-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WEXNQpuMheyQUOC9tklClz6mf7iS75nhPQnVqRamKOPlr02AL4nWlJZ7Es8Y5h5I 0ho65Pb5PdK/2rtahOSflQ== 0001091862-00-000006.txt : 20000331 0001091862-00-000006.hdr.sgml : 20000331 ACCESSION NUMBER: 0001091862-00-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CK WITCO CORP CENTRAL INDEX KEY: 0001091862 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 522183153 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-15339 FILM NUMBER: 584423 BUSINESS ADDRESS: STREET 1: 199 BENSON ROAD STREET 2: METRO CENTER CITY: MIDDLEBURY STATE: CT ZIP: 06749 BUSINESS PHONE: 2035732000 MAIL ADDRESS: STREET 1: 199 BENSON ROAD E STREET 2: METRO CENTER CITY: MIDDLEBURY STATE: CT ZIP: 06749 10-K 1 CK WITCO CORPORATION FORM 10-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-30270 CK Witco Corporation (Exact name of registrant as specified in its charter) Delaware 52-2183153 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One American Lane Greenwich, Connecticut 06831-2559 (address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(203) 552-2000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $0.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non- affiliates of the registrant, computed as of February 25, 2000, was $1,118,770,776. The number of shares of Common Stock of the registrant outstanding as of February 25, 2000, was 114,004,574. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Stockholders for fiscal year ended December 31, 1999 ........ Parts I, II and IV Proxy Statement for Annual Meeting of Stockholders on April 25, 2000 ........ Part III INDEX Page PART I Item 1. Business 1 Polymer Products 3 Specialty Products 7 Item 2. Properties 16 Legal Proceedings 19 Submission of Matters to a Vote of Security Holders 21 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 21 Item 6. Selected Financial Data 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 22 Item 8. Financial Statements and Supplementary Data 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 22 PART III Item 10. Directors and Executive Officers of the Registrant 22 Item 11. Executive Compensation 25 Item 12. Security Ownership of Certain Beneficial Owners and Management 25 Item 13. Certain Relationships and Related Transactions 25 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 25 PART I ITEM 1. BUSINESS (a) General Development of Business CK Witco Corporation (together with its consolidated subsidiaries, the "Corporation" or "Registrant") was incorporated in Delaware in 1999 in connection with the merger of Crompton & Knowles Corporation and Witco Corporation on September 1, 1999 (the "Merger"). The terms of the Merger provided that Crompton & Knowles Corporation merge with and into the Corporation and immediately thereafter, Witco Corporation merge with and into the Corporation, so that the Corporation was the surviving corporation. At the time of the Merger, each share of Crompton & Knowles Corporation's common stock was automatically converted into one share of the Corporation's common stock, and each share of Witco Corporation's common stock was exchanged for 0.9242 shares of the Corporation's common stock. The Merger was accounted for as a purchase and accordingly, the results of operations of Witco Corporation have been included in the consolidated financial statements from the date of acquisition. Crompton & Knowles Corporation ("Crompton & Knowles") was incorporated in Massachusetts in 1900. Crompton & Knowles had engaged in the manufacture and sale of specialty chemicals since 1954 and, since 1961, in the manufacture and sale of polymer processing equipment. Crompton & Knowles had substantially expanded both its specialty chemical and its polymer processing equipment businesses through a number of acquisitions in both the United States and Europe, including the acquisition in 1996 of Uniroyal Chemical Company, Inc. ("Uniroyal"), a multinational manufacturer of performance chemicals, including rubber chemicals and additives for plastics and lubricants, crop protection chemicals, and polymers, which include Royalene(R) EPDM rubber, Paracril(R) nitrile rubber and Adiprene(R)/Vibrathane(R) urethane prepolymers. Witco Corporation ("Witco") was incorporated in Delaware in 1958 as Witco Chemical Company, Inc., at which time it succeeded by merger to the business of Witco Chemical Company, an Illinois corporation formed in 1920. Witco was a global manufacturer and marketer of specialty chemical products for use in a wide variety of industrial and consumer applications. In 1995, Witco acquired Osi Specialties Holding Company, an entity engaged in the manufacture of silicone surfactants, organofunctional silanes, specialty fluids and amine catalysts with manufacturing and blending facilities throughout the world. Witco sold its Battery Parts and Carbon Black operations in 1995 and in 1997 completed the divestiture of its Lubricants Group. In 1996, Witco announced a major restructuring plan to be implemented over a three year period (1997-1999). Elements of the plan included reducing fixed and variable costs, undertaking a $600 million three-year capital spending plan for new capacity, modernizing facilities, upgrading environmental and safety compliance and information systems capabilities and reducing the number of its manufacturing facilities, while consolidating related distribution, research and development and administrative centers. In 1998, Witco acquired Ciba Specialty Chemicals Inc.'s ("Ciba") worldwide polyvinyl chloride heat stabilizers business and related assets and Ciba acquired Witco's global epoxy systems and adhesives business and related assets. Prior to the Merger, Witco's operations were divided into four business groups: the Polymer Chemicals Group, the OrganoSilicones Group, the Performance Chemicals Group and the Oleochemicals and Derivatives Group. The Oleochemicals and Derivatives business was sold on August 31, 1999, in a transaction described below. In January 1999, Crompton & Knowles sold its specialty ingredients business, Ingredient Technology Corporation ("ITC"), to Chr. Hansen, Inc. for approximately $103 million. In August 1999, Witco completed the sale of its Oleochemicals and Derivatives business to Goldschmidt AG for approximately $249 million. In December 1999, the Corporation completed the sale of its global textile colors business and most of its non-United States industrial colors business to Yorkshire Group PLC, a producer of textile dyestuffs headquartered in Leeds, United Kingdom. The consideration received from the Yorkshire transaction was approximately $86.5 million; $78 million in cash proceeds and a 12.4 percent equity interest in Yorkshire then valued at approximately $8.5 million. In early 2000, the Corporation's joint venture with GIRSA S.A. de C.V. ("GIRSA"), a subsidiary of DESC, S.A. de C.V., a Mexican corporation, commenced operation of a new 40,000 metric ton nitrile rubber plant in Altamira, Mexico, to produce Paracril(R) oil-resistant nitrile rubber products. The facility is the largest dedicated nitrile rubber plant in the world producing a wide range of general purpose and specialty polymers. (b) Financial Information About Industry Segments Information as to the sales, operating profit, depreciation and amortization, assets and capital expenditures attributable to each of the Corporation's business segments during each of its last three fiscal years is set forth in the Notes to Consolidated Financial Statements on pages 51-52 of the Corporation's 1999 Annual Report to Stockholders, and such information is incorporated herein by reference. The Corporation's businesses are grouped into two units, "Polymer Products" and "Specialty Products." Polymer Products consists of separate reporting segments for Polymer Additives (plastic additives, rubber chemicals and urethane chemicals), Polymers (EPDM, urethanes and nitrile joint venture) and Polymer Processing Equipment (Davis-Standard). Specialty Products consists of separate reporting segments for OrganoSilicones (silanes and specialty silicones), Crop Protection (specialty actives, industrial surfactants and Gustafson Joint Venture) and Other (petroleum additives, refined products, colors and glycerine/fatty acids). (c) Narrative Description of Business Products and Services The Corporation manufactures and markets a wide variety of polymer and specialty products. Most of the Corporation's products are sold to industrial customers for use as additives, ingredients or intermediates that impart particular characteristics to the customers' end products. The Corporation's products are currently marketed in more than 120 countries and serve a wide variety of end use markets including tires, agriculture, automobiles, textiles, plastics, lubricants, petrochemicals, leather, construction, recreation, mining, paper, packaging, home furnishings, personal care and appliances. The principal products and services offered by the Corporation are described below. POLYMER PRODUCTS Polymer Additives The Polymer Additives business supplies a number of specialty chemicals to the plastics, rubber and coatings/adhesives industries. The Polymer Additives business had net sales for fiscal 1999 of $620.2 million. Plastic Additives The Corporation is a global leader in supplying additives and catalysts for the polymer industry. The Corporation manufactures and markets a broad line of additives for plastics and lubricants, including antioxidants, lubricant additives, chemical foaming agents, synthetic fluids, chemical intermediates, polymerization inhibitors, curatives, dispersants and polymer modifiers. These products are used in the manufacture of numerous plastic and petroleum related products which in turn have diverse end uses, including plastic products, petrochemicals, adhesives, aerospace equipment, athletic equipment, automotive components, construction materials, electronics, food packaging, vinyl flooring, wire and cable and automotive and industrial oils and lubricants. These chemicals are often specially developed for a customer's specific manufacturing requirements. The Corporation also manufactures stabilizers, lubricants, plasticizers, and peroxide catalysts, and markets UV stabilizers and antistats, which products are used in the manufacture of PVC compounds and resins for such applications as pipes, fittings, siding and packaging materials. In addition, the Corporation is a supplier of lubricants, antioxidants, catalysts and polymerization initiators to the polyolefin/polystyrene industry for use in the manufacture of resins that are employed in a broad spectrum of applications used in packaging, automobiles, furniture and appliances. The Corporation also produces organotin compounds for the production of PVC stabilizers and biocides for marine paints. Net sales of plastic additives during fiscal 1999, 1998 and 1997 were 14.2%, 7.1% and 6.9% of the Corporation's net sales, respectively. Rubber Chemicals This product line of the Polymer Additives business contains over 100 different chemicals for use in processing rubber. These products include accelerators, antioxidants, antiozonants, chemical foaming agents and waxes. Accelerators are used for curing natural and synthetic rubber, and have a wide range of activation temperatures, curing ranges and use forms. Antiozonants protect rubber compounds from flex cracking and ozone, oxygen and heat degradation. Antioxidants provide rubber compounds with protection against oxygen, light and heat. Foaming agents produce gas by thermal decomposition or via a chemical reaction with other components of a polymer system and are mixed with rubber to produce sponge rubber products. Waxes inhibit static atmospheric ozone cracking in rubber. Tire manufacturers accounted for approximately 60% of the Corporation's rubber chemical sales in fiscal 1999, with the balance of such sales going to the industrial rubber market which includes numerous manufacturers of hoses, belting, sponge and a wide variety of other engineered rubber products. The Corporation believes it is one of the three largest suppliers of rubber chemicals in the world. Net sales of rubber chemicals during fiscal 1999, 1998 and 1997 were 12.7%, 14.7% and 15.6% of the Corporation's net sales, respectively. Urethane Chemicals The Urethane Chemicals business is comprised of three product groupings that offer technologically advanced materials to a diverse and global customer base: Fomrez(R) saturated polyester polyols, Witcobond(R) polyurethane dispersions, and Witcothane(R) polyurethane systems. Polyester polyols are employed in industrial applications such as flexible foam for seating, thermoplastic urethanes for structural parts, adhesives and coatings. The polyurethane dispersions are sold to a larger and more diverse customer base primarily for coating applications such as flooring, fiberglass sizing and textiles. Polyurethane systems are used primarily by the shoe sole industry, and is a highly service intensive business. Baxenden Chemicals Limited, the Corporation's 53.5% owned subsidiary (Croda Inc. owns 46.5%), is engaged in the manufacture and marketing of isocyanate derivatives, polyester polyols and specialty polymer systems used in a wide range of applications. The major markets served by Baxenden are automotive, construction, surface coatings, leather and textile finishing. Sub-markets include coatings, adhesives, sealants, elastomers and insulation for the above markets. Baxenden is focused on specialty polymer and resin chemistry and novel curing mechanisms for such polymers. The core technology is urethane and acrylic chemistry but includes novel polyesters and esterification processes. Polymer additives are sold through a specialized sales force, including technical service professionals who address customer inquiries and problems. The technical service professionals generally have degrees in chemistry and/or chemical engineering and are knowledgeable in specific product application fields. The sales and technical service professionals identify and focus on customers' growth opportunities, working not only with the customers' headquarters staff, but also with their research and development and manufacturing personnel on a worldwide basis. Polymers The Polymers business, which had net sales for fiscal 1999 of $316.3 million, has three principal product lines: Royalene(R) EPDM rubber, Adiprene(R)/Vibrathane(R) urethane prepolymers and Paracril(R) nitrile rubber. EPDM Ethylene-propylene-diene rubber ("EPDM") is commonly known as "crackless rubber" because of its ability to withstand sunlight and ozone without cracking. EPDM's application end uses include various automobile components, single-ply roofing, hoses, electrical insulation, tire sidewalls, mechanical seals and gaskets, oil additives and plastic modifiers. The Corporation produces and markets approximately 30 different EPDM polymer variations. The Corporation believes it is one of the three largest suppliers of EPDM polymers in the world, and the largest domestic manufacturer of EPDM polymers in the United States. The Corporation's success in this business has been due to several factors, including product performance, low cost manufacturing, and outstanding technical and customer service, which have earned the Corporation a reputation for excellence and strong customer loyalty. Urethanes The Corporation believes that it is the leading manufacturer of high performance liquid castable urethane prepolymers in the world. Among the most common applications using these prepolymers are solid industrial tires, printing rollers, industrial rolls, abrasion-resistant mining products such as chutes, hoppers and slurry transport systems, mechanical goods and a variety of sports equipment and other consumer items. The Corporation effectively competes in this business by providing efficient customer service and technical assistance through a highly regarded technical service staff and a proven ability to develop new products and technologies for its customers. Over 150 grades of urethane prepolymers are commercially available from the Corporation. Adiprene(R)/Vibrathane(R) urethane prepolymers are sold directly by a dedicated sales force in the United States, Canada and Australia and by direct sales and through distributorships in Europe, Latin America and the Far East. Adiprene(R)/Vibrathane(R) customers are serviced worldwide by a dedicated technical staff. Technical service personnel support field sales, while a research and development staff is dedicated to support new product and process development to meet rapidly changing customer needs. Technical support is a critical component of the product offering. Nitrile Joint Venture In early 2000, ParaTec S.A. de C.V., a joint venture between the Corporation's subsidiary, Uniroyal, and GIRSA, commenced operation of a 40,000 metric ton nitrile rubber plant in Altamira, Mexico, to produce Paracril(R) oil-resistant nitrile rubber products. It is the largest dedicated nitrile rubber plant in the world producing a wide range of general purpose and specialty polymers. The products are marketed in the United States by ParaTec Elastomers L.L.C. under the Paracril(R) trademark. The Corporation's nitrile rubber production facility in Painesville, Ohio closed in June 1999. Nitrile rubber polymers are resistant to most types of oils. Paracril(R) nitrile rubber is produced in 31 different variations to meet specific end use requirements in automotive hoses, seals, rings, printing rolls, insulation and many other products exposed to oil. The sale of Royalene(R) and Paracril(R) products is supported by a highly qualified staff of technical service specialists with extensive field and rubber processing experience. Strong customer relations and market knowledge result from this sales effort. In certain geographic areas, the Royalene(R) and Paracril(R) products are sold through distributors. Polymer Processing Equipment The Corporation's wholly owned subsidiary, Davis-Standard Corporation, manufactures and sells polymer processing equipment, which includes extruders, electronic controls, and integrated extrusion systems, and offers specialized service and modernization programs for in-place polymer processing systems. The polymer processing equipment business had net sales in the 1999 fiscal year of $300.0 million. Integrated polymer processing systems, which include extruders in combination with controls and other equipment, are used to process polymers into various products such as plastic sheet and profiles used in appliances, automobiles, home construction, sports equipment, and furniture; extruded shapes used as house siding, furniture trim, and substitutes for wood molding; and cast and blown film used to package many consumer products. Integrated extrusion systems are also used to compound engineered polymers, to recycle and reclaim plastics, to coat paper, cardboard and other materials used as packaging, and to apply plastic or rubber insulation to high voltage power cable for electrical utilities and to wire for the communications, construction, automotive, and appliance industries. Industrial blow molding equipment produced by the Corporation is sold to manufacturers of non-disposable plastic items such as tool cases and beverage coolers. The Corporation is a leading producer of polymer processing equipment for the polymers industry and competes with domestic and foreign producers of such products. The expansion of its Pawcatuck, Connecticut facility and a strong performance at its German subsidiary, ER-WE-PA Davis-Standard GmbH, have enabled shipments to keep pace with customers' demand for extruders. The Corporation is one of a number of producers of other types of polymer processing machinery. In the United States, most of the Corporation's sales of polymer processing equipment are made by its own dedicated sales force. In other parts of the world, and for export sales from the United States, the Corporation's sales of such equipment are made largely through agents. SPECIALTY PRODUCTS OrganoSilicones The OrganoSilicones business manufactures and sells over 500 silicone-based chemical intermediate products to manufacturers of fiberglass, reinforced plastics, polyurethane foam, textiles, coatings, automotive components, adhesives, rubber, pharmaceuticals, thermoplastics, sealants and electrical products throughout the world. The OrganoSilicones business had net sales for fiscal 1999 of $158.9 million. Regardless of form, most silicones share a combination of properties, including electrical resistance, ability to maintain performance across a broad range of temperatures, resistance to aging, water repellence, lubricating characteristics and relative chemical and physiological inertness. The versatility of silicone-based intermediates has led to a wide variety of applications across a broad spectrum of industries in all major countries. Silanes The Corporation is the world's largest producer of organofunctional silanes. Depending on their major organofunctional group (amino, epoxy, methacryl, sulfur, vinyl, etc.), silanes can act as coupling agents or cross-linkers. As a coupling agent, they have the unique ability to bond organic materials to inorganic materials and are used in a variety of end use products, including fiberglass, rubber and adhesive sealants. As cross-linkers, silanes have become the standard in the manufacture of thermoplastics where they promote the cross- linking of polyolefins in applications such as wire and cable. There is a developing opportunity for silanes in the tire industry, especially in Europe where there has been a growing demand for sulfur-functional silanes, which are necessary when silica is used in place of carbon black, in tire tread. Silica- tires, or "greentyres", provide improved handling, safety and other environmental benefits by lowering fuel consumption. Specialty Silicones Silicone fluids have several distinctive properties, which include chemical and physical inertness, good low-temperature performance, high compressibility, low-surface tension, stable viscosity with a change in the temperature or rate of shear, and thermal and oxidative stability. In addition to allowing these products to bond with various materials, these properties also offer improved antistatic, lubricity, and water-repellency performance. With these distinctive properties, silicone fluids serve a variety of end markets including the textile market where silicone fluids serve as textile softeners and wetting modifiers; the personal care market for hair care products and antiperspirants; the pharmaceutical market where they serve as a protective barrier in creams and lotions; the paper and pulp industry where they act as antifoams, surfactants, or release agents; and the automotive and furniture industries where silicone fluids are used in polishes and coatings because of their low-surface tension, lubricating properties, and water repellency. In the early 1950's the OrganoSilicones business (while part of Union Carbide Corporation) invented the use of silicone surfactants in the manufacture of urethane foam. This fundamental technological advance facilitated a lower-cost, continuous manufacturing method, resulting in accelerated growth in the urethane foam industry. The largest end markets for urethane additives are flexible, molded and rigid polyurethane foams in which urethane additives are used to control cell size and stabilize the foam. The Corporation markets its OrganoSilicone products worldwide primarily directly through its own sales force. Crop Protection The Crop Protection business manufactures and markets a wide variety of agricultural chemicals for many major food crops, including grains, fruits, nuts and vegetables, and many non-food crops, such as tobacco, cotton, turf, flax and ornamental plants. The business focuses its efforts mainly on products used on high value cash crops, such as ornamentals, nuts, citrus and tree and vine fruits as opposed to commodity crops such as soybeans and corn. The Crop Protection business had net sales for fiscal 1999 of $294.8 million. Specialty Actives The Specialty Actives business offers four major crop protection chemical product lines: fungicides; miticides and insecticides; growth regulants; and herbicides. Each product line is composed of numerous formulations for specific crops and geographic regions. The Corporation has a substantial presence in its targeted segments of the agrichemicals market due to its strategy of focusing research, product development, and sales and marketing on highly profitable market niches which are less sensitive to competitive pricing pressures than commodity segments of the market. While the products of the Specialty Actives business represent a relatively small percentage of the grower's overall costs, these products are often critical to the success or failure of the crops being treated. In addition, product line extensions, attention to application effectiveness and customer service are important factors in developing strong customer loyalty. In Australia, the Corporation's subsidiary, Hannaford Seedmaster Services Pty. Ltd., provides seed treatment chemicals and treating services to the local market. The Crop Protection business, under the Uniroyal name, promotes seed treatment chemicals in all regions of the world other than North America and Australia and enjoys a substantial position in the international seed treatment market. The Corporation anticipates continuing growth in seed treatment, which is environmentally attractive because it involves very localized use of agricultural chemicals and very low use rates compared to broad foliar or soil treatment. The Crop Protection business markets its products in North America through a direct sales force selling to a distribution network consisting of more than one hundred distributors and direct customers. In the international market, the Crop Protection business' direct sales force services over 300 distributors, dealers and agents. Net sales of specialty actives during fiscal 1999, 1998 and 1997 were 11.9%, 15.0% and 15.0% of the Corporation's net sales, respectively. Industrial Surfactants The Corporation's Industrial Surfactants business manufactures and sells a broad line of non-ionic and anionic surfactants to a range of industries, primarily agriculture, oil field, emulsion (water based) polymers, paints and coatings; and, to a smaller extent, to personal care, soap and detergent, and textile markets. Surfactants change the surface tension (spreadability) of liquids. In agricultural applications, surfactants separate pesticides into small particles, thereby increasing their efficiency via dispersion and penetration; in the oil field, surfactants are used as demulsifiers that aid in the clean separation of oil from water. Gustafson Joint Venture The Corporation is a leading producer and marketer of seed treatment chemicals. In November 1998, the Corporation formed joint ventures with Bayer Corporation to serve the agricultural seed treatment markets in North America based on Gustafson, Inc. ("Gustafson"), formerly a wholly owned subsidiary, which is a leading producer of seed treatment formulations and equipment. Bayer acquired a 50 percent interest in the Gustafson seed treatment business. As a result of this transaction, the operating results of Gustafson were deconsolidated in December 1998. Gustafson has a leading share of the North American commercial seed treatment formulation market and is recognized as a technological leader in this market. Gustafson is engaged directly and through cooperative ventures in developing and formulating seed treatment systems, offering a broad line of chemical formulations which contain fungicides, insecticides and seed conditioning aids in addition to commercial seed treating equipment. Gustafson's expertise enables it to develop and produce formulations consisting of multiple components to obtain optimum efficacy against seed and soil disease pathogens and insects. For the last several years, Gustafson has maintained a major developmental program in the field of naturally occurring biological control agents targeted for disease. Gustafson has focused its efforts on naturally occurring organisms as opposed to genetically engineered organisms. Gustafson received regulatory approval from the United States Environmental Protection Agency ("EPA") in 1992 for the first of a series of new biological formulations. Other The Other business, which had net sales for fiscal 1999 of $405.6 million, has four principal product lines: Petroleum Additives, Refined Products, Colors and Glycerine/Fatty Acids. Petroleum Additives The Corporation is a global manufacturer and marketer of performance additive components used in transport and industrial lubricant applications. The component product line includes Hybase(R) overbased calcium sulfonates and Lobase(R) neutral calcium sulfonates used in motor oils and marine lubricants. These sulfonates are oil soluble surfactants and their properties include detergency to help lubricants keep car, truck and ship engines clean with minimal wear. Also in the product line are barium and sodium sulfonates which provide corrosion protection and emulsification in metalworking fluids. Other key products are the Naugalube(R) antioxidants widely used by the Corporation's customers in engine oils, gear oils, industrial oils and greases; Synton(R) high viscosity poly alpha olefins (PAO) used in the production of synthetic lubricants for automotive, aviation and industrial applications (e.g. compressor oils and gear oils); and Trilene(R) for use as a viscosity index improver/viscosity modifier in both industrial and automotive gear oils, automatic transmission fluids, hydraulic fluids and greases where cost-effective, shear-stable fluids with good low temperature properties are required. Refined Products The Refined Products business is engaged in the manufacture and marketing of a wide range of high purity hydrocarbon products, including white oils and ink oils, petrolatums, microcrystalline waxes, cable compounds, and refrigeration oils and compression lubricants, serving numerous global markets predominantly requiring food grade quality. The business' products serve as lubricants, emollients, moisture barriers, plasticizers and carriers and are characterized by their chemical inertness and high quality. Refined Products are used in five major market segments: polystyrene, polymers (including polyolefin, thermoplastic elastomers and PVC applications), personal care, refrigeration oils and telecommunication cables, as well as additional minor markets. In 1998, Petro-Canada Lubricants of Mississauga, Ontario, Canada, became Refined Products' supplier for most grades of paraffinic white oils used in certain applications and Refined Products became Petro-Canada's exclusive distributor of these white oils in North America, Latin America and Asia Pacific. The Refined Products sales, marketing and distribution organization services Refined Products' and Petro-Canada's paraffinic white mineral oil customers for a variety of applications. Colors In December 1999, the Corporation completed the sale of its global textile colors business and most of its non-United States industrial colors business to Yorkshire Group PLC, a producer of textile dyestuffs headquartered in Leeds, United Kingdom. The business sold generated annual revenues of approximately $150 million, and included four manufacturing facilities located in Lowell, North Carolina; Greenville, South Carolina; Tertre, Belgium; and Oissel, France. The Corporation will continue to own and operate its industrial colors business in the Americas, including four manufacturing facilities located in Pennsylvania and New Jersey. This business produces and markets dyes used in specialty papers, inks and coatings, leather and plastic parts and films for customers in North and South America. In addition, the Corporation supplies unique dyes for metal coating applications and ink-jet printers. Domestically, the Corporation sells dyes predominantly through its own dedicated sales force. The Corporation's position as a leading industrial dyes supplier in the United States has been maintained by satisfying the market's needs with quick customer response, efficient production, customized quality products and strong technical service. Glycerine/Fatty Acids The Corporation is a producer of glycerine and fatty acids. These products modify surfaces either as direct lubricants or emulsifiers or as intermediates for ingredients that modify surfaces. Natural glycerines are by-products from the production of soaps, fatty acids, fatty acid methyl esters, and fatty alkanolamides that use animal fats and vegetable oils as feedstock. Pharmaceuticals and personal care products are the largest end markets for glycerines. In medical and pharmaceutical preparations, glycerine is used to improve smoothness, provide lubrication, or maintain moisture in suppositories, cough syrups, elixirs and expectorants. Glycerine is also used as a lubricant and solvent in personal care products including toothpastes, products for hair and skin care, soaps and mouthwashes. Fatty acids are carboxylic acids derived from or contained in animal fat or vegetable oil. Examples of diverse applications of fatty acids include their use as lubricants in plastics; their use as components of personal care products such as soaps, creams and lotions; and their use as release agents or components of curing systems for rubber. The Corporation markets its petroleum additives, refined products and gylcerine/fatty acids worldwide primarily directly through its own sales force. * * * Sources of Raw Materials Chemicals, steel, castings, parts, machine components and other raw materials required in the manufacture of the Corporation's products are generally available from a number of sources, some of which are foreign. The Corporation also uses significant amounts of petrochemical feedstocks in many of its chemical manufacturing processes. Large increases in the cost of these petrochemical feedstocks could adversely affect the Corporation's operating margins. While temporary shortages of raw materials may occur occasionally, raw materials are currently readily available. However, their continuing availability and price are subject to domestic and world market and political conditions and regulations. Major requirements for key raw materials are typically purchased pursuant to multi-year contracts. The Corporation is not dependent on any one supplier for a material amount of its raw material requirements; however, the OrganoSilicones business purchases, in the aggregate, approximately 40% of its raw materials from Dow Corning Corporation and Union Carbide Corporation under various long-term agreements, which expire at various times through 2010. The Corporation holds a 50% interest in Rubicon Inc. ("Rubicon"), a manufacturing joint venture between Uniroyal and Huntsman Corporation, located in Geismar, Louisiana, which supplies both Huntsman and the Corporation with aniline, and the Corporation with diphenylamine ("DPA"). The Corporation believes that its aniline and DPA needs in the foreseeable future will be met by production from Rubicon and the Corporation's DPA facility located in Huddersfield, England. Patents and Licenses The Corporation has over 3,500 United States and foreign patents and pending applications and has trademark protection for approximately 700 product names. Patents, trade names, trademarks, know-how, trade secrets, formulae, and manufacturing techniques assist in maintaining the competitive position of certain of the Corporation's products. Patents, formulae, and know-how are of particular importance in the manufacture of a number of specialty chemicals manufactured and sold by the Corporation, and patents and know-how are also significant in the manufacture of certain wire insulating and polymer processing machinery product lines. The Corporation is licensed to use certain patents and technology owned by other companies, including some foreign companies, to manufacture products complementary to its own products, for which it pays royalties in amounts not considered material to the consolidated results of the enterprise. Products to which the Corporation has such rights include certain crop protection chemicals, dyes, and polymer processing machinery. While the existence of a patent is prima facie evidence of its validity, the Corporation cannot assure that any of its patents will not be challenged nor can it predict the outcome of any such challenge. The Corporation believes that no single patent, trademark, or other individual right is of such importance, however, that expiration or termination thereof would materially affect its business. Seasonal Business With the exception of the Crop Protection business which has approximately 17% of its annual sales occurring in the fourth calendar quarter, no material portion of any segment of the business of the Corporation is seasonal. Customers The Corporation does not consider any segment of its business dependent on a single customer or a few customers, the loss of any one or more of whom would have a material adverse effect on the segment. No one customer's business accounts for more than ten percent of the Corporation's gross revenues nor more than ten percent of its earnings before taxes. Backlog Because machinery production schedules range from about 60 days to 10 months, backlog is significant to the Corporation's polymer processing equipment business. Firm backlog of customers' orders for this business at the end of 1999 totalled approximately $113 million compared with $118 million at the end of 1998. It is expected that most of the 1999 backlog will be shipped during 2000. Orders for specialty chemicals and polymers are generally filled from inventory stocks and thus are excluded from backlog. Competitive Conditions The Corporation is a major manufacturer of polymer products and specialty products. Competition varies by product and by geographic region, except that in rubber chemicals the market is fairly concentrated. In that market, the Corporation and its two principal competitors together account for approximately 46% of total worldwide sales. In addition, the EPDM market is fairly concentrated. The Corporation and its two principal competitors together account for approximately 67% of sales within the United States and approximately 51% worldwide. Product performance, quality, customer service, and price are all important factors in competing in the polymer product and specialty product businesses. Two new EPDM technologies are being developed and commercialized by competitors. The first technology has been commercialized and is based on a metallocene catalyst system. This technology may expand the application areas of EPDM and is also being developed by the Corporation. The second technology is a gas phase process that has not been fully commercialized by any company and cannot be fully assessed at this time. Research and Development The Corporation conducts research and development on a worldwide basis at a number of facilities, including field stations that are used for crop protection research and development activities. Research and development expenditures by the Corporation totalled $68.0 million for the year 1999, $52.8 million for the year 1998, and $53.6 million for the year 1997. Environmental Matters Chemical companies are subject to extensive environmental laws and regulations concerning, among other things, emissions to the air, discharges to land, surface, subsurface strata and water and the generation, handling, storage, transportation, treatment and disposal of waste and other materials and are also subject to other federal, state and local laws and regulations regarding health and safety matters. Environmental Regulation. The Corporation believes that its business, operations and facilities have been and are being operated in substantial compliance in all material respects with applicable environmental and health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. The ongoing operations of chemical manufacturing plants, however, entail risks in these areas and there can be no assurance that material costs or liabilities will not be incurred. In addition, future developments, such as increasingly strict requirements of environmental and health and safety laws and regulations and enforcement policies thereunder, could bring into question the handling, manufacture, use, emission or disposal of substances or pollutants at facilities owned, used or controlled by the Corporation or the manufacture, use or disposal of certain products or wastes by the Corporation and could involve potentially significant expenditures. To meet changing permitting and regulatory standards, the Corporation may be required to make significant site or operational modifications, potentially involving substantial expenditures and reduction or suspension of certain operations. The Corporation incurred $19.5 million of costs for capital projects and $39.4 million for operating and maintenance costs related to environmental compliance at its facilities during fiscal 1999. In fiscal 2000, the Corporation expects to incur approximately $34.7 million of costs for capital projects and $58.5 million for operating and maintenance costs related to environmental compliance at its facilities. During fiscal 1999, the Corporation spent $23.1 million to clean up previously utilized waste disposal sites and to remediate current and past facilities. The Corporation expects to spend approximately $42.0 million during fiscal 2000 to clean up such waste disposal sites and current and past facilities. Pesticide Regulation. The Corporation's Crop Protection business is subject to regulation under various federal, state, and foreign laws and regulations relating to the manufacture, sales and use of pesticide products. In August, 1996, Congress enacted significant changes to the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), governing U.S. sale and use of pesticide products, and the Federal Food, Drug, and Cosmetic Act ("FFDCA"), which limits pesticide residues on food with the Food Quality Protection Act of 1996 ("FQPA"). Under FIFRA, the law will facilitate registrations and reregistrations of pesticides for special (so called "minor") uses and authorize collection of maintenance fees to support pesticide reregistrations. Coordination of regulations implementing FIFRA and FFDCA will be required. Food safety provisions will establish a single standard of safety for pesticide residue on raw and processed foods; provide information through large food retail stores to consumers about the health risks of pesticide residues and how to avoid them; preempt state and local food safety laws if they are based on concentrations of pesticide residues below recently established federal residue limits (called "tolerances"); and ensure that tolerances protect the health of infants and children. FFDCA, as amended by FQPA, authorizes EPA to set a tolerance for a pesticide in or on food at a level which poses "a reasonable certainty of no harm" to consumers. The EPA is required to review all tolerances for all pesticide products within 10 years. It is not known when and to what extent the Corporation's products will be reviewed and/or restricted under this standard. In April, 1996, the Corporation announced that it had voluntarily canceled registered uses of its propargite miticide on certain crops in the United States. The action was taken to reduce dietary exposure as requested by the EPA, using the EPA's current risk assessment model. Tests to confirm that propargite does not pose a dietary risk are continuing under EPA approved protocols. Propargite will be reviewed under the new FQPA standard discussed above. The European Commission ("EC") has established procedures whereby all existing active ingredient pesticides will be reviewed. This EC regulation became effective in 1993 and will result in a review of all commercial products. The initial round of reviews covered ninety products, four of which are the Corporation's products. Other of the Corporation's products will be reviewed in subsequent years and all data from the Corporation pertaining to its products must be submitted for review by mid- 2003. The process may lead to full reregistration in member states of the EC or may lead to some restrictions, if adverse data is discovered. Employees The Corporation had approximately 8,600 employees on December 31, 1999. Geographic Information The information with respect to sales and property, plant and equipment attributable to each of the major geographic areas served by the Corporation for each of the Corporation's last three fiscal years, set forth in the Notes to Consolidated Financial Statements on page 52 of the Corporation's 1999 Annual Report to Stockholders, is incorporated herein by reference. The Corporation considers that the risks relating to operations of its foreign subsidiaries are comparable to those of other U.S. companies which operate subsidiaries in developed countries. All of the Corporation's international operations are subject to fluctuations in the relative values of the currencies in the various countries in which its activities are conducted. ITEM 2. PROPERTIES The following table sets forth information as to the principal operating properties and other significant properties of the Corporation and its subsidiaries. All properties are owned in fee except where otherwise indicated: Location Facility Products/Businesses UNITED STATES Alabama Bay Minette Plant Polymer Additives Connecticut Bethany Research Center Crop Protection Greenwich Corporate Offices* Corporate Headquarters Middlebury Corporate Offices and Crop Protection, Research Center* Polymer Additives, Polymers and Other Naugatuck Plant, Research Center Crop Protection and Polymer Additives, Pawcatuck Office, Plant, Polymer Processing Laboratory, Machine Equipment Shop and Tech Center Illinois Mapleton Plant Polymer Additives Louisiana Geismar Plant Crop Protection, Polymer Additives, Polymers and Other Taft Plant Polymer Additives Gretna Plant Other Harahan Plant Crop Protection New Jersey Edison Office and Polymer Processing Plant* Equipment Newark Plant Other Nutley Office, Laboratory Other and Plant Perth Amboy Plant Polymer Additives and Other Somerville Office, Plant and Polymer Processing Machine Shop Equipment New York Tarrytown Research Center* Polymer Additives, OrganoSilicones and Other North Carolina Gastonia Plant Crop Protection, Polymer Additives and Polymers Ohio Dublin Research Center Crop Protection and Other Pennsylvania Gibraltar Office, Laboratory Other and Plant Petrolia Plant Other Reading Plant Other Tennessee Memphis Plant Polymer Additives and Other Texas Fort Worth Plant Crop Protection Houston Plant Crop Protection, Polymer Additives and Other Marshall Plant Polymer Additives West Virginia Sistersville Plant OrganoSilicones South Charleston Administrative, OrganoSilicones Research and Sales Office* INTERNATIONAL Australia South Australia Regency Park, S.A. Office and Crop Protection Machine Shop* New South Wales Seven Hills Office and Laboratory* Polymers Bahamas Freeport Plant Polymer Additives, Polymers and Other Belgium Antwerp Plant* OrganoSilicones Brussels Office* Crop Protection, Polymer Additives, Polymers and Other Brazil Itatiba Plant OrganoSilicones Rio Claro Plant Crop Protection, Polymer Additives and Polymers Canada Ontario Elmira Plant Crop Protection, Polymer Additives, Polymers and Other Guelph Research Center Crop Protection, Polymer Additives, Polymers and Other Scarborough Plant* Other West Hill Plant Other Denmark Soro Plant** Polymer Additives France Dannemarie Office and Machine Shop Polymer Processing Equipment Germany Bergkamen Plant* Polymer Additives Erkrath Office, Plant, Polymer Processing Machine Shop Equipment and Laboratory Haan Office and Polymer Processing Machine Shop Equipment Lampertheim Plant Polymer Additives Italy Latina Plant Crop Protection, Polymer Additives, Polymers and Other Termoli Plant OrganoSilicones Korea Kyungki-do Plant Polymer Additives Mexico Altamira Plant*** Polymers Cuatitlan Plant Polymer Additives Tampico Plant Polymer Additives The Netherlands Amsterdam Plant Crop Protection Amsterdam Plant Other Haarlem Plant Other Koog aan de Zaan Plant Other Republic of China (Taiwan) Kaohsiung Plant+ Polymer Additives and Other Singapore Plant Crop Protection Singapore Administrative, Crop Protection, Research Polymer Additives, and Sales Office* Polymers, OrganoSilicones and Other Switzerland Meyrin Administrative, Crop Protection, Research Polymer Additives, and Sales Office* OrganoSilicones and Other Thailand Bangkok Plant Polymer Additives United Kingdom Accrington Plant** Polymer Additives Droitwich Plant** Polymer Additives Evesham Research Center Crop Protection Huddersfield Plant# Polymer Additives and Other Langley Office* Crop Protection, Polymer Additives, Polymers and Other Luton Office and Machine Shop Polymer Processing Equipment ____________________________ * Facility leased by the Corporation. ** Facility owned by Baxenden Chemicals Limited, which is 53.5% owned by the Corporation. *** Facility located on property owned by a subsidiary of GIRSA, the joint venture partner. Uniroyal holds a 49% interest in ParaTec S.A. de C.V. which owns certain of the facility's equipment and buildings used for the production of nitrile rubber. + Facility owned by Uniroyal Chemical Taiwan Ltd., which is 80% owned by Uniroyal. # Land leased by and facility owned by Uniroyal. All facilities are considered to be in good operating condition, well maintained, and suitable for the Corporation's requirements. ITEM 3. LEGAL PROCEEDINGS The Corporation is involved in claims, litigation, administrative proceedings and investigations of various types in a number of jurisdictions. A number of such matters involve claims for a material amount of damages and relate to or allege environmental liabilities, including clean-up costs associated with hazardous waste disposal sites, natural resource damages, property damage and personal injury. Environmental Liabilities. Each quarter, the Corporation evaluates and reviews estimates for future remediation and other costs to determine appropriate environmental reserve amounts. For each site, a determination is made of the specific measures that are believed to be required to remediate the site, the estimated total cost to carry out the remediation plan, the portion of the total remediation costs to be borne by the Corporation and the anticipated time frame over which payments toward the remediation plan will occur. The total amount accrued for such environmental liabilities at December 31, 1999, was $198 million. The Corporation estimates the potential liabilities to range from $181 million to $222 million at December 31, 1999. It is reasonably possible that the Corporation's estimates for environmental remediation liabilities may change in the future should additional sites be identified, further remediation measures be required or undertaken, the interpretation of current laws and regulations be modified or additional environmental laws and regulations be enacted. The Corporation and some of its subsidiaries have been identified by federal, state or local governmental agencies, and by other potentially responsible parties (a "PRP") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or comparable state statutes, as a PRP with respect to costs associated with waste disposal sites at various locations in the United States. Because these regulations have been construed to authorize joint and several liability, the EPA could seek to recover all costs involving a waste disposal site from any one of the PRP's for such site, including the Corporation, despite the involvement of other PRPs. In many cases, the Corporation is one of several hundred PRPs so identified. In a few instances, the Corporation is one of only a handful of PRPs. In certain instances, a number of other financially responsible PRPs are also involved, and the Corporation expects that any ultimate liability resulting from such matters will be apportioned between the Corporation and such other parties. In addition, the Corporation is involved with environmental remediation and compliance activities at some of its current and former sites in the United States and abroad. The more significant of these matters are described below. . Beacon Heights and Laurel Park - Uniroyal is a member of the Beacon Heights Coalition, a group of entities engaged in remedial work at the Beacon Heights site in the State of Connecticut pursuant to a Consent Decree entered in 1987. The actions required by this Consent Decree have been essentially completed. There is a continuing requirement for operation and maintenance at the site. Over many years, Uniroyal has entered into and performed activities pursuant to a series of Administrative Orders with respect to the Laurel Park site located in the State of Connecticut. The EPA, the State of Connecticut, and the Laurel Park Coalition (consisting of Uniroyal and a number of other parties) have entered into a Consent Decree governing the design and implementation of the selected remedy. Remedial construction began at the Laurel Park site in July 1996, and was completed in 1998. Operation and maintenance activities at the site are ongoing. Consolidated litigation brought by the Beacon Heights and Laurel Park Coalitions seeking contribution to the costs from the owner/operators of the site and later from other identified generator parties has resulted in substantial recoveries from a number of parties. Hearings on the remaining claims have been completed before a Special Master appointed by the Court. The Special Master has issued a Report and Recommendations to the Court denying recovery to the Coalitions. On September 22, 1999, the United States District Court for the District of Connecticut set aside the Report and Recommendations of the Special Master and issued an order allowing recovery against various municipalities by the Beacon Heights Coalition in the amount of approximately $3,955,000 and the Laurel Park Coalition in the amount of approximately $1,000,000. Motions to Alter and Amend and for Reconsideration and Rehearing on the ruling have been filed by various parties to the litigation. . Polybutylene Resin Manufacturing Business - The Corporation is a defendant in two similar actions arising out of the Corporation's involvement in the polybutylene resin manufacturing business in the 1970's. The following cases are currently pending in California state courts: Alameda County Water District v. Mobil Oil Corporation, et al, filed in April 1996 and Marin Municipal Water District v. Shell Oil Company, et al., filed in May 1996, both pending in Superior Court for the County of San Mateo. The actions generally allege that the Corporation and several other defendants negligently misrepresented the performance of polybutylene pipe and fittings installed in water distribution systems. Other allegations include breach of the California Unfair Practices Act, breach of warranty, fraud and strict liability. It is possible that the Corporation may be named as a defendant in future actions arising out of its past involvement in the polybutylene manufacturing business. . Vertac - Uniroyal and its Canadian subsidiary, Uniroyal Chemical Co./Cie. (formerly known as Uniroyal Chemical Ltd./Ltee) were joined with others as defendants in consolidated civil actions brought in the United States District Court, Eastern District of Arkansas, Western Division by the United States of America, the State of Arkansas and Hercules Incorporated ("Hercules") relating to a Vertac Chemical Corporation site in Jacksonville, Arkansas. Uniroyal has been dismissed from the litigation. On May 21, 1997, the Court entered an order finding that Uniroyal Chemical Co./Cie. is jointly and severally liable to the United States, and finding that Hercules and Uniroyal Chemical Co./Cie. are liable to each other in contribution. On October 23, 1998, the Court entered an order granting the United States' motion for summary judgment against Uniroyal Chemical Co,/Cie. and Hercules as to the amount of its claimed removal and remediation costs of $102.9 million at the Vertac site. Trial on the allocation of these costs as between Uniroyal Chemical Co./Cie. and Hercules was concluded on November 6, 1998, and on February 3, 2000, the Court entered an Order finding Uniroyal Chemical Co./Cie liable to the United States for approximately $2,300,000 and liable to Hercules in contribution for approximately $700,000. Uniroyal Chemical Co./Cie and Hercules have each appealed to the United States Court of Appeals for the Eighth Circuit. The Corporation intends to assert all meritorious legal defenses and all other equitable factors which are available to it with respect to the above matters. The Corporation believes that the resolution of these matters will not have a material adverse effect on its consolidated financial position. While the Corporation believes it is unlikely, the resolution of these matters could have a material adverse effect on its consolidated results of operations in any given year if a significant number of these matters are resolved unfavorably. