Company with certain restrictive provisions of this
Indenture or the Notes.
However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) change the maturity of the principal of or any installment
of interest on any such Note or alter the optional redemption or
repurchase provisions of any such Note or Sections 3.7, 4.10 and 4.13
hereof in a manner adverse to the Holders of the Notes;
(b) reduce the principal amount of (or the premium) of any such
Note;
(c) reduce the rate of or extend the time for payment of
interest on any such Note;
(d) change the currency of payment of principal of (or premium)
or interest on any such Note;
(e) modify any provisions of this Indenture relating to the
waiver of past defaults or the right of the Holders of Notes to receive
payments of principal of, or premium, if any, or interest on the Notes
or to institute suit for the enforcement of any payment on or with
respect to any such Note or the modification and amendment provisions of
this Indenture and the Notes (other than to add sections of this
Indenture or the Notes which may not be amended, supplemented or waived
without the consent of each Holder therein affected);
(f) reduce the percentage of the principal amount of outstanding
Notes necessary for amendment to or waiver of compliance with any
provision of this Indenture or the Notes or for waiver of any Default in
respect thereof;
(g) waive a default in the payment of principal of, interest on,
or redemption payment with respect to, the Notes (except a rescission of
acceleration of the Notes by the Holders thereof as provided in this
Indenture and a waiver of the payment default that resulted from such
acceleration);
(h) modify the ranking or priority of any Note or amend or
modify Article 10 hereof in any manner adverse to the Holders of the
Notes; or
(i) make any change to this Section 9.2.
Upon the request of the Company accompanied by a resolution of
the Board of Directors of the Company, authorizing the execution of any such
amended or supplemental indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section
7.2 hereof, the Trustee shall join with the Company in the execution of such
amended or supplemental indenture unless such amended or supplemental indenture
affects the Trustee's own rights, duties or immunities under this indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective,
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the Company shall mail to the Holders of Notes affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amended or supplemental indenture or waiver.
Section 9.3. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.5. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 9.6. Trustee to Sign Amendment, etc.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental indenture until its Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.1) shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture and that there has been compliance
with all conditions precedent.
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ARTICLE 10
SUBORDINATION
Section 10.1. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees,
that (i) the Indebtedness evidenced by the Notes, including, but not limited to,
the payment of principal of, premium, if any, and interest on the Notes, and any
other payment Obligation of the Company in respect of the Notes (including any
obligation to repurchase the Notes) is subordinated in right of payment, to the
extent and in the manner provided in this Article, to the prior payment in full
in cash of all Senior Indebtedness of the Company (whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed) and (ii) the
subordination is for the benefit of the Holders of Senior Indebtedness.
Section 10.2. Certain Definitions.
"Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or state law for the relief of debtors.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness.
A "distribution" may consist of cash, securities or other
property, by set-off or otherwise.
All Designated Senior Indebtedness now or hereafter existing and
all other Obligations relating thereto shall not be deemed to have been paid in
full unless the holders or owners thereof shall have received payment in full in
cash (or other form of payment consented to by the holders of such Designated
Senior Indebtedness) with respect to such Designated Senior Indebtedness and all
other Obligations with respect thereto.
Section 10.3. Liquidation; Dissolution; Bankruptcy.
Upon any payment or distribution of property or securities to
creditors of the Company in a liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, or in an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities:
(1) the holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full in cash or Cash Equivalents or
otherwise in a form satisfactory to such holders of all Obligations in
respect of such Senior Indebtedness (including interest after, or which
would accrue but for, the commencement of any such proceeding at the
rate specified in the applicable Senior Indebtedness, whether or not a
claim for such interest would be allowed in such proceeding) before the
Holders of Notes shall be entitled to receive any payment or
distribution of any kind or character with respect to the Notes (except
in each case that Holders of Notes may receive payments made from any
defeasance trust created pursuant to Section 8.1 hereof provided that
the applicable deposit does not violate Article 8 or 10 of this
Indenture); and
(2) until all Obligations with respect to Senior Indebtedness of
the Company (as provided in subsection (1) above) are paid in full in
cash, any payment or distribution to which the Holders of the Notes
would be entitled shall be made to the holders of Senior Indebtedness of
the Company (except that the Holders of the Notes may receive
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payments made from the trust described under Article 8 hereof).
Under the circumstances described in this Section 10.3, the
Company or any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar person making any payment or distribution of cash or other
property or securities is authorized or instructed to make any payment or
distribution to which the Holders of the Notes would otherwise be entitled
(other than payments made from any defeasance trust referred to in the second
parenthetical clause of each of clauses (1) and (2) above, which shall be
delivered or paid to the Holders of Notes as set forth in such clauses) directly
to the holders of the Senior Indebtedness of the Company (pro rata to such
holders on the basis of the respective amounts of Senior Indebtedness of the
Company held by such holders) or their Representatives, or to any trustee or
trustees under any other indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Indebtedness in full, in cash or Cash
Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
To the extent any payment of or distribution in respect of
Senior Indebtedness (whether by or on behalf of the Company, as proceeds of
security or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then if such payment or distribution is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Indebtedness
is declared to be fraudulent, invalid or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then
the obligation so declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had such obligation not
been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
Section 10.4. Default on Designated Senior Indebtedness.
The Company may not make any payment or distribution of any kind
or character (whether by redemption, purchase, retirement, defeasance or
otherwise) upon or in respect of the Notes (other than payments and other
distributions made from any defeasance trust created pursuant to Section 8.1
hereof if the applicable deposit does not violate Article 8 or 10 of this
Indenture) until all principal and other Obligations with respect to the Senior
Indebtedness of the Company have been paid in full if:
(i) a default in the payment of all or any portion of the
Obligations with respect to Designated Senior Indebtedness occurs; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits, or with the giving of
notice or passage of time or both (unless cured or waived) would permit,
holders of the Designated Senior Indebtedness as to which such other
default relates to accelerate its maturity and the Trustee receives a
notice of such other default (a "Payment Blockage Notice") from the
Company or a Representative of the holders of any Designated Senior
Indebtedness. If the Trustee receives any such Payment Blockage Notice,
no subsequent Payment Blockage Notice shall be effective for purposes of
this Section unless and until 360 days shall have elapsed since the date
of commencement of the payment blockage period resulting from the
immediately prior Payment Blockage Notice. No nonpayment default in
respect of any
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Designated Senior Indebtedness that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be,
or be made, the basis for a subsequent Payment Blockage Notice, unless
such default has been cured or waived for a period of not less than 90
consecutive days.
The Company shall resume payments on and distributions in
respect of the Notes:
(1) in the case of a default referred to in Section 10.4(i)
hereof, on the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.4(ii)
hereof, on the earliest of (1) the date on which such nonpayment default
is cured or waived or (2) 179 days after the date on which the
applicable Payment Blockage Notice is received unless (A) the maturity
of any Designated Senior Indebtedness has been accelerated or (B) a
Default or Event of Default under Section 6.1(h) or (i) has occurred and
is continuing,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.5. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
Section 10.6. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment
or distribution of or in respect of any Obligations with respect to the Notes at
a time when such payment or distribution is prohibited by Section 10.3 or
Section 10.4 hereof, such payment or distribution shall be held by the Trustee
(if the Trustee has received notice pursuant to Section 10.12 or such Holder, in
trust for the benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
such Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Indebtedness remaining unpaid to the extent necessary to pay such Obligations in
full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and, except as
provided in Section 10.12, shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders of Notes or the
Company or any other Person money or assets to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article 10 or Section 6.10,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
Section 10.7. Notice by Company.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article, but failure to
give such notice shall not affect the subordination of the
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Notes to the Senior Indebtedness as provided in this Article.
Section 10.8. Subrogation.
After all Senior Indebtedness is paid in full and until the
Notes are paid in full, Holders of Notes shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Notes) to the rights of
holders of Senior Indebtedness to receive distributions and payments applicable
to Senior Indebtedness to the extent that distributions and payments otherwise
payable to the Holders of Notes have been applied to the payment of Senior
Indebtedness. A payment or distribution made under this Article to holders of
Senior Indebtedness that otherwise would have been made to Holders of Notes is
not, as between the Company and Holders of Notes, a payment by the Company on
the Notes.
Section 10.9. Relative Rights.
This Article defines the relative rights of Holders of Notes and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors
of the Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article to pay principal of
or interest on a Note on the due date, the failure is still a Default or Event
of Default.
Section 10.10. Subordination May Not Be Impaired by Company.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination as provided in this Article 10 will at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof that any such holder of Senior Indebtedness
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.
Section 10.11. Payment, Distribution or Notice to
Representative.
Whenever a payment or distribution is to be made or a notice
given to holders of Senior Indebtedness, the distribution may be made and the
notice given to their Representative.
Upon any payment or distribution of assets or securities of the
Company referred to in this Article 10, the Trustee and the Holders of Notes
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any payment or distribution
to the Trustee or to the Holders of Notes for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
the Senior Indebtedness and
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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 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least one Business Day prior to the date of such
payment written notice from the Company or a transaction of facts that would
cause the payment of any Obligations with respect to the Notes to violate this
Article, which notice shall specifically refer to Section 10.3 or 10.4 hereof.
The Trustee may withhold payment and distributions hereunder without inquiry as
to the authority of any Person claiming to be a Representative or whether any
obligation described in such notice is Senior Indebtedness. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.9 hereof at least 30 days before the expiration of the time to file such
claim, each lender under the Credit Facility is hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
Section 10.14. Amendments.
No amendment may be made to the provisions of or the definitions
of any terms appearing in this Article 10, or to the provisions of Section 6.2
relating to the Designated Senior Indebtedness, that adversely affects the
rights of any holder of Senior Indebtedness then outstanding unless the holders
of such Senior Indebtedness (or any group or Representative authorized to give a
consent) consent to such change.
Section 10.15. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 10.9
hereof, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article 10 or the obligations hereunder of the
Holders to the holders of Senior Indebtedness, do any one or more of the
following: (a) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness and (d) exercise or refrain from exercising any rights against the
Company and any other Person.
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ARTICLE 11
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control. If any provisions of this Indenture modifies or excludes any
provision of the TIA that may be so modified or excluded, the letter provision
shall be deemed to apply to this Indenture as so modified or excluded, as the
case may be.
Section 11.2. Notices.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
LaRoche Industries Inc.
1100 Johnson Ferry Rd., N.E.
Atlanta, Georgia 30342
Telecopier No.: (404) 851-0324
Attention: Harold W. Ingalls
With a copy to:
Hunton & Williams
NationsBank Plaza
600 Peach Tree St., Suite 4100
Atlanta, Georgia 30308-2316
Telecopier No.: (404) 888-4190
Attention: B. Lynn Walsh
If to the Trustee:
State Street Bank
and Trust Company
61 Broadway, 15th Floor
New York, New York 10006
Telecopier No.: (212) 612-3201
Attention: Corporate Trust Division
Ref: LaRoche Industries Inc.
The Company or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if by telecopy; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 11.3. Communication by Holders of Notes with Other
Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
Section 11.4. 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 in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.5 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been complied with;
and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.5 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been complied
with.
Section 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion 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 certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him
or her 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 or not, in the opinion of such
Person, such condition or covenant has been complied with.
<PAGE> 74
68
Section 11.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 11.7. No Personal Liability of Directors, Officers,
Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of
the Company or any Subsidiary, as such, shall have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes, by accepting a Note, waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
Section 11.8. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER
JURISDICTION WOULD BE REQUIRED HEREBY.
Section 11.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or their respective Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture and the Notes.
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes
shall bind its respective successors. All agreements of the Trustee in this
Indenture shall bind its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes 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.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
Section 11.13. 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 of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
<PAGE> 75
69
[Signatures on following page]
<PAGE> 76
SIGNATURES
Dated as of
September 23, 1997
LAROCHE INDUSTRIES INC.
Attest: By: /s/ Grant O. Reed
-----------------------------------------
Name: Grant O. Reed
---------------------------------------
/s/ Richard H. Watts Title: President and Chief Executive Officer
- ----------------------- -------------------------------------
STATE STREET BANK AND TRUST COMPANY
Attest: By: /s/ Henry W. Seemore
-----------------------------------------
Name: Henry W. Seemore
---------------------------------------
/s/ Christina Van Ryzin Title: Assistant Vice President
- ----------------------- -------------------------------------
<PAGE> 77
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
SERIES A NOTE
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
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<PAGE> 78
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, (E) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE
CASE OF THE FOREGOING CLAUSE (D), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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<PAGE> 79
LAROCHE INDUSTRIES INC.
9 1/2% Senior Subordinated Notes due 2007
No. 1 $175,000,000
CUSIP Number: 517289ABO
LAROCHE INDUSTRIES INC., a Delaware corporation, promises to pay to Cede
& Co., or registered assigns, the principal sum of One Hundred Seventy-Five
Million Dollars on September 15, 2007.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto and imprinted hereon.
Dated: September 23, 1997
LAROCHE INDUSTRIES INC.
By
---------------------
Name:
Title:
By
---------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee, certifies that this is
one of the Notes referred to in the
within-mentioned Indenture:
By
-------------------------------
Authorized Signatory
Dated: September 23, 1997
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<PAGE> 80
(Back of Note)
9 1/2% Senior Subordinated Notes due 2007
Capitalized terms used hereof shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. Interest. LaRoche Industries Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate of 9 1/2% per annum, which interest shall be payable in cash
semiannually in arrears on each March 15 and September 15, or if any such day is
not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"); provided that the first Interest Payment Date shall be March 15,
1998. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
2. Method of Payment. On each Interest Payment Date, the Company
will pay interest to the Person who is the Holder of record of this Note as of
the close of business on the March 1 or September 1 immediately preceding such
Interest Payment Date, even if this Note is cancelled after such record date and
on or before such Interest Payment Date, except as provided in Section 2.12 of
the Indenture with respect to defaulted interest. Principal, premium, if any,
and interest on this Note will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, in the
event the Notes do not remain in book-entry form, at the option of the Company,
payment of interest may be made by check mailed to the Holder of this Note at
its address set forth in the register of Holders of Notes; provided that all
payments with respect to the Global Notes and Definitive Notes having an
aggregate principal amount of $5.0 million or more the Holders of which have
given wire transfer instructions to the Company at least 10 Business Days prior
to the applicable payment date will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent and Registrar. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of the Company's Subsidiaries may act in any
such capacity.
4. Indenture. The Company issued the Notes under an Indenture
dated as of September 23, 1997 ("Indenture") between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Section Section 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes are general unsecured obligations of the
Company equal in an aggregate principal amount to $175,000,000 and will mature
on September 15, 2007.
The Notes are general unsecured senior subordinated obligations
of the Company limited to $175,000,000 aggregate principal amount (subject to
Section 2.6 of the Indenture). This Note is one of the Initial Notes referred to
in the Indenture. The Notes include the Initial Notes and any Exchange Notes
issued in exchange for the Initial Notes pursuant to the Indenture and the
Registration Rights Agreement. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the incurrence of Indebtedness by the Company and
its Restricted Subsidiaries, the payment of
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<PAGE> 81
dividends and other distributions on the Equity Interests of the Company and its
Restricted Subsidiaries, the purchase or redemption of Equity Interests of the
Company and Equity Interests of such Restricted Subsidiaries, certain purchases
or redemptions of Subordinated Indebtedness, the sale or transfer of assets and
Equity Interests of Restricted Subsidiaries, the issuance or sale of Equity
Interests of Restricted Subsidiaries, the investments of the Company and its
Subsidiaries and transactions with Affiliates. In addition, the Indenture limits
the ability of the Company and its Restricted Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
5. Optional Redemption.
(a) The Notes are not redeemable at the Company's option prior
to September 15, 2002. From and after September 15, 2002, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on September 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 ................. 104.750%
2003 ................. 103.167%
2004 ................. 101.583%
2005 and thereafter .. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Paragraph 5, prior to September 15, 2000 the Company may, at its option, on any
one or more occasions, redeem up to 33_% of the original aggregate principal
amount of Notes with the net cash proceeds of one or more Public Equity
Offerings by the Company at a redemption price equal to 109.5% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
redemption date; provided that at least 66_% of the original aggregate principal
amount of Notes must remain outstanding immediately after the occurrence of such
redemption (excluding any Notes held by the Company or any of its Affiliates);
and provided, further, that notice of any such redemption must be given within
60 days after the date of the closing of the relevant Public Equity Offering of
the Company.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not
be required to make mandatory redemption or sinking fund payments with respect
to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, thereon to the date of purchase (the
"Change of Control Payment"). The right of the Holders of the Notes to require
the Company to repurchase such Notes upon a Change of Control may not be waived
by the Trustee without the approval of the Holders of the Notes required by
Section 9.2 of the Indenture. Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in such
notice. The Change of Control Payment shall be made on a business day not less
than 30 days nor more than 60 days after such
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<PAGE> 82
notice is mailed. The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales permitted by the Indenture, when the aggregate amount of Excess
Proceeds equals or exceeds $10.0 million, the Company shall make an Asset Sale
Offer for all outstanding Notes and other Senior Subordinated Indebtedness, pro
rata up to a maximum principal amount (expressed as a multiple of $1,000) of
Notes and other Senior Subordinated Indebtedness equal to such Excess Proceeds,
at a purchase price in cash equal to 100% of the principal amount thereof (or
the accreted value of such other Senior Subordinated Indebtedness, if such other
Senior Subordinated Indebtedness is issued as a discount), plus accrued and
unpaid interest thereon, if any, to the date of purchase in accordance with the
procedures set forth in Section 3.9 of the Indenture or the agreements governing
the Senior Subordinated Indebtedness, as applicable. To the extent that the
aggregate principal amount (or accreted value, as the case may be) of Notes and
Senior Subordinated Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may retain and use any remaining
Excess Proceeds for any purpose consistent with the other terms of the
Indenture. If the sum of (i) the aggregate principal amount of Notes surrendered
by Holders thereof and (ii) the aggregate principal amount or accreted value, as
the case may be, of Senior Subordinated Indebtedness surrendered by holders or
lenders thereof exceeds the amount of Excess Proceeds, the Trustee and the
trustee or other lender representative for the Senior Subordinated Indebtedness
shall select the Notes and the other Senior Subordinated Indebtedness to be
purchased on a pro rata basis, based on the aggregate principal amount (or
accreted value, as applicable) thereof surrendered in such Asset Sale Offer.
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on the
aggregate principal amount of the Notes called for redemption.
9. Denominations, Transfer, Exchange. The Notes may be issued
initially in the form of one or more fully registered Global Notes. The Notes
may also be issued in registered form without coupons in minimum denominations
of $1,000 and integral multiples of $1,000. The transfer of Notes may be
registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, it need not register the transfer of or exchange
of any Note for a period of 15 days before a selection of Notes to be redeemed
or during the period between a record date and the corresponding Interest
Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may
be treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or the tender offer or exchange
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<PAGE> 83
offer for, such Notes), and any existing Default or Event of Default under, or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
12. Defaults and Remedies. Events of Default include: (a)
failure to pay principal of (or premium, if any, on) any Note when due (whether
or not prohibited by Article 10 of the Indenture); (b) failure to pay any
interest on any Note when due, continued for 30 days or more (whether or not
prohibited by Article 10 of the Indenture); (c) default in the payment of
principal of or interest on any Note required to be purchased pursuant to any
Asset Sale Offer required by the Indenture when due and payable or failure to
pay on the Purchase Date the Offer Amount for any Note validly tendered pursuant
to any Asset Sale Offer required by the Indenture (whether or not prohibited by
Article 10 of the Indenture); (d) failure to perform or comply with any of the
provisions of Section 5.1 of the Indenture; (e) failure to perform any other
covenant, warranty or agreement of the Company under the Indenture or in the
Notes or of any future Guarantor under the Indenture or in any future Guarantee
and such Default continues for the period and after the notice specified in
Section 6.1 of the Indenture; (f) default or defaults under the terms of one or
more instruments evidencing or securing Indebtedness of the Company or any of
its Restricted Subsidiaries having an outstanding principal amount of $5.0
million or more individually or in the aggregate that has resulted in the
acceleration of the payment of such Indebtedness or failure by the Company or
any of its Restricted Subsidiaries to pay principal, premium, if any, or
interest when due at the stated maturity of any such Indebtedness and such
default or defaults shall have continued after any applicable grace period; (g)
the rendering of a final judgment or judgments (not subject to appeal) against
the Company or any of its Restricted Subsidiaries in an amount of $5.0 million
or more (net of any amounts covered by reputable and creditworthy insurance
companies) which remains undischarged or unstayed for a period of 60 days after
the date on which the right to appeal has expired; or (h) certain events of
bankruptcy, insolvency or reorganization affecting the Company or any of its
Restricted Subsidiaries. If any Event of Default (other than an Event of Default
described in clause (h) above) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration
the principal and interest shall be due and payable immediately; provided,
however, that so long as any Designated Senior Indebtedness or any commitment
therefor is outstanding, any such notice or declaration shall not become
effective until the earlier of (a) five Business Days after such notice is
delivered to the representative for the Designated Senior Indebtedness or (b)
the acceleration of any Designated Senior Indebtedness and thereafter, payments
on the Notes pursuant to Article 6 of the Indenture shall be made only to the
extent permitted pursuant to Article 10 of the Indenture. If an Event of Default
specified in clause (h) above occurs, the Notes will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of the Notes. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of
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<PAGE> 84
Default in the payment of principal of, premium, if any, or interest on, the
Notes. The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, within
five Business Days after becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
13. Subordination. The Notes are subordinated to Senior
Indebtedness of the Company. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Notes may be paid. The Company agrees, and
each Holder by accepting a Note agrees, that the Indebtedness evidenced by the
Notes, including, but not limited to, the payment of principal of, premium, if
any, and interest on the Notes, and any other payment Obligation of the Company
in respect of the Notes is subordinated in right of payment, to the extent and
in the manner provided in the Indenture, to the prior payment in full in cash of
all Senior Indebtedness of the Company (whether outstanding on the date hereof
or hereafter created, incurred, assumed or guaranteed) and authorizes the
Trustee to give effect and appoints the Trustee as attorney-in-fact for such
purpose.
14. Trustee Dealings with Company. The Indenture contains
certain limitations on the rights of the Trustee, should it become a creditor of
the Company or any other obligor upon the Notes, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claim as security or otherwise. The Trustee is permitted to engage in other
transactions with the Company or an Affiliate of the Company; provided, however,
that if it acquires any conflicting interest (as defined in the TIA), it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
15. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes, by accepting a Note, waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
LaRoche Industries Inc.
1100 Johnson Ferry Rd., N.E.
Atlanta, Georgia 30342
Telecopier No.: (404) 851-0324
Attention: Harold W. Ingalls
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<PAGE> 85
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
- -------------------------------------------------------------------------------
Date: Your Signature:
---------------- -------------------
Signature Guarantee:*
-----------------------------------
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
In connection with any transfer or exchange of any of the Notes evidenced by
this certificate occurring prior to the date that is three years after the later
of the date of original issuance of such Notes and the last date, if any, on
which such Notes were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Notes are being:
CHECK ONE BOX BELOW:
1[ ] acquired for the undersigned's own account, without transfer
(in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture); or
2[ ] transferred to the Company; or
3[ ] transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
4[ ] transferred pursuant to an effective registration statement
under the Securities Act; or
5[ ] transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
6[ ] transferred to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act of 1933), that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter appears as Exhibit D to the Indenture); or
- -----------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee). Indenture); or
A-9
<PAGE> 86
7[ ] transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered holder thereof; provided, however, that if box (5), (6) or (7) is
checked, the Trustee or the Company may require, prior to registering any such
transfer of the Notes, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
------------------------------
Signature
Signature Guarantee:*
- ------------------------------ ------------------------------
(Signature must be guaranteed) Signature
- ------------------------------------------------------------
- -------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-10
<PAGE> 87
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.13 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.13
If you want to elect to have only part of the Note purchased by
the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the
principal amount you elect to have purchased: $
-----------------
Date: Your Signature:
----- -------------------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee:*
--------------------
- ---------------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-11
<PAGE> 88
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease Amount of increase this Global Note authorized officer
in Principal Amount in Principal Amount following such of Trustee or Note
Date of Exchange of this Global Note of this Global Note decrease or increase Custodian
- ---------------- ------------------- ------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-12
<PAGE> 89
EXHIBIT B
(Form of Face of Exchange Note)
SERIES B NOTE
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
B-1
<PAGE> 90
LAROCHE INDUSTRIES INC.
9 1/2% Senior Subordinated Notes due 2007
No. $175,000,000
CUSIP Number:
LAROCHE INDUSTRIES INC., a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum of One Hundred
Seventy-Five Million Dollars on September 15, 2007.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Additional provisions of this Security are set forth on the
other side of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto and imprinted hereon.
Dated: September 23, 1997
LAROCHE INDUSTRIES INC.
By
------------------------
Name:
Title:
By
------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee, certifies that this is
one of the Notes referred to in the
within-mentioned Indenture:
By
------------------------------
Authorized Signatory
Dated: September 23, 1997
B-2
<PAGE> 91
(Back of Note)
9 1/2% Senior Subordinated Notes due 2007
Capitalized terms used hereof shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. Interest. LaRoche Industries Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate of 9 1/2% per annum, which interest shall be payable in cash
semiannually in arrears on each March 15 and September 15, or if any such day is
not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"); provided that the first Interest Payment Date shall be March 15,
1998. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
2. Method of Payment. On each Interest Payment Date, the Company
will pay interest to the Person who is the Holder of record of this Note as of
the close of business on the March 1 or September 1 immediately preceding such
Interest Payment Date, even if this Note is cancelled after such record date and
on or before such Interest Payment Date, except as provided in Section 2.12 of
the Indenture with respect to defaulted interest. Principal, premium, if any,
and interest on this Note will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, in the
event the Notes do not remain in book-entry form, at the option of the Company,
payment of interest may be made by check mailed to the Holder of this Note at
its address set forth in the register of Holders of Notes; provided that all
payments with respect to the Global Notes and Definitive Notes having an
aggregate principal amount of $5.0 million or more the Holders of which have
given wire transfer instructions to the Company at least 10 Business Days prior
to the applicable payment date will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent and Registrar. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of the Company's Subsidiaries may act in any
such capacity.
4. Indenture. The Company issued the Notes under an Indenture
dated as of September 23, 1997 ("Indenture") between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Section Section 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes are general unsecured obligations of the
Company equal in an aggregate principal amount to $175,000,000 and will mature
on September 15, 2007.
The Notes are general unsecured senior subordinated obligations
of the Company limited to $175,000,000 aggregate principal amount (subject to
Section 2.6 of the Indenture). This Note is one of the Initial Notes referred to
in the Indenture. The Notes include the Initial Notes and any Exchange Notes
issued in exchange for the Initial Notes pursuant to the Indenture and the
Registration Rights Agreement. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the incurrence of Indebtedness by the Company and
its Restricted Subsidiaries, the payment of
B-3
<PAGE> 92
dividends and other distributions on the Equity Interests of the Company and its
Restricted Subsidiaries, the purchase or redemption of Equity Interests of the
Company and Equity Interests of such Restricted Subsidiaries, certain purchases
or redemptions of Subordinated Indebtedness, the sale or transfer of assets and
Equity Interests of Restricted Subsidiaries, the issuance or sale of Equity
Interests of Restricted Subsidiaries, the investments of the Company and its
Subsidiaries and transactions with Affiliates. In addition, the Indenture limits
the ability of the Company and its Restricted Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
5. Optional Redemption.
(a) The Notes are not redeemable at the Company's option prior
to September 15, 2002. From and after September 15, 2002, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on September 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 ................. 104.750%
2003 ................. 103.167%
2004 ................. 101.583%
2005 and thereafter .. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Paragraph 5, prior to September 15, 2000 the Company may, at its option, on any
one or more occasions, redeem up to 33_% of the original aggregate principal
amount of Notes with the net cash proceeds of one or more Public Equity
Offerings by the Company at a redemption price equal to 109.5% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
redemption date; provided that at least 66_% of the original aggregate principal
amount of Notes must remain outstanding immediately after the occurrence of such
redemption (excluding any Notes held by the Company or any of its Affiliates);
and provided, further, that notice of any such redemption must be given within
60 days after the date of the closing of the relevant Public Equity Offering of
the Company.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not
be required to make mandatory redemption or sinking fund payments with respect
to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, thereon to the date of purchase (the
"Change of Control Payment"). The right of the Holders of the Notes to require
the Company to repurchase such Notes upon a Change of Control may not be waived
by the Trustee without the approval of the Holders of the Notes required by
Section 9.2 of the Indenture. Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in such
notice. The Change of Control Payment shall be made on a business day not less
than 30 days nor more than 60 days after such
B-4
<PAGE> 93
notice is mailed. The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales permitted by the Indenture, when the aggregate amount of Excess
Proceeds equals or exceeds $10.0 million, the Company shall make an Asset Sale
Offer for all outstanding Notes and other Senior Subordinated Indebtedness, pro
rata up to a maximum principal amount (expressed as a multiple of $1,000) of
Notes and other Senior Subordinated Indebtedness equal to such Excess Proceeds,
at a purchase price in cash equal to 100% of the principal amount thereof (or
the accreted value of such other Senior Subordinated Indebtedness, if such other
Senior Subordinated Indebtedness is issued as a discount), plus accrued and
unpaid interest thereon, if any, to the date of purchase in accordance with the
procedures set forth in Section 3.9 of the Indenture or the agreements governing
the Senior Subordinated Indebtedness, as applicable. To the extent that the
aggregate principal amount (or accreted value, as the case may be) of Notes and
Senior Subordinated Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may retain and use any remaining
Excess Proceeds for any purpose consistent with the other terms of the
Indenture. If the sum of (i) the aggregate principal amount of Notes surrendered
by Holders thereof and (ii) the aggregate principal amount or accreted value, as
the case may be, of Senior Subordinated Indebtedness surrendered by holders or
lenders thereof exceeds the amount of Excess Proceeds, the Trustee and the
trustee or other lender representative for the Senior Subordinated Indebtedness
shall select the Notes and the other Senior Subordinated Indebtedness to be
purchased on a pro rata basis, based on the aggregate principal amount (or
accreted value, as applicable) thereof surrendered in such Asset Sale Offer.
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on the
aggregate principal amount of the Notes called for redemption.
9. Denominations, Transfer, Exchange. The Notes may be issued
initially in the form of one or more fully registered Global Notes. The Notes
may also be issued in registered form without coupons in minimum denominations
of $1,000 and integral multiples of $1,000. The transfer of Notes may be
registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, it need not register the transfer of or exchange
of any Note for a period of 15 days before a selection of Notes to be redeemed
or during the period between a record date and the corresponding Interest
Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may
be treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or the tender offer or exchange
B-5
<PAGE> 94
offer for, such Notes), and any existing Default or Event of Default under, or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
12. Defaults and Remedies. Events of Default include: (a)
failure to pay principal of (or premium, if any, on) any Note when due (whether
or not prohibited by Article 10 of the Indenture); (b) failure to pay any
interest on any Note when due, continued for 30 days or more (whether or not
prohibited by Article 10 of the Indenture); (c) default in the payment of
principal of or interest on any Note required to be purchased pursuant to any
Asset Sale Offer required by the Indenture when due and payable or failure to
pay on the Purchase Date the Offer Amount for any Note validly tendered pursuant
to any Asset Sale Offer required by the Indenture (whether or not prohibited by
Article 10 of the Indenture); (d) failure to perform or comply with any of the
provisions of Section 5.1 of the Indenture; (e) failure to perform any other
covenant, warranty or agreement of the Company under the Indenture or in the
Notes or of any future Guarantor under the Indenture or in any future Guarantee
and such Default continues for the period and after the notice specified in
Section 6.1 of the Indenture; (f) default or defaults under the terms of one or
more instruments evidencing or securing Indebtedness of the Company or any of
its Restricted Subsidiaries having an outstanding principal amount of $5.0
million or more individually or in the aggregate that has resulted in the
acceleration of the payment of such Indebtedness or failure by the Company or
any of its Restricted Subsidiaries to pay principal, premium, if any, or
interest when due at the stated maturity of any such Indebtedness and such
default or defaults shall have continued after any applicable grace period; (g)
the rendering of a final judgment or judgments (not subject to appeal) against
the Company or any of its Restricted Subsidiaries in an amount of $5.0 million
or more (net of any amounts covered by reputable and creditworthy insurance
companies) which remains undischarged or unstayed for a period of 60 days after
the date on which the right to appeal has expired; or (h) certain events of
bankruptcy, insolvency or reorganization affecting the Company or any of its
Restricted Subsidiaries. If any Event of Default (other than an Event of Default
described in clause (h) above) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration
the principal and interest shall be due and payable immediately; provided,
however, that so long as any Designated Senior Indebtedness or any commitment
therefor is outstanding, any such notice or declaration shall not become
effective until the earlier of (a) five Business Days after such notice is
delivered to the representative for the Designated Senior Indebtedness or (b)
the acceleration of any Designated Senior Indebtedness and thereafter, payments
on the Notes pursuant to Article 6 of the Indenture shall be made only to the
extent permitted pursuant to Article 10 of the Indenture. If an Event of Default
specified in clause (h) above occurs, the Notes will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of the Notes. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of
B-6
<PAGE> 95
Default in the payment of principal of, premium, if any, or interest on, the
Notes. The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, within
five Business Days after becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
13. Subordination. The Notes are subordinated to Senior
Indebtedness of the Company. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Notes may be paid. The Company agrees, and
each Holder by accepting a Note agrees, that the Indebtedness evidenced by the
Notes, including, but not limited to, the payment of principal of, premium, if
any, and interest on the Notes, and any other payment Obligation of the Company
in respect of the Notes is subordinated in right of payment, to the extent and
in the manner provided in the Indenture, to the prior payment in full in cash of
all Senior Indebtedness of the Company (whether outstanding on the date hereof
or hereafter created, incurred, assumed or guaranteed) and authorizes the
Trustee to give effect and appoints the Trustee as attorney-in-fact for such
purpose.
14. Trustee Dealings with Company. The Indenture contains
certain limitations on the rights of the Trustee, should it become a creditor of
the Company or any other obligor upon the Notes, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claim as security or otherwise. The Trustee is permitted to engage in other
transactions with the Company or an Affiliate of the Company; provided, however,
that if it acquires any conflicting interest (as defined in the TIA), it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
15. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes, by accepting a Note, waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
LaRoche Industries Inc.
1100 Johnson Ferry Rd., N.E.
Atlanta, Georgia 30342
Telecopier No.: (404) 851-0324
Attention: Harold W. Ingalls
B-7
<PAGE> 96
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
---------------- -------------------
Signature Guarantee:*
-------------------------------------
(Signature must be guaranteed)
- -------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
In connection with any transfer or exchange of any of the Notes evidenced by
this certificate occurring prior to the date that is three years after the later
of the date of original issuance of such Notes and the last date, if any, on
which such Notes were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Notes are being:
CHECK ONE BOX BELOW:
1[ ] acquired for the undersigned's own account, without transfer (in
satisfaction of Section 2.6(a)(ii)(A) or Section 2.6(d)(i)(A) of
the Indenture); or
2[ ] transferred to the Company; or
3[ ] transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
4[ ] transferred pursuant to an effective registration statement
under the Securities Act; or
5[ ] transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
6[ ] transferred to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act of 1933), that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter appears as Exhibit D to the Indenture); or
- ----------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
B-8
<PAGE> 97
7[ ] transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered holder thereof; provided, however, that if box (5), (6) or (7) is
checked, the Trustee or the Company may require, prior to registering any such
transfer of the Notes, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
------------------------------
Signature
Signature Guarantee:*
- ------------------------------ ------------------------------
(Signature must be guaranteed) Signature
- ------------------------------------------------------------
- ------------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
B-9
<PAGE> 98
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.13 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.13
If you want to elect to have only part of the Note purchased by
the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the
principal amount you elect to have purchased: $
----------------------
Date: Your Signature:
----- --------------------------------------------
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee:*
-----------------------------
- ------------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
B-10
<PAGE> 99
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease Amount of increase this Global Note authorized officer
in Principal Amount in Principal Amount following such of Trustee or Note
Date of Exchange of this Global Note of this Global Note decrease or increase Custodian
- ---------------- ------------------- ------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
B-11
<PAGE> 100
EXHIBIT C
FORM OF
TRANSFEREE LETTER OF REPRESENTATION
LaRoche Industries Inc.
c/o [Trustee ]
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the ___% Senior Subordinated Notes due 2007 (the "Notes") of
LaRoche Industries Inc. (the "Company"). Upon transfer, the Notes would be
registered in the name of the new beneficial owner as follows:
Name:
-------------------------------------------
Address:
-----------------------------------------
Taxpayer ID Number:
-------------------------------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in
Rules 501(a)(1), (2), (3) and (7) under the Securities Act of 1933, as amended
(the "Securities Act")), purchasing for our own account or for the account of
such an institutional "accredited investor" at least $250,000 principal amount
of the Notes, and we are acquiring the Notes not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act. We
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes and we
invest in or purchase securities similar to the Notes in the normal course of
our business. We and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date which is two years after the
later of the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor", in each case in a minimum principal amount of Notes of
$250,000, or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the
B-12
<PAGE> 101
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and in compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Company and the Trustee, which
shall provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act and that it is acquiring such Notes for investment
purposes and not for distribution in violation of the Securities Act. Each
purchaser acknowledges that the Company and the Trustee reserve the right prior
to the offer, sale or other transfer prior to the Resale Restriction Termination
Date of the Notes pursuant to clause (d), (e) or (f) above to require the
delivery of an opinion of counsel, certifications and/or other information
satisfactory to the Company and the Trustee.
Date: Transferee:
------------------- -------------------
By:
---------------------------
B-13
<PAGE> 102
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
This Supplemental Indenture, dated as of [__________] (this
"Supplemental Indenture" or "Guarantee"), among [name of Guarantor] (the
"Guarantor"), LaRoche Industries Inc. (together with its successors and assigns,
the "Company"), [each other then existing Guarantor under the Indenture referred
to below,] and State Street Bank and Trust Company, as Trustee under the
Indenture referred to below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore executed
and delivered an Indenture, dated as of September ___, 1997 (as amended,
supplemented, waived or otherwise modified, the "Indenture"), providing for the
issuance of an aggregate principal amount of $150,000,000 of ___% Senior
Subordinated Notes due 2007 of the Company (the "Notes");
WHEREAS, Section 4.14 of the Indenture provides that under
certain circumstances the Company is required to cause the Guarantor to execute
and deliver to the Trustee a supplemental indenture pursuant to which the
Guarantor shall unconditionally guarantee all of the Company's obligations under
the Notes pursuant to a Guarantee on the terms and conditions set forth herein;
and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee
and the Company are authorized to execute and deliver this Supplemental
Indenture to amend the Indenture, without the consent of any Noteholder;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guarantor, the Company[, the other Guarantors] and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the Notes
as follows:
ARTICLE I
Definitions
SECTION I.1 Defined Terms. As used in this Guarantee, terms
defined in the Indenture or in the preamble or recital hereto are used herein as
therein defined, except that the term "Holders" in this Supplemental Indenture
shall refer to the term "Holders" as defined in the Indenture and the Trustee
acting on behalf or for the benefit of such holders. The words "herein,"
"hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
"Guarantor Senior Indebtedness" means the following obligations,
without duplication: (i) any Guarantee of the Credit Facility by such Guarantor
and all other Guarantees by such Guarantor of Senior Indebtedness of the Company
or Guarantor Senior Indebtedness for any other Guarantor; and (ii) all
obligations consisting of the principal of and premium, if any, and accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Guarantor
regardless of whether postfiling interest is allowed in such proceeding) on, and
fees and other amounts owing in respect of, all other Indebtedness of the
Guarantor, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is expressly provided that the obligations
in respect
D-1
<PAGE> 103
of such Indebtedness are not senior in right of payment to the obligations of
such Guarantor under the Guarantee; provided, however, that Indebtedness shall
not include (1) any obligations of such Guarantor to the Guarantor or any other
Subsidiary of the Guarantor, (2) any liability for Federal, state, local,
foreign or other taxes owed or owing by such Guarantor, (3) any accounts payable
or other liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of such Guarantor that is expressly subordinate in right of
payment to any of the Indebtedness of such Guarantor, including any Guarantor
Senior Subordinated Indebtedness and Guarantor Subordinated Obligations of such
Guarantor or (5) any Equity Interests.
"Guarantor Senior Subordinated Indebtedness" means, with respect
to a Guarantor, the obligations of such Guarantor under the Guarantee and any
other Indebtedness of such Guarantor that specifically provides that such
Indebtedness is to rank pari passu in right of payment with the obligations of
such Guarantor under the Guarantee and is not expressly subordinated by its
terms in right of payment to any Indebtedness of such Guarantor which is not
Guarantor Senior Indebtedness of such Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a
Guarantor, any Indebtedness of such Guarantor which is expressly subordinate in
right of payment to the obligations of such Guarantor under its Guarantee
pursuant to a written agreement.
ARTICLE II
Guarantee
SECTION II.1 Guarantee. The Guarantor hereby fully,
unconditionally and irrevocably guarantees, as primary obligor and not merely as
surety, jointly and severally with each other Guarantor, to each Holder of the
Notes (a) the full and punctual payment when due, whether at Stated Maturity, by
acceleration, by redemption or otherwise, of principal of and interest on the
Notes and all other monetary obligations of the Company under the Indenture and
the Notes and (b) the full and punctual performance within applicable grace
periods of all other obligations of the Company under the Indenture and the
Notes (all the foregoing being hereinafter collectively called the
"Obligations"). The Guarantor further agrees (to the extent permitted by law)
that the Obligations may be extended or renewed, in whole or in part, without
notice or further assent from it, and that it will remain bound under this
Article II notwithstanding any extension or renewal of any Obligation.
To the extent permitted by applicable law, (i) the Guarantor
waives presentation to, demand of payment from and protest to the Company of any
of the Obligations and also waives notice of protest for nonpayment, (ii) the
Guarantor waives notice of any default under the Notes or the Obligations and
(iii) the Obligations of the Guarantor hereunder shall not be affected by (a)
the failure of any Holder to assert any claim or demand or to enforce any right
or remedy against the Company or any other person under the Indenture, the Notes
or any other agreement or otherwise; (b) any extension or renewal of any
thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of the Indenture, the Notes or any other agreement; or (d)
the failure of any Holder to exercise any right or remedy against any other
Guarantor of the Obligations.
The Guarantor further agrees that its Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and, to the extent permitted by applicable law,
waives any right to require that any resort be had by any Holder to any security
held for payment of the Obligations.
D-2
<PAGE> 104
Except as otherwise provided herein or under applicable law, the
obligations of the Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than payment of the
Obligations in full), including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Obligations or otherwise.
Without limiting the generality of the foregoing, to the extent permitted by
applicable law, the obligations of the Guarantor herein shall not be discharged
or impaired or otherwise affected by the failure of any Holder to assert any
claim or demand or to enforce any remedy under the Indenture, the Notes or any
other agreement, by any waiver or modification of any thereof, by any default,
failure or delay, willful or otherwise, in the performance of the Obligations,
or by any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of the Guarantor
or would otherwise operate as a discharge of the Guarantor as a matter of law or
equity.
The Guarantor further agrees that, subject to Section 2.2(b)
hereof, its Guarantee herein shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored by any
Holder upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder has at law or in equity against the Guarantor by
virtue hereof, upon the failure of the Company to pay the principal of or
interest on any Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Obligation, the Guarantor hereby promises to and will, upon
receipt of written demand by the Trustee or the Holders of a majority in
principal amount of the then outstanding Notes (the "Majority Noteholders"),
forthwith pay, or cause to be paid, in cash, to the Holders an amount equal to
the sum of (i) the unpaid principal amount of such Obligations then due and
owing, (ii) accrued and unpaid interest on such Obligations then due and owing
(but only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders then due and owing.
The Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any Obligations
guaranteed hereby until payment in full of all Obligations. The Guarantor
further agrees (to the extent permitted by applicable law) that, as between such
Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity
of the Obligations guaranteed hereby may be accelerated for the purposes of such
Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Obligations, such Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Section.
The Guarantor also agrees to pay any and all reasonable costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
the Holders in enforcing any rights under this Section.
SECTION II.2 Limitation on Liability; Termination, Release and
Discharge. (a) Any term or provision of this Guarantee to the contrary
notwithstanding, the maximum aggregate amount of the Obligations guaranteed
hereunder by the Guarantor shall not exceed the maximum amount that can be
hereby guaranteed without rendering this Guarantee, as it relates to such
Guarantor, voidable under applicable law, including without limitation
applicable law relating to fraudulent conveyance or fraudulent transfer or
affecting the rights or remedies of creditors generally.
D-3
<PAGE> 105
(b) This Guarantee shall terminate and be of no further force or
effect, and the Guarantor shall automatically and unconditionally be released
and discharged from all liabilities and obligations in respect hereof, upon (w)
payment in full of the principal amount of all outstanding Notes (whether by
payment at maturity, purchase, redemption, defeasance, retirement or other
acquisition) and all other monetary Obligations then due and owing, (x) the
merger or consolidation of the Guarantor with and into the Company or another
Guarantor that is the surviving Person in such merger or consolidation, (y) the
exercise by the Company of its legal defeasance option or its covenant
defeasance option, or (z) the sale or other transfer (i) by the Guarantor of all
or substantially all of its assets or (ii) by the Company or a Restricted
Subsidiary of all of the capital stock or other equity interests in the
Guarantor held by the Company or such Restricted Subsidiary, to a Person that is
not an Affiliate of the Company; provided, however, that, in the case of this
clause (z), (1) any such sale or transfer is made in accordance with the terms
of the Indenture (including Section 5.1 thereof), and (2) all obligations of the
Guarantor under, and all of its guarantees of, and all of its pledges of assets
or other security interests which secure, any Senior Indebtedness of the Company
shall also terminate upon such release, sale or transfer (other than with
respect to any such Indebtedness that is assumed by any Person that is not an
Affiliate of the Company). Upon notice to the Trustee that any such payment,
merger, consolidation, exercise, sale or transfer has occurred or is occurring,
the Trustee shall execute all agreements and instruments confirming and
acknowledging such termination, release and discharge as may be reasonably
requested by the Guarantor, and the Trustee shall return the original Guarantee
to the Guarantor.
ARTICLE III
Subordination
SECTION III.1 Subordination. The Guarantor agrees, and each
Noteholder by accepting a Note agrees, that (a) the obligations of the Guarantor
under this Guarantee are subordinated in right of payment to the prior payment
in full (when due) of all existing and future Guarantor Senior Indebtedness of
the Guarantor, including without limitation any Guarantee by the Guarantor of
any Senior Indebtedness of the Company or of any Guarantor Senior Indebtedness
of any other Guarantor, to the extent and in the matter provided in Article 10
of the Indenture (as if the Guarantor were the Company for purposes of such
Article 10 and all defined terms used therein, and the Guarantor Senior
Indebtedness of the Guarantor were Senior Indebtedness), and this Guarantor is
made subject to such provisions (which are hereby incorporated herein by
reference), and (b) such subordination is for the benefit of and enforceable by
the holders of Guarantor Senior Indebtedness of the Guarantor.
ARTICLE IV
Miscellaneous
SECTION IV.1 Notices. All notices and other communications
pertaining to this Guarantee or any Note shall be in writing and shall be deemed
to have been duly given upon the receipt thereof. Such notices shall be
delivered by hand, or mailed, certified or registered mail with postage prepaid
(a) if to the Guarantor, at its address set forth below, with a copy to the
Company as provided in the Indenture for notices to the Company, and (b) if to
the Holders or the Trustee, as provided in the Indenture. The Guarantor by
notice to the Trustee may designate additional or different addresses for
subsequent notices to or communications with the Guarantor.
SECTION IV.2 Parties. Nothing expressed or mentioned in this
Guarantee is intended or shall be construed to give any Person, firm or
corporation, other than the Holders and the Trustee and the holders of any
Guarantor Senior Indebtedness, any legal or equitable right, remedy or claim
under or in respect of this Guarantee or any provision herein contained.
D-4
<PAGE> 106
SECTION IV.3 Governing Law. This Agreement shall be governed by
the laws of the State of New York.
SECTION IV.4 Severability Clause. In case any provision in this
Guarantee 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 and such provision shall be ineffective only to the extent of
such invalidity, illegality or unenforceability.
SECTION IV.5 Waivers and Remedies. Neither a failure nor a delay
on the part of the Holders or the Trustee in exercising any right, power or
privilege under this Guarantee shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Holders and
the Trustee herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Guarantee or
at law, in equity, by statute or otherwise.
SECTION IV.6 Successors and Assigns. Subject to Section 2.2(b)
hereof, (a) this Guarantee shall be binding upon and inure to the benefit of the
Guarantor, the Trustee, any other parties hereto, the Holders and their
respective successors and assigns and (b) in the event of any transfer or
assignment of rights by any Holder, the rights and privileges conferred upon
that party in this Guarantee and in the Notes shall automatically extend to and
be vested in such transferee or assignee, all subject to the terms and
conditions of this Guarantee and the Indenture.
SECTION IV.7 Modification, etc. Subject to the provisions of,
and except as otherwise provided in, Article 9 of the Indenture (including
without limitation Section 9.1 thereof), no modification, amendment or waiver of
any provision of this Guarantee, nor the consent to any departure by the
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and consented to by the Majority Noteholders, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given. No notice to or demand on the Guarantor in any case shall
entitle such Guarantor or any other guarantor to any other or further notice or
demand in the same, similar or other circumstances.
SECTION IV.8 Entire Agreement. This Guarantee is intended by the
parties to be a final expression of their agreement in respect of the subject
matter contained herein and, together with the Indenture, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
SECTION IV.9 Ratification of Indenture; Supplemental Indentures
Part of Indenture. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect. This Supplemental Indenture shall
form a part of the Indenture for all purposes, and every holder of Notes
heretofore or hereafter authenticated and delivered shall be bound hereby. The
Trustee makes no representation or warranty as to the validity or sufficiency of
this Supplemental Indenture.
SECTION IV.10 Counterparts. The parties hereto may sign one or
more copies of this Supplemental Indenture in counterparts, all of which
together shall constitute one and the same agreement.
SECTION IV.11 Headings. The headings of the Articles and the
sections in this Guarantee are for convenience of reference only and shall not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof.
D-5
<PAGE> 107
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NAME OF GUARANTOR]
By:
--------------------------------------
Name:
Title:
Address:
[COMPANY]
By:
--------------------------------------
Name:
Title:
[Add signature block for any other existing
Guarantor]
[TRUSTEE]
By:
--------------------------------------
Name:
Title:
D-6
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
dated as of
August 1, 1997
Among
LII EUROPE S.A.R.L.
as Buyer
LAROCHE INDUSTRIES INC.
as Guarantor
RHONE-POULENC CHIMIE S.A.
as Seller
And
RHONE L S.A.S.
as the Issuer of the Shares
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
PURCHASE AND SALE OF SHARES .............................................. 3
- ---------------------------
ARTICLE 2
REPRESENTATIONS AND WARRANTIES ........................................... 8
- ------------------------------
ARTICLE 3
COVENANTS ............................................................... 25
- ---------
ARTICLE 4
CONDITIONS .............................................................. 32
- ----------
ARTICLE 5
CLOSING ................................................................. 35
- -------
ARTICLE 6
INDEMNIFICATION ......................................................... 36
- ---------------
ARTICLE 7
ENVIRONMENTAL INDEMNIFICATION ........................................... 42
- -----------------------------
ARTICLE 8
TERMINATION ............................................................. 48
- -----------
ARTICLE 9
DEFINITIONS ............................................................. 49
- -----------
ARTICLE 10
GUARANTY ................................................................ 56
- --------
ARTICLE 11
MISCELLANEOUS ........................................................... 56
- -------------
</TABLE>
6
<PAGE> 3
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("this Agreement"), dated as of
August 1, 1997, among:
(i) LII Europe S.A.R.L., a societe a responsabilite
limitee organized under the laws of France, having a corporate capital
of FF 1,500,000, whose head office is located at 15, avenue du Marechal
Joffre, 92000 Nanterre, France, registered with the Registry of
Commerce and Companies of Nanterre under the number B 412 883 019,
represented by Bertrand Pinet ("Buyer");
(ii) LAROCHE INDUSTRIES INC., a corporation organized
under the laws of the State of Delaware, United States of America,
whose principal executive office is located at 1100 Johnson Ferry Road
N.E., Atlanta, Georgia 30342-1708, U.S.A., which owns directly or
indirectly all of the outstanding shares of Buyer, represented by W.