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information concerning the range of market prices for the Corporation's Common Stock on the New York Stock Exchange and the amount of dividends per share paid thereon during the past two years, set forth in the Notes to Consolidated Financial Statements on page 52 of the Corporation's 1999 Annual Report to Stockholders, is incorporated herein by reference. The number of registered holders of Common Stock of the Corporation on December 31, 1999, was 6,815. ITEM 6. SELECTED FINANCIAL DATA The selected financial data for the Corporation for each of its last five fiscal years, set forth under the heading "Five Year Selected Financial Data" on page 54 of the Corporation's 1999 Annual Report to Stockholders, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of the Corporation's financial condition and results of operations, set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 26 through 33 of the Corporation's 1999 Annual Report to Stockholders, is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk and risk management policy is summarized under the heading "Management's Discussion and Analysis of Financial Conditions and Results of Operations" on pages 27 through 29 of the Corporation's 1999 Annual Report to Stockholders and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Corporation, notes thereto, and supplementary data, appearing on pages 34 through 54 of the Corporation's 1999 Annual Report to Stockholders, are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information called for by this item concerning directors of the Corporation is included in the definitive proxy statement for the Corporation's Annual Meeting of Stockholders to be held on April 25, 2000, which is to be filed with the Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, and such information is incorporated herein by reference. The executive officers of the Corporation are as follows: Vincent A. Calarco, age 57, has served as Chairman, President and Chief Executive Officer of the Registrant since 1999. Mr. Calarco served as President and Chief Executive Officer of Crompton & Knowles from1985 to 1999, and Chairman of the Board from 1986 to 1999. Mr. Calarco has been a member of the Board of Directors of the Registrant since 1999 and was a member of the Board of Directors of Crompton & Knowles from 1985 to 1999. Robert W. Ackley, age 58, has served as Executive Vice President, Polymer Processing Equipment of the Registrant since 1999. Mr. Ackley served as Vice President, Polymer Processing Equipment, of Crompton & Knowles from 1998 to 1999 and as President of Davis- Standard Corporation (prior to 1995, Davis-Standard Division) since 1983. Peter Barna, age 56, has served as Senior Vice President and Chief Financial Officer of the Registrant since 1999. Mr. Barna served as Senior Vice President and Chief Financial Officer of Crompton & Knowles in 1999 and as Vice President-Finance of Crompton & Knowles from 1996 to 1999. Mr. Barna was the Principal Accounting Officer of Crompton & Knowles from 1986 to 1999 and its Treasurer from 1980 to 1996. James J. Conway, age 56, has served as Executive Vice President, Performance Chemicals and Elastomers, of the Registrant since 1999. Mr. Conway served as Vice President, Colors, of Crompton & Knowles from 1998 to 1999 and President of Crompton & Knowles Colors Incorporated since 1997. Mr. Conway was Senior Vice President and General Manager of International Specialty Products, Inc. from 1992 to 1997. Brian J. Dick, age 43, has served as Vice President, Finance of the Registrant since 1999. Mr. Dick served as Vice President, Finance and Controller of Witco in 1999 and as Vice President and Controller from 1997 to 1999. Mr. Dick served as Assistant Controller from 1995 to 1997. Joseph B. Eisenberg, Ph.D., age 57, has served as Executive Vice President, Polymer Additives, of the Registrant since 1999. Mr. Eisenberg served as Vice President, Rubber Chemicals, EPDM and Nitrile Rubber, of Crompton & Knowles from 1998 to 1999 and as Executive Vice President, Chemicals & Polymers, of Uniroyal since 1994. John T. Ferguson II, age 53, has served as Senior Vice President, General Counsel and Secretary of the Registrant since 1999. Mr. Ferguson served as Vice President of Crompton & Knowles from 1996 to 1999, and General Counsel and Secretary of Crompton & Knowles from 1989 to 1999. Mr. Ferguson served as a member of the Board of Directors of the Registrant in 1999. Gerald H. Fickenscher, age 56, has served as Regional Vice President, Europe, Africa & Middle East of the Registrant since 1999. Mr. Fickenscher served as President, Dyes & Chemicals International Operations, of Crompton & Knowles from 1994 to 1999. Mary L. Gum, PhD., age 52, has served as Executive Vice President, OSi, of the Registrant since 1999. Ms. Gum served as Vice President of Silanes, OSi, from 1997 to 1999 and as Vice President of Specialty Fluids, OSi, from 1995 to 1997. Marvin H. Happel, age 60, has served as Senior Vice President, Organization & Administration of the Registrant since 1999. Mr. Happel served as Vice President-Organization and Administration of Crompton & Knowles from 1996 to 1999 and Vice President- Organization from 1986 to 1996. Alfred F. Ingulli, age 58, has served as Executive Vice President, Crop Protection, of the Registrant from 1999. Mr. Ingulli served as Vice President, Crop Protection, of Crompton & Knowles from 1998 to 1999 and as Executive Vice President, Crop Protection of Uniroyal since 1994. John R. Jepsen, age 44, has served as Vice President and Treasurer of the Registrant since 1999. Mr. Jepsen served as Treasurer of Crompton & Knowles from 1998 to 1999. Mr. Jepsen served with the International Paper Company as Assistant Treasurer, International from 1996 to 1998 and, prior to that, as Director of Corporate Finance from 1986 to 1996. Charles J. Marsden, age 59, has served as Senior Vice President, Strategy & Development of the Registrant since 1999. Mr. Marsden served as Senior Vice President, Strategy & Development of Crompton & Knowles in 1999; Senior Vice President and Chief Financial Officer from 1996 to 1999; and Vice President-Finance and Chief Financial Officer from 1985 to 1996. Mr. Marsden served as a member of the Board of Directors of the Registrant in 1999 and as a Director of Crompton & Knowles from 1985 to 1999. Walter K. Ruck, age 57, has served as Senior Vice President, Operations, of the Registrant since 1999. Mr. Ruck has served as Vice President, Operations, of Uniroyal since 1998; and served as Vice President, Manufacturing, of Uniroyal from 1997 to 1998. He served as Regional Vice President, Americas of Uniroyal from 1995 to 1997 and Regional Vice President of Uniroyal from 1994 to 1995. William A. Stephenson, age 52, has served as Executive Vice President, Urethanes and Petroleum Additives, of the Registrant since 1999. Mr. Stephenson served as Vice President, Specialty Additives and Urethanes, of Crompton & Knowles from 1998 to 1999 and has served as Executive Vice President, Specialties of Uniroyal since 1994. Michael F. Vagnini, age 43, has served as Corporate Controller of the Registrant since 1999 and as Corporate Controller of Crompton & Knowles from 1998 to 1999. Mr. Vagnini has served as Corporate Controller of Uniroyal since 1995. The term of office of each of the above-named executive officers is until the first meeting of the Board of Directors following the next annual meeting of stockholders and until the election and qualification of his or her successor. There is no family relationship between any of such officers, and there is no arrangement or understanding between any of them and any other person pursuant to which any such officer was selected as an officer. ITEM 11. EXECUTIVE COMPENSATION Information called for by this item is included in the definitive proxy statement for the Corporation's Annual Meeting of Stockholders to be held on April 25, 2000, which is to be filed with the Commission pursuant to Regulation 14A, and such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information called for by this item is included in the definitive proxy statement for the Corporation's Annual Meeting of Stockholders to be held on April 25, 2000, which is to be filed with the Commission pursuant to Regulation 14A, and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information called for by this item is included in the definitive proxy statement for the Corporation's Annual Meeting of Stockholders to be held on April 25, 2000, which is to be filed with the Commission pursuant to Regulation 14A, and such information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. Financial statements and Independent Auditors' Report, as required by Item 8 of this form, which appear on pages 34 through 53 of the Corporation's 1999 Annual Report to Stockholders and are incorporated herein by reference: (i) Consolidated Statements of Operations for the fiscal years ended 1999, 1998, and 1997; (ii) Consolidated Balance Sheets for the fiscal years ended 1999 and 1998; (iii) Consolidated Statements of Cash Flows for the fiscal years ended 1999, 1998, and 1997; (iv) Consolidated Statements of Stockholders' Equity [Deficit] for the fiscal years ended 1999, 1998 and 1997; (v) Notes to Consolidated Financial Statements; and (vi) Independent Auditors' Report of KPMG LLP. 2. Independent Auditors' Report and Consent, and Financial Statement Schedule II, Valuation and Qualifying Accounts, required by Regulation S-X. Pages S-1 and S-2 hereof. 3. The following exhibits are either filed herewith or incorporated herein by reference to the respective reports and registration statements identified in the parenthetical clause following the description of the exhibit: Exhibit No. Description 2.0 Agreement and Plan of Reorganization dated as of May 31, 1999, by and among Crompton & Knowles Corporation, Park Merger Co. and Witco Corporation (incorporated by reference to Appendix A to the Joint Proxy Statement- Prospectus dated July 28, 1999, as part of the Registrant's Registration Statement on Form S-4, Registration No. 333-83901, dated July 28, 1999 ("Joint Proxy Statement-Prospectus S-4 Registration Statement")). 2.1 Amendment No. 1 to Agreement and Plan of Reorganization dated as of July 27, 1999, by and among Crompton & Knowles Corporation, CK Witco Corporation (formerly known as Park Merger Co.) and Witco Corporation (incorporated by reference to Appendix A-1 to the Joint Proxy Statement-Prospectus S-4 Registration Statement). 2.2 Agreement and Plan of Merger dated April 30, 1996, by and among Crompton & Knowles, Tiger Merger Corp. and Uniroyal Chemical Corporation ("UCC") (incorporated by reference to Exhibit 2 to the Crompton & Knowles Form 10-Q for the period ended March 31, 1996). 2.3 Acquisition Agreement dated November 29, 1999, by and among Yorkshire Group PLC, Yorkshire Americas, Inc., as Purchasers and CK Witco Corporation, Crompton & Knowles Europe S.P.R.L., Uniroyal Chemical European Holdings B.V. and Crompton & Knowles Colors Incorporated, as Sellers (filed herewith*). 2.4 Limited Liability Company Agreement by and between Gustafson, Inc. and Trace Chemicals, Inc., effective as of September 23, 1998, (incorporated by reference to Exhibit 2.1 to the Crompton & Knowles Form 8-K/A dated January 21, 1999 ("Form 8-K/A")). 2.5 First Amendment to Limited Liability Company Agreement by and among GT Seed Treatment Inc. (f/k/a Gustafson, Inc.), Ecart Inc. (f/k/a Trace Chemicals, Inc.) and BayerCorporation, dated as of November 20, 1998, (incorporated by reference to Exhibit 2.2 to Form 8-K/A). 2.6 Purchase Agreement by and among the Crompton & Knowles, Uniroyal, Trace Chemicals, Inc. and Gustafson, Inc. as Sellers, and Bayer Corporation, as Purchaser, and Gustafson LLC, as the Company, dated as of November 20, 1998, (incorporated by reference to Exhibit 2.3 to Form 8-K/A). 2.7 Purchase Agreement by and between Uniroyal Chemical Co./Cie and Bayer Inc., effective as of November 20, 1998, (incorporated by reference to Exhibit 2.4 to Form 8-K/A). 2.8 Partnership Agreement of Gustafson Partnership by and between Uniroyal Chemical Co./Cie and Bayer Inc., effective as of November 20, 1998, (incorporated by reference to Exhibit 2.5 to Form 8-K/A). 2.9 Joint Venture Agreement and Shareholders Agreement dated September 18, 1998, by and between Uniroyal and GIRSA S.A. de C.V. (incorporated by reference to Exhibit 2.6 to the Crompton & Knowles Form 10-K for the fiscal year ended December 26, 1998 ("1998 Form 10-K")). 2.10 Stock Purchase Agreement dated as of December 8, 1998, by and among Crompton & Knowles and Ingredient Technology Corporation, as Sellers, and Chr. Hansen Inc., as Purchaser (incorporated by reference to Exhibit 2.7 to the 1998 Form 10-K). 3(i) Restated Certificate of Incorporation of the Registrant (incorporated by reference to Appendix H to the Joint Proxy Statement-Prospectus S-4 Registration Statement). 3(ii) By-laws of the Registrant (incorporated by reference to Exhibit 3.02 to the Joint Proxy Statement-Prospectus S-4 Registration Statement). 4.1 Rights Agreement dated as of September 2, 1999, by and between the Registrant and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (incorporated by reference to Form 8-A dated September 28, 1999). 4.2 Form of Indenture, dated as of February 8, 1993, among Uniroyal and State Street Bank and Trust Company, as Trustee, relating to the 10 1/2% Notes, including form of securities (incorporated by reference to Exhibit 4.1 to the Registration Statement on UCC Form S-1, Registration No. 33-45296 and 33-45295 ("UCC Form S-1, Registration No. 33-45296/45295")). 4.3 Form of First Supplemental Indenture, dated as of December 9, 1998, among UCC, as Issuer, Uniroyal, as successor to the Issuer, and State Street Bank and Trust Company, as Trustee, relating to the 10 1/2% Senior Notes due 2002 (incorporated by reference to Exhibit 4.4 to Form 10-K for the fiscal year ended December 26, 1998). 4.4 Form of Indenture, dated as of September 1, 1993, among Uniroyal and State Street Bank and Trust Company, as Trustee, relating to $270 million of 9% Notes, including the form of securities (incorporated by reference to Exhibit 4.2 to UCC Form S-1, Registration No. 33-66740). 4.5 Form of $600 Million 364-Day Credit Agreement dated as of October 28, 1999, by and among the Registrant, certain subsidiaries of the Registrant, various banks, The Chase Manhattan Bank, as Syndication Agent, Citibank, N.A., as Administrative Agent and Bank of America, N.A. and Deutsche Bank Securities Inc., as Co-Documentation Agents (incorporated by reference to Exhibit 4.1 to the 10-Q for the quarter ended September 30, 1999 ("September 30, 1999 10-Q")). 4.6 Form of $400 Million Five-Year Credit Agreement dated as of October 28, 1999, by and among the Registrant, certain subsidiaries of the Registrant, various banks, The Chase Manhattan Bank, as Syndication Agent, Citibank, N.A., as Administrative Agent and Bank of America, N.A. and Deutsche Bank Securities Inc., as Co-Documentation Agents (incorporated by reference to Exhibit 4.2 to the September 30, 1999 10-Q). 4.7 Form of $600 Million Third Amended and Restated Credit Agreement dated as of March 31, 1998, by and among Crompton & Knowles and certain of its subsidiaries, as Borrowers, and various lenders, Citicorp USA, Inc., as Agent and The Chase Manhattan Bank, Corestates Bank, N.A. and First Union National Bank, as Managing Agents (incorporated by reference to Exhibit 4 to the Crompton & Knowles Form 10-Q for the quarter ended June 27, 1998). 4.8 Form of $50 Million Credit Agreement dated as of December 23, 1999, by and among the Registrant, various banks and Merrill Lynch Capital Corporation, as Administrative Agent (filed herewith*). 4.9 Offering Memorandum, dated March 2, 2000, relating to $25 Million Floating Rate Notes due 2001(filed herewith*). 4.10 Form of Indenture, dated as of March 1, 2000, by and between the Registrant and Citibank, N.A., relating to $25 Million Floating Rate Notes due 2001, including as Annex A thereto, Form of Floating Rate Note Pledge Agreement by and among the Registrant, certain foreign subsidiaries of the Registrant, and Citibank, N.A., as Collateral Agent (filed herewith*). 4.11 Form of Purchase Agreement, dated as of March 2, 2000, by and between the Registrant, as Seller, and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as Purchaser, relating to $25 Million Floating Rate Notes due 2001 (filed herewith*). 4.12 Offering Memorandum, dated March 2, 2000, relating to $600 Million of 8 1/2% Senior Notes due 2005 (filed herewith*). 4.13 Form of Indenture, dated as of March 1, 2000, by and between the Registrant and Citibank, N.A., relating to $600 Million of 8 1/2% Senior Notes due 2005, including as Annex A thereto, Form of Senior Note Pledge Agreement by and among the Registrant, certain foreign subsidiaries of the Registrant, and Citibank, N.A., as Collateral Agent (filed herewith*). 4.14 Form of Purchase Agreement, dated as of March 2, 2000, by and among the Registrant, as Seller, and Merrill Lynch, ABN AMRO Incorporated, Banc of America Securities LLC, Chase Securities Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co. and Salomon Smith Barney Inc. (together, the "Initial Purchasers"), relating $600 Million of 8 1/2% Senior Notes due 2005 (filed herewith*). 4.15 Form of Indenture, dated as of February 1, 1993, by and between Witco and the Chase Manhattan Bank, N.A., as Trustee, relating to Witco's 6.60% Notes due 2003, 7.75% Debentures due 2023, 6 1/8% Notes due 2006 and 6 7/8% Debentures due 2026, including form of securities (incorporated by reference to Post-Effective Amendment No. 2 to the Registration Statement on Form S-3, Registration No. 33-58066, filed March 19, 1993). 4.16 Form of First Supplemental Indenture, dated February 1, 1996, by and among Witco, Chase Manhattan Bank, N.A., the Initial Trustee, and Fleet National Bank of Connecticut, the Note Trustee, relating to Witco's 6 1/8% Notes due 2006 and 6 7/8% Notes due 2026 (incorporated by reference to Registration Statement on Form S-3, Registration Number 33-65203, filed January 25, 1996). 4.17 Form of Registration Rights Agreement, dated as of March 7, 2000, by and among the Registrant and the Initial Purchasers, relating to $600 Million of 8 1/2% Senior Notes due 2005 (filed herewith*). 4.18 Form of Second Supplemental Indenture, dated as of December 6, 1999, among UCC, as Issuer, Uniroyal, as successor to the Issuer, and State Street Bank & Trust Company, as Trustee, relating to the 10 1/2% Senior Notes due 2002 (filed herewith*). 4.19 Form of First Supplemental Indenture, dated as of December 6, 1999, by and between Uniroyal, as Issuer, and State Street Bank & Trust Company, as Trustee, relating to the 9% Senior Notes due 2000 (filed herewith*). 10.1 + Summary of the Management Incentive Bonus Plan for selected key management personnel (incorporated by reference to Exhibit 10(m) to the Crompton & Knowles Form 10-K for the fiscal year ended December 27, 1980). 10.2+ Supplemental Medical Reimbursement Plan (incorporated by reference to Exhibit 10(n) to the Crompton & Knowles Form 10-K for the fiscal year ended December 27, 1980). 10.3+ Supplemental Dental Reimbursement Plan (incorporated by reference to Exhibit 10(o) to the Crompton & Knowles Form 10-K for the fiscal year ended December 27, 1980). 10.4+ Employment Agreement dated February 22, 1988, between Crompton & Knowles and Vincent A. Calarco (incorporated by reference to Exhibit 10(j) to the Crompton & Knowles Form 10-K for the fiscal year ended December 26, 1987). 10.5+ Form of Employment Agreement entered into in 1988, 1989, 1992, 1994, 1996 and 1998 between Crompton & Knowles or one of its subsidiaries and ten of the executive officers of Crompton & Knowles (incorporated by reference to Exhibit 10(k) to the Crompton & Knowles Form 10-K for the fiscal year ended December 26, 1987). 10.6+ Form of Employment Agreement dated as of August 21, 1996, between a subsidiary of the Registrant and three executive officers of the Registrant (incorporated by reference to Exhibit 10.28 to the UCC/Uniroyal Form 10-K for the fiscal year ended September 28, 1996). 10.7+ Amended Supplemental Retirement Agreement dated October 18, 1995, between Crompton & Knowles and Vincent A. Calarco (incorporated by reference to Exhibit 10(i) to the Crompton & Knowles Form 10-K for the fiscal year ended December 30, 1995). 10.8+ Form of Amended Supplemental Retirement Agreement dated October 18, 1995, between Crompton & Knowles and three of its executive officers (incorporated by reference to Exhibit 10(j) to the Crompton & Knowles Form 10-K for the fiscal year ended December 30, 1995). 10.9+ Form of Supplemental Retirement Agreement dated October 18, 1995, between Crompton & Knowles and five of its executive officers (incorporated by reference to Exhibit 10(k) to the Crompton & Knowles Form 10-K for the fiscal year ended December 30, 1995). 10.10+ Form of Supplemental Retirement Agreement dated as of August 21, 1996, between a subsidiary of the Registrant and two executive officers of the Registrant (incorporated by reference to Exhibit 10.29 to the UCC/Uniroyal Form 10-K for the fiscal year ended September 28, 1996). 10.11+ Form of Supplemental Retirement Agreement dated as of August 21, 1996, between a subsidiary of the Registrant and two executive officers of the Registrant (incorporated by reference to Exhibit 10.30 to the UCC/Uniroyal Form 10-K for the fiscal year ended September 28, 1996). 10.12+ Supplemental Retirement Agreement Trust Agreement dated October 20, 1993, between Crompton & Knowles and Shawmut Bank, N.A. (incorporated by reference to Exhibit 10(l) to the Crompton & Knowles Form 10-K for the fiscal year ended December 25, 1993). 10.13+ Amended Benefit Equalization Plan dated October 20, 1993 (incorporated by reference to Exhibit 10(m) to the Crompton & Knowles Form 10-K for the fiscal year ended December 25, 1993). 10.14+ Amended Benefit Equalization Plan Trust Agreement dated October 20, 1993, between Crompton & Knowles and Shawmut Bank, N.A. (incorporated by reference to Exhibit 10(n) to the Crompton & Knowles Form 10-K for the fiscal year ended December 25, 1993). 10.15+ Amended 1988 Long Term Incentive Plan (incorporated by reference to Exhibit 10(o) to the Crompton & Knowles Form 10-K for the fiscal year ended December 25, 1993). 10.151+ Amendment No. 4 to 1988 Long Term Incentive Plan (incorporated by reference to Exhibit 10.171 to the Crompton & Knowles Form 10-K for the fiscal year ended December 28, 1996). 10.16 Trust Agreement dated as of May 15, 1989, between Crompton & Knowles and Shawmut Worcester County Bank, N.A. and First Amendment thereto dated as of February 8, 1990 (incorporated by reference to Exhibit 10(w) to the Crompton & Knowles Form 10-K for the fiscal year ended December 30, 1989). 10.17+ Form of 1992 - 1994 Long Term Performance Award Agreement (incorporated by reference to Exhibit 10(y) to the Crompton & Knowles Form 10-K for the fiscal year ended December 28, 1991). 10.18+ Restricted Stock Plan for Directors of Crompton & Knowles approved by the stockholders on April 9, 1991 (incorporated by reference to Exhibit 10(z) to the Crompton & Knowles Form 10-K for the fiscal year ended December 28, 1991). 10.19+ Amended 1993 Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.21 to the Crompton & Knowles Form 10-K for the fiscal year ended December 26, 1998). 10.20+ UCC Purchase Right Plan, as amended and restated as of March 16, 1995 (incorporated by reference to Exhibit 10.1 to the UCC Form 10-Q for the period ended April 2, 1995 ("UCC April 1995 Form 10-Q")). 10.21+ UCC 1993 Stock Option Plan (incorporated by reference to Exhibit 28.1 to UCC's Registration Statement No. 33-62030 on Form S-8, filed on May 4, 1993). 10.22+ Form of Amendment No. 2 to the UCC 1993 Stock Option Plan (incorporated by reference to Exhibit 10.2 to the UCC April 1995 Form 10-Q). 10.23+ Form of Executive Stock Option Agreement, dated as of November 15, 1993 (incorporated by reference to Exhibit 10.22 to the UCC 1994 Form 10-K). 10.24+ Form of Amended and Restated 1996 - 1998 Long Term Performance Award Agreement entered into in 1996 between Crompton & Knowles or one of its subsidiaries and thirteen of the executive officers of Crompton & Knowles (incorporated by reference to Exhibit 10.27 to the Crompton & Knowles Form 10-K for the fiscal year ended December 27, 1997). 10.25 Second Amended and Restated Lease Agreement between the Middlebury Partnership, as Lessor, and Uniroyal, as Lessee, dated as of August 28, 1997 (incorporated by reference to Exhibit 10 to the UCC/Uniroyal 10-Q for the quarter ended September 27, 1997) . 10.261 Form of Receivables Sale Agreement, dated as of December 11, 1998, by and among Crompton & Knowles, as Initial Collection Agent, Crompton & Knowles Receivables Corporation, ABN AMRO Bank N.V., as the Agent, the Enhancer, and the Liquidity Provider, and Windmill Funding Corporation (incorporated by reference to Exhibit 10.291 to the Crompton & Knowles Form 10-K for the fiscal year ended December 26, 1998). 10.262 Form of Receivables Purchase Agreement, dated as of December 11, 1998, by and among Crompton & Knowles, as Initial Collection Agent, and certain of its subsidiaries, as Sellers, and Crompton & Knowles Receivables Corporation, as Buyer (incorporated by reference to Exhibit 10.292 to the Crompton & Knowles Form 10-K for the fiscal year ended December 26, 1998). 10.263 Form of Receivables Purchase Agreement, dated as of June 10, 1999, by and among Witco Funding Corporation, as Seller, CIESCO L.P., as Investor, Citibank, N.A., as the Initial Bank, Citicorp North America, Inc., as Agent, and Witco, as Collection Agent and Originator (filed herewith*). 10.264 Purchase and Contribution Agreement, dated as of June 10, 1999, by and between Witco, as Seller, and Witco Funding Corporation, as Purchaser (filed herewith*). 10.27+ Crompton & Knowles Corporation (n/k/a CK Witco Corporation) 1998 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Crompton & Knowles Form 10-Q for the quarter ended June 26, 1999) 10.28+ Amendment to the Crompton & Knowles (n/k/a CK Witco Corporation) 1998 Long Term Incentive Plan (incorporated by reference to page 12 of the Joint Proxy-Statement Prospectus S-4 Registration Statement). 10.29+ Amended and Restated Employment Agreement by and between Crompton & Knowles and Vincent A. Calarco dated May 31, 1999 (incorporated by reference to Exhibit 10.1 to the Crompton & Knowles Form 10-Q for the quarter ended June 26, 1999). 10.30+ Supplemental Retirement Agreement dated March 22, 1999, by and between Crompton & Knowles and Vincent A. Calarco (incorporated by reference to Exhibit 10.1 to the Crompton & Knowles Form 10-Q for the quarter ended March 27, 1999). 10.31+ Form of Supplemental Retirement Agreement dated as of March 22, 1999, by and between Crompton & Knowles and six of its executive officers (incorporated by reference to Exhibit 10.2 to the Crompton & Knowles Form 10-Q for the quarter ended March 27, 1999). 10.32+ Form of Merger Synergy Restrict Stock Agreement, dated as of October 19, 1999, by and between the Registrant and various of its executive officers (filed herewith*). 10.33+ Form of 1999-2001 Long Term Performance Award Agreement, dated as of February 1, 1999, by and between the Registrant and various of its executive officers (filed herewith*). 10.34+ Form of 2000-2002 Long Term Performance Award Agreement, dated as of February 24, 2000, by and between the Registrant and various of its executive officers (filed herewith*). 10.35+ Form of Supplemental Retirement Agreement, dated as of October 21, 1999, by and between the Registrant and various of its executive officers (filed herewith*). 13 1999 Annual Report to Stockholders of the Registrant. (Not to be deemed filed with the Securities and Exchange Commission except those portions expressly incorporated by reference into this report on Form 10-K.) (filed herewith*). 21 Subsidiaries of the Registrant (filed herewith*). 23 Consent of independent auditors. (See Item 14(a)2 herein.) (filed herewith*). 24 Power of attorney from directors and executive officers of the Registrant authorizing signature of this report. (Original on file at principal executive offices of Registrant.) (filed herewith*). 27 Financial data schedule for the fiscal year ended December 31, 1999 (filed herewith*). * Copies of these Exhibits are annexed to this report on Form 10-K provided to the Securities and Exchange Commission and the New York Stock Exchange. + This Exhibit is a compensatory plan, contract or arrangement in which one or more directors or executive officers of the Registrant participate. (b) Reports on Form 8-K filed in fourth quarter 1999 During the fiscal fourth quarter of 1999, the Registrant filed a Current Report on Form 8-K dated October 18, 1999, reporting on Item 5, Other Events and Item 7, Financial Statements and Exhibits. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CK WITCO CORPORATION (Registrant) Date: March 29, 2000 By: /s/Peter Barna Peter Barna Senior Vice President & Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Name Title Vincent A. Calarco* Chairman of the Board, President, and Director (Principal Executive Officer) Peter Barna* Senior Vice President (Chief Financial Officer) Brian J. Dick* Vice President - Finance (Principal Accounting Officer) James A. Bitonti* Director Simeon Brinberg* Director Robert A. Fox* Director Roger L. Headrick* Director Leo I. Higdon, Jr.* Director Harry G. Hohn* Director Nicholas Pappas* Director C. A. Piccolo* Director Bruce F. Wesson* Director Patricia K. Woolf* Director Date: March 29, 2000 *By:/s/Peter Barna Peter Barna as attorney-in-fact Independent Auditors' Report and Consent The Board of Directors and Stockholders CK Witco Corporation: Under date of January 31, 2000, except for the private placement information described in the note captioned "Credit Facilities" as to which the date is March 7, 2000, we reported on the consolidated balance sheets of CK Witco Corporation and subsidiaries (the Company) as of December 31, 1999 and December 26, 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended December 31,1999, which are incorporated by reference in this Form 10 K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule included in this Form 10 K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audit. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to the incorporation by reference in the registration statements (Nos. 33-21246, 33-42280, 33-67600, 333-62429 and 333- 87035) on Form S-8 of CK Witco Corporation of our report, dated January 31, 2000, except for the private placement information described in the note captioned "Credit Facilities" as to which the date is March 7, 2000, relating to the consolidated balance sheets of CK Witco Corporation and subsidiaries as of December 31, 1999 and December 26, 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 1999, which report is incorporated by reference in the December 31, 1999 Annual Report on Form 10-K of CK Witco Corporation. Stamford, Connecticut March 29, 2000 S-1 Schedule II CK WITCO CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts (In thousands of dollars) Additions Balance at charged to Balance beginning costs and Adjustments at end of year expenses Recurring Other of year Fiscal Year ended December 31, 1999: Allowance for doubtful accounts $ 9,768 $ 3,937 $ (5,206)(1) $ 14,857(5) $ 23,356 Accumulated amortization of cost in excess of acquired net assets 44,647 12,382 (939)(2) (6,687)(4) 49,403 Accumulated amortization of other intangible assets 120,860 15,078 (232)(2) (167)(4) 135,539 Fiscal Year ended December 26, 1998: Allowance for doubtful accounts $ 8,708 $ 5,209 $ (3,742)(1) $ (407)(3) $ 9,768 Accumulated amortization of cost in excess of acquired net assets 42,243 7,222 (572)(2) (4,046)(3) 44,647 Accumulated amortization of other intangible assets 123,262 14,122 743 (2) (17,267)(3) 120,860 Fiscal Year ended December 27, 1997: Allowance for doubtful accounts $ 7,299 $ 2,230 $ (821)(1) $ 0 $ 8,708 Accumulated amortization of cost in excess of acquired net assets 36,616 5,751 (67)(2) (57)(4) 42,243 Accumulated amortization of other intangible assets 108,163 15,413 (314)(2) 0 123,262 (1) Represents accounts written off as uncollectible (net of recoveries), and the translation effect of accounts denominated in foreign currencies. (2) Represents the translation effect of intangible assets denominated in foreign currencies. (3) Represents primarily disposition of the Gustafson seed treatment business. (4) Represents intangible asset retirements. (5) Represents primarily the acquisition of Witco Corporation. S - 2 EX-2.3 2 ACQUISITION AGREEMENT by and among YORKSHIRE GROUP PLC YORKSHIRE AMERICAS, INC. CK WITCO CORPORATION CROMPTON & KNOWLES EUROPE S.P.R.L. UNIROYAL CHEMICAL EUROPEAN HOLDINGS B.V. and CROMPTON & KNOWLES COLORS INCORPORATED November 29, 1999 Addleshaw Booth & Co Sovereign House Leeds LS1 1HQ Kilpatrick Stockton LLP 1100 Peachtree Street Atlanta, Georgia 30309 ACQUISITION AGREEMENT Table Of Contents* 1. THE ACQUISITION 2 1.1 Purchase and Sale 2 1.2 Excluded Assets 6 1.3 Purchase Price 9 1.4 Adjustments to Purchase Price 9 1.5 Assumption of Certain Liabilities 11 1.6 Obligations Not Assumed; Payment Obligations 11 1.7 Sales Taxes and Stamp Duties 12 1.8 Proration; Customer Rebates 13 1.9 Allocation 13 1.10 Closing 13 1.11 Transactions and Documents at Closing 14 2. ADDITIONAL COVENANTS 16 2.1 Access and Inspection 16 2.2 Cooperation 16 2.3 Expenses 16 2.4 Brokers 17 2.5 Publicity 17 2.6 Certain Governmental Filings 17 2.7 Confidentiality 17 2.8 Covenant Not to Compete 18 2.9 No Solicitation of Third Party Interest 20 2.10 Business Employees and Employee Benefit Matters21 2.11 Compliance with ERISA, Etc. 26 2.12 Admission of Ordinary Shares 27 2.13 Extraordinary General Meeting 28 2.14 Cooperation by Management of CK Witco 28 2.15 Certain Transactions 28 2.16 Certain Relocation Matters and Costs 28 2.17 Limited Use of CK Witco Name 28 2.18 Distributable Profits and Voting with Respect to Europe 29 2.19 Mail Received after Closing 29 2.20 Notices to Customers; Collection of Receivables29 2.21 Payments for CK Witco European Liabilities 29 2.22 Certain IP Registration Costs 30 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK WITCO, COLORS, HOLDINGS AND EUROPE 30 3.1 Existence 31 3.2 Subsidiaries 32 3.3 Authority; Inconsistent Obligations 32 3.4 No Violation; Compliance with Laws 33 3.5 Consents 34 3.6 Possession of Licenses, Etc. 34 3.7 Sufficiency of Assets 34 3.8 Grants and Allowances 35 3.9 Year 2000 Compliance 35 3.10 Financial Statements 35 3.11 Euro-Affected Products and Services 36 3.12 Liabilities 36 3.13 Title to Properties 36 3.14 Receivables 36 3.15 Inventories 36 3.16 Movable Property 37 3.17 Immovable Property 37 3.18 Environmental Matters 38 3.19 Intellectual Property Rights 39 3.20 Contracts 40 3.21 Insurance 41 3.22 Litigation; Contingencies 41 3.23 Taxes 42 3.24 Employment and Labor Matters 42 3.25 Compliance with ERISA, etc. 43 3.26 Other Benefits Plans 46 3.27 Absence of Certain Business Practices 47 3.28 Books and Records 48 3.29 Agreements and Transactions with Related Parties 48 3.30 No Agreement in Anticipation of Sale 48 3.31 Government Reports 49 3.32 Banking Relationships 49 3.33 Customers and Suppliers 49 3.34 Absence of Changes 49 3.35 Insolvency 50 3.36 Information Warranty 51 3.37 Indebtedness as of 15 October 1999 52 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK WITCO RELATING TO THE CONSIDERATION SECURITIES 52 4.1 Investment Intentions 52 4.2 Standstill; Sale of Consideration Securities 52 4.3 Listing Particulars 53 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF YORKSHIRE, AMERICAS 53 5.1 Organization 53 5.2 Authorization; No Inconsistent Agreements 53 5.3 Dividends in relation to Consideration Securities 54 5.4 Financing 54 5.5 No Violation; Compliance with Laws 54 5.6 Consents 54 5.7 Financial Statements 54 5.8 Litigation; Contingencies 54 6. CONDUCT OF BUSINESS PENDING CLOSING 55 6.1 Business in the Ordinary Course 55 6.2 No Material Changes 57 6.3 Compensation 57 6.4 Employee Benefit Plans 57 7. CONDITIONS TO OBLIGATIONS OF YORKSHIRE AND THE YORKSHIRE ENTITIES 57 7.1 Representations and Warranties 57 7.2 Compliance with Covenants and Conditions 58 7.3 Closing Certificates 58 7.4 Consents 58 7.5 Passage of Resolutions 58 7.6 Admission to Official List 58 7.7 No Inconsistent Requirements 58 7.8 No Injunction 58 7.9 Additional Agreements and Closing Documents 59 7.10 Related Party Matters 59 7.11 Adverse Conditions 59 8. CONDITIONS TO OBLIGATIONS OF THE CK WITCO ENTITIES 59 8.1 Representations and Warranties 59 8.2 Compliance with Covenants and Conditions 59 8.3 Closing Certificates 59 8.4 Consents 60 8.5 Passage of Resolutions 60 8.6 No Inconsistent Requirements 60 8.7 No Injunction 60 8.8 Admission to Official List 60 8.9 Additional Agreements and Closing Documents 60 8.10 Adverse Conditions 60 9. INDEMNITIES 60 9.1 General Indemnification of the Yorkshire Entities 60 9.2 Payment 61 9.3 Defense of Claims 62 9.4 Indemnification of the CK Witco Entities by Yorkshire and Americas 63 9.5 Environmental Indemnity 64 9.6 Taxation Schedule Indemnity 76 9.7 No Contribution by Europe or any Acquired Entity76 9.8 Minimum Losses 77 9.9 Maximum Indemnification 77 9.10 Subrogation 78 9.11 Adjustments to Indemnification 78 9.12 Smith Road Indemnity 78 9.13 BCC Indemnity 79 9.14 Dusseldorf Indemnity 79 9.15 Exclusive Remedy 79 9.16 Duty to Mitigate 79 9.17 After-Tax Payments 79 9.18 Pensions Indemnity 81 10. SURVIVAL 81 10.1 Survival 81 11. TERMINATION 82 11.1 Termination for Certain Causes. 82 11.2 Procedure on and Effect of Termination 83 12. MISCELLANEOUS 83 12.1 Notices 83 12.2 Counterparts 85 12.3 Entire Agreement 85 12.4 Governing Law, Dispute Resolution 85 12.5 Successors and Assigns 85 12.6 Partial Invalidity and Severability 85 12.7 Waiver 86 12.8 Headings 86 12.9 Number and Gender 86 12.10 Construction 86 12.11 Time of Performance 86 13. CERTAIN DEFINITIONS; INDEX OF DEFINITIONS 86 13.1 Certain Definitions 86 13.2 Index to Definitions 91 *This Table of Contents does not constitute a part of this Agreement. SCHEDULE OF EXHIBITS* Exhibit Reference Exhibit Name Exhibit A-1 Lowell Land Exhibit A-2 Charlotte Land Exhibit A-3 Greenville Land Exhibit A-4 Dalton Land Exhibit B Leased Real Property Exhibit C BCC Tangible Personal Property Exhibit D Registered Trademarks and Service Marks Exhibit D-1 Excluded Registered Marks Exhibit E Gibraltar Facility Assets Exhibit F Americas IPD Business Registered Marks Exhibit G Excluded Americas IPD Business Information Exhibit H Other Excluded Americas IPD Business Intellectual Property Rights Exhibit I Assets Used Exclusively in Monitoring of Groundwater Exhibit J Other Excluded Assets and Properties Exhibit K Balance Sheet Principles Exhibit L Assumed Liabilities Exhibit M European Retained Liabilities Exhibit N Closing Documents Exhibits O-1 and O-2 CK Witco Supply Contracts Exhibits P-1 and P-2 Yorkshire Supply Contracts Exhibit Q Transition Services Agreement Exhibit R Charlotte Lease Agreement Exhibit S Gibraltar Lease Agreement Exhibit T Trademark License Agreement (CK Witco to Yorkshire) Exhibit U Trademark License Agreement (Yorkshire to CK Witco) Exhibit V Non-European Patent and Technology License Agreement (CK Witco to Yorkshire) Exhibit W European Patent and Technology License Agreement (CK Witco to Yorkshire) Exhibit X Non-European Patent and Technology License Agreement (Yorkshire to CK Witco) Exhibit Y European Patent and Technology License Agreement (Yorkshire to CK Witco) Exhibit Z Groundwater Monitoring Agreement Exhibit AA Gibraltar Employees Exhibit BB BCC Reorganization Matters Exhibit CC Excluded Liability Fund Matters Exhibit DD IP Registration Costs Exhibit EE Special Purpose Statement Exhibit FF Oissel, France Land Exhibit GG Due Diligence Requests Exhibit HH Indebtedness as of October 15, 1999 Exhibit II Reviewed Pages - Listing Particulars Exhibit II-1 Listing Particulars Exhibit JJ Covered Properties Exhibit KK Certain Environmental Matters Exhibit LL Specific Indemnity Issues Exhibit MM Dispute Resolution Procedures Exhibit NN Americas IPD Business Territory *This Schedule of Exhibits does not constitute a part of this Agreement. ACQUISITION AGREEMENT THIS AGREEMENT is made and entered into as of the 29 day of November, 1999, by and among: (1) YORKSHIRE GROUP PLC, a public company limited by shares organized and existing under the laws of England and Wales ("Yorkshire"); (2) YORKSHIRE AMERICAS, INC., a South Carolina corporation ("Americas"); (3) CK WITCO CORPORATION, a Delaware corporation ("CK Witco"); (4) CROMPTON & KNOWLES EUROPE S.P.R.L., a private company with limited liability incorporated under the laws of Belgium ("Europe"); (5) UNIROYAL CHEMICAL EUROPEAN HOLDINGS B.V., a private company with limited liability incorporated under the laws of The Netherlands ("Holdings"); and (6) CROMPTON & KNOWLES COLORS INCORPORATED, a Delaware corporation ("Colors"). BACKGROUND STATEMENTS WHEREAS, CK Witco, directly and through its subsidiaries and Affiliates, is engaged worldwide in the Textile Dyes Business; and WHEREAS, CK Witco, directly and through its subsidiaries and Affiliates, is engaged worldwide in the IPD Business; and WHEREAS, CK Witco desires to sell, and Yorkshire desires to acquire, (i) the whole of the Textile Dyes Business and (ii) so much of the IPD Business as is conducted throughout the world other than for that IPD Business conducted within the Americas IPD Business Territory (the acquired portion of the IPD Business being referred to in this Agreement as the "Acquired IPD Business"; and together with the Textile Dyes Business, the "Acquired Businesses"); provided, however, the Acquired Businesses shall not include that portion of the IPD Business relating to the development, manufacture, distribution and sale of goods exclusively within the IPD Business product line for their own consumption and application as is conducted throughout the world with the customers Technicolor, Lexmark, Video Jet Systems International Inc. and ICI Imagedata, and their respective Affiliates; and WHEREAS, CK Witco is indirectly the record and beneficial owner of all of the issued and outstanding capital stock of Colors; and WHEREAS, Holdings is the record and beneficial owner of all of the issued and outstanding capital stock of Europe; and WHEREAS, the IPD Business that will be retained by CK Witco and not acquired by Yorkshire hereunder is sometimes referred to in this Agreement as the "Americas IPD Business", and each Person (other than Colors, Holdings and Europe) controlled by CK Witco, Holdings, Colors or Europe that is engaged principally in an Acquired Business and is not an Excluded Asset is referred to herein collectively as the "Acquired Entities" and individually as an "Acquired Entity"; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements in this Agreement contained, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties to this Agreement agree as follows: 1. THE ACQUISITION 1.1 Purchase and Sale. At the Closing (this term and other capitalized terms used in this Agreement being defined in either Paragraph 13.1 of this Agreement or in those parts of this Agreement identified in Paragraph 13.2), CK Witco, Holdings and Colors shall, and CK Witco shall cause such other Affiliates of CK Witco (excluding Europe and the Acquired Entities) as have ownership, possession or control of, or exercise dominion or control over, any of the Transferred Assets (collectively with CK Witco, Holdings and Colors, but only if not (i) Europe or (ii) otherwise an Acquired Entity, the "CK Witco Entities") to, sell, transfer, convey and assign to Yorkshire and, except for the Europe Capital Stock (which shall be sold, transferred, conveyed and assigned to Yorkshire) such of its Affiliates as Yorkshire shall designate (collectively with Yorkshire, the "Yorkshire Entities"), and in reliance on and subject to the terms contained in this Agreement, the Yorkshire Entities shall purchase and acquire from the CK Witco Entities, all of their respective right, title and interest in and to all of the assets and properties of the CK Witco Entities which are related to the Acquired Businesses, other than the Excluded Assets (all of such acquired assets and properties being referred to collectively as the "Transferred Assets"), which, except to the extent excluded in Paragraph 1.2, include the following: (a) all of the following parcels of real estate and improvements thereon, which are collectively referred to in this Agreement as the "Owned Real Property": (i) All that certain lot, tract or parcel of improved real estate more particularly described on Exhibit A-1 attached to this Agreement, together with all rights, ways and easements appurtenant thereto, including all of Color's right, title and interest in and to the land underlying and the air space overlying any public or private ways or streets crossing or abutting such real estate ("Lowell Land"); and all buildings, structures and other improvements of any and every nature located on the Lowell Land and all fixtures attached or affixed, actually or constructively, to the Lowell Land or to any such buildings, structures or other improvements (the "Lowell Improvements"); and (ii) All that certain lot, tract or parcel of improved real estate more particularly described on Exhibit A-2 attached to this Agreement, together with all rights, ways and easements appurtenant thereto, including all of Color's right, title and interest in and to the land underlying and the air space overlying any public or private ways or streets crossing or abutting such real estate ("Charlotte Land"); and all buildings, structures and other improvements of any and every nature located on the Charlotte Land and all fixtures attached or affixed, actually or constructively, to the Charlotte Land or to any such buildings, structures or other improvements (the "Charlotte Improvements"); and (iii) All that certain lot, tract or parcel of improved real estate more particularly described on Exhibit A-3 attached to this Agreement, together with all rights, ways and easements appurtenant thereto, including all of Color's right, title and interest in and to the land underlying and the air space overlying any public or private ways or streets crossing or abutting such real estate ("Greenville Land"); and all buildings, structures and other improvements of any and every nature located on the Greenville Land and all fixtures attached or affixed, actually or constructively, to the Greenville Land or to any such buildings, structures or other improvements (the "Greenville Improvements"); and (iv) All that certain lot, tract or parcel of improved real estate more particularly described on Exhibit A-4 attached to this Agreement, together with all rights, ways and easements appurtenant thereto, including all of Color's right, title and interest in and to the land underlying and the air space overlying any public or private ways or streets crossing or abutting such real estate ("Dalton Land"; and together with the Lowell Land, the Charlotte Land and the Greenville Land, the "Land"); and all buildings, structures and other improvements of any and every nature located on the Dalton Land and all fixtures attached or affixed, actually or constructively, to the Dalton Land or to any such buildings, structures or other improvements (the "Dalton Improvements"; and together with the Lowell Improvements, the Charlotte Improvements and the Greenville Improvements, the "Improvements"); and (b) all leasehold or similar interests in real property leased from third parties or otherwise used by a CK Witco Entity in the conduct or operation of an Acquired Business (subject, in each case, to lessor approval) identified on Exhibit B attached to this Agreement, and all of the CK Witco Entities' right, title