Walter LaRoche, III ("Guarantor");
(iii) RHONE-POULENC CHIMIE S.A., a societe anonyme
organized under the laws of France, having a corporate capital of FF
2,703,447,200, whose head office is located at 25 quai Paul Doumer,
92408 Courbevoie Cedex, France, registered with the Registry of
Commerce and Companies of Nanterre under the number B 642 014 526,
represented by ______________ ("Seller"); and
(iv) RHONE L S.A.S., a societe par actions simplifiee
organized under the laws of France (and whose name will be changed on
or prior to Closing to ChlorAlp S.A.S.), having a corporate capital of
FF 250,000, whose head office is located at 25 quai Paul Doumer, 92408
Courbevoie Cedex, France, registered with the Registry of Commerce and
Companies of Nanterre under the number B 411 129 612, represented by
Chantal Rubin ("Company"):
Certain terms used in this Agreement are defined in Article 9 hereof.
<PAGE> 4
-2-
W I T N E S S E T H:
WHEREAS, Seller is the owner of 100% of the shares of the Company;
WHEREAS, Seller operates at its Pont de Claix, Hauterives and Saint Fons
facilities a business unit engaged principally in the manufacture of
chlor-alkali products operated by or on behalf of Seller and comprising assets,
liabilities, business, product lines and going concern value representing a
complete and autonomous branch of activity (herein referred to as the
"Division");
WHEREAS, on the Closing Date, Seller shall have transferred to the Company
the Transferred Assets and the Transferred Liabilities of the Division in
exchange for 3,024,740 newly issued shares, par value FF100, pursuant to a
capital increase (all of the shares of the Company collectively referred to as
the "Shares") in accordance with the terms hereof and by means of an apport
partiel d'actif ("Transfer") pursuant to a transfer agreement (traite d'apport
partiel d'actif) (herein referred to as the "Transfer Agreement", in the form
attached hereto as Exhibit I), entered into between Seller and the Company on
July 29, 1997;
WHEREAS, the Division is supplied at the Pont de Claix site with
electricity and steam produced by a Centrale Electricite Vapeur belonging to
Seller ("CEV");
WHEREAS, Seller is also supplied at the Pont de Claix site (the "Pont de
Claix Site") with electricity and steam produced by the CEV;
WHEREAS, CEVCO ("CEVCO") is a French Groupement d'Interet Economique,
without corporate capital, whose head office is located at 12, rue Notre Dame
des Victoires, 75002 Paris, and which is registered with the Registry of
Commerce and Companies of Paris under the number C 412 577 835;
WHEREAS, Seller and the Company are the sole members of CEVCO;
<PAGE> 5
-3-
WHEREAS, on or prior to the Closing Date, Seller shall have caused the
transfer to CEVCO of the CEV Transferred Assets and the CEV Transferred
Liabilities of the CEV business in accordance with the terms hereof and by means
of an apport mixte ("CEV Transfer") pursuant to a transfer agreement (traite
d'apport) (herein referred to as the "CEV Transfer Agreement", in the form
attached hereto as Exhibit II), entered into between Seller and CEVCO on July
29, 1997;
WHEREAS, immediately subsequent to the transfer to CEVCO of the CEV
Transferred Assets and the CEV Transferred Liabilities pursuant to the CEV
Transfer Agreement, but prior to the Closing, CEVCO shall have constituted
capital in the amount of FF 73,010,000 divided into 730,100 interests ("CEVCO
Shares") and Seller shall have sold to the Company sixty percent (60%) of the
CEVCO Shares for cash in the amount of FF 43,806,000 pursuant to a stock
purchase agreement (herein referred to as the "CEVCO Stock Purchase Agreement",
substantially in the form attached hereto as Exhibit III);
WHEREAS, after giving effect to such sale pursuant to the CEVCO Stock
Purchase Agreement, the Company will own sixty percent (60%) of the CEVCO Shares
and Seller will own forty percent (40%) of the CEVCO Shares;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, 50% of the Shares, for the purchase price and upon the terms and
conditions hereinafter set forth;
WHEREAS, in order to induce Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Guarantor is willing to enter
into this Agreement and to guarantee the obligations of Buyer pursuant to
Article 10 hereof.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1
<PAGE> 6
-4-
PURCHASE AND SALE OF SHARES
1.1 Sale of Shares. Subject to the terms and conditions hereof, Seller
agrees to sell, assign and transfer to Buyer and Buyer agrees to purchase from
Seller, on the Closing Date, 1,512,370 of the Shares, representing 50% of the
Shares.
1.2 Purchase Price and Payment. (a) The purchase price ("Purchase Price")
for the Shares to be purchased hereunder shall be one hundred twenty eight
million five hundred fifty one thousand four hundred fifty French Francs (FF
128,551,450) (as calculated pursuant to Schedule 1.2) and shall be payable at
Closing (as defined in Section 5.1). The Purchase Price has been determined by
mutual agreement on the basis of the valuation of the Division as set forth in
the Transfer Agreement, less a discount of fifteen percent (15%) to reflect the
sale of less than 100% of the Shares and the shared control of the Company.
(b) Payment of the Purchase Price under this Agreement shall be made to
Seller by Buyer by Bank of France wire transfer (virement Banque de France) in
immediately available funds to an account of Seller designated by it for such
purpose.
(c) There shall be no adjustment of the Purchase Price between Buyer and
Seller; instead, Buyer and Seller shall cause the Company and Seller, or CEVCO
and Seller, respectively, to make the adjustments described in Section 1.3 in
connection with the Transfer and the CEV Transfer. Similarly, there shall be no
adjustment of the purchase price between Seller and the Company payable under
the CEVCO Stock Purchase Agreement, because of the adjustments to be made
between Seller and CEVCO which are described in Section 1.3 in connection with
the CEV Transfer.
1.3 Adjustments Between Seller and the Company and Between Seller and
CEVCO.
1.3.1 Base Statements. (a) Attached hereto as Schedule 1.3.1(a) is
a balance sheet of the Division which
<PAGE> 7
-5-
reflects, as of December 31, 1996 ("Reference Date") but subject to mutually
agreed adjustments, the values of the respective line items and reference
accounts which are set forth in the Transfer Agreement ("Company Base
Statement"). The Company Base Statement has been prepared in accordance with
Seller's Accounting Principles (as defined in Section 2.1.4 hereafter).
(b) Attached hereto as Schedule 1.3.1(b) is a balance sheet of the CEV
business which reflects, as of the Reference Date but subject to mutually agreed
adjustments, the values of the respective line items and reference accounts
which are set forth in the CEV Transfer Agreement ("CEVCO Base Statement"). The
CEVCO Base Statement has been prepared in accordance with Seller's Accounting
Principles. As used herein, the term "Base Statements" means the Company Base
Statement and the CEVCO Base Statement.
1.3.2 Adjustment Assumptions. (a) The adjustments to be made under
this Section 1.3 shall be made only and exclusively in respect of: (i) the
working capital line items referred to under the heading Actif Circulant in
section 2.2 of the Transfer Agreement (exclusive of the cash portion thereof
used by the Company to pay the purchase price under the CEVCO Stock Purchase
Agreement) ("Company Cash and Inventory"); (ii) the liabilities referred to in
section 2.3 of the Transfer Agreement (i.e., the Transferred Liabilities as
defined in Section 4.1.3 hereafter); (iii) the working capital line items
referred to under the heading Actif Circulant in Section 2.1 of the CEV Transfer
Agreement ("CEVCO Cash and Inventory"); and (iv) the liabilities referred to in
Section 2.2 of the CEV Transfer Agreement (i.e., the CEV Transferred Liabilities
as defined in Section 4.1.4 hereafter). These line items are set forth on
Schedule 1.3.5.
(b) As used herein with reference to the Division or the CEV Business,
the term "Cash and Inventory" means the sum of cash and cash equivalents
(exclusive of the cash portion thereof used to pay the purchase price under the
CEVCO Stock Purchase Agreement), plus the value of inventory, determined on the
basis of Seller's Accounting Principles, where inventory shall include only raw
materials, work in process, consumable processing supplies, specific spare
parts, and finished goods.
<PAGE> 8
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1.3.3 Closing Statements. As soon as practicable and, in any event,
not later than thirty (30) calendar days after the Closing, Seller shall deliver
to:
(a) the Company and Buyer a statement reviewed by Seller's Auditor
("Company Closing Statement"), setting forth Seller's determination of (i)
the amount of the Company Cash and Inventory as of the Closing Date; (ii)
the amount of the Transferred Liabilities as of the Closing Date; and
(iii) the amount of any Post-Closing Adjustment Amount to be paid pursuant
to Section 1.3.5 hereunder; and
(b) CEVCO and Buyer a statement reviewed by Seller's Auditor (the
"CEVCO Closing Statement"), setting forth Seller's determination of (i)
the amount of CEVCO Cash and Inventory as of the Closing Date; (ii) the
amount of the CEV Transferred Liabilities as of the Closing Date; and
(iii) the amount of any Post-Closing Adjustment Amount to be paid pursuant
to Section 1.3.5 hereunder.
The Company Closing Statement and the CEVCO Closing Statement (each a "Closing
Statement") shall be prepared on a basis consistent with the Base Statements in
accordance with Seller's Accounting Principles. Buyer's Auditor, on behalf of
Buyer, shall have access to all workpapers prepared by Seller's Auditor and to
accounting documents of Seller to the extent relating exclusively to the
Division in connection with its review of the Closing Statements. Seller's and
Buyer's Auditors shall limit their review to the line items referred to on
Schedule 1.3.5.
1.3.4 Disputes Regarding Closing Statements. (a) Buyer shall have
twenty (20) business days after the delivery to Buyer of the Closing Statements
in which to review the Closing Statements and the workpapers referred to above
related thereto. Unless Buyer notifies Seller in writing within such twenty-day
period of any objection to the Closing Statements, specifying in reasonable
detail the items and amounts subject to such objection ("Disputed Items"), the
Closing Statements (including the Post-Closing Adjustment Amounts, if any, shown
thereon) shall be conclusive and binding on Buyer and Seller.
<PAGE> 9
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If within such twenty-day period, Buyer notifies Seller in writing of any such
objection, then Buyer and Seller shall use reasonable efforts for fifteen (15)
business days after the xpiration of such initial twenty-day period to resolve
in good faith their differences and agree upon any adjustments to the Closing
Statements (including any Post-Closing Adjustment Amounts shown thereon). Any
Disputed Items which are not resolved by the mutual agreement of Buyer and
Seller within such fifteen-day period shall be submitted for resolution to the
Paris, France office of Price Waterhouse or such other internationally
recognized accounting firm as is mutually acceptable to Buyer and Seller and
independent of each of them and failing such mutual agreement an internationally
recognized accounting firm independent of each of them designated by the
President of the Commercial Court of Paris statuant en refere ("Independent
Accounting Firm"). Seller and Buyer shall instruct the Independent Accounting
Firm to limit its examination to the unresolved Disputed Items, to resolve any
unresolved Disputed Items affecting the Closing Statements in such manner as to
preserve the conformity of the Closing Statements with the requirements
described in Section 1.3.3 hereof and to use its best efforts to make its
determination thereon within twenty (20) business days after its engagement
hereunder. The Independent Accounting Firm shall hear both parties and their
advisers and shall in all respects enforce the "principe du contradictoire". The
resolution of any such previously unresolved Disputed Items by such Independent
Accounting Firm shall be made in a written notice delivered to Buyer and Seller
as promptly as practicable (which written notice shall set forth the amount of
any Post-Closing Adjustment Amounts as finally determined) and shall be final,
conclusive and binding upon Seller, Buyer, the Company and CEVCO. Seller and
Buyer each shall pay one-half of the fees and expenses charged by the
Independent Accounting Firm.
(b) Each Closing Statement to which Buyer does not object as provided in
Section 1.3.4(a) hereof, or to which Seller and Buyer agree, or as otherwise
conclusively determined pursuant to Section 1.3.4(a) hereof (any such final form
of Closing Statement being referred to herein as the "Company Final Closing
Statement" for the Company and the "CEVCO Final Closing Statement" for CEVCO,
and collectively the "Final Closing Statements") shall be used in determining
the Post-Closing
<PAGE> 10
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Adjustment Amounts and any further adjustments, which will be promptly paid by
Seller to the Company, or by the Company to Seller, and/or by Seller to CEVCO,
or by CEVCO to Seller, as the case may be.
1.3.5 Determination of any Post-Closing Adjustment Amounts. The
payment of the post-closing adjustments between Seller and the Company and/or
between Seller and CEVCO as the case may be and the amount thereof, if any,
shall be determined as follows ("Post-Closing Adjustment Amounts"):
(i) If (A) the aggregate value of the Company Cash and
Inventory as shown on the Company Final Closing Statement less the
Transferred Liabilities as shown on the Company Final Closing Statement
exceeds (B) the aggregate value of the Company Cash and Inventory as
shown on the Company Base Statement less the Transferred Liabilities as
shown on the Company Base Statement, a Post Closing Adjustment Amount
equal to the amount of such excess shall be due and payable by the
Company to Seller in accordance with section 4.2 of the Transfer
Agreement.
(ii) If (A) the aggregate value of the Company Cash and
Inventory as shown on the Company Final Closing Statement less the
Transferred Liabilities as shown on the Company Final Closing Statement
is less than (B) the aggregate value of the Company Cash and Inventory
as shown on the Company Base Statement less the Transferred Liabilities
as shown on the Company Base Statement, a Post-Closing Adjustment
Amount equal to the amount of such difference shall be due by Seller to
the Company in accordance with section 4.2 of the Transfer Agreement.
(iii) If (A) the aggregate value of the CEVCO Cash and
Inventory as shown on the CEVCO Final Closing Statement less the CEV
Transferred Liabilities as shown on the CEVCO Final Closing Statement
exceeds (B) the aggregate value of the CEVCO Cash and Inventory as
shown on the CEVCO Base Statement less the CEV Transferred Liabilities
as shown on the CEVCO Base Statement, a Post Closing Adjustment Amount
equal to the amount of such excess shall be due and payable by CEVCO to
Seller in accordance with Section 4.2 of the CEV Transfer Agreement.
<PAGE> 11
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(iv) If (A) the aggregate value of the CEVCO Cash and
Inventory as shown on the CEVCO Final Closing Statement less the CEV
Transferred Liabilities as shown on the CEVCO Final Closing Statement
is less than (B) the aggregate value of the CEVCO Cash and Inventory as
shown on the CEVCO Base Statement less the CEV Transferred Liabilities
as shown on the CEVCO Base Statement, a Post-Closing Adjustment Amount
equal to the amount of such difference shall be due by Seller to CEVCO
in accordance with Section 4.2 of the CEV Transfer Agreement.
(v) For the avoidance of doubt, Schedule 1.3.5 hereto
sets forth hypothetical determinations of the Post-Closing Adjustment
Amounts.
1.3.6 Payment. Within eight (8) business days after the lapse of
the twenty (20) business day period referred to in the first sentence of
Section 1.3.4, the estimated amount of any Post-Closing Adjustment Amounts
excluding any amount of any Disputed Items, shall be paid respectively to or by
Seller by or to the Company and/or CEVCO, as the case may be, by bank wire
transfer of the required amount (in immediately available funds). The remaining
unpaid amount of any Post-Closing Adjustment Amounts, if any, shall be paid to
or by Seller, as the case may be, within eight (8) business days of the
resolution of all Disputed Items and determination of each Final Closing
Statement, by bank wire transfer of the required amount (in immediately
available funds). The Post-Closing Adjustment Amounts shall be increased by
interest at a rate of seven percent (7%) per annum accruing from the expiration
of the above-referenced eight day period to the date of payment of such
amounts. Such payment of late interest shall not be deemed to constitute an
agreement or waiver by any of the parties hereto to delay the payment of any
Post-Closing Adjustment Amounts.
<PAGE> 12
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Seller represents and
warrants to Buyer as follows:
2.1.1 Corporate Status.
(a) Seller. Seller is a societe anonyme duly organized and validly
existing under the laws of France and has all requisite corporate power to own
its properties and carry on the business of the Division and the CEV business as
now being conducted.
(b) The Company. (i) The Company is a societe par actions
simplifiee duly organized and validly existing under the laws of France and at
the Closing will have the corporate power and authority to own the properties
and carry on the business of the Division as conducted by Seller. A copy of the
Company's statuts (articles and by-laws) as of the date hereof is annexed hereto
as Schedule 2.1.1(b)(i).
(ii) As of the date hereof, the Company has not conducted any
business and has no assets or liabilities, other than nominal liabilities
incident to its organization. As of the Closing Date, the Company will have (A)
no assets other than the Transferred Assets and the CEVCO Shares transferred to
it pursuant to the CEVCO Stock Purchase Agreement, and (B) no liabilities,
whether accrued, absolute, contingent or otherwise, including but not limited to
off balance sheet liabilities, other than the Transferred Liabilities.
(iii) The Transferred Assets (A) constitute all of the real property
(including, without limitation, buildings, plants and structures but excluding
any buildings, plants and structures outside the perimeter of the Conveyed Real
Property), movable property (including, without limitation, equipment),
intangible property, contract rights (including, without limitation, Material
Contracts and intellectual and industrial property) and other properties and
assets used exclusively or nearly exclusively in the conduct of the Division
prior to the
<PAGE> 13
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Closing, except that no representation is made as to the inclusion in the
Transferred Assets of any accounts receivable or cash assets, or as to the
sufficiency of any accounts receivable or cash assets which may be included in
the Transferred Assets for purposes of the working capital needs of the Company
after the Closing; and (B) are, taking into account the terms of the Related
Agreements, sufficient for the Company to continue to conduct the business of
the Division in the Ordinary Course of Business substantially as conducted by
Seller prior to Closing, subject to the availability to the Company of
sufficient working capital.
(c) CEVCO. (i) CEVCO is a groupement d'interet economique duly
organized and validly existing under the laws of France and at the Closing will
have the corporate power and authority to own the properties and carry on the
CEV business as conducted by Seller. A copy of CEVCO's contrat de groupement
(articles and by-laws) as of the date hereof is annexed hereto as Schedule
2.1.1(c)(i).
(ii) As of the date hereof, CEVCO has not conducted any business
and has no assets or liabilities, other than nominal liabilities incident to its
organization. As of the Closing Date, CEVCO will have (A) no assets other than
the CEV Transferred Assets, and (B) no liabilities, whether accrued, absolute,
contingent or otherwise, including but not limited to off balance sheet
liabilities, other than the CEV Transferred Liabilities.
(iii) The CEV Transferred Assets (A) constitute all of the real
property (including, without limitation, buildings, plants and structures but
excluding any buildings, plants and structures outside the perimeter of the
Conveyed Real Property), movable property (including, without limitation,
equipment), intangible property, contract rights (including without limitation,
Material Contracts and intellectual and industrial property) and other
properties and assets used exclusively or nearly exclusively in the conduct of
the CEV prior to the Closing except that no representation is made as to the
inclusion in the CEV Transferred Assets of any accounts receivable or cash
assets, or as to the sufficiency of any accounts receivable or cash assets which
may be included in the CEV Transferred Assets for purposes of the working
capital
<PAGE> 14
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needs of CEVCO after the Closing; and (B) are, taking into account the terms of
the Related Agreements, sufficient for CEVCO to continue to conduct the business
of the CEV in the Ordinary Course of Business substantially as conducted by
Seller prior to Closing, subject to the availability to CEVCO of sufficient
working capital.
2.1.2 Share Capital. (a) Immediately prior to the Closing and to the
completion of the capital increase contemplated by the Transfer Agreement, the
share capital of the Company will be FF 250,000, consisting of 2,500 shares, par
value FF 100 per share. At Closing, (i) Seller will be the only record and
beneficial owner of the Shares, (ii) all of the Shares will be fully paid-up and
validly issued and will not be subject to any calls or assessments, (iii) there
will be no commitments providing for the issuance of any additional shares of
capital stock of the Company (with or without voting rights), or providing for
the issuance of securities convertible into shares of capital stock or providing
for the issuance of other securities except to the benefit of CIM, Compagnie
Industrielle et Miniere, such as contemplated by the Transfer Agreement, and
(iv) the Shares will not be subject to any contractual restrictions as to the
payment and distribution of dividends, other than such restrictions as may be
contained in the Shareholders Agreement.
(b) Immediately prior to the Closing and to the completion of the
capital increase contemplated by the CEV Transfer Agreement, the share capital
of CEVCO will be FF 73,010,000, consisting of 730,100 shares, par value FF 100
per share. At Closing, (i) Seller and the Company shall be the only record and
beneficial owners of the CEVCO Shares, (ii) Seller will be the record and
beneficial owner of 292,040 CEVCO Shares and the Company will be the record and
beneficial owner of 438,060 CEVCO Shares, (iii) all of the CEVCO Shares will be
fully paid-up and validly issued and will not be subject to any calls or
assessments, (iv) there will be no commitments providing for the issuance of any
additional shares of capital stock of CEVCO (with or without voting rights), or
providing for the issuance of securities convertible into shares of capital
stock or providing for the issuance of other securities, and (v) the CEVCO
Shares will not be subject to any contractual restrictions as to the payment and
distribution of
<PAGE> 15
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dividends, other than such restrictions as may be agreed in writing between the
parties.
(c) For purpose of this Section "beneficial" shall mean having
all rights attached to the French legal ownerships of "nue-propriete et
usufruit".
2.1.3 Title. (a) At the Closing, Seller will have good and
marketable title to the Shares to be purchased hereunder and to all of the
rights afforded thereby, free of all options, privileges, guarantees, liens and
other Encumbrances (as defined in Article 9 hereafter).
(b) At the Closing, Seller and the Company will have good and
marketable title to all of the shares of CEVCO and to all of the rights afforded
thereby, free of all options, privileges, guarantees, liens and other
Encumbrances.
(c) At the Closing, the Company and/or CEVCO, as the case may be,
will have good and marketable title to the Conveyed Real Property, free and
clear of all Encumbrances other than Permitted Encumbrances.
(d) At the Closing, the Company and/or CEVCO, as the case may be,
will have good and marketable title to the Movable Property, free and clear of
all encumbrances other than Permitted Encumbrances.
(e) At the Closing, the Company and/or CEVCO, as the case may be,
will have good and marketable title to the Industrial Property, free and clear
of all encumbrances other than Permitted Encumbrances.
2.1.4 Financial Statements. Attached hereto at Schedule 2.1.4 are
(i) a profit and loss statement (compte de resultat) for the Division and the
CEV business for the period ending June 30, 1996 (the "June 30 Statements")
together with the report of Coopers & Lybrand thereon, and (ii) the Base
Statements referred to in Article 1 hereof. The June 30 Statements and the Base
Statements have been, and the Closing Statements will be, prepared by Seller in
accordance with generally accepted accounting principles in effect in the United
States of America, consistently applied, subject to the
<PAGE> 16
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modifications described in Schedule 2.1.4 hereto (such accounting principles, as
so modified, "Seller's Accounting Principles"). The June 30 Statements present
the results of operations of the Division and the CEV business for the six month
period ended such date in accordance with Seller's Accounting Principles. The
Base Statements do, and the Closing Statements will, fairly present, in
accordance with Seller's Accounting Principles and subject to the modifications
described in Schedule 2.1.4 hereto, the financial position of the Division and
the CEV business as of the respective dates specified therein.
2.1.5 Subsidiaries. Except as disclosed in Schedule 2.1.5 hereto,
the Company and CEVCO have no subsidiaries and do not directly or indirectly own
any capital stock of or other equity interests in any corporation, partnership,
or other person and the Company and CEVCO are not members of or participants in
any partnership, joint venture, groupement d'interet economique or similar
enterprise, other than the Company's interest in the CEVCO Shares acquired
pursuant to the CEVCO Stock Purchase Agreement.
2.1.6 Absence of Certain Changes and Events. Since June 30, 1996,
except as set forth in or contemplated by Schedule 2.1.6 hereto, or this
Agreement, none of the Company, Seller and CEVCO, with respect to the Division
or the CEV business as the case may be, has:
(a) conducted the business of the Division or the business of the
CEV other than in the Ordinary Course of Business;
(b) effected any payment or increase of any bonuses, salaries, or
other compensation to any stockholder, director, officer or employee, or
entered into any employment, severance, or similar Contract with any
director, officer or employee (other than in the Ordinary Course of
Business);
(c) effected the adoption of, or an increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with
any
<PAGE> 17
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employees of the Division or the CEV business (other than in the Ordinary
Course of Business);
(d) suffered any damage to or destruction or loss of any asset or
property of the Division or the CEV business, whether or not covered by
insurance, materially and adversely affecting the properties, assets,
business, financial condition, or prospects of the Division or the CEV
business;
(e) entered into, terminated, or received notice of termination of
(i) any license agreement; or (ii) any Contract or transaction involving a
total commitment by the Division or the CEV business of at least FF
500,000;
(f) made any sale, lease, or other disposition of any asset or
property (other than sales of finished products in the Ordinary Course of
Business), or mortgaged, pledged, or suffered the imposition of
Encumbrances (other than Permitted Encumbrances) on any asset or property
other than in the Ordinary Course of Business;
(g) cancelled or waived any material claims or rights;
(h) acquired the share capital of, or substantially all of the
assets of, any other business;
(i) received any notices that any material supplier or customer has
taken or has overtly threatened taking any steps which could disrupt the
business relationship of the Company with said supplier or customer;
(j) incurred any indebtedness (other than by way of Transferred
Liabilities);
(k) changed its maintenance practices in any material respect;
(l) changed Seller's Accounting Principles; or
<PAGE> 18
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(m) entered into any Contract to do any of the foregoing.
2.1.7 Industrial Property. (a) Schedule 2.1.7(a) hereto contains:
(i) a list of each patent, patent application, registered copyright
and applications therefor, registered trademark and applications therefor,
registered trade name and design (collectively, "Intellectual Property"),
owned by Seller, any Affiliate of Seller, the Company or CEVCO and used in
the operation of the Division or the CEV business, as the case may be
(including application dates, registration numbers and expiration dates),
(B) a list of the trade secrets, including, without limitation, know-how,
process technology and other confidential information (collectively,
"Trade Secrets"), used by Seller or the Company or CEVCO in the operation
of the Division or the CEV business, as the case may be, other than any
such Intellectual Property or such Trade Secrets which are of only minimal
value or usefulness, and (C) a list of any license or other agreement
pursuant to which Seller or the Company or CEVCO has granted the right to
use any such Intellectual Property or Trade Secrets; and
(ii) a list of each license or other agreement pursuant to which
Seller or the Company or CEVCO has obtained the right to use any
Intellectual Property owned by any other person which is used by Seller or
the Company or CEVCO in the operation of the Division or the CEV business,
as the case may be, other than any such licenses or other agreements which
are of only minimal value or usefulness (collectively, "Licenses"). The
Intellectual Property owned by Seller or the Company or CEVCO and used in
the operation of the Division or the CEV business, licenses with respect
thereto, Trade Secrets used in the operation of the Division or the CEV
business, licenses with respect thereto, and Licenses, which are
in such Schedule, are herein collectively referred to as the
"Industrial Property").
(b) Except as set forth on Schedule 2.1.7(b) hereto, Seller has received no
notice, and has no knowledge, that (i)
<PAGE> 19
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the ownership or use by Seller or the Company or CEVCO of any of the Industrial
Property used in the operation of the Division or the CEV business is subject to
any claim by any third party of infringement or other violation of third party
rights or (ii) the rights of Seller or the Company or CEVCO in any of the
Industrial Property used in the operation of the Division or the CEV business
are being infringed or violated by any third party.
2.1.8 Real Property. (a) Schedule 2.1.8 hereto contains (i) a brief
description of the real property (including fixtures, improvements and the real
property attributes of the brine and the chlorine pipelines) that is owned,
leased or otherwise held by Seller, the Company or CEVCO and used by any of them
in the operation of the Division or the CEV business, as the case may be
(herein, the "Real Property"), and (ii) a description of any leases under which
Seller, the Company or CEVCO hold any leasehold interests in any of the Real
Property. Save as otherwise disclosed on such Schedule 2.1.8, all Real Property
is in good operating condition and state of repair, ordinary wear and tear and
routine and periodic maintenance and repair excepted, and such Real Property has
been regularly maintained and repaired in accordance with Seller's historical
standards and practices.
(b) All Real Property reflected in the Base Statements as being owned is
owned free and clear of all Encumbrances except (i) utility and other easements,
minor encroachments and other title defects, statutory liens arising in the
Ordinary Course of Business by operation of law with respect to a liability not
yet due or delinquent and other limitations, restrictions, reservations and
encumbrances of record, none of which impairs in any material respect the
present or anticipated use, value or marketability of the property subject
thereto; and (ii) zoning laws, building use restrictions, variances and other
land use restrictions that do not impair in any material respect the present or
anticipated use, value or marketability of the property subject thereto. Upon
signature of the notarized deed (acte authentique) and the related notarial and
conveyancing documents, and upon completion of statutory publications in
connection therewith, the Company shall acquire good and marketable title to the
real property parcels or volumes identified in the Transfer Agreement and
defined in the
<PAGE> 20
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notarized deed ("Conveyed Real Property"), free and clear of all Encumbrances
except those enumerated at clauses (i) and (ii) above (collectively "Permitted
Encumbrances").
(c) Except as disclosed in Schedule 2.1.8 hereto, (i) Seller has, and as of
the Closing the Company or CEVCO as the case may be will have, all easements and
rights of ingress and egress necessary for utilities and services and for all
operations conducted on the Real Property; and (ii) none of Seller, the Company
and CEVCO has received notice of violation of any zoning or real estate
regulation, ordinance or law applicable to the operations of the Division or the
CEV business and, to Seller's knowledge, there is no such violation, in any such
case that may impair in any material respect the present or anticipated use of
the Real Property subject thereto.
2.1.9 Movable Property. (a) Schedule 2.1.9(a) hereto contains (i) a
list, prepared as of a recent date, of all of the movable property which is used
in the operation of the Division or the CEV business, as the case may be, other
than (x) any such movable property which is obsolete or has been taken out of
service and/or is not necessary to such operations and (y) movable property not
comprised within the Transferred Assets but to be made available to the Company
or CEVCO after the Closing pursuant to the Related Agreements ("Movable
Property"), and (ii) a description of all leases or other agreements under which
any Movable Property is leased to Seller or the Company or CEVCO as the case may
be.
(b) Except as set forth on Schedule 2.1.9(b) hereto or as contemplated by
the Related Agreements, (i) all Movable Property which is used in the operation
of the Division or the CEV business, as the case may be, will be included in the
Transferred Assets or the CEV Transferred Assets, (ii) such Movable Property is
in good operating condition and state of repair, ordinary wear and tear and
routine and periodic maintenance and repair excepted, and (iii) such Movable
Property has been regularly maintained and repaired in accordance with Seller's
historical standards and practices.
(c) Schedule 2.1.9(c) hereto sets forth (i) the capital expenditure and
material maintenance schedules of the Division
<PAGE> 21
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as of the date hereof and (ii) the status and actual expenditures with respect
to such items, as of the date hereof.
2.1.10 Title to Movable Property. At the Closing, the Company or
CEVCO as the case may be will have good and marketable title to all Movable
Property purported to be transferred to them as part of the Transferred Assets
or the CEV Transferred Assets, as the case may be, subject to no Encumbrances,
other than any described on Schedule 2.1.10.
2.1.11 Contracts and Commitments. (a) Schedule 2.1.11(a) hereto
contains a list, as of a recent date, of each of the following Contracts which
directly relates to the operation of the Division or to the operation of the CEV
business (collectively, "Material Contracts"):
(i) each Contract (as defined in Article 9 hereafter)
that involves performance of services or delivery of goods or materials
by Seller, the Company or CEVCO of an amount or value in excess of FF
1,000,000 per year;
(ii) each Contract that involves performance of services
or delivery of goods or materials to Seller, the Company or CEVCO of an
amount or value in excess of FF 1,000,000 per year;
(iii) each Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts
of Seller, the Company or CEVCO in excess of FF 100,000 per year;
(iv) each employment termination or severance agreement
(other than pursuant to an Accord d'Entreprise), or consulting or
personal services agreement which has an aggregate future liability in
excess of FF 100,000 per year and does not contain the right for the
Company or CEVCO, as the case may be, to terminate such agreement
without penalty;
(v) each joint venture or partnership involving a
sharing of profits or losses by Seller, the Company or CEVCO with any
other Person;
<PAGE> 22
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(vi) each Contract for capital expenditures in excess of
FF 100,000; and
(vii) each Contract containing secrecy, confidentiality or
non-competition covenants and affecting the business of the Company as
it is proposed to be conducted after the Closing Date.
(b) Except as set forth in Schedule 2.1.11(b) hereto, such Material
Contracts (i) are enforceable in all material respects by Seller and Seller has
performed all of its material obligations required to be performed thereunder,
(ii) are valid and binding in all material respects upon all parties thereto,
are in full force and effect and, to Seller's knowledge, no party thereto is in
breach of any provision thereof, (iii) will be transferred to the Company or
CEVCO, as the case may be, on the Closing Date, (iv) do not require the consent
or approval of the cocontractor under such Material Contracts in order to
permit the transfer thereof to the Company or CEVCO, as the case may be, (v) do
not contain any change of control provision, (vi) will be enforceable in all
material respects by the Company or CEVCO, as the case may be, and (vii)
constitute all Contracts that are material to the operation of the Division and
the CEV business.
2.1.12 Inventory. At the Closing, the inventory included in the
Transferred Assets and the CEV Transferred Assets will consist of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Company and CEVCO
Base Statements in accordance with Seller's Accounting Principles. All
inventories not written off have been priced at the lower of cost or net
realizable value in accordance with Seller's Accounting Principles. The
quantities of each category of inventory (whether raw materials, processing
supplies, work-in-process, spare-parts or finished goods) are reasonable for
sale or use in the Ordinary Course of Business and with respect to spare-parts
are at levels consistent with past practice.
<PAGE> 23
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2.1.13 Powers of Attorney; Bank Accounts. Schedule 2.1.13 hereto
sets forth (i) the name of each person, corporation, firm, association or
business entity holding a proxy, general or special power of attorney, or other
similar instrument from Seller or the Company relating to the Division or from
Seller or CEVCO relating to the CEV business, and (ii) a brief description of
each bank or other financial institution at which the Company has an account
with respect to the Division or at which CEVCO has an account with respect to
the CEV business and the names of all persons having signature authority over
any such accounts.
2.1.14 Litigation. Except as set forth on Schedule 2.1.14 hereto,
(i) there is no material claim, action, lawsuit, arbitration, judicial or
administrative claim pending or, to the knowledge of Seller, threatened against
Seller or the Company or CEVCO or against the assets or business of the
Division or CEV business, and (ii) neither Seller nor the Company has received
notice that Seller or the Company or CEVCO is subject to any judgment, order or
decree entered in any lawsuit relating to the Division or the Company or CEVCO
or the CEV business or which questions the valid execution, delivery or
performance by Seller or the Company of their respective obligations hereunder
or under the Related Agreements, or their respective consummation of the
transactions contemplated hereby or thereby.
2.1.15 No Broker. Seller does not know of any broker, finder or
financial advisor other than Chase Investment Bank Limited or its Affiliates
(whose fees and expenses are Seller's sole responsibility) who is acting or has
acted on its behalf, or of any person, firm or corporation entitled to receive
any brokerage or finder's or financial advisory fee from Seller, in connection
with the transactions contemplated by this Agreement.
2.1.16 Governmental Permits; Compliance with Legal Requirements.
(a) Each of the permits and authorizations of any Governmental Entity necessary
to conduct the business of the Division and the CEV business as now conducted
("Governmental Permits") (other than the Environmental Permits as defined in
Section 2.1.17 below) is listed on Schedule 2.1.16(a), and is in full force and
effect.
<PAGE> 24
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(b) Except as disclosed on Schedule 2.1.16(b) hereto,
(i) the operation and conduct by Seller of the Division and the
CEV business are and have been in compliance in all material respects
with all Legal Requirements applicable thereto and do not violate any
of the material terms and conditions of any such Governmental Permits;
(ii) no notices have been received by Seller from any Governmental
Entity relating to the termination or cancellation of any such
Governmental Permits and, to Seller's knowledge, no such termination or
cancellation is threatened; and
(iii) no written complaint, citation or notice of violation has been
received by Seller and to Seller's knowledge none is threatened from any
Governmental Entity alleging that Seller has violated any of the terms and
conditions of any such Governmental Permits or that Seller is not in
compliance with any Legal Requirements in connection with the conduct or
operation of the business of the Division or the CEV business, other than
(A) those which have been resolved or otherwise satisfied in the Ordinary
Course of Business since June 30, 1996 without any material adverse impact
upon the conduct of the business of the Division or the CEV business (and
identified in Schedule 2.1.16(b)), and (B) those which Seller reasonably
anticipates will be resolved or otherwise satisfied in the Ordinary Course
of Business without any material adverse impact upon the conduct of the
business of the Division or the CEV business (and identified in Schedule
2.1.16(b)).
(c) CIM (Compagnie Industrielle et Miniere), an RPC Affiliate, holds
title to the mining concession of Chatelard pursuant to a decree dated November
27, 1995 having authorized the transfer of the mining concession of Chatelard to
CIM.
(d) The representations contained in this Section 2.1.16 as they relate to
Environmental Laws are qualified by the
<PAGE> 25
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representations and disclosures of Seller made pursuant to Section 2.1.17
hereunder.
2.1.17 Environmental Permits; Compliance with Environmental Laws.
(a) Schedule 2.1.17(a) hereto contains:
(i) a complete list of all Environmental Permits necessary to
conduct the business of the Division and the CEV business as now
conducted;
(ii) a complete list of all Hazardous Materials and Contaminants
that would be classified as dangerous substances or preparations under
Directive 67/548 of June 27, 1967 on Classification, Packaging and
Labeling of Dangerous Substances, as amended, and Directive 88/379 of June
7, 1988 on Classification, Packaging and Labeling of Dangerous
Preparations, as amended, used, generated or handled by Seller incident to
the manufacture of the Division's products or incident to the CEV
production activity;
(iii) a complete description of the current and historical waste
disposal practices of the Division and of the CEV business since January
1, 1987, including the names and addresses of owners or operators of each
location to which wastes have been or are sent for treatment, storage or
disposal;
(iv) copies of all environmental instructions with continuing
force and effect by any Governmental Entity received by Seller concerning
the Division or the CEV business;
(v) copies of all reports previously filed with Governmental
Entities by Seller since January 1, 1987 pertaining to operation permits
(autorisations d'exploiter), changes in activity or reports on Releases at
the Division and at the CEV business;
(vi) copies of all audit or investigation reports in the control
of Seller concerning releases of Contaminants or Hazardous Materials to
soil or groundwater at the Real Property;
<PAGE> 26
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(vii) a complete list and description of the location of all
underground tanks, aboveground tanks, drums, sumps, pits or other areas
at the Real Property currently or, to the knowledge of Seller, previously
used to contain, store, treat, handle or dispose of Hazardous Materials
(aside from chlorine and natural gas) or Contaminants; and
(viii) a complete description of environmental risks and hazards
tied to the manufacture of the Division's products and to the CEV
business, of which Seller has knowledge, as defined by Article 8.1 of the
Law n degrees 76-663 of July 19, 1976 on regulated facilities
(installations classees), which description shall be deemed to include
the Survey (as defined in Section 7.4 hereof).
(b) Except as set forth in Schedule 2.1.17(b) hereto or in the Survey
attached hereto in Schedule 2.1.17(b):
(i) the operation and conduct by Seller of the Division and the
CEV business are, and since January 1, 1987, have been in compliance with
all Environmental Laws and do not and have not violated any of the
material terms and conditions of any Environmental Permits necessary to
conduct the business of the Division and the CEV business;
(ii) no notices have been received by Seller from any
Governmental Entity relating to the modification, termination or
cancellation of any such Environmental Permits and, to Seller's
knowledge, no such termination or cancellation is threatened; and
(iii) Seller has not received any written communication from a
Governmental Entity alleging that Seller is not in compliance with any
Environmental Laws applicable to the conduct by Seller of the business or
operations of the Division or the CEV, other than those which have been
resolved or otherwise satisfied in the Ordinary Course of Business
without any material adverse impact upon the conduct of the business of
the Division or the CEV business (and identified in Schedule 2.1.17(b)).
<PAGE> 27
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(iv) to Seller's knowledge, no audit or investigation
has been conducted by any private party (including but not limited to
Seller) or any governmental agency concerning releases of Contaminants
or Hazardous Materials to soil or groundwater at the Real Property,
except as identified in Section 2.1.17(a)(vi) hereof; and
(v) except in compliance with Environmental Laws, no
prior owner or operator of the Real Property or the CEV business, has,
to Seller's knowledge, generated, manufactured, transported, treated,
stored, handled, disposed, transferred, or processed any Hazardous
Material or Contaminant at the Real Property, and Seller has no
knowledge of any release or threatened release of any Hazardous
Material or Contaminant at a facility other than the Real Property
that has migrated to or reasonably could migrate to the Real Property.
2.1.18 Employees; Employee Benefits. (a) Schedule 2.1.18(a)
hereto contains:
(i) a list identifying by age, seniority,
classification and annual salary or hourly compensation rate,
respectively the employees of the Division and the employees of the
CEV business as of the date of such list;
(ii) a summary of all modifications from June 30, 1996
in the general level of compensation paid to the Division's or the CEV
business employees;
(iii) a summary of the existing Accord d'Entreprise
applicable to such employees;
(iv) a description of each of the employee benefits
provided to employees of the Division and to the employees of the CEV
business, including but not limited to any pension or retirement
benefits, bonus, profit sharing, stock purchase or stock option plans,
company savings plans or employee funds of the Division or the Company
or the CEV business or CEVCO beyond mandatory French statutory or
regulatory obligations (collectively, "Benefit Plans").
<PAGE> 28
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(b) Except as set forth in Schedule 2.1.18(b) hereto, (i) as of the
Closing, the Company and CEVCO will be in compliance in all material respects
with all statutory and regulatory requirements (and contractual requirements
applicable to any of its employees, or any group or classification of its
employees), including but not limited to safety and health ("securite, hygiene
et sante des salaries") with respect to the employees of the Division and the
CEV business, respectively; and (ii) as of the date of signature hereof, there
is no pending labor strike and, to Seller's knowledge, there is no threatened
labor strike and there has been no organized labor strike of any employees of
the Division or the CEV business within the three years preceding the date of
signature hereof, which has had, at the time considered, a material adverse
impact on the Division or the CEV business.
2.1.19 Taxes, Social Security and Customs. Seller, the Company and
CEVCO have filed with the appropriate Governmental Entities all tax returns, tax
reports, customs duties and social security reports required to be filed in
respect of the activities and employees of the Division, the Company, the CEV
business and CEVCO. Seller, the Company and CEVCO have paid all taxes, social
security charges and customs duties legally due for each of the periods
mentioned on the appropriate returns, or have effected appropriate reserves or
accrued liabilities on the relevant Closing Statement with respect to, or
claimed to be due thereon. None of Seller, the Company and CEVCO is a party to
any material action or proceeding by any Governmental Entity for assessment and
collection of taxes, social security charges or customs duties, nor has any of
them received notice of any claim for such assessment and collection of taxes,
social security charges or customs duties, in respect of the activities and
employees of the Division, the Company, the CEV business and CEVCO.
2.1.20 No Conflict; Governmental Approvals and Filings. The
execution, delivery and performance by Seller, the Company and CEVCO of their
respective obligations under the Transfer Agreement, the CEV Transfer Agreement,
the CEVCO Stock Purchase Agreement, this Agreement and the other documents
contemplated hereby and thereby to which Seller, the Company or CEVCO is or is
to become a party on or prior to the Closing Date, as the
<PAGE> 29
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case may be, and the consummation of the transactions contemplated hereby and
thereby, do not:
(i) conflict with any of the terms or provisions of the
statuts of any such person;
(ii) except as disclosed on Schedule 2.1.11(b), result in a
breach in any material respect of any of the terms or provisions of, or
give rise to a right of termination of, any Material Contract; or
(iii) except as disclosed on Schedule 2.1.20, require any
consent or approval of any French Governmental Entity on the part of
Seller, the Company or CEVCO under any Legal Requirement.
2.1.21 Insurance. (a) Schedule 2.1.21(a) contains with respect to the
Division and the CEV business a description of insurance coverage (including
deductibles, self insurance and the like) and a list of material insurance
policies.
(b) All such material insurance policies are in full force and effect;
however, inasmuch as they have been subscribed at Seller's group level, they
will be automatically terminated at the time of the transfer of the Shares
purchased hereunder.
(c) Schedule 2.1.21(c) contains with respect to the Division and the CEV
business and insofar as the same relate to any of such material insurance
policies a description of all open claims as of a recent date, and a description
of any claim exceeding FF 100,000 made during the period from January 1, 1995
through December 31, 1996.
2.1.22 Customers and Suppliers. Except as disclosed on Schedule
2.1.22 or in Schedule 2.1.6, during the period from June 30, 1996 to the Closing
Date (as defined in Section 5.1 hereof), Seller has received no notice that any
of the suppliers or customers of the Division or the CEV business which is a
party to any Material Contract has terminated or contemplates terminating any
agreement or commercial relationship with Seller with respect to the Division or
the
<PAGE> 30
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CEV business, which termination would result in a Material Adverse Change.
2.1.23 Products. To the knowledge of Seller, except as disclosed on
Schedule 2.1.23, (i) all chlorine, caustic soda and bleach products sold by the
Division during the nine (9) month period prior to Closing conformed to the
specifications applicable thereto and were, as of the date of sale, of
merchantable quality, free from patent or latent defects ("vices apparents ou
caches"), (ii) all chlorine, caustic soda and bleach products manufactured by
the Division prior to Closing conformed, as of the date of manufacture, to the
specifications relating thereto or were, as of the date of manufacture, free
from patent or latent defects, and (iii) there are no unresolved claims with
respect to any such matters involving a claim in excess of FF 100,000.
2.1.24 Certain Payments. To Sellers' knowledge, neither Seller, the
Company or CEVCO, nor any director, officer, agent or employee of Seller, the
Company or CEVCO, has with respect to the business of the Division or the CEV
business, directly or indirectly, (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other similar payment to any
person in violation of any Legal Requirement that is presently in effect, or (b)
established or maintained any "off-the-books" fund or asset that under Seller's
Accounting Principles is required to be recorded in the books and records of
Seller, the Company or CEVCO, as the case may be, and was not so recorded.
2.1.25 Binding Effect. Each of the Transfer Agreement, the CEV
Transfer Agreement, the CEVCO Stock Purchase Agreement, each of the Related
Agreements and this Agreement, to which Seller, the Company or CEVCO, as the
case may be, is or is to become a party on or prior to the Closing Date, (i) is
within the corporate power and authority of Seller, the Company or CEVCO, as the
case may be, (ii) has been duly authorized by all necessary corporate action on
the part of Seller, the Company or CEVCO, as the case may be, and (iii) is or
will be upon the execution and delivery thereof a valid, binding and legal
agreement or obligation of Seller, the Company or CEVCO, as the case may be,
enforceable against it in accordance with its terms.
<PAGE> 31
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2.1.26 Schedules. All information included in the Schedules hereto
was true and correct as of the date thereof, or if no date is indicated, as of
the date indicated therefor in this Agreement, or if not so indicated in this
Agreement, as of the date of this Agreement. A matter disclosed in one Schedule
may be referred to by cross reference to another Schedule; however, whether or
not any Schedule contains any cross reference to any matter disclosed in any
other Schedule, the disclosure of a matter in one Schedule shall constructively
be deemed to be a disclosure of such matter in all other Schedules.
2.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
2.2.1 Corporate Status. Buyer is a societe par actions simplifiee
duly organized and validly existing under the laws of France, and has all
requisite corporate power to own its properties and carry on its business as now
being conducted.
2.2.2 Litigation. There is no claim, action, lawsuit, arbitration,
judicial or administrative proceeding pending or, to the knowledge of Buyer,
threatened against Buyer, which questions the valid execution, delivery or
performance by Buyer of its obligations under this Agreement or any of the other
documents referred to herein, or the consummation by Buyer of the transactions
contemplated hereby.
2.2.3 No Broker. Buyer does not know of any broker, finder or
financial advisor other than Clinvest who is acting or has acted on its behalf,
or of any person, firm or corporation entitled to receive any brokerage or
finder's or financial advisory fee from Buyer, in connection with the
transactions contemplated by this Agreement.
2.2.4 No Conflict, Governmental Approvals and Filings. The
execution, delivery and performance by Buyer of its obligations under this
Agreement and the other documents contemplated hereby to which Buyer is or is to
become a party on or prior to the Closing Date, and the consummation of the
transactions contemplated hereby and thereby, do not (i)
<PAGE> 32
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conflict with any of the terms or provisions of the statuts of Buyer; (ii)
result in a breach in any material respect of any of the terms or provisions of,
or give rise to a right of termination of, any material contract to which Buyer
is a party or by which any of its properties or assets is bound; or (iii) other
than the filing with the Direction du Tresor, require any consent, approval or
action of, filing with or notice to, any Governmental Entity on the part of
Buyer under any Legal Requirement.
2.2.5 Binding Effect. Each of this Agreement and the other documents
contemplated hereby to which Buyer is or is to become a party on or prior to the
Closing Date, (i) is within the corporate power and authority of Buyer, (ii) has
been duly authorized by all necessary corporate action on the part of Buyer, and
(iii) is or will be upon the execution and delivery thereof a valid, binding and
legal agreement or obligation of Buyer, enforceable against it in accordance
with its terms.
2.3 Representations and Warranties of Guarantor. Guarantor repesents
and warrants to Seller as follows:
2.3.1 Corporate Status. Guarantor is a corporation duly organized
and validly existing under the laws of the State of Delaware, United States of
America, and has all requisite corporate power to own its properties and carry
on its business as now being conducted.
2.3.2 Financial Statements. Guarantor has delivered to Seller its
audited consolidated financial statements contained in its Form 10-K Annual
Report for its fiscal year ended February 28, 1997, together with its condensed
unaudited consolidated financial statements for each fiscal quarter subsequent
thereto which have been filed by it with the United States Securities and
Exchange Commission on Form 10-Q. All such consolidated financial statements
fairly present the consolidated financial position of Guarantor and its
consolidated subsidiaries as at the dates, and their consolidated results of
operations and cash flows for the periods then ended, in conformity with
generally accepted accounting principles as in effect in the United States.
<PAGE> 33
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2.3.3 No Material Adverse Change. Since the date of its most recent
audited consolidated financial statements referred to in Section 2.3.2, no event
has occurred which has resulted in a Material Adverse Change.
2.3.4 Financing Arrangements. Guarantor has furnished to Buyer and
Seller a true and complete copy of a binding commitment letter dated March 17,
1997, as extended, for a syndicated bank financing in the amount of U.S.$
160,000,000 (the "Proposed Financing").
2.3.5 Litigation. There is no claim, action, lawsuit, arbitration,
judicial or administrative proceeding pending or, to the knowledge of Guarantor,
threatened against Guarantor, which questions the valid execution, delivery or
performance by Guarantor of its obligations under this Agreement or any of the
other documents referred to herein, or the consummation by Guarantor of the
transactions contemplated hereby.
2.3.6 No Broker. Guarantor does not know of any broker, finder or
financial advisor other than Clinvest (or, in respect of the Noteholder Offer to
Purchase, Chase Securities Inc.) who is acting or has acted on its behalf, or of
any person, firm or corporation entitled to receive any brokerage or finder's or
financial advisory fee from Guarantor, in connection with the transactions
contemplated by this Agreement.
2.3.7 No Conflict, Governmental Approvals and Filings. The
execution, delivery and performance by Guarantor of its obligations under this
Agreement and the other documents contemplated hereby to which Guarantor is or
is to become a party on or prior to the Closing Date, and the consummation of
the transactions contemplated hereby and thereby, do not (i) conflict with any
of the terms or provisions of the certificate of incorporation or by-laws of
Guarantor; (ii) result in a breach in any material respect of any of the terms
or provisions of, or give rise to a right of termination of, any material
contract to which Guarantor is a party or by which any of its properties or
assets is bound; or (iii) require any consent, approval or action of, filing
with or notice to, any Governmental Entity on the part of Guarantor under any
Legal Requirement or US Legal Requirement.
<PAGE> 34
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2.3.8 Binding Effect. Each of this Agreement and the other documents
contemplated hereby to which Guarantor is or is to become a party on or prior to
the Closing Date, (i) is within the corporate power and authority of Guarantor,
(ii) has been duly authorized by all necessary corporate action on the part of
Guarantor, and (iii) is or will be upon the execution and delivery thereof a
valid, binding and legal agreement or obligation of Guarantor, enforceable
against it in accordance with its terms.
ARTICLE 3
CONVENANTS
3.1 Covenants of Seller. Seller hereby covenants and agrees that:
3.1.1 Access to Information. From the date hereof to the Closing
Date, Seller will furnish to Buyer and its counsels and advisers all information
with respect to the affairs and business of the Division and the CEV business
which Buyer may reasonably request.
3.1.2 Business in Ordinary Course. (a) From the date hereof to the
Closing Date, Seller shall and shall cause the Company to carry on the business
of the Division in the Ordinary Course of Business in substantially the same
manner as heretofore conducted, including, without limitation, maintaining the
Division property as it has been maintained through the date hereof and, to the
extent relevant, in accordance with Schedule 2.1.9(c) and keeping the insurance
policies listed in Schedule 2.1.21(a) in force and effect without limiting their
scope and conditions, except as otherwise provided herein.
(b) From the date hereof to the Closing Date, Seller shall and shall cause
CEVCO to carry on the business of the CEV in the Ordinary Course of Business in
substantially the same manner as heretofore conducted, including, without
limitation, maintaining the CEV property as it has been maintained through
<PAGE> 35
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the date hereof and, to the extent relevant, in accordance with Schedule
2.1.9(c) and keeping the insurance policies listed in Schedule 2.1.21(a) in
force and effect without limiting their scope and conditions, except as
otherwise provided herein.
3.1.3 Prohibited Actions. Between the date hereof and the Closing
Date, Seller will not undertake and shall ensure that neither the Company nor
CEVCO undertake any of the acts described in clauses (a) through (m) of Section
2.1.6 hereof, without the prior written consent of Buyer, which shall not be
unreasonably withheld or delayed. Failure of Buyer to respond in writing within
five business days of receipt of notice from Seller that it or the Company or
CEVCO proposes to take any of the actions described in the preceding sentence
and describing in reasonable detail the proposed action, shall be deemed to
constitute written consent thereto on the part of Buyer.
3.1.4 Best Efforts to Satisfy Conditions. Between the date of this
Agreement and the Closing Date, Seller will use its Best Efforts to cause all
conditions that are in part or in whole in its control contained in Article 4
hereof to be satisfied.
3.1.5 Employees. Seller shall bear any and all costs (including but
not limited to severance indemnities, paid vacations, notice period indemnities,
additional damages) associated with the termination of Seller's employees who
shall not have been transferred to the Company or CEVCO in the context of the
transaction contemplated hereby and who shall have successfully (by judicial
action or further to a settlement agreement with the Company and/or CEVCO)
claimed a right to such transfer pursuant to Article L122-12 of the French Labor
Code. Buyer shall inform Seller of any proposed settlement with an employee and
obtain Seller's prior approval, such approval not being unreasonably withheld.
3.1.6 Waivers of Liens and Consents. Seller shall, without expense
to Buyer, the Company or CEVCO, obtain lien waivers ("mainlevee pure et entiere,
simple et definitive") on or prior to Closing, of liens existing prior to the
Closing Date, from all creditors whose claims relates to any Transferred Asset
or CEV Transferred Asset. With respect to easements and servitudes that burden
the brine pipeline, and
<PAGE> 36
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that do not run with the pipeline but require the consent of the landowner,
Seller shall exert reasonable efforts to obtain such required consents in due
course after Closing and shall hold harmless the Company in the event the
Company shall be held liable financially for breach of such consent requirement
or shall suffer an interruption of brine supply as a result of the failure to
obtain any such required consent.
3.1.7 Required Approval and Notice. Between the date hereof and th
Closing Date, and with respect to such filings and notices which are
contemplated hereby to be filed or given after the Closing Date, promptly after
the Closing Date, Seller will, at Seller's cost, make all filings and give all
notices required by Legal Requirements to be made by it in order to consummate
the transactions contemplated hereby.
3.2 Covenants of Buyer. Buyer hereby covenants and agrees that:
3.2.1 Access to Information. Following the Closing Date, upon
reasonable notice, Buyer and/or the Company and/or CEVCO will give, or cause to
be given, to Seller access, during normal business hours, to records relating to
the Division, the Company and CEVCO for periods prior to the Closing Date, and
will permit Seller to examine and copy such records to the extent reasonably
requested in connection with tax, social security and financial reporting
matters (including without limitation any tax return), audits, including tax
audits or similar proceedings, legal proceedings, governmental investigations
and other regulatory or business purposes involving or otherwise relating to the
Division or any Transferred Assets or Transferred Liabilities (or the income
therefrom or assets thereof) or to the CEV business or any CEV Transferred
Assets or CEV Transferred Liabilities (or the income therefrom or assets
thereof); provided, however, that such right is limited to matters, the origin
of which is prior to the Closing Date and that nothing herein will obligate any
party to take actions that would unreasonably disrupt the normal course of its
business, violate the terms of any contract to which it is a party or to which
it or any of its assets is subject or grant access to any of its proprietary,
confidential or classified information.
<PAGE> 37
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3.2.2 Required Approval and Notice. (a) Buyer will on the date of
execution and delivery of this Agreement file with the French "Direction du
Tresor" the requisite notice of a foreign investment. No such notification or
report shall be filed by Buyer without the prior written approval of Seller,
which approval shall not be unreasonably withheld or delayed.
(b) Except as otherwise contemplated hereby or in any of the documents
contemplated hereby or in any of the documents contemplated thereby, between the
date hereof and the Closing Date, and with respect to any such filings and
notices which are contemplated hereby to be filed or given after the Closing
Date, promptly after the Closing Date, Buyer will, at Buyer's cost, make all
filings and give all notices required by Legal Requirements to be made by it in
order to consummate the transactions contemplated hereby.
3.2.3 Best Efforts to Satisfy Conditions. Between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause all
conditions that are in part or in whole in its control contained in Article 4
hereof to be satisfied.
3.3 Covenants of Guarantor. Guarantor hereby covenants and agrees that:
3.3.1 Required Approval and Notice. Between the date hereof and the
Closing Date, and with respect to any such filings and notices which are
contemplated hereby to be filed or given after the Closing Date, promptly after
such Closing Date, Guarantor will, at Guarantor's cost, make all filings and
give all notices required by Legal Requirements or U.S. Legal Requirement to be
made by it in order to consummate the transactions contemplated hereby.
3.3.2 Best Efforts to Satisfy Conditions. Between the date of this
Agreement and the Closing Date, Guarantor will use its Best Efforts to cause all
conditions that are in part or in whole in its control contained in Article 4
hereof to be satisfied. In particular, but without limitation, Guarantor shall
exert its Best Efforts to complete the Noteholder Offer to Purchase not later
than September 30, 1997.
<PAGE> 38
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3.3.3 Company Intragroup Indebtedness. At the Closing, Guarantor
shall either cause Buyer to purchase from Seller (and Seller shall assign to
Buyer) or shall cause Buyer to refinance the Company to enable the Company to
reimburse to Seller, 42.5% of the total intragroup indebtedness of one hundred
fifty six million French Francs (FF 156,000,000) ("Intragroup Indebtedness")
included in the Transferred Liabilities (said portion of sixty six million three
hundred thousand French Francs (FF 66,300,000), the "Refunded Intragroup
Indebtedness"). It is understood that interest on the Refunded Intragroup
Indebtedness and interest on the balance of the intragroup indebtedness owed to
Seller shall be calculated on the same basis. The terms and conditions of such
indebtedness of the Company to Seller and Buyer shall be governed by term loan
agreements to be entered into between Seller and the Company and Buyer and the
Company on the Closing Date.
3.4 Mutual Covenants. Each of Seller and Buyer and Guarantor and
Company, as the case may be) covenants and agrees as follows:
3.4.1 Publicity. (a) Seller and Buyer agree that, from the date
hereof through the Closing Date, no public release or announcement concerning
the transactions contemplated hereby shall be issued by either party without the
prior consent of the other party (which consent shall not be unreasonably
withheld or delayed), except as such release or announcement may be required by
law or the rules or regulations of any securities exchange; provided, however,
that Seller may make internal announcements to its employees regarding the
transactions contemplated hereby and that Buyer may inform its bankers in
connection with the financing of this transaction and may further provide such
information as may be required pursuant to the Noteholder Solicitation; in all
cases, the party required to make the release or announcement shall provide the
other party reasonable time to comment on such release or announcement in
advance of such issuance.
(b) Sellers and Buyer will in addition consult with each other concerning
the means by which the employees, customers, suppliers and others having
dealings with the Division and the CEV business will be informed of the
transactions contemplated
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hereby, provided that the consent required by paragraph (a) above shall have
been obtained.
3.4.2 Confidentiality. (a) Subject to Section 3.4.1 above, between
the date of this Agreement and the Closing Date, Buyer and Seller will maintain
in confidence, and will cause the directors, officers, employees, agents, and
advisors of Buyer and the Division and the CEV business to maintain in
confidence, and not use to the detriment of another party the contents of this
Agreement and the other documents referred to herein and any written, oral, or
other information obtained in confidence from another party in connection with
this Agreement or the transactions contemplated hereby, unless (i) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (ii) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the transactions contemplated hereby, (iii) the disclosure of
such information is required by any Legal Requirements or U.S. Legal Requirement
or the rules and regulations of any national securities exchange, applicable to
such party or any of its Affiliates, (iv) in the case of Buyer and Guarantor,
such disclosure is made in connection with obtaining the Proposed Financing or
completing the Noteholder Offer to Purchase, and is made on a confidential
basis, to persons having an interest in such matters, and their respective
advisors and representatives, or (v) the furnishing or use of such information
is required by or necessary or appropriate in connection with legal or
arbitration proceedings.
(b) In the event that any of the parties hereto and/or any of their
respective subsidiaries and Affiliates shall be obliged, at any time prior to or
after the Closing, to disclose the contents of this Agreement or any of the
other documents referred to herein, or any other confidential information
referred to in Section 3.4.2(a), pursuant to the exception provided in clause
(v) of Section 3.4.2(a), such party shall use its Best Efforts to immediately
inform the other party thereof before disclosing any information to any third
party unless such party is prevented from so informing the other party by any
Legal Requirement or U.S. Legal Requirement.
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(c) If the transactions contemplated hereby are not consummated, each party
will return or destroy such written information provided by the other party as
such other party may reasonably request.
3.4.3 Records. Promptly after the Closing Date, Seller shall
transfer (i) to the Company all agreements, documents, books, records and files,
including records and files stored on computer disks or tapes or any other
storage medium (collectively, "Records"), if any, in the possession of Seller
relating exclusively to the business and operations of the Division, and (ii) to
CEVCO all Records, if any, in the possession of Seller relating exclusively to
the business and operations of the CEV business and/or CEVCO. Seller and Buyer
shall be entitled to make copies of such Records, provided that such Records
shall in all events be kept confidential.
3.4.4 Related Agreements. At or prior to the Closing, the parties
hereto shall, and/or, as the case may be, shall cause their Affiliates
(including but not limited to CEVCO) to, enter into each of the agreements
identified at Schedule 3.4.4, in form and substance mutually satisfactory to the
parties (collectively, together with such other agreements as may be executed
and delivered by the parties as of the date hereof or at the Closing, the
"Related Agreements").
3.4.5 Certain Industrial Property Matters. (a) Promptly after the
Closing Date, Seller shall, and, as the case may be, cause its Affiliates to,
undertake the requisite formalities concerning the assignment to the Company, of
such items of Industrial Property as are set forth on Annex 1 to the Transfer
Agreement and shall record these assignments at Seller's expense with the
appropriate authorities, said formalities to be completed not later than nine
(9) months after the Closing.
(b) Promptly after the Closing Date, Seller shall provide Buyer with all
supporting and background documentation, and all files and correspondence, that
relate to the items of Industrial Property set forth at Annex 1 to the Transfer
Agreement.
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(c) For a period of three (3) months following the Closing Date, and upon
the Company's or CEVCO's request, Seller agrees to continue to pay all
maintenance and renewal fees with respect to the items of Industrial Property
that are set forth on Annex 1 to the Transfer Agreement. Seller and Buyer shall
cause the Company or CEVCO, as the case may be, to reimburse Seller, or, upon
Seller's request, shall provide estimated advances with respect to, the actual
incurred cost of all such maintenance and renewal fees and other fees payable to
patent and trademark offices.
(d) From and after the Closing Date, the Company shall be responsible and
liable for the payment of any royalties and/or license or other payments due to
employees of Seller or Sellers' Affiliates identified at Schedule 3.4.5(d)
having the status of inventor under applicable French laws and regulations and
applicable conventions collectives and due in relation to the Industrial
Property transferred hereby or hereafter pursuant to the terms hereof.
3.4.6 Governmental Permits, Environmental Permits and Consents.
From and after the date hereof and, if the Closing shall occur, for as long as
Seller and Buyer shall remain shareholders of Company, Seller shall use its Best
Efforts, and upon Seller's request, Buyer shall fully cooperate with Seller and
use its Best Efforts to obtain:
(i) all contractual consents identified in Schedule 2.1.11(b) hereto;
(ii) all consents or approvals required for the transfer to the Company or
CEVCO, as the case may be, of the existing Governmental Permits and
Environmental Permits listed on Schedule 2.1.16(a) and Schedule 2.1.17(a),
or to obtain new licenses, permits or other authorizations issued in the
name of the Company or CEVCO, as the case may be, in substitution for the
Governmental Permits and Environmental Permits listed on Schedule
2.1.16(a) and Schedule 2.1.17(a); it being expressly specified that with
respect to the Hauterives mining concession, Seller shall, and shall cause
CIM, one of its Affiliates, to cooperate with the Company and, upon
Seller's request, Buyer shall cooperate with the Company, to obtain a
"Decret en Conseil
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d'Etat" authorizing the transfer to the Company and the registration in
the name of the Company of such mining concession.
3.4.7 Taxes. The parties shall allocate liability on a pro rata
temporis basis for the taxe professionnelle and the taxe fonciere relating to
the Division, the Company and CEVCO businesses for calendar year 1997. Seller
and Buyer shall cause the Company and CEVCO to refund to Seller the amount of
such taxes paid by Seller to the extent allocable to periods after the Closing
Date; provided, however that the amount of taxe professionnelle to be refunded
to Seller by the Company or CEVCO shall be reduced by an amount equal to the
difference between the pro rata amount of the taxe professionnelle recharged by
Seller to the Company and CEVCO and four percent (4%) of the value added (for
taxe professionnelle purposes), if lower, generated by the Company and CEVCO
from January 1, 1997 through the Closing Date.
ARTICLE 4
CONDITIONS
4.1 Conditions to Obligations of Buyer. The obligations of Buyer to
complete the purchase of the Shares to be purchased hereunder on the Closing
Date and to perform its other obligations hereunder to be performed at or prior
to the Closing are subject to the satisfaction at the Closing on the Closing
Date of the following conditions (any one or more of which and of Section 4.3
below may be waived in the sole discretion of Buyer):
4.1.1 Representations and Warranties True and Correct. Seller's
representations and warranties made in this Agreement shall be true and correct
as of the date hereof and as of the Closing Date in all material respects as if
made at and as of the Closing Date, except that any such representations and
warranties which are made expressly as of or with reference to a specified date
need only have been true and correct in all material respects on and as of such
specified date.
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4.1.2 Compliance with Agreement. Seller, the Company and CEVCO shall
have performed and complied in all material respects with all of their
obligations under this Agreement to be performed at or before the Closing on
the Closing Date.
4.1.3 Transfer. Seller shall have transferred on the Closing Date to
the Company the Transferred Assets and the Transferred Liabilities of the
Division pursuant to the Transfer Agreement to be entered into between Seller
and the Company on the date hereof. The assets so transferred to the Company as
listed in the respective annexes thereto are referred to herein as the
"Transferred Assets" and the liabilities so transferred as listed in the
respective annexes thereto are referred to herein as the "Transferred
Liabilities".
4.1.4 CEV Transfer. Seller shall have transferred on the Closing Date
to CEVCO the CEV Transferred Assets and the CEV Transferred Liabilities
pursuant to the CEV Transfer Agreement to be entered into between Seller and
CEVCO on the date hereof. The assets so transferred to CEVCO as listed in the
respective annexes thereto are referred to herein as the "CEV Transferred
Assets" and the liabilities so transferred to CEVCO as listed in the respective
annexes thereto are referred to herein as the "CEV Transferred Liabilities".
4.1.5 Related Agreements. Each of the Related Agreements required to
be executed and delivered at or prior to the Closing shall have been duly
executed and delivered by Seller and each of its Affiliates which is to be a
party thereto and, subject to execution and delivery of any thereof to be
executed and delivered by Buyer or any of its Affiliates, shall be in full
force and effect. Seller, the Company and CEVCO shall have taken all actions
contemplated by the Shareholders Agreement to elect or appoint officers and
directors of the Company and CEVCO conforming to the board and officer
composition requirements of the Shareholders Agreement.
4.1.6 Key Employees. Those key employees of the Division identified in
writing by Buyer to Seller by letter dated the date hereof shall have agreed to
enter into employment agreements with the Company.
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4.1.7 Contractual Consents. The parties to the Material Contracts
identified at Schedule 4.1.7 hereto shall have consented to the assignment and
transfer of such respective Material Contracts to the Company or CEVCO, as the
case may be; provided, however, that Seller shall be entitled to cure any
failure to obtain a consent by undertaking to provide alternative or substitute
arrangements effective as of the Closing Date providing the benefit of such
Material Contracts to the Company or CEVCO, as the case may be, in a manner
reasonably satisfactory to Buyer.
4.1.8 Noteholder Offer to Purchase. Guarantor shall have completed the
Noteholder Offer to Purchase, or shall otherwise obtained consents, waivers
and/or releases from the Noteholders sufficient to permit Guarantor and Buyer
to complete the transactions contemplated hereby in conformity with the
indenture governing the U.S.$ 100,000,000 13% Senior Notes due 2004.
4.2 Conditions to Obligations of Seller. The obligations of Seller to
complete the sale of the Shares to be sold hereunder on the Closing Date and to
perform its other obligations hereunder to be performed at or prior to the
Closing are subject to the satisfaction at the Closing on the Closing Date of
the following conditions (any one or more of which and of Section 4.3 below may
be waived in the sole discretion of Seller):
4.2.1 Representations and Warranties True and Correct. Buyer's and
Guarantor's representations and warranties made in this Agreement shall be true
and correct in all material respects as of the date hereof and as of the
Closing Date as if made at and as of the Closing Date, except that any such
representations and warranties which are made expressly as of or with reference
to a specified date need only have been true and correct in all material
respects on and as of such specified date.
4.2.2 Compliance with Agreement. Buyer and Guarantor shall each have
performed and complied in all material respects with all of their respective
obligations under this Agreement to be performed at or before the Closing on
the Closing Date.
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4.2.3 Related Agreements. Each of the Related Agreements required to
be executed and delivered at or prior to the Closing shall have been duly
executed and delivered by Buyer and each of its Affiliates which is to be a
party thereto and, subject to execution and delivery of any thereof to be
executed and delivered by Seller or any of its Affiliates, shall be in full
force and effect. Buyer, the Company and CEVCO shall have taken all actions
contemplated by the Shareholders Agreement to elect or appoint officers and
directors of the Company and CEVCO conforming to the board and officer
composition requirements of the Shareholders Agreement.
4.2.4 Turbine Lease Counterguarantee. Guarantor shall have executed
and delivered to Seller a turbine lease counterguarantee or other credit
support with respect to the counterguarantee of a portion of Seller's guarantee
obligations incurred in connection with the assignment and transfer of rights
and obligations under the turbine lease between Seller and UFB Locabail
identified in Schedule 2.1.9(a)(ii) hereto, in form and substance satisfactory
to Seller ("Turbine Lease Counterguarantee").
4.3 Mutual Conditions.
4.3.1 Governmental Consents. All consents of Governmental Entities
that may be required to be obtained as a condition to closing the transactions
contemplated hereby in compliance with Legal Requirements shall have been
obtained.
4.3.2 No Injunction, etc. No action or proceeding shall have been
instituted by any Governmental Entity in any court or in or before any
governmental agency or other authority to enjoin, restrain, prohibit, or impose
any material restrictions upon the conduct of any business in connection with,
the consummation of the transactions contemplated hereby, which would legally
prevent Buyer and/or Seller from consummating such transactions or which would
make the consummation of such transactions commercially infeasible for either
Buyer or Seller.
4.3.3 Permis d'Exploitation. The aggregate capital expenditures
required to be incurred by the Company in order to obtain a new permis
d'exploitation for the Company shall not be
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projected to exceed forty five million French Francs (FF 45,000,000).
ARTICLE 5
CLOSING
5.1 Closing. The closing hereunder ("Closing") shall take place at the
offices of Seller's counsel, Jones, Day, Reavis & Pogue, 62 rue du Faubourg
Saint Honore, 75008 Paris, France, at 9:00 A.M. local time, on the business day
selected by the parties which is at the latest seven (7) business days after
the parties have indicated to each other that all conditions to Closing
contained in Article 4 have been or may be met within seven (7) business days,
and in any case not later than November 15, 1997, or at such other place and at
such other time and date as may be mutually agreed upon in writing by Buyer and
Seller ("Closing Date), and shall be immediately preceded by the closing of the
transactions contemplated by the CEVCO Stock Purchase Agreement.
5.2 Deliveries. At the Closing:
5.2.1 Seller's Deliveries. Seller shall deliver, or shall cause to be
delivered, to Buyer the following:
(a) Duly signed and completed stock powers ("ordres de
mouvement") in favor of Buyer or its designee(s) for all of the Shares
purchased hereunder.
(b) The stock transfer register (registre des mouvements de
titres) and the stockholder register (registre des comptes
d'actionnaires) of the Company.
(c) A certified copy of the minutes of all meetings of
shareholders and directors of the Company and of CEVCO held since
their formations, including the minutes of their shareholders'
meetings approving the Transfer Agreement and the CEV Transfer
Agreement and the transactions contemplated thereby.
(ii) A certified copy of the minutes or relevant
extracts thereof of all meetings of board of directors
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(and of shareholders if required) of Seller approving the Transfer
Agreement, the CEV Transfer Agreement, this Agreement and the
transactions contemplated hereby.
(d) An "extrait K-bis" of each of the Company and CEVCO dated
no earlier than three months prior to the Closing Date.
(e) Executed counterparts of each of the Related Agreements.
(f) A certificate of a duly authorized officer of Seller
dated the Closing Date attesting as to the fulfillment of the
conditions set forth at Sections 4.1.1 and 4.1.2 above as of the
Closing Date.
(g) Those contractual consents under Material Contracts
required pursuant to Section 4.1.7 hereof.
5.2.2 Buyer's Deliveries. Buyer shall deliver, or shall cause
to be delivered, to Seller the following:
(a) The payment of the Purchase Price by bank wire transfer
in immediately available funds as set forth at Section 1.2(b) hereof,
to the account previously designated by Seller to Buyer.
(b) Funds in the full amount of the Refunded Intragroup
Indebtedness.
(c) Certified copies of the resolutions of the Board of
Directors of Buyer authorizing the execution and delivery of this
Agreement and all other documents referred to herein to which Buyer is
to be a party on or prior to the Closing Date and the consummation of
the transactions contemplated hereby.
(d) Certified copies of the resolutions of the Board of
Directors of Guarantor authorizing the execution and delivery of this
Agreement and all other documents referred to herein to which
Guarantor is to be a party on or prior to the Closing Date and the
consummation of the transactions contemplated hereby.
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(e) An "extrait K-bis" of Buyer dated no earlier than three
months prior to the Closing Date.
(f) Executed counterparts of each of the Related Agreements.
(g) Copies of all documents incident to the Noteholder Offer
to Purchase and the completion of the Proposed Financing.
(h) Certificates of duly authorized officers of Buyer and
Guarantor dated the Closing Date attesting as to the fulfillment of
the conditions set forth at Sections 4.2.1 and 4.2.2 above as of the
Closing Date.
(i) The Turbine Lease Counterguarantee, duly executed by
Guarantor.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by Seller. Subject to the terms and conditions of
this Agreement (and, with respect to Environmental Indemnifiable Losses, as
defined in Section 7.3 below, subject to Article 7 hereof), Seller agrees to
indemnify and hold Buyer, the Company and CEVCO harmless from and against any
and all liabilities, obligations, damages, deficiencies, losses, claims,
actions, lawsuits, proceedings, judgments, demands, costs, penalties, and
expenses (including reasonable attorneys' fees) ("Indemnifiable Losses")
suffered or incurred by Buyer and/or the Company and/or CEVCO and arising or
resulting from:
(a) any breach of any representation or warranty of Seller
contained in Section 2.1 hereof, (except to the extent any such breach
is waived by Buyer pursuant to Section 4.1 hereof and except to the
extent Buyer had actual knowledge thereof prior to Closing and failed
to disclose such breach to Seller);
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(b) any breach by Seller of any covenant or obligation of
Seller contained in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Seller
(or any Person acting on its behalf) in connection with the
transactions contemplated hereby;
(d) those items specifically listed on Schedule 6.1; or
(e) any claim by (or by another Person on behalf of) any
current or former employee of the Division or the CEV business for
death, personal injury or related loss, expense, damage, liability or
disability, incurred as the result of exposure to asbestos or
asbestos-containing material during the course of such employment in
so far as the employee becomes aware of the injury within twenty (20)
years of Closing.
6.2 Indemnification by Buyer. Subject to the terms and conditions of
this Agreement (and, with respect to Environmental Indemnifiable Losses, as
defined in Section 7.3 below, subject to Article 7 hereof), Buyer agrees to
indemnify and hold Seller harmless from and against any and all Indemnifiable
Losses suffered or incurred by Seller and arising or resulting from:
(a) any breach of any representation or warranty of Buyer or
Guarantor contained in Section 2.2 or 2.3 hereof, except to the extent
any such breach is waived by Seller pursuant to Section 4.2 hereof;
(b) any breach by Buyer or Guarantor of any covenant or
obligation of Buyer or Guarantor contained in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been
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made by any such Person with Buyer or Guarantor (or any Person acting
on behalf of Buyer or Guarantor) in connection with the transactions
contemplated hereby.
6.3 When Payable. Indemnification under this Article 6 and Article 7
hereof shall be payable with respect to any claim concerning an Indemnifiable
Loss or an Environmental Indemnifiable Loss upon the occurrence of the earliest
of (a) any payment required to be made to any tax or other administrative
authority with respect to any claim from such authority, (b) the resolution of
such claim by mutual agreement between Seller and Buyer and/or the Company
and/or CEVCO, as the case may be, (c) the issuance of a jugement executoire par
provision provided however that if a final judgment subsequently reverses in
whole or in part the jugement executoire par provision, the Indemnified Party
shall promptly reimburse to the Indemnifying Party as and when cash is actually
received by the Indemnified Party from any claimant an amount equal to the
amount received by such Indemnified Party as a result of this final judgment up
to the amount paid by the Indemnifying Party as a result of such claim, (d) the
issuance of a final judgment, award, order or other ruling (which is not
subject to appeal or with respect to which the time for appeal has elapsed) by
a court or arbitral tribunal having jurisdiction over the parties and the
subject matter of such claim or to which such claim was submitted for
resolution by joint agreement between Seller and Buyer and/or the Company
and/or CEVCO, as the case may be, or (e) the final settlement of such claim
with a third party pursuant to mutual authorization by Seller and Buyer.
6.4 Limitations on Indemnification. (a) Neither (i) the aggregate
indemnification obligations of Seller under Section 6.1 above, nor (ii) the
aggregate indemnification obligations of Buyer under Section 6.2 above, shall
exceed fifty percent (50%) of the Total Enterprise Value.
(b) Notwithstanding any other provision of this Agreement: (i) no
claim in respect of any individual event or occurrence shall be deemed to give
rise to an Indemnifiable Loss (other than an Environmental Indemnifiable Loss,
as to which Section 7.8 shall apply) unless and until the liability, loss or
damage claimed exceeds fifty thousand French Francs (FF
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50,000), it being understood that individual events or occurrences of a
substantially similar nature that arise out of a single or directly related
origins, facts or circumstances shall be aggregated for purposes hereof as a
single Indemnifiable Loss; and (ii) neither Buyer (or the Company or CEVCO, as
the case may be) nor Seller shall be entitled to make a claim under Section 6.1
or Section 6.2 respectively unless and until the aggregate amount of claims for
Indemnifiable Losses (other than an Environmental Indemnifiable Loss, as to
which Section 7.8 shall apply)) under clause (i) above exceeds three million
French Francs (FF 3,000,000), in which event (subject to clause (i) above) such
party may assert its right to indemnification hereunder only to the extent of
the excess provided however, that breaches of Seller's covenants set forth at
Sections 3.1.5 and 3.1.6 shall not be subject to the limitations set forth at
paragraph (a) or clauses (b)(i) or (ii) above and provided further that for
purposes of paragraphs (b)(i) and (b)(ii) above and Section 7.8(a) below
Indemnifiable Losses and Environmental Losses shall be calculated without
regard to any associated insurance recovery.
(c) Any limitations on Seller's indemnification obligations set forth
in paragraphs (a) and (b) above or in Section 6.6 below shall not be deemed to
limit or qualify Seller's obligation to transfer the full amount of the
Transferred Assets and the CEV Transferred Assets pursuant to the Transfer
Agreement and the CEV Transfer Agreement respectively, and in the event of
breach of Seller's obligations pursuant to such agreements and to Section
2.1.1(b)(iii) and Section 2.1.1(c)(iii) hereof, Seller shall be under the
obligation of specific performance to transfer and convey to the Company or
CEVCO, as the case may be, such assets as should have been comprised within the
Transferred Assets or the CEV Transferred Assets, as the case may be.
6.5 Procedures Relating to Indemnification of Third Party Claims. (a)
A party ("Indemnified Party") shall use its Best Efforts to notify the party
obligated to provide indemnification under this Agreement ("Indemnifying
Party") of any claim for any indemnification provided for under this Agreement
(including claims for Environmental Indemnifiable Losses) in respect of,
arising out of or involving a claim or demand made by any person against the
Indemnified Party ("Third
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Party Claim"), in writing, in reasonable detail and promptly, and in any event
within thirty (30) business days of the date the Indemnified Party shall have
knowledge of the Third Party Claim. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within ten (10) business days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third Party Claim. The failure of an Indemnified Party so to notify an
Indemnifying Party or to deliver such copies shall not disqualify such
Indemnified Party from receiving indemnification from such Indemnifying Party
and shall not constitute a breach of this Agreement unless and to the extent
that such failure to notify materially and adversely affects the ability of the
Indemnifying Party to defend against any such Third Party Claim.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the Indemnified
Party therefor, to assume, at its own expense, the defense thereof with counsel
selected by the Indemnifying Party; provided, however, that such counsel is not
reasonably objected to by the Indemnified Party. Should the Indemnifying Party
so elect to assume the defense of a Third Party Claim, the Indemnifying Party
shall not be liable to the Indemnified Party for legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof. If
the Indemnifying Party assumes such defense, the Indemnified Party shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Party, it
being understood that the Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnified Party for any period during
which the Indemnifying Party has failed to assume the defense thereof (other
than during the period prior to the time the Indemnified Party shall have given
notice of the Third Party Claim as provided above).
(c) If the Indemnifying Party so elects to assume the defense of any
Third Party Claim, the Indemnified Party shall cooperate with the Indemnifying
Party in the defense or
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prosecution thereof. Such cooperation shall include (upon the Indemnifying
Party's request) the retention and the provision to the Indemnifying Party of
records and information to the extent practicable which are reasonably relevant
to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the Indemnifying Party shall have
assumed the defense of a Third Party Claim, the Indemnified Party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the Indemnifying Party's prior written consent (which
consent shall not be unreasonably withheld). If the Indemnifying Party shall
have assumed the defense of a Third Party Claim, the Indemnified Party shall
agree to any settlement, compromise or discharge of a Third Party Claim which
the Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the Indemnified Party completely in
connection with such Third Party Claim and which would not otherwise adversely
affect the Indemnified Party.
(d) Should the Indemnifying Party elect not to assume the defense of
any Third Party Claim, it shall cooperate at its cost with the Indemnified
Party in the defense or prosecution thereof and shall supply the Indemnified
Party with all applicable information, records or documents it may have to
ensure the best defense of the Indemnified Party.
6.6 Survival of Indemnification. The right of either party to make a
claim for any Indemnifiable Loss under Section 6.1(a) or 6.2(a) shall survive
the Closing Date until the second anniversary of the Closing Date and any such
claim once made within such period shall survive and be indemnifiable in
accordance with the terms hereof, except that (i) claims for breach of Section
2.1.23 shall survive for nine (9) months after the Closing Date; (ii) claims
for Environmental Indemnifiable Losses shall be governed by Section 7.9 hereof;
(iii) claims for breach of Sections 2.1.3(a),(b) and (c) and Section 2.1.19
shall survive for the applicable statute of limitation period plus sixty (60)
days and (iv) claims for breaches of Sections 2.1.3(d) and (e) shall survive
the Closing Date until the tenth anniversary of the Closing Date and (v)
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claims with respect to the matters identified in Schedule 6.1 shall survive for
the respective periods set forth therein.
6.7 Miscellaneous Provisions. (a) The amount of any indemnity payable
hereunder on account of an Indemnifiable Loss or an Environmental Indemnifiable
Loss shall (subject to the second proviso at Section 6.4(b)) be reduced by any
insurance proceeds received by the Indemnified Party with respect thereto, and
further reduced by the value of any net tax benefit or tax savings realized or
reasonably determined to be realizable by the Indemnified Party as a result of
or related to the foregoing (including without limitation a tax deduction or
loss, basis adjustment and/or shifting of income, deductions, gains, loss
and/or credits), and increased by any tax incurred or reasonably expected to be
incurred by the Indemnified Party as a result of or related to the foregoing
(including without limitation any tax related to the inclusion, if required by
law, in gross income of insurance proceeds or a payment pursuant hereto) so
that the net indemnity received after tax corresponds to the Indemnifiable Loss
or Environmental Indemnifiable Loss after taxes. For the calculation of the
Indemnifiable Loss or Environmental Indemnifiable Loss, tax savings and tax
costs will be calculated so that the savings and costs will be optimized in an
equitable fashion.
(b) Any indemnity payment by Seller to Buyer, the Company and/or CEVCO
on account of an Indemnifiable Loss or an Environmental Indemnifiable Loss
shall be understood to constitute damages and not a reduction in the Purchase
Price. Such payment by Seller shall be made to the persons (as between the
Company, CEVCO and/or Buyer) that shall have actually suffered the
Indemnifiable Loss or the Environmental Indemnifiable Loss and to the extent
made to the Company or CEVCO, the Company or CEVCO shall be third party
beneficiaries of Buyer's rights and remedies in respect of the Indemnifiable
Loss or the Environmental Indemnifiable Loss (by way of example, in respect of
breaches of representations, warranties or covenants with regard to the
Division, the CEV business and/or the Company's business or CEVCO's business,
the Indemnifiable Loss or Environmental Indemnifiable Loss shall be paid to the
Company and/or CEVCO, as the case may be (and, to the extent Seller shall fail
to make such payment Buyer shall
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have a direct right of action against Seller), but any breach of
representations, warranties or covenants with regard to title to Shares
constitutes an Indemnifiable Loss directly and actually suffered by Buyer and
therefore shall be paid directly to Buyer), provided that, upon Buyer's
request, the payment of an Indemnifiable Loss or an Environmental Indemnifiable
Loss by Seller with respect to a Third Party Claim may be made directly to the
third party claimant.
ARTICLE 7
ENVIRONMENTAL INDEMNIFICATION
7.1 Environmental Indemnification by Seller. Subject to the terms and
conditions of this Agreement, Seller agrees to indemnify and hold (subject to
Section 6.7(b) hereof) Buyer and Company and/or CEVCO and their respective
officers, directors, employees, agents, successors and assigns harmless from
and against any and all Environmental Indemnifiable Losses (as defined at
Section 7.3 below) suffered or incurred by Buyer or Company and/or CEVCO
resulting from (a) any breach of representation or warranty of Seller contained
in Section 2.1.17 hereof, or (b) any Remedial Action (as defined at Section 7.3
below) for which responsibility is to be borne by Seller in accordance with
Section 7.5 hereof.
7.2 Environmental Indemnification by Buyer. Subject to the terms and
conditions of this Agreement, Buyer agrees to indemnify and hold (subject to
Section 6.7(b) hereof) Seller and Company and/or CEVCO and their respective
officers, directors, employees, agents, successors and assigns harmless from
and against any and all Environmental Indemnifiable Losses suffered or incurred
by Seller or Company and/or CEVCO resulting from any Remedial Action for which
responsibility is to be borne by Buyer in accordance with Section 7.5 hereof.
7.3 Environmental Indemnifiable Losses. "Environmental Indemnifiable
Losses" means any and all damages, costs, claims, losses, liabilities,
penalties, fines, judgments and expenses (including reasonable legal,
consulting and engineering fees and expenses) imposed by, under or pursuant to
Environmental
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Laws, and shall also include without limitation all costs and expenses related
to Remedial Action. "Remedial Action" means any and all actions required (a) by
a Governmental Entity or by applicable Environmental Laws, (b) on account of a
Third Party Claim, (c) to respond to an event materially adversely affecting
the conduct of any of Seller's, Company's and/or CEVCO's business or (d) to
respond to an imminent and/or substantial hazard to human health or to the
Environment, to investigate, monitor, clean up, contain, cure, neutralize,
remediate, remove or treat any Release and shall comprise any actions required
under relevant Environmental Laws or Legal Requirements in respect of brine
wells at the Hauterives site.
7.4 Environmental Survey. Prior to the date hereof, Seller and Buyer
have jointly retained Dames & Moore to perform an environmental assessment of
the Sites, including soil and groundwater sampling, in accordance with the
scope of work set forth at Schedule 7.4 hereto, in order to establish a
baseline with respect to the presence of certain Contaminants as of the Closing
Date (the "Survey"). A copy of the Survey is attached hereto as Schedule 7.4.
7.5 Responsibility for Remedial Action. Subject to Sections 7.1 and
7.2 hereof, (a) Seller shall bear responsibility for Remedial Action relating
to (i) Non-Listed Contaminants; and (ii) Listed Contaminants, up to the
concentrations set forth in Schedule 7.5, unless and to the extent attributable
to the operation of Seller's business after the Closing Date, in which case
Seller shall bear such responsibility. Buyer shall bear responsibility for
Remedial Action relating to Listed Contaminants for the concentrations
exceeding the concentrations set forth in Schedule 7.5, unless and to the
extent attributable to the operation of Seller's business after the Closing
Date, in which case Seller shall bear such responsibility. In the event that
Remedial Action is conducted for Common Contaminants that are attributable to
the conduct of both Company's (and/or CEVCO's) business and Seller's business
(other than through Seller's interests in Company or CEVCO), responsibility for
such Remedial Action shall be shared between Company and Seller in proportion
to the respective responsibility of Company's, CEVCO's and/or Seller's business
for such Release. Any dispute regarding the allocation of responsibility of
Listed Contaminants that cannot
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be resolved by good faith negotiation among the parties within thirty (30) days
after any party has delivered the other party written notice of the dispute,
shall be submitted to such independent environmental consultant as may be
mutually agreed between Buyer and Seller. Said consultant shall, in reliance
upon the conclusions of the Survey and any other information the consultant
chooses to rely on, including new information developed at the Sites through
additional investigation, make a determination as to the appropriate allocation
of responsibility for Remedial Action, based upon its evaluation of the
respective responsibilities of the parties as regards the relevant Releases
that are subject of the Remedial Action. If said consultant can not determine
the origin of the Release(s) of Listed Contaminants, and as a result, the
proportion of the respective responsibility of Company's, CEVCO's and/or
Seller's business for such Release(s), then responsibility for such Remedial
Action shall be shared equally between Company and Seller. If Seller and Buyer
can not agree on the choice of such consultant within a period of thirty (30)
days, or if the consultant mutually chosen by Seller and Buyer shall not accept
such mission, either party shall be entitled to request the designation of an
independent environmental consultant by the President of the Court of Commerce
of Nanterre. The fees and expenses of such consultant shall be shared equally
by Seller and Buyer.
(b) Notwithstanding anything herein to the contrary, any Environmental
Indemnifiable Losses (to the extent that such Environmental Indemnified Losses
relate to Remedial Action(s)) arising from or relating to the Sites
attributable to the operation of Company during joint ownership shall be
allocated in accordance with the portion of shares owned by Buyer and Seller.
(c) It is understood and agreed between the parties that if and to the
extent a Remedial Action is required pursuant to a change in Environmental Law
after the Closing Date, the portion of the Environmental Indemnifiable Loss
resulting from such change in Environmental Law shall be borne by Company.
(d) Buyer shall inform Seller promptly of (i) the results of all
non-routine measurements and sampling of Contaminants on the Sites as may be
undertaken by or on behalf of Buyer,
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Company, CEVCO or their Affiliates, (ii) any material Release, and (iii) any
changes in the use of raw materials and/or industrial procedures or processes,
at the Sites from and after the Closing Date to the extent such measurement,
Release or changes may be relevant to the allocation of responsibility between
Buyer and Seller under Section 7.5(a) hereof. Buyer, Company, CEVCO or their
Affiliates shall use its Best Efforts to keep Seller informed of any action
with relevant Governmental Entities or any building work or action that may
give rise to an enquiry, proceeding or claim with respect to an Environmental
Indemnifiable Loss unless Buyer, Company, CEVCO or their Affiliates shall have
previously consulted with Seller in such regard. To the extent such changes in
the use of raw materials or industrial procedures or processes are considered
by Buyer and Seller to be relevant to the allocation of responsibility between
Buyer and Seller under Section 7.5(a) hereof, either party may require that an
independent environmental consultant, to be mutually agreed upon by Buyer and
Seller, be retained to conduct a new environmental Site(s) assessment to
establish a new baseline for the allocation of responsibility between Buyer and
Seller pursuant to Section 7.5(a) hereof. If Seller and Buyer can not agree on
the choice of such consultant within a period of thirty (30) days, or if the
consultant mutually chosen by the Seller and Buyer shall not accept such
mission, either party shall be entitled to request the designation of an
independent environmental consultant by the President of the Court of Commerce
of Nanterre. The fees and expenses of the consultant shall be shared equally by
Seller and Buyer.
7.6 Procedures with Respect to Remedial Actions.
(a) Subject to the terms and conditions of Section 6.5 hereof, if a
Third Party Claim is made against an Indemnified Party with respect to an
Environmental Indemnifiable Loss, the Indemnifying Party shall be entitled to
discuss and negotiate with the relevant third party or Governmental Entity as
regards the Third Party Claim and in particular as regards any proposed
Remedial Action, it being understood that the Indemnified Party shall also have
the right to participate in such discussions and negotiations. To this effect,
the Indemnified Party shall promptly inform the Indemnifying Party of any
pending or threatened claim or enforcement action, and notify in advance
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and afford the Indemnifying Party the opportunity to participate in any
proposed meeting or discussion with such third party or Governmental Entity.
The Indemnified Party shall also provide to the Indemnifying Party all relevant
information and documents received from such third party or Governmental Entity
as required by Section 6.5 hereof.
(b) The Indemnifying Party shall be entitled to monitor or cause an
independent consultant of its choice to monitor the conduct of the Remedial
Actions. Before initiating any Remedial Action, the Indemnified Party shall
prepare, with the input of the Indemnifying Party, a written document
describing in detail the scope, nature, methodology and estimated cost of
Remedial Actions to be taken (the "Plan"). Preparation of the Plan shall be
deemed a Remedial Action. The Plan shall be prepared in accordance with
Environmental Laws and shall not unreasonably interfere with the conduct of
business of the Indemnified Party. Unless otherwise agreed between the parties,
the Indemnified Party shall be the entity in charge of the conduct of the
Remedial Actions. The Indemnifying Party shall not be liable to indemnify the
Indemnified Party for any and all Remedial Actions made outside the scope of
the Plan. Any dispute regarding the Plan that cannot be resolved by good faith
negotiation among the Indemnifying Party and the Indemnified Party shall be
submitted to such independent environmental consulting firm as may be mutually
agreed between the Indemnifying Party and Indemnified Party. The Indemnified
Party may commence implementation of the Plan prior to the resolution of any
dispute regarding the Plan and shall be indemnified in accordance with the
terms of this Article 7 for the costs incurred in implementing (i) the
nondisputed sections of the Plan and (ii) the disputed sections of the Plan to
the extent approved by the independent environmental consulting firm. If the
Indemnifying Party and Indemnified Party can not agree on the choice of such
independent environmental consulting firm within a period of thirty (30) days,
or if the independent environmental consulting firm mutually chosen by the
parties shall not accept such mission, either party shall be entitled to
request the designation of an independent environmental consulting firm by the
President of the Court of Commerce of Nanterre. The fees and expenses of such
independent environmental consulting firm shall be shared equally by the
Indemnifying Party and Indemnified Party.
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(c) In the event of an imminent hazard to human health or the
Environment, Company or Seller may initiate a Remedial Action without a Plan as
it deems appropriate under the circumstances. The party responding to the
imminent hazard shall promptly notify the other party of the hazard and its
response to the hazard. Such Remedial Action shall be subject to the
indemnification provisions of this Article 7, insofar as subsequently ratified
by the Indemnifying Party, or in the event of dispute, through the dispute
resolution procedures in Section 7.6(b) hereof. After the imminent hazard has
been abated, any follow-up Remedial Actions shall be performed pursuant to
Section 7.6(b) hereof.
7.7 Access. (a) Seller shall be entitled to visit the Real Property
and the Division at least four times a year at dates mutually agreed with
Buyer, during the period of survival of indemnification defined at Section 7.9
below.
(b) Until such time as Company has received, in its name, Classified
Installation Permits for its operating facilities, Seller and Buyer shall
ensure that the manager of Seller's facility at Pont de Claix ("directeur
d'etablissement") shall have reasonable access to Company's operating
facilities to ensure compliance with Environmental Laws, and this manager shall
have the responsibility and authority to make decisions with respect Company's
operations and give instructions to Company employees in the event of imminent
hazards to human health and the environment.
7.8 Limitations on Environmental Indemnification.
(a) Notwithstanding any other provision of this Agreement, neither
Seller nor Buyer shall be entitled to make a claim under Section 7.1 or 7.2
hereof, unless and until the aggregate amount of Environmental Indemnifiable
Losses suffered by Seller or Buyer respectively, or Company and/or CEVCO
exceeds three million French Francs (FF 3,000,000), in which event Seller and
Buyer may assert their rights to indemnification thereunder to the full amount
of the Environmental Indemnifiable Loss.
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(b) Subject to the provisions of Section 7.5 hereof, the aggregate
indemnification obligations of Seller for any Environmental Indemnifiable
Losses resulting from a Remedial Action relating to a Release of Division
Contaminants shall not exceed 50% of the Total Enterprise Value and Seller's
indemnification obligation for any such individual Remedial Action shall not
exceed the percentage of the amount of any such Environmental Indemnifiable
Loss set forth in Schedule 7.8(b) hereto. The indemnification obligations of
Seller for any Environmental Indemnifiable Losses resulting from a breach of
representation or warranty contained in Section 2.1.17 hereof shall not exceed
three hundred fifty million French Francs (FF 350,000,000). The indemnification
obligations of Seller for any Environmental Indemnifiable Losses resulting from
a Remedial Action relating to a Release of Non-Listed Contaminants or Common
Contaminants shall not be capped. Subject to the provisions of Section 7.5
hereof, the aggregate indemnification obligations of Buyer for any
Environmental Indemnifiable Losses resulting from a Remedial Action relating to
a Release of Division Contaminants shall not exceed 50% of the Total Enterprise
Value. The indemnification obligations of Buyer for any Environmental
Indemnifiable Losses resulting from a Remedial Action relating to a Release of
Common Contaminants shall not be capped.
7.9 Survival of Indemnification.
(a) The right of Buyer to make a claim for Environmental Indemnifiable
Losses resulting from a Remedial Action relating to Division Contaminants shall
survive the Closing Date for a period of ten (10) years. The right of Buyer to
make a claim for Environmental Indemnifiable Losses resulting from a breach of
representation or warranty contained in Section 2.1.17 hereof shall survive the
Closing Date for a period of five (5) years. The right of Buyer to make a claim
for Environmental Indemnifiable Losses resulting from a Remedial Action
relating to Non-Listed Contaminants or Common Contaminants shall survive the
Closing Date and shall have no termination date.
(b) The right of Seller to make a claim for Environmental
Indemnifiable Losses resulting from a Remedial Action relating to Division
Contaminants shall survive the Closing Date for a period of ten (10) years
(provided however, that Seller shall
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not be precluded after the expiration of such period from bringing any action
arising under general principles of law). The right of Seller to make a claim
for Environmental Indemnifiable Losses resulting from a Remedial Action
relating to Common Contaminants shall survive the Closing Date and shall have
no termination date.
(c) Claims for Environmental Indemnifiable Losses shall be made in
accordance with Section 6.5 (as regards Third Party Claims) or otherwise in
writing, in reasonable detail and promptly, and in any event within thirty (30)
business days of the date the Indemnified Party shall have knowledge of such
claim, provided that the failure of an Indemnified Party so to notify an
Indemnifying Party shall not disqualify such Indemnified Party from receiving
indemnification from such Indemnifying Party and shall not constitute a breach
of this Agreement unless and to the extent that such failure to notify
materially and adversely affects the ability of the Indemnifying Party to
defend against any such claim.
7.10 Indemnification by Company. For that period of time after the
Closing during which Seller shall remain sole permittee of the Classified
Installation Permit for the Pont de Claix facility, Company shall indemnify and
hold Seller and its officers, directors, employees, agents, successors and
assigns harmless from and against any and all Environmental Indemnifiable
Losses (as defined in Section 7.3 of this Agreement) suffered or incurred by
Seller as permittee of the Classified Installation Permit for the Pont de Claix
facility and arising or resulting solely from the acts of Company; provided,
however, that Company shall have no obligation to indemnify Seller insofar as
such Indemnifiable Losses are attributable to the actions or inactions of
Seller.
7.11 Saint Fons Facility. Subject to Section 7.8 hereof, Seller shall
indemnify and hold Buyer and Company and their respective officers, directors,
employees, agents, successors and assigns harmless from and against any and all
Environmental Indemnifiable Losses resulting or arising from the operation of
the Saint Fons facility prior to the Closing Date. The indemnification
obligation of Seller under this Section 7.11 shall have no termination date.
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ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may, by notice given in writing prior
to or at the Closing, be terminated by (a) mutual written consent of the
parties hereto; or (b) by Buyer, if any of the conditions provided for in
Section 4.1 and Section 4.3 of this Agreement has not been satisfied by October
15, 1997, or if satisfaction of any such condition becomes impossible or
impracticable (other than through the failure of Buyer or Guarantor to comply
with its obligations under this Agreement), and Buyer has not waived such
condition by such date (in which case, and save as set forth in Section 8.3,
the sole remedy for Buyer and Guarantor shall be termination of this Agreement
without liability or indemnity); or (c) by Seller, if the condition to Buyer's
obligation provided for at Section 4.1.8 of this Agreement has not been
satisfied by September 30, 1997 or if any of the conditions provided for in
Section 4.2 and Section 4.3 of this Agreement has not been satisfied by October
15, 1997, or if satisfaction of any such condition becomes impossible or
impracticable (other than through the failure of Seller or the Company to
comply with its obligations under this Agreement), and Seller has not waived
such condition by such date (in which case, the sole remedy for Seller shall be
termination of this Agreement without liability or indemnity).