and interest in and to all improvements thereon, together with all easements, rights of way, licenses and other interest therein (collectively, the "Leased Real Property"; and together with the Owned Real Property, the "Acquired Properties"); (c) all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, spare parts, vehicles and other items of tangible personal property (other than Inventories) owned or leased by a CK Witco Entity (wherever located and whether or not carried on a CK Witco Entity's books) and related to an Acquired Business, including (i) all research and development equipment and the associated chemical stocks in laboratories and stock rooms in the Gibraltar Facility, (ii) such items of tangible personal property relating to the Belgian Co-Ordination Centre and also known as C&K Services SPRL (the "BCC") as is set forth on Exhibit C attached to this Agreement, and (iii) such items as are listed on the Fixed Asset Registers, in all cases, together with any express or implied warranty by the manufacturers, sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto; (d) (i) all inventories of all types outside the Americas IPD Business Territory relating to an Acquired Business and (ii) within the Americas IPD Business Territory, those inventories relating to an Acquired Business consisting of (A) that amount of each finished good wherever located having a value equal to the product of (I) the total value of that finished good wherever located and (II) a number equal to a quotient (rounded to the nearest one-thousandth), the numerator of which is the revenue generated from the sale of that finished good with respect to the Textile Dyes Business in the Americas IPD Business Territory during the period from December 27, 1998 through September 26, 1999, inclusive (the "Measuring Period") and the denominator of which is the total revenue generated from the sale of that finished good in the Americas IPD Business Territory during the Measuring Period; (B) that work in process (other than Crude Stocks) and those raw materials located at an Acquired Property, (iii) those intermediates to be used or consumed solely in the production of finished goods to be sold in an Acquired Business and in existence at the Effective Date and Time; (iv) that amount of each intermediate in the Americas IPD Business Territory to be used or consumed by a CK Witco Entity in the production of finished goods to be sold or saleable in an Acquired Business and in existence at the Effective Date and Time and equal to the product of (I) the total amount of that intermediate in the Americas IPD Business Territory and (II) a number equal to a quotient (rounded to the nearest one- thousandth), the numerator of which is the total amount of that intermediate consumed in the production of finished goods with respect to the Textile Dyes Business in the Americas IPD Business Territory during the Measuring Period, and the denominator of which is the total amount of that same intermediate consumed in the America IPD Business Territory during the Measuring Period; and (iv) all Crude Stocks located at an Acquired Property (collectively, the "Inventories"). (e) all notes receivable and accounts receivable of an Acquired Business in existence at the Effective Date and Time, other than for intercompany accounts (which shall be an Excluded Asset) (collectively, the "Receivables"); (f) all (i) trademarks, service marks, trade names, trade dress, symbols, and logos, all registrations and pending applications therefor, and all goodwill associated therewith, relating to an Acquired Business, including the registered marks (and applications therefor) set forth on Exhibit D attached to this Agreement, but specifically excluding the name "Crompton & Knowles", "CK Witco", "Crompton & Knowles Colors Incorporated" and "CK Colors", and those registered marks (and applications therefor) set forth on Exhibit D-1 attached to this Agreement (all of which shall be Excluded Assets), (ii) business, proprietary and confidential information, including: trade secrets, technical information, know-how, ideas, designs, processes, procedures, algorithms, discoveries, inventions, computer programs (including documentation and related object and source code), patents, patent applications, and copyrights, and all improvements thereof and all registrations and applications for the foregoing, relating to an Acquired Business, including the registered patents and product registrations (and applications therefor) set forth on such Exhibit D, (iii) data, documents, files, books (including the Research and Development Library) and records, tax records (excluding generally income tax records, and only to the extent principally relating to the other Transferred Assets or an Acquired Business), sales records, customer information and lists, and order information relating to an Acquired Business, and (iv) all other information and Intellectual Property Rights to the extent relating to the operation of the other Transferred Assets or an Acquired Business, in each case whether owned outright by a CK Witco Entity or as to which the relevant Person has rights as a licensee or otherwise. (g) all right, title and interest in, to and under all contracts, leases, non-compete agreements, licenses, indemnities, agreements, commitments, arrangements, and purchase and sale orders which relate to an Acquired Business or the Transferred Assets to which a CK Witco Entity is a party, in existence on the date of this Agreement, as well as those entered into after the date hereof in the ordinary and regular course of an Acquired Business pursuant to Paragraph 6.1, excluding this Agreement and the Additional Agreements (collectively, the "Assigned Contracts"); (h) all right, title and interest in and to all prepaid expenses, advances, deposits, promotional discounts, rebates, refunds and all similar rights and claims relating to an Acquired Business or the Acquired Properties; (i) all warranties and guaranties by, and rights, choses in action, and claims, known or unknown, matured or unmatured, accrued or contingent against, third parties, including rights in and to insurance and indemnity claims relating to the Transferred Assets or an Acquired Business; (j) all of those assets described on Exhibit E attached to this Agreement relating to the research and development facilities and physically located at the Gibraltar Facility; (k) all of the issued and outstanding capital stock of Europe (the "Europe Capital Stock"); (l) to the extent transferable, all franchises, certificates, licenses, permits, orders, approvals and other authorizations from any Government or self-regulatory organization relating to an Acquired Business; (m) telephone and facsimile numbers, post office boxes, forms, labels, shipping material, supplies, catalogs, brochures, art work, photographs and advertising and promotional materials relating to an Acquired Business or otherwise physically located at an Acquired Property; (n) that value equal to (i) the sum of (A) that value of raw materials equal to the product of (1) the total amount of raw materials in the Americas IPD Business Territory wherever located and (2) a number equal to a quotient (rounded to the nearest one-thousandth), the numerator of which is the revenue (the "1999 Americas Textile Dyes Revenue") generated from the sale of finished goods with respect to the Textile Dyes Business in the Americas IPD Business Territory during the Measuring Period and the denominator of which is a number equal to the sum of (I) the 1999 Americas Textile Dyes Revenue and (II) the revenue generated from the sale of finished goods with respect to the Americas IPD Business in the Americas IPD Business Territory during the Measuring Period, and (B) that value of work in process (other than Crude Stocks) equal to the sum of the values of the work in process for each individual finished good which is produced in the Americas IPD Business Territory, with each such value equal to the product of (1) the total amount of the value of the work in process for that finished good in the Americas IPD Business Territory and (2) a number equal to a quotient (rounded to the nearest one-thousandth), the numerator of which is the revenue generated from the sale of that finished good with respect to the Textile Dyes Business in the Americas IPD Business Territory during the Measuring Period and the denominator of which is the total revenue generated from the sale of that finished good in the Americas IPD Business Territory during the Measuring Period, minus (ii) the value of the work in process (other than Crude Stocks) and raw materials included as Transferred Assets pursuant to Paragraph 1.1(d)(ii)(B) (the credits referred to in this Paragraph 1.1(n) will be given to Yorkshire in 6 equal monthly installments over the 6-month period following the Effective Date and Time); and (o) all other assets and rights, of every kind and nature relating to the Transferred Assets or an Acquired Business. 1.2 Excluded Assets. Notwithstanding anything in this Agreement to the contrary, the Transferred Assets shall not include those assets and properties (i) principally related to the Americas IPD Business, (ii) those assets and properties specifically identified elsewhere in this Agreement as being Excluded Assets, (iii) those assets and properties licensed by CK Witco to Yorkshire pursuant to an Additional Agreement, and (iv) the following excluded assets and properties (collectively, the "Excluded Assets"): (a) all of the following parcels of real estate and improvements thereon owned or leased by Colors that is not an Acquired Property (collectively, the "Excluded Properties"); (i) All that land underlying and the air space overlying CK Witco's facility in Newark, New Jersey, and all buildings, structures and other improvements of any and every nature located thereon (the "Newark Facility"); (ii) All that land underlying and the air space overlying CK Witco's facility in Nutley, New Jersey, and all buildings, structures and other improvements of any and every nature located thereon (the "Nutley Facility"); (iii) All that land underlying and the air space overlying CK Witco's facility in Reading, Pennsylvania, and all buildings, structures and other improvements of any and every nature located thereon (the "Reading Facility"); (iv) Except as otherwise expressly set forth in this Agreement, all that land underlying and the air space overlying CK Witco's Facility in Gibraltar, Pennsylvania; and all buildings, structures and other improvements of any and every nature located on the Gibraltar Land and all fixtures attached or affixed, actually or constructively, to the Gibraltar Land or to any such buildings, structures or other improvements (the "Gibraltar Facility"); (v) Each parcel of Leased Real Property to the extent any relevant lessor does not consent to the assignment thereof to Yorkshire; (b) those (i) trademarks, service marks, trade names, trade dress, symbols, and logos, all registrations and pending applications therefor, and all goodwill associated therewith that are either registered in any of the countries, territories or possessions in the Americas IPD Business Territory and principally related to the Americas IPD Business, or those registrations and pending applications listed on Exhibit F attached to this Agreement; (ii) patents, patent applications, and copyrights, and all improvements thereof and all registrations and applications in connection therewith either registered in the Americas IPD Business Territory and principally related to the Americas IPD Business, or those registrations and pending applications listed on Exhibit F attached to this Agreement; (iii) business, proprietary and confidential information, including: trade secrets, technical information, know-how, ideas, designs, processes, procedures, algorithms, discoveries, inventions, notebooks (including the notebooks in the Research and Development Library, laboratory research notes and files, computer programs (including documentation and related object and source code), and all improvements thereof and all registrations and applications therefore, principally related to the Americas IPD Business and including the information listed on Exhibit G attached to this Agreement; (iv) the Dyebath Monitoring System; and (v) all other information and Intellectual Property Rights principally related to the Americas IPD Business, including the information listed on the attached Exhibit H, in each case whether owned by a CK Witco Entity or as to which a CK Witco Entity has rights as a licensee or otherwise; (c) any right, title and interest in, to and under (i) a Royalty and Licensing Agreement by and between Crompton & Knowles Corporation and Dyes and Chemicals, Inc. n/k/a Colors, dated as of January 1, 1995; (ii) Royalty and Licensing Agreement by and between Crompton & Knowles Corporation and CK Colors Incorporated, dated as of January 1, 1998; (iii) License by and between Crompton & Knowles (Hong Kong) Ltd., dated as of January 1, 1995; and (iv) License by and between Crompton & Knowles Colors Incorporated and Crompton & Knowles Europe S.P.R.L, dated as of ____________________ (collectively, the "Colors Contracts"); provided, however, that the Proprietary Rights being conveyed or licensed to Yorkshire pursuant to this Agreement or any Additional Agreement will be conveyed, or as the case may be, licensed, free and clear of all of the Colors Contracts, and further CK Witco shall procure that all rights of any parties in such agreements (notwithstanding express rights to the contrary contained in the Colors Contracts including provisions to the effect that such licenses are irrevocable or will continue after termination) shall terminate at Closing. (d) (i) any machinery, equipment, tools, furniture and office equipment, computer hardware, supplies, materials, or other items of tangible personal property in the customer service laboratory of the Charlotte Improvements used principally in the operation of the Americas IPD Business and (ii) equipment and furniture for the office and cubicle spaces in the Charlotte Improvements used principally in the operation of the Americas IPD Business; (e) the IPD bagger equipment located on the Greenville Land and within the Greenville Improvements (the "IPD Bagger"); (f) [INTENTIONALLY OMITTED] (g) the machinery and equipment owned by Colors, physically located on the Lowell Land and used exclusively in the monitoring of groundwater at the Lowell Land pursuant to the Groundwater Monitoring Agreement, all of which is listed on Exhibit I attached to this Agreement; (h) the shares of the capital stock of the BCC owned of record by Europe on the date of this Agreement; (i) three (3) uninstalled liquid dye storage tanks physically located at the date of this Agreement on the Lowell Land (collectively, the "Liquid Dye Storage Tanks"); and (j) those assets and properties, if any, identified on Exhibit J attached to this Agreement. 1.3 Purchase Price. Subject to adjustment as provided in Paragraph 1.4, the aggregate consideration payable (i) for the Transferred Assets other than the Europe Capital Stock shall be an amount of cash equal to US$64,000,000, and (ii) for the Europe Capital Stock, the Consideration Securities (having an agreed value of US$8,500,000) and an amount of cash equal to US$14,000,000 (as may be adjusted pursuant to Paragraph 1.4, the aggregate amount payable or to be given pursuant to this Paragraph 1.3 is referred to in this Agreement as the "Purchase Price"). The Purchase Price will be paid at the Closing as provided in Paragraph 1.11. 1.4 Adjustments to Purchase Price. (a) Within one hundred twenty (120) days of the Effective Date and Time, Yorkshire shall prepare a closing special purpose statement, in accordance with the accounting principles (the "Balance Sheet Principles"), and in the format set out in Exhibit K attached to this Agreement, including a calculation of the closing statement of net assets in the English language for the Acquired Businesses as of the Effective Date and Time applying the Balance Sheet Principles (as so prepared or determined pursuant to the further provisions of this Paragraph 1.4, the "Closing Special Purpose Statement", including the "Closing Net Assets") and cause a copy of the same to be delivered to CK Witco. Together with the Closing Special Purpose Statement, Yorkshire will deliver to CK Witco its calculation of the Closing Net Assets as of the Effective Date and Time (collectively, the "Computations"). Subject to the further provisions of this Paragraph 1.4, the Computations will be final and binding on the parties for purposes of calculating the adjustments as provided for in this Paragraph 1.4. (b) If within sixty (60) days following delivery of the Closing Balance Sheet and the Computations, CK Witco has not given Yorkshire written notice of objection to any or all of the Closing Special Purpose Statement and the Computations (which notice must contain a statement in reasonable detail, with supporting documentation if applicable, of CK Witco's objections), then the Closing Special Purpose Statement and the Computations shall be final and binding on all parties for purposes of calculating the adjustments as provided for in this Paragraph 1.4. If CK Witco gives such notice of objection, then Yorkshire and CK Witco shall in good faith attempt to resolve the issues raised in the notice between themselves. If they are unable to reach a resolution within thirty (30) days of such notice, the issues in dispute will be promptly submitted first to PriceWaterhouseCoopers, and if they are unable to act, then to Deloitte & Touche, and if they are unable to act, finally to Arthur Andersen (the "Accountants") for resolution, which disputes shall not be further subject to the dispute resolution procedures as provided in Paragraph 12.4. The parties agree to cooperate in approaching, engaging and instructing the Accountants with regard to the matters addressed in the preceding sentence. If the issues in dispute are submitted to the Accountants for resolution: (i) each party will furnish to the Accountants such work papers and other documents and information relating to the disputed issues as the Accountants may request and are available to the party (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the relevant Closing Special Purpose Statement and the Computations and to discuss the same with the Accountants, (ii) the determination by the Accountants as set forth in a written notice delivered to Yorkshire and CK Witco by the Accountants will be binding and conclusive on all parties, and (iii) Yorkshire and CK Witco will each bear one-half of the fees and expenses of the Accountants in resolving the issues in dispute. The Accountants will deliver their written notice of determination within thirty (30) days of the disputes having been referred to them. (c) If the Closing Net Assets are less than US$94,150,000, then CK Witco shall pay over to Yorkshire (or such other entity that Yorkshire may designate) by way of a pro rata refund (as between the Europe Capital Stock and the other Transferred Assets) of a part of the Purchase Price in United States dollars to such account as Yorkshire may designate the difference between US$94,150,000 and the Closing Net Assets (as finally determined in accordance with this Paragraph 1.4) within five (5) Business Days after a final determination of the Closing Special Purpose Statement, the Closing Net Assets and the Computations. There shall be no payment by Yorkshire to CK Witco if the Closing Net Assets are equal to or greater than US$94,150,000. (d) If the provision referred to in Section 1.22 of the Balance Sheet Principles has not been utilized in full by December 31, 2001, then such provision will be released in full and on such date Yorkshire will make a payment to Holdings by way of additional consideration for the Europe Capital Stock of US$1,350,000. (e) On the Closing Date, or on such other date Prior to the Closing Date as Yorkshire and CK Witco shall mutually agree, Representatives of Yorkshire and CK Witco shall jointly conduct and complete a physical inventory to determine a count for all the Inventories, which physical inventory shall be summarized in a listing signed by Representatives of Yorkshire and CK Witco on the Closing Date. Yorkshire and CK Witco shall thereafter determine the value of the Inventories, based upon the physical counts from the physical inventory described in this Paragraph 1.4(e) and valued at the lower of cost and fair market value in accordance with GAAP. The calculation of the values of the Inventories as determined by Yorkshire shall be compiled and delivered to CK Witco as part of the Computations in accordance with Paragraph 1.4(a). 1.5 Assumption of Certain Liabilities. (a) On the Closing Date, but effective as of the Effective Date and Time, the appropriate Yorkshire Entity shall assume and agree to pay or perform, as appropriate, only the following specifically enumerated obligations and liabilities of the CK Witco Entities (the "Assumed Liabilities"): (i) obligations and liabilities arising on and after the Effective Date and Time under Assigned Contracts to which a CK Witco Entity is a party relating to the Textile Dyes Business; and (ii) those Assumed Liabilities identified on Exhibit L attached to this Agreement; (b) Nothing contained in this Paragraph 1.5 or in any instrument of assumption executed by a Yorkshire Entity at the Closing shall be deemed to release or relieve any CK Witco Entity from its representations, warranties, covenants, agreements and indemnities contained in this Agreement or any certificate, schedule, instrument or document executed pursuant to this Agreement or in connection with this Agreement. 1.6 Obligations Not Assumed; Payment Obligations. (a) Except for the Assumed Liabilities (which shall not include any obligation or liability arising from any default, breach, misfeasance, malfeasance or nonfeasance by a CK Witco Entity), no Yorkshire Entity shall assume any other Liability of any kind, including: (i) any Liability of a CK Witco Entity related to the Textile Dyes Business; or (ii) any Liability of any CK Witco Entity related to the Americas IPD Business, and the relevant CK Witco Entity shall pay, satisfy and perform all of its Liabilities (other than the Assumed Liabilities), which may affect in any way the Transferred Assets or the operation of an Acquired Business (collectively, the "Excluded Liabilities"). CK Witco's obligations and responsibilities pursuant to this Paragraph 1.6 shall not be subject to the monetary or temporal limitations set forth in Article 9. (b) Following Closing, and following receipt of written notice from the relevant Yorkshire Entity and in any case, only when due, CK Witco shall pay to the relevant creditor or to the relevant Yorkshire Entity, or cause to be so paid, (i) all Excluded Liabilities (only when due) and (ii) all Liabilities (only when due) of Europe and each Acquired Entity that are not European Retained Liabilities (such Liabilities being referred to in this Agreement as the "CK Witco European Liabilities", which shall include (i) any outstanding payments due under a certain Sale of Business Agreement, dated 18 October 1999, between Europe and Croda Chemicals International Limited and (ii) US$1,250,000 relating to Pre-Closing Employment Liabilities (as defined in Exhibit M attached to this Agreement)). Yorkshire on behalf of itself and each Yorkshire Entity covenants and agrees to give CK Witco prompt written notice of each Excluded Liability or CK Witco European Liability assessed against or sought to be collected from a Yorkshire Entity, Europe or an Acquired Entity for which CK Witco has responsibility pursuant to this Paragraph 1.6, it being understood that any failure to give such notice or any delay in giving such notice shall not relieve CK Witco of its obligations under this Paragraph 1.6. With effect from and after the Effective Date and Time, Yorkshire shall procure that Europe or the relevant Acquired Entity shall pay or perform, as appropriate, all obligations and liabilities arising on and after the Effective Date and Time under the Contracts, as well as those arising under or pursuant to those agreements that would constitute Contracts entered into after the date hereof in the ordinary and regular course of an Acquired Business pursuant to Paragraph 6.1, excluding this Agreement and the Additional Agreements. For purposes of this Agreement, "European Retained Liabilities" means those Liabilities of Europe and the Acquired Entities identified as such on Exhibit M attached to this Agreement. (c) Notwithstanding any other provision of this Agreement, the obligations of CK Witco, each other CK Witco Entity and each Yorkshire Entity pursuant to this Paragraph 1.6 shall survive the Closing and the transactions contemplated by this Agreement. The party causing any delay in payment of any debt or obligation covered by this Paragraph 1.6 shall bear the responsibility for any late fees or interest accruing on or charged in respect of the underlying debt. (d) Within 45 days of the Effective Date and Time, in respect of each of those contracts, leases, non-compete agreements, licenses, indemnities, agreements, commitments, arrangements, and purchase and sale orders (i) which relate to an Acquired Business, and (ii) to which either Europe or an Acquired Entity is a party, and (iii) which do not otherwise constitute a Contract (collectively, the "Reviewed Contracts"), Yorkshire shall review the Reviewed Contracts. Within such 45-day period, Yorkshire shall assess whether in its commercially reasonable view (and not considering any of its restructuring plans) it wishes to treat such Reviewed Contracts as European Retained Liabilities. If Yorkshire determines not to treat any Reviewed Contract as a European Retained Liability, then Yorkshire shall provide written notice to CK Witco that Yorkshire desires to transfer and assign, or procure the transfer and assignment of, responsibility for performance of each such Reviewed Contract (not to be treated as a European Retained Liability) to CK Witco, and CK Witco shall be obliged to accept such transfer and assignment (whether or not the counterparty thereto accepts or consents to such transfer and assignment) and responsibility for each such Reviewed Contract and the same shall be treated thereafter for all purposes as a CK Witco European Liability. With respect to each Reviewed Contract, if Yorkshire does not provide such notice within such 45-day period, then Yorkshire shall be deemed to have agreed to treat such Reviewed Contract as a European Retained Liability. During such 45-day period (or such shorter period as is from the Effective Date and Time until the requisite notice is given by Yorkshire) such Reviewed Contract shall be treated as a European Retained Liability. To the extent that the counterparty to any Reviewed Contract transferred or assigned to CK Witco has a consent right in respect thereof and does not so consent, Yorkshire shall make available to CK Witco the benefits of such Reviewed Contract to the extent practicable and such Reviewed Contract shall thereafter be treated for all purposes as a CK Witco European Liability. 1.7 Sales Taxes and Stamp Duties. CK Witco and Yorkshire shall equally share responsibility for the payment of all sales, use, excise, transfer, value added taxes and stamp or tax duties, imposed by any Government on the purchase and sale of the Transferred Assets pursuant to this Agreement or instrument transferring any title or right to the Transferred Assets to any Yorkshire Entity, but not Taxes payable in respect of any profit or gain on the sale or disposal of any Transferred Asset pursuant to this Agreement. 1.8 Proration; Customer Rebates. (a) There shall be prorated as of the Effective Date and Time the following accrued or prepaid items relating to Colors and the Transferred Assets held by it: (i) ad valorem, real or personal property and similar taxes, (ii) rents, royalties and other payments due under the Assigned Contracts, (iii) charges for utilities serving Acquired Properties, (iv) license fees related to transferable licenses and Permits, and (v) assessments of any Government and charges for services. (b) Without prejudice to the generality of Paragraph 1.8(a), any customer rebates relating to the Acquired Businesses will be prorated as of the Effective Date and Time, and such proration will include the amortized effect of any ratchet or other adjustment mechanism relating to such rebates where such mechanism operates by reference to periods both before and after the Effective Date and Time. (c) CK Witco, Colors and Holdings will jointly and severally indemnify Yorkshire, each Yorkshire Entity, Yorkshire's Affiliates, each Acquired Entity and Europe in respect of all costs, claims, liabilities and expenses incurred by them in relation to Paragraphs 1.8(a) and (b) above which arise in relation to periods prior to the Effective Date and Time, including for these purposes the effect of any such ratchet or other adjustment mechanism as is referred to in Paragraph 1.8(b). (d) Any payments required to be made by CK Witco, Colors or Holdings to Yorkshire, any Yorkshire Entity, any of Yorkshire's Affiliates, any Acquired Entity or Europe pursuant to this Paragraph 1.8 will be made in accordance with the provisions of Paragraph 1.6(b). 1.9 Allocation. The Purchase Price, other than insofar as it relates to the Europe Capital Stock, shall be allocated among the Transferred Assets in accordance with Section 1060(b) of the Code and the regulations promulgated thereunder. After the Closing Date, any adjustments required to such allocations shall be made in accordance with Section 1060 of the Code and the regulations thereunder, and Yorkshire and CK Witco agree to cooperate in filing all information required by Section 1060(b) of the Code and the regulations thereunder, and to take no position on any income tax return, report or filing inconsistent with such allocation. 1.10 Closing. The consummation of the transactions contemplated in this Agreement (the "Closing") shall take place at the offices of Kilpatrick Stockton LLP, 1100 Peachtree Street, Suite 2800, Atlanta, Georgia (or at such other place as the parties may mutually agree), at 13:00 p.m. G.M.T., on the Business Day on which all conditions to Closing contained in Articles 7 and 8 have been satisfied or waived in writing, other than conditions which by their terms are to be satisfied at the Closing (the "Closing Date"). The Closing shall be effective as of the actual time of consummation of the transactions the subject of this Agreement (the "Effective Date and Time"). 1.11 Transactions and Documents at Closing. (a) At the Closing: (i) Holdings shall convey, transfer and assign the Europe Capital Stock to Yorkshire free and clear of any and all Liens, and (ii) subject thereto, each relevant CK Witco Entity shall convey to a designated Yorkshire Entity all of the other Transferred Assets, free and clear of any and all Liens, and in furtherance thereof shall deliver those deeds, bills of sale, assignments, consents, certificates of title, share certificates, powers of attorney, documents and other instruments of transfer and conveyance listed and described on Exhibit N (collectively, the "Closing Documents"); and (iii) against delivery by Holdings of the Europe Capital Stock (and the share certificates evidencing the same) to Yorkshire, Yorkshire shall pay and deliver, or cause to be paid and delivered, to Holdings (x) either from Yorkshire's own bank account or from Addleshaw Booth & Co's client account, the sum of US$14,000,000 by wire transfer of immediately available funds to a U.S. bank account designated by CK Witco not less than three (3) Business Days prior to the Closing Date (the "Bank Account"), (y) share certificates representing the Consideration Securities allotted to Holdings, and (z) against delivery of all of the other Transferred Assets, Yorkshire shall pay and deliver, or cause to be paid and delivered, to CK Witco (if appropriate, such sum to be paid directly from Yorkshire's lenders) the sum of US$64,000,000 by wire transfer of immediately available funds to the Bank Account. (b) At the Closing, the relevant Persons shall, in addition to the other documents, agreements, papers and instruments required to be executed and delivered under or pursuant to this Agreement, execute and deliver the following documents, agreements, instruments and papers (all of which are collectively referred to herein as the "Additional Agreements" and individually as an "Additional Agreement"): (i) Supply Contracts (CK Witco to Yorkshire) in the agreed forms attached to this Agreement as Exhibits O-1 and O-2 (each, a "CK Witco Supply Contract"); (ii) Supply Contracts (Yorkshire to CK Witco) in the agreed forms attached to this Agreement as Exhibit P-1 and P-2 (each, a "Yorkshire Supply Contract"); (iii) a Transition Services Agreement in the agreed form attached to this Agreement as Exhibit Q; (iv) a Lease Agreement (relating to the Charlotte facility) in the agreed form attached to this Agreement as Exhibit R; (v) a Lease Agreement (relating to the Gibraltar facility) in the agreed form attached to this Agreement as Exhibit S; (vi) a Trademark License Agreement (CK Witco to Yorkshire) in the agreed form attached to this Agreement as Exhibit T; (vii) a Trademark License Agreement (Yorkshire to CK Witco) in the agreed form attached to this Agreement as Exhibit U; (viii) a Non-European Patent and Technology License Agreement (CK Witco to Yorkshire) in the agreed form attached to this Agreement as Exhibit V; (ix) a European Patent and Technology License Agreement (CK Witco to Yorkshire) in the agreed form attached to this Agreement as Exhibit W; (x) a Non-European Patent and Technology License Agreement (Yorkshire to CK Witco) in the agreed form attached to this Agreement as Exhibit X; (xi) a European Patent and Technology License Agreement (Yorkshire to CK Witco) in the agreed Form attached to this Agreement as Exhibit Y; and (xii) a Groundwater Monitoring Agreement in the agreed form attached to this Agreement as Exhibit Z. (c) All deliveries, payments and other transactions and documents relating to the Closing shall be interdependent and none shall be effective unless and until all are effective (except to the extent that the party entitled to the benefit thereof has waived satisfaction or performance thereof as a condition precedent to Closing). All conveyances and transfers of registered trademarks and patents shall be effected only by the execution and delivery of the relevant Closing Documents related thereto, it being understood and agreed that this Agreement imposes only an obligation to so transfer and convey and that no transfer or conveyance is effected by this Agreement. (d) From time to time and at any time, at Yorkshire's reasonable request, whether on or after the Closing Date, and without further consideration, Holdings and each relevant CK Witco Entity shall, and CK Witco shall ensure that Holdings and each such CK Witco Entity shall, at its expense, execute and deliver such further documents and instruments of conveyance, assignment, and transfer and shall take such further reasonable actions as may be necessary or reasonably desirable, in the reasonable opinion of Yorkshire, to transfer and convey to Yorkshire and the other Yorkshire Entities all right, title and interest in and to the Transferred Assets, free and clear of any and all Liens (subject to any exclusions set forth in the CK Witco Disclosure Memorandum), or as may otherwise be necessary or reasonably desirable to carry out the intent of this Agreement. 2. ADDITIONAL COVENANTS 2.1 Access and Inspection. CK Witco will provide, and CK Witco will cause each CK Witco Entity to provide, Yorkshire, the other Yorkshire Entities and their respective Representatives reasonable access during normal business hours from and after the date of this Agreement until the Closing, to all of the Representatives, personnel, books and records of Holdings, Europe, each Acquired Entity and each CK Witco Entity (including the right to make copies, extracts and translations) and will furnish such information concerning each Acquired Business as Yorkshire and its Representatives may reasonably request, in each case for the purpose of making a continuing investigation of each CK Witco Entity (as it relates to the Acquired Business), Europe, the Acquired Entities, and the Acquired Businesses. CK Witco shall not, and CK Witco shall ensure that no other CK Witco Entity, Europe, or Acquired Entity will, provide any other Person with similar access or information between the date of this Agreement and any termination or expiration of this Agreement. No investigation made before or after the date of this Agreement by or on behalf of any Yorkshire Entity will limit or affect in any way the representations, warranties, covenants, agreements and indemnities of any CK Witco Entity or Europe under or pursuant to this Agreement or any Additional Agreement, each of which will survive any investigation and the Closing. CK Witco and its Representatives shall have full access to all relevant books and records and employees of the Acquired Businesses and the auditors and their non-proprietary workpapers to the extent required to perform its review of the Special Purpose Statements, Closing Special Purpose Statements, Closing Net Assets and the Computations. 2.2 Cooperation. The parties will cooperate fully with each other and with their respective Representatives in connection with any steps required to be taken as part of their respective obligations under this Agreement, and all parties will use their best efforts to consummate the transactions contemplated by this Agreement and to fulfill their obligations under this Agreement, including causing to be fulfilled at the earliest practical date the conditions precedent to the obligations of the parties to consummate the transactions contemplated by this Agreement. Without the prior written consent of the other parties, no party to this Agreement may take any intentional actions, or omit to take any actions, that would cause the conditions precedent to the obligations of the parties to this Agreement not to be fulfilled, including, taking or causing to be taken any action which would cause the representations and warranties made by a party in this Agreement not to be true, correct and complete as of the Closing. 2.3 Expenses. Subject to Paragraph 1.7 and except as otherwise expressly set forth in this Agreement, all expenses incurred by any Yorkshire Entity in connection with the authorization, preparation, execution and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of its Representatives, will be paid by Yorkshire. Subject to Paragraph 1.7 and except as otherwise expressly set forth in this Agreement, all expenses incurred by Europe, any CK Witco Entity or any Acquired Entity in connection with the authorization, preparation, execution and performance of this Agreement and the transactions contemplated by this Agreement and the Additional Agreements, including all fees and expenses of their Representatives, will be borne by CK Witco without any contribution by or Liability to either Acquired Business, Europe or any Acquired Entity or the payment out of the Transferred Assets or any assets of any Acquired Entity or Europe. 2.4 Brokers. CK Witco represents and warrants to Yorkshire that no broker or finder has acted on behalf of any CK Witco Entity in connection with this Agreement or the transactions contemplated in this Agreement, and CK Witco agrees to indemnify each Yorkshire Entity and hold it harmless from and against any and all claims or demands for commissions or other compensation by any broker, finder or similar agent claiming to have been employed by or on behalf of them. Yorkshire represents and warrants that no broker or finder other than N M Rothschild & Sons has acted on behalf of any Yorkshire Entity in connection with this Agreement or the transactions contemplated in this Agreement and agrees to indemnify each CK Witco Entity and hold it harmless from and against any and all claims or demands for commissions or other compensation by N M Rothschild & Sons or any other broker, finder or similar agent claiming to have been employed by or on behalf of any Yorkshire Entity. 2.5 Publicity. Except to the extent required by applicable Law, the listing requirements of any stock exchange or the requirements of any other regulatory authority, all press releases and other public announcements respecting the subject matter of this Agreement or any Additional Agreement will be made only with the mutual agreement of CK Witco and Yorkshire, which agreement will not be unreasonably withheld, delayed or conditioned. 2.6 Certain Governmental Filings. The parties will make, or cause to be made, all filings and submissions required to be made to any Government in connection with the transactions contemplated by or resulting from this Agreement, including the filing of Notification and Report Forms under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended, with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice (the "HSR Filing"). Each of the parties will furnish to the other parties any and all necessary information and reasonable assistance as another party may reasonably request in connection with its preparation of necessary filings or submissions to any Government. Yorkshire shall pay all filing fees required to be paid in connection with the HSR Filing. 2.7 Confidentiality. On and after the Closing Date and with effect from the Effective Date and Time, CK Witco on behalf of itself, each CK Witco Entity and any other Person Affiliated with CK Witco, agrees that it shall not use or disclose or reveal to any other Person any trade secrets or other confidential business information related to any Acquired Business (whether or not constituting a Transferred Asset and whether or not the subject of any Additional Agreement), provided that the foregoing obligations shall not apply to (i) any information which is generally known in the industry, (ii) any information which becomes generally known in the industry through no fault of CK Witco, any CK Witco Entity or any other Person Affiliated with CK Witco, or (iii) commencing three (3) years after the Effective Date and Time, any information which does not constitute a trade secret under applicable Law. 2.8 Covenant Not to Compete. (a) In order to induce Yorkshire and Americas to enter into and perform this Agreement, Colors, Holdings, and CK Witco on behalf of itself and each CK Witco Entity and each Person Affiliated with CK Witco, agrees that, for a period of five (5) years beginning on the Closing Date, and effective as of the Effective Date and Time (the "CK Witco Restricted Period"), it shall not, without the prior written consent of Yorkshire, for its own account or jointly or in combination with another Person, directly or indirectly, for or on behalf of any Person, as principal, agent or otherwise: (i) engage in, consult with, or own, control, manage or otherwise participate in the ownership, control or management of a business competitive with an Acquired Business, except as an agent or otherwise for and on behalf of any Yorkshire Entity or otherwise pursuant to the CK Witco Supply Contracts and then only in strict accordance with their terms; (ii) solicit, call upon, or attempt to solicit the patronage of any Person within the CK Witco Service Areas and to whom an Acquired Business provided products, goods or services during the 12-month period immediately preceding the Effective Date and Time, for the purpose of obtaining the patronage of any such Person for the purchase of any products, goods or services competitive with those of the relevant Acquired Business, except as an agent and on behalf of a Yorkshire Entity or pursuant to the CK Witco Supply Contracts and then only in strict accordance with their terms; or (iii) solicit or induce, or in any manner attempt to solicit or induce, any individual who is employed in an Acquired Business at the Effective Date and Time to leave such employment, whether or not such employment is pursuant to a written contract or otherwise. In respect of employees of the Acquired Businesses resident outside of the United States, neither CK Witco nor any Person Affiliated with CK Witco shall employ any such individual for a period of two years following the Effective Date and Time. (b) Notwithstanding anything herein to the contrary: (i) it shall not be a breach of the covenants contained in Paragraph 2.8(a) for CK Witco to own, of record or beneficially, the Consideration Securities or not more than, in the case of a Person that has any class of its equity securities quoted or listed, five percent (5.00%), and in the case of any other Person, seven and one-half percent (7.50%), of the capital stock or other equity interest of any Person; (ii) the covenants described in Paragraph 2.8(a) shall apply only if the transactions contemplated by this Agreement are consummated; and (iii) it shall not be a breach of the covenants contained in this Paragraph 2.8 for CK Witco to supply the products to be supplied by Colors pursuant to the terms of the Supply Agreement, dated January 15, 1999, by and between Ingredient Technology Corporation and Colors, as modified through the date of this Agreement. (c) Notwithstanding anything herein to the contrary but subject to the further provisions of this Paragraph 2.8(c), in the event CK Witco or any of its Affiliates agrees to acquire any other Person or business, or is acquired by any other Person or business, whether in the form of a merger, stock purchase, purchase and assumption, collection of a loan or otherwise, CK Witco or its Affiliate (or any acquiring entity or its Affiliates, if applicable) shall be entitled to consummate such transaction, continue to operate any lines of business in which such Person or its subsidiaries were engaged at the time of such acquisition, and expand such Person. If, during the CK Witco Restricted Period, CK Witco or any of its Affiliates acquires any other Person or business competitive with an Acquired Business (the competitive part of such Person or business being referred to herein as the "Target Competitive Business") and the Target Competitive Business has annual revenues or turnover in excess of US$10,000,000 (or its reasonable equivalent in any other currency) for the fiscal year (whether or not measured or accounted for separately) immediately preceding the date of acquisition, then CK Witco (or its Affiliate) shall dispose of such Target Competitive Business within eighteen (18) months from the closing date of such acquisition (the "Disposal Period"). If CK Witco and its Affiliates shall not have disposed of the Target Competitive Business within the Disposal Period, CK Witco shall pay to Yorkshire as liquidated damages and not a penalty the sum of ten thousand United States dollars (US$ 10,000) for each day after the conclusion of the Disposal Period for which CK Witco has not disposed of or closed the Target Competitive Business. CK Witco and Yorkshire each acknowledge and agree that monetary damages are not readily ascertainable and that this provision for liquidated damages represents the best estimate of such damages and that they believe such liquidated damages are a reasonable estimate of such damages. In addition, if CK Witco or its Affiliates makes an acquisition of a Person or business that does not constitute a Target Competitive Business but such Person or business (together with any other acquired Person or business) grows during the CK Witco Restricted Period, either through organic growth or by acquisition, to such a size that if it were then acquired by CK Witco or its Affiliates it would constitute a Target Competitive Business, then CK Witco and its Affiliates shall be bound to the foregoing provisions of this Paragraph 2.8(c) in respect of such Person or business. (d) Notwithstanding anything herein to the contrary and subject to the further provisions of this Paragraph 2.8(d) it shall not be a breach of the covenants contained in this Paragraph 2.8 for CK Witco to continue to operate the Americas IPD Business and to expand the Americas IPD Business within the Americas IPD Business Territory. If at any time during the CK Witco Restricted Period CK Witco or its Affiliates dispose of all or substantially all of the Americas IPD Business to an unaffiliated Person through a merger, stock purchase, share exchange or similar transaction, then the restrictions on Colors and such unaffiliated Person with respect to the Acquired IPD Business set forth in Paragraph 2.8(a) shall immediately be of no further force or effect. (e) Subject to the further provisions of this Paragraph 2.8(e), in order to induce CK Witco, Europe and Holdings to enter into and perform this Agreement, Yorkshire and Americas on behalf of itself and each Person Affiliated with Yorkshire, agrees that, for a period of five (5) years beginning on the Closing Date, and effective as of the Effective Date and Time (the "Yorkshire Restricted Period"), it shall not, without the prior written consent of CK Witco, for its own account or jointly or in combination with another Person, directly or indirectly, for or on behalf of any Person, as principal, agent or otherwise; (i) engage in, consult with, or own, control, manage or otherwise participate in the ownership, control or management of a business engaged in the Americas IPD Business, except as an agent or otherwise for and on behalf of any CK Witco Entity or otherwise pursuant to the Yorkshire Supply Contract and then only in strict accordance with its terms; (ii) solicit, call upon, or attempt to solicit the patronage of any Person within the Americas IPD Business Territory and to whom the Americas IPD Business provided products, goods or services during the 12-month period immediately preceding the Closing Date, for the purpose of obtaining the patronage of any such Person for the purchase of any products, goods or services competitive with those of the Americas IPD Business except as an agent or otherwise for and on behalf of CK Witco or any of its Affiliates or otherwise pursuant to the Yorkshire Supply Contract and only in strict accordance with its terms; or (iii) solicit or induce, or in any manner attempt to solicit or induce, any individual who is employed in the Americas IPD Business at the Effective Date and Time to leave such employment, whether or not such employment is pursuant to a written contract or otherwise. In respect of employees of the Americas IPD Business resident outside of the United States, neither Yorkshire nor any Person Affiliated with Yorkshire shall employ any such individual for a period of two years following the Effective Date and Time. If at any time during the Yorkshire Restricted Period CK Witco or its Affiliates dispose of all or substantially all of the Americas IPD Business, whether in the form of a merger, stock purchase, asset purchase, purchase and assumption, collection of a loan or otherwise, then the restrictions set forth in this Paragraph 2.8(e) shall immediately be of no further force or effect. (f) Notwithstanding anything herein to the contrary, it shall not be a breach of the covenants contained in this Paragraph 2.8 for Yorkshire to continue to sell Yorkshire's current category of goods throughout the world to each of Coates Ink, Keystone and Seller Ink, and their respective Affiliates. 2.9 No Solicitation of Third Party Interest. CK Witco, on behalf of itself and all CK Witco Entities, Europe and the Acquired Entities, agrees that none of them nor any of their respective directors, officers, employees or agents, will (a) negotiate or discuss with any other Person this Agreement or any Additional Agreement, or the terms contained in this Agreement or any Additional Agreement, (b) negotiate or discuss with any other Person any other transaction involving a sale of all or any of the capital stock of any CK Witco Entity, Europe, or any Acquired Entity or the sale of any assets of any CK Witco Entity, Europe, or any Acquired Entity related to the Acquired Businesses (other than for sales of inventory in the ordinary course and disposal of items of tangible personal property in the ordinary course which is not material to the conduct of the Acquired Businesses) or any other business combination involving Colors, Europe, any other CK Witco Entity or any Acquired Entity related to the Acquired Businesses, (c) reveal the terms of this Agreement or any Additional Agreement to any Person except for the express purpose of carrying out the transactions contemplated in this Agreement or any Additional Agreement, or (d) solicit, encourage, consider, entertain or accept any offer, bid or proposal from any other Person respecting any transaction involving, whether directly or indirectly, a sale of any of the capital of any of Colors, Holdings, Europe, any other CK Witco Entity or any Acquired Entity related to the Acquired Businesses, or the sale of any assets of any of CK Witco or any other business combination involving Colors, Europe or the Acquired Businesses. If any proposal of the kind described in the preceding clause (d) is received prior to the date of the Closing, then CK Witco will immediately notify Yorkshire of the receipt of a proposal and will promptly provide Yorkshire with a copy of the proposal (or if the proposal is not in writing, a written summary of its terms). 