8.2 Consequences. If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Article 8: (a) this
Agreement shall become void and of no further force or effect, except for the
provisions of (i) Section 11.5(e) relating to certain expenses, (ii) Section
3.4.1 relating to publicity, (iii) Section 3.4.2 relating to confidentiality,
(iv) Sections 2.1.15, 2.2.3 and 2.3.7 relating to finder's fees and broker's
fees, (v) Article 10 relating to the guaranty of Buyer's obligations by
Guarantor and (vi) this Section 8.2; and (b) all confidential information
provided by either party to the other shall be returned to such first party or,
upon such first party's instruction, destroyed.
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8.3 Breach of Covenant. Notwithstanding the foregoing, nothing in this
Article 8 shall be deemed to release any party from any liability for any
willful breach by such party of any of its covenants set forth in this
Agreement.
ARTICLE 9
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to below:
"Affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned
person. A person shall be deemed to control another person if such
person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of the "controlled"
person, whether through ownership of voting securities, by contract,
or otherwise.
"Base Statements" has the meaning specified in Section
1.3.1(b) of this Agreement.
"Benefit Plans" has the meaning specified in Section
2.1.18(a) of this Agreement.
"Best Efforts" means the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to
ensure that such result is achieved as expeditiously as possible;
provided, however, that an obligation to use Best Efforts under this
Agreement does not require the Person subject to that obligation to
take actions that would result in a material adverse change in the
benefits to such Person of this Agreement and the transactions
contemplated hereby.
"Business Day" or "business day" means any day other than a
Saturday, Sunday or a public bank holiday, or the equivalent, for
banks generally under the laws of the
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Republic of France, or for banks generally in the City of New York,
New York, U.S.A.
"Buyer" has the meaning specified in the introductory
paragraph of this Agreement.
"Buyer's Auditor" shall mean Ernst & Young.
"Cash and Inventory" has the meaning specified in Section
1.3.2(b) of this Agreement.
"CEV" has the meaning specified in the recitals of this
Agreement.
"CEVCO" has the meaning specified in the recitals of this
Agreement.
"CEVCO Base Statement" has the meaning specified in Section
1.3.1(b) of this Agreement.
"CEVCO Closing Statement" has the meaning specified in
Section 1.3.3(b) of this Agreement.
"CEVCO Purchase and Supply Agreement" has the meaning
specified in Schedule 3.4.4 of this Agreement.
"CEVCO Shares" has the meaning specified in the recitals of
this Agreement.
"CEVCO Stock Purchase Agreement" has the meaning specified in
the recitals of this Agreement.
"CEVCO Transfer" has the meaning specified in the recitals of
this Agreement.
"CEVCO Transfer Agreement" has the meaning specified in the
recitals of this Agreement.
"CEV Transferred Assets" has the meaning specified in Section
4.1.4 of this Agreement.
"CEV Transferred Liabilities" has the meaning specified in
Section 4.1.4 of this Agreement.
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"Closing Statement" has the meaning specified in Section
1.3.3 of this Agreement.
"Common Contaminant" means any Listed Contaminant which is
stored, processed, generated, manufactured, handled or otherwise used
by Seller's business (other than Company or CEVCO) and by Company or
CEVCO after the Closing Date at either the Pont de Claix site or the
Hauterives site, but only if such substance is stored, processed,
generated, manufactured, handled or otherwise used by both parties at
the same site.
"Company" has the meaning specified in the introductory
paragraph of this Agreement.
"Company Base Statement" has the meaning specified in Section
1.3.1(a) of this Agreement.
"Company Closing Statement" has the meaning specified in
Section 1.3.3(a) of this Agreement.
"Contaminants" means those substances, including Hazardous
Materials, whose Releases are regulated by, or form the basis of
liability under, any Environmental Laws.
"Contract" means any oral or written agreement, contract,
obligation, promise, or undertaking that is legally binding.
"Conveyed Real Property" has the meaning specified in Section
2.1.8(b) hereto.
"Disputed Items" has the meaning specified in Section 1.3.4
of this Agreement.
"Division" has the meaning specified in the recitals of this
Agreement.
"Division Contaminants" means those Listed Contaminants
stored, processed, generated,
1
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manufactured, handled or otherwise used by the Division prior to the
Closing Date and solely by Company after the Closing Date.
"Encumbrance" means any legally binding charge, claim,
condition, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other
attribute of ownership.
"enforceability", "binding and enforceable in accordance with
its terms" or terms of similar import, where they describe an
obligation of a party to any agreement, shall be deemed in all cases
to be subject to applicable bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect.
"Environmental Indemnifiable Losses" has the meaning
specified in Section 7.3 of this Agreement.
"Environmental Laws" means any and all treaties, laws,
regulations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations or permissions in each case in force and
effect in France, applicable to the running of the business of the
Division, the CEV business, Company's business, CEVCO's business
and/or Seller's business, and relating to the protection of the
environment.
"Environmental Permits" means all permits and authorizations
of any Governmental Entity under any Environmental Laws as presently
in effect.
"Final Closing Statements" has the meaning specified in
Section 1.3.4(b) of this Agreement.
"Governmental Entity" or "Governmental Entities" means any
State authority or any court of competent jurisdiction, administrative
agency or commission or other authority or instrumentality, domestic
or foreign,
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including any court, administrative agency, commission or other organ
of the European Union.
"Governmental Permits" has the meaning specified in Section
2.1.16(a) of this Agreement.
"Guarantor" has the meaning specified in the introductory
paragraph of this Agreement.
"Hauterives Services and Supply Agreement" has the meaning
specified in Schedule 3.4.4 of this Agreement.
"Hazardous Materials" means all materials or substances
regulated as explosive, flammable, toxic, hazardous or radioactive
pursuant to any Environmental Laws.
"Indemnifiable Losses" has the meaning specified in Section
6.1 of this Agreement.
"Indemnified Party" has the meaning specified in Section 6.5
of this Agreement.
"Indemnifying Party" has the meaning specified in Section 6.5
of this Agreement.
"Independent Accounting Firm" has the meaning specified in
Section 1.3.4(a) of this Agreement.
"Industrial Property" has the meaning specified in Section
2.1.7(a) of this Agreement.
"Intellectual Property" has the meaning specified in Section
2.1.7(a) of this Agreement.
"Intragroup Indebtedness" means the sum of FF 156,000,000, as
defined in Schedule 3.3.3.
"June 30 Statements" has the meaning specified in Section
2.1.4 of this Agreement.
"knowledge"--an individual will be deemed to have "knowledge"
of a particular fact or other matter if:
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(a) such individual is actually aware of such fact
or other matter; or
(b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other
matter.
A Person (other than an individual) will be deemed to have "knowledge"
of a particular fact or other matter if any individual who is serving,
or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, knowledge of such fact or other matter.
"Legal Requirement" means any and all treaties, laws,
regulations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations or permissions in each case, as in force and
effect on the date hereof in France, applicable to the running of the
business of the Division or the CEV business, exclusive of
Environmental Laws.
"Licenses" has the meaning specified in Section 2.1.7(a) of
this Agreement.
"Listed Contaminants" means those Contaminants and Hazardous
Materials listed in Schedule 7.5.
"material", when used in connection with the Division or the
CEV business, shall mean material to the business of the Division or
the CEV business, respectively.
"Material Adverse Change" shall mean:
(a) with reference to Seller, the Company, CEVCO,
the Division or the CEV business, any change in the business
of the Division or the CEV business (which, for the purposes
hereof, shall be deemed not to comprise (i) changes that
result from general economic or political conditions or other
conditions affecting the chemical industry generally
(including
<PAGE> 70
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prices of raw material and finished products); or (ii)
environmental conditions that may give rise to actual or
potential requirements of Remedial Action, as to which
Article 7 hereof shall apply) that is materially adverse to
the financial condition or results of operations of the
Division or the CEV business and that shall not have been
cured by Seller at or before the Closing Date; and
(b) with reference to any other person, any change
in the financial condition or results of operations of such
person, taken as a whole, which is materially adverse.
In determining the materiality of any changes for purposes of this
definition, reference shall be made to the most recent audited
financial statements of the person involved.
"Material Contracts" has the meaning specified in Section
2.1.11(a) of this Agreement.
"Movable Property" has the meaning specified in Section
2.1.9(a) of this Agreement.
"Non-Listed Contaminants" means those Contaminants and
Hazardous Materials other than the Listed Contaminants.
"Noteholder Offer to Purchase" means the offer to purchase to
be addressed by Guarantor to the holders of U.S.$100,000,000 aggregate
original principal amount of its 13% Senior Notes due 2004.
"Option Lease Agreement" has the meaning specified in
Schedule 3.4.4 of this Agreement.
"Ordinary Course of Business": an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past
practices of such Person and is taken in the ordinary
<PAGE> 71
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course of the normal day-to-day operations of such Person;
and
(b) such action is similar in nature and magnitude
to actions customarily taken, in the ordinary course of the
normal day-to-day operations of other Persons that are in the
same line of business as such Person.
"Permitted Encumbrances" has the meaning specified in Section
2.1.8(b) of this Agreement.
"Person" or "person" means any individual, corporation
(including any non-profit corporation), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or
Governmental Entity.
"Proposed Financing" has the meaning specified in Section
2.3.4 of this Agreement.
"Purchase Price" has the meaning specified in Section 1.2(a)
of this Agreement.
"Post-Closing Adjustment Amounts" has the meaning specified
in Section 1.3.5 of this Agreement.
"Real Property" has the meaning specified in Section 2.1.8(a)
of this Agreement.
"Refunded Intragroup Indebtedness" means the sum of FF
66,300,000, as defined in Section 3.3.3.
"Release" means any spill, omission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching,
emanation, loss of confining or migration of any Contaminant or
Hazardous Material in, into, onto, or through the environment
(including ambient air, surface water, groundwater, soils, land
surface, subsurface strata, workplace, or structure).
"Records" has the meaning specified in Section 3.4.3 of this
Agreement.
<PAGE> 72
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"Reference Date" has the meaning specified in Section
1.3.1(a) of this Agreement.
"Refunded Intragroup Indebtedness" has the meaning specified
in Section 3.3.3 of this Agreement.
"Related Agreements" has the meaning specified in Section
3.4.4 of this Agreement.
"Remedial Action" has the meaning specified in Section 7.3 of
this Agreement.
"Seller" has the meaning specified in the introductory
paragraph of this Agreement.
"Seller's Auditor" shall mean Coopers & Lybrand.
"Seller's Accounting Principles" has the meaning specified in
Section 2.1.4 of this Agreement.
"Shareholder Agreement" has the meaning specified in Schedule
3.4.4 of this Agreement.
"Shares" has the meaning specified in the recitals of this
Agreement.
"Sites" means the Pont de Claix and Hauterives sites.
"Survey" has the meaning specified in Section 7.4 of this
Agreement.
"Third Party Claim" has the meaning specified in Section 6.5
of this Agreement.
"Total Enterprise Value" shall mean four hundred fifty eight
million four hundred seventy four thousand French Francs (FF
458,474,000).
"Trade Secrets" has the meaning specified in Section 2.1.7(a)
of this Agreement.
<PAGE> 73
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"Transfer" has the meaning specified in the recitals of this
Agreement.
"Transfer Agreement" has the meaning specified in the
recitals of this Agreement.
"Transferred Assets" has the meaning specified in Section
4.1.3 of this Agreement.
"Transferred Liabilities" has the meaning specified in
Section 4.1.3 of this Agreement.
"Turbine Lease Counterguarantee" has the meaning specified in
Section 4.2.4 of this Agreement.
"U.S. Legal Requirement" means any and all federal, state,
local, municipal, foreign, international, multinational, or other
administrative order, constitution, treaty, law, ordinance, principle
of common law, regulation, statute or decree, judgement, injunction,
permit, approval, authorization or permission in force and effect on
the date hereof in the United States of America.
ARTICLE 10
GUARANTY
10.1 Guaranty of LaRoche Obligations. Guarantor hereby irrevocably
guarantees to Seller, as a primary obligor ("cautionnement solidaire sans
faculte de revocation; la caution renonce au benefice de discussion et de
division"), the due, punctual and complete payment and performance of all of
Buyer's obligations under this Agreement.
10.2 Costs of Enforcement. Guarantor agrees to reimburse Seller for
all reasonable costs and expenses (including legal fees and expenses) incurred
by it in connection with the legalization, registration and enforcement of this
guaranty.
10.3 Payment Currency. All payments under this guaranty shall be made
in French Francs.
<PAGE> 74
-72-
10.4 Obligations Survive Termination. The obligations of Guarantor
under this Article shall survive termination of this Agreement (a) as to any
obligations of Buyer which survive termination of this Agreement, and (b) as to
any obligations of Buyer which remained unsatisfied as of the termination of
this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by courier service (with
document tracking capabilities), such as chronopost, DHL or Federal Express,
etc., to the parties at the following addresses or facsimile numbers:
(a) If to Buyer or Guarantor, to it at:
1100 Johnson Ferry Road N.E.
Atlanta, Georgia 30342-1708, U.S.A.
Attn.: Philip P. Gura, Esq.
Executive Director of Legal Affairs
Facsimile No.: 1 (404) 851-0327
and
Attn.: William G. Osborne
Vice President
Facsimile No.: (1) (404) 851-0324
with a copy to:
Stephane J. Cournot
C.L. & A.
5, rue Beaujon
75006 Paris, FRANCE
Facsimile No.: (33) (1) 53.81.53.30
<PAGE> 75
-73-
(b) If to Seller, to it at:
25 quai Paul Doumer
92408 Courbevoie Cedex, FRANCE
Attn: Fred Scetbon
Facsimile No.: (33) (1) 47.68.22.50
with a copy to:
Wesley R. Johnson, Esq.
Jones, Day, Reavis & Pogue
62 rue du Faubourg Saint-Honore
75008 Paris, FRANCE
Facsimile No.: (33) (1) 49.24.04.71
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in or pursuant to this Section, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in or pursuant to this Section, be deemed given
upon sending, if promptly confirmed by mail, and (iii) if delivered by courier
in the manner described above to the address as provided in or pursuant to this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
11.2 Entire Agreement. This Agreement, the Schedules and the Exhibits
hereto represent the entire understanding and agreement and supersedes all
prior agreements, understandings or arrangements among the parties hereto with
respect to the subject matter hereof and can be amended, supplemented or
changed, and any provision hereof can be waived, only by written instrument
making specific reference to this Agreement signed by the party against whom
enforcement of such amendment, supplement, modification or waiver is sought.
Buyer acknowledges that Seller has made no representation or warranty to Buyer,
and that Buyer has relied on no representation or warranty, other than those
specifically set forth herein.
<PAGE> 76
-74-
11.3 Article and Section Headings. The Article and Section headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
11.4 Applicable Law/Forum. This Agreement shall be governed by and
construed and enforced in accordance with the laws of France. All disputes
arising in connection with this Agreement shall be finally settled under the
Rules of Conciliation and Arbitration of the International Chamber of Commerce
by three or more arbitrators appointed in accordance with the said Rules (and
in accordance with French law requirements to ensure the adequate
representation of each party's interests). The arbitrators shall be fluent in
French and in English. The arbitration proceedings shall take place in Paris
and shall be conducted in French and/or English, each party being free to
determine the language it will use during the proceedings (i.e. hearings,
briefs, oral and written communications, etc. shall be fully accepted in the
French language or in the English language without translation from French to
English nor from English to French). More specifically, documentary exhibits in
the French language will be admissible without an English translation thereof
and documentary exhibits in the English language will be admissible without a
French translation thereof, provided that when used in the English version of
this Agreement, French language words or terms shall have their precise French
meanings.
11.5 Taxes and Governmental Charges; Expenses. (a) Transfer taxes in
accordance with the terms of Article 726-1(Degree) of the French Tax Code shall
be borne by the purchaser of the Shares (it being understood that transfers of
interests in CEVCO are subject to the fixed duty of FF 500 pursuant to Article
680 of the French Tax Code).
(b) All notarial costs and expenses in connection with any
transactions contemplated by this Agreement shall be borne by the parties
involved in accordance with the prevailing custom in France in similar
transactions as to the allocation to or among such parties of such costs and
expenses; provided, however that Seller shall bear the costs of recording the
<PAGE> 77
-75-
transfer of Conveyed Real Property to the extent such costs shall exceed FF
600,000 in the aggregate.
(c) Whether or not the transactions contemplated hereby are
consummated, each party will pay its own costs and expenses incurred in
connection with the preparation, negotiation, execution and administration of
this Agreement and the closing of any transactions contemplated by this
Agreement.
11.6 Waiver. Any party may, by written notice to another party: (a)
extend the time for the performance of any of the obligations or other actions
of such other party; (b) waive any inaccuracies in the representations of such
other party contained in this Agreement; or (c) waive compliance with any of
the agreements of such other party contained in this Agreement or waive or
consent to the modification of performance of any of the obligations of such
other party. No other action taken pursuant to this Agreement, including
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representation, warranty, condition, or agreement contained herein.
11.7 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any Legal Requirement, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.
11.8 Payments and Computations; Judgment and Successor Currency. (a)
All amounts payable hereunder shall be payable in French Francs. All payments
to be made hereunder shall be
<PAGE> 78
-76-
made not later than 11:00 A.M. (Paris, France time) on the date due in same day
funds.
(b) If for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due from any party in the currency expressed to be
payable (the "Specified Currency") into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the party to whom such payment is to be made could purchase the
Specified Currency with such other currency at the main Paris, France office of
Banque de France on the Business Day following that on which final judgment is
given. The obligations of each party in respect of any amount due shall,
notwithstanding any judgment in a currency other than the Specified Currency,
be discharged only to the extent that on the Business Day following receipt by
the party to whom such amount is owed of any sum adjudged to be so due in such
other currency such party may in accordance with normal banking procedures
purchase the Specified Currency with such other currency; if the amount of the
Specified Currency so purchased is less than the amount originally due to such
party in the Specified Currency, the applicable party obligated to pay such
amount agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify such
party against such loss, and if the amount of the Specified Currency so
purchased exceeds the amount originally due to such party, such party agrees to
remit such excess to such obligor party.
(c) The term "French Francs" shall be deemed to comprise any successor
currency that shall hereafter be legal tender in France, converted in
accordance with the parity fixed between the French Franc and such successor
currency.
11.9 Language. All notices, communications, evidence, reports,
opinions and other documents given or to be given under this Agreement shall be
made in the French or English language, provided that when used in the English
version of this Agreement, French language words or terms shall have their
precise French meanings.
<PAGE> 79
-77-
11.10. Counterparts. This Agreement may be executed in four or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
11.11. Assignment. The rights and obligations under this Agreement
may not be assigned or delegated, in whole or in part, to any third party
without the prior written consent of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the day and year first above written.
RHONE-POULENC CHIMIE S.A.
By: /s/ Fred SCETBON
--------------------------------
Title: Manager M&A
--------------------------------
LII EUROPE S.A.R.L.
By: /s/ William G. Osborne
--------------------------------
Title:
--------------------------------
LAROCHE INDUSTRIES INC.
By: /s/ W. Walter LaRoche
--------------------------------
Title: Chairman
--------------------------------
RHONE L S.A.S.
<PAGE> 80
-78-
RHONE L S.A.S.
By: /s/ Chantal RUBIN
--------------------------------
Title: President
--------------------------------
[handwritten mention of Guarantor: "bon pour cautionnement solidaire sans
faculte de revocation - s/s _____ pour LaRoche Industries Inc."]
<PAGE> 81
LIST OF EXHIBITS
Exhibit I: Transfer Agreement.
Exhibit II: CEV Transfer Agreement.
Exhibit III: CEVCO Stock Purchase Agreement
<PAGE> 82
<TABLE>
<CAPTION>
Schedule 1.3.5 Post-Closing Adjustments - Company
------------------------ -------
Closing Date Reference Date
------------ --------------
<S> <C> <C>
Company Cash and Inventory
Raw material, work in
process, finished goods 8,000,000 8,442,589
Industrial supplies 11,000,000 11,262,296
---------- ----------
Total inventory 19,000,000 19,704,885
Loans to Employees 60,000 71,031
Other Employee Related Loans/
Advances 28,000 2,690,784
TVA prepayment 500,000 614,825
------- -------
Total 19,688,000 23,081,525
-----
Transferred Liabilities
Pension provision 18,000,000 18,091,056
Atochem debt 19,788,000 23,690,381
Other personnel entitlements 8,000,000 8,524,331
Turnaround provision 7,000,000 7,425,472
Accrued Charges 900,000 912,000
------- -------
Total 53,688,000 58,643,240
-----
(34,000,000) (35,561,715)
</TABLE>
Post-Closing Adjustment of FF 1,561,715 due by Company to Seller
<PAGE> 83
<TABLE>
<CAPTION>
Schedule 1.3.5 Post-Closing Adjustments - CEVCO
--------------------------------
Closing Date Reference Date
------------ --------------
<S> <C> <C>
CEVCO Cash and Inventory
Raw material, work in
process, finished goods 10,000,000 10,595,865
Industrial supplies 1,983,000 2,845,708
---------- ----------
Total inventory 11,983,000 13,441,573
Loans to Employees 767,000 827,827
Prepayment (Turbine Lease) 7,850,000 7,755,648
---------- ----------
Total 20,600,000 22,025,048
-----
CEVCO Transferred Liabilities
Pension provision 4,300,000 4,325,907
Other personnel entitlements 2,300,000 2,306,285
---------- ----------
Total 6,700,000 6,632,191
-----
14,000,000 15,392,856
</TABLE>
Post-Closing Adjustment of FF 1,392,856 due by Seller to CEVCO
<PAGE> 84
Schedule 6.1
Indemnifiable Disclosures
1. Seller shall indemnify and hold the Company harmless from and against any
Indemnifiable Losses incurred by the Company as a result of any failure to
complete the title formalities and procedures contemplated by the last sentence
of Section 2.1.8(b), subject to Section 6.6 (iii) hereof.
2. Seller shall indemnify and hold the Company harmless, subject to Section
6.4(a) and for a period of five (5) years from and after the Closing Date, from
and against Indemnifiable Losses incurred by the Company as a result of any
municipal order or injunction requiring the Company to effect improvements at
the Pont de Claix site, and based on the argument that the transfer of the
Conveyed Volume should have been effected by means of a lotissement in
accordance with French zoning and land regulation statutes. In determining the
amount of the resulting Indemnifiable Loss, the capital value of such
improvements shall be given due consideration. To the extent it can be
demonstrated that improvements would in all events have been required to be
undertaken by the Company or CEVCO within a three (3) year period after such
municipal order or injunction to comply with Environmental Laws or Legal
Requirements, the expenditures related to such improvements shall not be deemed
Indemnifiable Losses (a "but for test").
3. Seller shall indemnify and held the Buyer and the Company harmless from and
against any Indemnifiable Losses incurred by the Company or the Buyer as a
result of any claim by any Person arising under or in connection with the
Benefit Plans or any pension, retirement, bonus, profit sharing, stock
purchase, stock option, company savings or other benefit plans of Seller or any
of Seller's Affiliates, whether or not disclosed on Schedule 2.1.18(a) or (b)
or on Schedule 2.1.14 or on any of the other Schedules hereto, subject to
Section 6.6 (iii) hereof.
<PAGE> 85
4. Seller shall indemnify and held the Buyer and the Company harmless from and
against any Indemnifiable Losses incurred by the Company or the Buyer as a
result of any claim in respect of, in connection with, or arising from, any
taxes, imposts, assessments, charges or duties imposed or imposable upon
Seller, the Company, CEVCO, the Division or their respective Affiliates or any
of their respective businesses or assets, unless otherwise specifically agreed
to the contrary herein, whether or not set forth on any Schedule hereto,
subject to Section 6.6 (iii) hereof.
5. Seller shall indemnify and held the Buyer and the Company harmless from and
against any Indemnifiable Losses incurred by the Company or the Buyer as a
result of any claim arising or that may arise, by virtue of the transactions
contemplated hereby and by the Related Agreements, under applicable bulk sales
laws or other laws protecting creditors against the transfer of Division and
CEVCO assets (including inventory and goods), subject to Section 6.6 (iii)
hereof.
6. Seller shall indemnify and held the Buyer and the Company harmless from and
against any Indemnifiable Losses incurred by the Company or the Buyer as a
result of any claim, action, lawsuit, arbitration, judicial or administrative
claim pending or threatened against Seller or the Company or against the assets
or business of the Division or the CEV business or any judgment, order or
decree entered in any lawsuit relating to the Division or the Company or CEVCO
or the CEV business (collectively "Litigation") (a) which relates to or arises
out of the conduct of the Division or the CEV prior to the Closing Date or (b)
which questions the Related Documents or the transactions contemplated hereby
or the consummation thereof provided however that with respect to Litigation
under paragraph (a) above, the survival periods set forth in Section 6.6 hereof
shall apply and be determined in accordance with the subject matter of such
Litigation.
<PAGE> 86
Schedule 7.8(b)
Percentage of the Amount
of any Environmental Indemnifiable Loss Below
the Limit set forth in Schedule 7.5
<TABLE>
<CAPTION>
===============================================================================
Year Percentage of the amount
of any Environmental
Indemnifiable Loss
- -------------------------------------------------------------------------------
<S> <C> <C>
1 100%
- -------------------------------------------------------------------------------
2 100%
- -------------------------------------------------------------------------------
3 100%
- -------------------------------------------------------------------------------
4 100%
- -------------------------------------------------------------------------------
5 100%
- -------------------------------------------------------------------------------
6 80%
- -------------------------------------------------------------------------------
7 60%
- -------------------------------------------------------------------------------
8 40%
- -------------------------------------------------------------------------------
9 20%
- -------------------------------------------------------------------------------
10 10%
===============================================================================
</TABLE>
<PAGE> 87
EXHIBIT 10.1a
AMENDMENT TO THE
STOCK PURCHASE AGREEMENT
dated as of
October 17, 1997
Among
LII EUROPE S.A.R.L.
as Buyer
LAROCHE INDUSTRIES INC.
as Guarantor
RHONE-POULENC CHIMIE S.A.
as Seller
And
CHLORALP S.A.S.
as the Issuer of the Shares
<PAGE> 88
AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This AMENDMENT (the "Amendment"), dated October 17, 1997,
amends the Stock Purchase Agreement by and among RHONE-POULENC CHIMIE S.A.
("Seller"), LII Europe S.A.R.L. ("Buyer"), LAROCHE INDUSTRIES INC.
("Guarantor") and RHONE L S.A.S. (now named CHLORALP S.A.S.) ("Company"), in
accordance with Section 11.2 of the Stock Purchase Agreement. Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Stock Purchase Agreement.
W I T N E S S E T H:
WHEREAS, Seller, Buyer, Guarantor and Company have entered into the
Stock Purchase Agreement; and
WHEREAS, Seller, Buyer, Guarantor and Company desire to amend the
Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
1. Article 1 shall be amended by deleting the existing text in
its entirety and substituting the following text:
"ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Sale of Shares. Subject to the terms and conditions hereof,
Seller agrees to sell, assign and transfer to Buyer and Buyer agrees to
purchase from Seller, on the Closing Date, 1,513,620 of the Shares,
representing 50% of the Shares.
1.2 Purchase Price and Payment. (a) The purchase price
("Purchase Price") for the Shares to be purchased hereunder shall be one
hundred twenty three million five hundred thirty two thousand eight hundred
seventy four French Francs (FF 123,532,874) (as calculated pursuant to Schedule
1.2) and shall be payable at Closing (as defined in Section 5.1). The Purchase
Price has been determined by mutual agreement on the basis of the valuation of
the Division as set forth in the Transfer Agreement, as adjusted, less a
discount of fifteen percent (15%) to reflect the sale of less than 100% of the
Shares
<PAGE> 89
-3-
and the shared control of the Company.
(b) Payment of the Purchase Price under this Agreement shall be
made to Seller by Buyer by Bank of France wire transfer (virement Banque de
France) in immediately available funds to an account of Seller designated by it
for such purpose.
(c) The Transfer and the CEV Transfer shall give rise to Transfer
Date Adjustments between Seller and the Company or CEVCO, as the case may be,
in accordance with Section 1.3 below. The Closing shall give rise to a Post-
Closing Adjustment between Seller and Buyer in accordance with Sections 1.4
below.
1.3 Adjustments as at the Transfer Date Between Seller and the
Company and Between Seller and CEVCO.
1.3.1 Base Statements. (a) Attached hereto as Schedule 1.3.1(a) is
a balance sheet of the Division which reflects, as of December 31, 1996
("Reference Date") but subject to mutually agreed adjustments, the values of
the respective line items and reference accounts which are set forth in the
Transfer Agreement ("Company Base Statement"). The Company Base Statement has
been prepared in accordance with Seller's Accounting Principles (as defined in
Section 2.1.4 hereafter).
(b) Attached hereto as Schedule 1.3.1(b) is a balance sheet of the
CEV business which reflects, as of the Reference Date but subject to mutually
agreed adjustments, the values of the respective line items and reference
accounts which are set forth in the CEV Transfer Agreement ("CEVCO Base
Statement"). The CEVCO Base Statement has been prepared in accordance with
Seller's Accounting Principles. As used herein, the term "Base Statements"
means the Company Base Statement and the CEVCO Base Statement.
1.3.2 Adjustment Assumptions. (a) The adjustments to be made under
this Section 1.3 shall be made only and exclusively in respect of: (i) the
working capital line items referred to under the heading Actif Circulant in
section 2.2 of the Transfer Agreement (exclusive of the cash portion thereof
used by the Company to pay the purchase price under the CEVCO Stock Purchase
Agreement) ("Company Cash and Inventory"); (ii) the liabilities referred to in
section 2.3 of the Transfer Agreement (i.e., the Transferred Liabilities as
defined in Section 4.1.3 hereafter); (iii) the working capital line items
referred to under the heading Actif Circulant in Section 2.1 of the CEV
Transfer Agreement ("CEVCO Cash and Inventory"); and (iv) the liabilities
referred to in Section 2.2 of the CEV Transfer Agreement (i.e., the CEV
Transferred Liabilities as defined in Section 4.1.4
<PAGE> 90
- 4 -
hereafter). These line items are set forth on Schedule 1.3.5.
(b) As used herein with reference to the Division or the CEV
Business, the term "Cash and Inventory" means the sum of cash and cash
equivalents (exclusive of the cash portion thereof used to pay the purchase
price under the CEVCO Stock Purchase Agreement), plus the value of inventory,
determined on the basis of Seller's Accounting Principles, where inventory
shall include only raw materials, work in process, consumable processing
supplies, specific spare parts, and finished goods.
1.3.3 Transfer Date Statements. As soon as practicable and, in any
event, not later than thirty (30) calendar days after the Closing Date, Seller
shall deliver to:
(a) the Company and Buyer a statement reviewed by
Seller's Auditor ("Company Transfer Date Statement "), setting forth
Seller's determination of (i) the amount of the Company Cash and
Inventory as of the Transfer Date; (ii) the amount of the Transferred
Liabilities as of the Transfer Date; and (iii) the amount of any
Transfer Date Adjustment Amount to be paid pursuant to Section 1.3.5
hereunder; and
(b) CEVCO and Buyer a statement reviewed by Seller's
Auditor (the "CEVCO Transfer Date Statement"), setting forth Seller's
determination of (i) the amount of CEVCO Cash and Inventory as of the
Transfer Date; (ii) the amount of the CEV Transferred Liabilities as
of the Transfer Date; and (iii) the amount of any Transfer Date
Adjustment Amount to be paid pursuant to Section 1.3.5 hereunder.
The Company Transfer Date Statement and the CEVCO Transfer Date Statement (each
a "Transfer Date Statement") shall be prepared on a basis consistent with the
Base Statements in accordance with Seller's Accounting Principles. Buyer's
Auditor, on behalf of Buyer, shall have access to all workpapers prepared by
Seller's Auditor and to accounting documents of Seller to the extent relating
exclusively to the Division in connection with its review of the Transfer Date
Statements. Seller's and Buyer's Auditors shall limit their review to the line
items referred to on Schedule 1.3.5.
1.3.4 Determination of any Transfer Date Adjustment Amounts. The
payment of the Transfer Date Adjustments between Seller and the Company and/or
between Seller and CEVCO as the case may be and the amount thereof, if any,
shall be determined as follows ("Transfer Date Adjustment Amounts"):
(i) If (A) the aggregate value of the Company Cash and
Inventory as shown on the Company Final Transfer
<PAGE> 91
- 5 -
Date Statement less the Transferred Liabilities as shown on the
Company Final Transfer Date Statement exceeds (B) the aggregate value
of the Company Cash and Inventory as shown on the Company Base
Statement less the Transferred Liabilities as shown on the Company
Base Statement, a Transfer Date Adjustment Amount equal to the amount
of such excess shall be due and payable by the Company to Seller in
accordance with section 4.2 of the Transfer Agreement.
(ii) If (A) the aggregate value of the Company Cash and
Inventory as shown on the Company Final Transfer Date Statement less
the Transferred Liabilities as shown on the Company Final Transfer
Date Statement is less than (B) the aggregate value of the Company
Cash and Inventory as shown on the Company Base Statement less the
Transferred Liabilities as shown on the Company Base Statement, a
Transfer Date Adjustment Amount equal to the amount of such difference
shall be due by Seller to the Company in accordance with section 4.2
of the Transfer Agreement.
(iii) If (A) the aggregate value of the CEVCO Cash and
Inventory as shown on the CEVCO Final Transfer Date Statement less the
CEV Transferred Liabilities as shown on the CEVCO Final Transfer Date
Statement exceeds (B) the aggregate value of the CEVCO Cash and
Inventory as shown on the CEVCO Base Statement less the CEV
Transferred Liabilities as shown on the CEVCO Base Statement, a
Transfer Date Adjustment Amount equal to the amount of such excess
shall be due and payable by CEVCO to Seller in accordance with Section
4.2 of the CEV Transfer Agreement.
(iv) If (A) the aggregate value of the CEVCO Cash and
Inventory as shown on the CEVCO Final Transfer Date Statement less the
CEV Transferred Liabilities as shown on the CEVCO Final Transfer Date
Statement is less than (B) the aggregate value of the CEVCO Cash and
Inventory as shown on the CEVCO Base Statement less the CEV
Transferred Liabilities as shown on the CEVCO Base Statement, a
Transfer Date Adjustment Amount equal to the amount of such difference
shall be due by Seller to CEVCO in accordance with Section 4.2 of the
CEV Transfer Agreement.
(v) For the avoidance of doubt, Schedule 1.3.5
hereto sets forth hypothetical determinations of the Transfer Date
Adjustment Amounts.
1.4 Post-Closing Adjustments Between Buyer and Seller.
1.4.1 Closing Statements. As soon as practicable and,
<PAGE> 92
- 6 -
in any event, not later than thirty (30) calendar days after the Closing Date,
Seller shall deliver to Buyer a statement reviewed by Seller's Auditor and
prepared on a consolidated basis ("Closing Statement"), setting forth Seller's
determination of the Net Profit or Loss at the Closing Date. "Net Profit or
Loss at the Closing Date" shall be determined on a consolidated basis after tax
comprising the Company and CEVCO (to the extent of 60% of CEVCO's profit or
loss) for the period from the Transfer Date to the Closing Date (or the
month-end immediately prior to the Closing Date if the Closing Date is not the
first business day of the month, in which event interest on the Purchase Price
shall be payable from the beginning of the month to the Closing Date at a rate
of PIBOR for one month deposits plus 100 basis points) and shall be calculated
and determined on a basis consistent with Seller's Accounting Principles
(provided that depreciation shall be calculated in accordance with historical
asset values and depreciation schedules without giving effect to the write-up
of assets effected pursuant to the Transfer). Buyer's Auditor, on behalf of
Buyer, shall have access to all workpapers prepared by Seller's Auditor and to
accounting documents of Seller to the extent relating exclusively to the
Division in connection with its review of the Closing Statement.
1.4.2 Determination of any Post-Closing Adjustment Amounts.
The payment of the post-closing adjustments between Seller and Buyer and the
amount thereof, if any, shall be determined as follows ("Post-Closing
Adjustment Amounts"):
(i) If the Net Profit or Loss at the Closing Date is
positive, a Post Closing Adjustment Amount equal to fifty percent
(50%) of the amount of such profit shall be due and payable by Buyer
to Seller.
(ii) If the Net Profit or Loss at the Closing Date is
negative, a Post-Closing Adjustment Amount equal to fifty percent
(50%) of the amount of such loss shall be due by Seller to Buyer.
1.5 Adjustment Procedures.
1.5.1 Disputes Regarding Statements. (a) Buyer shall have
twenty (20) business days after the delivery to Buyer of the Transfer Date
Statements or the Closing Statement, as the case may be (collectively
"Statements") in which to review the Statements and the workpapers referred to
above related thereto. Unless Buyer notifies Seller in writing within such
twenty-day periods of any objection to the Statements, specifying in reasonable
detail the items and amounts subject to such objection ("Disputed Items"), the
Statements (including the Adjustment
<PAGE> 93
- 7 -
Amounts, if any, shown thereon) shall be conclusive and binding on Buyer and
Seller. If within such twenty-day period, Buyer notifies Seller in writing of
any such objection, then Buyer and Seller shall use reasonable efforts for
fifteen (15) business days after the expiration of such initial twenty-day
period to resolve in good faith their differences and agree upon any
adjustments to the Statements (including any Adjustment Amounts shown thereon).
Any Disputed Items which are not resolved by the mutual agreement of Buyer and
Seller within such fifteen-day period shall be submitted for resolution to the
Paris, France office of Price Waterhouse or such other internationally
recognized accounting firm as is mutually acceptable to Buyer and Seller and
independent of each of them and failing such mutual agreement an
internationally recognized accounting firm independent of each of them
designated by the President of the Commercial Court of Paris statuant en refere
("Independent Accounting Firm"). Seller and Buyer shall instruct the
Independent Accounting Firm to limit its examination to the unresolved Disputed
Items, to resolve any unresolved Disputed Items affecting the Statements in
such manner as to preserve the conformity of the Statements with the
requirements described in Section 1.3.3 hereof and to use its best efforts to
make its determination thereon within twenty (20) business days after its
engagement hereunder. The Independent Accounting Firm shall hear both parties
and their advisers and shall in all respects enforce the "principe du
contradictoire". The resolution of any such previously unresolved Disputed
Items by such Independent Accounting Firm shall be made in a written notice
delivered to Buyer and Seller as promptly as practicable (which written notice
shall set forth the amount of any Adjustment Amounts as finally determined) and
shall be final, conclusive and binding upon Seller, Buyer, the Company and
CEVCO. Seller and Buyer each shall pay one-half of the fees and expenses
charged by the Independent Accounting Firm.
(b) Each Statement to which Buyer does not object as provided in
Section 1.3.7(a) hereof, or to which Seller and Buyer agree, or as otherwise
conclusively determined pursuant to Section 1.3.7(a) hereof (any such final
form of Statement being referred to herein as the respective "Final Statement")
shall be used in determining the Adjustment Amounts and any further
adjustments.
1.5.2 Payment. Within eight (8) business days after the lapse of
the twenty (20) business day period referred to in the first sentence of
Section 1.5.1, the estimated amount of any Adjustment Amounts excluding any
amount of any Disputed Items, shall be paid by bank wire transfer of the
required amount (in immediately available funds). The remaining unpaid amount
of any
<PAGE> 94
- 8 -
Adjustment Amounts, if any, shall be paid within eight (8) business days of the
resolution of all Disputed Items and determination of each Final Statement, by
bank wire transfer of the required amount (in immediately available funds).
The Adjustment Amounts shall be increased by interest at a rate of seven
percent (7%) per annum accruing from the expiration of the above-referenced
eight day period to the date of payment of such amounts. Such payment of late
interest shall not be deemed to constitute an agreement or waiver by any of the
parties hereto to delay the payment of any Adjustment Amounts.
2. Section 2.1.8 shall be amended by the addition of the
following paragraph 2.1.8(d):
"Seller does not, has not, nor has ever, owned any real property (or
rights with respect thereto) at or relating to the Saint Fons Facility (as
defined at Section 2.1.11(c) below)."
3. Section 2.1.11 shall be amended by the addition of the
following paragraph 2.1.11(c):
"The contract dated March 14, 1983, as amended, by and between Seller
and Atochem (" Atochem Contract") is the only agreement, contract,
understanding, arrangement or undertaking (whether written or oral) between
such parties with respect to the bleach production facilities located at Saint
Fons ("Saint Fons Facility"), and, other than the provisions of the Atochem
Contract, there exists no obligation of Seller or Company to indemnify Seller
or any other person with respect to the Saint Fons Facility."
4. Section 3.1.2 shall be amended by the addition of the
following text:
"In particular, Seller shall make, or, after the Transfer Date, shall
cause ChlorAlp to make, all maintenance capital expenditures (also referred to
as common capital expenditures) associated with the maintenance and operation
of the Pont de Claix chloralkali facility, the brine mine, pipelines and other
facilities of ChlorAlp at Hauterives, the St. Fons Facility and the CEVCO
Facility, which capital expenditures shall, in each case, be made by Seller at
the times and in accordance with established Seller procedures and in the
Ordinary Course of Business, said capital expenditures being adjusted for in
accordance with Schedule 1.2."
5. Section 3.1.6 shall be amended by deleting the existing
second sentence in its entirety and substituting the
<PAGE> 95
- 9 -
following second sentence:
"With respect to easements and servitudes that burden the brine
pipeline between Hauterives and Pont de Claix and/or the transferred portion of
the chlorine pipeline, and that do not run with the pipelines but require the
consent of the landowner, Seller shall exert its Best Efforts to obtain such
required consents in due course after Closing and shall hold harmless the
Company in the event the Company shall be held liable financially for breach of
such consent requirement or shall suffer an interruption of brine supply and/or
of chlorine sales as a result of the failure to obtain any such required
consent."
6. The following paragraphs shall be added as paragraphs (b) and
(c) to Section 3.1.7 (the existing paragraph becoming paragraph (a)):
"(b) On or prior to the Closing Date, Seller shall have sent to the
Commune of Champagnier a letter notifying the change of owner of the chlorine
pipeline.
(c) The parties acknowledge that the agreements identified in
Schedule 3.1.7(c) hereto shall not be transferred to the Company at the Closing
Date and for so long as the other parties under these agreements shall not have
entered into contracts with the Company providing for terms and conditions
similar to those provided by these agreements but limited in scope to the
Division, Seller shall (i) exert its Best Efforts to cause such other parties
to continue supplying the services to the Company and/or CEVCO, as the case may
be, in a manner consistent with past practice; (ii) provide alternative or
substitute arrangements effective as of the Closing Date providing the benefit
of such agreements to the Company in a manner reasonably satisfactory to Buyer;
and (iii) indemnify and hold harmless the Company and CEVCO from and against
the loss of the benefits under such agreements.
(d) With respect to the agreements identified at Schedule 3.1.7(d)
hereto, Seller shall (i) exert its Best Efforts to obtain consents to the
transfer of such agreements from the other parties within a period of two
months after the Closing Date, (ii) provide alternative or substitute
arrangements effective as of the Closing Date providing the benefit of such
agreements to the Company and/or CEVCO, as the case may be, in a manner
reasonably satisfactory to Buyer and (iii) indemnify and hold harmless the
Company and CEVCO from and against the loss of the benefits under such
agreements."
(e) The indemnities provided in subparagraphs (c) and (d)
<PAGE> 96
- 10 -
of this Section 3.1.7 shall not be limited by any restrictions on amount or
rights to claim provided herein.
7. The following Section 3.4.8 shall be added to Article 3:
"3.4.8 PCBs. The Company, CEVCO and RPC shall maintain copies of
official and commercial documents concerning removal, recovery or disposal of
PCBs from the Pont de Claix Site and shall, on written request, make those
documents available to the other parties in the event of a dispute concerning
PCBS. A list of transformers and rectifiers potentially containing PCBs is
attached hereto at Schedule 3.4.8".
8. Article 4 shall be amended by the addition of a new Section
4.1.9:
"4.1.9 Saint Fons Facility. (a) Seller shall have used its Best
Efforts to cooperate with Buyer to obtain such additional information and to
make such additional inquiries and investigations with respect to the Saint
Fons Facility and the operations thereat as Buyer shall have reasonably
requested, and (b) such information and investigations shall not have disclosed
any facts which would have a significant effect on the liabilities to be
assumed by the Company pursuant hereto."
9. Section 6.4(a) shall be amended by the addition of the
following sentence at the end of such paragraph (a):
"Notwithstanding the foregoing, Indemnifiable Losses and Environmental
Indemnifiable Losses in respect of the matters identified at Schedule 6.1,
paragraph 7 shall be indemnifiable to the extent such losses, when aggregated
with all other indemnification obligations of Seller under Section 6.1 above,
do not exceed the Total Enterprise Value".
10. Section 7.3 shall be amended by the addition of the following
text at the end of such sentence:
"or in respect of the Saint Fons Facility".
11. Section 7.9 shall be amended by the addition of the following
sentence at the end of paragraph (a):
"The right of Buyer to make a claim for Environmental Indemnifiable
Losses in respect of the Saint Fons Facility shall survive the Closing Date for
a period of ten (10) years".
12. The first sentence of Section 11.2 shall be amended by
<PAGE> 97
- 11 -
adding the following text after the word "hereof" and before the words "and can
be amended" at the fifth line: "including but not limited to the letter of
understanding dated August 1, 1997."
13. Section 11.5 shall be amended by deleting the existing
paragraph (b) and substituting the following text:
"(b) All fees and expenses of Me. Peysson and Me. Bailly, costs of
notification to public authorities of the transfer of easements relating to the
Hauterives brine pipeline and the chlorine pipeline, costs of recording such
easements and transfer of Company and CEVCO volumes and all of the costs and
expenses of the geometre hired by the parties shall be borne as follows: (a)
up to an aggregate maximum amount of 600,000 French Francs shall be paid by the
Company and CEVCO; and (b) all such amounts in excess of 600,000 French Francs
shall be paid by Seller".
14. Section 11.10 shall be amended by deleting the existing text
in its entirety and substituting the following text:
"11.10 Counterparts. (a) Subject to paragraph (b) below, this
Agreement may be executed in four or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and
the same instrument.
(b) Schedules to this Agreement shall be executed in two
counterparts, one counterpart to be kept by Seller and one counterpart to be
kept by Buyer, it being understood that Guarantor shall have full access at any
time to the set of Schedules kept by Buyer and shall be entitled to make copies
thereof and that the Company shall have full access at any time to the set of
Schedules kept by Buyer or Seller or if not jointly controlled by Seller and
Buyer to the set kept by its controlling shareholder and shall be entitled to
make copies thereof."
15. The definitions shall be amended as follows:
"Post Closing Adjustment Amount" has the meaning specified in Section
1.4.2 of this Agreement.
"Total Enterprise Value" shall mean FF 446,665,586".
16. The Schedules shall be amended as follows:
The attached revised Schedules 1.2 and 1.3.1(a) shall be substituted
for existing Schedules 1.2 and 1.3.1(a).
The attached revised Schedule 1.3.5 shall be substituted for
<PAGE> 98
- 12 -
existing Schedule 1.3.5.
The coversheets of Schedules 2.1.7(a)(i)(c), 2.1.7(a)(ii) and
2.1.11(a)(v) signed at the date hereof shall supersede and replace the
respective coversheets signed on August 1, 1997.
New Schedule 3.1.7(c) and (d) (attached) shall be added to the
Schedules.
Schedule 6.1 shall be amended by the addition of the following
sentence at the end of paragraph 6: "The DRIRE discussions identified in
Schedule 2.1.6(d) (as to which Seller's liability shall not be limited by
Section 6.4(a)(i) or Section 6.4(b), the Albermarle claim identified in
Schedule 2.1.11(a)(ii) (as to which Seller's liability shall not be limited by
Section 6.4(b)) and the claim of Mme Rahon and son identified in Schedule
2.1.14 (as to which Seller's liability shall be limited both by Section
6.4(a)(i) and Section 6.4(b)) shall be covered by this paragraph 6."
Schedule 6.1 shall be amended by the addition of the following
paragraph 7:
"Seller shall indemnify and hold the Company and CEVCO harmless from
and against (x) any Environmental Indemnifiable Losses attributable to the
Saint Fons Facility prior to the Closing Date and (y) any other Indemnifiable
Losses attributable to any breach by Seller of its obligations under the
Atochem Contract prior to the Closing Date".
The parties agree that Schedule 7.4 containing copy of a portion of
the Survey (part II was missing) and initialled on August 1, 1997 is null and
void and shall be replaced by the complete Survey containing part II as
initialled as of the date hereof.
17. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be considered one and the same instrument.
18. Governing Law. This Amendment shall be governed and construed
in accordance with Section 11.4 of the Stock Purchase Agreement.
19. Effect of Amendment. Except as amended hereby, the terms and
provisions of the Stock Purchase Agreement shall remain in full force and
effect."
<PAGE> 99
- 13 -
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the day and year first above written.
RHONE-POULENC CHIMIE S.A.
By: /s/ Fred SCETBON
-------------------------------
Title: Manager M&A
----------------------------
LII EUROPE S.A.R.L.
By: /s/ Bertrand PINET
-------------------------------
Title: Gerant
----------------------------
LAROCHE INDUSTRIES INC.
By: /s/ William G. Osborne
-------------------------------
Title: Vice President
----------------------------
[handwritten mention of Guarantor: "bon pour cautionnement solidaire sans
faculte de revocation - s/s _____ pour LaRoche Industries Inc."]
CHLORALP S.A.S.
By: /s/ Marc Polaud
-------------------------------
Title:
----------------------------
<PAGE> 100
Schedule 1.2: Calculation of Purchase Price
<TABLE>
<S> <C>
Fixed Assets
ChlorAlp
Intangible (excluding mining permit
valued at 200,000) 120,000,000
Tangible 310,557,441
In Process 19,672,273
CEVCO @ 60%
Tangible 32,700,000
In Process 1,870,286
-----------
Total Fixed Assets 484,800,000
Other Assets and Liabilities
ChlorAlp
Loans to Employees(1) 28,784
Other Employee Related Advance (Apec)(1) 2,662,000
Inventories (1) 19,704,885
Loans to Employees (1) 71,031
Prepayment State Taxes (1) 614,825
----------
Sub-total 23,081,525
Pension Provision (1) (18,091,056)
Other Personnel Entitlements (1) (8,524,331)
Turnaround Provision (1) (7,425,472)
Atochem Debt (1) (23,690,381)
Accrued Charges (1) (912,000)
RPC invoices payable (10,672,761)
------------
Sub-total (69,316,001)
CEVCO @ 60%
Loans to Employees(1) 10,696
Other Employee Related Advance (Apec)(1) 486,000
Inventories (1) 8,064,944
Prepayment of Turbine Lease (1) 4,653,389
----------
Sub-total 13,215,029
Pension Provision (1) (2,595,544)
Other Personnel Entitlements (1) (1,383,771)
RPC invoices payable (67,780)
-----------
Sub-total (4,047,095)
Total Other Assets and Liabilities (37,066,542)
Other Adjustments to ChlorAlp Value (1,305,028)
Other Adjustments to CEVCO Value (12,844)
Initial ChlorAlp Cash 250,000
Total Enterprise Value "TEV" 446,665,586
RPC Transferred "Intragroup Indebtedness" (156,000,000)
-------------
Total Debt Assumed (156,000,000)
100% Equity Value ("Full Company Equity Value") 290,665,586
42.5% TEV (Total Payment by LII at Closing)
(Debt + Equity) 189,832,874
LaRoche pays to RP "Purchase Price" for Equity 123,532,874
LaRoche repays I/C Debt to ChlorAlp ("Refunded
Intragroup Indebtedness") 66,300,000
-----------
Total Payment by LII at Closing (Debt and
Equity) 189,832,874
Exercise Price for RPC Put Option 167,132,712
-----------
</TABLE>
(1) Item subject to adjustment provisions in Section 1.3 of the Stock
Purchase Agreement.
<PAGE> 101
Schedule 1.3.1(a): the Company Base Statement
<TABLE>
<S> <C>
Fixed Assets
ChlorAlp
Intangible (excluding mining permit
valued at 200,000) 120,000,000
Tangible 310,557,441
In Process 19,672,273
-----------
Total Fixed Assets 450,229,714
Other Assets and Liabilities
ChlorAlp
Cash 250,000
Loans to Employees (1) 28,784
Other Employee Related Advance (Apec) (1) 2,662,000
Inventories (1) 19,704,885
Loans to Employees (1) 71,031
Prepayment State Taxes (1) 614,825
-----------
Sub-total 23,331,525
Pension Provision (1) (18,091,056)
Other Personnel Entitlements (1) (8,524,331)
Turnaround Provision (1) (7,425,472)
Atochem Debt (1) (23,690,381)
Accrued Charges (1) (912,000)
------------
Sub-total (58,643,240)
Total Other Assets and Liabilities (35,311,715)
Total Assets and Liabilities 414,917,999
</TABLE>
(1) Item subject to adjustment provisions in Section 1.3.5(i) and 1.3.5(ii) of
Stock Purchase Agreement.
In addition to the aforementioned assets and liabilities ChlorAlp owns
a 60% (43,806,000) share in CEVCO which is an asset that is not
adjustable under Sections 1.3.5(i) or 1.3.5(ii) as any necessary
adjustment thereto is covered by Sections 1.3.5(iii) and 1.3.5(iv).
<PAGE> 102
Schedule 1.3.1(b): CEVCO Base Statement
(All values on 100% basis)
<TABLE>
<S> <C>
Fixed Assets
CEVCO
Tangible 54,500,000
In Process 3,117,143
----------
Total Fixed Assets 57,617,143
Other Assets and Liabilities
CEVCO
Loans to Employees(1) 17,827
Other Employee Related Advance (Apec)(1) 810,000
Inventories (1) 13,441,573
Prepayment of Turbine Lease (1) 7,755,648
----------
Sub-total 22,025,048
Pension Provision (1) (4,325,907)
Other Personnel Entitlements (1) (2,306,285)
-----------
Sub-total (6,632,192)
Total Other Assets and Liabilities 15,392,857
Total Assets and Liabilities 73,010,000
</TABLE>
(1) Item subject to adjustment provisions in Section 1.3.5(iii) and
1.3.5(iv) fo the Stock Purchase Agreement.
<PAGE> 103
Schedule 1.3.5 Transfer Date Adjustments - Company
<TABLE>
<CAPTION>
Transfer Date Reference Date
------------- --------------
<S> <C> <C>
Company Cash and Inventory
- --------------------------
Raw material, work in process, finished goods 8,000,000 8,442,589
Industrial supplies 11,000,000 11,262,296
----------- -----------
Total inventory 19,000,000 19,704,885
Loans to Employees 60,000 71,031
Other Employee Related Loans/Advances 28,000 2,690,784
TVA prepayment 600,000 614,825
----------- -----------
Total 19,688,000 23,081,525
-----
Transferred Liabilities
- -----------------------
Pension provision 18,000,000 18,091,056
Atochem debt 19,788,000 23,690,381
Other personnel entitlements 8,000,000 8,524,331
Turnaround provision 7,000,000 7,425,472
Accrued charges 900,000 912,000
------------ -----------
Total 53,688,000 58,643,240
-----
Company Transfer Date Net Working Capital (34,000,000) (35,561,715)
Transfer Date Adjustment of FF 1,561,715 due by Company to Seller
-----------------------------------------------------------------
</TABLE>
<PAGE> 104
Schedule 1.3.5 Transfer Date Adjustments - CEVCO
<TABLE>
<CAPTION>
Transfer Date Reference Date
------------- --------------
<S> <C> <C>
CEVCO Cash and Inventory
- ------------------------
Raw material, work in process, finished goods 10,000,000 10,595,865
Industrial supplies 1,983,000 2,845,708
---------- ----------
Total inventory 11,983,000 13,441,573
Loans to Employees 767,000 827,827
Prepayment (Turbine Lease) 7,850,000 7,755,648
---------- ----------
Total 20,600,000 22,025,048
-----
CEVCO Transferred Liabilities
- -----------------------------
Pension provision 4,300,000 4,325,907
Other personnel entitlements 2,300,000 2,306,285
---------- ---------
Total 6,600,000 6,632,192
-----
CEVCO Transfer Date Net Working Capital 14,000,000 15,392,856
Transfer Date Adjustment of FF 1,392,856 due by Seller to CEVCO
---------------------------------------------------------------
</TABLE>
<PAGE> 105
EXHIBIT 10.1b
AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This AMENDMENT (the "Amendment"), dated October 17, 1997, amends the
Stock Purchase Agreement by and among RHONE-POULENC CHIMIE S.A. ("Seller"), LII
Europe S.A.R.L. ("Buyer"), LAROCHE INDUSTRIES INC. ("Guarantor") and RHONE L
S.A.S. (now named ChlorAlp) ("Company"), in accordance with Section 11.2 of the
Stock Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Stock Purchase
Agreement.
W I T N E S S E T H:
WHEREAS, Seller contributed to the Company on September 1, 1997,
pursuant to the Transfer Agreement dated July 29, 1997, by means of a partial
asset contribution subject to the regime of article 817-1 of the French tax
code, a complete and autonomous branch of activity specializing in research,
design, manufacturing and marketing of chlorine, bleach soda, as well as brine
mining activity, made up of various assets and liabilities;
WHEREAS, Seller, Buyer, Guarantor and Company have entered into the
Stock Purchase Agreement; and
WHEREAS, Seller, Buyer, Guarantor and Company desire to amend the
Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
1. Amendment to Section 11.5 of the Stock Purchase Agreement.
Section 11.5 of the Stock Purchase Agreement shall be amended by
adding the following clauses:
"(d) In the event that the tax regime regarding registration duties shall
be challenged by any Governmental Entity on the basis of the
provisions ofarticles 719 and 720 of the French tax code, imposing a
tax reassessment on the Company or Buyer, Seller undertakes to
indemnify the Company or Buyer, as the case may be, for the amount of
registration duties effectively assessed, including penalties and late
payment interest [as well as reasonable attorney fees]. The amount
<PAGE> 106
-2-
of the indemnification shall be reduced by the value of any tax
benefit or tax savings realized or reasonably expected to be realized
as a result of the tax reassessment and the payment of any attorney
fees in connection therewith.
(e) The indemnification under paragraph (d) above shall survive until
December 31, 2007, corresponding to the tax authorities' statute of
limitation with respect to registration duties in application of
articles L. 180 and L. 186 of the French book of tax procedures.
(f) The indemnification given by Seller under paragraph (d) above shall
not apply if the tax reassessment arises out of the contribution or
transfer of the constructions in process (" immobilisations en
cours").
(g) Guarantor, Buyer and the Company agree to cooperate with Seller if any
Governmental Entity attempts such tax reassessment. Guarantor, Buyer,
the Company and Seller, prior to making any communication to any
Governmental Entity, shall agree on the terms of any such
communication. Guarantor, Buyer or the Company shall not settle or
compromise without the written consent of Seller, which consent shall
not be unreasonably withheld or delayed."
2. Confidentiality.
Guarantor, Buyer, the Company and Seller undertake to maintain the
terms of this Amendment in confidence and not to disclose or communicate its
terms to any third party, except that they may communicate this Amendment to
their respective advisers. Any holder of this Amendment is hereby also
instructed to keep confidential the terms of this Amendment.
3. Counterparts.
This Amendment may be executed in one or more counterparts, each of
which shall be considered one and the same instrument.
4. Governing Law.
This Amendment shall be governed and construed in accordance with
Section 11.4 of the Stock Purchase Agreement.
<PAGE> 107
-3-
5. Effect of Amendment.
5.1 Except as amended hereby, the terms and provisions of the Stock
Purchase Agreement shall remain in full force and effect.
5.2 This Amendment shall not apply to facts and circumstances covered by
the guarantee signed on August 1st, 1997 by Guarantor and Buyer, the provisions
of which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the day and year first above written.
RHONE-POULENC CHIMIE S.A. [with manuscript mention
By: Daniel Humbert "bon pour garantie
/s/ Daniel Humbert sans faculte de revocation"]
LII EUROPE S.A.R.L.
By: Bertrand Pinet
/s/ Bertrand Pinet
LAROCHE INDUSTRIES INC.
By: William G. Osborne
/s/ William G. Osborne
CHLORALP S.A.S.
By: Marc Polaud
/s/ Marc Polaud
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
LAROCHE INDUSTRIES INC.
$175,000,000
9 1/2% Senior Subordinated Notes due 2007
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
September 23, 1997
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
LaRoche Industries Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Chase Securities Inc. ("CSI") and
Donaldson, Lufkin & Jenrette Securities Corporation (together with CSI, the
"Initial Purchasers"), upon the terms and subject to the conditions set forth in
a purchase agreement dated September 18, 1997 (the "Purchase Agreement"),
$175,000,000 aggregate principal amount of its 9 1/2% Senior Subordinated Notes
due 2007 (the "Notes"). Capitalized terms used but not defined herein shall have
the meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company agrees with the Initial Purchasers,
for the benefit of the holders (including the Initial Purchasers) of the Notes,
the Exchange Notes (as defined herein) and the Private Exchange Notes (as
defined herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall (i) prepare
and, not later than 45 days following the date of original issuance of the Notes
(the "Issue Date"), file with the Commission a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders of the Notes (the
"Registered Exchange Offer") to issue and deliver to such Holders, in exchange
for the Notes, a like aggregate principal amount of debt securities of the
Company (the "Exchange Notes") that are identical in all material respects to
the Notes, except for the transfer restrictions relating to the Notes, (ii) use
its reasonable best efforts to cause the Exchange Offer Registration Statement
to become effective under the Securities Act no later than 165 days after the
Issue Date and the Registered Exchange Offer to be consummated no later than 195
days after the Issue Date and (iii) keep the Exchange Offer Registration
Statement effective for not less than 30 days (or longer, if required by
applicable law) after the date on which notice of the Registered Exchange Offer
is mailed to the Holders (such period being called the "Exchange Offer
Registration Period"). The Exchange Notes will be issued under the Indenture or
an indenture (the "Exchange Notes Indenture") between the Company and the
Trustee or such other bank or trust company that is reasonably satisfactory to
the Initial Purchasers, as trustee (the "Exchange Notes Trustee"), such
indenture to be identical in all material respects to the Indenture, except for
<PAGE> 2
2
the transfer restrictions relating to the Notes (as described above).
Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Notes for Exchange Notes (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) acquires the Exchange
Notes in the ordinary course of such Holder's business and (c) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Notes) and to trade such Exchange Notes from and
after their receipt without any limitations or restrictions under the Securities
Act and without material restrictions under the securities laws of the several
states of the United States. The Company, the Initial Purchasers and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Notes, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing
substantially the information set forth in Annex A hereto on the cover, in Annex
B hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Exchange Notes
received by such Exchanging Dealer pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange
Offer, any Holder holds any Notes acquired by it that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment in
an initial distribution, or any Holder is not entitled to participate in the
Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Exchange Notes in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the Notes
held by such Holder (the "Private Exchange"), a like aggregate principal amount
of debt securities of the Company (the "Private Exchange Notes") that are
identical in all material respects to the Exchange Notes, except for the
transfer restrictions relating to such Private Exchange Notes. The Private
Exchange Notes will be issued under the same indenture as the Exchange Notes,
and the Company shall use its reasonable best efforts to cause the Private
Exchange Notes to bear the same CUSIP number as the Exchange Notes.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than
30 days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(d) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open;
and
(e) otherwise comply in all material respects with all laws
that are applicable to the Registered Exchange Offer.
<PAGE> 3
3
As soon as practicable after the close of the Registered
Exchange Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(c) cause the Trustee or the Exchange Notes Trustee, as the
case may be, promptly to authenticate and deliver to each Holder,
Exchange Notes or Private Exchange Notes, as the case may be, equal in
principal amount to the Notes of such Holder so accepted for exchange.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; provided that (i) in the case where such
prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 195 days and the date on
which all Exchanging Dealers have sold all Exchange Notes held by them and (ii)
the Company shall make such prospectus and any amendment or supplement thereto
available to any broker-dealer for use in connection with any resale of any
Exchange Notes for a period of not less than 90 days after the consummation of
the Registered Exchange Offer.
The Indenture or the Exchange Notes Indenture, as the case may
be, shall provide that the Notes, the Exchange Notes and the Private Exchange
Notes shall vote and consent together on all matters as one class and that none
of the Notes, the Exchange Notes or the Private Exchange Notes will have the
right to vote or consent as a separate class on any matter.
Interest on each Exchange Note and Private Exchange Note
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Notes received by
such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understanding with any person to participate
in the distribution of the Notes or the Exchange Notes within the meaning of the
Securities Act and (iii) such Holder is not an affiliate of the Company or, if
it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company
covenants that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto will
comply in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto will not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, will not, as of the
consummation of the Registered Exchange Offer, include an untrue statement of a
<PAGE> 4
4
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) for any other reason the Registered Exchange Offer is not
consummated within 195 days after the Issue Date, or (iii) any Initial Purchaser
so requests with respect to Notes or Private Exchange Notes not eligible to be
exchanged for Exchange Notes in the Registered Exchange Offer and held by it
following the consummation of the Registered Exchange Offer, or (iv) any
applicable law or interpretations do not permit any Holder to participate in the
Registered Exchange Offer, or (v) any Holder that participates in the Registered
Exchange Offer does not receive freely transferable Exchange Notes in exchange
for tendered Notes, or (vi) the Company so elects, then the following provisions
shall apply:
(a) The Company shall use its reasonable best efforts to file
as promptly as practicable (but in no event more than 45 days after so required
or requested pursuant to this Section 2) with the Commission, and thereafter
shall use its reasonable best efforts to cause to be declared effective, a shelf
registration statement on an appropriate form under the Securities Act relating
to the offer and sale of the Transfer Restricted Securities (as hereinafter
defined) by the Holders thereof from time to time in accordance with the methods
of distribution set forth in such registration statement (hereafter, a "Shelf
Registration Statement" and, together with any Exchange Offer Registration
Statement, a "Registration Statement").
(b) The Company shall use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer Restricted
Securities for a period of two years from the Issue Date or such shorter period
that will terminate when all the Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold pursuant thereto (in any such case,
such period being called the "Shelf Registration Period"). The Company shall be
deemed not to have used its reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable law
or is taken by the Company in good faith and for valid business reasons (but not
including avoidance of the Company's obligations hereunder) such as a material
corporate transaction or other event referred to in Section 4(b)(v) hereof so
long as the Company promptly complies with the requirements of Section 4(o)
hereof.
(c) Notwithstanding any other provisions hereof, the Company
covenants that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto will comply
in all material respects with the Securities Act and the rules and regulations
of the Commission thereunder, (ii) any Shelf Registration Statement and any
amendment thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for use
therein (the "Holders' Information")) will not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any prospectus forming part of any Shelf Registration
Statement, and any supplement to such prospectus (in either case, other than
with respect to Holders' Information), 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.
<PAGE> 5
5
3. Liquidated Damages. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company
fails to fulfill its obligations under Section 1 or Section 2, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement is not filed with the
Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 165 days after the Issue Date (or in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or the applicable interpretations of the Commission's staff, if later,
within 45 days after publication of the change in law or interpretation), (iii)
the Registered Exchange Offer is not consummated on or prior to 195 days after
the Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 165 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's staff, if later, within 45 days
after publication of the change in law or interpretation) but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will be
obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $0.192 per week per $1,000 principal amount of Transfer
Restricted Securities held by such Holder until (i) the applicable Registration
Statement is filed, (ii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. On the day following the
cure of all Registration Defaults, the accrual of liquidated damages will cease.
As used herein, the term "Transfer Restricted Securities" means (i) each Note
until the date on which such Note has been exchanged for a freely transferable
Exchange Note in the Registered Exchange Offer, (ii) each Note or Private
Exchange Note until the date on which it has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) each Note or Private Exchange Note until the date on which it
is distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding
anything to the contrary in this Section 3(a), the Company shall not be required
to pay liquidated damages to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations under the representations set forth
in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent
under the Indenture immediately upon the happening of each and every
Registration Default. The Company shall pay the liquidated damages due on the
Transfer Restricted Securities by depositing with the Paying Agent (which may
not be the Company for these purposes), in trust, for the benefit of the Holders
thereof, prior to 10:00 a.m., New York City time, on the next interest payment
date specified by the Indenture and the Notes, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on each
interest payment date specified by the Indenture and the Notes to the record
holder entitled to receive the interest payment to be made on such date. Each
obligation to pay liquidated damages shall be deemed to accrue from and include
the date of the applicable Registration Default and shall cease on the day
following the day such Registration Default is cured.
(c) The parties hereto agree that the liquidated damages
provided for in this Section 3 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration
<PAGE> 6
6
Statement to be declared effective and the Registered Exchange Offer to be
consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any
Registration Statement, the following
provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and shall use its reasonable best efforts to reflect
in each such document, when so filed with the Commission, such comments as any
Initial Purchaser may reasonably propose; (ii) include the information set forth
in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of the prospectus forming a part
of the Exchange Offer Registration Statement, and include the information set
forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and (iii) if requested by any Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K, as
applicable, in the prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Company shall advise each Initial Purchaser, each
Exchanging Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment
thereto has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes, the
Exchange Notes or the Private Exchange Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making
of any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain
the withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
<PAGE> 7
7
(e) The Company will, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities included
within the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included in
such Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to the use of such
prospectus or any amendment or supplement thereto by each of the selling Holders
of Transfer Restricted Securities in connection with the offer and sale of the
Transfer Restricted Securities covered by such prospectus or any amendment or
supplement thereto.
(f) The Company will furnish to each Initial Purchaser and
each Exchanging Dealer, and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(g) The Company will, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement or the Shelf Registration Statement and any
amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or
other persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by any such Initial
Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration
Statement, the Company will use its reasonable best efforts to register or
qualify, or cooperate with the Holders of Notes, Exchange Notes or Private
Exchange Notes included therein and their respective counsel in connection with
the registration or qualification of, such Notes, Exchange Notes or Private
Exchange Notes for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holder reasonably requests in writing and do any and
all other acts or things necessary or advisable to enable the offer and sale in
such jurisdictions of the Notes, Exchange Notes or Private Exchange Notes
covered by such Registration Statement; provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.
(i) The Company will cooperate with the Holders of Notes,
Exchange Notes or Private Exchange Notes to facilitate the timely preparation
and delivery of certificates representing Notes, Exchange Notes or Private
Exchange Notes to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders thereof may request in writing prior to sales of Notes, Exchange
Notes or Private Exchange Notes pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through
(v) occurs during the period for which the Company is required to maintain an
effective Registration Statement, the Company will promptly prepare and file
with the Commission a post-effective amendment to the Registration Statement or
a supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Notes, Exchange Notes or
Private Exchange Notes from a Holder, the prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
<PAGE> 8
8
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the Notes,
the Exchange Notes and the Private Exchange Notes, as the case may be, and
provide the applicable trustee with printed certificates for the Notes, the
Exchange Notes or the Private Exchange Notes, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
(l) The Company will comply in all material respects with
all applicable rules and regulations of the Commission and will make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earning statement satisfying
the provisions of Section 11(a) of the Securities Act; provided, that in no
event shall such earning statement be delivered later than 45 days after the end
of a 12-month period (or 90 days, if such period is a fiscal year) beginning
with the first month of the Company's first fiscal quarter commencing after the
effective date of the applicable Registration Statement, which statement shall
cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange
Notes Indenture, as the case may be, to be qualified under the Trust Indenture
Act as required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer
Restricted Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the Holder and
the distribution of such Transfer Restricted Securities as the Company may from
time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Company may exclude from such registration the Transfer
Restricted Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each
Holder of Transfer Restricted Securities to be registered pursuant thereto
agrees by acquisition of such Transfer Restricted Securities that, upon receipt
of any notice from the Company pursuant to Section 4(b)(ii) through (v), such
Holder will discontinue disposition of such Transfer Restricted Securities until
such Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) or until advised in writing (the "Advice") by the
Company that the use of the applicable prospectus may be resumed. If the Company
shall give any notice under Section 4(b)(ii) through (v) during the period that
the Company is required to maintain an effective Registration Statement (the
"Effectiveness Period"), such Effectiveness Period shall be extended by the
number of days during such period from and including the date of the giving of
such notice to and including the date when each seller of Transfer Restricted
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemental or amended prospectus contemplated by Section 4(j)
(if an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the
Company shall enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action, if
any, as Holders of a majority in aggregate principal amount of the Notes,
Exchange Notes and Private Exchange Notes being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate any
disposition of Notes, Exchange Notes or Private Exchange Notes pursuant to such
Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the
Company shall (i) make reasonably available for inspection by a representative
of, and Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Notes, Exchange Notes and Private Exchange
Notes being sold and any underwriter participating in any
<PAGE> 9
9
disposition of Notes, Exchange Notes or Private Exchange Notes pursuant to such
Shelf Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
and (ii) use its reasonable best efforts to have its officers, directors,
employees, accountants and counsel supply all relevant information reasonably
requested by such representative, Special Counsel or any such underwriter (an
"Inspector") in connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the
Company shall, if requested by Holders of a majority in aggregate principal
amount of the Notes, Exchange Notes and Private Exchange Notes being sold, their
Special Counsel or the managing underwriters (if any) in connection with such
Shelf Registration Statement, use its reasonable best efforts to cause (i) their
counsel to deliver an opinion relating to the Shelf Registration Statement and
the Notes, Exchange Notes or Private Exchange Notes, as applicable, in customary
form, (ii) their officers to execute and deliver all customary documents and
certificates requested by Holders of a majority in aggregate principal amount of
the Notes, Exchange Notes and Private Exchange Notes being sold, their Special
Counsel or the managing underwriters (if any) and (iii) their independent public
accountants to provide a comfort letter in customary form, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
5. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4, and the Company will reimburse the Initial Purchasers and the
Holders for the reasonable fees and disbursements of one firm of attorneys
chosen by the Holders of a majority in aggregate principal amount of the Notes,
the Exchange Notes and the Private Exchange Notes to be sold pursuant to each
Registration Statement (the "Special Counsel") acting for the Initial Purchasers
or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Notes, Exchange Notes or
Private Exchange Notes), to which that Holder may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Registration Statement or any prospectus forming part
thereof or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and shall reimburse
each Holder promptly upon demand for any legal or other expenses reasonably
incurred by that Holder in connection with investigating or defending or
preparing to defend against or appearing as a third party witness in connection
with any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon and in
conformity with any Holders' Information; and provided, further, that with
respect to any such untrue statement in or omission from any related
<PAGE> 10
10
preliminary prospectus, the indemnity agreement contained in this Section 6(a)
shall not inure to the benefit of any Holder from whom the person asserting any
such loss, claim, damage, liability or action received Notes, Exchange Notes or
Private Exchange Notes to the extent that such loss, claim, damage, liability or
action of or with respect to such Holder results from the fact that both (A) a
copy of the final prospectus was not sent or given to such person at or prior to
the written confirmation of the sale of such Notes, Exchange Notes or Private
Exchange Notes to such person and (B) the untrue statement in or omission from
the related preliminary prospectus was corrected in the final prospectus unless,
in either case, such failure to deliver the final prospectus was a result of
non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each
Holder shall indemnify and hold harmless the Company, each of its affiliates,
each of their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Notes, Exchange Notes or
Private Exchange Notes pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the
<PAGE> 11
11
indemnified party has been authorized in writing by the indemnifying party, (2)
the indemnified party has reasonably concluded (based upon advice of counsel to
the indemnified party) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in
Section 6 is unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company from the offering and sale
of the Notes, on the one hand, and a Holder with respect to the sale by such
Holder of Notes, Exchange Notes or Private Exchange Notes, on the other, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and such Holder on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and a Holder on the other with respect to such offering and such sale shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Notes (before deducting expenses) received by or on behalf of the Company
as set forth in the table on the cover of the Offering Memorandum, on the one
hand, bear to the total proceeds received by such Holder with respect to its
sale of Notes, Exchange Notes or Private Exchange Notes, on the other. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to the Company or information
supplied by the Company on the one hand or to any Holders' Information supplied
by such Holder on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 7 were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The
<PAGE> 12
12
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 7 shall be deemed to include, for purposes of this Section 7, any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Notes, Exchange Notes or Private Exchange Notes shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Notes, Exchange Notes or Private Exchange Notes sold by such
indemnifying party to any purchaser exceeds the amount of any damages which such
indemnifying party has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable
best efforts to file the reports required to be filed by it under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Company is
not required to file such reports, it will, upon the written request of any
Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Company covenants that it will take such
further action as any Holder of Transfer Restricted Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Transfer Restricted Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rules 144 and 144A
(including, without limitation, the requirements of Rule 144A(d)(4)). Upon the
written request of any Holder of Transfer Restricted Securities, the Company
shall deliver to such Holder a written statement as to whether it has complied
with such requirements. Notwithstanding the foregoing, nothing in this Section 8
shall be deemed to require the Company to register any of its securities
pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall be
responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Notes, the Exchange Notes and the Private Exchange
Notes, taken as a single class. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Notes, Exchange Notes or
Private Exchange Notes are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of a majority in aggregate principal amount of the Notes, the
Exchange Notes and the Private Exchange Notes being sold by such
<PAGE> 13
13
Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
10(b), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture,
with a copy in like manner to Chase Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation;
(2) if to an Initial Purchaser, initially at its address set
forth in the Purchase Agreement; and
(3) if to the Company, initially at the address of the
Company set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding
upon the Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any
number of counterparts (which may be delivered in original form or by
telecopier) and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act and (c) except where otherwise expressly
provided, the term "affiliate" has the meaning set forth in Rule 405 under the
Securities Act.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Company or by
any Holder of any of its obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
<PAGE> 14
14
(i) No Inconsistent Agreements. The Company represents,
warrants and agrees that (i) it has not entered into, shall not, on or after the
date of this Agreement, enter into any agreement that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Securities, it
shall not grant to any person the right to request the Company to register any
debt securities of the Company under the Securities Act unless the rights so
granted are not in conflict or inconsistent with the provisions of this
Agreement.
(j) No Piggyback on Registrations. Neither the Company nor
any of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
(k) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
<PAGE> 15
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the Initial Purchasers.
Very truly yours,
LAROCHE INDUSTRIES INC.
By /s/ Harold W. Ingalls
----------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: CHASE SECURITIES INC.
By /s/ Daniel P. Tredwell
----------------------------
Authorized Signatory
<PAGE> 16
ANNEX A
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale by it of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Notes
where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 195 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE> 17
ANNEX B
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
-17-
<PAGE> 18
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of up to 195 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until _______________, 199_,
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.(1/)
-
The Company will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Registered Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commission or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of up to 195 days after the Expiration Date, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Registered Exchange Offer (including the reasonable
expenses of one counsel for the Holders of the Notes) other than commissions or
concessions of any broker-dealers and will indemnify the Holders of the Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
- ------------------------------
(1/) In addition, the legend required by Item 502(e) of Regulation S-K will
- appear on the back cover page of the Registered Exchange Offer
prospectus.
-18-
<PAGE> 19
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
-19-
<PAGE> 1
EXHIBIT 10.3
EXECUTION COPY
LAROCHE INDUSTRIES INC.
$175,000,000
9 1/2% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
September 18, 1997
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
LaRoche Industries Inc., a Delaware corporation (the "Company"),
proposes to issue and sell $175,000,000 aggregate principal amount of its 9 1/2%
Senior Subordinated Notes due 2007 (the "Notes"). The Notes will be issued
pursuant to an Indenture to be dated as of September 23, 1997 (the "Indenture")
between the Company and State Street Bank and Trust Company, as trustee (the
"Trustee"). The Company hereby confirms its agreement with Chase Securities Inc.
("CSI") and Donaldson, Lufkin & Jenrette Securities Corporation (together with
CSI, the "Initial Purchasers") concerning the purchase of the Notes from the
Company by the several Initial Purchasers.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon an exemption therefrom. The Company has prepared a
preliminary offering memorandum dated September 4, 1997 (the "Preliminary
Offering Memorandum") and will prepare an offering memorandum dated the date
hereof (the "Offering Memorandum") setting forth information concerning the
Company and the Notes. Copies of the Preliminary Offering Memorandum have been,
and copies of the Offering Memorandum will be, delivered by the Company to the
Initial Purchasers pursuant to the terms of this Agreement. Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto, unless otherwise
noted. The Company hereby confirms that it has authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offering and resale of the Notes by the Initial Purchasers in accordance
with Section 2.
Holders of the Notes (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of an Exchange
and Registration Rights Agreement, substantially in the form attached hereto as
Annex A (the "Registration Rights Agreement"), pursuant to which the Company
will agree to file with the Securities and Exchange Commission (the
"Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of senior
subordinated notes of the Company (the "Exchange Notes") which are identical in
all material respects to the Notes (except that the Exchange Notes will not
contain terms with respect to transfer restrictions) and (ii) under certain
<PAGE> 2
2
circumstances, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement").
On August 12, 1997, the Company commenced an offer (the "Tender
Offer") to purchase for cash up to all (but not less than a majority in
principal amount outstanding) of the Company's 13% Senior Subordinated Notes due
2004 (the "Existing Notes") and a related solicitation of consents (the "Consent
Solicitation") to modify certain terms of the indenture under which the Existing
Notes were issued.
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, the several Initial
Purchasers on and as of the date hereof and the Closing Date (as defined in
Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date the
Offering Memorandum will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation or warranty as to information contained in
or omitted from the Preliminary Offering Memorandum or the Offering
Memorandum in reliance upon and in conformity with written information
relating to the Initial Purchasers furnished to the Company by or on behalf
of any Initial Purchaser specifically for use therein (the "Initial
Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all of the information
that, if requested by a prospective purchaser of the Notes, would be
required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 2 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Notes to the Initial Purchasers and the offer,
resale and delivery of the Notes by the Initial Purchasers in the manner
contemplated by this Agreement and the Offering Memorandum, to register the
Notes under the Securities Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses requires such
qualification, and have all power and authority necessary to own or hold
their respective properties and to conduct the businesses in which they are
engaged, except where the failure to so qualify or have such power or
authority would not, singularly or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries taken
as a whole (a "Material Adverse Effect").
(e) The Company has an authorized capitalization as set forth in the
Offering Memorandum under the heading "Capitalization"; all of the
outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid
<PAGE> 3
3
and non-assessable; and the capital stock of the Company conforms in all
material respects to the description thereof contained in the Offering
Memorandum. All of the outstanding shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly or indirectly by
the Company, free and clear of any lien, charge, encumbrance, security
interest, restriction upon voting or transfer or any other claim of any
third party except those created under the Credit Facility (as defined in
the Offering Memorandum).
(f) The Company has full right, power and authority to execute and
deliver this Agreement, the Indenture, the Registration Rights Agreement
and the Notes (collectively, the "Transaction Documents") and the Stock
Purchase Agreement among the Company, Rhone-Poulenc Chimie S.A. and certain
other parties dated as of August 1, 1997 (the "Stock Purchase Agreement")
and to perform its obligations hereunder and thereunder; and all corporate
action required to be taken for the due and proper authorization, execution
and delivery of each of the Transaction Documents and the Stock Purchase
Agreement and the consummation of the transactions contemplated by the
Transaction Documents have been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at
law) and except to the extent that rights to indemnification under this
Agreement may be limited by federal or state securities laws or the public
policy underlying such laws.
(h) The Registration Rights Agreement has been duly authorized by
the Company and, when duly executed and delivered in accordance with its
terms by each of the parties thereto, will constitute a valid and legally
binding agreement of the Company enforceable against the Company in
accordance with its terms, except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered in
a proceeding in equity or at law).
(i) The Indenture has been duly authorized by the Company and, when
duly executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding agreement of
the Company enforceable against the Company in accordance with its terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at
law). On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act and the rules and
regulations of the Commission applicable to an indenture which is qualified
thereunder.
(j) The Notes have been duly authorized by the Company and, when
duly executed, authenticated, issued and delivered as provided in the
Indenture and paid for as provided herein, will be duly and validly issued
and outstanding and will 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 to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights
<PAGE> 4
4
generally and by general equitable principles (whether considered in a
proceeding in equity or at law).
(k) The Exchange Notes have been duly authorized by the Company and,
when duly executed, authenticated, issued and delivered as provided in the
Indenture and the Registration Rights Agreement in exchange for the Notes,
will be duly and validly issued and outstanding and will constitute valid
and legally binding obligations of the Company entitled to the benefits of
the Indenture, enforceable against the Company in accordance with their
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally and
by general equitable principles (whether considered in a proceeding in
equity or at law).
(l) Each Transaction Documents and the Stock Purchase Agreement
conform in all material respects to the description thereof contained in
the Offering Memorandum.
(m) The execution, delivery and performance by the Company of the
Transaction Documents and the Stock Purchase Agreement, the issuance,
authentication, sale and delivery of the Notes and compliance by the
Company with the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents and the Stock Purchase Agreement
will not (i) conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries is
subject, which conflict, breach, violation, lien, charge or encumbrance
would, singularly or in the aggregate, have a Material Adverse Effect or
which would have a material adverse effect on the Company's ability to
perform its obligations under this Agreement and the Transaction Documents,
(ii) result in any violation of the provisions of the charter or by-laws of
the Company or any of its subsidiaries or (iii) result in any violation of
any statute or any judgment, order, decree, rule or regulation of any court
or arbitrator or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties or assets
which violation would, singularly or in the aggregate, have a Material
Adverse Effect or which would have a material adverse effect on the
Company's ability to perform its obligations under this Agreement and the
Transaction Documents ; and no consent, approval, authorization or order
of, or filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery and
performance by the Company of the Transaction Documents, the issuance,
authentication, sale and delivery of the Notes and compliance by the
Company with the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents, except for such consents,
approvals, authorizations, filings, registrations or qualifications (i)
which shall have been obtained or made prior to the Closing Date, (ii) as
may be required to be obtained or made under the Securities Act and
applicable state securities laws as provided in the Registration Rights
Agreement and (iii) the failure to so obtain would, singularly or in the
aggregate, have a Material Adverse Effect or which would have a material
adverse effect on the Company's ability to perform its obligations under
this Agreement and the Transaction Documents .
(n) Ernst & Young LLP are independent certified public accountants
with respect to the Company and its subsidiaries within the meaning of Rule
101 of the Code of Professional Conduct of the American Institute of
Certified Public Accountants ("AICPA") and its interpretations and rulings
thereunder. The historical financial
<PAGE> 5
5
statements (including the related notes) contained in the Offering
Memorandum comply in all material respects with the requirements applicable
to a registration statement on Form S-1 under the Securities Act (except
that certain supporting schedules are omitted); such financial statements
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby and
fairly present the financial position of the entities purported to be
covered thereby at the respective dates indicated and the results of their
operations and their cash flows for the respective periods indicated; and
the financial information contained in the Offering Memorandum under the
headings "Summary--Summary Historical Financial Data", "Capitalization",
"Selected Historical Consolidated Financial Data", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Management--Executive Compensation" are derived from the accounting
records of the Company and its subsidiaries and fairly present the
information purported to be shown thereby. The other historical financial
and statistical information and data included in the Offering Memorandum
are, in all material respects, fairly presented.
(o) Except as described in the Offering Memorandum, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which, singularly or in
the aggregate, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse
Effect; and to the best knowledge of the Company, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
(p) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Notes or suspends the sale of the
Notes in any jurisdiction; no injunction, restraining order or order of any
nature by any federal or state court of competent jurisdiction has been
issued with respect to the Company or any of its subsidiaries which would
prevent or suspend the issuance or sale of the Notes or the use of the
Preliminary Offering Memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the
best knowledge of the Company, threatened against or affecting the Company
or any of its subsidiaries before any court or arbitrator or any
governmental agency, body or official, domestic or foreign, which could
reasonably be expected to interfere with or adversely affect the issuance
of the Notes or in any manner draw into question the validity or
enforceability of any of the Transaction Documents or any action taken or
to be taken pursuant thereto; and the Company has complied with any and all
requests by any securities authority in any jurisdiction for additional
information to be included in the Preliminary Offering Memorandum and the
Offering Memorandum.
(q) Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws, (ii) in default in any material
respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance
of any term, covenant or condition contained in any material indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which it is a party or by which it is bound or to which any
of its property or assets is subject or (iii) in violation in any material
respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject.
(r) The Company and each of its subsidiaries possess all material
licenses, certificates, authorizations and permits issued by, and have made
all declarations and filings with, the appropriate federal, state or
foreign regulatory agencies or bodies which are necessary or desirable for
the ownership of their respective properties or the conduct
<PAGE> 6
6
of their respective businesses as described in the Offering Memorandum,
except where the failure to possess or make the same would not, singularly
or in the aggregate, have a Material Adverse Effect, and neither the
Company nor any of its subsidiaries has received notification of any
revocation or modification of any such license, certificate, authorization
or permit, except for such modifications which would not, singularly or in
the aggregate, have a Material Adverse Effect, or has any reason to believe
that any such license, certificate, authorization or permit will not be
renewed in the ordinary course.
(s) The Company and each of its subsidiaries have filed all federal,
state, local and foreign income and franchise tax returns required to be
filed through the date hereof and have paid, or are contesting in good
faith by appropriate proceedings, all taxes due thereon, and no tax
deficiency has been determined adversely to the Company or any of its
subsidiaries which has had (nor does the Company have any knowledge of any
tax deficiency which, if determined adversely to the Company or any of its
subsidiaries could reasonably be expected to have) a Material Adverse
Effect.
(t) Neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled by" an investment company
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations of the Commission
thereunder or (ii) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(u) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient in the Company's judgment to
provide reasonable assurance that (i) transactions are executed in
accordance with management's authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management's authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(v) The Company and each of its subsidiaries have insurance
covering their respective properties, operations, personnel and businesses,
which insurance is in amounts and insures against such losses and risks as
are adequate in the Company's judgment to protect the Company and its
subsidiaries and their respective businesses. Neither the Company nor any
of its subsidiaries has received written notice from any insurer or agent
of such insurer that material capital improvements or other material
expenditures are required or necessary to be made in order to continue such
insurance.
(w) The Company and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) necessary for the conduct of their
respective businesses; and the conduct of their respective businesses will
not conflict in any material respect with, and the Company and its
subsidiaries have not received any notice of any claim of conflict with,
any such rights of others except for any such claims that would not have,
singularly or in the aggregate, a Material Adverse Effect.
(x) The Company and each of its subsidiaries have good and
marketable title in fee simple to, or have valid rights to lease or
otherwise use, all items of real and personal property which are material
to the respective businesses business of the Company and its subsidiaries
in each case free and clear of all liens, encumbrances, claims and defects
and
<PAGE> 7
7
imperfections of title except such as (i) do not materially interfere
with the use made and proposed to be made of such property by the Company
and its subsidiaries or (ii) could not reasonably be expected to have a
Material Adverse Effect.
(y) No labor disturbance by or dispute with the employees of the
Company exists or, to the best knowledge of the Company, is contemplated or
threatened other than disputes arising in the ordinary course of business
which would not have, singularly or in the aggregate, a Material Adverse
Effect.
(z) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code")) or "accumulated funding deficiency" (as defined in Section
302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to
any employee benefit plan of the Company or any of its subsidiaries which
could reasonably be expected to have a Material Adverse Effect; each such
employee benefit plan is in compliance in all material respects with
applicable law, including ERISA and the Code; the Company and each of its
subsidiaries have not incurred and do not expect to incur liability under
Title IV of ERISA with respect to the termination of, or withdrawal from,
any pension plan for which the Company or any of its subsidiaries would
have any liability; and each such pension plan that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which could reasonably be expected to cause the loss of such qualification.
(aa) Except as described in the Offering Memorandum, there has been
no storage, generation, transportation, handling, treatment, disposal,
discharge, emission or other release of any kind of toxic or other wastes
or other hazardous substances by, due to or caused by the Company or any of
its subsidiaries (or, to the knowledge of the Company, any other entity
(including any predecessor) for whose acts or omissions the Company, is or
could reasonably be expected to be liable) upon any of the property now or
previously owned or leased by the Company or any of its subsidiaries, or
upon any other property, in violation of any statute or any ordinance,
rule, regulation, order, judgment, decree or permit or which would, under
any statute or any ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any liability,
except for any violation or liability could not reasonably be expected to
have, singularly or in the aggregate with all such violations and
liabilities, a Material Adverse Effect; and there has been no disposal,
discharge, emission or other release of any kind onto such property or into
the environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which the Company has knowledge,
except for any such disposal, discharge, emission or other release of any
kind which could not reasonably be expected to have, singularly or in the
aggregate with all such discharges and other releases, a Material Adverse
Effect.
(ab) The Company has not, and to the best knowledge of the Company,
no director, officer, agent, employee or other person associated with or
acting on behalf of the Company has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
<PAGE> 8
8
(ac) On and immediately after the Closing Date, the Company (after
giving effect to the issuance of the Notes and to the other transactions
related thereto as described in the Offering Memorandum) will be Solvent.
As used in this paragraph, the term "Solvent" means, with respect to a
particular date, that on such date (i) the present fair market value (or
present fair saleable value) of the assets of the Company is not less than
the total amount required to pay the probable liabilities of the Company on
its total existing debts and liabilities (including contingent liabilities)
as they become absolute and matured, (ii) the Company is able to realize
upon its assets and pay its debts and other liabilities, contingent
obligations and commitments as they mature and become due in the normal
course of business, (iii) assuming the sale of the Notes as contemplated by
this Agreement and the Offering Memorandum, the Company is not incurring
debts or liabilities beyond its ability to pay as such debts and
liabilities mature and (iv) the Company is not engaged in any business or
transaction, and is not about to engage in any business or transaction, for
which its property would constitute unreasonably small capital after giving
due consideration to the prevailing practice in the industry in which the
Company is engaged. In computing the amount of such contingent liabilities
at any time, it is intended that such liabilities will be computed at the
amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become
an actual or matured liability.
(ad) Except as described in the Offering Memorandum, there are no
outstanding subscriptions, rights, warrants, calls or options to acquire,
or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of
capital stock of or other equity or other ownership interest in the Company
or any of its subsidiaries.
(ae) None of the proceeds of the sale of the Notes will be used,
directly or indirectly, for the purpose of purchasing or carrying any
margin security as that term is defined in Regulations G and U of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"),
for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any
other purpose which might cause any of the Notes to be considered a
"purpose credit" within the meanings of Regulation G, T, U or X of the
Federal Reserve Board.
(af) Neither the Company nor any of its subsidiaries is a party to
any contract, agreement or understanding with any person that would give
rise to a valid claim against the Company or the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with the
offering and sale of the Notes.
(ag) The Notes satisfy the eligibility requirements of Rule 144A(d)
(3) under the Securities Act.
(ah) Neither the Company nor any of its affiliates or any person
acting on its or their behalf has engaged or will engage in any directed
selling efforts (as such term is defined in Regulation S under the
Securities Act ("Regulation S")), and all such persons have complied and
will comply with the offering restrictions requirement of Regulation S to
the extent applicable.
(ai) Neither the Company nor any of its affiliates has, directly or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as such term is defined
in the Securities Act), which is or will be integrated with the sale of the
Notes in a manner that would require registration of the Notes under the
Securities Act.
(aj) Neither the Company nor any of its affiliates or any other
person acting on its
<PAGE> 9
9
or their behalf has engaged, in connection with the offering of the Notes,
in any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act.
(ak) Except for the Existing Notes, there are no securities of the
Company registered under the Notes Exchange Act of 1934, as amended (the
"Exchange Act"), or listed on a national securities exchange or quoted in a
U.S. automated inter-dealer quotation system.
(al) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act in
connection with the offering of the Notes.
(am) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis or has been disclosed other than in
good faith.
(an) Since the date as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (i) there has been no
material adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs, management or business prospects of the
Company, whether or not arising in the ordinary course of business, (ii)
the Company has not incurred any material liability or obligation, direct
or contingent, other than in the ordinary course of business, (iii) the
Company has not entered into any material transaction other than in the
ordinary course of business and (iv) there has not been any change in the
capital stock or long-term debt of the Company, or any dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock.
(ao) The statistical and market-related data included in the
Offering Memorandum are based on or derived from sources which the Company
believes to be reliable.
2. Purchase and Resale of the Notes. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Company, the principal amount of Notes set forth opposite the name of such
Initial Purchaser on Schedule 1 hereto at a purchase price equal to 96.552% of
the principal amount thereof. The Company shall not be obligated to deliver any
of the Notes except upon payment for all of the Notes to be purchased as
provided herein.
(b) The Initial Purchasers have advised the Company that they
propose to offer the Notes for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, represents and warrants to, and agrees
with, the Company that (i) it is purchasing the Notes pursuant to a private sale
exempt from registration under the Securities Act, (ii) it has not solicited
offers for, or offered or sold, and will not solicit offers for, or offer or
sell, the Notes by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (iii) it has
solicited and will solicit offers for the Notes only from, and has offered or
sold and will offer, sell or deliver the Notes, as part of its initial offering,
only to persons whom it reasonably believes to be qualified institutional buyers
<PAGE> 10
10
("Qualified Institutional Buyers") as defined in Rule 144A under the Securities
Act, or if any such person is buying for one or more institutional accounts for
which such person is acting as fiduciary or agent, only when such person has
represented to it that each such account is a Qualified Institutional Buyer to
whom notice has been given that such sale or delivery is being made in reliance
on Rule 144A and in each case, in transactions in accordance with Rule 144A.
Each Initial Purchaser, severally and not jointly, agrees that, prior to or
simultaneously with the confirmation of sale by such Initial Purchaser to any
purchaser of any of the Notes purchased by such Initial Purchaser from the
Company pursuant hereto, such Initial Purchaser shall furnish to that purchaser
a copy of the Offering Memorandum (and any amendment or supplement thereto that
the Company shall have furnished to such Initial Purchaser prior to the date of
such confirmation of sale). In addition to the foregoing, each Initial Purchaser
acknowledges and agrees that the Company and, for purposes of the opinions to be
delivered to the Initial Purchasers pursuant to Sections 5(d) and (e), counsel
for the Company and for the Initial Purchasers, respectively, may rely upon the
accuracy of the representations and warranties of the Initial Purchasers and
their compliance with their agreements contained in this Section 2, and each
Initial Purchaser hereby consents to such reliance.
(c) The Company acknowledges and agrees that the Initial Purchasers
may sell Notes to any affiliate of an Initial Purchaser and that any such
affiliate may sell Notes purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Notes. (a) Delivery of and
payment for the Notes shall be made at the offices of Simpson Thacher &
Bartlett, New York, New York, or at such other place as shall be agreed upon by
the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on
September 23, 1997, or at such other time or date, not later than seven full
business days thereafter, as shall be agreed upon by the Initial Purchasers and
the Company (such date and time of payment and delivery being referred to herein
as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Notes shall be made to the Company by wire or book-entry transfer of same-day
funds to such account or accounts as the Company shall specify prior to the
Closing Date or by such other means as the parties hereto shall agree prior to
the Closing Date against delivery to the Initial Purchasers of the certificates
evidencing the Notes. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligations of the Initial Purchasers hereunder. Upon delivery, the Notes shall
be in global form, registered in such names and in such denominations as CSI on
behalf of the Initial Purchasers shall have requested in writing not less than
two full business days prior to the Closing Date. The Company agrees to make one
or more global certificates evidencing the Notes available for inspection by CSI
on behalf of the Initial Purchasers in New York, New York at least 24 hours
prior to the Closing Date.
4. Further Agreements of the Company. The Company agrees with each
of the several Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes
any statement of a material fact made in the Offering Memorandum untrue or
which requires the making of any additions to or changes in the Offering
Memorandum (as amended or supplemented from time to time) in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; to advise the Initial Purchasers promptly of any
order preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum, of any suspension of the
qualification of the Notes for offering or sale in any jurisdiction and of
the initiation or threatening of any proceeding for any such purpose; and
to use their best efforts to prevent the issuance of any such
<PAGE> 11
11
order preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum or suspending any such qualification
and, if any such suspension is issued, to obtain the lifting thereof at
the earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and any
amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to each of the Initial Purchasers and
counsel for the Initial Purchasers and not to effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by
notice to the Company after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the
Notes by the Initial Purchasers, any event shall occur or condition exist
as a result of which it is necessary, in the opinion of counsel for the
Initial Purchasers or counsel for the Company, to amend or supplement the
Offering Memorandum in order that the Offering Memorandum will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Notes are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Notes and prospective
purchasers of the Notes 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, unless the
Company is then subject to and in compliance with Section 13 or 15(d) of
the Exchange Act (the foregoing agreement being for the benefit of the
holders from time to time of the Notes and prospective purchasers of the
Notes designated by such holders);
(f) for so long as the Notes are outstanding, to furnish to the
Initial Purchasers copies of any annual reports, quarterly reports and
current reports filed by the Company with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as shall be
furnished by the Company to the Trustee or to the holders of the Notes
pursuant to the Indenture or the Exchange Act or any rule or regulation of
the Commission thereunder;
(g) to promptly take from time to time such actions as the
Initial Purchasers may reasonably request to qualify the Notes for offering
and sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may designate and to continue such qualifications in
effect for so long as required for the resale of the Notes; and to arrange
for the determination of the eligibility for investment of the Notes under
the laws of such jurisdictions as the Initial Purchasers may reasonably
request; provided that the Company and its subsidiaries shall not be
obligated to qualify as foreign corporations in any jurisdiction in which
they are not so qualified or to file a general consent to service of
process in any jurisdiction;
(h) to assist the Initial Purchasers in arranging for the Notes
to be designated
<PAGE> 12
12
Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market securities in accordance with the rules and regulations
adopted by the National Association of Notes Dealers, Inc. ("NASD")
relating to trading in the PORTAL Market and for the Notes to be eligible
for clearance and settlement through The Depository Trust Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as such term is defined in the Securities Act) which could be
integrated with the sale of the Notes in a manner which would require
registration of the Notes under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may
be, not to, and to cause its affiliates not to, and not to authorize or
knowingly permit any person acting on their behalf to, solicit any offer to
buy or offer to sell the Notes by means of any form of general solicitation
or general advertising within the meaning of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act; and not to offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any securities under circumstances
where such offer, sale, contract or disposition would cause the exemption
afforded by Section 4(2) of the Securities Act to cease to be applicable to
the offering and sale of the Notes as contemplated by this Agreement and
the Offering Memorandum;
(k) for a period of 180 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement for,
or announce any offer, sale, contract for sale of or other disposition of
any debt securities issued or guaranteed by the Company, any Guarantor or
any of their respective subsidiaries (other than the Notes) without the
prior written consent of the Initial Purchasers;
(l) during the period from the Closing Date until three years
after the Closing Date, without the prior written consent of the Initial
Purchasers, not to, and not permit any of its affiliates (as defined in
Rule 144 under the Securities Act) to, resell any of the Notes that have
been reacquired by them, except for Notes purchased by the Company or any
of its affiliates and resold in a transaction registered under the
Securities Act;
(m) not to, for so long as the Notes are outstanding, be or
become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act, and to not
be or become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder;
(n) in connection with the offering of the Notes, until CSI on
behalf of the Initial Purchasers shall have notified the Company of the
completion of the resale of the Notes, not to, and to cause its affiliated
purchasers (as defined in Regulation M under the Exchange Act) not to,
either alone or with one or more other persons, bid for or purchase, for
any account in which it or any of its affiliated purchasers has a
beneficial interest, any Notes, or attempt to induce any person to purchase
any Notes; and not to, and to cause its affiliated purchasers not to, make
bids or purchase for the purpose of creating actual, or apparent, active
trading in or of raising the price of the Notes;
(o) in connection with the offering of the Notes, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
<PAGE> 13
13
(p) to furnish to each of the Initial Purchasers on the date
hereof a copy of the independent accountants' report included in the
Offering Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and
performed by it under this Agreement that are within its control prior to
or after the Closing Date, and to use its best efforts to satisfy all
conditions precedent on its part to the delivery of the Notes;
(r) to not take any action prior to the execution and delivery
of the Indenture which, if taken after such execution and delivery, would
have violated any of the covenants contained in the Indenture;
(s) to not take any action prior to the Closing Date which would
require the Offering Memorandum to be amended or supplemented pursuant to
Section 4(d);
(t) prior to the Closing Date, not to issue any press release or
other communication directly or indirectly or hold any press conference
with respect to the Company, its condition, financial or otherwise, or
earnings, business affairs or business prospects (except for routine
communications in the ordinary course of business and consistent with the
past practices of the Company and of which the Initial Purchasers are
notified), without the prior written consent of the Initial Purchasers,
unless in the judgment of the Company and its counsel, and after
notification to the Initial Purchasers, such press release or communication
is required by law; and
(u) to apply the net proceeds from the sale of the Notes as set
forth in the Offering Memorandum under the heading "Use of Proceeds".