2.10 Business Employees and Employee Benefit Matters. (a) Business Employees. For purposes of this Paragraph 2.10, "Business Employees" are hereby defined as follows: (i) all persons employed by CK Witco or any of its Affiliates in an U.S. Asset Acquired Business immediately before the Effective Date and Time; (ii) all employees of CK Witco or any of its Affiliates who are absent from work with the Acquired Businesses on account of sickness or leave of absence on the Effective Date and Time and who are reasonably expected to return to active employment within 90 days following the date such employee was first absent from employment, or for whom an obligation to rehire exists under a collective bargaining agreement assumed by Yorkshire (as described in Paragraph 2.10(e)); (iii) all employees of CK Witco or any of its Affiliates who are not employed in the Acquired Businesses immediately before the Effective Date and Time but who, in the ordinary course of business become employees of Yorkshire within 60 days after the Effective Date and Time; and (iv) those full- time, active employees at the Gibraltar Facility listed on Exhibit AA attached to this Agreement. All Business Employees described in Paragraph 2.10(a) shall be identified on a schedule that is made part of the CK Witco Disclosure Memorandum. (b) Business Employees' Employment and Employee Benefits. (i) Yorkshire shall offer employment, effective on the Effective Date and Time (or, in the case of any Business Employee specified in Paragraph 2.10(a)(iii), effective as of the date of hiring), to each of the Business Employees described in Paragraphs 2.10(a) at compensation rates that are equal to those provided by CK Witco and any of its Affiliates immediately before the Effective Date and Time. (ii) Yorkshire shall treat service of each Business Employee with CK Witco, any of its Affiliates and their predecessor companies before the Effective Date and Time as if such service had been with Yorkshire for purposes of determining eligibility to participate, eligibility for benefits, benefit calculations, benefit forms and vesting (but not for benefit accruals under any defined benefit pension plan) under Yorkshire's employee benefit plans (within the meaning of Section 3(3) of ERISA). (iii) For a period of not less than one year from and after the Effective Date and Time, Yorkshire shall provide to Business Employees employee benefits that are, in the aggregate, no less favorable than those provided to them immediately prior to the Effective Date and Time; provided that with respect to Business Employees who are covered under the Assumed Collective Bargaining Agreements (as hereinafter defined), Yorkshire shall provide such compensation and benefits as are from time to time required by such collective bargaining agreements. (c) Severance Benefits. (i) From and after the Effective Date and Time, Business Employees shall be eligible for benefits in accordance with the terms of the applicable Yorkshire severance or separation pay policies or plans or the Assumed Collective Bargaining Agreements, as applicable. Yorkshire shall recognize the service of each such Business Employee with CK Witco and its Affiliates for eligibility, vesting, and benefit determinations under the applicable severance or separation pay policy or plan on the same basis as such service was recognized by CK Witco and any of its Affiliates. (ii) If CK Witco or any of its Affiliates is required to pay severance benefits or similar payments to a Business Employee as a result of the Business Employee's failure to accept employment with Yorkshire where the employment offered by Yorkshire requires relocation more than 35 miles from the Business Employee's primary work location immediately prior to the Effective Date and Time or, as a result of Yorkshire's failure to offer employment to such Business Employee in accordance with the requirements of Paragraphs 2.10 (b), Yorkshire shall reimburse CK Witco for such benefits and payments in an amount not to exceed fifteen times the weekly salary or regular weekly compensation of such Business Employee immediately prior to Effective Date and Time of the severance benefits or similar payments that are payable to such Business Employee and if such Business Employee is hired by Yorkshire during the twelve-month period ending on the first anniversary of the Effective Date and Time, Yorkshire shall reimburse CK Witco for the entire amount of the severance benefits or similar payments that are payable by CK Witco to such Business Employee. Yorkshire shall make such reimbursement within 10 days of receipt of notice of payment by CK Witco. (d) Assumption of Liabilities. Except as specifically provided otherwise in this Paragraph 2.10, on the Effective Date and Time, Yorkshire shall assume all employee- related liabilities and obligations with respect to Business Employees and their beneficiaries and dependents that accrue or are incurred or arise on or after the Effective Date and Time. As of the Effective Date and Time, CK Witco shall not be responsible for wages, salaries and other employee benefits for Business Employees for service of such Business Employees with Yorkshire that accrue or are incurred or arise on or after the Effective Date and Time. The active participation of all employees of the Acquired Businesses in each Employee Benefit Plan shall cease on the Effective Date and Time. (e) Collective Bargaining Agreements. As of the Effective Date and Time, Yorkshire shall adopt and assume the collective bargaining agreements listed on the Disclosure Memorandum (the "Assumed Collective Bargaining Agreements"). On and after the Effective Date and Time, any obligations or liabilities that may be payable under the Assumed Collective Bargaining Agreements, with respect to hourly Business Employees, that relate to services performed on or after the Effective Date and Time, shall be the sole responsibility of Yorkshire. (f) CK Witco Qualified Defined Contribution Plans. As of the Effective Date and Time, CK Witco shall, to the extent permitted by applicable law (i) fully vest the account balances of each Business Employee participating in the CK Witco Individual Account Retirement Plan (the "CK Witco 401(k) Plan") and the CK Witco Employee Stock Ownership Plan (the "CK Witco ESOP"), and (ii) permit the Business Employees to elect to receive a lump sum cash distribution of their vested account balances from the CK Witco 401(k) Plan and CK Witco ESOP in accordance with provisions of Code Section 401(k)(10)(A)(ii). Yorkshire agrees to permit Business Employees to directly roll over distributions from the CK Witco 401(k) Plan and CK Witco ESOP into a defined contribution plan maintained by Yorkshire (the "Yorkshire 401(k) Plan"), which plan shall be qualified under Section 401 and 501 of the Code. The Yorkshire 401(k) Plan shall provide that each Business Employee shall be given credit for purposes of determining eligibility to participate, eligibility for benefits, benefit calculations, benefit forms and vesting, for the Business Employee's service with CK Witco, any of its Affiliates and their predecessor companies, to the extent that the CK Witco 401(k) Plan gave credit for such service. Business Employees shall not accrue additional benefits on or after the effective date and time under the CK Witco 401(k) Plan or CK Witco ESOP. CK Witco shall file as soon as reasonably practicable following the date hereof a private letter ruling request with the U.S. Internal Revenue Service seeking a ruling that the Business Employees may elect to receive a lump-sum cash distribution of their vested account balances from the CK Witco 401(K) Plan and the CK Witco ESOP following the Effective Date and Time, and shall diligently pursue the same. (g) Worker's Compensation. On and after the Effective Date and Time, Yorkshire shall assume liability under workers' compensation laws for claims incurred on or after the Effective Date and Time with respect to Business Employees. CK Witco shall remain liable for all workers' compensation claims incurred prior to the Effective Date and Time. A claim for worker's compensation benefits shall be deemed to be incurred upon the occurrence of the event giving rise to such claim. (h) Welfare Benefit Plans. (i) Yorkshire shall provide Business Employees with credit during the current plan year under Yorkshire's health benefit plans for payments made by Business Employees under CK Witco's health benefit plans for purposes of determining deductibles and out-of-pocket expenses under Yorkshire's health benefit plans. Buyer shall not impose on Business Employees pre-existing condition provisions, proof of insurability requirements, or any similar conditions or requirements that would delay commencement of Business Employees' participation in, or limit Business Employees' level of coverage under, any of Yorkshire's welfare benefit plans (within the meaning of Section 3(l) of ERISA). (ii) From and after the Effective Date and Time, Yorkshire shall pay, discharge, and be responsible for all claims and liabilities for the welfare benefits of the Business Employees incurred on or after the Effective Date and Time. For purposes of this Agreement, the following claims and liabilities shall be deemed to be incurred as follows: (A) life, accidental death and dismemberment and business travel accident insurance benefits, upon the death, disability or accident giving rise to such benefits; (B) long-term disability, upon the event or commencement of the condition resulting in the disability giving rise to such benefit; (C) hospital-provided health, dental, prescription drug or other benefits, which become payable with respect to any hospital confinement, upon commencement of such confinement; and (D) health, dental and/or prescription drug benefits, upon provision of such services, materials or supplies. (iii) Yorkshire shall be responsible for health care continuation obligations under Section 4980B of the Code and Section 601 through 608 of ERISA ("COBRA") for those Business Employees who actually become employees of Yorkshire. CK Witco shall remain responsible for health care continuation obligations under COBRA for those Business Employees who never become employees of Yorkshire. CK Witco agrees that it shall retain the obligation to comply with the certification requirements under the Health Insurance Portability and Accountability Act of 1996 with respect to all individuals covered under any health or medical plan sponsored by CK Witco or any CK Witco Entity who lost coverage at any time prior to the Effective Date and Time. (i) Vacation Pay. Yorkshire shall assume liability for all unpaid vacation pay banked or accrued by any Business Employee prior to the Effective Date and Time, provided such liability has been accrued by CK Witco and reflected on CK Witco's balance sheet. (j) WARN Act. Yorkshire shall be responsible for, and indemnify and hold harmless CK Witco, with respect to compliance with and liability under the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act") and any other similar law, including any requirement to provide any notifications or pay in lieu of notice, in respect of Business Employees who are terminated on or after the Effective Date and Time. (k) CK Witco Nonqualified Equalization Plan and Stock Options. As soon as practicable following the Effective Date and Time, CK Witco shall distribute to Business Employees the full account balances of such employees under the CK Witco Nonqualified Equalization Plan in accordance with the terms thereunder. To the extent options granted under the CK Witco 1998 Long-Term Incentive Plan to Business Employees are not fully vested, CK Witco shall cause such options to be fully vested and immediately exercisable for a period of not less than three (3) years following the employee's cessation of service with CK Witco or any CK Witco Entity upon the Effective Date and Time. (l) 1999 Annual Bonuses and Outstanding Commissions. With respect to the payment of the annual bonuses and any commissions earned by Business Employees in respect of the 1999 fiscal year (the "1999 Annual Bonus and Commissions"), CK Witco shall pay and be solely responsible for the proportionate share of the 1999 Annual Bonus and Commissions, in accordance with and on the same basis as the annual bonus and commission plans and policies of CK Witco as in effect on the Effective Date and Time, for the period commencing on December 27, 1998 and ending on the Effective Date and Time, and Yorkshire shall pay and be solely responsible for the proportionate share of the 1999 Annual Bonus and Commission for the period commencing on the Effective Date and Time and ending on the last day of CK Witco's 1999 fiscal year. For purposes hereof, Yorkshire's proportionate share of the 1999 Annual Bonus and Commissions shall be equal to the product of the (x) 1999 Annual Bonus and Commissions and (y) a fraction, the numerator of which is the number of days from and including the Effective Date and Time until December 31, 1999 and the denominator of which is 365. (m) Administration. Yorkshire and CK Witco shall each make its appropriate employees and data regarding employee benefit coverage available to the other at such reasonable times as may be necessary for the proper administration by the other of any and all matters relating to employee benefits and worker's compensation claims affecting, its employees. (n) Transition Agreement. (i) CK Witco shall provide, or cause to be provided, certain benefits, administration and payroll services relating to the provision of benefits during the transition of the Business Employees from employment with CK Witco to employment with Yorkshire as described below: (A) Yorkshire will be unable to provide payroll services with respect to the Business Employees until it has collected necessary payroll and employment-related data relating to the Business Employees. Until Yorkshire is able to process payroll with respect to the Business Employees (but in no event later than 30 days following the Effective Date and Time), CK Witco will continue to administer the payroll with respect to the Business Employees, including the withholding of employee contributions under the health benefit plan as provided herein. CK Witco agrees to transfer directly to Yorkshire (or a designated service provider) such payroll and employment-related data as soon as practicable following the Effective Date and Time. (B) Yorkshire intends to establish a replacement health benefit plan for the Business Employees as soon as practicable following the Effective Date and Time. Until such plan is operational (but in no event later than 60 days following the Effective Date and Time), CK Witco will continue to cover the Business Employees under the CK Witco Health Benefit Plan, and provide administration services with respect to such plan. (ii) The cost of providing the transition services and any benefits described in this Paragraph 2.10(n) shall be determined based on the actual cost of the service, including overhead, incurred by CK Witco in providing the service and/or the actual cost of the benefit provided by CK Witco. CK Witco will invoice Yorkshire for the cost of such services and benefits and Yorkshire shall remit payment within 7 days of receipt of such invoice. Yorkshire agrees to indemnify CK Witco against all loss, liability, costs and expenses incurred by CK Witco in connection with transition services performed pursuant to this Paragraph 2.10(n). 2.11 Compliance with ERISA, Etc. (a) The CK Witco Disclosure Memorandum lists all plans, programs, and similar arrangements, commitments or agreements maintained by or on behalf of CK Witco, any CK Witco Entity or any other party that provides benefits or compensation to, or for the benefit of, current or former employees of an U.S. Asset Acquired Business, including, but not limited to, pension, retirement, deferred compensation, stock option, stock purchase, stock ownership, savings, stock appreciation right, profit sharing, group insurance, severance, and other benefit plans, contracts and agreements (collectively, the "Employee Benefit Plans"). The CK Witco Disclosure Memorandum identifies each Employee Benefit Plan in which Business Employees were eligible to participate prior to the Effective Date and Time. With respect to each Employee Benefit Plan, to the extent applicable, CK Witco has supplied Yorkshire a true and correct copy of (i) the plan document, including amendments thereto, (ii) the annual report on the applicable Form 5500 series filed with the IRS for the most recent three plan years, (iii) each trust agreement, insurance contract or other funding arrangement relating to such Employee Benefit Plan, including amendments thereto, (iv) the most recent Summary Plan Description and material employee communications for such Employee Benefit Plan, (v) the most recent actuarial report or valuation, and (vi) the most recent IRS determination letter. (b) Each of the Employee Benefit Plans (i) is in substantial compliance with all applicable provisions of ERISA, the Code, and all other applicable laws, (ii) has been administered, operated and managed in accordance with its governing documents, and (iii) has timely filed or distributed all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including annual reports, summary annual reports (Form 5500s), summary plan descriptions, actuarial reports, PBGC- 1 Forms, or returns). (c) All Employee Benefit Plans that are intended to be qualified under Section 401(a) of the Code are so qualified and have received a favorable determination letter from the IRS, and CK Witco is not aware of any circumstances likely to result in the revocation of any such favorable determination letter. (d) No Employee Benefit Plan is a "defined benefit pension plan" (as defined in Section 3(35) of ERISA) or a "multi- employer plan" (as defined in Section 3(37) of ERISA, subject to Title IV of ERISA. (e) With respect to each Employee Benefit Plan, neither such plan, or any trustee, administrator, fiduciary, agent or employee thereof, nor CK Witco or any CK Witco Entity has engaged in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code). With respect to each Employee Benefit Plan, no act, omission or transaction has occurred which would result in the imposition of (i) breach of fiduciary duty liability damages under Section 409 of ERISA, (ii) a civil penalty assessed pursuant to subsection (c), (i) or (l) of Section 502 of ERISA, or (iii) any excise tax under applicable provisions of the Code. With respect to each Employee Benefit Plan, there have been no terminations, partial terminations or discontinuances of contributions without a determination by the IRS that such action does not adversely affect the tax-qualified status of that plan. (f) No liability has been incurred by or is reasonably expected to be incurred by CK Witco or any entity, trade or business that is a member of a group described in Sections 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes CK Witco, which could subject Yorkshire to liability under Title IV of ERISA, Section 301 of ERISA, Sections 412 or 4971 of the Code or the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code. (g) No litigation or claims (other than routine claims for benefits) are pending or, to the knowledge of CK Witco, threatened against, or with respect to, any of the Employee Benefit Plans or with respect to any fiduciary, administrator, sponsor (in their capacities as such), or any party-in-interest thereof. (h) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in any payment or series of payments by the Acquired Businesses to any person which is an "excess parachute payment" (as defined in Section 280G of the Code), increase or secure (by way of a trust or other vehicle) any benefits payable under any Employee Benefit Plan, or accelerate time of payment or vesting of any such benefit. (i) With respect to each Employee Benefit Plan qualifying as a "group health plan" under Section 4980B of the Code or Section 607(l) or 609 of ERISA and related regulations (relating to the benefit continuation rights imposed by COBRA or qualified medical child support orders), CK Witco and each CK Witco Entity has complied in all material respects with all reporting, disclosure, notice, election and other benefit continuation and coverage requirements imposed thereunder as and when applicable to those plans, and has not incurred any direct or indirect liability or is not subject to any loss, assessment, excise tax penalty, loss of federal income tax deduction or other sanction, arising on account of or in respect of any direct or indirect failure at any time to comply with any such federal or state benefit continuation of coverage requirement. 2.12 Admission of Ordinary Shares. Yorkshire agrees that not later than two (2) Business Days following the date of execution of this Agreement, it shall file the Application with the London Stock Exchange and shall use its reasonable efforts to ensure that the application is approved by the London Stock Exchange. In the circular concerning the transaction the subject of this Agreement, the Board of Directors of Yorkshire will unanimously recommend that the Yorkshire members approve this Agreement and declare this Agreement to be in the best interests of Yorkshire. 2.13 Extraordinary General Meeting. Yorkshire agrees to promptly call and hold the Extraordinary General Meeting no later than 15 December, 1999 (subject to any proper adjournment thereof) and in accordance with applicable Law and to perform any and all acts and to do all things as shall be necessary in accordance with applicable Law to so call and hold the Extraordinary General Meeting and to put the Resolutions to vote at that meeting. 2.14 Cooperation by Management of CK Witco. CK Witco hereby undertakes with Yorkshire to provide, and to use its reasonable best efforts to procure that the senior management of CK Witco shall provide, all information known to them or which on reasonable inquiry ought to be known to them and relating to the Acquired Businesses or otherwise as Yorkshire may reasonably require for the purpose of complying with any applicable Law or the requirements of the London Stock Exchange. 2.15 Certain Transactions. CK Witco agrees to execute and complete the transactions set forth on Exhibit BB attached hereto on or before the Closing, including the execution of and performance under those agreements, documents and instruments annexed to Exhibit BB. CK Witco agrees not to make any material changes to the terms of the draft agreements appended to such Exhibit BB without the prior consent of Yorkshire, which consent shall not be unreasonably withheld or delayed. 2.16 Certain Relocation Matters and Costs. Within one (1) year of the Closing Date, CK Witco shall (a) cause the IPD Bagger to be disassembled and removed from the Greenville Land and (b) cause the liquid dye storage tanks to be disassembled and removed from the Lowell Improvements and the Lowell Land, in each case, at CK Witco's sole cost and expense. Such disassemblies and removals shall be done in a workmanlike manner and so as to cause as little disruption as is practicable of the operations being conducted on the Greenville Land and the Lowell Improvements and the Lowell Land, as applicable. CK Witco shall be liable for, and shall indemnify Yorkshire in respect of, all loss, cost, damage and expenses suffered or incurred by any Yorkshire Entity related to or arising in connection with such disassemblies and removals. 2.17 Limited Use of CK Witco Name. For a period of one hundred eighty (180) days following the Effective Date and Time, the Yorkshire Entities, Europe and the Acquired Entities shall have the right to use the CK Witco name for the limited purpose of depleting and disposing of letterhead, product brochures and information, and the like, except (i) in the case of Inventories and product packaging for which the relevant period shall be one (1) year following the Effective Date and Time and (ii) for the last one hundred twenty (120) days of the foregoing 180-day period, all of such letterhead, product brochures and information, and the like, such items shall also include the "Yorkshire" name with equal size and prominence as the "CK Witco" name. Other than as permitted in this Paragraph 2.17, from and after the Effective Date and Time no Yorkshire Entity, Europe or any Acquired Entity shall use the name "CK Witco" in any fashion. Yorkshire shall have a reasonable period of time (not to exceed forty five (45) days) following the Closing Date to change the legal name of Europe and each Acquired Entity so as not to include the "CK Witco" name. 2.18 Distributable Profits and Voting with Respect to Europe. Yorkshire confirms it is aware of CK Witco's intent to procure that Europe's Shareholders' Meeting will distribute an interim dividend in an amount not to exceed the Belgian Francs equivalent of US$25,000,000 (to the extent lawfully possible) between the date of this Agreement and the Closing Date. Yorkshire undertakes, on behalf of itself and Europe, that between the Closing Date and 1 January 2000 it will not carry out any act outside the scope of the ordinary daily management of Europe intended to reduce the distributable profits of Europe (within the meaning of Article 77bis of the Belgian Company Laws) shown in Europe's annual accounts for the business year closed on December 31, 1999, below the amount referred to above. 2.19 Mail Received after Closing. Following the Closing, Yorkshire may receive and open all mail addressed to CK Witco and deal with the contents thereof in its discretion to the extent that such mail and the contents thereof relate to an Acquired Business, Europe, an Acquired Entity or the Transferred Assets, or any of the Assumed Liabilities or any European Retained Liabilities. All other mail received by Yorkshire shall be promptly forwarded to CK Witco. Following the Closing, CK Witco shall promptly forward, or cause to be promptly forwarded, to Yorkshire all mail received by it that relate to an Acquired Business, Europe, an Acquired Entity or the Transferred Assets, or any of the Assumed Liabilities or any European Retained Liabilities. 2.20 Notices to Customers; Collection of Receivables. (a) Between the date hereof and the Closing Date, CK Witco, in consultation and cooperation with Yorkshire, shall by written notice direct all customers of the Acquired Businesses to make payment of amounts owed by such customers to CK Witco and its Affiliates in respect of an Acquired Business to such bank account(s) as shall be mutually acceptable to CK Witco and Yorkshire. (b) Commencing with the Business Day that immediately follows the Effective Date and Time, CK Witco hereby grants to Yorkshire, the Yorkshire Entities and their Affiliates the power, right and authority, coupled with an interest, to receive, endorse, cash, deposit, and otherwise deal with, in the name of the appropriate CK Witco Entity and in a manner consistent with this Paragraph 2.20, any checks, drafts, documents, and instruments evidencing payment of Receivables which are payable to, payable to the order of, or endorsed in favor of, that CK Witco Entity. 2.21 Payments for CK Witco European Liabilities. Between the date hereof and the Closing Date, CK Witco, in consultation with Yorkshire, shall establish such bank account(s) with such level of funds (the "Excluded Liability Fund") as shall be mutually acceptable to CK Witco and Yorkshire. The purpose of the Excluded Liability Fund shall be to enable Yorkshire to make payments to certain specified creditors with respect to certain CK Witco European Liabilities due soon after the Closing Date. Commencing with the Business Day that immediately follows the Effective Date and Time, only when due, and in consultation with CK Witco, the relevant Yorkshire Entity shall draw from the Excluded Liability Fund to make payments to relevant creditors on relevant dates as determined pursuant to Exhibit CC attached to this Agreement. 2.22 Certain IP Registration Costs. (a) CK Witco shall reimburse Yorkshire and each Yorkshire Affiliate for all Duty Costs reasonably required to be incurred by an Agency and that are paid by Yorkshire or a Yorkshire Affiliate in order to register title with such Agency of ownership of those Proprietary Rights listed on Exhibit DD attached to this Agreement in the name of either CK Witco or Europe or an Acquired Entity (as the case may be) in so far as the foregoing is not already the case. (b) If in so far as at Closing any of the registered trademarks and patents are not assigned to Yorkshire (or its designates) pursuant to this Agreement, then, in such case, from the Closing until the date of such assignment, CK Witco shall not (and shall ensure that its Affiliates shall not) use, assign, exploit or create any third party rights in such registered trademarks and patents other than as envisaged under any of the Additional Agreements (and any such use or exploitation will comply with the terms of the relevant Additional Agreement). CK Witco will, until such registered patents or trademarks are assigned to Yorkshire (or its designates), forward promptly to Yorkshire any correspondence that it may receive from the relevant registry or any third party that relates to such registered trademarks and patents. CK Witco and Yorkshire shall use their reasonable commercial efforts to file the assignments for the registered trademarks and patents to Yorkshire (or its designates) within thirty (30) days from the Effective Date and Time. To the extent there is a conflict between the terms of any relevant trademark assignment or patent assignment and this Agreement, the terms of this Agreement shall control. 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK WITCO, COLORS, HOLDINGS AND EUROPE CK Witco has prepared and delivered to Yorkshire a disclosure memorandum (the "CK Witco Disclosure Memorandum") setting forth any and all exceptions or supplemental information to the representations, warranties and covenants contained in Articles 3, 4 and 6 of this Agreement, and has delivered to Yorkshire documents and materials pursuant to or in connection with this Agreement, and any and all modifications or amendments to the documents and materials have been or will be delivered to Yorkshire with the CK Witco Disclosure Memorandum. The disclosures set forth in the CK Witco Disclosure Memorandum qualify or supplement only those representations, warranties and covenants specifically referenced and referred to in the CK Witco Disclosure Memorandum, and a disclosure or supplement related to any particular representation, warranty or covenant shall not qualify or supplement any other representation, warranty or covenant unless evident by its context or unless expressly stated. Nothing in the CK Witco Disclosure Memorandum or in any documents or materials delivered to Yorkshire shall operate to limit or exclude the liability of CK Witco and Holdings under or in respect of Part B of the Taxation Schedule or to qualify or supplement any of the covenants set out in the Taxation Schedule, it being understood and agreed that the representations, warranties and covenants set forth in the Taxation Schedule shall be the exclusive representations, warranties and covenants made in respect of the matters covered thereby. To induce Yorkshire to enter into this Agreement and to consummate the transactions contemplated by this Agreement, subject to the qualifications set forth in the CK Witco Disclosure Memorandum, CK Witco, Colors, Holdings and Europe, jointly and severally, represent and warrant to Yorkshire, Americas, each other Yorkshire Entity, and each Affiliate of Yorkshire, and covenants and agrees, as of the date hereof and again as of the Closing Date, as follows: 3.1 Existence. (a) Each of CK Witco and Colors is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and is entitled to own or lease its assets and properties and to carry on its business as and in the places where its business is conducted and its assets and properties are owned or leased. Holdings is a private company with limited liability incorporated under the laws of The Netherlands and Europe is a private company with limited liability incorporated under the laws of Belgium. Each of Europe and Holdings has full corporate power and is entitled to own or lease its assets and properties and to carry on its business as and in the places where its business is conducted and its assets and properties are owned or leased. Each of CK Witco, Colors, Holdings and Europe is authorized, licensed or qualified in those jurisdictions identified in the CK Witco Disclosure Memorandum and is not otherwise required to be authorized, licensed, qualified or domesticated as a foreign Person in any other jurisdiction. CK Witco has delivered to Yorkshire true, correct and complete copies of the Certificate of Incorporation and Bylaws or equivalent organizational documents and agreements of each of Holdings and Europe, as amended to date. CK Witco has delivered to Yorkshire the minute book and statutory records of Holdings and Europe, which in each instance contains all records of meetings and actions taken by its respective shareholders and directors, to the extent required by applicable law, and shows all corporate actions taken by its respective shareholders and board of directors (and any committees thereof). Europe's authorized, issued and outstanding capital is as described in the CK Witco Disclosure Memorandum and is wholly-owned by those Persons identified in the CK Witco Disclosure Memorandum. No Person has any option or right to acquire any of the equity or share capital of Europe. The equity and share capital of Europe is free and clear of any and all Liens. (b) Each CK Witco Entity is identified in the CK Witco Disclosure Memorandum. Each such CK Witco Entity is an entity of the type described in the CK Witco Disclosure Memorandum, in each case having full entity power and authority, and duly organized, registered and validly existing under the laws of the jurisdiction of its organization as so identified in the CK Witco Disclosure Memorandum and is entitled to own or lease its assets and properties and to carry on its business as and in the places where its business is conducted and its assets and properties are owned or leased. (c) Each Acquired Entity is duly organized, registered and validly existing under the laws of the jurisdiction of its organization and has full entity power and is entitled to own or lease its assets and properties and to carry on its business as and in the places where its business is conducted and its assets and properties are owned or leased. Each Acquired Entity is duly authorized, licensed, qualified or domesticated as a foreign Person in those jurisdictions outside of its jurisdiction of organization as listed in the CK Witco Disclosure Memorandum and is not otherwise required to be authorized, licensed, qualified or domesticated as a foreign Person in any other jurisdiction. CK Witco has previously furnished Yorkshire with true, correct and complete copies of the organizational documents, as amended to the date hereof, of each Acquired Entity. CK Witco has delivered to Yorkshire true, correct and complete copies of the minutes and other similar records of meetings and actions by the equity holders and directors (or their equivalent under any applicable Law) of each Acquired Entity. (d) The CK Witco Disclosure Memorandum lists: (i) all locations where Colors, Europe and each Acquired Entity currently owns or leases real property, has an office or place of business; (ii) all locations of real or immovable property owned or leased by any CK Witco Entity, Europe or an Acquired Entity and used in an Acquired Business by such CK Witco Entity, Europe or Acquired Entity; and (iii) all trading names under which any CK Witco Entity, Europe or Acquired Entity or its respective predecessors has operated, if different from its present legal name, at any time since December 31, 1995. (e) The jurisdiction of organization, type of entity, capitalization and record and beneficial holders of all share capital of each Acquired Entity is as set forth in the CK Witco Disclosure Memorandum. No Person has any option or right to acquire any of the equity or share capital of any Acquired Entity. The equity and share capital of each Acquired Entity is free and clear of any and all Liens. 3.2 Subsidiaries. Other than for the Acquired Entities, neither Colors, Holdings nor Europe, nor any Acquired Entity, owns, either directly or indirectly, any interest in any Person, nor does it possess any right, option or commitment to purchase or otherwise acquire any interest (whether direct or indirect), in any Person other than for Europe and the Acquired Entities, and none of CK Witco, any CK Witco Entity, Europe or any Acquired Entity has any legal responsibility, duty, obligation or liability in respect of any such Person, nor do any of the Transferred Assets or the revenues or profits of an Acquired Business, Colors, Europe or any Acquired Entity stand for any duty, obligation or liability of any such Person. 3.3 Authority; Inconsistent Obligations. (a) Each of CK Witco, Colors, Holdings and Europe has the full right, power and authority to execute and deliver and to perform and comply with this Agreement and the Additional Agreements to which any of them is or will be a party. All proceedings and actions required to be taken by any of CK Witco, Colors, Europe and Holdings to authorize the execution, delivery and performance of this Agreement and the Additional Agreements have been taken. This Agreement and each Additional Agreement to which any of them is or will be a party, have been, or in the case of any Additional Agreement will be at the Closing, duly and validly executed and delivered by each of them, as appropriate, by its duly authorized officers or representatives. This Agreement constitutes, and each Additional Agreement when executed and delivered will constitute, the valid and legally binding obligation, subject to general equity principles, of each of CK Witco, Colors, Holdings and Europe, as appropriate, enforceable in accordance with its respective terms. (b) Neither the execution and delivery of this Agreement or of the Additional Agreements by CK Witco, Colors, Holdings or Europe, nor the consummation of the transactions contemplated by this Agreement or by any Additional Agreement, will (i) result in a violation of the Certificate or Articles of Incorporation and By-Laws or other organizational or foundation documents of any of them or any CK Witco Entity or Acquired Entity, (ii) violate any Law or Order applicable to any of CK Witco, Colors, Europe, the other CK Witco Entities (as it relates to the Acquired Business) or any Acquired Entity, or (iii) result in a breach of, conflict with or default under, any term or provision of any material indenture, note, mortgage, bond, security agreement, loan agreement, guaranty, pledge, or other instrument, contract, agreement or commitment to which any of CK Witco, Colors, Europe, Holdings, any CK Witco Entity (as it relates to the Acquired Business) or any Acquired Entity is or will be upon consummation of the transactions contemplated by this Agreement be a party or by which any of them or any of their respective assets, properties, or businesses is subject or bound; nor will these actions result in (x) the creation of any Lien on any of the Transferred Assets or the share capital, assets, properties, businesses, revenues or profits of Europe or any Acquired Entity, (y) the acceleration or creation of any obligation of Colors, Europe, Holdings or any Acquired Entity, or (z) the forfeiture of any material right or privilege of an Acquired Business, Colors, Europe or any Acquired Entity that may affect its ability to perform under this Agreement or any Additional Agreement or to carry on its business. 3.4 No Violation; Compliance with Laws. None of CK Witco, Colors, Holdings, Europe or any Acquired Entity is in default under or in violation of (a) its Certificate or Articles of Incorporation or By-Laws, or other organizational and foundation documents, as appropriate, or (b) any Order, and the operations of each Acquired Business and CK Witco, Colors, Holdings, Europe and each Acquired Entity have since December 31, 1995, been conducted, in all material respects, in accordance with, and are in compliance in all material respects with, all applicable Laws. Since December 31, 1995, none of Colors (in respect of an Acquired Business), Europe, Holdings or any Acquired Entity has received any written notification of any asserted present or past failure by any of them to comply with any Order or Laws. 3.5 Consents. The execution and delivery by CK Witco, Colors, Holdings and Europe of this Agreement and the Additional Agreements to which any of them is to be a party on the Closing Date, the consummation of the transactions contemplated in this Agreement or the Additional Agreements, the conduct of the Acquired Businesses on and after the Effective Date and Time, and the performance by CK Witco, Colors, Europe, Holdings, the other CK Witco Entities or any Acquired Entity of its obligations under or pursuant to this Agreement or any Additional Agreement, as appropriate, do not (a) require the consent or approval of, or any filing with or notice to, any Government or other Person, other than for the HSR Filing, (b) require the consent or approval of CK Witco's shareholders, or (c) impose any other material term, condition or restriction on the Acquired Businesses, the Transferred Assets, Colors, Holdings, Europe, the other CK Witco Entities or any Acquired Entity pursuant to any Order or Law. 3.6 Possession of Licenses, Etc. Colors, Europe and each Acquired Entity possesses all material certificates, licenses, permits and other authorizations from Governments (collectively, the "Permits") that are necessary for the ownership, maintenance and operation of the Transferred Assets and the Acquired Businesses, and none of CK Witco, Colors, Holdings, Europe, the other CK Witco Entities or any Acquired Entity is or has been since December 31, 1995, in violation of any such Permits. All Permits held by each of Colors, Europe, the other CK Witco Entities or any Acquired Entity in connection with the Acquired Businesses, are in full force and effect, and neither the validity nor continuance of which will be adversely affected by the consummation of the transactions contemplated by this Agreement. 3.7 Sufficiency of Assets. (a) The assets of each Acquired Entity and Europe, and assets the benefit of which is conferred upon the Acquired Entities or Europe pursuant to an Additional Agreement, constitute to the knowledge of CK Witco and Holdings and except for the services of any current employees of any of the CK Witco Entities, the Acquired Entities or Europe, the assets necessary to operate the Acquired Businesses outside the Americas IPD Business Territory substantially in the manner presently operated by the CK Witco Entities, the Acquired Entities and Europe as of the Closing Date. (b) The Transferred Assets constitute, to the knowledge of CK Witco or Holdings and except for (i) services of any current employees of the CK Witco Entities or Colors necessary to operate the U.S. Asset Acquired Businesses and (ii) any assets the benefit of which may be conferred pursuant to an Additional Agreement, the assets necessary to operate the U.S. Asset Acquired Businesses substantially in the manner presently operated by the CK Witco Entities as of the Closing Date. 3.8 Grants and Allowances. Since December 31, 1995, there have been no grants, allowances, subsidies or other like sums paid or pledged to Europe or any Acquired Entity by any supranational, national or local authority or government agency. 3.9 Year 2000 Compliance. (a) All of the equipment, Software and computer hardware, owned or used by a CK Witco Entity, Europe or an Acquired Entity or to the knowledge of CK Witco or Holdings, used and operated by third parties on behalf of a CK Witco Entity, Europe or an Acquired Entity, which performs or is or may be required to perform functions involving dates or the computation of dates, or containing date related data, has the programming, design and performance capabilities to ensure that: it will not suffer any material Malfunction; and it will not, as a result of the date change at the end of the twentieth century or the input, processing, storage or use of dates up to and including December 31, 2000, (i) be adversely affected, (ii) require changes in inputting or operating practices, (iii) produce materially invalid or incorrect output or results, (iv) cause any materially abnormal ending scenario, or (v) suffer any material diminution in functionality or performance. (b) All of the equipment, Software and computer hardware, owned or used by a CK Witco Entity, Europe or an Acquired Entity or, to the knowledge of CK Witco or Holdings, used and operated by third parties on behalf of a CK Witco Entity (as it relates to the Acquired Business), Europe or an Acquired Entity, includes an indication of century in all date related user interfaces and data interfaces. (c) All date related data stored electronically by or on behalf of a CK Witco Entity (as it relates to the Acquired Business), Europe or an Acquired Entity is in such form that its input, processing, storage or use by or on behalf of a CK Witco Entity, Europe or an Acquired Entity will not, directly or indirectly, cause any material Malfunction in any of the equipment, Software or computer hardware. (d) Attached to the CK Witco Disclosure Memorandum are true, correct and complete copies of all Year 2000 readiness and remediation plans related to an Acquired Business. 3.10 Financial Statements. Prior to the date of this Agreement, CK Witco has delivered to Yorkshire copies of the Special Purpose Statements of the Acquired Businesses as of and for the periods ended December 28, 1996, December 27, 1997, December 26, 1998, and June 26, 1999, together with the report thereon of KPMG LLP, including a Special Purpose Combined Statements of Net Assets, Special Purpose Combined Statements of Revenues and Expenses and Comprehensive Income (Loss), and Special Purpose Combined Statements of Cash Flows (collectively, the "Special Purpose Statements"), all of which are attached to this Agreement as Exhibit EE. The Special Purpose Statements have been prepared from the books and records of the Acquired Businesses and have been prepared in accordance with GAAP consistently applied and present fairly the financial condition of the Acquired Businesses as at the respective dates of the Special Purpose Statements and the revenues, expenses and comprehensive income (loss), net assets and cash flows for the respective periods then ended. 3.11 Euro-Affected Products and Services. To the extent that CK Witco's software, hardware, systems, products and services receive, recognize, use or process financial information from any one of the Participating Member States planning to change their currencies to the Euro (collectively, the "Euro- Affected Products and Services"), and to the knowledge of CK Witco or Holdings, all of CK Witco's Euro-Affected Products and Services included within the Transferred Assets or relating to any other CK Witco Entity, Europe or an Acquired Entity will (i) operate without material errors, problems, delays or the need for any further modifications as a result of the introduction of the Euro in whole or in part as a European currency or currency unit and (ii) continue to receive, recognize, use and process both national currency units and Euro units (and permit conversions from national currency units to Euro units and vice-versa) without errors, problems, delays or the need for any further modifications before, during and after the period beginning January 1, 1999. 3.12 Liabilities. Neither Europe nor any Acquired Entity has any debt, borrowings, Liability or obligation of any kind, whether accrued, absolute, contingent or otherwise, except the European Retained Liabilities. 3.13 Title to Properties. All of the Transferred Assets and the assets and properties of Europe and each Acquired Entity, whether personal or movable or immovable or real, tangible or intangible, are owned exclusively by the relevant CK Witco Entity, Europe or an Acquired Entity (including the land at Oissel, France shown hatched on Exhibit FF attached to this Agreement) free and clear of any and all Liens. 3.14 Receivables. The reserve with respect to Receivables set forth in the relevant Special Purpose Statement is adequate in accordance with GAAP consistently applied. All of the Receivables were, are and will be, valid and, to the knowledge of CK Witco or Holdings, collectible obligations of the respective makers or the relevant account debtors and were not, and are not, subject to any offset, counterclaim or recoupment, except to the extent reflected in the customer claim account as shown on the relevant Special Purpose Statement. 3.15 Inventories. Subject to any applicable reserve set forth in the relevant Special Purpose Statement and to the knowledge of CK Witco or Holdings, the Inventories less than two (2) years old are saleable and useable in the ordinary and regular course of the Acquired Businesses. The Inventories reflected on the relevant Special Purpose Statement have been valued at the lower of cost and net realizable value. 3.16 Movable Property (a) All of the machinery, equipment, vehicles, and other items of movable or personal property which are included within the Transferred Assets or owned or leased by Europe or any Acquired Entity are in good condition and repair in all material respects, subject to normal wear and tear, suited for the use intended, and are and have been operated in all material respects in conformity with all applicable insurance requirements, manufacturer's operating manuals, manufacturer's warranties, and applicable Orders and Laws. CK Witco has previously delivered to Yorkshire the Fixed Assets Registers, which together constitute a true, correct and substantially complete list of all movable property owned by Europe or any Acquired Entity or included within the Transferred Assets. To the best of CK Witco's or Holdings' knowledge, there are no defects or conditions which would cause the movable property to be or become inoperable or unsafe. (b) To the best of CK Witco's or Holdings' knowledge, all lessors of any machinery, equipment or other movable property included with the Transferred Assets or leased by Europe or an Acquired Entity have in all material respects performed and satisfied their respective duties and obligations under the leases, and neither Europe nor any Acquired Entity has brought or threatened any Action against any relevant lessor for failure to perform and satisfy its duties and obligations under the relevant lease. 