5. Conditions of Initial Purchasers' Obligations. The
respective obligations of the several Initial Purchasers hereunder are subject
to the accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Company contained herein, to the accuracy
of the statements of the Company and its officers made in any certificates
delivered pursuant hereto, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial Purchasers
may agree; and no stop order suspending the sale of the Notes in any
jurisdiction shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel for the Initial
Purchasers, is material or omits to state any fact which, in the opinion of
such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of the Transaction
Documents and the Offering Memorandum, and all other legal matters relating
to the Transaction Documents and the transactions contemplated thereby,
shall be satisfactory in all material respects to the Initial Purchasers,
and the Company shall have furnished to the Initial Purchasers all
documents and information that they or their counsel may reasonably request
to enable them to pass upon such matters.
<PAGE> 14
14
(d) Hunton & Williams shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed to
the Initial Purchasers and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers, substantially to the
effect set forth in Annex B hereto.
(e) The Initial Purchasers shall have received from Simpson
Thacher & Bartlett, counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to such matters as the
Initial Purchasers may reasonably require, and the Company shall have
furnished to such counsel such documents and information as they request
for the purpose of enabling them to pass upon such matters.
(f) The Company shall have furnished to the Initial Purchasers
(i) a letter (the "Initial Letter") of Ernst & Young LLP, addressed to the
Initial Purchasers and dated the date hereof, in form and substance
satisfactory to the Initial Purchasers, substantially to the effect set
forth in Annex C hereto and (ii) a letter of Coopers & Lybrand, permitting
reliance by the Initial Purchasers, in form and substance satisfactory to
the Initial Purchasers, relating to the financial information included in
the Offering Memorandum with respect to the PCL Facility (as defined in the
Offering Memorandum).
(g) The Company shall have furnished to the Initial Purchasers a
letter (the "Bring-Down Letter") of Ernst & Young LLP, addressed to the
Initial Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants with respect to the Company and its
subsidiaries within the meaning of Rule 101 of the Code of Professional
Conduct of the AICPA and its interpretations and rulings thereunder, (ii)
stating, as of the date of the Bring-Down Letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Offering Memorandum,
as of a date not more than three business days prior to the date of the
Bring-Down Letter), that the conclusions and findings of such accountants
with respect to the financial information and other matters covered by the
Initial Letter are accurate and (iii) confirming in all material respects
the conclusions and findings set forth in the Initial Letter.
(h) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, of its chief executive officer and its
chief financial officer stating that (A) such officers have carefully
examined the Offering Memorandum, (B) in their opinion, the Offering
Memorandum, as of its date, did not include any untrue statement of a
material fact and did not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
since the date of the Offering Memorandum, no event has occurred which
should have been set forth in a supplement or amendment to the Offering
Memorandum so that the Offering Memorandum (as so amended or supplemented)
would not include any untrue statement of a material fact and would not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading and (C) as of the Closing Date,
the representations and warranties of the Company in this Agreement are
true and correct in all material respects, the Company has complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder on or prior to the Closing Date, and subsequent to the
date of the most recent financial statements contained in the Offering
Memorandum, there has been no material adverse change in the financial
position or results of operation of the Company or any of its subsidiaries,
or any change, or any development including a prospective change, in or
affecting the condition (financial or otherwise), results of operations,
business or prospects of the Company and its subsidiaries taken as a whole,
except as set forth in the Offering Memorandum.
<PAGE> 15
15
(i) The Initial Purchasers shall have received a counterpart of
the Registration Rights Agreement which shall have been executed and
delivered by duly authorized officers of the Company.
(j) The Indenture shall have been duly executed and delivered by
the Company and the Trustee, and the Notes shall have been duly executed
and delivered by the Company and duly authenticated by the Trustee, as
applicable.
(k) The Notes shall have been approved by the NASD for trading
in the PORTAL Market.
(l) If any event shall have occurred that requires the Company
under Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof shall have been delivered to the
Initial Purchasers reasonably in advance of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchasers
would materially impair the ability of the Initial Purchasers to purchase,
hold or effect resales of the Notes as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall
not have been any change in the capital stock or long-term debt or any
change, or any development involving a prospective change, in or affecting
the condition (financial or otherwise), results of operations, business or
prospects of the Company and its subsidiaries taken as a whole, the effect
of which, in any such case described above, is, in the judgment of the
Initial Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Notes on the terms
and in the manner contemplated by this Agreement and the Offering
Memorandum (exclusive of any amendment or supplement thereto).
(o) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date, prevent
the issuance or sale of the Notes; and no injunction, restraining order or
order of any other nature by any federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance or sale of the Notes.
(p) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the Notes or
any of the Company's other debt securities or preferred stock by any
"nationally recognized statistical rating organization", as such term is
defined by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance
or review (other than an announcement with positive implications of a
possible upgrading), its rating of the Notes or any of the Company's other
debt securities or preferred stock.
(q) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York
<PAGE> 16
16
Stock Exchange, the American Stock Exchange or the over-the-counter market
shall have been suspended or limited, or minimum prices shall have been
established on any such exchange or market by the Commission, by any such
exchange or by any other regulatory body or governmental authority having
jurisdiction, or trading in any securities of the Company on any exchange
or in the over-the-counter market shall have been suspended or (ii) any
moratorium on commercial banking activities shall have been declared by
federal or New York state authorities or (iii) an outbreak or escalation of
hostilities or a declaration by the United States of a national emergency
or war or (iv) a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the
financial markets in the United States shall be such) the effect of which,
in the case of this clause (iv), is, in the judgment of the Initial
Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or the delivery of the Notes on the
terms and in the manner contemplated by this Agreement and in the Offering
Memorandum (exclusive of any amendment or supplement thereto).
(r) The Tender Offer and the Consent Solicitation shall have
been consummated, pursuant to which the Company shall have (i) purchased
for cash not less than a majority in principal amount outstanding of the
Company's Existing Notes and (ii) received the number of consents necessary
in order to modify certain terms of the indenture under which the Existing
Notes were issued.
All opinions, letters, evidence and certificates mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers, in their absolute
discretion, by notice given to and received by the Company prior to delivery of
and payment for the Notes if, prior to that time, any of the events described in
Section 5(m), (n), (o), (p) or (q) shall have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date,
any Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Notes which such defaulting Initial Purchaser agreed but failed
to purchase by other persons satisfactory to the Company and the non-defaulting
Initial Purchasers, but if no such arrangements are made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
the non-defaulting Initial Purchasers or the Company, except that the Company
will continue to be liable for the payment of expenses to the extent set forth
in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall
not terminate and shall remain in effect. As used in this Agreement, the term
"Initial Purchasers" includes, for all purposes of this Agreement unless the
context otherwise requires, any party not listed in Schedule 1 hereto that,
pursuant to this Section 7, purchases Notes which a defaulting Initial Purchaser
agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Company or any non-defaulting
Initial Purchaser for damages caused by its default. If other persons are
obligated or agree to purchase the Notes of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchasers or the Company may postpone the
Closing Date for up to seven full business days in order to effect any changes
that in the opinion of counsel for the Company or counsel for the Initial
Purchasers may be necessary in the Offering Memorandum or in any other document
or arrangement, and the Company agrees to promptly prepare any amendment or
supplement to the Offering Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 6 or 7, (b) the Company
shall fail to tender the Notes
<PAGE> 17
17
for delivery to the Initial Purchasers for any reason permitted under this
Agreement or (c) the Initial Purchasers shall decline to purchase the Notes for
any reason permitted under this Agreement, the Company shall reimburse the
Initial Purchasers for such out-of-pocket expenses (including reasonable fees
and disbursements of counsel) as shall have been reasonably incurred by the
Initial Purchasers in connection with this Agreement and the proposed purchase
and resale of the Notes. If this Agreement is terminated pursuant to Section 7
by reason of the default of one or more of the Initial Purchasers, the Company
shall not be obligated to reimburse any defaulting Initial Purchaser on account
of such expenses.
9. Indemnification. (a) The Company shall indemnify and hold
harmless each Initial Purchaser, its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(a) and
Section 10 as an Initial Purchaser), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of the Notes), to which that Initial Purchaser may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum or in any amendment or supplement thereto or in any information
provided by the Company pursuant to Section 4(e) or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and shall reimburse
each Initial Purchaser promptly upon demand for any legal or other expenses
reasonably incurred by that Initial Purchaser in connection with investigating
or defending or preparing to defend against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Initial Purchasers'
Information; and provided, further, that with respect to any such untrue
statement in or omission from the Preliminary Offering Memorandum, the indemnity
agreement contained in this Section 9(a) shall not inure to the benefit of any
such Initial Purchaser to the extent that the sale to the person asserting any
such loss, claim, damage, liability or action was an initial resale by such
Initial Purchaser and any such loss, claim, damage, liability or action of or
with respect to such Initial Purchaser results from the fact that both (A) to
the extent required by applicable law, a copy of the Offering Memorandum was not
sent or given to such person at or prior to the written confirmation of the sale
of such Notes to such person and (B) the untrue statement in or omission from
the Preliminary Offering Memorandum was corrected in the Offering Memorandum
unless, in either case, such failure to deliver the Offering Memorandum was a
result of non-compliance by the Company with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(b) and
Section 10 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or (ii) the omission or
<PAGE> 18
18
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any Initial
Purchasers' Information, and shall reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 9 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on
<PAGE> 19
19
claims that are the subject matter of such proceeding.
The obligations of the Company and the Initial Purchasers in
this Section 9 and in Section 10 are in addition to any other liability that the
Company or the Initial Purchasers, as the case may be, may otherwise have,
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
10. Contribution. If the indemnification provided for in Section
9 is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other from the offering of the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Notes purchased under this Agreement (before deducting expenses) received
by or on behalf of the Company, on the one hand, and the total discounts and
commissions received by the Initial Purchasers with respect to the Notes
purchased under this Agreement, on the other, bear to the total gross proceeds
from the sale of the Notes under this Agreement, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to the Company or information supplied by the Company on
the one hand or to any Initial Purchasers' Information on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the Initial Purchasers agree that it would not be just and equitable if
contributions pursuant to this Section 10 were to be determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10 shall be deemed
to include, for purposes of this Section 10, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 10, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchaser with respect to the Notes
purchased by it under this Agreement exceeds the amount of any damages which
such Initial Purchaser has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute as provided in this Section 10 are several in
proportion to their respective purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, the
Company and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 9 and 10 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Company and
the
<PAGE> 20
20
Initial Purchasers and in Section 4(e) with respect to holders and
prospective purchasers of the Notes. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 11, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
12. Expenses. The Company agrees with the Initial Purchasers to
pay (a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Notes and any taxes payable in that connection; (b) the costs
incident to the preparation, printing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum and any amendments or supplements
thereto; (c) the costs of reproducing and distributing each of the Transaction
Documents; (d) the costs incident to the preparation, printing and delivery of
the certificates evidencing the Notes, including stamp duties and transfer
taxes, if any, payable upon issuance of the Notes; (e) the fees and expenses of
the Company's counsel and independent accountants; (f) the fees and expenses of
qualifying the Notes under the securities laws of the several jurisdictions as
provided in Section 4(h) and of preparing, printing and distributing Blue Sky
Memoranda (including related fees and expenses of counsel for the Initial
Purchasers); (g) any fees charged by rating agencies for rating the Notes;
(h) the fees and expenses of the Trustee and any paying agent (including related
fees and expenses of any counsel to such parties); (i) all expenses and
application fees incurred in connection with the application for the inclusion
of the Notes on the PORTAL Market and the approval of the Notes for book-entry
transfer by DTC; and (j) all other costs and expenses incident to the
performance of the obligations of the Company under this Agreement which are not
otherwise specifically provided for in this Section 12; provided, however, that
except as provided in this Section 12 and Section 8, the Initial Purchasers
shall pay their own costs and expenses.
13. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Company and the
Initial Purchasers contained in this Agreement or made by or on behalf of the
Company or the Initial Purchasers pursuant to this Agreement or any certificate
delivered pursuant hereto shall survive the delivery of and payment for the
Notes and shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement or any investigation made by or on behalf of
any of them or any of their respective affiliates, officers, directors,
employees, representatives, agents or controlling persons.
14. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by
mail or telecopy transmission to Chase Securities Inc., 270 Park Avenue,
New York, New York 10017, Attention: Daniel Tredwell (telecopier no.: (212)
270-0994); or
(b) if to the Company, shall be delivered or sent by mail or
telecopy transmission to the address of the Company set forth in the
Offering Memorandum, Attention: Harold W. Ingalls (telecopier no.: (404)
851-0324);
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on Schedule 2 hereof. Any such statements, requests, notices or agreements
shall take effect at the time of receipt thereof. The Company shall be entitled
to act and rely upon any request, consent, notice or agreement given or made on
behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405
<PAGE> 21
21
under the Securities Act.
16. Initial Purchasers' Information. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Initial
Purchasers' Information consists solely of the following information in the
Preliminary Offering Memorandum and the Offering Memorandum: (i) the last
paragraph on the front cover page concerning the terms of the offering by the
Initial Purchasers; (ii) the legend in the first paragraph on page i concerning
over-allotment and trading activities by the Initial Purchasers; and (iii) the
statements concerning the Initial Purchasers contained in the third sentence of
the sixth paragraph under the heading "Plan of Distribution".
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a
<PAGE> 22
binding agreement between the Company and the several Initial Purchasers in
accordance with its terms.
Very truly yours,
LAROCHE INDUSTRIES INC.
By /s/ Harold W. Ingalls
-----------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: CHASE SECURITIES INC.
By: /s/ Daniel P. Tredwell
-------------------------------
Authorized Signatory
<PAGE> 23
SCHEDULE 1
Principal
Amount
Initial Purchasers of Notes
------------------ ---------
Chase Securities Inc. $131,250,000
Donaldson, Lufkin & Jenrette
Securities Corporation $ 43,750,000
------------
Total $175,000,000
<PAGE> 24
SCHEDULE 2
Addresses for Notices
- ---------------------
Chase Securities Inc.
1 Chase Plaza, 25th Floor
New York, NY 10081
Attention: Legal Department
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Attention: Legal Department
LaRoche Industries Inc.
1100 Johnson Ferry Rd., N.E.
Atlanta, Georgia 30342
<PAGE> 25
ANNEX A
[Form of Exchange and Registration Rights Agreement]
See Tab No. 11
<PAGE> 26
ANNEX B
[Form of Opinion of Hunton & Williams]
Hunton & Williams shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set forth
below:
(i) the Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority necessary
to own or hold their respective properties and to conduct the
businesses in which they are engaged (except where the failure to so
qualify or have such power or authority would not, singularly or in the
aggregate, have a Material Adverse Effect);
(ii) the Company has an authorized capitalization as set
forth in the Offering Memorandum, and all of the outstanding shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable; and the capital stock of
the Company conforms in all material respects to the description
thereof contained in the Offering Memorandum. All of the outstanding
shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company,
free and clear of any lien, charge, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third
party, except those created under the Credit Facility (as defined in
the Offering Memorandum);
(iii) the descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts and other documents
are accurate in all material respects; and such counsel does not have
actual knowledge of any current or pending legal or governmental
actions, suits or proceedings which would be required to be described
in the Offering Memorandum if the Offering Memorandum were a prospectus
included in a registration statement on Form S-1 which are not
described as so required;
(iv) the Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations
of the Commission applicable to an indenture which is qualified
thereunder;
(v) the Company has full right, power and authority to
execute and deliver the Purchase Agreement, the Indenture, the
Registration Rights Agreement and the Notes (collectively, the
"Transaction Documents") and the Stock Purchase Agreement between the
Company and Rhone-Poulenc Chimie S.A. dated as of August 1, 1997 (the
"Stock Purchase Agreement") and to perform its obligations thereunder;
and all corporate action required to be taken for the due and proper
authorization, execution and delivery of each of the Transaction
Documents and the Stock Purchase Agreement and the consummation of the
transactions contemplated by the Transaction Documents have been duly
and validly taken;
(vi) each of the Purchase Agreement and the Registration
Rights Agreement has
<PAGE> 27
2
been duly authorized, executed and delivered by the Company and
constitutes a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, except
to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law) and except to the extent that the
indemnification provisions thereof may be unenforceable or limited by
federal or state securities laws or the public policy underlying such
laws;
(vii) the Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery thereof by the Trustee, constitutes a valid and legally
binding agreement of the Company enforceable against the Company in
accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law);
(viii) the Notes have been duly authorized and issued by the
Company and, assuming due authentication thereof by the Trustee and
upon payment and delivery in accordance with the Purchase Agreement,
will 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 to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law);
(ix) the Exchange Notes have been duly authorized by the
Company and, when duly executed, authenticated, issued and delivered as
provided in the Indenture and the Registration Rights Agreement in
exchange for the Notes, will be duly and validly issued and outstanding
and will constitute valid and legally binding obligations of the
Company entitled to the benefits of the Indenture, enforceable against
the Company in accordance with their terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or
at law);
(x) each Transaction Document and the Stock Purchase
Agreement conforms in all material respects to the description thereof
contained in the Offering Memorandum;
(xi) the execution, delivery and performance by the Company
of the Transaction Documents and the Stock Purchase Agreement, the
issuance, authentication, sale and delivery of the Notes and
compliance by the Company with the terms thereof and the consummation
of the transactions contemplated by the Transaction Documents and the
Stock Purchase Agreement will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries (except those created under the
Credit Facility) pursuant to, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, which conflict,
breach, violation, lien,
<PAGE> 28
3
chartge or encumbrance would, singularly or in the aggregate, have a
Material Adverse Effect or which would have a material adverse effect
on the Company's ability to perform its obligations under the
Transaction Documents, (ii) result in any violation of the provisions
of the charter or by-laws of the Company or any of its subsidiaries or
(iii) result in the violation of the constitution or statutes of any
relevant jurisdiction or any rule or regulation promulgated thereunder
or any judgment, order or decree of any court or governmental agency or
instrumentality having proper jurisdiction over the Company or any of
its subsidiaries or any of its or their properties or assets which
violation would, singularly or in the aggregatre, have a Material
Adverse Effect or which would have a material adverse effect on the
Company's ability to perform its obligations under the Transaction
Documents; and no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
instrumentality having proper jursidiction over the Company is required
for the execution, delivery and performance by the Company of the
Transaction Documents, the issuance, authentication, sale and delivery
of the Notes and compliance by the Company with the terms thereof and
the consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations,
filings, registrations or qualifications (i) which have been obtained
or made prior to the Closing Date, (ii) as may be required to be
obtained or made under the Securities Act and applicable state
securities laws as provided in the Registration Rights Agreement and
(iii) the failure to so obtain would not singularly or in the
aggregate, have a Material Adverse Effect or which would have a
material adverse effect on the Company's abiltiy to perform its
obligations under the Transaction Documents;
(xii) except as disclosed in the Offering Memorandum, to the
best knowledge of such counsel, there are no pending actions or suits
or judicial, arbitral, rule-making, administrative or other proceedings
to which the Company or any of its subsidiaries is a party or of which
any property or assets of the Company or any of its subsidiaries is the
subject which (A) singularly or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, could reasonably
be expected to have a Material Adverse Effect or (B) questions the
validity or enforceability of any of the Transaction Documents or any
action taken or to be taken pursuant thereto; and to the best knowledge
of such counsel, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xiii) the Company is not (A) in violation of its charter or
by-laws, (B) in default in any material respect, and no event has
occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term,
covenant or condition contained in any material indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument
to which it is a party or by which it is bound or to which any of its
property or assets is subject or (C) in violation in any material
respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject;
(xiv) the Company is not (A) an "investment company" or a
company "controlled by" an investment company within the meaning of the
Investment Company Act and the rules and regulations of the Commission
thereunder, without taking account of any exemption under the
Investment Company Act arising out of the number of holders of the
Company's securities or (B) a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended;
<PAGE> 29
4
(xv) neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes will violate Regulation G, T, U or X of the
Federal Reserve Board; and
(xvi) assuming the accuracy of the representations, warranties
and agreements of the Company and of the Initial Purchasers contained
in the Purchase Agreement, no registration of the Notes under the
Securities Act or qualification of the Indenture under the Trust
Indenture Act is required in connection with the issuance and sale of
the Notes by the Company and the offer, resale and delivery of the
Notes by the Initial Purchasers in the manner contemplated by the
Purchase Agreement and the Offering.
Such counsel shall also state that they have participated in
conferences with representatives of the Company, representatives of its
independent accountants and counsel and representatives of the Initial
Purchasers and their counsel at which conferences the contents of the
Preliminary Offering Memorandum and the Offering Memorandum and any amendment
and supplement thereto and related matters were discussed and, although such
counsel assumes no responsibility for the accuracy, completeness or fairness of
the Offering Memorandum or any amendment or supplement thereto (except as
expressly provided above), nothing has come to the attention of such counsel to
cause such counsel to believe that the Offering Memorandum or any amendment or
supplement thereto (other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need express
no belief), as of the date thereof and as of the Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials which are furnished to the Initial
Purchasers.
<PAGE> 30
ANNEX C
[Form of Initial Comfort Letter]
The Company shall have furnished to the Initial Purchasers a
letter of Ernst & Young LLP, addressed to the Initial Purchasers and dated the
date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchasers, substantially to the effect set forth below:
(i) they are independent certified public accountants with
respect to the Company within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings;
(ii) based upon a reading of the latest unaudited financial
statements made available by the Company, the procedures of the AICPA
for a review of interim financial information as described in Statement
of Auditing Standards No. 71, reading of minutes and inquiries of
certain officials of the Company who have responsibility for financial
and accounting matters and certain other limited procedures requested
by the Initial Purchasers and described in detail in such letter,
nothing has come to their attention that causes them to believe that
(A) any unaudited financial statements included in the Offering
Memorandum do not comply as to form in all material respects with
applicable accounting requirements or (B) any material modifications
should be made to the unaudited financial statements included in the
Offering Memorandum for them to be in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in
the Offering Memorandum;
(iv) based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available
balance sheet, including reading of minutes and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters, nothing has come to their attention that causes
them to believe that (A) at a specified date not more than three
business days prior to the date of such letter, there was any change in
capital stock, increase in long-term debt or decrease in net current
assets as compared with the amounts shown in the March 31, 1997
unaudited balance sheet included in the Offering Memorandum or (B) for
the period from March 31, 1997 to a specified date not more than three
business days prior to the date of such letter, there were any
decreases, as compared with the corresponding period in the preceding
year, in net sales, income from operations or net income, except in all
instances for changes, increases or decreases that the Offering
Memorandum discloses have occurred or which are set forth in such
letter, in which case the letter shall be accompanied by an explanation
by the Company as to the significance thereof unless said explanation
is not deemed necessary by the Initial Purchasers; and
(v) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the Offering
Memorandum agrees with the accounting records of the Company, excluding
any questions of legal interpretation.
<PAGE> 1
EXHIBIT 10.4
================================================================================
SHAREHOLDERS AGREEMENT
dated as of
August 1, 1997
Among
RHONE L S.A.S.
RHONE-POULENC CHIMIE S.A.
LII EUROPE S.A.R.L.
LAROCHE INDUSTRIES INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRELIMINARY STATEMENTS...................................................................................... 1
ARTICLE 1.
DEFINITIONS.............................................. 2
1.1. Defined Terms............................................................................. 2
ARTICLE 2.
GOVERNANCE OF THE COMPANY....................................... 5
2.1. Articles.................................................................................. 5
2.2. Composition of Board...................................................................... 5
2.3. Right of Shareholder to Designate Majority of the Board upon
Suspension Event Relating to the Other Shareholder........................................ 6
2.4. General Manager........................................................................... 6
2.5. Composition of the Executive Committee.................................................... 7
2.6. Statutory Auditor(s)...................................................................... 7
2.7. Board Meetings............................................................................ 7
2.8. Executive Committee Meetings.............................................................. 8
2.9. Powers of the Chairman and of the Board................................................... 8
2.10. Deadlock Situation........................................................................ 10
2.11. Management of the Company................................................................. 11
2.11.1 Insurance Policies...................................................... 11
2.11.2 Personnel............................................................... 11
2.11.3 Environment, Safety and Health.......................................... 11
2.12. Financial Information..................................................................... 11
2.13. Visits and Access to Books and Records.................................................... 11
ARTICLE 3.
GUARANTY................................................ 11
3.1. Guaranty of LII Europe Obligations........................................................ 12
3.2. Costs of Enforcement...................................................................... 12
3.3. Payment Currency.......................................................................... 12
3.4. Obligations Survive Termination........................................................... 12
ARTICLE 4.
TERMINATION; DEFAULT AND REMEDIES................................... 12
4.1. Termination............................................................................... 12
4.2. Effect of Termination..................................................................... 12
ARTICLE 5.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MISCELLANEOUS............................................. 13
5.1. Notices................................................................................... 13
5.2. Entire Agreement.......................................................................... 14
5.3. No Third Party Beneficiary................................................................ 14
5.4. Public Announcements...................................................................... 14
5.5. Confidentiality........................................................................... 15
5.6. Further Assurances........................................................................ 15
5.7. Time of Essence........................................................................... 15
5.8. Amendment and Waiver...................................................................... 15
5.9. No Assignment; Binding Effect............................................................. 15
5.10. Taxes and Governmental Charges; Expenses.................................................. 16
5.11. Headings.................................................................................. 16
5.12. Arbitration............................................................................... 16
5.13. Invalid Provisions........................................................................ 16
5.14. Payments and Computations; Judgment Currency.............................................. 17
5.15. English Language.......................................................................... 17
5.16. Specific Performance...................................................................... 18
5.17. Governing Law............................................................................. 18
5.18. Counterparts.............................................................................. 18
5.19. Effectiveness............................................................................. 18
</TABLE>
<PAGE> 4
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of August 1,
1997, by and among the following:
(a) RHONE L, a societe par actions simplifiee organized under
the laws of the Republic of France (and whose name will be changed on
or prior to Closing to ChlorAlp S.A.S.) (herein, together with its
successors and assigns, the "Company"), having a corporate capital of
FF 250,000, whose head office is located at 25 quai Paul Doumer, 92408
Courbevoie Cedex, France, registered with the Registry of Commerce and
Companies of Nanterre under the number B 411 129 612, represented by
Chantal Rubin;
(b) RHONE-POULENC CHIMIE S.A., a societe anonyme organized
under the laws of the Republic of France (herein referred to, together
with its successors and assigns, as "RPC" or a "Shareholder" and,
together with LII Europe, the "Shareholders"), having a corporate
capital of FF 2,703,447,200, whose head office is located at 25 quai
Paul Doumer, 92408 Courbevoie Cedex, France, registered with the
Registry of Commerce and Companies of Nanterre under the number B 642
014 526, represented by Fred Scetbon;
(c) LII Europe S.A.R.L. a societe a responsabilite limitee
organized under the laws of the Republic of France (herein referred to,
together with its successors and assigns, as "LII Europe" or a
"Shareholder" and, together with RPC, the "Shareholders"), having a
corporate capital of FF 1,500,000, whose head office is located at 15,
avenue du Marechal Joffre, 92000 Nanterre, France, registered with the
Registry of Commerce and Companies of Nanterre under the number B 412
883 019, represented by William G. Osborne; and
(d) LAROCHE INDUSTRIES INC., a corporation organized under the
laws of the State of Delaware, United States of America, which owns
directly or indirectly all of the outstanding capital stock of LII
Europe (herein, together with its successors and assigns, the
"Guarantor"), whose head office is located at 1100 Johnson Ferry Road
N.E., Atlanta, Georgia 30342-1708 U.S.A., represented by W. Walter
LaRoche, III;
PRELIMINARY STATEMENTS:
(A) RPC shall contribute on the effective date of this Agreement its
full and autonomous division specializing in the development, manufacturing and
marketing of chlorine, caustic soda and bleach (the "Division") to the Company;
<PAGE> 5
2
(B) As a result of this contribution, the Company will increase its
corporate capital, to FF 73,010,000 divided into 730,100 shares of FF 100 par
value per Share (the "Shares").
(C) RPC, the Company, LII Europe and the Guarantor have entered into a
Stock Purchase Agreement, dated as of the date hereof (herein, as amended or
otherwise modified, the "Stock Purchase Agreement"), pursuant to which, among
other things, LII Europe has undertaken to purchase from RPC 50% of the Shares.
(D) After giving effect to the consummation of the transactions
contemplated by the Stock Purchase Agreement, the Shareholders will own
beneficially and of record, in the aggregate, 100% of the outstanding Shares.
(E) The Company and the Shareholders desire to provide for stability of
the ownership and operation of the Company and to promote continuity in the
Company's management and policies.
(F) The effectiveness of this Agreement is conditioned on the
consummation of the transactions contemplated by the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, and other good and valuable
consideration had and received, the parties hereto, upon the terms and subject
to the conditions contained herein, hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. The following capitalized terms when
used in this Agreement shall have the following respective meanings. Initially
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Stock Purchase Agreement:
"Actions or Proceedings" means any action, suit, proceedings,
arbitration or any investigation or audit by any person.
"Assets and Properties" of any person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned, leased or licensed by or to such person, including
without limitation rights under Contracts, Licenses, permits and authorizations,
cash, cash equivalents, investment assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and intellectual property.
<PAGE> 6
3
"Bankruptcy" means, with respect to any person, such person's filing a
petition or otherwise voluntarily commencing a case or proceeding seeking relief
under any bankruptcy, insolvency, arrangement, reorganization or similar law for
the relief of debtors, or being the voluntary or involuntary subject of an order
for relief by any court under any such law, or being adjudicated a "bankrupt",
"debtor" or "insolvent" under any such law, in "reglement amiable",
"redressement judiciaire" or "liquidation judiciaire".
"Books and Records" means all files, documents, instruments, papers,
electronic data, books and records relating to the Division and/or the Company
or, with respect to any other person, relating to the business of such person.
"Business" means the business consisting of the processing and
marketing of chlorine, caustic soda and bleach, together with the activities and
businesses related or incidental thereto as conducted by the Company, including,
but not limited to, the activities of the Company at the Pont de Claix,
Hauterives and Saint Fons sites.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the City of New York, State of New York, United States of
America, or the City of Paris, France, are authorized or obligated to close.
"CEVCO" means Centrale Electricite Vapeur, a French Groupement
d'Interet Economique, whose head office is located at 12, rue Notre Dame des
Champs, 75002 Paris, France, and which is registered with the Registry of
Commerce and Companies of Nanterre under the number C 412 577 835.
"Closing Date" means the actual Closing Date under the Stock Purchase
Agreement.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral) that is legally binding.
"GAAP" means generally accepted accounting principles in France,
consistently applied.
"LII Europe" means LII Europe S.A.R.L., a societe a responsabilite
limitee organized under the laws of the Republic of France, together with its
successors and assigns. If any Shares have been Transferred by LII Europe to a
Permitted Transferee, references herein to LII Europe or to any Shares owned by
LII Europe, as the case may be, shall be deemed to include any such Permitted
Transferee and any Shares owned by such Permitted Transferee.
"Permitted Transferee" means, with respect to a Shareholder, any person
which (i) is an entity; (ii) is a Subsidiary of such Shareholder or of any
person of which such Shareholder is a Subsidiary; (iii) the performance of whose
obligations shall have been guaranteed by such Shareholder; and (iv) has agreed
to become a Shareholder for purposes of this Agreement and shall have executed
and delivered to the Company and the other Shareholder a counterpart
<PAGE> 7
4
of this Agreement agreeing to be subject to the restrictions and obligations of
a Shareholder hereunder and to hold such Shares in accordance herewith.
"PIBOR Rate" means the interest rate from time to time in effect for
PIBOR deposits of one month duration as published in Les Echos - Taux monetaire
- - PIBOR, or such successor interbank offer rate for ECU deposits of one month to
the extent at any time hereafter the ECU shall be substituted for the French
Franc as the currency of the Republic of France.
"RP" means Rhone-Poulenc SA, a French societe anonyme, together with
its successors and assigns.
"RPC" means Rhone-Poulenc Chimie S.A., a societe anonyme organized
under the laws of the Republic of France, together with its successors and
assigns. If any Shares have been Transferred by RPC to a Permitted Transferee,
references herein to RPC or to any Shares owned by RPC, as the case may be,
shall be deemed to include any such Permitted Transferee and any Shares owned by
such Permitted Transferee.
"Shareholder" shall mean either or both of the Shareholders named
herein, and any person who becomes a party to this Agreement as the result of a
Transfer of Shares to such person.
"Subsidiary" means, with respect to any person, any other person in
which such person has a Controlling Interest.
"Suspension Event" means any of the following events with respect to
the Shareholder concerned:
(i) as of any date of determination, (A) any Director
designated by the concerned Shareholder shall, without just cause, have
failed to attend in person or by proxy at least three out of the last
four regularly scheduled quarterly meetings of the Board of Directors
of the Company ("Board" or "Board of Directors"), (B) all of the
Directors designated by the concerned Shareholder shall have failed to
attend in person or by proxy the most recent regularly scheduled
quarterly meeting of the Board, and shall likewise have failed to
attend the adjourned (rescheduled) meeting after due notice and without
just cause, or (C) the concerned Shareholder shall have failed for at
least 60 days following the death, resignation or removal of a Director
designated by the concerned Shareholder to designate a replacement
Director;
(ii) the concerned Shareholder, or Guarantor with respect to
LII Europe, shall be in Bankruptcy; or
(iii) the concerned Shareholder, or Guarantor with respect to
LII Europe, shall be in material breach of its obligations hereunder
and such breach shall not have been remedied within ninety (90) days
following such Shareholder's receipt of written notice of such alleged
breach.
<PAGE> 8
5
"Transfer" means any sale, assignment, exchange, disposition, transfer
(including, without limitation, a transfer by will or intestate distribution or
by merger or consolidation), gift or attempt to create or grant an Encumbrance
or security interest in Shares, whether voluntary, involuntary, by operation of
law or otherwise.
ARTICLE 2.
GOVERNANCE OF THE COMPANY
2.1. Articles. The Articles of Incorporation (Statuts) of the Company
(herein, as amended or otherwise modified, the "Articles") shall be
substantially in the form attached hereto as Exhibit A and shall be amended or
modified after the date hereof only (i) to incorporate therein any of the
provisions contained in this Agreement, (ii) to include any provisions required
by any mandatory French statute, regulation or case law to be included therein,
or (iii) as otherwise permitted by this Agreement. In the event of any conflict
or inconsistency between the terms hereof and the terms of the Articles, the
terms hereof shall prevail.
2.2. Composition of Board. (a) The Shareholders each hereby agree to
take any and all action necessary to cause the Board of Directors to be
comprised as follows. The number of Directors on the Board (including the
Chairman) shall not exceed six (6). Subject to the provisions of Section 2.3,
and for so long as RPC and LII Europe shall be Shareholders, the Board shall
include:
(i) three (3) Persons designated in writing by RPC; and
(ii) three (3) Persons designated in writing by LII Europe.
(b) The Chairman and the directors shall serve without compensation.
Any Director who is elected to the Board may be removed from the Board, with or
without cause, only upon the request of the Shareholder who designated such
Director; provided that either Shareholder may propose to the Board the removal
for serious cause of any Director designated by the other Shareholder. In the
event that a Director elected pursuant to Section 2.2(a) resigns, is removed
from, or otherwise ceases to serve on the Board, for any reason, the vacancy
shall be filled promptly with a Person designated in accordance with the
applicable provisions of Section 2.2(a) by the Shareholder who originally
designated such Director and in accordance with the Articles.
(c) The Chairman (President du Conseil d'Administration) of the Company
shall be designated in accordance with the procedures set forth at article 13 of
the Articles. The Chairman may be removed, with or without cause, by a decision
of the Shareholder who designated such Chairman. Save as otherwise decided in
accordance with the terms hereof or of the Articles, the term of office of the
Chairman shall be four (4) years and the initial Chairman shall
<PAGE> 9
6
be designated by RPC. At the end of the initial term, the Chairman shall be
designated by LII Europe and the General Manager shall be designated by RPC (as
contemplated at Section 2.4 below). The Chairman shall prepare and preside over
meetings of the Board of Directors and shall exercise an oversight function with
respect to the implementation of decisions of the Board of Directors.
2.3. Right of Shareholder to Designate Majority of the Board upon
Suspension Event Relating to the Other Shareholder. Notwithstanding the
provisions of Section 2.2 of this Agreement, from and after the occurrence of a
Suspension Event relating to a Shareholder (the "Breaching Shareholder"), and
for so long as such Suspension Event continues, the other Shareholder (the
"Non-Breaching Shareholder") shall be entitled to suspend such number of
Directors designated by the Breaching Shareholder (notices to attend meetings to
be continued to be sent to suspended directors and to designate an individual or
individuals to fill the vacancy(s) created by such suspension to the extent
necessary to allow the Non-Breaching Shareholder to designate a majority of the
Directors then serving on the Board. If thereafter, the Suspension Event giving
rise to such right shall have been cured or shall no longer exist for a period
of at least forty five (45) days (or, in the case of Suspension Events under
clause (i) of the definition thereof, attendance shall have resumed) and no
other Suspension Event relating to the Breaching Shareholder shall have occurred
and be continuing, the Shareholders shall take immediate appropriate actions to
restore the composition of the Board in accordance with the provisions of
Section 2.2. If any Directors designated by the Breaching Shareholder are to be
suspended pursuant to this Section 2.3 the Breaching Shareholder shall be
provided an opportunity to select the Director(s) designated by it who are to be
suspended as herein provided.
2.4. General Manager. The Board shall, upon request of the Shareholder
who shall not have designated the Chairman currently in office, appoint a
General Manager (Directeur General) designated by such Shareholder, who may or
may not be a member of the Board of Directors and shall serve for a term
concurrent with that of the Chairman. Such Shareholder may cause to be removed
such General Manager and designate an alternate General Manager in the event of
any vacancy. The General Manager shall be responsible for the day to day
management of the business and affairs of the Company, and shall have authority
to take those decisions not otherwise reserved to the Board of Directors. The
General Manager shall have apparent authority to represent the Company with
respect to third parties as provided by French company law. The General Manager
shall further be empowered to take emergency measures to preserve the rights,
Assets, Properties and/or interests of the Company and prevent risks of imminent
harm to persons or property, notwithstanding the provisions of Section 2.9.2
hereof.
2.5. Composition of the Executive Committee. The Shareholders each
hereby agree to constitute an Executive Committee composed of the Chairman of
the Company (who shall represent the Shareholder who designated him) and a
member of the Board of Directors designated by the other Shareholder (who shall
represent the other Shareholder). The General Manager shall not be a voting
<PAGE> 10
7
member of the Executive Committee but the Executive Committee may in its
discretion cause the General Manager to participate in its meetings. The
Executive Committee may by unanimous vote take all actions, initiatives and
decisions that may be delegated to it pursuant to a formal Board resolution and
which are within the authority of the Board as set forth in Section 2.9. In
addition, in the absence of such a delegation of authority, it may take such
actions, initiatives and decisions within the exclusive authority of the Board
of Directors (as set forth below) to the extent, in the reasonable judgment of
the Executive Committee, urgent action is required within a time frame which
precludes convening the Board of Directors. The Executive Committee shall
further be empowered to formulate resolutions and proposals for submission to
the Board of Directors.
2.6. Statutory Auditor(s). The Shareholders each hereby agree to take
any and all action necessary to appoint one or several duly qualified member(s)
of Ernst & Young as statutory auditor(s) in the Company as required by French
law.
2.7. Board Meetings. (a) Regular meetings of the Board will be
scheduled and held in accordance with article 16 of the Articles at least once
quarterly at the Company's offices or at such other location within or outside
France to the extent all the Directors shall have agreed to such other place of
meeting. Notice of meeting shall be delivered in accordance with the Articles.
The Board shall not have a quorum unless (x) at least half of the Directors are
present in person or by proxy and (y) at least one (1) Director appointed by RPC
and one (1) Director appointed by LII Europe are present in person or by proxy
as stipulated at article 16 of the Articles (provided that this latter quorum
requirement shall not apply if a Suspension Event shall be in effect). Unless
otherwise provided for herein or by the Articles, decisions of the Board shall
be taken by a unanimous vote of the Directors present or participating in the
Board meeting, it being understood (x) that the Chairman of the Board shall have
no casting vote, (y) that in the event a Suspension Event shall be in effect
decisions of the Board shall be taken by a majority vote of the Directors
present or participating and (z) that, in respect of matters arising between the
Company and CEVCO as to which their respective interests may conflict or be
adverse, the Directors designated by RPC shall abstain from voting and the Board
decision shall be taken by the Directors designated by LII Europe in conformity
with 2.8.3 (b) (i) of the CEVCO Shareholder Agreement.
(b) Unless prohibited by any applicable law, Board meetings may be
conducted by means of video or telephone conference facilities or other means of
communication at which all Directors who are present or participate may be
heard.
2.8. Executive Committee Meetings. Regular meetings of the Executive
Committee will be scheduled and held once in between each Board meeting, or
otherwise as mutually agreed by the members of the Executive Committee.
2.9. Powers of the Chairman and of the Board.
<PAGE> 11
8
2.9.1 Subject to Section 2.4 above and Section 2.9.2 below, and to the
provisions of French company law governing the apparent authority of a president
directeur general, the Chairman shall represent the Company with respect to
third parties and shall be vested with such powers to act on behalf of the
Company as provided in the Articles and to oversee the implementation of the
decisions made by the Board or the Shareholders in compliance with the Articles
and this Agreement.
2.9.2 The following matters concerning the Company shall be submitted
by the Chairman or the General Manager to the Board and subject to its approval
by a vote in accordance with Section 2.7(a) above:
(a) Any capital expenditure program related to the Company which
entails aggregate expenditures exceeding two million five hundred thousand
French Francs (FF 2,500,000) other than (i) those approved in an agreed capital
expenditure budget, (ii) those funded by a Shareholder in accordance with
Section 2.11.2(c) hereof and (iii) those required to obtain and maintain
material environmental and governmental permits, as to which the mutual written
agreement of the parties shall govern;
(b) Any fundamental change in the scope or nature of the business of
the Company;
(c) Approval of the annual business plans and budgets of the Company
and any material changes thereto;
(d) Approval of the general commercial and marketing policies of the
Company;
(e) Any material changes to accounting practices;
(f) Any entering into any agreement, or any material amendment or
termination of any agreement, with a term of more than twelve (12) months or
involving financial liability of the Company of more than two million French
Francs (FF 2,000,000);
(g) Any acquisition or disposition by the Company of any activity or
business assets (fonds de commerce);
(h) Any subscription, acquisition or disposition by the Company of
share(s) or interest in any entity or of an interest in any unincorporated
organization (such as a societe en participation);
(i) Any entering into, or amendment to or termination of, any
agreement between the Company, on the one hand, and RPC or LII Europe or any of
their Affiliates, on the other hand; provided however, that with respect to
those agreements enumerated at Schedule 2.9.2(i) hereto whereby RPC is
furnishing services to the Company, decisions as to the scope and duration of
the various services to be rendered by RPC to the Company under such agreements,
and actions, approvals, authorizations, consents and determinations by or on
behalf
<PAGE> 12
9
of the Company, shall be decided on behalf of the Company by the LII Europe
designee who shall then be acting as General Manager or Chairman of the Company,
as the case may be;
(j) Any entering into, or amendment to or termination of, any agreement
relating to any Intellectual Property, and any decision with respect to the
maintenance, filing or abandonment of registrations with respect to Intellectual
Property, other than in the Ordinary Course of Business;
(k) Approval of the general environmental, safety, health and
maintenance policy in order to ensure compliance with Legal Requirements and
Environmental Laws as in effect on the date hereof and from time to time
hereafter;
(l) Except as otherwise contemplated by the Related Agreements,
approval of the employment policies of the Company, including those impacting
labor relations, employment levels, labor costs and salaries, executive
compensation and Benefit Plans;
(m) Any decision to settle or prosecute litigation other than (i)
litigation in the Ordinary Course of Business, (ii) litigation involving an
amount in controversy or risk of liability not exceeding two million French
Francs (FF 2,000,000), (iii) litigation in respect of the Stock Purchase
Agreement or the CEVCO Stockholder Agreement, which shall be governed by the
terms of such respective agreements, or (iv) in case of emergency or to take any
appropriate mesure conservatoire;
(n) The incurring by the Company of (i) any funded indebtedness or (ii)
any other indebtedness (x) not in the Ordinary Course of Business or (y) in
excess of five million French Francs (FF 5,000,000); and
(o) The nomination of the controleur de gestion of CEVCO in accordance
with the terms of the CEVCO Stockholder Agreement.
2.10. Deadlock Situation. (a) The Shareholders and their respective
designated Directors shall seek in good faith to reach consensus on material
business decisions relating to the conduct of the Business. Such decisions shall
be taken in the best interest of the Company. If the requisite affirmative vote
required with respect to any resolution to be adopted by the Board is not
attained, and the adoption of such resolution can reasonably be deemed essential
to the survival of the Company or the absence of which can reasonably be deemed
to prevent the Company from conducting its business, the Chairman shall
reconvene another Board meeting to be held at the earliest three (3) weeks and
at the latest four (4) weeks after the Board meeting during which the
disagreement occurred. The agenda of this second Board meeting shall relate
exclusively to those matters subject of the disagreement.
(b) If the disagreement is not resolved during the second Board
meeting, then the Directors designated by RPC and the Directors designated by
LII Europe shall respectively consult the (i) chief executive officer of RPC
<PAGE> 13
10
(i.e., the president du conseil d'administration of RPC) and the chief executive
officer of the Guarantor within eight (8) days following the date of the second
Board meeting. The respective chief executive officers of RPC and Guarantor
shall then have one (1) month after the expiration of this eight (8) day-period
to try to resolve the disagreement. If as a result of negotiations between the
chief executive officers of RPC and Guarantor, the disagreement is resolved
within such one (1) month, the Shareholders shall promptly take any and all
actions necessary to cause the Company to enforce the agreement reached between
the chief executive officers of RPC and Guarantor.
(c) If the chief executive officers of RPC and Guarantor do not resolve
the disagreement as provided by paragraph (b) above ("Deadlock Situation"), the
parties shall by mutual agreement designate a mediator (conciliateur) who shall
be an individual of established reputation in the French business community,
fluent in both French and English and independent of each Shareholder. Failing
mutual agreement on the designation of such mediator within fifteen (15) days,
either party may request the International Chamber of Commerce to designate such
a person fulfilling the above criteria. Said mediator shall have as his or her
mission to seek a mutually acceptable resolution of the Deadlock Situation, but
shall have no binding power of arbitration to decide the merits or impose a
resolution. The Shareholders shall participate in good faith in such mediation
for a period of not less than thirty (30) days. If, at the end of such period,
no such resolution is found, either party may submit the dispute (i) to the
Commercial Court of Paris to seek as remedies the appointment (par refere) of an
administrateur provisoire to the extent the continuity and fundamental interests
of the Company are in jeopardy and/or (ii) to the International Chamber of
Commerce pursuant to Section 9.12 hereof to seek a determination on the merits
(au fond).
2.11. Management of the Company.
2.11.1 Insurance Policies. The Board shall cause the Company to obtain
adequate insurance policies to take effect on the Closing Date to cover risks
associated with the operation of the Company (including, without limitation,
coverage of business interruption risks and losses), with a recognized insurance
company mutually acceptable to RPC and LII Europe.
2.11.2 Personnel. The Company will as of the Closing negotiate with its
employees the terms and conditions of the new Benefit Plans. Notwithstanding any
other provision of this Agreement or of the Articles, it is expressly agreed
that the General Manager with the assistance of RPC shall negotiate such new
benefit plans in the name and on behalf of the Company; provided however, that
any such Benefit Plans shall in any event be subject to approval by the Board in
accordance with Section 2.9.2(l). LII Europe shall at the request of RPC
participate in such negotiation process and RPC shall in all events keep LII
Europe apprised of the status of such negotiations.
2.11.3 Environment, Safety and Health. The Board shall cause the
Company to take all appropriate measures to comply with mandatory French legal
<PAGE> 14
11
requirements with respect to environment, safety and health, in conformity with
RPC's policies in such area.
2.12. Financial Information. The Company will deliver to the
Shareholders monthly management accounts, and quarterly and annual financial
statements, promptly upon their respective completion and availability and with
respect to quarterly and annual financial statements within such reasonable time
frame as shall permit the Shareholders to incorporate such statements within the
consolidated statements of their respective groups including for purposes of
compliance with relevant securities laws and regulations.
2.13. Visits and Access to Books and Records. The Company shall permit
the representatives of any Shareholder, at the expense of such Shareholder and
upon reasonable prior notice to the Company, to visit the principal executive
office of the Company and the other offices and properties of the Company and
each of its Subsidiaries, and to examine its Books and Records and the Books and
Records of its Subsidiaries, all at such reasonable times, but not more
frequently than once each calendar semester, as may be reasonably requested in
writing by any Shareholder.
ARTICLE 3.
GUARANTY
3.1. Guaranty of LII Europe Obligations. The Guarantor hereby
irrevocably guarantees to RPC and the Company, as a primary obligor
("cautionnement solidaire sans faculte de revocation; la caution renonce au
benefice de discussion et de division") the due, punctual and complete payment
and performance of all of LII Europe's obligations under this Agreement.
3.2. Costs of Enforcement. The Guarantor agrees to reimburse the
Company and RPC for all reasonable costs and expenses (including reasonable
legal fees and expenses) incurred by them in connection with the legalization,
registration and enforcement of this guaranty.
3.3. Payment Currency. All payments under this guaranty shall be made
in French Francs.
3.4. Obligations Survive Termination. The obligations of the Guarantor
under this Article shall survive termination of this Agreement (i) as to any
obligations of LII Europe which survive termination of this Agreement, and (ii)
as to any obligations of LII Europe which remained unsatisfied as of the
termination of this Agreement.
ARTICLE 4.
TERMINATION; DEFAULT AND REMEDIES
<PAGE> 15
12
4.1. Termination. This Agreement may be terminated by mutual written
agreement of all of the parties hereto or when there shall remain only one
Shareholder of the Company.
4.2. Effect of Termination. If validly terminated pursuant to Section
3.1, this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of any party hereto to any other party
hereto hereunder or in connection herewith, except for (i) any damages arising
out of a material breach of any of the terms or provisions hereof and any
arbitration obligations in respect thereof under Section 5.12, (ii) the
provisions with respect to confidentiality and expenses in Sections 5.5 and
5.10(b), which will continue to apply following any such termination, and (iii)
any other obligations under this Agreement which by their express terms survive
termination of this Agreement.
ARTICLE 5.
MISCELLANEOUS
5.1. Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by overnight courier service
(with document tracking capabilities) to the parties at the following addresses
or facsimile numbers:
(a) If to LII Europe or the Guarantor, to it at:
1100 Johnson Ferry Road N.E.
Atlanta, Georgia 30342-1708
U.S.A.
Attn.: Philip P. Gura, Esq.
Executive Director of Legal Affairs
Facsimile No.: 1 (404) 851-0327
-and-
Attn.: William G. Osborne
Vice President
Facsimile No.: (1) (404) 851-0324
with a copy to:
Stephane J. Cournot
C.L. & A.
5, rue Beaujon
75006 Paris FRANCE
<PAGE> 16
13
Facsimile No.: (33) (1) 53.81.53.30
(b) If to RPC, to it at:
25 quai Paul Doumer
92408 Courbevoie Cedex
FRANCE
Attn: Fred Scetbon
Facsimile No.: 011-331-47-68-2250
with a copy to:
Wesley R. Johnson, Jr. Esq.
Jones, Day, Reavis & Pogue
62 rue du Faubourg Saint Honore
75008 Paris FRANCE
Facsimile No.: 011 33 1 49 24 04 71
(c) If to the Company, to it at:
25 quai Paul Doumer
92408 Courbevoie Cedex
FRANCE
Attn: Chantal Rubin
Facsimile No: 011-331-47-68-2250
with copies to the other Shareholders.