3.17 Immovable Property. (a) Neither Europe nor any Acquired Entity owns any real or immovable property except as listed in the CK Witco Disclosure Memorandum. The relevant CK Witco Entity is lawfully occupying and using the Leased Real Property. Europe and each Acquired Entity is lawfully occupying and using each parcel of real or immovable property used in its business (each such parcel of real or immovable property together with the Leased Real Property being sometimes referred to herein as the "Immovable Property"). (b) All material agreements with respect to leases, easements, rights of way, licenses or other interests in Immovable Property granted to Colors, Europe or any Acquired Entity or included among the Transferred Assets (collectively, the "Property Leases") are listed in the CK Witco Disclosure Memorandum. Each of the Property Leases is freely assignable. The interest of Colors, Europe and each Acquired Entity, as applicable, in and under each of the Property Leases is free and clear of any material defects, claims or Liens and subject to no present Action or threatened Action. (c) There is lawfully available to all the Immovable Property and the Land and Improvements, through private easements and facilities or properly dedicated public easements and facilities, all of the water, gas, sewer, electricity and telephone services which are now being utilized and sufficient to allow Europe, the CK Witco Entities and the Acquired Entities, as applicable, to continue to conduct the Acquired Businesses as presently conducted by them. All of the Immovable Property and Land has reasonably suitable ingress and egress and each parcel of Immovable Property and Land has reasonably suitable access to the existing paved roads and other public rights of way, which access is not limited or restricted, except as provided in the Property Leases. (d) The present use, occupancy and operation of the Immovable Property, and all aspects of the improvements on and to the Immovable Property, and the Land and Improvements, are in compliance in all material respects with all Laws and with all private restrictive covenants of record, and neither CK Witco nor Holdings has any knowledge of any proposed change to the applicable Laws or the private restrictive covenants of record that would affect any of the Immovable Property or Land, or its use, occupancy or operation. There exist no conflicts or disputes with any Government or Person relating to any Immovable Property or Land or the activities on the Immovable Property or Land. All Improvements are in good condition and repair, ordinary wear and tear excepted, suited for the operation of the Acquired Businesses, as applicable. 3.18 Environmental Matters. (a) In respect of environmental matters: (i) The Acquired Businesses comply and have since December 31, 1995 complied in all material respects with all applicable Environmental Laws and the conditions of all Environmental Licenses. (ii) All Environmental Licences necessary for the operation of the Acquired Businesses are in full force and effect and there are no circumstances entitling any such Environmental Licences to be revoked, suspended, amended, varied, or withdrawn. (b) In respect of the Oissel Facility: (i) The purchase price paid under the ICI Agreement was US$26,000,000. (ii) The total value of all claims made by any of Holdings, Europe, or any Acquired Entity under the ICI Agreement as at today's date is no more than US$250,000. (iii) To the best of CK Witco's and Holdings' knowledge and belief, no act, omission, operation or transaction of any CK Witco Entity, Holdings, Europe or any Acquired Entity, or any of their respective Affiliates, has affected or compromised the ability of Europe to make a claim under the ICI Agreement. The representation and warranty set out in this Paragraph 3.18(b)(iii) shall be of no further force and effect after the fifth anniversary of the Effective Date and Time. 3.19 Intellectual Property Rights. (a) A CK Witco Entity, Europe or an Acquired Entity, as applicable, owns the entire right, title and interest in and to the following, whether or not registered (all of the following collectively, the "Proprietary Rights") and such Proprietary Rights are in full force and effect and not subject to any application for cancellation or amendment or to the best of any CK Witco Entity's or Holdings' knowledge not subject to a license of right or compulsory license: (i) all patents, patent applications and registrations, trademarks, trademark applications and registrations, copyright applications and registrations, trade names and industrial designs, service marks and service mark applications, used by any CK Witco Entity, Europe or an Acquired Entity in the operation of an Acquired Business including those to be licensed to Yorkshire and its Affiliates pursuant to an Additional Agreement, (ii) all trade secrets, know-how, inventions and other Intellectual Property Rights owned or used by Europe, a CK Witco Entity or an Acquired Entity in the operation of an Acquired Business including those to be licensed to Yorkshire and its Affiliates pursuant to an Additional Agreement, and (iii) all computer systems and application software, including all documentation relating to the computer systems and application software, and the latest revisions of all related object and source codes therefor, used by Europe, a CK Witco Entity or an Acquired Entity in the operation of an Acquired Business. A CK Witco Entity, Europe or an Acquired Entity, as applicable, owns the entire right, title and interest in and to all of the Proprietary Rights, free and clear of any and all Liens and none of them has granted any license to any third party with relation to any of the Proprietary Rights. The CK Witco Disclosure Memorandum sets forth a list of (y) all patents, patent applications and registrations, trademarks, trademark applications and registrations, copyright applications and registrations, trade names and industrial designs and service marks and service mark applications owned or used by Europe, any CK Witco Entity or Acquired Entity in the operation of an Acquired Business, and (z) all material computer systems and application software, used by Europe, a CK Witco Entity or an Acquired Entity in the operation of an Acquired Business. All of the Proprietary Rights are included among the Transferred Assets or are licensed to Yorkshire or its Affiliates pursuant to the relevant Additional Agreement, (iv) no CK Witco Entity, Europe or Acquired Entity has granted or is obliged to grant any licenses under any Proprietary Rights owned by it or licensed to it or furnish know-how to any person, (v) no CK Witco Entity, Europe or Acquired Entity has been granted any license or right under or in respect of any Intellectual Property Rights of a third party and has not manufactured, sold, supplied or developed anything which is the subject of any such Intellectual Property Rights, whether presently existing or (to the knowledge of any CK Witco Entity or Holdings) applied for and by carrying on the Acquired Businesses in the ordinary course no CK Witco Entity, Europe or Acquired Entity is or will become liable to pay any royalty or like fee, (vi) to the best of each of the CK Witco Entities' or Holdings' knowledge no act, omission or event has occurred which would entitle any authority or person to cancel, forfeit or modify any Proprietary Rights and so far as each CK Witco Entity and Holdings is aware the Proprietary Rights are valid, (vii) to the best of each of the CK Witco Entities' or Holdings' knowledge there exists no actual or threatened infringement (including misuse of confidential information) or any event likely to constitute an infringement or breach by any third party of any of the Proprietary Rights, (viii) all application, renewal and other official statutory and regulatory fees rendered to and received by any CK Witco Entity, Europe or Acquired Entity prior to the date hereof relating to the administration and maintenance of the Proprietary Rights or for the protection or enforcement thereof have been duly paid and all commercially reasonable steps have been taken for their maintenance and protection, (ix) all inventions made by any employees of any of the CK Witco Entities, Europe and Acquired Entities and used or enjoyed by the CK Witco Entities, Europe or Acquired Entities were made in the course of the normal duties of the employee concerned and no claim for compensation under section 40 Patents Act 1977 (United Kingdom) or similar law under any other jurisdiction or otherwise has been made against any of the CK Witco Entities, Europe or Acquired Entities nor to the best of the knowledge, information and belief of each of the CK Witco Entities or Holdings is any such claim likely to be made, or (x) CK Witco has the right to grant the licenses set out in the Trade Mark License Agreement and the Patent and Technology License Agreement and neither the granting of the same nor use or exploitation of the licensed rights by Yorkshire and its Affiliates (or its sub-licensees) shall infringe the Intellectual Property Rights of any third party. (b) There is no existing or, to the best knowledge of CK Witco or Holdings, threatened, challenge to the use by Europe, any CK Witco Entity or any Acquired Entity in connection with an Acquired Business of any of the Proprietary Rights, and, to the best knowledge of CK Witco or Holdings, the use of the Proprietary Rights and the Intellectual Property Rights relating to the Acquired Businesses does not infringe on the rights of any third party. Except as and to the extent reflected in the Special Purpose Statements, no royalty or other fee is required to be paid by Europe, any CK Witco Entity or any Acquired Entity to any Person in respect of the use of any of the Proprietary Rights. (c) No CK Witco Entity, any Acquired Entity or Europe has received any notice, complaint, threat or claim alleging infringement of, any patent, trademark, trade name, copyright, industrial design, trade secret or any other intellectual property or proprietary right of any Person. To the best knowledge of CK Witco or Holdings, the conduct of each Acquired Business and the use of the Proprietary Rights do not infringe on any patent, trademark, trade name, copyright, industrial design, trade secret or any other Intellectual Property Right or Proprietary Right of any Person. (d) To the best knowledge of CK Witco or Holdings, there are no rights of third parties with respect to any patent, patent application, invention, copyrights, trademark, service mark, trade secret, trade name, device or other Intellectual Property Rights which would have an adverse effect on the operations or prospects of either Acquired Business, the Transferred Assets, Europe or any Acquired Entity. 3.20 Contracts. The CK Witco Disclosure Memorandum contains a true, correct and complete list of all Contracts and Assigned Contracts. CK Witco has, prior to the date of this Agreement, delivered to Yorkshire a true, correct and complete copy of each Assigned Contract and each material written and each material oral agreement, commitment and arrangement to which Europe or any Acquired Entity is a party or under which Europe or any Acquired Entity has any rights or obligations (collectively, the "Contracts") or, in the case of an oral Contract, provided a true and correct summary. None of the Assigned Contracts or Contracts, individually or together, constitute an unlawful restraint of trade under any applicable Law. All obligations to be performed by any CK Witco Entity (relating to an Acquired Business), Europe or any Acquired Entity as of the date of this Agreement under any Assigned Contract or any Contract to which any of them is a party have been performed in all material respects in accordance with their terms and no claim exists in respect of the Assigned Contracts or the Contracts. Neither any CK Witco Entity, Europe nor any Acquired Entity is a party to any agreement or commitment relating to an Acquired Business which was likely to, at the time it was entered into, result in a loss upon completion of performance. All of the Assigned Contracts and the Contracts are valid, binding and enforceable in accordance with their terms, and are in full force and effect, subject to the effects of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and to general equitable principles; no event has occurred which would constitute a material default (whether with or without notice, lapse of time or the happening or occurrence of any event) under any Assigned Contract or any Contract; all parties to any Assigned Contract or any Contract have consented (where any relevant consent is necessary) to the consummation of the transactions contemplated by this Agreement without requiring modification in the rights or obligations thereunder; and consummation of the transactions contemplated by this Agreement, to the knowledge of CK Witco or Holdings, will not result in any other party thereto having the right to terminate any such Assigned Contract or Contract or to accelerate performance thereunder. 3.21 Insurance. Europe and the Acquired Entities are the sole owners of their insurance policies, which policies insure their assets, properties and businesses against the types of risks and in the amounts as are prudent and customary in the geographies in which they conduct their respective businesses, and all relevant policies are in full force and effect. All premiums due on any relevant policies have been paid, and no CK Witco Entity or Acquired Entity has received any notice of cancellation or non-renewal with respect to any insurance policy. There is no material Liability for premiums or retrospective premium adjustments for any period prior to the date of this Agreement in respect of any such insurance policies. 3.22 Litigation; Contingencies. There are no Actions existing or, to the knowledge of CK Witco or Holdings, threatened against, by or affecting the Transferred Assets, any CK Witco Entity (insofar as relates to an Acquired Business), Europe or any Acquired Entity or any of its property, business, revenues or assets, in any Forum. No CK Witco Entity (insofar as relates to an Acquired Business), Europe or any Acquired Entity has been charged with, or is under investigation with respect to, any charge concerning any violation of any provision of any Law. 3.23 Taxes. Each U.S. Asset Acquired Business has filed all Tax Returns that it was required to file, and has paid all Taxes shown thereon as owing, except where the failure to file Tax Returns or to pay Taxes would not have a material adverse effect on the financial condition of the U.S. Asset Acquired Businesses taken as a whole or would result in a Lien on any of the Transferred Assets. There have been no material United States Governmental Tax audits or examinations conducted on, nor are any material tax audits presently being conducted with respect to, any U.S. Asset Acquired Business at any time during the 5-year period immediately preceding the date of this Agreement. There are no currently effective waivers of the applicable statutory period of limitation for any Taxes for any taxable period. No U.S. Asset Acquired Business is a party to any Tax sharing or Tax allocation agreement, understanding, arrangement or commitment. Representations relating to taxes of other than the U.S Asset Acquired Businesses (which are dealt with exclusively in this Paragraph 3.23) are exclusively as set out in the Taxation Schedule. 3.24 Employment and Labor Matters. (a) In respect of U.S. Employees: Except as set forth in the CK Witco Disclosure Memorandum, Colors is not a party to any collective bargaining agreement or agreement of any kind with any union or labor organization, and no union or other collective bargaining unit has been certified or recognized by Colors as representing any employee, nor, to the knowledge of CK Witco or Holdings, is a union or other collective bargaining unit seeking recognition for such purpose. There are no controversies pending, or to the knowledge of CK Witco or Holdings' threatened, between Colors and any labor union or collective bargaining unit representing, or seeking to represent, any of its employees. There has been no attempt by any union or other labor organization to organize any of Color's employees at any time in the past five years. Colors has complied with all applicable Laws relating to wages, hours, health and safety, payment of social security, withholding and other taxes, maintenance of worker's compensation insurance, labor and employment relations, and employment discrimination, including the Americans with Disabilities Act. (b) In respect of non-U.S. based employees: (i) The names of the employees of Europe and each Acquired Entity on the date immediately preceding the date of this Agreement earning a basic rate of pay of US$50,000 (or its reasonable equivalent in any other currency) per annum or more are set out in the list annexed to the CK Witco Disclosure Memorandum ("European/Asian Employees"). (ii) On the day immediately preceding the date of this Agreement, no European/Asian Employee has given, or has been given notice of termination of his employment. (iii) The principal terms of employment of each European/Asian Employee are annexed to the CK Witco Disclosure Memorandum. The rate of each such European/Asian Employee's emoluments as at April 1999 is stated in that annex and since that date no change has been made, promised or indicated in the rate of such emoluments. (iv) Each of Europe and each Acquired Entity maintain accurate records in respect of all European/Asian Employees which comply in all material respects with the legal requirements of the jurisdiction in which such Employees work. (v) Within a period of one year preceding the date of this Agreement, none of Europe or any Acquired Entity has: (A) made any redundancies; or (B) been a party to any transfer which has triggered transfer of undertaking obligations under relevant legislation and none of Europe or any Acquired Entity has failed to any material extent to inform and consult any independent trade union and/or Works council. (vi) On the date immediately preceding the date of this Agreement, there is no existing, material dispute between any of Europe or any Acquired Entity and any material number or category of its employees, or any trade union or employee representative body or other organization formed for a similar purpose and there are no circumstances (other than Closing) which are likely to give rise to any such dispute. 3.25 Compliance with ERISA, etc. (a) The CK Witco Disclosure Memorandum lists all plans, programs, and similar arrangements, commitments or agreements maintained by or on behalf of CK Witco, any CK Witco Entity or any other party that provides benefits or compensation to, or for the benefit of, current or former employees of an U.S Asset Acquired Business, including, but not limited to, pension, retirement, deferred compensation, stock option, stock purchase, stock ownership, savings, stock appreciation right, profit sharing, group insurance, severance, and other benefit plans, contracts and agreements (collectively, the "Employee Benefit Plans"). With respect to each Employee Benefit Plan, to the extent applicable, CK Witco has supplied Yorkshire a true and correct copy of (i) the plan document, including amendments thereto, (ii) the annual report on the applicable Form 5500 series filed with the IRS for the most recent three plan years, (iii) each trust agreement, insurance contract or other funding arrangement relating to such Employee Benefit Plan, including amendments thereto, (iv) the most recent Summary Plan Description and material employee communications for such Employee Benefit Plan, (v) the most recent actuarial report or valuation, and (vi) the most recent IRS determination letter. (b) Each of the Employee Benefit Plans (i) is in substantial compliance with all applicable provisions of ERISA, the Code, and all other applicable laws, (ii) has been administered, operated and managed in accordance with its governing documents, and (iii) has timely filed or distributed all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including annual reports, summary annual reports (Form 5500s), summary plan descriptions, actuarial reports, PBGC-1 Forms, or returns). (c) All Employee Benefit Plans that are intended to be qualified under Section 401(a) of the Code are so qualified and have received a favorable determination letter from the IRS, and neither CK Witco nor Holdings is aware of any circumstances likely to result in the revocation of any such favorable determination letter. (d) Neither CK Witco nor any CK Witco Entity maintains, or within the past 6 years has maintained, for the benefit of current or former employees of the Acquired Businesses, a "defined benefit plan" subject to Title IV of ERISA. To the extent CK Witco or any CK Witco Entity maintains a defined benefit plan for the benefit of current or former employees of CK Witco other than those employed in the Acquired Businesses: (i) the fair market value of the assets of each such defined benefit plan exceeds the present value of the "benefits liabilities" (as defined in Section 4001(a)(16) of ERISA) under such plan as of the end of the most recent plan year, calculated on the basis of the actuarial assumptions used in the most recent actuarial valuation for such plan; (ii) neither CK Witco nor any CK Witco Entity has incurred, or reasonably expects to incur within the 12 month period following the Effective Date and Time, liability to the Pension Benefit Guaranty Corporation or otherwise with respect to any such defined benefit plan; and (iii) neither CK Witco nor any CK Witco Entity anticipates terminating any such defined benefit plan within the 12 month period following the Effective Date and Time. (e) With respect to each Employee Benefit Plan, neither such plan, or any trustee, administrator, fiduciary, agent or employee thereof, nor CK Witco or any CK Witco Entity has engaged in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code). With respect to any Employee Benefit Plan, no act, omission or transaction has occurred which would result in the imposition of (i) breach of fiduciary duty liability damages under Section 409 of ERISA, (ii) a civil penalty assessed pursuant to subsection (c), (i) or (l) of Section 502 of ERISA, or (iii) any excise tax under applicable provisions of the Code. With respect to each Employee Benefit Plan (i) all minimum funding standards required by law with respect to funding of benefits payable or to be payable under such plan have been met; (ii) there is no accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(a) of ERISA; and (iii) there have been no terminations, partial terminations, or discontinuances of contributions without a determination by the IRS that such action does not adversely affect the tax-qualified status of that plan. (f) With respect to Employee Benefit Plans qualifying as "group health plans" under Section 4980B of the Code or Section 607(l) or 609 of ERISA and related regulations (relating to the benefit continuation rights imposed by "COBRA" or qualified medical child support orders), CK Witco and each CK Witco Entity has complied in all material respects with all reporting, disclosure, notice, election and other benefit continuation and coverage requirements imposed thereunder as and when applicable to those plans, and has not incurred any direct or indirect liability or is not subject to any loss, assessment, excise tax penalty, loss of federal income tax deduction or other sanction, arising on account of or in respect of any direct or indirect failure at any time to comply with any such federal or state benefit continuation of coverage requirement. (g) CK Witco has made, and as of the Effective Date and Time will have made or accrued, all payments and contributions required, or reasonably expected to be required, to be made under the provisions of each Employee Benefit Plan, or required to be made under applicable laws, rules and regulations, with respect to any period prior to the Effective Date and Time, such amounts to be determined using the ongoing actuarial and funding assumptions of such plan. CK Witco's financial statements reflect the approximate total pension, medical and other benefit liability for all Employee Benefit Plans, and no material funding changes or irregularities are reflected thereon which would cause such statements to be not representative of prior periods. (h) Neither CK Witco nor any other entity considered to be one employer with CK Witco under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") is, or at any time during the six-year period ended on the date hereof was, obligated to contribute to a multiemployer plan, as defined in Section 3(37) of ERISA. (i) No litigation or claims (other than routine claims for benefits) are pending or, to the knowledge of CK Witco or Holdings, threatened against, or with respect to, any of the Employee Benefit Plans or with respect to any fiduciary, administrator, sponsor (in their capacities as such), or any party- in-interest thereof. (j) CK Witco has the right to amend, modify, or terminate any Employee Benefit Plan without incurring any liability thereunder, except as to any benefits accrued prior to such amendment, modification, or termination. CK Witco does not have any obligations for post-retirement or post-employment benefits under any employee benefit plan that cannot be amended or terminated upon sixty (60) days advance notice, except as required by Section 601 of ERISA and Section 4980(b) of the Code. Prior to the Effective Date and Time, CK Witco agrees not to amend or modify any Employee Benefit Plan or take any other action which results in an increase in liability under such Employee Benefit Plan . To the extent Yorkshire adopts or continues any Employee Benefit Plan, nothing contained in this Agreement limits or restricts Yorkshire's right to amend, modify, or terminate any of such plans in such manner as Yorkshire deems appropriate. (k) Except as specifically identified in the CK Witco Disclosure Memorandum, the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in any payment or series of payments by the Acquired Businesses to any person which is an "excess parachute payment" (as defined in Section 280G of the Code), increase or secure (by way of a trust or other vehicle) any benefits payable under any Employee Benefit Plan, or accelerate time of payment or vesting of any such benefit. 3.26 Other Benefits Plans. (a) For the purpose of this Paragraph 3.26 "Disclosed Schemes" means: (i) In the UK: Uniroyal Chemical Limited Group Personal Pension Plan provided through Scottish Widows Company personal pension builder plan (the "UK Scheme"); (ii) In the Netherlands, a pension assurance agreement dated 1st January 1977 between Althouse Tertre B.V. and Belgische Maatschappij van Algemene Verzekeringen "Level" N.V. and attached rules (pensioenreglement). (iii) In Belgium: Contrat d Assurances Groupe no 4,997 and 5,138 with A.G. de 1824 and its addenda including: (A) plan Soins de Sante (4997); (B) plan Pension Salary Invest for workers signed on 25.6.98; (C) plan Vie et deces signed on 31.5.95 (officers and employees). and Group Personnel Accident Insurance with AXA ending on 31.12.99. (iv) In France: Mandatory pension plans provided by AGIRC and ARRCO; nonmandatory pension plans provided through CMAV, AXIVA and IREC; and a defined benefit scheme known as SAD 4000 and the collective bargaining agreement applicable to chemical industries (Convention Collective des Industries Chimiques du 30 Decembre 1952 modifee brochure JO: 3108). (v) In Luxembourg: La Convention d Assurance de Groupe No. 5127/01 and Plan de Pension Extra-Legale Societe Crompton and Knowles Luxembourg. (b) Except for the Disclosed Schemes there is not, and has not in the past been, in operation any agreement (and no proposal has been announced to enter into or establish any agreement) for the provision of pension or lump sum benefits payable to an employee on or in connection with his reaching retirement age, or earlier, or on his death, or sickness or disability benefits for any person employed (or previously employed) by any of Europe or any of the Acquired Entities. None of Europe or any of the Acquired Entities have contributed and are not under any obligation to contribute to any such agreement either now or in the future and have not given any assurance about the continuance of any of the Disclosed Schemes. (c) All material details relating to the Disclosed Schemes have been supplied and, in particular, details of the rates at which each of Europe and the Acquired Entities and the members contribute to each of the Disclosed Schemes and make payments in respect of the expenses of administration, and management of the Disclosed Schemes. (d) All amounts that have become due to be paid to the Disclosed Schemes have been paid and no amounts are paid to the Disclosed Schemes in arrears. (e) So far as CK Witco or Holdings are aware, the Disclosed Schemes comply and have always complied with all relevant tax and other regulatory provisions imposed by any national and European laws, or collective bargaining agreements or Article 119 of the Treaty of Rome now re-numbered Article 141 by the Treaty of Amsterdam or any decision of the European Court of Justice. (f) So far as CK Witco or Holdings are aware, each of Europe and the Acquired Entities has complied with all and any requirements of national and European laws and legislation concerning mandatory social security payments, including making any such payments within any specified time limits and for the correct amounts. (g) All benefits payable under each of the Disclosed Schemes on the death of a member are fully insured under a policy effected with an insurance company and all premiums due under that policy have been paid. (h) No person has made or threatened any claim or complaint against any of Europe or any of the Acquired Entities or against any administrator of the Disclosed Schemes (excluding the administrator of the UK Scheme) in respect of any matter arising out of or in connection with the Disclosed Schemes. (i) All benefits accrued up to the Closing under any of the Disclosed Schemes (except the collective bargaining agreement applicable to chemical industries in France) have been properly funded or provision has been made in the Special Purpose Statements for the full amount of the benefits due to any Person accrued up to Closing to be paid under the Disclosed Schemes and CK Witco or Holdings have not received any advice that the funding of the Disclosed Schemes is inadequate. 3.27 Absence of Certain Business Practices. To the extent prohibited by applicable law, none of Europe, the CK Witco Entities nor any Acquired Entity, or any of their respective officers, directors, employees, agents or Affiliates, nor any other Person acting on any of their behalf has, directly or indirectly, within the past five years given or agreed to give any gift or similar benefit to any Government employee or other Person who is or may be in a position to help or hinder an Acquired Business (or to assist any of them in connection with any actual or proposed transaction) which might subject any Yorkshire Entity or any of Yorkshire's Affiliates, or any of Yorkshire's or its Affiliates, directors, officers, employees or agents, to any damage or penalty in any civil, criminal or Governmental Action. 3.28 Books and Records. The books, records and accounts of Europe, the Acquired Entities and the Acquired Businesses (i) have been maintained in accordance with good business practices on a basis consistent with prior years, (ii) are stated in reasonable detail and accurately and fairly reflect the transactions related to the Acquired Businesses, and (iii) accurately and fairly reflect the basis for the Special Purpose Statements. CK Witco, Europe and the Acquired Entities have devised and maintained systems of internal accounting controls sufficient to provide reasonable assurances that (y) transactions are executed in accordance with management's general or specific authorization, and (z) transactions are recorded as necessary (A) to permit preparation of financial statements in conformity with GAAP and (B) to maintain accountability for assets. 3.29 Agreements and Transactions with Related Parties. No CK Witco Entity (insofar as relates to any Transferred Asset or an Acquired Business), Europe or any Acquired Entity is, directly or indirectly, a party to any contract, agreement, or lease with, or any other arrangement with or commitment to, in each case whether oral or written, any Related Party. No Related Party, directly or indirectly, owns or controls any assets or properties which are or have been used in the Acquired Businesses, and no Related Party, directly or indirectly, engages in or has any significant interest in or in connection with any business (x) which is or which within the last three years has been a material competitor, customer or supplier of the Acquired Businesses or has done a material amount of business with the Acquired Businesses, or (y) which as of the date of this Agreement sells or distributes products or services which are similar or materially related to the products or services of the Acquired Businesses. As used in this Agreement, the term "Related Parties" means, collectively, (a) CK Witco, each CK Witco Entity, any Person owning, or formerly owning, beneficially or of record, directly or indirectly, at least five percent (5.0%) of any of the shares in CK Witco, (b) any director or executive officer of CK Witco, (c) any Person in which any of the foregoing Persons has, directly or indirectly, at least a ten percent (10.0%) beneficial interest in the capital or other type of equity interests of that Person, or (d) any partnership in which CK Witco is a partner. 3.30 No Agreement in Anticipation of Sale. No CK Witco Entity, Europe nor any Acquired Entity has, directly or indirectly, taken any action or actions or entered into any agreements in anticipation of this Agreement. The consummation of the transactions contemplated by this Agreement will not entitle any employee of the Acquired Businesses to severance pay nor will it accelerate the time of payment, vesting or increase the amount of any compensation or benefits due to any employee of the Acquired Businesses. 3.31 Government Reports. CK Witco has prior to the date of this Agreement delivered or made available to Yorkshire, true, correct and complete copies of, all Tax returns and all material reports relating to any Employee Benefit Plan, finance and monetary transactions, employees and employment conditions, compliance with or violation of Law, and other matters material to the Acquired Businesses filed with any Government or issued by any Government to or in respect of, the Acquired Businesses during the past five years. 3.32 Banking Relationships. The CK Witco Disclosure Memorandum sets forth a complete and accurate description of all material arrangements that Europe or any Acquired Entity has with any banks or other financial institutions providing for accounts, safe deposit boxes, borrowing arrangements, and certificates of deposit or otherwise, indicating in each case account numbers, if applicable, and the person or persons authorized to act or sign on behalf of them in respect of any of the foregoing. 3.33 Customers and Suppliers. Neither CK Witco nor Holdings is aware of (i) any supplier or customer of the Acquired Businesses which intends to discontinue or substantially diminish or change its relationship with the Acquired Businesses or the terms of its relationship with the Acquired Businesses, (ii) any supplier of the Acquired Businesses which intends to materially increase prices or charges for goods or services presently supplied, or (iii) of any material supplier to the Acquired Businesses which is likely to become unable to continue its relationship with the Acquired Businesses, or supply the goods or services which it presently supplies to the Acquired Businesses, without significant change in the terms and conditions of any relevant relationship or supply arrangement. Other than in the ordinary course of business, there are no returns or consignment sales pending. 3.34 Absence of Changes. Except as expressly provided for in this Agreement, since June 26, 1999 (the "Reference Date"): (a) there has been no change in the business, assets, properties, debts, borrowings, Liabilities, affairs, results of operations condition (financial or otherwise), or cash flows of the Acquired Businesses, Europe and the Acquired Entities or in their respective relationships with suppliers, customers, employees, lessors or others, other than changes in the ordinary course of business, none of which have had or will have a material adverse effect; (b) there has been no damage, destruction or loss to any of the Transferred Assets or the assets, properties, or business of Europe or any Acquired Entity, whether or not covered by insurance; (c) the Acquired Businesses have been operated in the ordinary course and consistent with prior practices; (d) there has been no declaration, setting aside or payment of any dividend or other distribution on or in respect of the capital of Europe or any Acquired Entity, nor has there been any direct or indirect redemption, retirement, purchase or other acquisition of any of the capital of Europe or any Acquired Entity; (e) no debt, borrowing or Liability of Europe or any Acquired Entity has been discharged or satisfied, other than in the ordinary course of business and consistent with prior practice; (f) no Acquired Business has discontinued or determined to discontinue the sale of any material products or services previously sold; (g) there has been no sale, transfer, lease or other disposition of any material asset or assets of an Acquired Business, except in the ordinary course of business, and no material debt to, or claim or right of, an Acquired Business has been canceled, compromised, waived or released; (h) no Acquired Business has entered into any agreement, contract, lease or license outside the ordinary course of business; and (i) no Acquired Business has delayed or postponed the payment of any accounts payable and other debts, borrowings or Liabilities outside the ordinary course of business, and all notes and accounts receivable relating to the Acquired Businesses have been collected in the ordinary course of business. 3.35 Insolvency. (a) In relation to Europe and each Acquired Entity: (i) no resolution has been passed (and no meeting has been convened, and no written resolution has been circulated with a view to any resolution), no petition has been presented and no order has been made for administration or winding up or for the appointment of a receiver or provisional liquidator or any equivalent or comparable proceeding; (ii) no procedure has been commenced by any Person, with a view to striking off under relevant legislation; (iii) no receiver or equivalent has been appointed, no encumbrance has been enforced, and no floating charge has crystallized on or over any of its assets, and no event has occurred or will occur by virtue of the execution and performance of this Agreement which would cause, or entitle any person to cause, any of these things to happen; (iv) it has not stopped paying its creditors, is not insolvent, and is not unable to pay its debts for the purposes of relevant legislation; (v) no distress, execution or other process has been levied against any of its assets; (vi) no meeting of its creditors, or any class of them, has been held or summoned and no proposal has been made for a moratorium, composition or arrangement in relation to any of its debts; and (vii) no event analogous to any of the above has occurred in any jurisdiction. (b) In relation to Holdings; (i) no resolution has been passed, no petition has been presented and no order has been made for administration or winding up or for the appointment of a receiver or provisional liquidator; (ii) no receiver has been appointed, no encumbrance has been enforced, no floating charge has crystallized and no distress, execution or other process has been levied, on or over any of the stock of Europe; and (iii) no event analogous to any of the above has occurred in any jurisdiction. 3.36 Information Warranty. Copies of all agreements or other binding arrangements between Europe or any Acquired Entity and either trade unions or relevant state authorities which relate to or impact on the following areas have been disclosed to Yorkshire in the Index of Documents or the Written Responses: (i) employee terms of employment; (ii) employee working conditions; (iii) redundancies; (iv) the structure of the workforce within the Acquired Businesses. For the purposes of this Paragraph 3.36: "Due Diligence Request" means the due diligence request dated 6 August 1999 sent by Kilpatrick Stockton LLP to John T. Ferguson II of CK Witco and attached as Exhibit GG. "Index of Documents" means the index of documents denominated as such and attached to the CK Witco Disclosure memorandum. "Written Responses" means those responses referred to in Section L1-5 in the Index of Documents. 3.37 Indebtedness as of 15 October 1999. Exhibit HH is a complete list of all bank accounts relating to the Acquired Business as at 15 October 1999 and the balances on such accounts as at such date were as set out in Exhibit HH. As at such date neither Europe, nor any Acquired Entity, nor any CK Witco Entity in relation to the Acquired Businesses had any borrowings, other than as set out in Exhibit HH or trade creditors arising in the ordinary course of business. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CK WITCO RELATING TO THE CONSIDERATION SECURITIES To induce Yorkshire to enter into this Agreement and to issue the Consideration Securities as contemplated by this Agreement, CK Witco, represents and warrants to Yorkshire, and covenants and agrees, as of the date hereof and again as of the Closing Date, as follows: 4.1 Investment Intentions. CK Witco (i) will be acquiring the Consideration Securities solely for its account, for investment purposes only and with no current intention or plan to distribute, sell, or otherwise dispose of any of the Consideration Securities; (ii) is not a party to any agreement or other arrangement for the disposition of any of the Consideration Securities; (iii) is an "accredited investor" as defined in Securities Act Rule 501(a) promulgated pursuant to the United States Securities Act of 1933, as amended; (iv) (A) is able to bear the economic risks of an investment in the Consideration Securities, (B) can afford to sustain a total loss of that investment, (C) has such knowledge and experience in financial and business matters that CK Witco is capable of evaluating the merits and risks of the proposed investment in the Consideration Securities, (D) has had an adequate opportunity to ask questions and receive answers from the officers of Yorkshire concerning any and all matters relating to the transactions contemplated hereby, Yorkshire and the Consideration Securities, including, the plans for the operations of the business of Yorkshire, the business, operations, and financial condition of Yorkshire, and any plans of Yorkshire, and (E) has asked all questions of the nature described in preceding clause (D), and all those questions have been answered to CK Witco's satisfaction. 4.2 Standstill; Sale of Consideration Securities. CK Witco agrees that it shall not at any time prior to the first anniversary of the Effective Date and Time without the prior written consent of Yorkshire (i) purchase or acquire, either directly or indirectly, any equity securities, debt securities, any other instrument convertible into or exchangeable for equity or debt securities, or any other instrument, option or right to acquire any of the equity securities or debt securities of Yorkshire or (ii) sell, convey, transfer, assign or otherwise dispose of, or hedge or swap its risk in respect of, the Consideration Securities. For a period of one (1) year after the first anniversary of the Effective Date and Time, CK Witco agrees that it shall dispose of the Consideration Securities only after consultation with Yorkshire's then retained broker with a view to ensuring an orderly marketing and liquidation of the Consideration Securities. 4.3 Listing Particulars. CK Witco hereby acknowledges that it has had a proper opportunity to consider and to comment on the pages of the Listing Particulars attached to this Agreement as Exhibit II and the factual information marked "Reviewed" thereon is true and accurate in all material respects and not misleading because of any omission or ambiguity and the activities of CK Witco, Colors, Holdings, Europe, the Acquired Businesses, and the Acquired Entities are fairly and accurately described in each such document. Attached to this Agreement as Exhibit II-1 are the "Listing Particulars". 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF YORKSHIRE, AMERICAS As an inducement to CK Witco, Colors, Holdings and Europe to enter into this Agreement, and to consummate the transactions contemplated by this Agreement, subject to the qualifications set forth in the Yorkshire Disclosure Memorandum, Yorkshire and Americas, jointly and severally, represent, warrant and covenant, as of the date hereof and again as of the Closing Date, as follows: 5.1 Organization. Yorkshire: (a) is a public company limited by shares organized and existing under the laws of England and Wales and (b) is entitled to own or lease, or will own or lease, its assets and properties and to carry on its business as and in places where the business is conducted and the properties are owned or leased. Americas: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of South Carolina, United States of America and (b) is entitled to own or lease, or will own or lease, its assets and properties and to carry on its business as and in places where the business is conducted and the properties are owned or leased. 5.2 Authorization; No Inconsistent Agreements. Each of Yorkshire and Americas has full corporate power and authority to make, execute and perform this Agreement and the Additional Agreements and the transactions contemplated by this Agreement and the Additional Agreements. This Agreement has been duly and validly authorized and approved by all necessary corporate action on the part of Yorkshire (except for the passing of the Resolutions) and Americas on or prior to the date of this Agreement. All transactions required under this Agreement to be performed by each of Yorkshire and Americas will be duly and validly authorized and approved by all necessary corporate action on their part prior to the Closing Date. Subject to satisfaction of the conditions set forth elsewhere in this Agreement, this Agreement has been duly and validly executed and delivered on behalf of each of Yorkshire and Americas by its duly authorized officers, and this Agreement constitutes the valid and legally binding obligation of each of them, enforceable, subject to general equity principles, in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally. Neither the execution and delivery of this Agreement or any Additional Agreement, nor the consummation of the transactions contemplated by this Agreement or any Additional Agreement, will constitute a violation or breach of the memorandum and articles of association or certificate of incorporation or By-Laws of either of them. 5.3 Dividends in relation to Consideration Securities. The Consideration Securities will rank pari passu in all respects with the Ordinary Shares of Yorkshire in issue at the Effective Date and Time. With respect to the Consideration Securities, Holdings hereby irrevocably waives any dividend or other distribution declared, paid or made in respect of the financial year of Yorkshire ending on 31st December 1999. 5.4 Financing. Yorkshire has no reason to believe that at the Effective Date and Time it will not have available all funds necessary to perform its obligations under this Agreement, including consummating the transactions contemplated by this Agreement, on the terms contemplated hereby and the payment of all fees and expenses relating to such transactions. Yorkshire has obtained commitments from financial institutions with respect to obtaining of all such funds as are necessary to pay the Purchase Price. 5.5 No Violation; Compliance with Laws. None of Yorkshire nor its controlled subsidiaries is in default under or in violation of (a) its memorandum and articles of association or other organizational and foundation documents, as appropriate, or (b) any Order or Law, and their respective operations have been conducted, in all material respects, in accordance with, and are in compliance with, all applicable Laws. None of Yorkshire nor its controlled subsidiaries has received any notification of any asserted present or past failure by any of them to comply with any Order or Laws. 5.6 Consents. The execution and delivery by Yorkshire and Americas of this Agreement and the Additional Agreements to which any of them is to be a party on the Closing Date, the consummation of the transactions contemplated in this Agreement or the Additional Agreements, and their performance under or pursuant to this Agreement or any Additional Agreement, as appropriate, do not require the consent, approval or action of, or any filing with or notice to, any Government or other Person, other than for the HSR Filing and the approval of the members of Yorkshire. 5.7 Financial Statements. The financial statements and accounts of Yorkshire included within the Listing Particulars have been prepared from the books and records of Yorkshire and have been prepared in accordance with United Kingdom GAAP consistently applied and present fairly the financial condition of Yorkshire as at their respective dates and the results of operations, shareholders equity and financial position for the periods then ended. 5.8 Litigation; Contingencies. There are no Actions existing or, to the knowledge of Yorkshire, threatened against, by or affecting Yorkshire or any of its controlled subsidiaries that if determined adversely to them would have a material adverse effect on the financial condition of Yorkshire taken as a whole. 6. CONDUCT OF BUSINESS PENDING CLOSING CK Witco covenants and agrees that, except as may otherwise be provided or permitted in this Agreement or set forth in the CK Witco Disclosure Memorandum, without the prior written consent of Yorkshire, between the date of this Agreement and the Closing Date: 6.1 Business in the Ordinary Course. The Acquired Businesses will be conducted only in the ordinary and usual course and consistent with prior practices, without the creation of any indebtedness for borrowed money or the creation or sufferance of any Lien on any of the Transferred Assets, the Acquired Businesses, or the share capital of any of Colors, Holdings, Europe or any Acquired Entity. Without limiting the generality of the foregoing, CK Witco covenants, agrees and undertakes, on behalf of itself and on behalf of Colors, Holdings, Europe, and each Acquired Entity, as follows: (a) their business shall be carried out in the ordinary course, in a manner consistent with past practices and professional usage applicable to such business, including but not limited to (i) keeping Holdings, Europe, Colors and each Acquired Entity intact, (ii) using reasonable best efforts to keep available the services of the present employees of each of them, and (iii) using best efforts to maintain the goodwill associated with each of them, including but not limited to preserving the relationships of customers, suppliers and others having business dealings with each of them, (b) Yorkshire will be kept fully and regularly informed of the progress of the business of each of the Acquired Businesses, (c) it will not take any significant action or decision affecting or likely to affect any Acquired Business or any of Holdings or Europe or any Acquired Entity in a material manner shall be taken without Yorkshire's prior approval (with such prior approval not to be unreasonably withheld), (d) it will not transfer title or use of any of the Transferred Assets except as required by law or pursuant to contracts in place as of the date hereof (copies of which are attached to the CK Witco Disclosure Memorandum (other than those relating to sales of finished goods in the ordinary course), and sales of obsolete equipment having an aggregate value of less than US$150,000 (or its reasonable equivalent in another currency), (e) it will maintain the Transferred Assets in good condition, and except for sales of products in the ordinary course of business, will not move any material Transferred Asset to any property not currently owned, (f) it will not create or permit to be created any Lien on any of its Transferred Assets nor allow to be created a situation pursuant to which the above is likely to occur, (g) it will not incur any liability or obligation (absolute, accrued, contingent or otherwise) or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, other than in the ordinary course of business, (h) it will not vary the material terms or conditions of any material agreement included within, or relating to other of, the Transferred Assets nor default or remain in default in the performance thereof, (i) it will not authorize or issue any additional equity securities, (j) it will not change its usual accounting methods or practices, in particular, as to depreciation and amortization, except as required by GAAP or applicable law, (k) it will not exercise puts and calls with respect to any futures contract, derivative or similar financial product and more generally modify its current portfolio thereof except in the usual course or without prior notice to and written approval of Yorkshire, (l) it will not take any action which constitutes or may constitute a default or omit to take such action as may be required to prevent a default under any relevant agreement, document or instrument, (m) it will not change the duties and powers of any senior executives of Europe or any Acquired Entity, except as required by law or contract, (n) it will maintain its books, accounts and records, or (o) it will maintain in full force and effect all its insurance currently in effect. (p) it will collect from debtors and pay creditors in the to ordinary course of business consistent with past practice. (q) it will not incur any borrowings of any kind other than normal trade credit; (r) it will not pay dividends, levy or pay any management charges or take any other action which will reduce the Closing Net Assets below the figure referred to Paragraph 1.4(c). 6.2 No Material Changes. Except as may be expressly permitted by this Agreement, no action will be taken which will materially alter the organization, capitalization, or financial structure, practices or operations of the Acquired Businesses, Colors, Holdings, Europe or any Acquired Entity. 6.3 Compensation. No increase will be made in the compensation payable or to become payable to any director, officer, employee or agent of the Acquired Businesses, Colors, Europe or any Acquired Entity and no bonus or profit sharing payment or other arrangement (whether current or deferred) will be made to or with that director, officer, employee or agent except normal individual increases in compensation to directors, officers, employees or agents consistent with past practice, or as required by law or contract. No officer, director or employee will be hired, and no consultant or agent will be retained, at a salary or fee in excess of US$50,000 (or its reasonable equivalent in any other currency). 6.4 Employee Benefit Plans. In respect of employees of U.S. Asset Acquired Businesses: CK Witco shall take such actions with respect to the Employee Benefit Plans, and refrain from such actions, as are necessary to maintain the qualification of each such plan under Section 401(a) of the Code, and the exemption of the trust maintained for each such plan under Section 501(a) of the Code. CK Witco shall timely make all contributions and other payments to the Employee Benefit Plans which it is obligated to make as of the date hereof. Other than contributions or payments declared, required or obligated to be paid to the Employee Benefit Plans as of the date hereof, no contribution shall be declared for or paid to any such plan. Except as required by Applicable Law or contractual commitment existing as of the date hereof, no amendment or change to the provisions of any Employee Benefit Plan shall be made or adopted prior to the Effective Date and Time, and each of such plans shall be continued in accordance with its terms. 7. CONDITIONS TO OBLIGATIONS OF YORKSHIRE AND THE YORKSHIRE ENTITIES The obligations of Yorkshire and the Yorkshire Entities under this Agreement to acquire the Transferred Assets, Acquired Businesses, Europe and the Acquired Entities and consummate the transactions contemplated by this Agreement are subject to the fulfillment and satisfaction of each and every one of the following conditions on or prior to the Closing, any or all of which may be waived in writing in whole or in part by Yorkshire: 7.1 Representations and Warranties. Subject to the exceptions and supplemental information set forth in the CK Witco Disclosure Memorandum, the representations and warranties of CK Witco contained in this Agreement, the Additional Agreements and in any certificate, instrument, schedule, agreement or other writing delivered by or on behalf of, or in respect of, the Transferred Assets, the Acquired Businesses, CK Witco, the other CK Witco Entities, Europe and the Acquired Entities in connection with the transactions contemplated by this Agreement or the Additional Agreements will be true and correct in all material respects as of the date when made and will be deemed to be made again at and as of the Closing Date and will be true and correct in all material respects at and as of the Closing Date. 7.2 Compliance with Covenants and Conditions. CK Witco, Colors, Europe and each other CK Witco Entity and the Acquired Entities shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by them prior to or on the Closing Date. 7.3 Closing Certificates. CK Witco, Colors, Europe, Holdings, the other CK Witco Entities, and the Acquired Entities will have delivered to Yorkshire certificates, executed by their appropriate officers or other Representative, dated as of the Closing, certifying in such detail as Yorkshire may request as to the fulfillment and satisfaction of the conditions specified in Paragraphs 7.2 and 7.3. 7.4 Consents. All registrations, permits, filings, applications, notices, consents, approvals, orders, qualifications, waivers and waiting periods listed in Paragraph 7.4 of the CK Witco Disclosure Memorandum and indicated therein as being a condition to the Closing for Yorkshire shall, as applicable, have been filed, made or obtained, or shall have expired, and the same shall continue to be in full force and effect and rescission thereof or other challenge thereto shall not have been threatened or initiated. 7.5 Passage of Resolutions. The Resolutions shall have been passed at the Extraordinary General Meeting. 7.6 Admission to Official List. The London Stock Exchange shall have admitted to the Official List the issued Ordinary Share capital of Yorkshire (as enlarged by the issue of the Consideration Securities), subject only to allotment (and such admission shall have become effective by the announcement by the London Stock Exchange of its decision to admit such shares for listing in accordance with the listing rules of the London Stock Exchange and the London Stock Exchange shall not have withdrawn such grant before such announcement.) 7.7 No Inconsistent Requirements. No Action will have been commenced by any Government or Person seeking to enjoin or prohibit the transactions contemplated by this Agreement or any Additional Agreement. 7.8 No Injunction. No temporary restraining order, preliminary or permanent injunction or other order by any court of competent jurisdiction which prohibits the consummation of the transactions contemplated in this Agreement will have been issued and remain in effect on the Closing Date; provided, however, that Yorkshire will use all reasonable efforts to have each and every relevant order or injunction vacated or reversed prior to the Closing Date. 7.9 Additional Agreements and Closing Documents. Yorkshire will have received duly executed and delivered execution counterparts of each Additional Agreement and Closing Document, in each case, signed by each relevant Person. 7.10 Related Party Matters. All agreements and commitments of any kind between Colors, Holdings, Europe, the CK Witco Entities, any Acquired Entity, and any other Person Affiliated with CK Witco, on the one hand, and any Related Party on the other, will have been terminated to the satisfaction of Yorkshire without Liability. 7.11 Adverse Conditions. There shall not have been any material adverse change in the assets, business or financial condition of the Acquired Businesses. 8. CONDITIONS TO OBLIGATIONS OF THE CK WITCO ENTITIES The obligations of CK Witco, Colors, Europe, Holdings, and the other CK Witco Entities under this Agreement to sell the Transferred Assets, Acquired Businesses, Europe and the Acquired Entities and consummate the transactions contemplated by this Agreement are subject to the fulfillment and satisfaction of each and every one of the following conditions on or prior to the Closing, any or all of which may be waived in writing in whole or in part by CK Witco: 8.1 Representations and Warranties. Subject to the exceptions and supplemental information set forth in the Yorkshire Disclosure Memorandum, the representations and warranties of Yorkshire contained in this Agreement, the Additional Agreements and in any certificate, instrument, schedule, agreement or other writing delivered by or on behalf of, any Yorkshire Entity in connection with the transactions contemplated by this Agreement or the Additional Agreements will be true and correct in all material respects as of the date when made and will be deemed to be made again at and as of the Closing Date and will be true and correct in all material respects at and as of the Closing Date. 8.2 Compliance with Covenants and Conditions. Each Yorkshire Entity shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by them prior to or on the Closing Date. 8.3 Closing Certificates. Each Yorkshire Entity will have delivered to CK Witco certificates, executed by their appropriate officers or other Representative, dated as of the Closing, certifying in such detail as CK Witco may request as to the fulfillment and satisfaction of the conditions specified in Paragraphs 8.2 and 8.3. 8.4 Consents. All registrations, fillings, applications, notices, consents, approvals, orders, qualifications, waivers and waiting periods listed in Paragraph 8.4 of the Yorkshire Disclosure Memorandum and indicated therein as being a condition to the Closing for CK Witco shall, as applicable, have been filed, made or obtained, or shall have expired. 8.5 Passage of Resolutions. The Resolutions shall have been passed at the Extraordinary General Meeting. 8.6 No Inconsistent Requirements. No Action will have been commenced by any Government or Person seeking to enjoin or prohibit the transactions contemplated by this Agreement or any Additional Agreement. 8.7 No Injunction. No temporary restraining order, preliminary or permanent injunction or other order by any court of competent jurisdiction which prohibits the consummation of the transactions contemplated in this Agreement will have been issued and remain in effect on the Closing Date; provided, however, that CK Witco will use all reasonable efforts to have each and every relevant order or injunction vacated or reversed prior to the Closing Date. 8.8 Admission to Official List. The London Stock Exchange shall have admitted to the Official List the issued Ordinary Share capital of Yorkshire (as enlarged by the issue of the Consideration Securities), subject only to allotment (and such admission shall have become effective by the announcement by the London Stock Exchange of its decision to admit such shares for listing in accordance with the listing rules of the London Stock Exchange and the London Stock Exchange shall not have withdrawn such grant before such announcement.) 8.9 Additional Agreements and Closing Documents. CK Witco will have received duly executed and delivered execution counterparts of each Additional Agreement and Closing Document, in each case signed by each relevant Person. 8.10 Adverse Conditions. There shall not have been any material adverse change in the assets, business or financial condition of Yorkshire. 9. INDEMNITIES 9.1 General Indemnification of the Yorkshire Entities. In accordance with and subject to the further provisions of this Article 9, CK Witco, Colors and Holdings (each, an "Indemnitor") will, jointly and severally, indemnify and hold harmless the Yorkshire Entities, Europe, the Acquired Entities and their Affiliates, and their respective officers, directors, agents and employees (collectively, "Indemnitees"), from and against and in respect of any and all loss, damage, Liability, cost and expense, including reasonable attorneys' fees and amounts paid in settlement (collectively, the "Indemnified Losses"), suffered or incurred by any one or more of the Indemnitees by reason of, or arising out of: (a) any misrepresentation, breach of warranty or breach or nonfulfillment of any agreement of CK Witco, Colors, Holdings, Europe, any other CK Witco Entity or any Acquired Entity contained in this Agreement (other than the Taxation Schedule), any Additional Agreement, or in any Closing Document; (b) all liabilities and obligations of, or claims, demands or actions against, Europe, the Acquired Entities, the Acquired Businesses, or the Transferred Assets, whether known or unknown, accrued, absolute, contingent or otherwise, existing (i) as of the date of this Agreement or (ii) at any time hereafter with respect to periods on or prior to the Effective Date and Time (without regard as to whether the same also relates to or is in respect of a period after the Effective Date and Time), to the extent not an Assumed Liability or a European Retained Liability, after any adjustment pursuant to Paragraph 1.4; (c) the ownership, operation or conduct of the Excluded Properties, the other Excluded Assets and the Americas IPD Business; (d) any and all Actions, suits, proceedings, claims, demands, assessments, judgments, fees and expenses, incident to any of the foregoing or incurred in investigating or attempting to avoid any Actions, suits, proceedings, claims, demands, assessments, judgments, fees and expenses or to oppose the imposition of any Actions, suits, proceedings, claims, demands, assessments, judgments, fees and expenses, or in enforcing this Agreement, including the provisions of this Article 9; provided that, no Indemnitor shall be obligated to indemnify any Indemnitee under this Paragraph 9.1 with respect to any Indemnified Losses under clause (a) of this Paragraph 9.1 (x) to the extent any such inaccuracy, breach, nonperformance or violation was disclosed by CK Witco in any written supplement to the CK Witco Disclosure Memorandum delivered to Yorkshire prior to the Closing and (y) such inaccuracy, breach, nonperformance or violation, together with all other inaccuracies, breaches, failures to perform or violations described in such written statement would have caused any of the conditions set forth in either of Paragraphs 7.1 and 7.2 not to be satisfied as of the Closing Date (without giving effect to any waiver thereof or any supplement to the CK Witco Disclosure Memorandum). 9.2 Payment. Subject to the provisions of Paragraph 1.6(b) and Paragraph 9.3, (i) after a final, non-appealable judgment has been rendered or a settlement has been reached in respect of a third party claim or Action, or (ii) in the case of a claim for Indemnified Losses arising other than pursuant to a third party claim or Action, after any award or judgment has been issued or a settlement has been reached, Indemnitor shall reimburse the Indemnitees within 30 days of written demand on the Indemnitor for any amounts to which Indemnitees are entitled to indemnification pursuant to this Article 9. 9.3 Defense of Claims. (a) Except as provided in Paragraph 9.3(b) and 9.6, if any Action by a third party arises after the date of this Agreement for which Indemnitor may be liable under the terms of this Agreement (other than under the Taxation Schedule to which the provisions of that Schedule shall apply in place of the provisions of this Paragraph 9.3), then the Indemnitees will notify Indemnitor in accordance with the provisions of this Article 9, and will give Indemnitor a reasonable opportunity: (i) to conduct any proceedings or negotiations in connection with the Action and necessary or appropriate to defend the Indemnitees; (ii) to take all other required steps or proceedings to settle or defend any Action; and (iii) to employ counsel reasonably acceptable to Indemnitees to contest any Action in the name of the Indemnitees or otherwise. Subject to Paragraph 9.3(b), the expenses of all proceedings, contests or lawsuits with respect to the Actions will be borne by Indemnitor. (b) Notwithstanding Paragraph 9.3(a), if (i) an Indemnitee determines in good faith that there is a reasonable probability that such an Action may adversely affect Yorkshire and its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification hereunder, or (ii) the Action seeks injunctive or similar relief, or (iii) it is an Action brought or initiated by a Government, an Indemnitee may, by notice to the Indemnitor, assume the exclusive right to defend, compromise or settle such Action. The Indemnitor shall be obligated to reimburse the legal fees, costs and expenses of that defense. (c) If Indemnitor does not assume the defense of, or if after so assuming the Indemnitor fails to defend, any such Action, then the Indemnitees may defend against any claim or Action in the manner they may deem appropriate and the Indemnitees may settle any claim or Action on the terms they deem appropriate, and Indemnitor will promptly reimburse the Indemnitees for the amount of all expenses, legal and otherwise, reasonably and necessarily incurred by the Indemnitees in connection with the defense against and settlement of any claim or Action. If no settlement of any claim or Action is made, Indemnitor will satisfy any judgment rendered with respect to any claim or in any Action, before the Indemnitees are required to do so, and pay all expenses, legal or otherwise, reasonably and necessarily incurred by the Indemnitees in the defense of any claim or Action. (d) If a judgment is rendered against any of the Indemnitees in any Action covered by the indemnification under this Agreement, or any Lien in respect of any judgment attaches to any of the assets of any of the Indemnitees, Indemnitor will immediately upon any entry or attachment pay the relevant judgment in full or discharge the relevant Lien unless, at the expense and direction of Indemnitor, an appeal is taken under which the execution of the judgment or satisfaction of the Lien is stayed. If and when a final judgment is rendered in any action, Indemnitor will forthwith pay any judgment or discharge any Lien before any of the Indemnitees is compelled to do so. (e) Any notice required to be given to Indemnitor pursuant to Paragraph 9.3(a) shall be given no later than the latter of: (i) the end of the first half of the term within which an answer or other response to the Action is required to be made (the "Answer Period") and (ii) two Business Days after receipt by an Indemnitee of notice of the Action. Indemnitor shall assume the defense of any Action, if at all, by notice to Indemnitees no later than the earlier of: (i) the end of the second third of the Answer Period and (ii) three Business Days prior to the date by which an answer or other response to the Action is required to be made. Indemnitor's failure to notify Indemnitees within the specified time shall be conclusively deemed an election by Indemnitor not to assume such defense. Any failure by Indemnitees to give the requisite notice within the time specified in this Paragraph 9.3(e) will not relieve Indemnitor of the obligation to indemnify Indemnitees pursuant to this Article 9 except to the extent that the defense of any Action is materially prejudiced by the delay. (f) The Indemnitor or the Indemnitee, as appropriate, shall have the right to participate in the defense of any Action related to an Indemnified Loss at its sole cost and expense and the cost and expense of that participation shall not be an Indemnified Loss. 9.4 Indemnification of the CK Witco Entities by Yorkshire and Americas. Yorkshire and Americas, jointly and severally, will indemnify and hold harmless the CK Witco Entities from and against and in respect of any and all loss, damage, Liability, cost and expense, including reasonable attorneys' fees and amounts paid in settlement, suffered or incurred by any one or more of them by reason of, or arising out of: (i) any misrepresentation, breach of warranty or breach or nonfulfillment of any agreement of a Yorkshire Entity contained in this Agreement or in any Additional Agreement or Closing Document; and (ii) any and all Actions, suits, proceedings, claims, demands, assessments, judgments, fees and expenses, incident to any of the foregoing or incurred in investigating or attempting to avoid any Actions, suits, proceedings, claims, demands, assessments, judgments, fees and expenses or to oppose the imposition of any Actions, suits, proceedings, claims, demands, assessments, judgments, fees and expenses, or in enforcing this Agreement, including the provisions of this Paragraph 9.4 including, any Action, suit, proceeding, claim, demand, assessment, judgment, fee or expense related to any breach by Yorkshire after the Closing Date of any distributorship and sales representative agreements included as an Assigned Contract or a Contract; provided, however, that Yorkshire shall not be obligated to indemnify any Person under this Paragraph 9.4 with respect to any losses to the extent any such inaccuracy, breach, nonperformance or violation was disclosed by Yorkshire in any written supplement to the Yorkshire Disclosure Memorandum delivered to CK Witco prior to the Closing and such inaccuracy, breach or nonperformance, together with all other inaccuracies, breaches and failures to perform, would have caused any of the conditions set forth in Paragraph 8.1 or 8.2 not to be satisfied as of the Closing Date (without giving effect to any waiver thereof or any supplement to the Yorkshire Disclosure Memorandum). 9.5 Environmental Indemnity. 9.5.1 Definitions 9.5.1.1 As used in this Agreement: "Environmental Law" means any and all laws, decrets, statutes, rules, regulations, treaties, directives, directions, codes of practice, orders (including consent orders or decrees), arretes, notices, demands or decisions of the courts or of any governmental authority or agency or any regulatory body having jurisdiction, including, but not limited to, the European Union, whether or not in force as of the Effective Date and Time, relating to pollution, protection or conservation of the environment, including, but not limited to, damage to realty, personalty, natural resources or human health. The term "Environmental Law" also includes any common law theory of recovery for Environmental Damage, whether codified or judge made, including, but not limited to nuisance, trespass, ultrahazardous activity or res ipsa loquitur. "Environmental Damage" means any condition of pollution or contamination of the environment, damage to realty, personalty or natural resources or harm to human health resulting from the release, discharge, emission, entry, introduction, storage, labeling, handling, treatment, management, manufacture, processing, transportation, disposal or deposit of any Hazardous Substance or any waste, pollutants or contaminants, that at the Effective Date and Time is in contravention of any Environmental Law, whether or not such condition was a violation of any Environmental Law at the time the condition was created. "Environmental License" means any material permit, license, authorization, consent or other approval required as of the Effective Date and Time by Yorkshire pursuant to any applicable Environmental Law so as to enable Yorkshire to carry on the Acquired Businesses at the Acquired Properties in the same manner and to the same extent as did CK Witco as of the Effective Date and Time. "Environmental Losses" means all and any liabilities, obligations, commitments, losses, fines, penalties, sanctions, costs and expenses (including reasonable legal, engineering and other professional fees) of any kind whatsoever (including any costs and expenses incurred in defending or resolving any suits, actions or claims, whether administrative, civil or criminal, or in appealing against any judgment, notice or award made in relation thereto), interest, deficiencies, damages or Remedial Works (but excluding any consequential liability, obligation, commitment, loss, cost, expense or damage, including without limitation any such liability, obligation, commitment, loss, cost, expense or damage attributable to the disruption of the operations of any business or use or value of any property) resulting from Environmental Damage, whether incurred alone or jointly with any other person. Environmental Losses includes, but is not limited to, all such suits, actions, claims, fines, penalties and sanctions, regardless of their merits, brought, asserted or levied by any Environmental Regulator or other third party. "Environmental Regulator" means any governmental agency charged with the enforcement or application of any applicable Environmental Law. "Environmental Reports" means those reports prepared on behalf of Yorkshire in agreed form. "Hazardous Substance" includes (i) any "hazardous material," "hazardous substance," "hazardous waste," "oil," "regulated substance," "toxic substance," "restricted hazardous waste," "special waste" or words of similar import as defined under any Environmental Law; (ii) polychlorinated biphenyls; (iii) any substance, the generation, storage, transportation, utilization, disposal, management, release or location of which, on, under or from the Covered Properties is prohibited or otherwise regulated pursuant to any Environmental Law and (iv) asbestos in any form except asbestos that is wholly contained within the structure and fixtures of buildings and plants or equipment at the Acquired Properties. "Covered Properties" means those parcels of land more particularly described in Exhibit JJ attached to this Agreement "Remedial Works" means: (a) the carrying out of any works or activities required pursuant to the provisions of this Paragraph 9.5 or under any Environmental Law; or (b) any decontamination, clean-up, restoration, modification, improvement or other work required under the provisions of this Paragraph 9.5 or in respect of or to avoid or mitigate any breach of any Environmental Law (which includes, but is not limited to, the payment of any costs and expenses as is required by an Environmental Regulator) with respect to the Covered Properties or any adjoining or third party land. 9.5.1.2 Terms not defined in this Paragraph 9.5.1 will have the same meaning as elsewhere in this Agreement and the provisions of Paragraph 9.5 will apply in relation to the definitions used in and the interpretation of this Paragraph 9.5 except as otherwise specifically provided in this Paragraph 9.5.1. 9.5.2 General Environmental Liability 9.5.2.1 CK Witco, Colors and Holdings will defend, indemnify and hold harmless Yorkshire, the Yorkshire Entities, the Acquired Entities and Europe for any Environmental Loss suffered or incurred by Yorkshire, the Yorkshire Entities, Affiliates of Yorkshire, the Acquired Entities or Europe after the Effective Date and Time provided the Environmental Damage existed as of the Effective Date and Time and is resulting from: (a) operations or acts or omissions carried out at the Covered Properties by any person, whether or not controlled by CK Witco, prior to the Effective Date and Time; (b) any pollution, contamination on, under or at other properties or migration of Hazardous Substances onto other properties which is caused, or alleged by a third party or Environmental Regulator to be caused, by operations or activities carried out by any person, whether or not controlled by CK Witco, at the Covered Properties prior to the Effective Date and Time; (c) the operation of the Acquired Businesses by CK Witco prior to the Effective Date and Time. 9.5.2.2 CK Witco will have the right, at its sole discretion, and at its sole cost, to conduct, or cause to be conducted, Remedial Works to comply with this Paragraph 9.5.2. (a) Initial Notification. (1) Upon Yorkshire's actual knowledge of any Environmental Damage subject to indemnification under this Agreement, Yorkshire will, with all reasonable haste, and prior to incurring costs with respect to such Environmental Damage, notify CK Witco of such Environmental Damage. (2) Notwithstanding any other provision of this Paragraph 9.5.2.2(a), Yorkshire may, without prior notification to CK Witco, incur costs otherwise reimbursable by CK Witco without compromising its rights under this Agreement in cases of emergency, including, but not limited to immediate responses to demands by Environmental Regulators and immediate threats to human health or the environment posed by such Environmental Damage. In such cases of emergency or immediate threats to human health or the environment, Yorkshire shall notify CK Witco of any Environmental Damage as soon as practicable but not more than 3 business days after incurring costs associated with such Environmental Damage. (b) Notice, Documents. CK Witco will provide Yorkshire with reasonable and timely written notice prior to the undertaking of any Remedial Works to satisfy the requirements of this Paragraph 9.5.2. CK Witco will provide Yorkshire with written information regarding the nature, scope and schedule of the planned Remedial Works within a reasonable period of time under the circumstances after it has received notice from Yorkshire. Further, CK Witco will also provide Yorkshire with one copy of any maps, drawings, plans, engineering documents or work plans relating to any such Remedial Works at the time of such notice or as soon as practicable after such documents are available to CK Witco. (c) Information, Approval of Reports. CK Witco will provide Yorkshire with copies of all material correspondence related to the Remedial Works or claim among itself, its Contractors, third party claimants and Environmental Regulators, as soon as practicable, including, but not limited to, all reports, data, drawings, schedules, tables, work plans, specifications, notices of deficiency and approvals. CK Witco will allow Yorkshire, upon reasonable request and at Yorkshire's cost, the opportunity to be present during the conduct of Remedial Works and to split samples during any sampling or assessment. CK Witco will submit to Yorkshire, prior to submission to Environmental Regulators and third party claimants, all reports, data and other correspondence for review. CK Witco will not submit such reports, data and other correspondence to Environmental Regulators without giving Yorkshire reasonable opportunity to review and comment, unless required to do so under applicable Environmental Law or other applicable requirement of law. Yorkshire will review and comment on such correspondence, reports and data in a timely manner, so as not to delay the Remedial Work. (d) Approval, Disruption of Operations, Access and Compensation (1) If CK Witco reasonably believes that the proposed Remedial Works will cause substantial disruption to the operations of Yorkshire, CK Witco will so advise Yorkshire in writing, and include the nature, scope and duration of the disruption. CK Witco will use reasonable efforts to design and implement proposed Remedial Works to minimize any disruption, including coordinating with Yorkshire so as to minimize disruption. CK Witco will not indemnify Yorkshire for any losses or damages resulting from changes in Yorkshire's operational procedures required by the Remedial Works or required to comply with any Environmental Laws or orders of any Environmental Regulators as a result of such claims. (2) Yorkshire will cooperate with CK Witco and will not unreasonably interfere with the conduct of Remedial Works by CK Witco. Yorkshire will grant to CK Witco reasonable access to the Acquired Properties for the purposes of designing, implementing, overseeing and conducting the Remedial Works. Further, Yorkshire will provide CK Witco with any documents, information, correspondence or communications related to the Remedial Works as soon as practicable and via the most expeditious means (i.e., facsimile, overnight courier, electronic mail) practicable. (e) Standards, Damage, Insurance. (1) Yorkshire will cooperate with CK Witco to minimize the cost of the Remedial Works, including assisting with appropriate land use or other environmental restrictions which may make Remedial Works unnecessary or more feasible or cost effective, provided, that CK Witco will not seek to unreasonably impair the reasonable use of the Acquired Properties. (2) CK Witco will conduct all Remedial Work in a competent and professional manner, and in compliance with all material and applicable laws and regulations, including but not limited to Environmental Laws. Further, CK Witco with obtain all required licenses, permits and approvals required by Environmental Regulators and any applicable laws, whether Environmental Laws or otherwise. If the Remedial Work is required by an order or directive from an Environmental Regulator, CK Witco will conduct such Remedial Works to the satisfaction of such Environmental Regulator, provided, that CK Witco reserves all right to take administrative, judicial or other applicable appeals, requests for reconsideration or the like. CK Witco will provide Yorkshire with evidence of such satisfaction as soon as practicable after receipt of such evidence. (3) For each separate Remedial Work, CK Witco will keep, at its sole cost, in full force and effect, with insurance companies licensed to do business in the jurisdiction of the applicable Remedial Work, commercial general liability and property damage insurance with a combined single limit of coverage of no less than US$1,000,000 (or its reasonable equivalent in another currency). CK Witco will, at its sole cost, comply with any other insurance statutes or laws arising from its status as an employer and entity licensed to do business in the jurisdiction of the Remedial Work, including, but not limited to carrying sufficient Automobile Liability and Worker's Compensation Insurance to comply with applicable regulations. CK Witco will provide Yorkshire with certificates of insurance on all required policies and name Yorkshire as an additional named insured on all required policies. (f) Other Obligations of CK Witco. Election by CK Witco to conduct Remedial Work under this Paragraph 9.5.2.2 does not relieve CK Witco of its obligations under Paragraphs 9.5.2 and 9.5.3 to defend, indemnify and hold harmless Yorkshire from Environmental Losses that can not be addressed by Remedial Work alone, including, but not limited to fines, penalties and damages, whether claimed by Environmental Regulators or third parties. However, Yorkshire will notify CK Witco of any such Environmental Losses and CK Witco shall have a right to provide a defense at its sole cost and expense. (g) Contractors CK Witco may, at its sole discretion and sole cost, employ contractors and subcontractors ("Contractors") to conduct Remedial Works required under Paragraphs 9.5.2 and 9.5.3. CK Witco will notify Yorkshire of its decision to employ a Contractor as soon as practicable after the decision is made. Any Contractor employed by CK Witco will be professional and competent in all skills required in the environmental consulting and engineering professions. Further such Contractors will be skilled and competent in any tasks required for the Remedial Works. The Contractors will have all required licenses, permits and approvals required by Environmental Regulators and any applicable laws, whether Environmental Laws or otherwise. The Contractor will carry insurance policies at such levels as are reasonably satisfactory to Yorkshire, will provide certificates of insurance acceptable to Yorkshire and will designate Yorkshire as additional named insured on all such policies. CK Witco will continue to be bound by all requirements of Paragraph 9.5.2, including but not limited to notice requirements, in the event CK Witco chooses to engage a Contractor to conduct Remedial Works. (h) Confidentiality (1) After notice to CK Witco of Environmental Damage and acknowledgment by CK Witco of its obligations under this Agreement regarding such Environmental Damage, Yorkshire will not communicate with any third party regarding such Environmental Damage without the written consent of CK Witco. Notwithstanding the previous sentence, Yorkshire may communicate with any third party regarding such Remedial Work if such communications are required by Environmental Laws or other applicable laws, including but not limited to disclosures based on securities laws. If practicable, Yorkshire will advise CK Witco its intent to engage in communications covered by this Paragraph 9.5.2.2(h)(1) and permit CK Witco to review and comment on the nature of the communication or disclosure or to make such disclosure itself. (2) CK Witco will not communicate with any third parties, including Environmental Regulators, regarding any confidential business, processes or operations of Yorkshire at any time, unless such communications are required by Environmental Laws or other applicable laws, including but not limited to disclosures based on securities laws. (i) Equipment (1) All equipment, machinery, devices or implements purchased for use in the Remedial Works that are to be permanently affixed or installed at the Acquired Properties and relate or appertain to the operations and processes of Yorkshire will be purchased by and at sole cost to CK Witco in the name of Yorkshire so that all manufacturer's or seller's warranties, express or implied, general or limited, will inure to the benefit of Yorkshire as though Yorkshire had purchased the equipment. (2) All other such equipment purchased for the Remedial Work, but not related to or appertaining to the operations and processes of Yorkshire will be purchased by and at sole cost to CK Witco in CK Witco's name. CK Witco will be responsible for the repair, maintenance and upkeep of this equipment, whether before or after the termination of the 5 year period described in Paragraph 9.5.2.6. Such repair and maintenance will be considered part of the Remedial Work. (j) Coordination of Remedial Work and Business Interference (1) Notwithstanding any other provision of this Agreement, if CK Witco elects to perform Remedial Work as provided in this Paragraph 9.5.2.2 to satisfy its obligations under Paragraphs 9.5.2 or 9.5.3, CK Witco will not be responsible for any loss of profits and business by Yorkshire resulting from the disruption of Yorkshire's operations due to any Remedial Works conducted by CK Witco, except that CK Witco will indemnify and hold harmless Yorkshire for: (i) the reasonable costs incurred by Yorkshire to purchase, from reputable suppliers or manufacturers, product equivalent in function, application and quality to that of Yorkshire, to meet its obligations under supply contracts existing as of the time of notification from CK Witco to Yorkshire of the Remedial Work, but only to the extent that such costs exceed all costs that would have been incurred by Yorkshire to meet such obligations in the absence of such Remedial Work; (ii) the reasonable direct labor costs, including but not limited to "overtime," incurred by Yorkshire to accelerate production prior to or after the Remedial Work to meet its obligations under supply contracts existing as of the time of notification from CK Witco to Yorkshire of the Remedial Work; or (iii) a combination of (i) and (ii) when purchasing replacement product or accelerating production alone will not allow Yorkshire to satisfy its existing supply contracts or when such combination will result in lower total costs that are the subject of the indemnity provided to Yorkshire by CK Witco under this Paragraph 9.5.2.2(j) than purchasing replacement product or accelerating production alone. (2) Yorkshire will notify CK Witco of all supply contracts that it reasonably believes will be affected by each Remedial Work within 5 Business Days of notification by CK Witco that it plans to undertake a Remedial Work. CK Witco will be responsible for only those supply Contracts with respect to which it has received such notice from Yorkshire. 9.5.2.3 Notwithstanding any other provision of this Agreement, CK Witco will not be liable to Yorkshire for any Environmental Damage, Hazardous Substance, breach of Environmental Law, or Environmental Losses to the extent that such Environmental Damage, Hazardous Substance, breach of Environmental Law or Environmental Losses arise out of or are related to an act or omission of Yorkshire, its employees or agents or any third party, after the Effective Date and Time. CK Witco will not be liable to Yorkshire for Environmental Losses arising from the modification or alteration of processes or the expansion of operations. Provided, however, that "the modification or alteration of processes" or "the expansion of operations" will not be interpreted to include discovery of unrelated Environmental Damage during any construction or other activities undertaken in connection with any modification or alteration of processes or the expansion of operations. This Paragraph 9.5.2.3 will not apply to any such breach, act or omission to the extent: (a) carried out at the specific written request or with the written permission of CK Witco; or (b) carried out in order to operate the business in compliance with applicable laws, including Environmental Laws. 9.5.2.4 Yorkshire will have the right to conduct or cause or voluntarily permit any person to carry out any environmental investigations, audits, surveys, testing, sampling or other actions reasonably necessary in order to continue to operate and run the Acquired Businesses from the Acquired Properties in accordance with good business practice after the Effective Date and Time. However, Yorkshire will not undertake any environmental investigations, audits, surveys, testing, sampling or other actions for the purpose of or directed at accelerating or increasing the likelihood, complexity or amount of a claim, liability, task or cost associated with or in any way related to an Environmental Damage or Environmental Loss, unless it is required by applicable law to do so. In that event and when allowed by applicable law, Yorkshire will first communicate its intent to take such action, correspond or communicate with a third party to CK Witco and permit CK Witco to undertake such action, correspondence or communication. Yorkshire will take no action that compromises the rights or obligations of Yorkshire or CK Witco under the ICI Agreement unless it is required by applicable law to do so. 9.5.2.5 CK Witco will not be liable to Yorkshire, the Yorkshire Entities, the Acquired Entities and Europe for the first US$ 750,000 of aggregate Environmental Losses claimed under Paragraph 9.5.2.1 or, to the extent CK Witco elects to conduct Remedial Works to meet its obligations under this Paragraph 9.5.2, of costs incurred by CK Witco in conducting Remedial Works. Yorkshire shall promptly reimburse CK Witco for any such costs incurred by CK Witco until such time as Environmental Losses claimed under Paragraph 9.5.2.1 and the costs of such Remedial Work equal US$750,000 (or its reasonable equivalent in another currency) Yorkshire will provide CK Witco with an accounting of all expenses claimed to be incurred against the US$750,000 (or its reasonable equivalent in another currency) aggregate amount commencing on the first anniversary of the Effective Date and Time and on each succeeding anniversary ending on the fifth anniversary. CK Witco will provide written notice to Yorkshire within 90 days of receipt of this yearly accounting of any item or sums challenged as invalid or excessive under this Agreement. Yorkshire shall promptly provide any additional background materials, including but not limited to scopes of work, draft documents, reports, bills, invoices, correspondence and will permit CK Witco to interview any persons conducting such work. All costs not challenged and contained within the yearly accounting will be considered valid and will reduce the US$750,000 (or its reasonable equivalent in another currency) aggregate accordingly after 90 days. Notwithstanding the yearly accounting requirements of this Paragraph 9.5.2.5, Yorkshire will provide an accounting of costs to CK Witco at any time upon reasonable request by CK Witco. Claims made under Paragraphs 9.5.3 and 9.5.4 will not apply to the $750,000 aggregate limitation of this Paragraph 9.5.2.5. CK Witco and Yorkshire will work in good faith to resolve the challenges made under this Paragraph 9.5.2.5, and may invoke the alternative dispute resolution procedures of Exhibit MM if no resolution can be reached within 30 days after termination of the 90 day period. 9.5.2.6 Save in respect of Environmental Losses arising in connection with those matters addressed in Paragraph 9.5.3 (which shall survive indefinitely unless otherwise specified in Paragraph 9.5.3), all claims for Environmental Losses must: (a) be made by or on behalf of Yorkshire, the Yorkshire Entities, the Acquired Entities and Europe to CK Witco in writing; (b) be made within five years after the Effective Date and Time; (c) specifically identify the contaminant, its concentration and the related operation, to the extent that Yorkshire has actual knowledge of such facts; and (d) arise or be related to an Environmental Loss suffered or cost incurred within five years after the Effective Date and Time. 9.5.2.7 Yorkshire acknowledges receiving a US$500,000 credit for those matters which are referred to in Exhibit KK to this Agreement and which are excluded for the purposes of making a claim under Paragraph 9.5.2.1. Expenditures for these matters will not be included for the purposes of the US$750,000 (or its reasonable equivalent in another currency) aggregate provided in Paragraph 9.5.2.5. 9.5.2.8 Certain specific instances of Environmental Damage are set out in Exhibit LL ("Specific Indemnity Issues"). These Specific Indemnity Issues are the subject of separate indemnities set out in Paragraph 9.5.3 below. Other specific instances of Environmental Damage are set out in Exhibit KK and are not the subject of specific indemnities ("Other Identified Issues"). No claim shall be made by Yorkshire with respect to such Specific Indemnity Issues and Other Identified Issues under this Paragraph 9.5.2. 9.5.2.9 CK Witco will provide Yorkshire with all reasonable assistance in obtaining transfers or name changes of any Environmental Licenses necessary for the operation of the Acquired Businesses at the Acquired Properties in a manner substantially similar to the operation of the Acquired Businesses at the Acquired Properties by CK Witco. CK Witco will respond as promptly as practical to all reasonable requests by Yorkshire for documents or other assistance related to Environmental Licenses. CK Witco will cooperate fully with Yorkshire in Yorkshire's dealings with Environmental Regulators. 9.5.3 Specific Indemnity Issues 9.5.3.1 Subject to the provisions of this Paragraph 9.5.3 CK Witco, Colors and Holdings will defend, indemnify and hold harmless Yorkshire, the Yorkshire Entities, the Acquired Entities and Europe for any Environmental Loss (or, where appropriate and in accordance with terms and conditions to be reasonably agreed by CK Witco and Yorkshire, undertake Remedial Work with respect thereto) suffered or incurred by Yorkshire, the Yorkshire Entities, the Acquired Entities or Europe after the Effective Date and Time provided the Environmental Damage existed as of the Effective Date and Time and is resulting from: (a) The items numbered 1 and 8 in Exhibit LL, save that no claim may be made with respect to these items unless written notice thereof will have been given by or on behalf of Yorkshire to CK Witco within seven years after the Effective Date. (b) The items numbered 2, 3 and 5 in Exhibit LL; (c) The items numbered 7 and 9 in Exhibit LL, save that with respect to these items, "Environmental Losses" shall mean only fines, costs (including appeal costs) or penalties suffered or incurred by Yorkshire arising out of a claim by a third party or an Environmental Regulator. (d) The item numbered 4 in Exhibit LL, save that with respect to this item, "Environmental Losses" shall mean only those costs suffered or incurred by Yorkshire associated with the repairs and improvements to the effluent holding tank recommended by the relevant Environmental Report. (e) The item numbered 6 in Exhibit LL, save that with respect to this item, "Environmental Losses" shall mean only such liabilities, obligations, losses, fines, or penalties that arise as a result of clean closure of the underground storage tank not having been effected in accordance with Environmental Law. 9.5.3.2 Effluent Pipeline at Tertre Complex. Pursuant to regulatory requirements relating to the Tertre Complex, the construction of an effluent pipeline may be required as more particularly identified and described on page 13 of the Environmental Report relating to the Tertre Complex. CK Witco will reimburse Yorkshire for the reasonable cost of construction of the pipeline if, in the reasonable judgment of Yorkshire, it must be constructed to meet applicable regulatory requirements, provided, that, if the additional consideration referred to in Paragraph 1.4(d) becomes payable by Yorkshire, Yorkshire agrees to promptly refund to CK Witco all amounts paid by CK Witco to Yorkshire for the construction of such pipeline. 9.5.4 Additional Environmental Indemnity relating to the Oissel Facility only 9.5.4.1 For the purposes of the provisions contained in this Paragraph 9.5.4 only, any capitalized terms will bear the same meaning as set out in the Share Purchase Agreement between Crompton & Knowles S.A. and Imperial Chemical Industries PLC dated as of April 30 1992 (the "ICI Agreement") but if any capitalized terms in this Paragraph 9.5.4 are not set out in the ICI Agreement, they will bear the same meaning as set out in this Agreement. 9.5.4.2 Yorkshire shall cooperate with CK Witco regarding the enforcement of the ICI Agreement through the fifth (5th) anniversary of the Effective Date and Time, including but not limited to permitting CK Witco and its attorneys, at their sole cost, expense and risk, to pursue claims or to prosecute one or more legal actions on behalf of Yorkshire with respect to any matter pertaining to the ICI Agreement. All costs and expenses and any losses, liability or damages of Yorkshire related to or arising out of such cooperation shall be born by CK Witco. CK Witco shall have no obligation to Yorkshire under this Agreement with respect to the ICI Agreement as of the fifth (5th) anniversary of the Effective Date and Time except that it will cooperate with Yorkshire regarding Yorkshire's reasonable requests to pursue indemnification in accordance with the terms and conditions of the ICI Agreement. Such cooperation shall only be required if Yorkshire cannot pursue the indemnification without CK Witco. All costs and expenses and any losses, liability or damages of CK Witco related to or arising out of such cooperation shall be born by Yorkshire. After Yorkshire has notified CK Witco and the parties have pursued claims consistent with the terms of the ICI Agreement, nothing in this Paragraph 9.5.4 will preclude Yorkshire from making a claim relating to the Oissel site under Paragraphs 9.5.2 or 9.5.3 of this Agreement if they believe a claim under one of those provisions exists. 