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in or pursuant to this Section,
be deemed given upon delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided in or pursuant to this Section, be deemed given
upon sending, if promptly confirmed by mail, and (iii) if delivered by courier
in the manner described above to the address as provided in or pursuant to this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
5.2. Entire Agreement. This Agreement super sedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
contains the sole and entire agreement between the parties hereto with respect
to the subject matter hereof. It is expressly understood and agreed that, as
between the parties, the terms hereof shall prevail over the terms of the
statuts of the Company and the parties hereby covenant and agree to cause the
Company to modify its statuts to include to the extent lawful and enforceable
the provisions of this Agreement.
<PAGE> 17
14
5.3. No Third Party Beneficiary No Third Party Beneficiary. The terms
and provisions of this Agreement are intended solely for the benefit of each
party hereto and their respective successors or permitted assigns, and it is not
the intention of the parties to confer third-party beneficiary rights upon any
other person.
5.4. Public Announcements. No party hereto will issue or make any
reports, statements or releases with respect to this Agreement or the
transactions contemplated hereby to the public or generally to the employees,
customers, suppliers or other persons to whom the Company sells or provide
products, goods or services or with whom the Company otherwise has significant
business relationships without the consent of (i) RPC, in the case of any such
actions by or on behalf of LII Europe or the Guarantor, or (ii) LII Europe in
the case of any such actions by or on behalf of RPC, in each case which consent
shall not be unreasonably withheld. If any party is unable to obtain the
approval of its public report, statement or release from another party and such
report, statement or release is, in the opinion of legal counsel to such party,
required by Law in order to discharge such party's disclosure obligations, then
such party may make or issue the legally required report, statement or release
and promptly furnish the other parties with a copy thereof.
5.5. Confidentiality. Each party hereto will hold, and will cause its
Affiliates and their respective Representatives to hold, in strict confidence
(unless (i) compelled to disclose by judicial or administrative process
(including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental Entities) or by other requirements of Law or (ii) disclosed in an
Action or Proceeding brought by a party hereto in pursuit of its rights or in
the exercise of its remedies hereunder) all documents and information concerning
the other parties or any of their Affiliates furnished to it by the other
parties or such other party's Representatives in connection with this Agreement
or the transactions contemplated hereby, except to the extent that such
documents or information can be shown to have been (a) previously known by the
party receiving such documents or information, (b) in the public domain (either
prior to or after the furnishing of such documents or information hereunder)
through no fault of such receiving party, or (c) later acquired by the receiving
party from another source if the receiving party is not aware that such source
is under an obligation to another party hereto to keep such documents and
information confidential; provided that each party shall be entitled to disclose
such documents and information to its Representatives (and in the case of LII
Europe and the Guarantor to any person who has provided or who is considering
providing the Financing).
5.6. Further Assurances. At any time or from time to time after the
execution and delivery of this Agreement, the parties hereto shall execute and
deliver to the other parties hereto such other documents and instruments,
provide such materials and information and take such other actions as may
reasonably be requested to more effectively carry out the intent and purposes of
this Agreement.
<PAGE> 18
15
5.7. Time of Essence. Time is of the essence in the performance of each
and every one of the obligations of each party under this Agreement.
5.8. Amendment and Waiver. This Agreement may be amended, supplemented
or modified, and compliance with the provisions hereof may be waived, only by a
written instrument duly executed by or on behalf of each party against whom the
amendment, supplement, modification or waiver is sought to be enforced.
5.9. No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of RPC, in the case of any such assignment by
LII Europe or the Guarantor, or LII Europe, in the case of any such assignment
by RPC, and any attempt to do so will be void, except that any Shareholder may
assign any or all of its rights, interests and obligations hereunder to a
Permitted Transferee, provided that any such Permitted Transferee agrees in
writing to be bound by all of the terms, conditions and provisions contained
herein, and in the case of any such assignment by LII Europe the Guarantor
confirms in writing that its guaranty contained herein extends to such Permitted
Transferee's obligations hereunder. No such assignment referred to above to a
Permitted Transferee shall relieve the assigning Shareholder of its obligations
hereunder.
5.10. Taxes and Governmental Charges; Expenses. (a) Transfer taxes in
accordance with the terms of Article 726-1(degree) of the French Tax Code shall
be borne by the purchaser of the Shares.
(b) Whether or not the transactions contemplated hereby are
consummated, each party will pay its own costs and expenses incurred in
connection with the preparation, negotiation, execution and administration of
this Agreement and the closing of any transactions contemplated by this
Agreement.
5.11. Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
5.12. Arbitration. Save as otherwise provided at Section
2.10(c) above, all disputes arising in connection with this Agreement shall be
finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three or more arbitrators appointed in
accordance with the said Rules (and in accordance with French law requirements
to ensure the adequate representation of each party's interests). The
arbitrators shall be fluent in French and in English. The arbitration
proceedings shall take place in Paris and shall be conducted in French and/or
English, each party being free to determine the language it will use during the
proceedings (i.e. hearings, briefs, oral and written communications, etc. shall
be fully accepted in the French language or in the English language without
translation from French to English nor from English to French). More
specifically, documentary exhibits in the French language will be admissible
<PAGE> 19
16
without an English translation thereof and documentary exhibits in the English
language will be admissible without a French translation thereof, provided that
when used in this Agreement, the French language shall prevail.
5.13. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom, and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provi sion as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
5.14. Payments and Computations; Judgment and Successor Currency. (a)
All amounts payable hereunder shall be payable in the legal tender of France.
All payments to be made hereunder shall be made not later than 11:00 A.M.
(Paris, France time) on the date due in same day funds. All computations of
interest or amounts equivalent to interest based on the PIBOR Rate shall be made
by RPC on the basis of quarterly compounding and a year of 360 days for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or other amount is payable. Each
determination by RPC of an interest rate shall be conclusive and binding for all
purposes, in the absence of manifest error.
(b) If for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due from any party in the currency expressed to be
payable (the "Specified Currency") into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the party to whom such payment is to be made could purchase the
Specified Currency with such other currency at the main Paris, France office of
the bank receiving such funds on the Business Day preceding that on which final
judgment is given. The obligations of each party in respect of any amount due
shall, notwithstanding any judgment in a currency other than the Specified
Currency, be discharged only to the extent that on the Business Day following
receipt by the party to whom such amount is owed of any sum adjudged to be so
due in such other currency such party may in accordance with normal banking
procedures purchase the Specified Currency with such other currency; if the
amount of the Specified Currency so purchased is less than the amount originally
due to such party in the Specified Currency, the applicable party obligated to
pay such amount agrees, to the fullest extent that it may effectively do so, as
a separate obligation and notwithstanding any such judgment, to indemnify such
party against such loss, and if the amount of the Specified Currency so
purchased exceeds the amount originally due to such party, such party agrees to
remit such excess to such obligor party.
<PAGE> 20
17
(c) The term "French Francs" shall be deemed to comprise any successor
currency that shall hereafter be legal tender in France, converted in accordance
with the parity fixed between the French Franc and such successor currency.
5.15. English Language. All notices, communications, evidence, reports,
opinions and other documents given or to be given under this Agreement, unless
made in the English language, shall be accompanied by an English translation. In
all events, the English version of this Agreement and of all such notices,
communications, evidence, reports, opinions and other documents shall govern as
between the parties in the event of any conflict with the non-English version
hereof or thereof, provided that when used in the English version of this
Agreement, French language words or terms shall have their precise French
meanings.
5.16. Specific Performance. The parties hereto agree that upon a breach
of any other provisions of this Agreement a remedy at law would not be adequate,
and that the parties hereto are entitled to injunctive relief and specific
performance, and any other legal or equitable remedies, as remedies for the
enforcement of this Agreement.
5.17. Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the Republic of France applicable to a contract
executed and performed in such Republic without giving effect to the conflicts
of laws principles thereof.
5.18. Counterparts. This Agreement may be executed by the parties
hereto separately in any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same agreement.
5.19. Effectiveness. This Agreement shall become effective on the
Closing of the Stock Purchase Agreement, and the effectiveness of this Agreement
shall be conditioned upon the closing of the transactions contemplated by the
Stock Purchase Agreement. If the Stock Purchase Agreement is terminated, this
Agreement shall be of no further force and effect.
<PAGE> 21
18
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer or officers of each party hereto as of the date
first above written.
RHONE-POULENC CHIMIE, S.A.
By: /s/ Chantal RUBIN /s/ Fred SCETBON
--------------------------------------
Title: Manager M&A
RHONE L S.A.S.
By: /s/ Chantal RUBIN
--------------------------------------
Title: President
LII EUROPE S.A.R.L.
By: /s/ William G. Osborne
--------------------------------------
Title:
LAROCHE INDUSTRIES INC.
By: /s/ W. Walter LaRoche
--------------------------------------
Title: Chairman
<PAGE> 22
EXHIBIT 10.4a
===============================================================================
AMENDMENT TO THE
SHAREHOLDERS AGREEMENT
dated as of
October 17, 1997
Among
CHLORALP S.A.S.
RHONE-POULENC CHIMIE S.A.
LII EUROPE S.A.R.L.
LAROCHE INDUSTRIES INC.
================================================================================
<PAGE> 23
AMENDMENT TO THE SHAREHOLDERS AGREEMENT
THIS AMENDMENT (the "Amendment"), dated October 17, 1997, amends the
Shareholders Agreement by and among RHONE L S.A.S. (now named CHLORALP S.A.S.)
(the "Company"), RHONE-POULENC CHIMIE S.A. ("RPC") or ("Shareholder") and,
together with LII Europe, the "Shareholders"), LII Europe S.A.R.L. ("LII EUROPE"
or a "Shareholder" and, together with RPC, the "Shareholders") and LAROCHE
INDUSTRIES INC. ("Guarantor"), in accordance with Section 5.8 of the
Shareholders Agreement. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Shareholders Agreement:
WITNESSETH:
WHEREAS, Company, Seller, Buyer and Guarantor have entered into the
Shareholders Agreement; and
WHEREAS, Company, Seller, Buyer and Guarantor desire to amend the
Shareholders Agreement;
NOW, THEREFORE, in consideration of the premises and agreements contained
herein, the parties hereto agree as follows:
1. Paragraph (B) of the PRELIMINARY STATEMENTS shall be amended by
deleting the existing text in its entirety and substituting the following text:
"(B) As a result of this contribution, the Company will increase
its corporate capital, to FF 302,724,000 divided into 3,027,240 shares of FF 100
par value per Share (the "Shares")."
2. Section 2.9.2(i) shall be amended by deleting the words
"enumerated at Section 2.9.2(i) hereto" at the fifth line and inserting the
words "goods or" after the word "furnishing" and prior to the word "services".
3. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be considered one and the same instrument.
4. Governing Law. This Amendment shall be governed and construed in
accordance with Section 5.17 of the Shareholders Agreement.
5. Effect of Amendment. Except as amended hereby, the terms and
provisions of the Shareholders Agreement shall remain in full force and effect.
<PAGE> 24
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the duly authorized officer or officers of each party hereto as of the date
first above written.
RHONE-POULENC CHIMIE S.A.
By: Daniel Humbert
-----------------------------
CHLORALP S.A.S.
By: Marc Polaud
-----------------------------
/s/ Marc Polaud
LII Europe S.A.R.L.
By: Bertrand Pinet
-----------------------------
/s/ Bertrand Pinet
LII EUROPE S.A.R.L.
By: William G. Osborne
-----------------------------
/s/ William G. Osborne
<PAGE> 1
EXHIBIT 10.5
===============================================================================
PUT AND CALL AGREEMENT
dated as of
August 1, 1997
Among
RHONE L
RHONE-POULENC CHIMIE S.A.
LII EUROPE S.A.R.L.
LAROCHE INDUSTRIES INC.
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRELIMINARY STATEMENTS .................................................... 1
ARTICLE 1.
DEFINITIONS ............................................................... 2
1.1. Defined Terms .............................................. 2
ARTICLE 2.
GOVERNANCE OF THE COMPANY ................................................. 6
2.1. Articles .................................................... 6
2.2. Financial Policy of the Company ............................. 6
2.2.1 Dividends ......................................... 6
2.2.2 Financial Policy .................................. 6
ARTICLE 3.
PUT AND CALL OPTIONS. ..................................................... 7
3.1. RPC Put Option .......................................... 8
3.1.1 Procedure in the absence of prior exercise of
the LaRoche Put Option ............................ 8
3.1.2 Procedure in the event of prior exercise of a
LaRoche Put Option ................................ 9
3.1.3 Price ............................................. 10
3.2. RPC Call Option ......................................... 10
3.2.1 Procedure ......................................... 10
3.2.2 Price ............................................. 10
3.3. LaRoche Put Option ...................................... 11
3.3.1 Procedure ......................................... 11
3.3.2 Price ............................................. 12
3.3.3 Adjustment Factor ................................. 12
3.4. Options in case of Change of Control .................... 13
3.4.1 Procedure ......................................... 13
3.4.2 Price of the RPC Option in case of
Change of LaRoche Control ............................... 13
3.4.3 Price of the LaRoche Option in case of
Change of RPC Control. ............................ 14
3.5. Rescission Put Option ................................... 14
3.5.1 Procedure ......................................... 14
3.6. Payment of Purchase Price; Assignment and Purchase
of Indebtedness ......................................... 15
</TABLE>
<PAGE> 3
2
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.7. Terms of Purchase and Sale Transactions upon
Exercise of Options ..................................... 15
ARTICLE 4.
RIGHT OF FIRST REFUSAL, CO-SALE RIGHTS AND OTHER TRANSFERS ................ 17
4.1. Rights of First Refusal ................................. 17
4.2. Terms of Purchase and Sale Transactions
upon Shareholder's Offer ................................ 18
4.3. Unrestricted Transfers .................................. 18
4.4. Mining Shares ........................................... 18
ARTICLE 5.
CONDITIONS TO OPTION OBLIGATIONS .......................................... 19
5.1. Conditions to Obligations of LII Europe ................. 19
5.2. Conditions to Obligations of RPC ........................ 20
ARTICLE 6.
COVENANTS ................................................................. 21
6.1. Covenants of Shareholders and Guarantor ................. 21
6.2. Special Covenants of the Guarantor ...................... 22
6.3. Non-competition Covenants ............................... 23
6.4. Intellectual Property ................................... 26
ARTICLE 7.
GUARANTY .................................................................. 26
7.1. Guaranty of LII Europe Obligations ...................... 26
7.2. Costs of Enforcement .................................... 26
7.3. Payment Currency ........................................ 26
7.4. Obligations Survive Termination ......................... 26
ARTICLE 8.
TERMINATION; DEFAULT AND REMEDIES ......................................... 27
8.1. Termination ............................................. 27
8.2. Effect of Termination ................................... 27
ARTICLE 9.
MISCELLANEOUS ............................................................. 27
9.1. Notices ................................................. 27
9.2. Entire Agreement ........................................ 28
9.3. No Third Party Beneficiary .............................. 29
9.4. Public Announcements .................................... 29
9.5. Confidentiality ......................................... 29
</TABLE>
<PAGE> 4
3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
9.6. Further Assurances ...................................... 30
9.7. Time of Essence ......................................... 30
9.8. Amendment and Waiver .................................... 30
9.9. No Assignment; Binding Effect ........................... 30
9.10. Taxes and Governmental Charges; Expenses ................ 30
9.11. Headings ................................................ 30
9.12. Arbitration ............................................. 30
9.13. Invalid Provisions ...................................... 31
9.14. Payments and Computations; Judgment Currency ............ 31
9.15. English Language ........................................ 32
9.16. Specific Performance .................................... 32
9.17. Governing Law ........................................... 32
9.18. Counterparts ............................................ 32
9.19. Effectiveness ........................................... 32
</TABLE>
<PAGE> 5
PUT AND CALL AGREEMENT
THIS PUT AND CALL AGREEMENT (this "Agreement"), dated as of August 1,
1997, by and among the following:
(a) RHONE L, a societe par actions simplifiee organized under
the laws of the Republic of France (and whose name will be changed on
or prior to Closing to ChlorAlp S.A.S) (herein, together with its
successors and assigns, the "Company"), having a corporate capital of
FF 250,000, whose head office is located at 25 quai Paul Doumer, 92408
Courbevoie Cedex, France, registered with the Registry of Commerce and
Companies of Nanterre under the number B 411 129 612, represented by
Chantal Rubin;
(b) RHONE-POULENC CHIMIE S.A., a societe anonyme organized
under the laws of the Republic of France (herein referred to, together
with its successors and assigns, as "RPC" or a "Shareholder" and,
together with LII Europe, the "Shareholders"), having a corporate
capital of FF 2,703,447,200, whose head office is located at 25 quai
Paul Doumer, 92408 Courbevoie Cedex, France, registered with the
Registry of Commerce and Companies of Nanterre under the number B 642
014 526, represented by Fred Scetbon;
(c) LII Europe S.A.R.L. a societe a responsabilite limitee
organized under the laws of the Republic of France (herein referred
to, together with its successors and assigns, as "LII Europe" or a
"Shareholder" and, together with RPC, the "Shareholders"), having a
corporate capital of FF 1,500,000, whose head office is located at 15,
avenue du Marechal Joffre, 92000 Nanterre, France, registered with the
Registry of Commerce and Companies of Nanterre under the number B 412
883 019, represented by William G. Osborne; and
(d) LAROCHE INDUSTRIES INC., a corporation organized under
the laws of the State of Delaware, United States of America, which
owns directly or indirectly all of the outstanding capital stock of
LII Europe (herein, together with its successors and assigns, the
"Guarantor"), whose head office is located at 1100 Johnson Ferry Road
N.E., Atlanta, Georgia 30342-1708 U.S.A., represented by W. Walter
LaRoche, III.
PRELIMINARY STATEMENTS:
(A) RPC shall contribute on the effective date of this Agreement its
full and autonomous division specializing in the development, manufacturing and
marketing of chlorine, caustic soda and bleach (the "Division") to the Company;
<PAGE> 6
2
(B) As a result of this contribution, the Company will increase its
corporate capital, to FF 73,010,000 divided into 730,100 shares of FF 100 par
value per Share (the "Shares").
(C) RPC, the Company, LII Europe and the Guarantor have entered into a
Stock Purchase Agreement, dated as of the date hereof (herein, as amended or
otherwise modified, the "Stock Purchase Agreement"), pursuant to which, among
other things, LII Europe has undertaken to purchase from RPC 50% of the Shares.
(D) RPC, the Company, LII Europe and the Guarantor have further
entered into a Shareholders Agreement, dated as of the date hereof, (herein, as
amended or otherwise modified, the "Shareholders Agreement"), pursuant to which
the parties have established certain principles of governance of the Company.
(E) After giving effect to the consummation of the transactions
contemplated by the Stock Purchase Agreement, the Shareholders will own
beneficially and of record, in the aggregate, 100% of the outstanding Shares.
(F) The Company and the Shareholders desire to provide for certain
puts and calls with respect to the Shares.
(G) The effectiveness of this Agreement is conditioned on the
consummation of the transactions contemplated by the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, and other good and valuable
consideration had and received, the parties hereto, upon the terms and subject
to the conditions contained herein, hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. The following capitalized terms when used in this
Agreement shall have the following respective meanings. Initially capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Stock Purchase Agreement or the Shareholders Agreement:
"Bona Fide Offer" means an offer to a Shareholder from a financially
responsible unrelated third party having access to available financial
resources adequate to fulfill its proposed obligations under such offer to
purchase all but not less than all of the Shares owned by such Shareholder for
a purchase price payable in cash or cash equivalents at closing, and committing
such offer or to become a party to this Agreement and the Shareholders
Agreement.
"Business" means the business consisting of the processing and
marketing of chlorine, caustic soda and bleach, together with the activities
and
<PAGE> 7
3
businesses related or incidental thereto as conducted by the Company,
including, but not limited to, the activities of the Company at the Pont de
Claix, Hauterives and Saint Fons sites.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the City of New York, State of New York, United States
of America, or the City of Paris, France, are authorized or obligated to close.
"Capex Plan" shall mean the capital expenditure plan attached hereto
at Annex A.
"Capex Security" has the meaning set forth at Section 2.2.2(c).
"CEVCO" means Centrale Electricite Vapeur, a French Groupement
d'Interet Economique, whose head office is located at 12 rue Notre Dame des
Champs, 75002 Paris, France, and which is registered with the Registry of
Commerce and Companies of Nanterre under the number C 412 577 835.
"Change of LaRoche Control" means any of the following: (i) the
Guarantor does not own, directly or indirectly, all of the fully diluted shares
of voting common stock (or equivalent voting equity interests) of LII Europe;
or (ii) the Permitted Holders do not in the aggregate possess a Controlling
Interest in the Guarantor; provided, however, that an initial public offering
or subsequent public offering of voting common stock of the Guarantor shall not
be deemed to constitute a Change of LaRoche Control unless, as a result thereof,
at any time thereafter, the Controlling Interest in Guarantor is held by any
person who can reasonably be deemed to be a competitor of RPC.
"Change of RPC Control" means any of the following: (i) any person (a)
other than RP, a direct or indirect wholly-owned Subsidiary of RP (including,
without limitation, a Permitted Transferee) or the shareholders of RP (through
a spin-off, distribution or analogous transaction), or (b) any person who can
reasonably be deemed to be a competitor of Guarantor, LII Europe or Newco,
shall have acquired a Controlling Interest in RPC; or (ii) RP shall no longer
possess a material ongoing interest at the Pont de Claix site sufficient to
ensure the ongoing benefit to the Company of the services to be supplied to the
Company under the Supply and Services Agreements.
"Closing Date" means the actual Closing Date under the Stock Purchase
Agreement.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral) that is legally binding.
"Controlling Interest" means (i) beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under the United States Securities and Exchange Act of 1934, as amended) or
control of 50% or more of the fully diluted shares of voting common stock (or
equivalent voting equity interests) of such person; or (ii) the unrestricted
power and right, through exercise of rights under a shareholder agreement,
voting trust
<PAGE> 8
4
agreement, or similar Contract, to appoint or elect a majority of
the board of directors (or similar governing body) of such person at any time,
subject only to compliance with such notice requirements not exceeding 30 days
in length as may be imposed by any Legal Requirement, organizational document
or applicable Contract.
"Distributable Profit" ("benefice distribuable") means the net book
income (resultat net comptable) after corporate income tax, allocation to the
legal and tax reserves and deduction of the loss carry forwards, as determined
under GAAP.
"Excess Permit Capital Expenditures" has the meaning specified in
Section 6.1(d)(ii).
"Existing LaRoche Debt" means the Debt outstanding, if any, under (i)
the Credit Agreement, dated as of from time to time, among the Guarantor, the
financial institutions named therein, and The Chase Manhattan Bank N.A., as
Agent (the "Credit Agreement"); (ii) the $100,000,000 aggregate original
principal amount of 13% Senior Subordinated Notes due 2004 of the Guarantor;
and (iii) a new series of Senior Subordinated Notes to be issued in the
approximate aggregate original principal amount of $150,000,000 (collectively
and as the case may be the "Senior Subordinated Notes").
"GAAP" means generally accepted accounting principles in France,
consistently applied.
"Full Company Equity Value" shall mean three hundred two million four
hundred seventy four thousand French Francs (FF 302,474,000) (being the Total
Enterprise Value minus the Intragroup Indebtedness).
"LII Europe" means LII Europe S.A.R.L, a societe a responsabilite
limitee organized under the laws of the Republic of France, together with its
successors and assigns. If any Shares have been Transferred by LII Europe to a
Permitted Transferee, references herein to LII Europe or to any Shares owned by
LII Europe, as the case may be, shall be deemed to include any such Permitted
Transferee and any Shares owned by such Permitted Transferee.
"Material Permits" has the meaning specified in Section 5.1.1(c)
hereof.
"Offer Price" shall mean the purchase price per Share set forth in the
applicable Bona Fide Offer.
"Option" means any of the RPC Put Option, the RPC Call Option, the RPC
Option in case of Change of LaRoche Control, the LaRoche Put Option, the
LaRoche Option in case of Change of RPC Control or the Rescission Put Option.
"Permitted Holders" means as of the date of determination: (i) any of
Johnnie Lou Stephens LaRoche, W. Walter LaRoche, III, Victoria E. LaRoche,
Louanne C. LaRoche, Harold W. Ingalls, William G. Osborne, Richard Watts, Neil
Stephansson, Vincent Gurzo and Grant O. Reed and such directors and officers of
<PAGE> 9
5
Guarantor who own common stock of Guarantor as of the date hereof; (ii) family
members or Relations of the persons described in clause (i); (iii) any trusts
created for the benefit of any of the persons described in clauses (i), (ii) or
(iv); (iv) in the event of incompetence or death of any of the persons
described in clause (i) or (ii), such person's estate, executor, administrator,
committee or other personal representative or beneficiaries and (v) employees
and directors of Guarantor who hereafter receive grants of common stock or
options to purchase common stock of Guarantor.
"Permitted Transferee" means, with respect to a Shareholder, any
person which (i) is an entity; (ii) is a Subsidiary of such Shareholder or of
any person of which such Shareholder is a Subsidiary; (iii) the performance of
whose obligations shall have been guaranteed by such Shareholder; and (iv) has
agreed to become a Shareholder for purposes of this Agreement and the
Shareholder Agreement and shall have executed and delivered to the Company and
the other Shareholder a counterpart of this Agreement and the Shareholder
Agreement agreeing to be subject to the restrictions and obligations of a
Shareholder hereunder and thereunder and to hold such Shares in accordance
herewith.
"PIBOR Rate" means the interest rate from time to time in effect for
PIBOR deposits of one month duration as published in Les Echos - Taux monetaire
- - PIBOR, or such successor interbank offer rate for ECU deposits of one month
to the extent at any time hereafter the ECU shall be substituted for the French
Franc as the currency of the Republic of France.
"Rescission Put Option" has the meaning specified in section 3.5.
"RP" means Rhone-Poulenc SA, a French societe anonyme, together with
its successors and assigns.
"RPC" means Rhone-Poulenc Chimie S.A., a societe anonyme organized
under the laws of the Republic of France, together with its successors and
assigns. If any Shares have been Transferred by RPC to a Permitted Transferee,
references herein to RPC or to any Shares owned by RPC, as the case may be,
shall be deemed to include any such Permitted Transferee and any Shares owned
by such Permitted Transferee.
"Shareholder" shall mean either or both of the Shareholders named
herein, and any person who becomes a party to this Agreement as the result of a
Transfer of Shares to such person.
"Shareholder's Offer" shall mean an irrevocable offer to sell all, but
not less than all, Shares to the other Shareholder on the terms and conditions
of the applicable Bona Fide Offer and in accordance with Section 4.1, which
shall include a copy of the applicable Bona Fide Offer and the form of
definitive agreement and any related agreements contemplated thereby and shall
set forth a description of the terms of the proposed sale in reasonable detail,
including, without limitation, the name and address of the prospective buyer,
the purchase price and other terms and conditions of payment (or the basis for
<PAGE> 10
6
determining the purchase price and other terms and conditions), the date on or
about which such sale is proposed to be consummated, and the number of Shares
to be sold.
"Subsidiary" means, with respect to any person, any other person in
which such person has a Controlling Interest.
"Transfer" means any sale, assignment, exchange, disposition, transfer
(including, without limitation, a transfer by will or intestate distribution or
by merger or consolidation), gift or attempt to create or grant an Encumbrance
or security interest in Shares, whether voluntary, involuntary, by operation of
law or otherwise.
ARTICLE 2.
GOVERNANCE OF THE COMPANY
2.1 Articles. The Articles of Incorporation (Statuts) of the Company
(herein, as amended or otherwise modified, the "Articles") shall be
substantially in the form attached hereto as Exhibit A and shall be amended or
modified after the date hereof only (i) to incorporate therein any of the
provisions contained in this Agreement, (ii) to include any provisions required
by any mandatory French statute, regulation or case law to be included therein,
or (iii) as otherwise permitted by this Agreement. In the event of any conflict
or inconsistency between the terms hereof and the terms of the Articles, the
terms hereof shall prevail.
2.2 Financial Policy of the Company.
2.2.1 Dividends. Unless otherwise agreed upon by the Shareholders or
as may otherwise be required by French laws or regulations and as contemplated
by article 37 of the Articles, the Shareholders shall take any and all action
necessary to cause the Company to distribute 100% of the Distributable Profit
(free of precompte) (benefice distribuable) en franchise de precompte as
promptly as possible.
2.2.2 Financial Policy. (a) Except as provided in Section 6.1(d)
hereof, no Shareholder shall be obligated to grant loans, credit facilities,
advances or guaranties, letters of comfort, letters of credit or to make any
other similar commitment to, or investment in or share subscription of, the
Company ("Shareholder Advance"); and any refusal of a Shareholder to do so
shall not be deemed to create a Deadlock Situation.
(b) Shareholder Advances shall be made on arms length conditions and
with the mutual agreement of the Shareholders as to their terms. In the absence
of written agreement providing for terms of reimbursement of any Shareholder
Advance, it is understood that such Shareholder Advance shall be automatically
terminated and any amount due under such Shareholder Advance
<PAGE> 11
7
shall be automatically reimbursed to the Shareholder having granted such
Shareholder Advance on the date on which such Shareholder shall cease to be a
Shareholder of the Company, for any reason whatsoever.
(c) Any non pro rata Shareholder Advance shall be made pursuant to an
amendment to this Agreement stipulating the interest rate or, as the case may
be, the appropriate formula by which the return on investment will be
determined for purposes of Article 3 below. If a Shareholder shall propose a
capital expenditure program which is not approved by the Board in accordance
with Section 2.9.2(a) of the Shareholders Agreement, or which the Company is
otherwise unable to finance out of internal financial resources, it is
understood and agreed that such Shareholder shall nevertheless be entitled to
make a non pro rata Shareholder Advance to the Company for the purposes of
financing such capital expenditure. In such event, such Shareholder shall bear
the entire cost and risk, and receive the entire net economic benefit, of such
capital expenditure, by means of an appropriate structured security issued by
the Company (which may, by way of example, include a pret participatif or a
societe en participation) which shall be redeemed by the Company or purchased
by the other Shareholder upon the exercise of any of the Options described
below (said structured security, the "Capex Security"). The net economic
benefit (or cost) to the Company of such capital expenditure for purposes
hereof shall be calculated as of the month-end immediately preceding the
consummation of the purchase and sale of the Shares pursuant to the relevant
Option. In the event that the Shareholders shall not mutually agree on the
equitable adjustment, the matter shall be submitted to Price Waterhouse for
final determination.
(d) In the event that the Company shall not be able to meet its
payment obligations as they come due, and the Shareholders shall not agree on
the terms of a Shareholder Advance to ensure the continued solvency of the
Company, either Shareholder shall be entitled to make non pro rata Shareholder
Advances at the PIBOR Rate plus three hundred (300) basis points.
ARTICLE 3
PUT AND CALL OPTIONS.
No Shareholder shall make any Transfer of any Shares except for
Transfers of Shares made in accordance with the provisions of this Article 3 or
of Article 4 hereof. Any Transfer of Shares by a Shareholder which is not made
in accordance with, or which violates, any of the provisions of this Article 3
or of Article 4 hereof shall be null and void and have no effect, and (i) the
Company shall not recognize any such Transfer or recognize the transferee as
the holder of such Shares for any purpose and (ii) such transferee shall have
no rights under Article 2 or any other provision of this Agreement with respect
to the Shares which are the subject of such Transfer.
<PAGE> 12
8
3.1. RPC Put Option. LII Europe hereby grants to RPC an irrevocable
right (the "RPC Put Option"), upon the terms and subject to the conditions
herein set forth, to require LII Europe to purchase from RPC, on the terms and
subject to the conditions contained herein, all but not less than all of the
Shares owned by RPC.
3.1.1. Procedure in the absence of prior exercise of the LaRoche Put
Option. (a) The RPC Put Option shall be deemed validly exercised by RPC if it
is exercised as follows:
(i) RPC shall deliver written notice of exercise ("Notice of
Exercise") to LII Europe (such delivery being deemed "exercise" for
the purposes of this Agreement);
(ii) such Notice of Exercise shall be delivered with a
six-month prior notice;
(iii) such Notice of Exercise shall specify the date on which
RPC proposes that LII Europe purchase the Shares owned by RPC (the
"Proposed Purchase Date") which shall be a Business Day immediately
before or after the six month anniversary of the date on which notice
was delivered; and
(iv) the Proposed Purchase Date for the RPC Put Option may be
any Business Day selected by RPC in its Notice of Exercise which is no
earlier than the first anniversary of the Closing Date and is no later
than the fifth anniversary of the Closing Date; provided that if on
the Proposed Purchase Date the conditions to LII Europe's obligation
specified in Section 5.1.1 are not satisfied, the Proposed Purchase
Date shall automatically be extended for a period of six (6) months
(the "Grace Period"), even if such extension would result in the
Proposed Purchase Date occurring after the fifth anniversary of the
Closing Date.
(b) Other than for non-satisfaction of the conditions referred to at
Section 5.1.1 below, any such Notice of Exercise, once delivered, shall be
irrevocable.
(c) If the RPC Put Option is exercised as provided in this Section
3.1.1, but the Shares owned by RPC are not purchased by LII Europe as provided
herein because any of the applicable conditions specified in Section 5.1.1 are
not satisfied or waived or LII Europe otherwise fails to complete the purchase
of such Shares, RPC may elect to either (i) retain the RPC Put Option for
possible future exercise within the time period specified above, or (ii) be
entitled to exercise the RPC Call Option as provided at Section 3.2 below from
and after the lapse of the Grace Period and during the six month period
contemplated at Section 3.2.1 below. Said election shall be without prejudice
to RPC's rights and remedies on account of any breach by LII Europe of its
obligations hereunder.
(d) The Guarantor or LII Europe will deliver to RPC, promptly and in
any event within 10 days following, as the case may be, the date of quarterly
<PAGE> 13
9
or annual filings of Guarantor with the United States Securities Exchange
Commission commencing the first quarter after the date hereof and quarterly
thereafter until the earlier of a Transfer of Shares under this Article 3 or
the fifth anniversary of the Closing Date, the following documents and
information:
(i) copies of all regular and periodic reports of the
Guarantor on Forms 10-Q and 10-K and all definitive proxy statements
and annual reports furnished to its security holders generally; and
(ii) promptly upon request (and subject to RPC's execution of
an appropriate confidentiality agreement), such additional financial
information concerning the Guarantor or LII Europe as may be
reasonably requested from time, including, in particular, information
with respect to financial covenants and restrictions in the documents
governing any Existing LaRoche Debt.
3.1.2 Procedure in the event of prior exercise of a LaRoche Put
Option. (a) Notwithstanding any provision of Section 3.1.1 above, the RPC Put
Option shall be deemed validly exercised by RPC if RPC delivers its Notice of
Exercise to LII Europe not more than six (6) months after the receipt of a
Notice of Exercise of the LaRoche Put Option as more fully described at Section
3.3.1 below. In this event, all rights and obligations of the Shareholders
under the LaRoche Put Option shall be automatically terminated and the Proposed
Purchase Date for the RPC Put Option may be any Business Day selected by RPC in
its Notice of Exercise which is no later sixty (60) days following the date of
delivery of RPC's Notice of Exercise.
(b) The sole conditions to LII Europe's obligation to purchase the
Shares from RPC under this Section 3.1.2 shall be Sections 5.1.1(a) and (c)
below. Other than for failure of these conditions, any such Notice of Exercise,
once delivered, shall be irrevocable. The failure of such conditions to LII
Europe's obligation shall not extinguish the RPC Put Option, and RPC shall
retain its right to elect to exercise the RPC Put Option at any time thereafter
and LII Europe shall retain its Option under Section 3.3 (subject always to
this Section 3.1.2). Said election shall be without prejudice to RPC's rights
and remedies on account of any breach by LII Europe of its obligations
hereunder.
3.1.3. Price. The purchase price for the Shares to be sold by RPC to
LII Europe pursuant to the exercise of the RPC Put Option under any of Sections
3.1.1 or 3.1.2 will be equal to:
(a) FF 173,922,550 equal to the Full Company Equity Value minus the
Purchase Price;
(b) plus or minus (as the case may be) 50% of the cumulative
undistributed net income or loss after tax of the Company from the Closing Date
to the month-end immediately preceding the consummation of the purchase and
<PAGE> 14
10
sale of the Shares pursuant to the Option (the determination of such amount
being made in conformity with GAAP).
3.2. RPC Call Option. LII Europe hereby grants to RPC an irrevocable
right (the "RPC Call Option"), upon the terms and subject to the conditions
herein set forth, to require LII Europe, to sell to RPC, on the terms and
subject to the conditions contained herein, all but not less than all of the
Shares owned by LII Europe.
3.2.1. Procedure. (a) The RPC Call Option shall be deemed validly
exercised by RPC if it is exercised as follows:
(i) RPC shall deliver a Notice of Exercise to LII Europe no
earlier than the date on which the Grace Period referred to in Section
3.1.1(a) lapsed and no later than the six months following the date on
which the Grace Period lapsed; and
(ii) the Proposed Purchase Date specified in such Notice of
Exercise shall be a Business Day that is the first Business Day that
is sixty (60) days after the date of delivery of such Notice of
Exercise.
(b) Other than for non-satisfaction of the conditions referred to at
Section 5.1.2 below, any such Notice of Exercise, once delivered, shall be
irrevocable. The non-satisfaction of such condition to LII Europe's obligation
to sell its Shares shall not extinguish the RPC Call Option, and RPC shall
retain its right to exercise the RPC Call Option until the date that is sixty
(60) days after the date on which the conditions in Section 5.1.2 are
fulfilled.
3.2.2 Price. The purchase price for the Shares to be sold by LII
Europe to RPC pursuant to the exercise of the RPC Call Option will be equal to:
(a) FF 99,323,732 equal to the Purchase Price less a discount equal to
the product of .15 x .425 x the Total Enterprise Value;
(b) plus or minus (as the case may be) 50% of the cumulative
undistributed net income or loss after tax of the Company from the Closing Date
to the month end immediately preceding the consummation of the purchase and
sale of the Shares pursuant to the Option (the determination of such amount
being made in conformity with GAAP).
3.3. LaRoche Put Option. RPC hereby grants to LII Europe an
irrevocable right (the "LaRoche Put Option"), upon the terms and subject to the
conditions herein set forth, to require RPC to purchase from LII Europe, on the
terms and subject to the conditions contained herein, all but not less than all
of the Shares owned by LII Europe.
3.3.1. Procedure. (a) The LaRoche Put Option shall be deemed validly
exercised by LII Europe if it is exercised as follows:
<PAGE> 15
11
(i) LII Europe shall deliver a Notice of Exercise to RPC
(such delivery being deemed "exercise" for the purposes of this
Agreement) (i) no earlier than the date following the date of
expiration of RPC's right to deliver a Notice of Exercise of the RPC
Put Option pursuant to Section 3.1.1, the RPC Call Option or the RPC
Option in case of Change of LaRoche Control (as defined in Section 3.4
below) and (ii) no later than the date which is the six (6) year plus
six month anniversary of the Closing Date;
(ii) such Notice of Exercise shall contain evidence
satisfactory to RPC of committed financial resources available to LII
Europe to satisfy its obligations under the RPC Put Option and more
generally as to the satisfaction of the conditions set forth in
Section 5.1.1;
(iii) such Notice of Exercise shall be delivered with a
six-month prior notice, which means that the Proposed Purchase Date
specified in such Notice of Exercise shall be a Business Day that is
the first Business Day that is six months after the date of delivery
of such Notice of Exercise.
(b) Subject to paragraph (c) below and other than for non-satisfaction
of the conditions referred to at Section 5.2 below, any such Notice of
Exercise, once delivered, shall be irrevocable.
(c) RPC shall have a six-month period following receipt of the Notice
of Exercise of the LaRoche Put Option to elect to deliver a Notice of Exercise
of the RPC Put Option as contemplated at Section 3.1.2 at the price
contemplated in Section 3.1.3. If RPC elects to deliver such a Notice of
Exercise, the RPC Put Option shall prevail and supersede the LaRoche Put
Option, which shall be automatically terminated as of the date of delivery of
the Notice of Exercise of the RPC Put Option. If RPC does not deliver such a
Notice of Exercise within such six-month period, RPC shall purchase the Shares
from LII Europe on the Proposed Purchase Date specified in the Notice of
Exercise delivered by LII Europe to RPC under Section 3.3.1(a) above.
(d) If the LaRoche Put Option is exercised as provided in Section
3.3.1(a) hereof and if RPC does not deliver a Notice of Exercise of the RPC Put
Option within the six-month period contemplated at Section 3.3.1(c) hereof, but
the Shares owned by LII Europe are not purchased by RPC as provided herein
because any of the conditions specified in Section 5.2 hereof are not satisfied
or waived, there shall be no closing of the sale of the Shares owned by LII
Europe under the LaRoche Put Option, it being understood that each Shareholder
shall retain its rights to exercise any Option granted to it hereunder (other
than any Option the rights to which have otherwise expired at that date),
including but not limited to the right for LII Europe to re-exercise the
LaRoche Put Option in accordance with Section 3.3.1(a) hereof.
3.3.2. Price. The purchase price for the Shares to be sold by LII
Europe to RPC pursuant to the exercise of the LaRoche Put Option will be:
<PAGE> 16
12
(a) An amount equal to the Purchase Price plus or minus, as
applicable, the Adjustment Factor (as defined at Section 3.3.3 below);
(b) plus or minus (as the case may be) 50% of the cumulative
undistributed net income or loss after tax of the Company from the Closing Date
to the month end immediately preceding the consummation of the purchase and
sale of the Shares pursuant to the Option (the determination of such amount
being made in conformity with the accounting principles described at Exhibit B
hereto).
3.3.3. Adjustment Factor. The Adjustment Factor applicable to a
LaRoche Put Option shall be determined as follows:
(a) If, prior to the exercise of the LaRoche Put Option, RPC shall not
have previously delivered a Notice of Exercise of the RPC Put Option, the
Adjustment Factor shall be a premium of FF 19,485,145 being 0.1 x 0.425 x the
Total Enterprise Value.
(b) If, prior to the exercise of the LaRoche Put Option, RPC shall
have delivered only one Notice of Exercise at any time prior to the fifth
anniversary of the Closing Date, the Adjustment Factor shall be zero.
(c) If, prior to the exercise of the LaRoche Put Option, RPC shall
have delivered only two Notices of Exercise, the second of which shall have
been delivered prior to the fourth anniversary of the Closing Date, the
Adjustment Factor shall be a discount of FF 19,485,145 being 0.1 x 0.425 x the
Total Enterprise Value.
(d) If, prior to the exercise of the LaRoche Put Option, RPC shall
have delivered (i) at least three Notices of Exercise, or (ii) only two Notices
of Exercise, the second of which shall have been delivered during the year
prior to the fifth anniversary of the Closing Date, the Adjustment Factor shall
be a discount of FF 29,227,718 being 0.15 x 0.425 x the Total Enterprise Value.
3.4. Options in case of Change of Control. (a) Each Shareholder hereby
grants to the other an irrevocable right (the "Option in case of Change of
Control"), effective on the occurrence of a change of control of such first
Shareholder (which shall be a Change of LaRoche Control or a Change of RPC
Control as the case may be) and upon the terms and subject to the conditions
herein set forth, to "call" and require the Shareholder having experienced a
change of control to sell to the other Shareholder, on the terms and subject to
the conditions contained herein, all but not less than all of the Shares owned
by the Shareholder having experienced a change of control. Such Shareholder
having experienced a change of control undertakes to sell to the other
Shareholder, all but not less than all of the Shares that it shall then own
under the terms and subject to the conditions herein set forth.
3.4.1. Procedure. (a) Any Option in case of Change of Control shall be
deemed validly exercised if it is exercised as follows:
<PAGE> 17
13
(i) a Change of LaRoche Control or Change of RPC Control
shall have occurred;
(ii) the Notice of Exercise of the Option in case of Change
of Control shall be delivered to the Shareholder having experienced a
change of control no earlier than the date of occurrence of the change
of control and no later than within six months following the delivery
by such Shareholder to the other Shareholder of the notice provided by
Section 6.1(c) hereof notifying the Change of LaRoche Control or
Change of RPC Control as the case may be;
(iii) such Notice of Exercise shall be delivered with a
minimum six-month prior notice, which means that the Proposed Purchase
Date specified in such Notice of Exercise shall be a Business Day that
is the first Business Day that is six months after the date of
delivery of such Notice of Exercise.
(b) If any Option in case of Change of Control is exercised as
provided in this Section 3.4.1, but the Shares owned by the Shareholder having
experienced the change of control are not purchased by the other Shareholder as
provided herein because any of the conditions specified in Section 5.1.2 or
Section 5.2 as the case may be are not satisfied or waived, the failure of such
condition shall not extinguish the respective Option in case of Change of
Control, and the party benefitting from such Option shall retain its rights to
exercise the Option at any time thereafter.
3.4.2 Price of the RPC Option in case of Change of LaRoche Control.
The purchase price for the Shares to be sold by LII Europe to RPC pursuant to
the exercise of the RPC Option in case of Change of LaRoche Control will be
equal to:
(a) the Purchase Price;
(b) plus or minus (as the case may be) 50% of the cumulative
undistributed net income or loss after tax of the Company from the Closing Date
to the month end immediately preceding the consummation of the purchase and
sale of the Shares pursuant to the Option (the determination of such amount
being made in conformity with the accounting principles described at Exhibit B
hereto);
provided however, that if at the time the Notice of Exercise relating
to the RPC Option in case of Change of LaRoche Control is delivered, RPC could
have exercised the RPC Call Option the price shall that applicable to the RPC
Call Option, as determined at Section 3.2.2 above;
3.4.3 Price of the LaRoche Option in case of Change of RPC Control.
The purchase price for the Shares to be sold by RPC to LII Europe pursuant to
the exercise of the LaRoche Option in case of Change of RPC Control will be
equal to the price applicable to the RPC Put Option as determined at Section
3.1.3 above.
<PAGE> 18
14
3.5. Rescission Put Option. The parties acknowledge that LII Europe
does not intend to acquire any Shares of the Company if the Company does not
receive the Material Permits. Therefore, RPC hereby grants to LII Europe an
irrevocable right ("Rescission Put Option"), upon the terms and subject to the
conditions herein set forth, to require RPC to purchase from LII Europe, on the
terms and subject to the conditions contained herein, all but not less than all
of the Shares owned by LII Europe.
3.5.1. Procedure. The Rescission Put Option shall be deemed validly
exercised by LII Europe if LII Europe shall deliver a Notice of Exercise not
earlier than nine (9) months after the Closing Date specifying that: (a) the
Material Permits have not been issued in the name of or to the benefit of the
Company despite compliance with the covenant set forth at Section 6.1(d)(i)
below, (b) the projected Excess Permit Capital Expenditures exceed forty five
million French Francs (FF 45,000,000) and (c) that the Shareholders have not
reached mutual agreement as to the funding of such Excess Permit Capital
Expenditures. Such Notice of Exercise shall be delivered within ninety (90)
days after the Shareholders shall have failed to reach mutual agreement on such
funding and shall specify a Proposed Purchase Date not later than thirty (30)
days after the date of the Notice of Exercise. Once delivered, such Notice of
Exercise shall be irrevocable.
3.5.2. Price. The purchase price for the Shares to be sold by LII
Europe to RPC pursuant to the exercise of the Rescission Put Option will be
equal to:
(a) the Purchase Price;
(b) plus interest on the Purchase Price from the date of the Closing
of the Stock Purchase Agreement to the date of the completion of the purchase
and sale pursuant to the Rescission Put Option, at the PIBOR Rate plus 100
basis points;
(c) minus the amount of any dividends received on the Shares by LII
Europe.
3.6. Payment of Purchase Price; Assignment and Purchase of
Indebtedness. If any Option is exercised and the sale and purchase completed,
the purchase price shall be payable in full in cash in immediately available
funds on the date the Shares subject to such Option are sold pursuant to the
exercise of such Option. Upon the exercise of any Option, and simultaneously
with the sale and purchase of the Shares: (a) the selling Shareholder shall
assign to the purchasing Shareholder, and the purchasing Shareholder shall be
obligated to purchase from the selling Shareholder, the full amount of then
existing indebtedness owed by the Company to such selling Shareholder,
including without limitation indebtedness of the Company under shareholder and
term loan agreements entered into by the Company at the closing of the Stock
Purchase Agreement; and (b) the selling Shareholder shall assign to the
purchasing Shareholder, or the Company shall redeem, the Capex Security.
<PAGE> 19
15
3.7 Terms of Purchase and Sale Transactions upon Exercise of Options.
(a) The purchase and sale of Shares pursuant to exercise of an Option shall be
consummated not later than the Proposed Purchase Date specified in the
applicable Notice of Exercise, but the Shareholders shall make every reasonable
effort to consummate such purchase and sale at the earliest practicable date
prior thereto which is mutually acceptable to the parties involved.
(b) At the consummation of each purchase and sale made pursuant to an
Option granted under this Article 3, the seller shall deliver to the purchaser
(i) a written instrument of Transfer of the Shares which are being sold, in
proper form for Transfer to the purchaser and (ii) written representations and
warranties of the seller to the effect that: (x) the seller is the record owner
of the Shares being sold, has good and marketable title thereto and the
absolute right to Transfer the same to the purchaser, and the same, upon
Transfer to the purchaser, will be free and clear of all restrictions and
Encumbrance and other adverse claims (other than restrictions imposed by this
Agreement and restrictions relative to Transfer under applicable Laws) of any
nature whatsoever; and (y) the seller has full power and capacity to sell such
Shares to the purchaser. It is understood that all representations and
warranties made under the Stock Purchase Agreement shall not be affected by the
provisions of this Section 3.6(b).
3.8. Priority in the event of concurrent exercisability of Options. In
the event a Shareholder shall become entitled to exercise an Option in case of
Change of Control, and the other Shareholder shall have previously delivered a
Notice of Exercise with respect to any other Option, then the Option in case of
Change of Control shall be deemed suspended pending the completion of the
procedures contemplated hereby with respect to such Notice of Exercise of the
other Option. If the purchase and sale of the Shares is consummated pursuant to
such other Option, then the Option in case of Change of Control shall be deemed
expired and of no further force and effect. If the purchase and sale of the
Shares pursuant to such other Option is not consummated at the expiration of
the relevant time period contemplated thereby, and shall no longer be
exercisable, then the Shareholder entitled to exercise the Option in case of
Change of Control shall have six (6) months from such expiration date in which
to exercise the Option in case of Change of Control.
3.9. The Company's Shares to be issued as a result of the contribution
of the Mining Permit. (a) The parties hereto acknowledge that pursuant to the
Transfer Agreement, the Rhone-Poulenc group shall have contributed to the
Company the Mining Permit under the condition precedent to obtain the
appropriate Decret(s) en Conseil d'Etat. If and when such condition shall be
fulfilled, Newco shall issue 2,000 new shares, 100 French Franc par value in
favor of [RPC] (the "Mining Shares"). The parties agree that on the date of
issuance of the Mining Shares, RPC shall immediately sell and LII Europe shall
immediately purchase that percentage of Mining Shares representing the interest
held by LII Europe in Newco immediately prior to the issuance of the Mining
Shares. Such sale shall be made for a price equal to the number of Mining
Shares sold times the par value of the Mining Shares.
<PAGE> 20
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(b) Simultaneously with the sale of the Shares by any Shareholder (the
"Selling Shareholder") to the other Shareholder under any of the Options
contemplated hereby, the Selling Shareholder agrees to immediately sell
together with its Shares to the other Shareholder and such other Shareholder
agrees to immediately purchase from the Selling Shareholder the Mining Shares
then owned by the Selling Shareholder. Such sale of Mining Shares shall be made
for a price to be calculated in the same way as that provided under paragraph
(a) above.
(c) Any sale of Mining Shares hereunder shall be made in compliance
with the provisions of Section 3.7(b) hereof and the payment of the price of
such Mining Shares shall be made in cash or cash equivalents.