9.5.4.3 Subject to all the conditions contained in the ICI Agreement and except as otherwise limited by this Paragraph 9.5.4, CK Witco, Colors and Holdings hereby agree to indemnify and hold harmless, at all times after the Effective Date and Time, Yorkshire and its respective officers, directors, employees, agents, successors and any controlling persons thereof, from any and all liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including attorneys', consultants', engineers', drillers', contractors', laboratories' fees and other costs and expenses) actually suffered or incurred by it (hereinafter, a "Purchaser Loss") to the extent arising out of or resulting from: (a) Liabilities arising out of events occurring before 30th April 1992, whether such Liabilities arise before or after 30th April 1992, and which were not expressly assumed by CK Witco under the ICI Agreement, including, without limitation, Liabilities arising from or relating to: (i) the handling, generation, release, treatment, storage, transportation or disposal on or off-site of all mercury-containing materials, wastes, sludges or other substances existing at the Oissel Complex prior to 30th April 1992; (ii) the discharge, emission, or release of any mercury- containing materials, wastes, liquids, sludges, particles, dust or other substances through the sewer system, the wastewater treatment system or in any way from the Oissel Complex, provided that Yorkshire does not at any time after the Effective Date and Time use, produce or manufacture mercury-containing materials, wastes, liquids, sludges, particles or other substances at the Company Site; or (iii) the discharge, emission, or release of any PCB-containing materials, wastes, liquids, sludges, particles, dust or other substances through the sewer system, the wastewater treatment system or in any way from the Oissel Complex, provided that Yorkshire does not at any time after the Effective Date and Time use, produce or manufacture PCB-containing materials, wastes, liquids, sludges, particles or other substances at the Company Site; (b) the investigation, removal or remediation of any Hazardous Materials in the soils at or beneath the Company Site on or after the 30th April 1992 or in the soils at or beneath the Excluded Site on or after the 30th April 1992 (the "Soils Indemnity"), or in the groundwater at or beneath the Company Site on or (except to the extent caused by Yorkshire or where Seller shall not have completed its obligations pursuant to Item 4 of Exhibit L to the ICI Agreement, or originating off the Oissel Complex) after the 30th April 1992 (the "Groundwater Indemnity"), if such investigation, removal or remediation is (i) required by a Governmental Authority, (ii) reasonably necessary to avoid or remove material interference with the operation by Yorkshire of the Business, or any material legal or operational constraints on the use, ownership, or occupancy of the Facilities, or (iii) reasonably necessary to protect the safety or health or employees at the Facilities. 9.5.4.4 Notwithstanding any other limitation set out in this Agreement: (a) the Groundwater Indemnity will continue in effect for a period of five years after the Effective Date and Time; (b) the Soils Indemnity will continue in effect for a period of five years after the Effective Date and Time with respect to Hazardous Materials which (i) are not used or produced by Yorkshire in its operation of the Business or (ii) are the source of contamination of the groundwater at or beneath the Company Site; and (c) the Soils Indemnity will continue in effect from the Effective Date and Time with respect to Hazardous Materials used or produced by Yorkshire in its operation of the Business with the indemnity extending to thirty-three percent of covered Purchaser Losses for the period ending on 30th April 2002 and for twenty-five percent for the period commencing 1st May 2002 until 30th April 2004. From the day following 30th April 2004 CK Witco will have no liability under this Paragraph 9.5.4.4(c). 9.5.5 Joint and Several Liability 9.5.5.1 No provision of this Agreement will be interpreted to require Yorkshire to exhaust any other remedies, sources of funding or to bring claims against any other person prior to seeking indemnification from CK Witco for Environmental Losses covered by this Agreement. Yorkshire will provide CK Witco with reasonable cooperation in pursuit of legal action against any third party, except that Yorkshire will not be required to pay any fees, fines, penalties or incur other costs associated with any such legal action. 9.5.6 Limitations On Claims 9.5.6.1 For the avoidance of doubt, no limitations on claims included elsewhere in this Agreement will apply to claims made under Paragraphs 9.5.2, 9.5.3 and 9.5.4 unless otherwise expressly provided in Paragraphs 9.5.2, 9.5.3 and 9.5.4. 9.6 Taxation Schedule Indemnity. Yorkshire and its Affiliates shall be entitled to indemnification as set forth in the Taxation Schedule to this Agreement, which shall be the exclusive source of indemnification for the matters covered thereby and which shall exclusively govern claims thereunder and third party claims with respect thereto. The provisions of Paragraphs 9.3, 9.8, 9.9, 9.10, 9.11, 9.13 and 9.16 shall be inapplicable with respect thereto and save as expressly stated by express reference to the Taxation Schedule or in the Taxation Schedule itself, nothing in this Agreement, any Additional Agreement, any Closing Document or the CK Witco Disclosure Memorandum shall operate to limit or exclude the liability of CK Witco in respect of any Claim under the Taxation Schedule. 9.7 No Contribution by Europe or any Acquired Entity. None of Europe or any Acquired Entity will have any Liability to any CK Witco Entity, nor will any CK Witco Entity have a right of indemnification or contribution against any of them or any of their officers or employees, as a result of any misrepresentation or breach of representation or warranty by it contained in this Agreement, any Additional Agreement or any certificate, schedule, instrument, agreement or other writing delivered by or on behalf of, or in respect of, it pursuant to or in connection with this Agreement, any Additional Agreement or in connection with the transactions contemplated by this Agreement or any Additional Agreement, or the breach of any of its covenants or agreements contained in this Agreement, any Additional Agreement, Closing Document or the CK Witco Disclosure Memorandum or any certificate, schedule, instrument, agreement or other writing by or on behalf of, or in respect of, it pursuant to or in connection with the terms of this Agreement or any Additional Agreement or in connection with the transactions contemplated by this Agreement or any Additional Agreement. 9.8 Minimum Losses. The parties shall have the right to obtain indemnification under this Agreement as follows: (a) with respect to Yorkshire: (i) and in respect of such Indemnified Losses, once aggregate Indemnified Losses relating to the Acquired Businesses and arising from North America, Central America and South America for which Yorkshire and its Affiliates, and the successors and assigns of Yorkshire and its Affiliates, are otherwise entitled to indemnification under this Article 9 exceed US$750,000 (or its reasonable equivalent in another currency), after which time only the aggregate amount of such Indemnified Losses in excess of US$750,000 (or its reasonable equivalent in another currency) shall be recoverable in accordance with the terms hereof, or (ii) and in respect of such Indemnified Losses, once aggregate Indemnified Losses relating to Europe and the Acquired Entities arising from Europe and Asia for which Yorkshire and its Affiliates, and the successors and assigns of Yorkshire and its Affiliates, are otherwise entitled to indemnification under this Article 9 exceed US$500,000 (or its reasonable equivalent in another currency), after which time only the aggregate amount of such Indemnified Losses in excess of US$250,000 (or its reasonable equivalent in another currency) shall be recoverable in accordance with the terms hereof, except that this Paragraph 9.8(a)(ii) shall not apply to liabilities arising out of Paragraph 3.26(ii) relating to Disclosed Schemes in the Netherlands (listed under Paragraph 3.26(a)(ii)) and Disclosed Schemes in France (listed under Paragraph 3.26(a)(iv)) provided through AXIVA and IREC and a defined benefit scheme known as SAD 4000; and (b) with respect to CK Witco, once aggregate losses for which CK Witco and its Affiliates, and the successors and assigns of CK Witco and its Affiliates, are otherwise entitled to indemnification under this Article 9 exceed US$1,250,000 (or its reasonable equivalent in another currency), after which time only the aggregate amount of such losses in excess of US$1,000,000 (or its reasonable equivalent in another currency) shall be recoverable in accordance with the terms hereof. (c) Notwithstanding the provisions of Paragraph 9.8(a), the foregoing limitations shall not apply to Indemnified Losses in respect of title to assets, litigation, Taxes, environmental matters (including claims arising pursuant to Paragraphs 3.18 and 9.5), Liabilities which are neither Assumed Liabilities nor European Retained Liabilities, or claims arising pursuant to any of Paragraphs 9.12, 9.13, 9.14 or 9.18. 9.9 Maximum Indemnification. No party shall have any right to obtain an indemnification payment under this Agreement to the extent the aggregate of the amounts received by such party and its Affiliates, and the successors and assigns of such party and its Affiliates, as indemnification payments hereunder exceeds an amount equal to (i) US$30,000,000 for Yorkshire or (ii) US$17,500,000 for CK Witco; provided, however, that the foregoing limitation shall not apply to Yorkshire and its Affiliates in respect of Indemnified Losses in respect of title to assets, litigation, Taxes, environmental matters (including claims arising pursuant to Paragraphs 3.18 and 9.5), Liabilities which are neither Assumed Liabilities nor European Retained Liabilities, or claims arising pursuant to any of Paragraphs 9.12, 9.13, 9.14 or 9.18. 9.10 Subrogation. Any Indemnifying Party shall be subrogated to any right of action which the Indemnified Party may have against any other Person with respect to any matter giving rise to a claim for indemnification hereunder. 9.11 Adjustments to Indemnification. (a) All indemnity payments made under this Article 9 (excluding payments pursuant to Paragraph 9.1(b)) shall be treated for accounting purposes as adjustments to the Purchase Price. All computations of indemnity payments due under this Article 9 shall reflect the actual present cash cost of the obligation with respect to which the indemnity payment relates. If any Indemnified Party receives a Tax benefit by virtue of having paid or accrued an amount for which an indemnity payment is provided, the amount of such Tax benefit will be refunded to the Indemnifying Party making such indemnity payment when, as and if such Indemnified Party realizes a cash Tax savings from such Tax benefit. (b) The amount which any Indemnifying Party is or may be required to pay any Indemnified Party pursuant to this Article 9 shall be reduced (including retroactively) by any insurance proceeds or other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Losses. If an Indemnified Party shall have received the payment required by this Agreement from an Indemnifying Party in respect of a Loss and shall subsequently actually receive insurance proceeds or other amounts in respect of such Loss, then such Indemnified Party shall pay to such Indemnifying Party a sum equal to the amount of such insurance proceeds or other amounts actually received (net of any expenses in obtaining the same). 9.12 Smith Road Indemnity. CK Witco and Yorkshire expressly acknowledge that the lease dated 24th April 1997 between Foden Investments Ltd (1), CK Witco (UK) Limited (2) and Europe (3) relating to offices at Waterside Industrial Park, Smith Road, Bolton, UK (the "Lease") is not intended to be assumed by Yorkshire pursuant to the transaction the subject of this Agreement and CK Witco, Colors and Holdings jointly and severally agree to indemnify Yorkshire, each Yorkshire Entity, each Yorkshire Affiliate, each Acquired Entity and Europe in respect of all costs, claims, liabilities and expenses (including for the avoidance of doubt, rent) relating to the Lease, provided that this indemnity shall not apply to the extent CK Witco (UK) Limited and Europe fail to comply with their obligations under the Lease (save for their obligations to pay for rent, service charges and other monetary amounts). 9.13 BCC Indemnity. CK Witco, Colors and Holdings jointly and severally agree to indemnify Yorkshire, each Yorkshire Affiliate, each Yorkshire Entity, each Acquired Entity and Europe in respect of all costs, claims, liabilities and expenses relating to the transactions referred to in Paragraph 2.15. 9.14 Dusseldorf Indemnity. CK Witco, Colors and Holdings jointly and severally agree to indemnify Yorkshire, each Yorkshire Entity, each Yorkshire Affiliate, each Acquired Entity and Europe in respect of all costs, claims, liabilities and expenses relating to the closure of the office previously occupied by the relevant Acquired Entity in Dusseldorf, Germany. 9.15 Exclusive Remedy. Subject to Paragraph 9.6, the right to indemnification, if any, with respect to breaches of representations, warranties and covenants pursuant to this Article 9 shall constitute the sole and exclusive remedy with respect thereto, shall preclude any other monetary award (whether at law or in equity), and shall preclude assertion by any party hereto of any right to any such monetary award from the Indemnifying Party, other than in the case of fraud or intentional misconduct, in which case each Person shall have all such remedies as may be available at law, in equity or otherwise. Nothing in this Article 9 shall limit the remedies available to an Indemnified Party to enforce its right to indemnification or to injunctive relief. 9.16 Duty to Mitigate. Each indemnified party shall cooperate with each indemnifying party with respect to resolving any actual or potential Losses arising out of, attributable to, or resulting from any inaccuracy in or breach of any of the representations, warranties, covenants or agreements of the other relevant parties hereto, including by making such commercially reasonable efforts to mitigate any or all such Losses as the indemnified party would reasonably use in mitigating its own losses (assuming it were not indemnified hereunder). In the event that any indemnified party shall fail to make such efforts as are described in the preceding sentence, then, notwithstanding anything else to the contrary contained in this Agreement, the indemnifying party shall not be required to indemnify any Person to the extent of any or all of the Losses that could reasonably have been avoided if the indemnified party had made such efforts, but only to that extent. 9.17 After-Tax Payments. 9.17.1 All sums payable by CK Witco, Colors, Holdings or any other CK Witco Entity (each, a "CK Witco Party") to Yorkshire or Americas or any Acquired Entity or Europe or any Yorkshire Affiliate (each, a "Yorkshire Party") under this Agreement (other than Paragraph 1.4) or by a Yorkshire Party to a CK Witco Party under Paragraph 9.4 or Article 5 shall be paid free and clear of all deductions or withholdings whatsoever, save only as may be required by law. 9.17.2 If any deductions or withholdings, not being in respect of payments of interest in respect of late payment of sums referred to in Paragraph 9.17.1, are required by law to be made from any sum payable as mentioned in Paragraph 9.17.1, then the payor shall pay to the payee, on payment of the relevant sum, such additional sum as will, after the deduction or withholding has been made, leave the payee with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding. 9.17.3 If any sum payable as mentioned in Paragraph 9.17.1, not being in respect of payments of interest in respect of late payment of sums referred to in Paragraph 9.17.1, shall be subject to Taxes in the hands of the payee (ignoring the availability of any Relief (as defined in the Taxation Schedule) not arising from the Underlying Loss (as defined herein)), then the payor shall pay to the payee an additional sum equal to the amount of such Taxes which are payable by the payee (or would be payable in the absence of any such Relief) such additional sum to be paid within five (5) Business Days of written demand therefor by the payee. 9.17.4 If any sum payable as mentioned in Paragraph 9.17.1 is payable with respect to an Indemnified Loss, Environmental Loss or other loss, damage, liability, cost or expense, including reasonable attorneys' fees and amounts paid in settlement (an "Underlying Loss"), and the payee receives a insurance payment or Tax Benefit with respect to the Underlying Loss, the amounts otherwise payable under this Paragraph 9.17 shall be reduced by such insurance payment or Tax Benefit. In the event that the insurance payment or Tax Benefit is received by the payee after the payment is made under this Paragraph 9.17, the payee shall refund to the payor an amount equal to the insurance payment or Tax Benefit within five (5) Business Days of receipt of such insurance payment or Tax Benefit. 9.17.5 As used in this Paragraph 9.17, "Tax Benefit" shall mean the benefit actually realized, through a reduction in Taxes otherwise due, from any item of deduction, loss or credit. It shall be assumed for this purpose that all Post- Closing Reliefs (as defined in the Taxation Schedule) and all other deductions, losses or credits that are not with respect to Underlying Losses are used in priority to any deduction, loss or credit with respect to the Underlying Loss. 9.17.6 For purposes of Paragraph 9.17.3, a sum payable as mentioned in Paragraph 9.17.1 by a CK Witco Party to a Yorkshire Party shall not be treated as subject to Taxes merely because the receipt of such payment results in a reduction in Yorkshire's tax basis in the Europe Capital Stock or any Yorkshire Entity's tax basis in other Transferred Assets. 9.17.7 To the extent permitted by applicable law, but without in any way limiting the obligations of any party to make any payment, the parties to this Agreement shall treat any payment paid or received pursuant to this Article 9 as an adjustment to the Purchase Price for all Tax purposes. 9.17.8 The provisions of this Paragraph 9.17 (including Paragraph 9.17.4) (i) shall not apply to any amounts payable pursuant to the Taxation Schedule (to which the corresponding provisions of that schedule shall apply); and (ii) with respect to payments by a CK Witco Party to a Yorkshire Party, shall apply only with respect to sums payable in relation to Europe or any Acquired Entity. 9.18 Pensions Indemnity. CK Witco, Colors and Holdings hereby jointly and severally indemnify and hold harmless the Yorkshire Entities, Yorkshire's Affiliates, Europe and the Acquired Entities against all and any losses, claims, expenses, damages, costs and all other liabilities (including, for the avoidance of doubt, the whole amount of any funding deficit relating to benefits accrued before Closing which is revealed by the first actuarial valuation carried out after Closing) relating to and arising from the Crompton & Knowles (UK) Limited Retirement Benefits Scheme (the "Scheme") (being the scheme mentioned in the 1997 report and accounts of Crompton & Knowles (UK) Limited). CK Witco will procure and Yorkshire will co-operate to ensure that Crompton & Knowles (UK) Limited will be replaced as the principal employer of the Scheme with effect from the Closing. 10. SURVIVAL 10.1 Survival. The representations, warranties, covenants, agreements and indemnities of the parties contained in this Agreement or any Additional Agreement, or in any writing delivered pursuant to the provisions of this Agreement or any Additional Agreement, will survive any investigation prior, on or subsequent to the date of this Agreement made by any party or its Representatives and the consummation of the transactions contemplated in this Agreement, any Additional Agreement or in any writing delivered pursuant to the provisions of this Agreement or any Additional Agreement and will continue in full force and effect for the periods specified below (the "Survival Period"): (a) representations, warranties, covenants, agreements and indemnities relating to undisclosed and contingent Liabilities, title to assets, title to Transferred Assets, employee welfare and benefits, the reporting or payment of or Liability for Taxes (other than for Taxes covered by the Taxation Schedule), compliance with laws, fraud or willful misrepresentation, and fraudulent or willful incompleteness of disclosure will survive until expiration of any applicable statute or period of limitations, and any extensions of the applicable statute or period of limitations; (b) representations, warranties, covenants, agreements and indemnities set forth in the Taxation Schedule shall survive as set forth in the Taxation Schedule; and (c) all other representations, warranties, covenants, agreements and indemnities for which no survival period or termination date is set forth elsewhere in this Agreement, will be of no further force and effect after June 30, 2001; provided, however, that the Survival Period will be extended automatically to include any time period necessary to resolve a claim for indemnification which arises out of any written notice to Indemnitor advising Indemnitor of the facts or circumstances that may give rise to a claim for indemnification, provided notice was delivered before expiration of the Survival Period. Liability for any item will continue until the claim will have been finally settled, decided or adjudicated. 11. TERMINATION 11.1 Termination for Certain Causes. This Agreement may be terminated at any time prior to or on the Closing Date by Yorkshire or CK Witco, upon written notice to the other as follows: (a) By Yorkshire, if a material adverse change in the business, properties, financial condition of the Acquired Businesses will have occurred. (b) By Yorkshire, if a material adverse change in the business, properties or financial condition of Yorkshire or the Acquired Businesses occurs prior to Closing, or there are other factors outside Yorkshire's reasonable control which in either case cause Yorkshire's lenders to terminate their obligation to lend to Yorkshire under its facility agreement of today's date with HSBC Bank and the other signatories thereto. (c) By Yorkshire, if the terms, covenants or conditions of this Agreement to be complied with or performed by any CK Witco Entity, Europe or any Acquired Entity at or before the Closing Date will not have been complied with or performed in all material respects or any other conditions to the obligations of Yorkshire to consummate the transactions contemplated by this Agreement required to be satisfied at or before the Closing Date will not have been complied with or satisfied in all material respects, and any such material noncompliance or nonperformance will not have been waived writing by Yorkshire. (d) By CK Witco, if the terms, covenants or conditions of this Agreement to be complied with or performed by any Yorkshire Entity at or before the Closing Date will not have been complied with or performed in all material respects or any other conditions to the obligations of CK Witco to consummate the transactions contemplated by this Agreement required to be satisfied at or before the Closing Date will not have been complied with or satisfied in all material respects, and any such material noncompliance or nonperformance will not have been waived in writing by CK Witco. (e) By CK Witco or Yorkshire, if any Action will have been instituted against any party to this Agreement to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the consummation of the transactions contemplated in this Agreement, which, in the reasonable and good faith opinion of any party and upon the written advice of outside counsel, makes consummation of the transactions contemplated in this Agreement inadvisable. (f) By CK Witco or Yorkshire, if the Closing has not occurred on or before December 31, 1999. (g) By CK Witco and Yorkshire, by written consent. 11.2 Procedure on and Effect of Termination. (a) Pursuant to Paragraph 11.1 of this Agreement, written notice of termination will be given to all other parties by the party electing to terminate, and this Agreement will terminate upon the giving of notice, without further action by any of the parties to this Agreement, with the consequence and effect set forth in this Paragraph 11.2. (b) If for any reason on the Closing Date there has been nonfulfillment of an undertaking by or condition precedent for Yorkshire on the one hand and CK Witco on the other not waived in writing by or on behalf of the party in whose favor the undertaking or condition or undertaking runs, the party in whose favor the undertaking or condition runs, in addition to any other right or remedy available to it for breach or non-performance of this Agreement or any Additional Agreement, may refuse to consummate the transactions contemplated by this Agreement without Liability or obligation on its part whatsoever. Notwithstanding the foregoing, the obligations of the parties pursuant to Paragraphs 2.3, 2.4, 2.5, 2.7, 10.1, 11.1, 11.2, 12.1, 12.3 and 12.4 will survive any termination. 12. MISCELLANEOUS 12.1 Notices. (a) All notices, demands or other communications required or permitted to be given or made under this Agreement will be in writing and (i) delivered personally, or (ii) sent by an internationally recognized express courier service to the intended recipient of the notice, demand or other communication at its address set forth below. Any notice, demand or communication will be deemed to have been duly given (x) immediately if personally delivered, or (y) on the fourth Business Day after delivery to an international express courier service, and in proving the giving of any notice, demand or other communication, it will be sufficient to show that the envelope containing the notice, demand or other communication was duly addressed (as evidenced by the courier receipt). The addresses of the parties for purposes of this Agreement are: (i) If to any CK Witco Entity, and before Closing, to Europe or any Acquired Entity: CK Witco Corporation One American Lane Greenwich, Connecticut 06831 USA Attn:Charles L. Marsden, Senior Vice President - Strategy and Development with copies to (which shall not constitute notice): Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 USA Attn: Edward D. Herlihy (ii) If to any Yorkshire Entity, and after Closing, additionally to Europe or any Acquired Entity: Yorkshire Group plc Kirkstall Road Leeds LS3 1LL England Attn: Group Finance Director with copies to (which shall not constitute notice): Addleshaw Booth & Co Sovereign House Leeds LS1 1HQ England Attn: Ian McIntosh Andrew Kay Kilpatrick Stockton LLP 1100 Peachtree Street Atlanta, Georgia 30309 USA Attn: Gregory K. Cinnamon (b) Any party may change the address to which notices, requests, demands or other communications to the relevant party will be delivered or mailed by giving notice of the address change to the other parties to this Agreement in the manner provided in this Agreement. 12.2 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, and all of which will constitute one and the same instrument. 12.3 Entire Agreement. This Agreement and the Additional Agreements, together supersede all prior discussions and agreements between the parties with respect to the subject matter of this Agreement and the Additional Agreements, including a certain Letter of Intent, dated 30 July, 1999, as amended and modified to the date of this Agreement, and this Agreement and the Additional Agreements contains the sole and entire agreement among the parties with respect to the matters covered by this Agreement and the Additional Agreements. This Agreement will not be altered or amended except by an instrument in writing signed by or on behalf of the party entitled to the benefit of the provision against whom enforcement is sought. 12.4 Governing Law; Dispute Resolution. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of New York (without application of its conflicts of laws rules), except that the choice of law set forth in the Taxation Schedule shall govern with respect to the matters governed by the Taxation Schedule. Any and all disputes (each, a "Disputed Matter") arising out of or in connection with the execution, interpretation, performance or nonperformance of this Agreement will be resolved by the procedures set forth on Exhibit MM attached to this Agreement. 12.5 Successors and Assigns. This Agreement will be binding upon and will inure to the benefit of the parties to this Agreement and their respective heirs, executors, legal representatives, successors and assigns, but may not be assigned by any party without the written consent of all other parties, except to an Affiliate; provided however Yorkshire shall be entitled to assign the full benefit of this Agreement and the Additional Agreements to its lenders from time to time and their successors in title. 12.6 Partial Invalidity and Severability. All rights and restrictions contained in this Agreement may be exercised and will be applicable and binding only to the extent that they do not violate any applicable laws and are intended to be limited to the extent necessary to render this Agreement legal, valid and enforceable. If any term of this Agreement, or part of this Agreement, not essential to the commercial purpose of this Agreement will be held to be illegal, invalid or unenforceable by a court of competent jurisdiction, it is the intention of the parties that the remaining terms of this Agreement, or part of this Agreement, will constitute their agreement with respect to the subject matter of this Agreement and all remaining terms, or parts of this Agreement, will remain in full force and effect. To the extent legally permissible, any illegal, invalid or unenforceable provision of this Agreement will be replaced by a valid provision which will implement the commercial purpose of the illegal, invalid or unenforceable provision. 12.7 Waiver. Any term or condition of this Agreement may be waived at any time by the party which is entitled to the benefit of the term, but only if the waiver is evidenced by a writing signed by the relevant party. No failure on the part of any party to this Agreement to exercise, and no delay in exercising any right, power or remedy created under this Agreement, will operate as a waiver thereof, nor will any single or partial exercise of any right, power or remedy by any party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. No waiver by any party to this Agreement or any breach of or default in any term or condition of this Agreement will constitute a waiver of or assent to any succeeding breach of or default in the same or any other term or condition of this Agreement. 12.8 Headings. The headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement. 12.9 Number and Gender. Where the context requires, the use of the singular form in this Agreement will include the plural, the use of the plural will include the singular, and the use of any gender will include any and all genders. 12.10 Construction. The word "including" (and, with correlative meaning, the word "include") means that the generality of any description preceding such word is not limited, and the words "shall" and "will" are used interchangeably and have the same meaning. 12.11 Time of Performance. Time is of the essence. 13. CERTAIN DEFINITIONS; INDEX OF DEFINITIONS 13.1 Certain Definitions. For purposes of this Agreement, the following capitalized terms will have the meanings specified below (all terms used in this Agreement which are not defined in this Paragraph 13.1 but defined elsewhere in this Agreement, will have for purposes of this Agreement the meanings set forth elsewhere in this Agreement): "Action" means any action, suit, complaint, counter-claim, claim, petition, set-off or administrative proceeding, whether at law, in equity or otherwise, and whether conducted by or before any Government or other Person. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with the former Person from time to time. A Person will be deemed to control another Person if that Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. "agreed form" means in the form produced to the parties on the date of this Agreement and initialled by or on behalf of each of Yorkshire and CK Witco for the purposes of identification. "Americas IPD Business Territory" means the countries, territories and possessions listed on the attached Exhibit NN attached to this Agreement. "Application" means the application to be made by Yorkshire to the London Stock Exchange for the admission of its issued Ordinary Share capital (as enlarged by the issue of the Consideration Securities) to the Official List subject only to allotment. "Article" and "Paragraph" and like references are to this Agreement unless otherwise specified, and all "Exhibits" are references to those attached to this Agreement and incorporated in this Agreement by this reference, unless otherwise specified. "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in either New York or London are required or authorized to be closed. "CK Witco Service Areas" means those geographies in which CK Witco conducted an Acquired Business during the 12-month period immediately preceding the Effective Date and Time. "Code" means the United States Internal Revenue Code of 1986, as amended, and all final and temporary regulations promulgated pursuant thereto. "Consideration Securities" means a number of new Ordinary Shares of Section 0.25p each of Yorkshire (not exceeding 15,274,072 in total and rounded down to the nearest whole share) equal to the quotient derived by dividing (A) US$8,500,000 by (B) the Average Share Price. For purposes of this definition of Consideration Securities, "Average Share Price" will be determined as follows: (i) the average mid-market price (the "Average Sterling Share Price") of Yorkshire's Ordinary Shares ("Ordinary Shares") on the London Stock Exchange for the 10 Business Days ending two (2) days before the Closing Date as quoted for each such Business Day in the London Financial Times shall be determined; (ii) if the Average Sterling Share Price is below 70p per Ordinary Share, then the Average Sterling Share Price for the purposes of this Agreement shall be deemed to be 70p per Ordinary Share, and if the Average Sterling Share Price is above 130p per Ordinary Share, then the Average Sterling Share Price for the purposes of this Agreement shall be deemed to be 130p per Ordinary Share; (iii) the Average sterling/US$ exchange rate (the "Average Exchange Rate") for each of the 10 Business Days ending two (2) days before the Closing Date shall be determined by reference to the closing mid-point of the buy-sell range as quoted for each such Business Day (or, if applicable, for those Business Days during such 10-day period for which the London Financial Times is published) in the following day's London Financial Times; (iv) the Average Sterling Share Price will be converted into US$ by reference to the Average Exchange Rate to produce the Average Share Price. "Crude Stocks" means dyes or other products, which have completed their synthesis process, but are not finished goods or "work-in-process" (as defined by CK Witco's financial accounting system at the time of sale). "Duty Costs" means all duty and filing costs (including stamp duty and filing costs but excluding attorneys', agent or advisors costs and fees reasonably required by an Agency, "Agency" means the United States Patent and Trademark Office, the United States Copyright Office, or any other federal, state, local, provincial or other governmental or regulatory agency in the world which now regulates or may in the future regulate, the protection, use, or registration of Intellectual Property Rights. "Extraordinary General Meeting" means the Extraordinary General Meeting of Yorkshire to be convened for December 15, 1999 (or any adjournment thereof) to consider (inter alia) the Resolutions. "Fixed Asset Registers" means those documents denominated and designated as such by CK Witco and Yorkshire, as evidenced by their signatures thereon on today's date. "Forum" means any national, provincial, municipal, local or foreign court, governmental agency, administrative body or agency, tribunal, private alternative dispute resolution system, or arbitration panel. "GAAP" means United States generally accepted accounting principles, consistently applied, as in effect from time to time. "Government" means any national, provincial, state, municipal, local or foreign government or any ministry, department, commission, board, bureau, agency, authority, instrumentality, unit, or taxing authority thereof. "Intellectual Property Rights" means all patents, registered designs, trademarks and service marks (whether or not registered or registerable), copyright, design right and all similar property rights (whether or not registered or registerable), including those existing (in any part of the world) in inventions, design, drawings, computer programmes, confidential information, business or brand names goodwill or the style of presentation of goods and services and in any applications for protection thereof. "Industrial Dyes" means those dyes (1) combined with or manufactured in whole or part using Intellectual Property Rights; and (2) intended to be combined with or applied to any Industrial Product. "Industrial Product" or "Industrial Products" means any of the following products, materials or items other than Textile Dyes, and specifically including without limitation all of the following products, materials or items: (a) paper, leather, wood, wood stains, plastics, resins, paints and printing inks (including without limitation, inkjet inks for graphic arts, paper, leather, wood, plastics and resins, but excluding inkjet inks for other than graphic arts, paper, leather, wood, plastics and resins; and including without limitation, printing inks for heat or other transfer or gravure); (b) decorative coatings for metallic foils and polymeric films, petroleum Dyes and water tracing; and (c) mass dyeing of molten polymers and other molten synthetic materials used to form fibers, filaments or yarns. "IPD Business" means those Persons engaged in (1) the distribution, use or sale of Industrial Dyes and/or (2) the manufacture, distribution, or sale of Industrial Products which contain or incorporate Industrial Dyes. "Law" means all national, provincial, regional, state, municipal, local or foreign constitutions, statutes, decrets, rules, regulations, ordinances, acts, codes, legislation, treaties, conventions and similar laws and legal requirements, as in effect from time to time. "Liability" means any liability or obligation whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due. "Lien" means any claim, mortgage, pledge, hypothecation, security interest, encumbrance, lien or charge of any kind, or any rights of others, however evidenced or created (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, or any lease having a similar effect or result). "London Stock Exchange" means London Stock Exchange Limited. "Malfunction" means any failure to: (a) accurately recognize dates falling before, on or after the Year 2000; or (b) accurately record, store, retrieve and process data input and date information. "Notice of EGM" means the notice in the form set out in the Listing Particulars. "Orders" means all orders, writs, judgments, decrees, rulings and awards of any Forum or Government. "Person" means and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any legal or juridical entity, the equivalent of any of the foregoing under any Law, and any Government. "Representative" of a party means that party's directors, officers, partners, employees, agents, accountants, lenders, lawyers, investment bankers, merchant bankers, and other financial or professional advisors or consultants. "Research and Development Library" means the research and development laboratory maintained at the Gibraltar Facility at today's date and all Proprietary Rights arising with respect thereto. "Resolution" means the Resolution set out in the Notice of EGM. "Software" means all computer software and subsequent versions thereof, including but not limited to, source code, object code, objects, comments, screens, user interfaces, report formats, templates, menus, buttons and icons, and all files, data, materials, manuals, design notes and other items and documentation related thereto or associated therewith. "Taxation Schedule" means the Schedule attached to and forming a part of this Agreement and denominated as such. "Taxes" means (other than in the Taxation Schedule) any past, present or future taxes, levies, imposts or duties of whatever nature, including income, gross receipts, excise, property, sales, transfer, license, payroll, withholding, social security, and franchise taxes, now or hereafter imposed or levied by any federal, state, local or foreign Government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interests, penalties, additions to tax, and other similar liabilities with respect to the Taxes. "Textile Dyes" means those dyes (1) combined with or manufactured in whole or part using Intellectual Property; and (2) intended to be combined with or applied to any Textile Product. "Textile Dyes Business" means those Persons engaged in (1) the distribution, use or sale of Textile Dyes and/or (2) the manufacture, distribution, or sale of Textile Products which contain or incorporate Textile Dyes. "Textile Product" or "Textile Products" means any of the following products, materials or items: (1) woven textiles; (2) non-woven textiles other than wet-laid or dry-laid cellulosic non-woven textiles; (3) knitted textiles; (4) pre-formed loose fibers, filaments or yarns (including without limitation pre-formed tufted yarns used to manufacture carpet); or (5) inkjet inks for other than graphic arts, paper, leather, wood, plastic or resin. "U.S. Asset Acquired Businesses" means those Acquired Businesses that have their primary operations in the United States and that are being purchased pursuant to this Agreement by means of the acquisition of assets rather than of shares. "US Employees" means full-time, active employees of an Acquired Business whose principal residence is in the United States. "Year 2000" means the calendar year 2000 A.D. "Yorkshire Disclosure Memorandum" means the letter denominated as such, dated today's date, and executed by Yorkshire in favor of CK Witco. 13.2 Index to Definitions. The definitions for the following defined terms used in this Agreement can be found as follows: Defined Term Reference Accountants 1.4(b) Acquired Businesses Recitals Acquired Entity(ies) Recitals Acquired IPD Business (es) Recitals Acquired Properties 1.1(b) Additional Agreement(s) 1.11(b) Americas Preamble Americas IPD Business Recitals Answer Period 9.3(e) Assigned Contracts 1.1(g) Assumed Collective Bargaining Agreements 2.10(e) Assumed Liabilities 1.5(a) Balance Sheet Principles 1.4(a) Bank Account 1.11(a) BCC 1.1(c) Business Employees 2.10(a) Charlotte Improvements 1.1(a)(ii) Charlotte Land 1.1(a)(ii) CK Witco Preamble CK Witco Disclosure Memorandum Article 3 CK Witco Entities 1.1 CK Witco ESOP 2.10(f) CK Witco Party 9.17.1 CK Witco Restricted Period 2.8 CK Witco Service Areas 13.1 CK Witco Supply Contract 1.11(b) CK Witco 401(k) 2.10(f) Closing 1.10 Closing Date 1.10 Closing Documents 1.11(a) Closing Net Assets 1.4(a) Closing Special Purpose Statement 1.4(a) COBRA 2.10(h)(iii) Colors Preamble Colors Contracts 1.2(c) Computations 1.4(a) Contracts 3.20 Contractors 9.5.2.2(g) Covered Properties 9.5.1.1 Dalton Improvements 1.1(a)(iv) Dalton Land 1.1(a)(iv) Disclosed Schemes 3.26(a) Disposal Period 2.8(c) Disputed Matter 12.4(a) Due Diligence Request 3.36 Effective Date and Time 1.10 Employee Benefit Plans 3.25(a) Environmental Damage 9.5.1.1 Environmental Law 9.5.1.1 Environmental License 9.5.1.1 Environmental Losses 9.5.1.1 Environmental Regulator 9.5.1.1 Environmental Reports 9.5.1.1 Euro-Affected Products and Services 3.10 ERISA Affiliate 3.25(h) Europe Preamble Europe Capital Stock 1.1(m) European /Asian Employees 3.24(b)(i) European Retained Liabilities 1.6(b) Excluded Assets 1.2 Excluded Liabilities 1.6(b) Excluded Liability Fund 2.21 Excluded Properties 1.2(a) Gibraltar Facility 1.2(a)(iv) Greenville Improvements 1.1(a)(iii) Greenville Land 1.1(a)(iii) Groundwater Indemnity 9.5.4.3(b) Hazardous Substance 9.5.1.1 Holdings Preamble HSR Filing 2.6 Immovable Property 3.17(a) Improvements 1.1(a)(iv) Indemnified Losses 9.1 Indemnitees 9.1 Indemnitors 9.1 Index of Documents 3.36 Inventories 1.1(d) IPD Bagger 1.2(e) Land 1.1(a)(iv) Lease 9.12 Leased Real Property 1.1(b) Listing Particulars 4.3 Lowell Improvements 1.1(a)(i) Lowell Land 1.1(a)(i) Measuring Period 1.1(d) Newark Facility 1.2(a)(i) Nutley Facility 1.2(a)(ii) Other Identified Issues 9.5.2.8 Owned Real Property 1.1(a) Participants 2.11(a)(i) Permits 3.6 Property Leases 3.17(b) Proprietary Rights 3.19(a) Purchase Price 1.3 Purchaser Loss 9.5.4.4 Reading Facility 1.2(a)(iii) Receivables 1.1(e) Reference Date 3.34 Related Parties 3.29 Remedial Works 9.5.1.1 Reviewed Contracts 1.6(b) Scheme 9.18 Soils Indemnity 9.5.4.3(b) Specific Indemnity Issues 9.5.2.8 Special Purpose Statements 3.10 Survival Period 10.1 Target Competitive Business 2.8(c) Tax Benefit 9.17.5 Transferred Assets 1.1 Underlying Loss 9.17.4 UK Scheme 3.25(a) WARN Act 2.10(j) Written Responses 3.36 Yorkshire Preamble Yorkshire Entities 1.1 Yorkshire Party 9.17.1 Yorkshire Restricted Period 2.8(e) Yorkshire Supply Contract 1.11(b)(ii) Yorkshire 401(k) Plan 2.10(j) 1999 Americas Textile Dyes Revenues 1.1(d) 1999 Annual Bonus and Commissions 2.10(l) [Signatures Appear on Following Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Yorkshire Group plc By: Print Name: Title: Yorkshire Americas, Inc. By: Print Name: Title: CK Witco Corporation By: Print Name: Title: Crompton & Knowles Europe S.P.R.L. By: Print Name: Title: Uniroyal Chemical European Holdings B.V. By: Print Name: Title: Crompton & Knowles Colors Incorporated By: Print Name: Title: TAXATION SCHEDULE Part A - General 1. Interpretation 1.1 In this schedule (unless the context otherwise requires): "Accounts" means in relation to each Company, the audited balance sheet as at and the profit and loss account and financial statements for the period ended on the Accounts Date. "Accounts Date" means 19th December, 1998 or 31st December, 1998 being the date in December 1998 as at which the relevant Company made up its Accounts. "Actual Taxation Liability" means a liability, or an increase in a liability, to make an actual payment of or of an amount in respect of Taxation whether or not such Taxation is also or alternatively, directly or indirectly, chargeable against or attributable to any other person and whether or not any amount in respect thereof is recoverable from any other person and whether or not such liability or increased liability is discharged prior to Closing. "Auditors" means the auditors for the time being of the Company. "CK Witco's Group" means CK Witco, Holdings and any company, not being a Company, which is the holding company from time to time of CK Witco and any subsidiary from time to time of such holding company or CK Witco and references to a "member of CK Witco's Group" shall be construed accordingly and the expressions "holding company" and "subsidiary" shall have the meanings ascribed thereto in section 736 of the Companies Act 1985 of the United Kingdom. "Claim" means any assessment, notice, demand or other document issued or action taken by or on behalf of any Taxation Authority or any form of return, computation or self-assessment required by law from which it appears that the Company is subject to, or is sought to be made subject to, or will or might become subject to, any Taxation Liability. "Deemed Taxation Liability" means the setting off of a Post- Closing Relief against any Actual Taxation Liability of the Company in respect of which CK Witco would have been liable under paragraph 1.1 of Part B or (as the case may be) against Profits which would have given rise to such an Actual Taxation Liability, in which event the amount of the Deemed Taxation Liability is in the former case the amount of the Actual Taxation Liability eliminated by such setting off and in the latter case the amount of the Actual Taxation Liability which would have arisen but for such setting off. "Event" means any event, occurrence, transaction, circumstance, act or omission whatsoever (and any event, occurrence, transaction, circumstance, act or omission deemed or treated or regarded for any Taxation purpose as having occurred) including being, or ceasing to be, a member of a group or under the control of, associated with or related to any person for the purposes of any Taxation, being or ceasing to be resident in any jurisdiction for the purposes of any Taxation, the entry into of any agreement (whether conditional or not) and the execution of this Agreement and Closing and references to an Event occurring on or before a particular time or date shall include any Event deemed to have occurred on or before that time or date for any Taxation purpose. "Post-Closing Relief" means any Relief which arises in consequence of or by reference to or is attributable to an Event occurring or deemed to occur after Closing including any losses attributable to any Event occurring after Closing or in respect of or attributable to a period commencing after Closing or which are apportioned to the Later Period, as defined at paragraph 5.6 of this Part A of the Schedule, in accordance with that paragraph. "Pre-Closing Relief" means a Relief arising to a Company which is not a Post-Closing Relief and which does not arise as a result of any Event occurring after Closing. "Relief" means any loss, allowance, exemption, set-off, deduction, credit or other relief in respect of or against any Taxation or in computing Profits for the purposes of any Taxation or otherwise from or relating to any Taxation and any right to a repayment of Taxation. "Reorganisation" means the intra-group reorganisations described in Exhibit BB to the Agreement. "Taxation" means: (a) any form of tax, levy, duty, rate, contribution, charge, impost, hypothecation, deduction, or withholding having the character of taxation whether governmental, statutory, state, provincial, local governmental, federal, cantonal or municipal whenever created or imposed and of whatever jurisdiction or part of a jurisdiction in the world and, in so far as not covered by the above: (i) taxes on gross or net Profits including any income tax, corporation tax, corporate income tax and capital gains tax; (ii) any taxes, rates, levies or contributions on receipts, sales, use, licence, lease, service use, occupation, franchise or real property; (iii) stamp duty and other documentary duties or taxes and any registration fees or duties; (iv) any value added tax, goods and service tax, purchase tax, sales tax, wholesale tax, any turnover tax, added value tax and any investment tax; (v) environmental taxes, duties or levies, any fuel tax and any tax on the construction of any building or structure and any tax relating to any landfill; (vi) any customs or excise duties or taxes and import taxes; (vii) any taxes, levies, social security contributions, national insurance contributions or similar taxes, levies or contributions payable on or in respect of any employees or payroll; (viii) any withholdings (including, without limitation, taxes parafiscales and redevances) or deductions of or on account of any tax; (ix) real estate transfer taxes, real estate and property taxes; (x) any capital duty or other tax, duty or levy in respect of the allotment or issue of any shares or securities or the raising of any capital; (xi) insurance taxes; (xii) any tax in respect of any dividend or distribution or any deemed or constructive dividend or distribution; (xiii) any capital transfer tax, wealth tax, net wealth tax, gift tax or capital appreciation tax and any taxes levied on or by reference to any asset value; and (xiv) any other taxes, levies, duties, rates contributions, charges, imposts, deductions, or withholdings similar to, corresponding with, or replacing or replaced by any of the foregoing; and (b) all charges, surcharge, additions to tax, interest, penalties, fines and other similar liabilities and costs, incidental or relating to, or relating to any obligation in respect of, any Taxation falling within paragraph (a) of this definition. "Taxation Authority" means any authority, court, tribunal, body, institution, person or official in any part of the world competent to impose, assess, collect or administer any Taxation or make any decision or ruling on any matter relating to any Taxation. "Taxation Benefit" means any Relief or other benefit or advantage available in the computation or ascertainment of any Taxation Liability. "Taxation Liability" means any Actual Taxation Liability and any Deemed Taxation Liability. "Taxation Warranties" means the warranties and representations set out in Part C of this schedule. "VAT" means value added tax or its equivalent in any jurisdiction other than the United Kingdom. "Yorkshire's Group" means Yorkshire and any company, not being a Company, which is the holding company from time to time of Yorkshire and any subsidiary from time to time of such holding company or Yorkshire and references to a "member of Yorkshire's Group" shall be construed accordingly and the expressions "holding company" and "subsidiary" shall have the meanings ascribed thereto in section 736 of the Companies Act 1985 of the United Kingdom. 