(d) Other than in accordance with this Section 3.9, no Transfer of
Mining Shares shall be permitted prior to the expiration of all rights under
any Option. After the expiration of such rights, any Transfer of Mining Shares
shall be subject to the provisions of Article 4 hereof.
ARTICLE 4.
RIGHT OF FIRST REFUSAL, CO-SALE RIGHTS AND OTHER TRANSFERS
4.1. Rights of First Refusal. (a) Other than in accordance with
Article 3 or Section 4.3 below, no Transfer of Shares shall be permitted prior
to the expiration of all rights under any Option with respect to the Shares. If
after the expiration of all rights under any Option with respect to the Shares
of any Shareholder (other than the Options provided in Section 3.4), but prior
to the termination of this Agreement, a Shareholder (the "Transferring
Shareholder") desires to make a Transfer of all (but not less than all, partial
Transfers of Shares being prohibited) of its Shares (including any Shares
acquired after the date hereof) pursuant to a Bona Fide Offer, the Transferring
Shareholder shall first deliver to the other Shareholder a Shareholder's Offer
in respect of such Shares of the Transferring Shareholder (the "Offered
Shares").
(b) The other Shareholder may, within one month after receipt of the
Shareholder's Offer, make any one of the following elections in a written
instrument executed by such other Shareholder and delivered to the Transferring
Shareholder:
(i) the other Shareholder may elect to purchase all but not
less than all of the Offered Shares; or
(ii) the other Shareholder may elect to require the
Transferring Shareholder to obtain a revised Bona Fide Offer under
which the party making the Bona Fide Offer will purchase both the
Offered Shares and all of the Shares of the other Shareholder.
<PAGE> 21
17
(c) In the event the other Shareholder elects to purchase the Offered
Shares, such Shareholder shall effect such purchase under the same terms and
conditions as set forth in the Shareholder's Offer within 60 days after the
expiration of the time period granted to the other Shareholder to make any of
the elections provided by paragraph (b) above.
(d) In the event the other Shareholder elects to require the
Transferring Shareholder to obtain a revised Bona Fide Offer under which the
party making the Bona Fide Offer will purchase both the Offered Shares and all
of the Shares of the other Shareholder, the Transferring Shareholder shall
exert its Best Efforts to obtain such revised Bona Fide Offer no later than 30
days after the date of election, which revised Bona Fide Offer shall provide
for terms and conditions of sale of the Shares of the other Shareholder similar
to those provided by the initial Bona Fide Offer for the sale of the Offered
Shares. In the event the Transferring Shareholder shall be unable to obtain
such a revised Bona Fide Offer, then the Transferring Shareholder shall not be
entitled to Transfer the Offered Shares and the restrictions on transfer
contained herein shall continue to apply. The prohibition on the Transferring
Shareholder against Transferring the Offered Shares in the event it shall have
been unable to obtain such a revised Bona Fide Offer shall be applicable and
enforceable for a ten (10) year period starting as of the Closing Date.
(e) In the event that no election provided in Section 4.1(b) is made
within the time period provided therein, all of the Offered Shares may be
Transferred by the Transferring Shareholder to the person(s) named in the
Shareholder's Offer within 120 days after the expiration of such time period,
on terms no more favorable to the transferee than those described in the
Shareholder's Offer and applicable Bona Fide Offer. If the Offered Shares are
not Transferred in such manner within such 120 day period, then all the rights
and obligations of this Article 4 shall be reinstated. The prohibition on the
transferring shareholder against Transferring the Offered Shares in the event
it shall have been unable to obtain such a revised Bona Fide Offer shall be
applicable and enforceable for a ten (10) year period starting as of the
Closing Date.
4.2. Terms of Purchase and Sale Transactions upon Shareholder's Offer.
(a) A closing of the purchase of the Offered Shares, provided for herein shall
take place at the principal office of the Company on the 90th day after the
date on which the other Shareholders received the Shareholder's Offer, unless
the Shareholders agree on a different place or time. The consideration in
respect of such purchase shall be payable by bank cashiers check (or any other
means acceptable to the selling Shareholders) at the closing, unless it is
being paid in accordance with the payment terms of the Bona Fide Offer.
(b) At the consummation of a purchase and sale made pursuant to a
Shareholder's Offer, the seller shall deliver to the purchaser (i) a written
instrument of Transfer of the Shares which are being sold, in proper form for
Transfer to the purchaser and (ii) written representations and warranties of
the seller to the effect that: (x) the seller is the record owner of the Shares
being sold, has good and marketable title thereto and the absolute right
<PAGE> 22
18
to Transfer the same to the purchaser, and the same, upon Transfer to the
purchaser, will be free and clear of all restrictions and Encumbrance and other
adverse claims (other than restrictions imposed by this Agreement and
restrictions relative to Transfer under applicable Laws) of any nature
whatsoever; and (y) the seller has full power and capacity to sell such Shares
to the purchaser. It is understood that all representations and warranties made
under the Stock Purchase Agreement shall not be affected by the provisions of
this Section 4.2(b).
4.3. Unrestricted Transfers. Notwithstanding any other provision of
this Article 4, any Transfer of Shares by a Shareholder to a Permitted
Transferee shall not be subject to the rights of first refusal or the co-sale
rights contained in this Article 4.
4.4. Mining Shares. (a) For the purpose of this Article 4, the term
"Shares" and "Offered Shares" shall be deemed to include all of the Mining
Shares that could be then held by any of the Shareholders.
(b) In case of Transfer of Shares by a Shareholder to a Permitted
Transferee, such Shareholder shall also simultaneously sell to such Permitted
Transferee all and not less than all of the Mining Shares it shall then own.
ARTICLE 5.
CONDITIONS TO OPTION OBLIGATIONS
5.1. Conditions to Obligations of LII Europe.
5.1.1 If the RPC Put Option is exercised as provided herein, the
obligations of LII Europe under Section 3.1.1 and under Section 3.1.2 hereof
incident to such exercise are subject to the fulfillment, at or before the time
for performance of such obligations, of each of the following conditions (all
or any of which may be waived in whole or in part by LII Europe in its sole
discretion):
(a) Orders and Laws. There shall not be in effect on such date any
order or law (including in respect of antitrust or competition law)
restraining, enjoining or otherwise prohibiting or making illegal the
consummation by LII Europe of any of the transactions contemplated by the
exercise of such Option. The purchase and sale of the Shares pursuant to the
RPC Put Option shall not violate any Legal Requirement (including in respect of
antitrust or competition law) applicable to LII Europe.
(b) No conflict with, or default under, the terms of Existing LaRoche
Debt. Completion of the sale and purchase of Shares contemplated by the RPC Put
Option shall not conflict with, or constitute a default under, the terms of the
documents governing the Existing LaRoche Debt.
<PAGE> 23
19
(c) Permits. The Governmental Permits and Environmental Permits
identified at Schedule 5.1.1(c) hereto (or substantially similar permits)
("Material Permits") shall at the time of Notice of Exercise and at completion
be validly issued in the name of or to the benefit of the Company, and the
completion of the sale and purchase pursuant to the RPC Put Option shall not
constitute an event of termination of such Governmental Permits or
Environmental Permits, or result in a material restriction on their terms. In
the event of disagreement between the Shareholders as to the fulfillment of
this condition, the Shareholders shall seek the binding written legal opinion
of a recognized authority in French administrative law matters. The parties
agree to consider the use of an operating agreement (location gerance) for an
interim period should the transfer of Material Permits to the Company be
interrupted.
(d) No Strike. There shall be no ongoing labor strike at the Pont de
Claix site which has a material adverse effect on the operations of the Company
or CEVCO; provided however, that in the event of such strike RPC may at its
option defer the completion of the RPC Put Option for two successive periods of
thirty (30) days pending resolution of the strike.
(e) The Company shall not be in Bankruptcy.
5.1.2 If the RPC Call Option or RPC Option in case of Change of
LaRoche Control is exercised as provided herein, the obligations of LII Europe
under Sections 3.2 and 3.4 hereof incident to such exercise are subject to the
fulfillment, at or before the time for performance of such obligations, of the
following conditions (all or any of which may be waived in whole or in part by
LII Europe in its sole discretion):
(a) RPC Compliance with Covenants. RPC shall have performed and
complied in all material respects with each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by RPC at or
before such time.
(b) Orders and Laws. There shall not be in effect on such date any
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation by LII Europe of any of the transactions contemplated by the
exercise of such Option. The purchase and sale of the Shares pursuant to such
Options shall not violate any Legal Requirement applicable to LII Europe.
5.2. Conditions to Obligations of RPC. If the LaRoche Put Option or
the LaRoche Option in case of Change of RPC Control is exercised as provided
herein, the obligations of RPC under Article 3 hereof incident to such exercise
are subject to the fulfillment, at or before the time for performance of such
obligations, of each of the following conditions (all or any of which may be
waived in whole or in part by RPC in its sole discretion):
(a) Performance. LII Europe and the Guarantor shall have performed and
complied with, in all material respects, each agreement, covenant and
<PAGE> 24
20
obligation required by this Agreement to be so performed or complied with by
LII Europe or the Guarantor at or before such time.
(b) Orders and Laws. There shall not be in effect on such date any
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation by RPC of any of the transactions contemplated by the exercise
of such Option. The purchase and sale of the Shares pursuant to such Options
shall not violate any Legal Requirement applicable to RPC.
(c) The Company shall not be in Bankruptcy.
ARTICLE 6.
COVENANTS
6.1. Covenants of Shareholders and Guarantor. Each Shareholder and, to
the extent so required, the Guarantor, covenants and agrees that:
(a) Regulatory and Other Approvals. Subject to the provisions of the
Stock Purchase Agreement, it will, and will use its best efforts to cause the
Company to, (i) use best efforts, as promptly as practicable, to obtain all
consents, approvals or actions of, to make all filings with and to give all
notices to all Governmental Entities and every other person required of it or
the Company to consummate any of the transactions contemplated hereby, (ii)
provide such other information and communications to such Governmental Entities
and other persons as any other party hereto or such Governmental Entities or
other persons may request and (iii) cooperate with the other parties hereto as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to Governmental Entities or
other persons required of such other parties to consummate any of the
transactions contemplated hereby. It will provide prompt notification to the
other parties when each such significant consent, approval, action, filing or
notice referred to above is obtained, taken, made or given, as applicable, and
will advise the other parties of all significant communications (and, unless
precluded by law, provide copies of all such significant communications that
are in writing) with any Governmental Entity or other person regarding any of
the transactions contemplated by this Agreement.
(b) Fulfillment of Conditions. It will use best efforts to take all
steps necessary or desirable and proceed diligently and in good faith to
satisfy each condition to its obligations contained in Article 5.
(c) Notice of Change of Control and Suspension Events. If a Change of
RPC Control, Change of LaRoche Control, Suspension Event relating to RPC or
Suspension Event relating to LII Europe occurs, RPC or LII Europe, as
applicable, will promptly, and in any event within 10 business days following
the date upon which the affected party knows, or should, with the exercise of
reasonable diligence, know, of the occurrence thereof, provide written notice
<PAGE> 25
21
to the other Shareholder and the Company of the occurrence thereof, together
with a statement of a responsible officer of RPC or LII Europe, as applicable,
describing in reasonable detail the nature of the transaction or circumstances
giving rise to such occurrence; provided however, that the failure by a party
to provide such notice shall not be deemed a material breach of its obligations
unless the other party shall be materially prejudiced thereby.
(d) Capital Expenditures for Governmental and Environmental Permits.
(i) The Shareholders agree to cause the Company to maintain
environmental, health and safety standards at least equivalent to
those applied generally by RPC, and to adopt the specific
recommendations of RPC in this regard to the extent reasonably deemed
necessary by RPC to obtain and maintain the Material Permits. The
Shareholders covenant and agree to cooperate in good faith to adopt
such recommendations in a cost-efficient manner. The Shareholders
further agree to cause the Company to undertake those capital
expenditures relating to environmental, health and safety matters
contemplated by the Capex Plan.
(ii) In the event the Company and/or CEVCO is required to undertake
capital expenditures in addition to those contemplated by the Capex
Plan in order to obtain or maintain the Material Permits ("Excess
Permit Capital Expenditures"), it is understood and agreed that the
Company and/or CEVCO shall bear all such Excess Permit Capital
Expenditures to the extent not exceeding twenty million French Francs
(FF 20,000,000) in the aggregate. RPC hereby covenants and agrees to
bear such Excess Permit Capital Expenditures in excess of twenty
million French Francs (FF 20,000,000) up to an aggregate amount not
exceeding forty five million French Francs (FF 45,000,000) (i.e. an
aggregate RPC commitment to fund Excess Permit Capital Expenditures of
twenty five million French Francs (FF 25,000,000)). If the aggregate
of such Excess Permit Capital Expenditures required in order to obtain
the Material Permits shall be projected to exceed forty five million
French Francs (FF 45,000,000), then, in such event, neither the
Company nor CEVCO nor either Shareholder shall be obligated to
undertake or bear such Excess Permit Capital Expenditures, the
Shareholders shall consult one another as to the appropriate
resolution of the matter and, absent the agreement of either or both
of the Shareholders to fund such Excess Permit Capital Expenditures,
LII Europe shall have the Rescission Put Option described at Section
3.5 above.
(e) To the extent that, as a result of the Transfer and the
adjustments contemplated thereby, the Company shall have excess cash, the
Shareholders shall cause the Company to pay down the amount of shareholder
loans in equal proportions.
6.2. Special Covenants of the Guarantor. The Guarantor further
covenants and agrees that:
<PAGE> 26
22
(a) Credit Agreement and Senior Subordinated Notes. Guarantor shall
provide to RPC on a quarterly basis a compliance certificate signed by the
Chief Financial Officer of the Guarantor attesting as to the status of
compliance by Guarantor with the covenants set forth in the Credit Agreement
and in the Indenture with respect to the Senior Subordinated Notes. Guarantor
shall provide prompt notice to RPC of any event of default under the Credit
Agreement or such Indenture, or any amendment to the covenants in either
thereof.
(b) Maintain Availability of Financing. Upon receipt of any Notice of
Exercise of any Option from RPC, Guarantor and LII Europe shall exert their
Best Efforts to refrain from undertaking or incurring any material financial
obligation or liability (other than regularly scheduled capital expenditures
for maintenance of plant, property and equipment) and shall accord priority to
maintaining and securing the financial resources necessary to meet their
obligations under such Option.
6.3 Non-competition Covenants. (a) During the term of this Agreement,
and, with respect to any party that shall have sold its Shares, for a period of
three (3) years after termination of this Agreement (save in the event LII
Europe shall have sold its Shares to RPC pursuant to the LaRoche Put Option or
the Rescission Put Option, in which event LII Europe shall not be bound by this
Section 6.3 after the termination of this Agreement), neither RPC nor LII
Europe nor their respective Affiliates shall, and RPC and LII Europe shall each
ensure that none of its respective Affiliates shall:
(i) engage in any business activities which (A) include the
production within the Territory of chlorine, caustic soda or bleach,
or the purchase of any of such products on the open market, for resale
to customers who will use such products at any facility located within
the Territory, and (B) compete within the Territory with the business
activities of the Company as conducted on the Closing Date (any such
activities described in both clause (A) and (B), herein "Competitive
Activities"); or
(ii) own, manage, operate or control, or participate in the
ownership, management, operation or control of, any other person whose
activities (including the activities of any of such person's
Subsidiaries) constitute Competitive Activities (herein, a
"Competitive Enterprise"); or
(iii) solicit, directly or indirectly, any key employees of
Newco nor make them any written or oral offer of employment.
As used herein, the term "Territory" means France, Italy, Spain, Switzerland
and Luxembourg.
(b) The covenants contained in Section 6.3(a) (i) and (ii) shall in no
event be applicable to any of the following:
<PAGE> 27
23
(i) Any direct or indirect ownership interest in the
Company or any of its Subsidiaries, or any participation in the
management, operation or control of the Company or any of its
Subsidiaries.
(ii) The development, production, sale, marketing or other
distribution of chlorine, caustic soda or bleach produced by RPC or
any of its Affiliates at facilities located in or near the Staveley
(U.K.) works or the Bruckl (Austria) works currently operated by RPC
or any of its Affiliates.
(iii) The purchase and/or resale of excess chlorine, caustic
soda or bleach, in quantities necessary to assure that RPC and its
Affiliates will at all times be able to deliver to customers of the
facilities referred to in paragraph (ii) above the quantities thereof
anticipated to be produced at such facilities.
(iv) The development, production, purchase and sale of
chlorine, caustic soda or bleach by RPC, LII Europe, or any of their
respective Affiliates, at or from any site for their own consumption
or for consumption by any of their respective Affiliates.
(v) The purchase and/or resale of excess chlorine, caustic
soda or bleach, in quantities necessary to assure that RPC, LII Europe
and their respective Affiliates will have at all times an adequate
supply thereof for their own consumption or for consumption by any of
their respective Affiliates.
(vi) Any direct or indirect ownership interest in, but not
any active participation beyond the exercise of shareholder or similar
voting rights in the management, operation or control of, (A) any
Competing Enterprise which derived less than twenty percent (20%) of
its consolidated revenues from Competitive Activities in its most
recent fiscal year; or (B) any Competing Enterprise, so long as such
ownership interest consists entirely of securities representing less
than 5% of the outstanding equity interests in such Competing
Enterprise and such securities are listed for trading on a recognized
stock exchange.
(vii) The acquisition or ownership, for investment purposes
only, of any debt securities (including commercial paper) of any
Competing Enterprise.
(viii) The acquisition or ownership, for investment purposes
only, by any employee savings, retirement or similar benefit plan, of
any ownership interest in, or debt securities (including commercial
paper) of, any Competing Enterprise; provided that all of the
investment decisions for such benefit plan in respect thereof are made
by an independent trustee or trustees or an independent investment
manager or managers.
<PAGE> 28
24
(ix) The acquisition by RPC, or any of its Affiliates, as the
case may be (an "Acquiring Person"), in the context of any
acquisition, merger, joint venture, asset purchase, or any other
business combination, of an ownership interest representing more than
5% of the outstanding equity of any Competing Enterprise which derived
twenty percent (20%) or more of its consolidated revenues from
Competitive Activities in its most recent fiscal year, so long as the
following procedure is followed:
(A) The Acquiring Person shall use its Best Efforts
to sell such Competitive Activity to a person or persons who
are not an Affiliate of the Acquiring Person within one (1)
year following the closing of the acquisition of such
Competitive Activity.
(B) LII Europe shall have a right of first offer
with respect to any sale contemplated in paragraph (A) above,
in accordance with the following procedure:
(1) The Acquiring Person shall provide LII
Europe with exclusive access for a period of sixty
(60) days from the date the Acquiring Person
initiates its selling efforts to relevant business
and financial information with respect to the
Competitive Activity (to the extent such information
is not subject to confidentiality restrictions
binding on the Acquiring Person) and shall negotiate
exclusively with LII Europe for such sixty (60) day
period, during which the parties shall negotiate in
good faith with a view to establishing mutually
agreeable binding terms of purchase and sale.
(2) To the extent the parties are unable to
reach such binding terms within such period, the
Acquiring Person may thereafter provide information
to and enter into negotiations with third party
bidders, provided that until the earlier of (x)
sixty (60) days after the lapse of such initial
sixty (60) day period or (y) such date on which the
Acquiring Person shall have entered into binding
terms of purchase and sale with a third party
bidder, the Acquiring Person shall continue to
provide LII Europe with such relevant information as
is provided to third party bidders and shall include
LII Europe among selected bidders on an equal
footing.
(C) If the Acquiring Person does not sell the
Competitive Activity in the time period contemplated by
paragraph (A) above and pursuant to paragraph (B) above, the
Acquiring Person shall place the Competitive Activity under
the direction and control of an independent trustee pursuant
to arrangements reasonably acceptable to LII Europe until the
Competitive Activity is sold.
<PAGE> 29
25
(x) The acquisition by LII Europe of a one hundred percent (100%)
equity interest in a Competitive Enterprise provided that prior to entering
into any binding agreement with respect thereto LII Europe demonstrates to
RPC's reasonable satisfaction that: (A) such Competitive Enterprise does not
prospect or service, and will not, during the term of this Agreement, prospect
or service, the customers of the Company and that LII Europe will therefore not
be subject to any conflict of interest with respect to the Company and the
Competitive Enterprise and (B) such acquisition will not compromise the
financial capacity of LII Europe to meet its obligations under the RPC Put
Option (it being understood that a binding commitment letter of a first class
bank with respect to such financing shall be deemed satisfactory evidence of
the fulfillment of such condition).
(xi) Any use of Intellectual Property of the Company licensed pursuant
to Section 6.4 hereof.
(xii) Any other business arrangements with Competing Enterprises,
provided that such arrangements do not involve Competitive Activities and
further do not involve any ownership interests in Competing Enterprises which
would not be permitted under the above provisions of this Section 6.3(b).
6.4 Intellectual Property. The Company will, promptly upon the request
of RPC, enter into a worldwide, royalty free, perpetual, non-exclusive license
for the benefit of RPC or any of its Affiliates, covering any patents, trade
secrets or other intellectual property rights which are necessary for RPC or
any of such Affiliates for the conduct of their respective businesses as
historically conducted on or prior to the Closing Date (collectively,
"Intellectual Property") and which are owned or held by the Company, subject
only to such constraints as may be imposed by any Legal Requirements or any
License under which the Company holds any such Intellectual Property. Upon the
issuance of the Material Permits, and the expiration of the Rescission Put
Option, the Company will, promptly upon the request of Guarantor, enter into
non-exclusive license for the term of this Agreement and for the territory of
the United States of America, Canada and Mexico at an arm's length royalty
rate, in respect of the Intellectual Property.
ARTICLE 7.
GUARANTY
7.1 Guaranty of LII Europe Obligations. The Guarantor hereby
irrevocably guarantees to RPC and the Company, as a primary obligor
("cautionnement solidaire sans faculte de revocation; la caution renonce au
benefice de discussion et de division") the due, punctual and complete payment
and performance of all of LII Europe's obligations under this Agreement.
7.2 Costs of Enforcement. The Guarantor agrees to reimburse the
Company and RPC for all reasonable costs and expenses (including reasonable
<PAGE> 30
26
legal fees and expenses) incurred by them in connection with the legalization,
registration and enforcement of this guaranty.
7.3. Payment Currency. All payments under this guaranty shall be made
in French Francs.
7.4. Obligations Survive Termination. The obligations of the Guarantor
under this Article shall survive termination of this Agreement (i) as to any
obligations of LII Europe which survive termination of this Agreement, and (ii)
as to any obligations of LII Europe which remained unsatisfied as of the
termination of this Agreement.
ARTICLE 8.
TERMINATION; DEFAULT AND REMEDIES
8.1. Termination. This Agreement may be terminated by mutual written
agreement of all of the parties hereto or when there shall remain only one
Shareholder of the Company.
8.2. Effect of Termination. If validly terminated pursuant to Section
8.1, this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of any party hereto to any other party
hereto hereunder or in connection herewith, except for (i) any damages arising
out of a material breach of any of the terms or provisions hereof and any
arbitration obligations in respect thereof under Section 9.12, (ii) the
provisions with respect to confidentiality and expenses in Sections 9.5 and
9.10(b), which will continue to apply following any such termination, and (iii)
any other obligations under this Agreement which by their express terms survive
termination of this Agreement.
ARTICLE 9.
MISCELLANEOUS
9.1. Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by overnight courier service
(with document tracking capabilities) to the parties at the following addresses
or facsimile numbers:
(a) If to LII Europe or the Guarantor, to it at:
1100 Johnson Ferry Road N.E.
Atlanta, Georgia 30342-1708
U.S.A.
<PAGE> 31
27
Attn.: Philip P. Gura, Esq.
Executive Director of Legal Affairs
Facsimile No.: 1 (404) 851-0327
-and-
Attn.: William G. Osborne
Vice President
Facsimile: (1) (404) 851-0324
with a copy to:
Stephane J. Cournot
C.L. & A.
5, rue Beaujon
75006 Paris FRANCE
Facsimile: (33) (1) 53.81.53.30
(b) If to RPC, to it at:
25 quai Paul Doumer
92408 Courbevoie Cedex
FRANCE
Attn: Fred Scetbon
Facsimile No.: 011-331-47-68-2250
with a copy to:
Wesley R. Johnson, Jr. Esq.
Jones, Day, Reavis & Pogue
62 rue du Faubourg Saint Honore
75008 Paris FRANCE
Facsimile No.: 011 33 1 49 24 04 71
(c) If to the Company, to it at:
25 quai Paul Doumer
92408 Courbevoie Cedex
FRANCE
Attn: Chantal Rubin
Facsimile No.: 011-331-47-68-2250
with copies to the other Shareholders.
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in or pursuant to this Section,
be deemed given upon delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided in or pursuant to this Section, be deemed
given upon sending, if promptly confirmed by mail, and (iii) if delivered by
<PAGE> 32
28
courier in the manner described above to the address as provided in or pursuant
to this Section, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
person to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
9.2. Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof
and contains the sole and entire agreement between the parties hereto with
respect to the subject matter hereof. It is expressly understood and agreed
that, as between the parties, the terms hereof shall prevail over the terms of
the statuts of the Company.
9.3. No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person.
9.4. Public Announcements. No party hereto will issue or make any
reports, statements or releases with respect to this Agreement or the
transactions contemplated hereby to the public or generally to the employees,
customers, suppliers or other persons to whom the Company sells or provide
products, goods or services or with whom the Company otherwise has significant
business relationships without the consent of (i) RPC, in the case of any such
actions by or on behalf of LII Europe or the Guarantor, or (ii) LII Europe in
the case of any such actions by or on behalf of RPC, in each case which consent
shall not be unreasonably withheld. If any party is unable to obtain the
approval of its public report, statement or release from another party and such
report, statement or release is, in the opinion of legal counsel to such party,
required by Law in order to discharge such party's disclosure obligations, then
such party may make or issue the legally required report, statement or release
and promptly furnish the other parties with a copy thereof.
9.5. Confidentiality. Each party hereto will hold, and will cause its
Affiliates and their respective Representatives to hold, in strict confidence
(unless (i) compelled to disclose by judicial or administrative process
(including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental Entities) or by other requirements of Law or (ii) disclosed in an
Action or Proceeding brought by a party hereto in pursuit of its rights or in
the exercise of its remedies hereunder) all documents and information
concerning the other parties or any of their Affiliates furnished to it by the
other parties or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party, or (c) later acquired by
<PAGE> 33
29
the receiving party from another source if the receiving party is not aware
that such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that each party shall be
entitled to disclose such documents and information to its Representatives (and
in the case of LII Europe and the Guarantor to any person who has provided or
who is considering providing the Financing).
9.6. Further Assurances. At any time or from time to time after the
execution and delivery of this Agreement, the parties hereto shall execute and
deliver to the other parties hereto such other documents and instruments,
provide such materials and information and take such other actions as may
reasonably be requested to more effectively carry out the intent and purposes
of this Agreement.
9.7. Time of Essence. Time is of the essence in the performance of
each and every one of the obligations of each party under this Agreement.
9.8. Amendment and Waiver. This Agreement may be amended, supplemented
or modified, and compliance with the provisions hereof may be waived, only by a
written instrument duly executed by or on behalf of each party against whom the
amendment, supplement, modification or waiver is sought to be enforced.
9.9. No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of RPC, in the case of any such assignment by
LII Europe or the Guarantor, or LII Europe, in the case of any such assignment
by RPC, and any attempt to do so will be void, except that any Shareholder may
assign any or all of its rights, interests and obligations hereunder to a
Permitted Transferee, provided that any such Permitted Transferee agrees in
writing to be bound by all of the terms, conditions and provisions contained
herein, and in the case of any such assignment by LII Europe the Guarantor
confirms in writing that its guaranty contained herein extends to such
Permitted Transferee's obligations hereunder. No such assignment referred to
above to a Permitted Transferee shall relieve the assigning Shareholder of its
obligations hereunder.
9.10. Taxes and Governmental Charges; Expenses. (a) Transfer taxes in
accordance with the terms of Article 726-1(degree) of the French Tax Code shall
be borne by the purchaser of the Shares.
(b) Whether or not the transactions contemplated hereby are
consummated, each party will pay its own costs and expenses incurred in
connection with the preparation, negotiation, execution and administration of
this Agreement and the closing of any transactions contemplated by this
Agreement.
9.11. Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
<PAGE> 34
30
9.12. Arbitration. Save as otherwise provided at Section 2.10(c)
above, all disputes arising in connection with this Agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce by three or more arbitrators appointed in accordance with
the said Rules (and in accordance with French law requirements to ensure the
adequate representation of each party's interests). The arbitrators shall be
fluent in French and in English. The arbitration proceedings shall take place
in Paris and shall be conducted in French and/or English, each party being free
to determine the language it will use during the proceedings (i.e. hearings,
briefs, oral and written communications, etc. shall be fully accepted in the
French language or in the English language without translation from French to
English nor from English to French). More specifically, documentary exhibits in
the French language will be admissible without an English translation thereof
and documentary exhibits in the English language will be admissible without a
French translation thereof, provided that when used in this Agreement, the
French language shall prevail.
9.13. Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.
9.14. Payments and Computations; Judgment and Successor Currency. (a)
All amounts payable hereunder shall be payable in the legal tender of France.
All payments to be made hereunder shall be made not later than 11:00 A.M.
(Paris, France time) on the date due in same day funds. All computations of
interest or amounts equivalent to interest based on the PIBOR Rate shall be
made by RPC on the basis of quarterly compounding and a year of 360 days for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or other amount is payable.
Each determination by RPC of an interest rate shall be conclusive and binding
for all purposes, in the absence of manifest error.
(b) If for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due from any party in the currency expressed to be
payable (the "Specified Currency") into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the party to whom such payment is to be made could purchase the
Specified Currency with such other currency at the main Paris, France office of
the bank receiving such funds on the Business Day preceding that on which final
judgment is given. The obligations of each party in respect of any amount due
<PAGE> 35
31
shall, notwithstanding any judgment in a currency other than the Specified
Currency, be discharged only to the extent that on the Business Day following
receipt by the party to whom such amount is owed of any sum adjudged to be so
due in such other currency such party may in accordance with normal banking
procedures purchase the Specified Currency with such other currency; if the
amount of the Specified Currency so purchased is less than the amount
originally due to such party in the Specified Currency, the applicable party
obligated to pay such amount agrees, to the fullest extent that it may
effectively do so, as a separate obligation and notwithstanding any such
judgment, to indemnify such party against such loss, and if the amount of the
Specified Currency so purchased exceeds the amount originally due to such
party, such party agrees to remit such excess to such obligor party.
(c) The term "French Francs" shall be deemed to comprise any successor
currency that shall hereafter be legal tender in France, converted in
accordance with the parity fixed between the French Franc and such successor
currency.
9.15. English Language. All notices, communications, evidence,
reports, opinions and other documents given or to be given under this
Agreement, unless made in the English language, shall be accompanied by an
English translation. In all events, the English version of this Agreement and
of all such notices, communications, evidence, reports, opinions and other
documents shall govern as between the parties in the event of any conflict with
the non- English version hereof or thereof, provided that when used in the
English version of this Agreement, French language words or terms shall have
their precise French meanings.
9.16. Specific Performance. The parties hereto agree that upon a
breach of any other provisions of this Agreement a remedy at law would not be
adequate, and that the parties hereto are entitled to injunctive relief and
specific performance, and any other legal or equitable remedies, as remedies
for the enforcement of this Agreement.
9.17. Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the Republic of France applicable to a contract
executed and performed in such Republic without giving effect to the conflicts
of laws principles thereof.
9.18. Counterparts. This Agreement may be executed by the parties
hereto separately in any number of counterparts, each of which will be deemed
an original, but all of which together will constitute one and the same
agreement.
9.19. Effectiveness. This Agreement shall become effective on the
Closing of the Stock Purchase Agreement, and the effectiveness of this
Agreement shall be conditioned upon the effectiveness of the Stock Purchase
Agreement. If the Stock Purchase Agreement is terminated, this Agreement shall
be of no further force and effect.
<PAGE> 36
32
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer or officers of each party hereto as of
the date first above written.
RHONE-POULENC CHIMIE, S.A.
By: /s/ Fred SCETBON
-----------------------
Title: Manager M&A
RHONE L S.A.S.
By: /s/ Chantal RUBIN
-----------------------
Title: President
LII EUROPE S.A.R.L.
By: /s/ William G. Osborne
-----------------------
Title:
LAROCHE INDUSTRIES INC.
By: /s/ W. Walter LaRoche
-----------------------
Title: Chairman
<PAGE> 37
EXHIBIT 10.5a
=============================================================================
AMENDMENT TO THE
PUT AND CALL AGREEMENT
dated as of
October 17, 1997
Among
CHLORALP S.A.S.
RHONE-POULENC CHIMIE S.A.
LII EUROPE S.A.R.L.
LAROCHE INDUSTRIES INC.
=============================================================================
<PAGE> 38
AMENDMENT TO THE PUT AND CALL AGREEMENT
THIS AMENDMENT (the "Amendment"), dated October 17, 1997, amends the
Put and Call Agreement by and among RHONE L S.A.S. (now named CHLORALP) (the
"Company"), RHONE-POULENC CHIMIE S.A. ("RPC") or ("Shareholder") and, together
with LII Europe, the "Shareholders"), LII Europe S.A.R.L. ("LII EUROPE" or a
"Shareholder" and, together with RPC, the "Shareholders") and LAROCHE
INDUSTRIES INC. ("Guarantor"), in accordance with Section 9.8 of the Put and
Call Agreement. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Put and Call Agreement:
W I T N E S S E T H:
WHEREAS, Company, Seller, Buyer and Guarantor have entered into the
Put and Call Agreement; and
WHEREAS, Company, Seller, Buyer and Guarantor desire to amend the Put
and Call Agreement;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
Paragraph (B) of the PRELIMINARY STATEMENTS shall be amended by
deleting the existing text in its entirety and substituting the following text:
"(B) As a result of this contribution, the Company will increase
its corporate capital, to FF 302,724,000 divided into 3,027,240 shares of FF
100 par value per Share (the "Shares")."
1. Section 3.1.3(a) shall be amended by the deletion of "FF
173,922,550" and the substitution of "FF 167,132,712".
2. Sections 3.1.3(b), 3.2.2(b), 3.3.2(b) and 3.4.2(b) shall be
amended by inserting the following words at the second line after the word
"tax": "(and with respect to any loss for the current tax period, after giving
effect to the benefit of such loss provided that it can reasonably be expected
to be utilized in the current tax period)", by deleting the words "the Closing
Date" at the third line and substituting the words "October 1, 1997", and by
deleting the period at the end of such clause and substituting;".
3. Section 3.1.3 shall be amended by the addition of new clauses
(c) and (d):
<PAGE> 39
- 2 -
(c) plus an amount equal to the Post Closing Adjustment Amount
determined pursuant to Section 1.4.2(i) or minus an amount (expressed as an
absolute number and not as a negative number) equal to the Post Closing
Adjustment Amount determined pursuant to Section 1.4.2(ii); and
(d) plus an additional amount, if any, equal to (x) one million Francs
(FF 1,000,000) if notification of the exercise of the RPC Put Option is
delivered on or prior to June 30, 1998 or (y) five hundred thousand Francs (FF
500,000) if notification of the exercise of the RPC Put Option is delivered on
or prior to June 30, 1999."
4. Section 3.2.2(a) shall be amended by the deletion of "FF
99,323,732" and the substitution of "FF 95,057,943".
5. Sections 3.3.2(b) and 3.4.2(b) shall be amended by deleting
the words "the accounting principles described at Exhibit B hereto" and
substituting the word "GAAP".
6. Sections 3.2.2, 3.3.2 and 3.4.2 shall be amended by the
addition of new clause (c):
"(c) plus an amount equal to the Post Closing Adjustment Amount
determined pursuant to Section 1.4.2(i) or minus an amount (expressed as an
absolute number and not as a negative number) equal to the Post Closing
Adjustment Amount determined pursuant to Section 1.4.2(ii);"
7. Section 3.3.3, paragraphs (a) and (c), shall be amended by the
deletion of "FF 19,485,145" and the substitution of "FF 18,983,287".
8. Section 3.3.3(d) shall be amended by the deletion of "FF
29,227,718" and the substitution of "FF 28,474,931".
9. Section 5.1.1 shall be amended by the additions of the
following paragraph (f):
"(f) Material Contracts. RPC shall have used its Best Efforts to
perfect the transfer to the Company of all Material Contracts which shall not
otherwise have been transferred by operation of law pursuant to the Transfer
Agreement (other than those identified in Schedule 2.1.11(b)(iii) to the Stock
Purchase Agreement), in each case obtaining as necessary the consent of each
counterparty to each such Material Contract whose consent would have been
required but for the Company's having previously qualified as a subsidiary or
other affiliate of RPC, with the effect that the exercise of the RPC Put shall
not cause the Company to lose the benefit of any such Material Contract. In
the event that the transfer of each such Material Contract shall not have been
so perfected, and also in respect of those non-transferred Material Contracts
<PAGE> 40
- 3 -
identified at such Schedule 2.1.11(b)(iii), RPC shall have made such alternate
arrangements (including, as appropriate, sublease or other analogous
arrangements) as shall be required, in LaRoche's reasonable commercial
judgment, to place the Company in the same economic and commercial position as
it would have enjoyed had the transfer of all such Material Contracts been so
perfected, it being understood that (x) alternate arrangements in place at or
prior to the Closing Date of the Stock Purchase Agreement shall conclusively be
deemed sufficient for the purposes hereof and (y) that the Company and LII
Europe shall not be entitled to require contractual benefits or durations in
excess of those prevailing under the initial terms of such Material Contracts."
10. Section 3.5 shall be amended by inserting in the first
sentence thereof after the words "Material Permits" the following:
"or if either of the Communes of Pont de Claix or Hauterives exercises
its preemption right on the volumes which have been contributed to
ChlorAlp and CEVCO pursuant to the Transfer Agreement and the CEV
Transfer Agreement".
11. (a) Section 3.5.1 shall be amended by inserting a
paragraph (d) after the words "such Excess Permit Capital Expenditures" as
follows:
"or (d) that the Commune of Pont de Claix has exercised its
preemption right on the volumes which have been contributed to
ChlorAlp and CEVCO pursuant to the Transfer Agreement and the CEV
Transfer Agreement".
(b) Section 3.5.1 shall be further amended by deleting the
existing two last sentences and substituting the following text:
"Such Notice of Exercise shall be delivered (i) within ninety (90)
days after the Shareholders shall have failed to reach mutual
agreement on such funding or, as the case may be, (ii) immediately
after the date on which the Commune of Pont de Claix or Hauterives has
exercised its preemption right referred to above. Such Notice of
Exercise shall specify a Proposed Purchase Date not later than thirty
(30) days after the date of the Notice of Exercise. Once delivered,
such Notice of Exercise shall be irrevocable."
<PAGE> 41
- 4 -
12. Section 3.5.2 shall be amended by the addition of new clause
(d):
"(d) plus an amount equal to the Post Closing Adjustment Amount
determined pursuant to Section 1.4.2(i) or minus an amount (expressed as an
absolute number and not as a negative number) equal to the Post Closing
Adjustment Amount determined pursuant to Section 1.4.2(ii)."
13. Section 6.1 shall be amended by deleting existing clause (e)
and substituting the following text:
"(e) To the extent the Company shall from time to time hereafter
have excess cash, such excess cash shall be applied to reduce, in equal amounts
on a 50/50 basis, (x) the principal amount of the Term Loan extended by Buyer
to Company pursuant to the Term Loan Agreement dated the date hereof and (y)
the principal amount of the Term Loan extended by Natexis Banque to the Company
pursuant to the "Convention de Credit" on or about the date hereof."
The definitions Section shall be amended as follows:
The definition of " Full Company Equity Value" shall be amended by the
deletion of "FF 302,474,000" and the substitution of "FF 290,665,586."
14. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be considered one and the same instrument.
15. Governing Law. This Amendment shall be governed and construed
in accordance with Section 9.17 of the Put and Call Agreement.
16. Effect of Amendment. Except as amended hereby, the terms and
provisions of the Put and Call Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officer or officers of each party hereto as of
the date first above written.
RHONE-POULENC CHIMIE, S.A.
By: /s/ Daniel Humbert
---------------------------
Title:
<PAGE> 42
- 5 -
CHLORALP S.A.S.
By: /s/ Marc Polaud
----------------------------
Title:
LII EUROPE S.A.R.L.
By: /s/ Bertrand Pinet
----------------------------
Title: Gerant
LAROCHE INDUSTRIES INC.
By: /s/ William G. Osborne
----------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.22
[EXECUTION COPY]
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of September 30, 1997 to the Credit Agreement dated
as of August 26, 1997 (the "CREDIT AGREEMENT") among LAROCHE INDUSTRIES INC.
(the "BORROWER"), the LENDERS party thereto (the "LENDERS") and THE CHASE
MANHATTAN BANK, as Administrative Agent (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement to
increase the revolving commitments to $125,000,000 (so that, with the term
commitments at $35,000,000 after a mandatory reduction of $25,000,000 pursuant
to Section 2.09(b)(i)(x) on September 23, 1997, total commitments will equal
$160,000,000);
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference
to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall, after this Amendment becomes
effective, refer to the Credit Agreement as amended hereby.
SECTION 2. Definition of Revolving Commitments. The definition of
"Revolving Commitment" in Section 1.01 of the Credit Agreement is amended to
delete "initial" in both places it appears and to replace "$100,000,000" with
"$125,000,000."
SECTION 3. Schedule 2.01. Schedule 2.01 to the Credit Agreement is
deleted and replaced by Schedule 2.01 attached to this Amendment.
SECTION 4. Representations to Borrower. The Borrower represents and
warrants that (i) the representations and warranties of the Borrower set forth
in Article 3 of the Credit Agreement will be true and correct on and as of the
Amendment Effective Date to the same extent as they would be required to be
under Secton 4.03(b) on the occasion of any Borrowing and (ii) no Default will
have occurred and be continuing on such date.
<PAGE> 2
SECTION 5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 7. Effectiveness. This Amendment shall become effective as
of the date hereof on the date when the following conditions are met (the
"AMENDMENT EFFECTIVE DATE"):
(a) the Administrative Agent shall have received from each of
the Borrower and the Lenders a counterpart hereof signed by such party
or facsimile or other written confirmation (in form satisfactory to
the Administrative Agent) that such party has signed a counterpart
hereof;
(b) the Administrative Agent shall have received a new
Revolving Loan promissory note for the account of each Lender with a
Revolving Loan promissory note outstanding prior to the Amendment
Effective Date;
(c) the Administrative Agent shall have received an opinion of
Hunton & Williams, counsel for the Borrower, dated the Amendment
Effective Date and in form and substance satisfactory to the
Administrative Agent; and
(d) the Administrative Agent shall have received all
documents and other opinions it may reasonably request relating to
the existence of the Borrower, the corporate authority for and the
validity of the Credit Agreement as amended by this Amendment, the
continued validity and perfection of the security interests created
by the Collateral Documents and any other matters relevant hereto,
all in form and substance satisfactory to the Administrative Agent.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
LAROCHE INDUSTRIES INC.
By: /s/ R. C. Cordaro
----------------------------------
Name: R. C. Cordaro
Title: Treasurer
THE CHASE MANHATTAN BANK
By: /s/ Robert T. Sacks
----------------------------------
Name: Robert T. Sacks
Title: Managing Director
HIBERNIA NATIONAL BANK
By: /s/ Trudy W. Nelson
----------------------------------
Name: Trudy W. Nelson
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ W. Thompkins Rison, Jr.
----------------------------------
Name: W. Thompkins Rison, Jr.
Title: Vice President
3
<PAGE> 4
THE BANK OF NOVA SCOTIA
By: /s/ A. S. Norsworthy
-----------------------------------------
Name: A. S. Norsworthy
Title: Sr. Team Leader - Loan Operations
By:
-----------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Rose M. Crump
-----------------------------------------
Name: Rose M. Crump
Title: Vice President
AMSOUTH BANK
By: /s/ Alan D. Lott
-----------------------------------------
Name: Alan D. Lott
Title: Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Linda Pace
-----------------------------------------
Name: Linda Pace
Title: Vice Presient
By: /s/ John Sykes
-----------------------------------------
Name: John Sykes
Title: A. Vice President
4
<PAGE> 5
COMERICA BANK
By: /s/ Kristine L. Andersen
----------------------------------------
Name: Kristine L. Andersen
Title: Account Officer
NATIONAL BANK OF CANADA
By: /s/ James F. Hannon
----------------------------------------
Name: James F. Hannon
Title: Vice President
By: /s/ Vernon B. Woods
----------------------------------------
Name: Vernon B. Woods
Title: Vice President
BANQUE PARIBAS
By: /s/ Duane Helkowski
----------------------------------------
Name: Duane Helkowski
Title: Vice President
By: /s/ Mary T. Finnegan
----------------------------------------
Name: Mary T. Finnegan
Title: Director
5
<PAGE> 6
SCHEDULE 2.01
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Revolving Term Total
Lender Commitments Commitments Commitments
- ------ ------------ ----------- ------------
<S> <C> <C> <C>
The Chase Manhattan Bank $ 16,406,250 $ 4,593,750 $ 21,000,000
Hibernia National Bank 15,625,000 4,375,000 20,000,000
Wachovia Bank, N.A. 15,625,000 4,375,000 20,000,000
The Bank of Nova Scotia 13,281,250 3,718,750 17,000,000
PNC Bank, National
Association 13,281,250 3,718,750 17,000,000
AmSouth Bank 11,328,125 3,171,875 14,500,000
BHF-Bank
Aktiengesellschaft 11,328,125 3,171,875 14,500,000
Comerica Bank 11,328,125 3,171,875 14,500,000
National Bank of Canada 8,984,375 2,515,625 11,500,000
Banque Paribas 7,812,500 2,187,500 10,000,000
- -------------------------- ------------ ----------- ------------
Total $125,000,000 $35,000,000 $160,000,000
============ =========== ============
</TABLE>
<PAGE> 1
EXHIBIT 12
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
------------------------------------------------------------------------ -----------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1993 1994 1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes,
minority interests and
extraordinary charges...... $28,463 $19,655 $28,243 $32,122 $ 1,076 $ (489) $ 2,581
Less income from equity
investments................ (416) (3,257) (2,905) (2,647) (4,909) (2,228) (2,104)
Distributions from equity
investments................ -- 2,455 2,933 1,332 5,701 2,292 2,625
Fixed charges................ 9,337 14,021 17,751 17,853 17,992 9,038 9,562
Less accretion related to LCI
stock...................... (828) (5,729) (3,654) -- -- -- --
Less capitalized interest.... (136) (89) -- -- (860) (276) (474)
------- ------- ------- ------- ------- ------- -------
Earnings............ $28,420 $27,056 $42,368 $48,660 $19,000 $ 8,337 $12,190
======= ======= ======= ======= ======= ======= =======
Interest expense and other... $ 7,158 $ 7,118 $13,083 $15,973 $14,881 $ 7,585 $ 7,736
Capitalized interest......... 136 89 -- -- 860 276 474
Interest portion of rental
expense.................... 1,215 1,085 1,014 1,880 2,251 1,177 1,352
Accretion related to LCI
stock...................... 828 5,729 3,654 -- -- -- --
------- ------- ------- ------- ------- ------- -------
Fixed charges................ $ 9,337 $14,021 $17,751 $17,853 $17,992 $ 9,038 $ 9,562
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed
charges.................... 3.04 1.93 2.39 2.73 1.06 0.92 1.27
======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 2
PROFORMA STATEMENT REGARDING COMPUTATION
OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
FEBRUARY 28, 1997 AUGUST 31, 1997
----------------- ----------------
<S> <C> <C>
Income before income taxes, minority interests and
extraordinary charges..................................... $(2,684) $ 1,473
Less income from equity investments......................... (4,909) (2,104)
Distributions from equity investments....................... 5,701 2,625
Fixed charges............................................... 21,752 10,670
Less accretion related to LCI stock......................... -- --
Less capitalized interest................................... (860) (474)
------- -------
Earnings.......................................... $19,000 $12,190
======= =======
Interest expense and other.................................. $18,641 $ 8,844
Capitalized interest........................................ 860 474
Interest portion of rental expense.......................... 2,251 1,352
Accretion related to LCI stock.............................. -- --
------- -------
Fixed charges............................................... $21,752 $10,670
======= =======
Ratio of Proforma earnings to Proforma fixed charges........ 0.87 1.14
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
LaRoche International Inc.,
a Delaware corporation
LaRoche Overseas Inc.,
a Delaware corporation
LaRoche Fortier Inc.,
a Delaware corporation
LaRoche Filter Systems Inc.,
a Delaware corporation
LaRoche Air Systems, Inc.,
a Delaware corporation
LaRoche Chemicals FSC Inc.
a Delaware corporation
LCI Stone Inc.,
A Delaware corporation
LII Europe S.A.R.L.,
a French limited liability corporation
LII Management Services S.A.S.,
a French corporation
<PAGE> 1
EXHIBIT 23.2
We consent to the reference to our firm under the captions "Selected
Historical Consolidated Financial Information" and "Experts" in the Registration
Statement (Form S-4) and related Prospectus of LaRoche Industries Inc. for the
registration of $175 million of 9 1/2% Senior Subordinated Notes due 2007,
Series B, and to the inclusion herein of our report dated April 30, 1997, with
respect to the consolidated financial statements of LaRoche Industries Inc. and
to the incorporation by reference herein of our report dated April 30, 1997,
with respect to the consolidated financial statements and the financial
statement schedule of LaRoche Industries Inc. included in its Annual Report
(Form 10-K) for the year ended February 28, 1997, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young
Atlanta, Georgia
October 31, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
---
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
LAROCHE INDUSTRIES INC.
(Exact name of obligor as specified in its charter)
DELAWARE 13-3341472
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 JOHNSON FERRY ROAD, N.E.
ATLANTA, GEORGIA 30342
(Address of principal executive offices) (Zip Code)
9-1/2% SENIOR SUBORDINATED NOTES DUE 2007
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15.NOT APPLICABLE.
ITEM 16.LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission
as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 27th day of October, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ State Street Bank and Trust Company
----------------------------------------
NAME: Henry W. Seemore
TITLE: Assistant Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by LAROCHE
INDUSTRIES INC. of its 9-1/2% SENIOR SUBORDINATED NOTES DUE 2007 we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ State Street Bank and Trust Company
-----------------------------------------
HENRY W. SEEMORE
ASSISTANT VICE PRESIDENT
DATED: OCTOBER 27, 1997
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this commonwealth
and a member of the Federal Reserve System, at the close of business June 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act and in
accordance with a call made by the Commissioner of Banks under General Laws,
Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........................ 1,842,337
Interest-bearing balances ................................................. 8,771,397
Securities ......................................................................... 10,596,119
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ....................................... 5,953,036
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 5,769,090
Allowance for loan and lease losses ................. 74,031
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances ................... 5,695,059
Assets held in trading accounts .................................................... 916,608
Premises and fixed assets .......................................................... 374,999
Other real estate owned ............................................................ 755
Investments in unconsolidated subsidiaries ......................................... 28,992
Customers' liability to this bank on acceptances outstanding ....................... 99,209
Intangible assets .................................................................. 229,412
Other assets........................................................................ 1,589,526
----------
Total assets ....................................................................... 36,097,449
==========
LIABILITIES
Deposits:
In domestic offices ....................................................... 11,082,135
Noninterest-bearing .......................... 8,932,019
Interest-bearing ............................. 2,150,116
In foreign offices and Edge subsidiary .................................... 13,811,677
Noninterest-bearing .......................... 112,281
Interest-bearing ............................. 13,699,396
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ....................................... 6,785,263
Demand notes issued to the U.S. Treasury and Trading Liabilities ................... 755,676
Other borrowed money ............................................................... 716,013
Subordinated notes and debentures .................................................. 0
Bank's liability on acceptances executed and outstanding ........................... 99,605
Other liabilities .................................................................. 841,566
Total liabilities .................................................................. 34,091,935
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................................... 0
Common stock ....................................................................... 29,931
Surplus ............................................................................ 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses) ....... 1,542,695
Cumulative foreign currency translation adjustments ............................... (4,295)
----------
Total equity capital ............................................................... 2,005,514
----------
Total liabilities and equity capital ............................................... 36,097,449
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