1.2 In this schedule (unless the context otherwise requires): (a) references to "the Company", or "a Company", whether express or implied, shall be read and construed as references to Europe and each Acquired Entity (as these terms are defined in the Agreement) individually and as if the provisions of this schedule were set out in full in respect of each such company; (b) references to "persons" include an individual, corporation, partnership, unincorporated association or body or persons and any state or any agency thereof; (c) the words and phrases "other", "including" and "in particular" shall not limit the generality of any preceding words or be construed as being limited to the same class as the preceding words where a wider construction is possible; (d) references to "Profits" shall include any standard or measure for the purposes of determining any liability for the purposes of any Taxation and shall include any income, profits or gains (including capital gains) of any description and from any source and references to "Profits earned, accrued or received" shall include Profits which are deemed to have been or treated as earned, accrued or received for the purposes of any Taxation and references to Profits earned, accrued or received on or before a particular date or time or in respect of a particular period shall include Profits deemed to have been earned, accrued or received on or before that time or in respect of that period for any Taxation purpose; and (e) references to "Parts" are references to Parts of this schedule and a reference in any Part to a paragraph shall, unless otherwise stated, be to the paragraph of that Part. 1.3 Notwithstanding any other provision of this Agreement the liability of CK Witco under this Schedule or Part B or Part C shall not be excluded, limited or restricted nor increased or extended in any way by any provision of this Agreement save to the extent that the provision is expressly stated to apply to this Schedule or Part B or Part C (as the case may be) and references in any provision to "this Agreement", "hereunder" or any similar expression shall be deemed not to be such an express statement. 1.4 Any payments made pursuant to this schedule shall, so far as possible, be treated as an adjustment to the consideration paid by Yorkshire for the Europe Capital Stock under this Agreement, provided that this paragraph 1.4 shall not operate in any way to limit the liability of CK Witco under this schedule. 2. Limitations 2.1 CK Witco shall not be liable under Part B or Part C in respect of any Taxation Liability to the extent (but only to the extent) that: (a) such Taxation Liability would not have arisen or would have been reduced but for: (i) any voluntary act or omission of the Company or Yorkshire after Closing otherwise than in the ordinary course of the business of the Company as carried on at Closing and otherwise than: (aa) pursuant to any of the provisions of this Agreement or any Additional Agreements or any of the Closing Documents; (bb) pursuant to a legally binding obligation of the Company in existence at Closing; (cc) pursuant to any agreement or arrangement (in either case whether conditional or not) or option entered into by the Company on or before Closing; (dd) at the request or with the consent of CK Witco or any member of CK Witco's Group or any of their duly authorised representatives where such request is made or such consent is given pursuant to the provisions of this Agreement or the Additional Agreements or any of the Closing Documents; (ee) anything done by CK Witco or any member of CK Witco's Group on behalf of or in the name of the Company pursuant to an exercise or purported exercise of any of its rights under this Schedule or the Agreement or any Additional Agreements or the Closing Documents; (ff) anything done by or on behalf of the Company to give effect to the Reorganisation or any Event or transaction which forms part of the Reorganisation; or (gg) anything done or omitted to be done in accordance with paragraph 2.18 of the Agreement. Provided that this paragraph 2.1(a) shall not apply to any claim by Yorkshire under paragraphs 1.1(g), (h), (i) or (j) of Part B or for a breach of the Taxation Warranties in each of sub- paragraphs (a) or (b) of paragraph 5 of Part C of this Schedule and Provided Further that for the purposes of this paragraph 2.1(a) the failure or omission by the Company to make any claim (including any supplementary claim) for Relief, appeal or further appeal against any assessment or Claim, application for the postponement of, or the payment by instalments of, any Taxation, disclaimer or postponement of Relief shall not be regarded as a voluntary act or omission of the Company or Yorkshire where the time limit for the making or doing of such thing expired within six months after Closing unless CK Witco shall have given written notice of the requirement or necessity for the making or doing of such thing to Yorkshire at least 20 Business Days before the expiry of such time limit. (ii) any change after Closing in: (aa) the accounting bases upon which the Company values its assets; (bb) the date to which the company makes up its accounts, save, in any such case, where such change is made to comply with any law or standard accounting practice in force at the date of Closing in the jurisdiction in which that Company is incorporated. (iii) a failure by Yorkshire to comply with its obligations under paragraphs 4 and/or 5 of Part A. (b) such Taxation Liability is an Actual Taxation Liability of the Company which has been paid or discharged by the Company on or before Closing; (c) such Taxation Liability: (i) arises on payment of a liability included in the Closing Special Purpose Statement where the Taxation Liability is a liability to account to a Taxation Authority for any Taxation which the Company is entitled or required to withhold or deduct from the amount of the liability on payment; or (ii) is a liability to pay an amount in respect of Taxation to a person other than a Taxation Authority and such Taxation forms part of a liability included in the Closing Special Purpose Statement; (d) such Taxation Liability is a liability of the Company to pay any Taxation Authority any VAT in respect of any VAT period current at Closing, but only to the extent that such VAT is taken into account in the Closing Special Purpose Statement; (e) such Taxation Liability is a liability in respect of any Taxation (being payroll taxes, national insurance or social security or similar taxes) which is payable by the Company in respect of wages, salaries or other remuneration, bonuses or vacation pay for which an accrual is made in the Closing Special Purpose Statement ("Payroll Taxes") to the extent that such Taxation is included in the Closing Special Purpose Statement. 2.2 Each of the sub-paragraphs of paragraph 1.1 of Part B of this schedule are separate and independent covenants but CK Witco shall not be liable to pay an amount in respect of a Taxation Liability pursuant to any sub-paragraph of paragraph 1.1 of Part B if and to the extent that CK Witco has made a payment to Yorkshire of an amount in respect of such Taxation Liability under any other sub-paragraph of paragraph 1.1 of Part B of this Schedule or to the extent that CK Witco has made a payment to Yorkshire in respect of such Taxation Liability in respect of a breach of any of the Taxation Warranties. CK Witco shall not be liable to make any payment in respect of a Taxation Liability as a result of a breach of any of the Taxation Warranties to the extent that CK Witco has made payment to Yorkshire pursuant to any of the other Taxation Warranties or pursuant to paragraph 1.1 of Part B in respect of such Taxation Liability. 2.3 CK Witco shall not be liable in respect of a claim under the Taxation Warranties or under Part B of this schedule unless notice of such claim (specifying, in such detail as shall be reasonable at the date of the notice, the nature of the claim) has been given by or on behalf of Yorkshire to CK Witco on or before the later of: (a) the tenth anniversary of the date of Closing; and (b) the date of expiration of the relevant statute of limitations or other time limit for the making or giving of any Claim in respect of the Taxation Liability or other matter the subject of the Claim in the relevant jurisdiction; provided that where the relevant statute of limitations in a jurisdiction is extended beyond the tenth anniversary of the date of Closing solely as a result of any voluntary action taken by Yorkshire (other than at the request of CK Witco), CK Witco's liability shall cease on the tenth anniversary of the date of Closing or, if later, the date on which the relevant statute of limitations or other time limit would have expired in the absence of such action by Yorkshire save in respect of any claim made before such tenth anniversary or (as the case may be) such later date. 3. Reliefs and Recoveries from Third Parties 3.1 Yorkshire shall at the request of CK Witco require the Auditors to determine (as experts and not as arbitrators and at the expense of CK Witco) whether any Taxation Liability (or the Event giving rise to such Taxation Liability or the discharge of it) which has resulted in any sum having been paid or becoming payable by CK Witco under this schedule has given rise to a Relief which is not a Post-Closing Relief and would not otherwise have arisen, and to determine whether: (a) a liability of the Company or Yorkshire to make an actual payment or increased payment of Taxation has been satisfied or avoided in whole or in part by the use of that Relief; or (b) a right to repayment of Taxation has arisen as a result of the use of that Relief; and, if the Auditors so determine, the amount by which that liability has been satisfied or avoided (as so determined by the Auditors) or an amount equal to the amount of that repayment as so determined by the Auditors (as the case may be) shall be dealt with in accordance with paragraph 3.2 Provided that nothing in this paragraph 3 shall oblige Yorkshire or any Company to utilise any Pre-Closing Relief in priority to any Post-Closing Relief or shall operate to treat Yorkshire or any Company as having utilised or being required to utilise any Pre-Closing Relief in priority to any Post-Closing Relief and it shall be assumed that all available Post-Closing Reliefs are used in priority to any Pre-Closing Reliefs. 3.2 Where it is provided under paragraph 3.1 that any amount is to be dealt with in accordance with this paragraph 3.2: (a) the amount shall first be set off against any payment then due from CK Witco under this schedule; (b) to the extent there is an excess, a refund shall be made to CK Witco of any previous payment made by CK Witco under this schedule and not previously refunded under this paragraph 3.2 or any other provision of this schedule or the Agreement up to the amount of such excess; and (c) to the extent that the excess referred to in paragraph 3.2(b) is not exhausted thereunder, the remainder of that excess shall be carried forward and set off against any future payment which becomes due from CK Witco under this schedule. 3.3 Where such determination by the Auditors as is mentioned in paragraph 3.1 has been made, CK Witco or Yorkshire may request the Auditors to review such determination (as experts and not as arbitrators and at the expense of the person making the request) in the light of all relevant circumstances, including any facts which have become known only since such determination, and to determine whether such determination remains correct or whether, in the light of those circumstances, the amount that was the subject of such determination should be amended. 3.4 If the Auditors determine under paragraph 3.3 that an amount previously determined should be amended, that amended amount shall be substituted for the purposes of paragraph 3.1 in place of the amount originally determined and such adjusting payment (if any) as may be required by virtue of such substitution shall forthwith be made by CK Witco to Yorkshire or, as the case may be, by Yorkshire to CK Witco. 3.5 If the Company or Yorkshire is entitled to recover from any third party (including any Taxation Authority but excluding any Company, Yorkshire, CK Witco or any member of CK Witco's Group) any sum which it would not have been able to recover but for any Taxation Liability in respect of which any amount has been paid or become payable by CK Witco under this schedule (other than the utilisation of a Relief referred to in Paragraph 3.1 or the utilisation of a Post-Closing Relief) then Yorkshire shall: (a) notify CK Witco in writing of such entitlement within 14 days of Yorkshire becoming aware of such entitlement; (b) subject to Yorkshire and the Company being indemnified by CK Witco to the reasonable satisfaction of Yorkshire against all losses, costs (including the cost of management time of Yorkshire and the Company which shall be deemed to be incurred or suffered by them for the purposes of this paragraph 3.5), damages and expenses which may be incurred or suffered by Yorkshire or the Company in so doing, at the written request of CK Witco take and procure that the Company takes such reasonable and appropriate action as CK Witco may reasonably so request to recover such sum; and (c) keep CK Witco informed at CK Witco's expense of the progress of any such action; and if Yorkshire or the Company shall so recover any such sum then Yorkshire shall repay to CK Witco a sum equal to the lesser of: (i) the amount of any sum so recovered (including any interest or repayment supplement), after deduction therefrom of an amount equal to any costs, fees and expenses in obtaining it (so far as not previously paid by CK Witco) and any Taxation Liability incurred in respect of it; and (ii) the amount paid by CK Witco under this schedule in respect of the Taxation Liability in question, less any part of such amount previously repaid to CK Witco pursuant to this provision or any other provision of this schedule or the Agreement, within two (2) Business Days after the date the relevant sum (being cleared funds) is received by Yorkshire or, as the case may be, the Company, provided that if at the date that the relevant sum is received by Yorkshire or, as the case may be, the Company, the due date for payment (determined in accordance with paragraph 2 of Part B) by CK Witco of an amount equal to the Taxation Liability in question pursuant to paragraph 1.1 of Part B has not passed then an amount equal to the amount referred to in sub-paragraph (i) above shall be set-off against the liability of CK Witco to pay to Yorkshire the amount which would, but for such set-off, have become payable by CK Witco on such due date in respect of such Taxation liability. 3.6 Yorkshire shall at the request and expense of CK Witco require the Auditors to determine (as experts and not as arbitrators) whether the Company is entitled to receive from any Taxation Authority a repayment or credit in respect of Taxation relating to any period ended on or before Closing (not being a credit or repayment in respect of VAT in respect of any VAT period current at Closing and other than in respect of Payroll Taxes which are included in the Closing Special Purpose Statement) where such credit or repayment does not arise as the result of the utilisation of any Post-Closing Relief or any Event occurring after Closing or as the result of the utilisation of any Relief referred to in paragraph 3.1 and if the Auditors determine that the Company has such an entitlement then: (a) Yorkshire shall give CK Witco details of the entitlement as soon as reasonably practicable after Yorkshire becomes aware of the entitlement and in any event within 14 days of Yorkshire becoming aware of such entitlement; and (b) subject to Yorkshire and the Company being indemnified by CK Witco to the reasonable satisfaction of Yorkshire against all losses, costs, damages and expenses which may be incurred or suffered by Yorkshire or the Company in so doing (including the cost of management time of Yorkshire and the Company which shall be deemed to have been so incurred), Yorkshire shall at the request and expense of CK Witco take all reasonable and appropriate steps to procure that the repayment or credit is obtained, keeping CK Witco fully informed of the progress of any action taken; and an amount equal to the amount of the repayment or credit (including any repayment supplement or interest) as so determined by the Auditors which is received by the Company shall first be set off against any amount then due from CK Witco to Yorkshire under this schedule and any balance shall be paid to CK Witco within two (2) Business Days after the date the relevant sum (being cleared funds) is received by the Company or, in the case of a credit, within two (2) Business Days after the credit gives rise to any cash saving to the Company. The provisions of paragraphs 3.3 and 3.4 shall apply to a determination by the Auditors under this paragraph 3.6 in the same way as they apply to a determination by the Auditors under paragraph 3.1. 3.7 CK Witco shall pay to Yorkshire any reasonable costs incurred or suffered by Yorkshire or the Company (including the cost of time of the management of Yorkshire and the Company which shall be deemed to have been incurred or suffered for the purposes of this paragraph 3.7) in connection with any matter referred to in this paragraph 3. 4. Conduct of Claims 4.1 If Yorkshire or, after Closing, the Company shall become aware of any Claim which will or may give rise to a liability of CK Witco under Part B or Part C of this schedule ("Relevant Claim") Yorkshire shall, but not as a conditions precedent to the liability of CK Witco under this schedule, give notice thereof or procure that notice thereof is given as soon as reasonably practicable to CK Witco and in any event within 14 days of Yorkshire and 21 days of the Company becoming aware of the Relevant Claim. 4.2 Subject to paragraphs 4.5, 4.6 and 4.7, Yorkshire shall, and shall procure that the Company shall, take such action to appeal, protest against, mitigate, reduce, avoid, dispute, resist or compromise the Relevant claim and make available such documents, information and assistance in connection with the Relevant Claim as CK Witco may by written notice request provided that CK Witco shall indemnify and secure Yorkshire and the Company against all reasonable costs and expenses (including any Taxation or additional Taxation and including the cost of time of the management of Yorkshire or the Company which shall be deemed to have been incurred, or suffered for the purposes of this paragraph 4) which Yorkshire or the Company incurs as a result of taking such action or providing such information and assistance, such reasonable costs and expenses to be paid in cleared, immediately available funds on or before the date five (5) Business Days after the date of written notice from Yorkshire of the amount which CK Witco is required to pay or, if later, on the last Business Day before the date on which such reasonable costs and expenses are due for payment. If Yorkshire shall have served a written notice on CK Witco requesting CK Witco to provide such indemnity or security and CK Witco shall fail to provide the same within 30 days thereafter then CK Witco's rights under this paragraph 4 shall cease and Yorkshire and the Company shall be entitled to deal with the Relevant Claim on such terms as they shall in their absolute discretion think fit without prejudice to their rights and remedies under this schedule. 4.3 Subject to paragraphs 4.5, 4.6 and 4.7 CK Witco may elect to have any action referred to in paragraph 4.2 conducted by CK Witco acting in the name of the Company but reporting to Yorkshire in which event the provisions of paragraph 4.4 shall apply. 4.4 CK Witco hereby undertakes to Yorkshire to: (a) keep Yorkshire fully and promptly informed of all matters relating to the action and deliver to Yorkshire copies of all correspondence relating to the action; (b) obtain the prior written approval of Yorkshire to the settlement or compromise of the action or the agreement of any matter in the conduct of the action which involves the utilisation of any Post-Closing Relief; (c) obtain the prior written approval of Yorkshire (not to be unreasonably withheld or delayed) to the content and sending of any written communications relating to the action to a Taxation Authority; (d) without prejudice to (b) above, obtain the prior written approval of Yorkshire (not to be unreasonably withheld or delayed) to: (i) the settlement or compromise of the Relevant Claim which is the subject of the action; and (ii) the agreement of any matter in the conduct of the action which is likely to affect the amount of the Relevant Claim; (e) deal with all matters relating to the Relevant Claim in a prompt and diligent manner and within any applicable time limit. 4.5 Yorkshire shall not be obliged to procure that the Company take any action under this paragraph 4 which involves the utilisation of any Post-Closing Relief. 4.6 Paragraph 4.3 shall not apply (and no request by CK Witco pursuant to paragraph 4.2 shall be deemed to be reasonable if it is a request by CK Witco to have any action referred to in paragraph 4.2 conducted by CK Witco in the name of the Company) in circumstances where any fraudulent conduct or fraud or wilful default or conduct involving dishonesty or any criminal offence has been committed by CK Witco (whether acting on its own behalf or in the name of any Company pursuant to paragraph 4.3) in relation to the Taxation affairs of any Company. 4.7 Any request made by CK Witco pursuant to paragraph 4.2 shall be made within a reasonable time of any notice given by Yorkshire to CK Witco in accordance with paragraph 4.1 and if: (a) on the expiry of a period of 14 days commencing on the date of such notice, CK Witco shall not have given to Yorkshire notice of CK Witco's intentions in respect of the Relevant Claim, or (b) at any time after CK Witco has given notice to Yorkshire indicating its intention to dispute, resist, appeal against, compromise or defend the Relevant Claim, CK Witco has failed promptly and diligently to request action to that effect under paragraph 4.2 or to progress any action under paragraph 4.3, Yorkshire and the Company shall be entitled to deal with the Relevant Claim on such terms as they shall in their absolute discretion think fit without prejudice to their rights and remedies under this schedule. 5. Taxation Computations 5.1 Subject to complying with the provisions of paragraph 5.2 below, CK Witco or its duly authorised agents shall have the right and obligation, at the cost and expense of CK Witco and including the cost of time of the management of Yorkshire or the Company which shall be deemed to have been incurred or suffered for the purposes of this paragraph 5, to prepare the Taxation returns and computations of each Company for all accounting periods or other periods in respect of which the Company is required to make a return or payment of Taxation to a Taxation Authority (other than a payment on account of or as an instalment of any Taxation for or in respect of a period ending after Closing) ending on or prior to Closing (each a "Relevant Period") to the extent that the same shall not have been prepared before Closing (each such Taxation return or computation is referred to in this paragraph 5 as a "Relevant Return"). CK Witco or its duly authorised agents shall (subject to paragraph 4 which shall override all of the provisions of this paragraph 5 in the event of any conflict between the provisions of this paragraph 5 and paragraph 4) have the right, at the cost and expense of CK Witco, to prepare all documentation and deal with all matters (including correspondence and the utilisation of any Pre-Closing Relief against any Taxation Liability in respect of which it would otherwise be liable under this Schedule but excluding the use of any Post-Closing Relief) relating to any Relevant Return to the extent that the same have not been prepared or dealt with prior to Closing. 5.2 CK Witco covenants with Yorkshire: (a) that all Relevant Returns will be prepared (so far as legally possible) on a basis consistent with past practice and the assumptions made for the purposes of calculating the provisions for Taxation in the Accounts and no claim shall be made in any such Relevant Returns to utilise a Post-Closing Relief; (b) to keep Yorkshire and its duly authorised agents and the Company fully informed of all matters relating to the submission, negotiation and agreement of each Relevant Return; (c) that no Relevant Return and no correspondence or documentation or communication pertaining to the negotiations or agreement of any Relevant Return shall be made or transmitted to any Taxation Authority without first being submitted to Yorkshire and the Company for Yorkshire's approval and shall only finally be submitted or transmitted on the receipt of the written approval of Yorkshire or its duly authorised agent, such approval not to be unreasonably withheld or delayed; and (d) to deal with all such matters diligently and promptly and within any applicable time limit. 5.3 In the event that the provisions of paragraph 5.2 have been complied with by CK Witco, Yorkshire shall procure that the Company shall cause any Relevant Return approved by Yorkshire under 5.2(c) (which shall incorporate all claims, elections, disclaimers, surrenders and consents notified by CK Witco to Yorkshire) to be authorised, signed and submitted to the appropriate Taxation Authority and generally do all such things as may be necessary to give effect to such returns, claims, elections, disclaimers, surrenders or consents provided that the Company shall not be obliged to sign any Relevant Return which it considers not to be full, true and accurate in all material respects. 5.4 Yorkshire shall (if requested in writing by CK Witco) procure that the Company promptly makes or gives such Relevant Returns and any such claims, elections, disclaimers, surrenders and consents as are mentioned in paragraph 5.3 and generally does all such things as CK Witco shall reasonably request in writing and which may be necessary to give effect to such Relevant Returns or any such claims, elections, surrenders or consents. 5.5 Yorkshire shall procure that there shall be prepared all Taxation returns and computations for each Company for any period which begins before Closing and ends after Closing (each such period being referred to as a "Current Period" and any such returns and computations being referred to as "Current Returns") and shall provide CK Witco with copies of all Current Returns and shall not submit any Current Return or any correspondence relating to a Current Return to any Taxation Authority or agree any Current Return with any Taxation Authority without CK Witco's approval, such approval not to be unreasonably withheld or delayed. In the case of any return in respect of corporation tax, corporate income tax or income tax (and any similar tax) Yorkshire shall provide CK Witco with a copy of the relevant Current Return at least 30 days before the time limit for submission of that Current Return to the relevant Taxation Authority. Yorkshire shall procure that any reasonably requested amendments to a Current Return (including amendments which involve the utilisation of a Pre-Closing Relief but not including amendments which involve the utilisation of a Post-Closing Relief) are incorporated in the relevant Current Return. 5.6 Each of CK Witco and Yorkshire shall co-operate with each other to agree as between themselves in relation to any Current Period the Profits and/or the Reliefs which, in accordance with the provisions of this paragraph, are attributable to: (a) that part of the Current Period which falls on or before Closing (the "Earlier Period"); and (b) that part of that Current Period which falls after Closing (the "Later Period"). CK Witco and Yorkshire hereby agree that any such allocation of Profits and/or Reliefs shall be made on the following basis: (i) Income, expenditure, Profits and Reliefs which arise solely as a result of any Event occurring on or before Closing and not as a result of any Event occurring after Closing shall be attributable to the Earlier Period; (ii) Income, expenditure, Profits and Reliefs which arise as a result of an Event occurring after Closing shall be attributable to the Later Period; and (iii) Income, expenditure, Profits and Reliefs which are only available in respect of the total period comprised within the relevant Current Period and not in respect of any particular part of the Current Period shall be apportioned between the Earlier Period and the Later Period on a time basis, having regard to the number of days in the Earlier Period and Later Period and the Current Period; It is further agreed by CK Witco and Yorkshire that any Relief apportioned or allocated to the Later Period in accordance with this paragraph 5.6 shall for all purposes of this Taxation Schedule be treated as if it were a Post-Completion Relief. 5.7 Yorkshire shall provide, and shall procure that the Company provides, CK Witco at the expense of CK Witco and CK Witco shall provide Yorkshire at (save as otherwise provided in this schedule) at the expense of Yorkshire with such documents, information and assistance (including, without limitation, access to books, accounts, records and personnel) as CK Witco or, as the case may be, Yorkshire, may reasonably require in connection with its conduct of the Company's Taxation affairs pursuant to this paragraph 5 or in relation to the exercise by CK Witco of its rights under paragraph 4. 6. Gross Up 6.1 All sums payable by CK Witco to Yorkshire under this schedule and any amount payable by Yorkshire to CK Witco pursuant to paragraph 3 of Part B shall be paid free and clear of all deductions or withholdings whatsoever, save only as may be required by law. 6.2 If any deductions or withholdings, not being in respect of payments of interest payable pursuant to paragraph 2.3 of Part B, are required by law to be made from any of the sums payable as mentioned in sub-paragraph 6.1 by CK Witco or Yorkshire (as the case may be) (the "Paying Party"), the Paying Party shall be obliged to pay to the other party (the "Receiving Party") such sum as will, after the deduction or withholding has been made, leave the Receiving Party with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding. 6.3 If any sum, not being in respect of payments of interest payable as mentioned in paragraph 6.1, shall be subject to Taxation in the hands of the Receiving Party, the Paying Party shall be under the same obligation to make an increased payment so as to ensure that the amount retained by the Receiving Party after taking into account such Taxation, is equal to the full amount which would have been received and retained but for such Taxation. 6.4 Where the Paying Party is required to make any such deduction or withholding as is referred to in paragraph 6.2 and to account for that deduction or withholding to any authority or person, the Paying Party shall: (a) make such deduction or withholding; (b) pay the full amount deducted or withheld to the relevant authority or person in accordance with applicable law; and (c) forthwith furnish to the Receiving Party the original, or a certified copy, of a receipt evidencing payment thereof. 7. Consents CK Witco undertakes to Yorkshire that CK Witco shall ensure that all necessary notifications, consents, certificates, authorisations and clearances required to be made in respect of the Reorganisation will be obtained on or before Closing and will notify Yorkshire of all notifications, claims for relief and returns required to be filed after Closing with any Taxation Authority in respect of any of the Events effected or proposed to be effected as part of the Reorganisation at least thirty (30) days before the expiry of the time limit for such filings and shall procure that Europe shall comply with all Belgian Taxation laws and regulations in relation to any payment made by Europe to the BCC for any asset to be transferred to Europe as mentioned in Exhibit BB to the Agreement. 8. General 8.1 If at any time any provision or part of a provision of this Schedule shall be or become, or be found by any court of competent jurisdiction to be illegal, invalid or unenforceable in any respect under the law of any jurisdiction such illegality, invalidity or unenforceability shall not in any way affect or impair the legality, validity or enforceability: (a) of any other provision or parts of such provision of this schedule in that jurisdiction all of which shall remain in full force and effect in such jurisdiction; or (b) of that provision (or part of a provision) or any other provision of this schedule in any other jurisdiction all of which shall remain in full force and effect in every other jurisdiction. 8.2 Each of the covenants on the part of CK Witco in this schedule shall be construed separately and none of such covenants shall limit or govern the extent, application or construction of any other of them and notwithstanding that any such covenant may prove to be illegal, invalid or unenforceable the remaining such covenants shall continue in full force and effect. 8.3 All of the provisions of this Schedule shall survive Closing and continue in full force and effect after Closing. 8.4 The provisions of this schedule shall be governed and construed in accordance with the laws of England. Part B - Taxation Covenants 1. Covenant by CK Witco 1.1 Subject only to the provisions of paragraph 2 of Part A of this Schedule, CK Witco hereby covenants with Yorkshire to pay to Yorkshire or such other person as Yorkshire may direct on the due date for payment ascertained in accordance with Paragraph 2 of this Part B an amount equal to: (a) any Actual Taxation Liability of the Company arising as a result of or, in respect of: (i) an Event occurring on or before Closing; or (ii) any Profits earned, accrued or received on or before Closing or in respect of any period (or part of a period) ended on or before Closing; or (iii) insofar as not covered within (i) or (ii) above, net wealth, asset values, turnover or added value for a period (or part of a period) ended on or before Closing; or (iv) any liability to Taxation arising before Closing; (b) any Deemed Taxation Liability; (c) any Taxation Liability of the Company (including, for the avoidance of doubt, any Taxation Liability (not within sub- paragraph (a) of this paragraph 1.1) for which the Company becomes jointly and severally liable) which arises as the result of that Company having been treated as, or having ceased to be, a member of any group, group registration, organschaft or fiscal unity (in each case as defined for any Taxation purpose) at any time prior to Closing or as the result of the filing of any consolidated return in relation to Taxation in respect of that Company and any other person relating to any period commencing prior to Closing (other than a person who is a member of a group of which the Company becomes a member on or after Closing) or as a result of any tax sharing arrangements affecting the Company on or before Closing; (d) any Taxation Liability for which the Company is or becomes liable or accountable in consequence of the failure to pay or discharge any Taxation within a specified time or otherwise by: (i) any company (other than a Company): (aa) which has at any time (before or after Closing) been or ceased to be a member of a group, group registration, organschaft, fiscal unity or consolidated return (in each case as defined for any Taxation purpose) of which the Company has at any time prior to Closing been a member; or (bb) from which the Company has received or is deemed to have received or has or is deemed to have become entitled to receive on or before Closing any asset or any dividend or other distribution from or in respect of shares in that other company; (ii) any other person not being a member of Yorkshire's Group but only insofar as the Taxation in question relates to any Profits earned, accrued or received on or before Closing or to any Event occurring on or before Closing; (e) any Taxation for which any member of Yorkshire's Group becomes liable or accountable and for which any Company would have been liable or accountable but for the merger or amalgamation after Closing of such Company or its business with another member of Yorkshire's Group or the dissolution or liquidation after Closing of such Company and in respect of which and to the extent only that but for such merger, amalgamation, liquidation or dissolution Yorkshire could have made a claim under any of the other provisions of this Part B in respect of the Company; (f) any liability of the Company to make any payment for or in respect of, or to repay in whole or in part any payment received for or in respect of, or the making available (whether by surrender or otherwise) of any Tax Benefit pursuant to an arrangement or agreement entered into by the Company on or before Closing; (g) any Taxation Liability of or affecting the Company or any member of Yorkshire's Group in respect of or arising from any Event or Events occurring on or before Closing outside the ordinary course of business of the Company as carried on at any time on or before Closing or by any member of the CK Witco Group on or before Closing and which forms part of any combination or series of Events which include any Event or Events occurring after Closing which are in the ordinary course of business of the Company as carried on at any time on or before Closing or which are effected pursuant to a legally binding obligation or arrangement (in either case whether conditional or not) entered into or incurred on or before Closing or which are carried out pursuant to any request in writing by CK Witco or any member of the CK Witco Group or their respective representatives pursuant to any other provision of this Agreement or any Additional Agreement or any Closing Document or otherwise; (h) any Taxation Liability of or affecting the Company or Yorkshire or any member of Yorkshire's Group which arises (whether before or after Closing) as a result of or in respect of anything done or failed to be done by Yorkshire or which Yorkshire procures the Company or any other Company to do or fail to do pursuant to its obligations under paragraph 2.18 of the Agreement; (i) any Taxation Liability of the Company or Yorkshire or any member of Yorkshire's Group which arises (whether before or after Closing) as a result of or in respect of anything done or omitted to be done by or on behalf of the Company to give effect to the Reorganisation or any Event or transaction which forms part of the Reorganisation; (j) any liability to Taxation of the Company (whether arising before or after Closing) as a result of the holding of, or the assignment or surrender of, the lease of the property at Waterside Industrial Park, Smiths Road, Bolton between Foden Investments Limited, C&K (UK) Limited and Europe (k) any costs, fees and expenses reasonably incurred by Yorkshire or the Company in connection with any such liability or amount as is referred to in any of paragraphs 1.1(a) to (j) inclusive or with any Claim in respect thereof or in taking or defending any action under this schedule. 2. Payment 2.1 If CK Witco is or becomes liable to make a payment under this Part B in respect of an Actual Taxation Liability, CK Witco shall pay such amount in cleared, immediately available funds on or before the date five (5) Business Days after the date of written notice from Yorkshire of the amount which CK Witco is required to pay or, if later, on the last Business Day before the date on which the Actual Taxation Liability in question is due for payment. 2.2 If CK Witco is or becomes liable to make a payment under this Part B in respect of a Deemed Taxation Liability, CK Witco shall pay the relevant amount on or before the date five (5) Business Days after the date of written notice from Yorkshire of the amount which CK Witco is required to pay or, if later, on the date which would have been the due date for payment of the Taxation which would have been payable (assuming taxable profits) but for the setting off. 2.3 Any sum payable by CK Witco or by Yorkshire under this Schedule shall bear interest which shall accrue from day to day at four per cent (4%) above the base rate from time to time of HSBC Bank plc (or, in the absence of such base rate, such similar rate as the person entitled to the payment shall specify) from the date following the specified or due date up to and including the day of actual payment of such sums (or the next business day if such day of actual payment is not a business day) compounded monthly. 2.4 If any Taxation Liability or other matter which gives rise to a claim under this schedule relates to, or is payable in, or was incurred in a currency other than United States Dollars then CK Witco shall make any payment due from it under this schedule in respect of such Taxation Liability or other matter in the currency in which it is payable or was incurred. 3. Yorkshire's Covenant 3.1 Yorkshire covenants with CK Witco to pay to CK Witco an amount equal to any Actual Taxation Liability of CK Witco or of any company which is a member of CK Witco's Group (and any reasonable costs and expenses incurred by CK Witco or that company in relation to such Actual Taxation Liability) where such Actual Taxation Liability: (a) arises as a result of the failure by the Company to discharge after Completion an Actual Taxation Liability for which the Company is primarily liable and which does not give rise to a liability of CK Witco under paragraph 1.1 of this Part B; or (b) arises as a result of the failure by the Company to discharge after Completion an Actual Taxation Liability for which the Company is primarily liable and which does give rise to a liability of CK Witco under paragraph 1.1 of Part B to the extent that CK Witco has made a payment under paragraph 1.1 of this Part B, but Yorkshire shall have no liability to make any payment under this paragraph 3.1 unless and until CK Witco and each member of the CK Witco Group shall have delivered to Yorkshire a duly executed document whereby CK Witco and each member of the CK Witco Group waives all rights which it may have (whether statutory, contractual or otherwise) against Yorkshire (other than under this paragraph 3.1) or any Company or any member of Yorkshire's Group to obtain an indemnity or reimbursement in respect of or by reference to such Actual Taxation Liability. 3.2 If Yorkshire becomes liable to make a payment under paragraph 3.1 of this Part B, Yorkshire shall pay such amount in cleared immediately available funds on or before the later of the last Business Day before that Actual Taxation Liability is finally due and payable and the date five (5) Business Days after the date of written demand on Yorkshire by CK Witco. Part C - The Taxation Warranties References in this Part C of this Schedule to "material" means material in relation to the Company concerned. In relation to any warranty in this Part C which is expressed to be given as to matters of which CK Witco is aware or within CK Witco's knowledge or awareness, this shall refer only to matters directly known to the Executive Officers of CK Witco and no other matters shall be deemed to be within the CK Witco's knowledge or awareness. For these purposes, "Executive Officers" mean each of Charles J. Marsden, Barry B. Dobinsky, Louis Lopez, Richard J. Lipka, James J. Conway, Matthew R. Joyner, John T. Ferguson II, Vincent A. Calarco, Jeans Jacques Silvestre, Dominique Balcean and Pierre Boury. CK Witco hereby warrants and undertakes to Yorkshire that, save as fairly disclosed in the CK Witco Disclosure Memorandum, each of the statements contained in the following paragraphs of this Part C are true and correct at the date of this Agreement and will be deemed to be made again as and at the Closing Date (provided that CK Witco shall have no liability under this Part C for breach of any Taxation Warranty to the extent that such breach was disclosed by CK Witco in any written supplement to the CK Witco Disclosure Memorandum delivered to Yorkshire prior to the date of this Agreement and again at Closing) and CK Witco hereby acknowledges that it has represented to Yorkshire in such terms and CK Witco acknowledges that Yorkshire is entering into the Agreement in reliance on such Taxation Warranties. 1. Returns and Information (a) All registrations, returns, computations, accounts, notices, reports and information which are or have been required to be made or given by the Company for any Taxation purpose (i) have been made or given within the requisite periods and on a proper basis and are up-to-date and correct in all material respects and (ii) were when made complete and accurate in all material respects and (iii) none of them is, or, so far as CK Witco is aware, is likely to be, the subject of any dispute or disagreement with any Taxation Authority. (b) None of the Taxation returns or other filings that include the operations of the Company, or of any group, organschaft or fiscal unity (as defined for any Taxation purpose) of which the Company is or has been a member, has, within the past 10 years been audited (other than by way of an audit which is of a routine nature in the country in which the Company is incorporated) or investigated by any Taxation authority and that Company has received no notice that any such audit (other than by way of an audit which is of a routine nature in the country in which the Company is incorporated) or investigation is or may be undertaken and so far as CK Witco is aware no facts exists which would constitute grounds for any liability or assessment of any material amount of additional Taxation by any Taxation Authority with respect to the taxable years or periods covered in such Taxation returns and filings. (c) No material issues have been raised in any examination or review by any Taxation Authority with respect to the businesses and operations of the Company which, by application of similar principles, reasonably could be expected to result in a proposed adjustment to the liability for Taxation for any other taxable period not so examined or reviewed. (d) The Company has not within the period of three years ending on the date of this Agreement paid or become liable to pay any penalty, fine, surcharge, interest or similar payment of a material amount in respect of or relating to any Taxation or any failure to comply with any obligation relating to Taxation and, so far as CK Witco is aware there are no facts which are likely to cause it to become liable to any such penalty, fine, surcharge, interest or similar amount. (e) The Company has maintained all material information and records which it is required to maintain for any Taxation purpose and the Company is in possession of sufficient information to enable it to calculate any present or, so far as possible having regard to the facts and circumstances at the date of this Agreement, any future liability to Taxation of the Company and any entitlement of the Company to any Relief insofar as such liability or Relief arises as a result of or is to be computed by references to any Event occurring on or before Closing or any Profits earned, accrued or received on or before Closing or any dividend or other distribution made or deemed to have been made on or before Closing or the acquisition of any asset on or before Closing or the making of any loan, charge, facility or benefit to or by the Company on or before Closing. 2. Taxation Liabilities and Reliefs (a) Proper provision or reserve in accordance with standard accounting practice of the jurisdiction in which it was incorporated has been made in its Accounts for all material liabilities for Taxation (whether actual, contingent, deferred or disputed) for which the Company was or is liable or for which it is or may become liable or accountable in respect of Profits earned, accrued or received on or before, or for a period (or part of a period) ended on or before the Accounts Date or Events occurring on or before, or for a period (or part of a period) ended on or before, the Accounts Date and whether incurred as principal, agent or trustees and whether or not the Company is primarily or secondarily liable therefor and the Company has not incurred and will not, on or before Closing, incur any liability to Taxation in respect of any Event occurring outside the ordinary course of business of that Company since the Accounts Date. (b) Proper provision has been made in its Accounts, in accordance with standard accounting practice in the jurisdiction in which the Company is incorporated, for all deferred tax of a material amount. (c) Since the Accounts Date no material payment has been made and no material liability (being a payment or liability on revenue account) has been incurred by the Company other than in the normal course of business which will not be deductible in computing Profits (or tax allowable losses) for Taxation purposes or in computing Taxation payable by the Company. (d) The Company has paid all payments of or in relation to Taxation which it has become liable to pay and which it was required to pay on or before Closing and the Company has duly complied with all obligations to deduct or withhold Taxation from any payments made or treated or regarded as made by it, whether on its own behalf or as agent or trustee, and to account for any such Taxation to the relevant Taxation Authority. (e) The Company has not been required to give or provide any security or guarantee in respect of any liability of the Company or any other person to Taxation (whether actual or contingent, present or future). (f) The Company is not liable for any Taxation as agent or Taxation representative of any other person or business and does not constitute the permanent establishment of any other person, business or enterprise for any Taxation purpose, and the Company is not a party to any joint venture, partnership or other arrangement or contract which is treated as a partnership for any Taxation purpose. The Company is not liable and so far as CK Witco is aware there are no circumstances which would render it liable for any Taxation as a consequence of the failure of any other person (other than another Company) to discharge any Taxation within a specified period. (g) The Company is not, and will not as a result of any Event occurring on or before Closing become, liable to pay, or to make reimbursement or indemnity in respect of, any Taxation payable by or chargeable on or attributable to any other person (or any amount in respect of or corresponding to any such Taxation). (h) So far as CK Witco is aware nothing has been done, and no event or series of events has occurred as a result of any contract, agreement or arrangement (in either case whether conditional or not) entered into on or before Closing in relation to the Company, which might, when taken together with the entry into this Agreement or Closing or any thing done at or as part of Closing, directly cause or contribute to the disallowance, restriction or non-availability to the Company of any Taxation Benefit. (i) The CK Witco Disclosure Memorandum sets out with express reference to this paragraph (i) full particulars of any agreement, arrangement between the Company and any Taxation Authority and of any concession, tolerance or abatement operated by any Taxation Authority and the Company has not taken any action which has had or will have, and nothing contemplated by this Agreement will have, the effect of altering, prejudicing or in any way disturbing any such agreement, arrangement, concession, tolerance or abatement. (j) The Company is not a party to and is not otherwise subject to any arrangement having the effect of or giving rise to the recognition of a deduction or loss in a taxable period ending on or before Closing, and a corresponding recognition of taxable Profits in a taxable period ending after Closing, or any other arrangement that would have the effect of or give rise to the recognition of taxable Profits in a taxable period ending after Closing without the receipt of or entitlement to a corresponding amount of cash. (k) The Company is not liable for or subject to any material amount of Taxation the liability for payment of which is or has been deferred, suspended or postponed. 3. Company Residence (a) The Company is and has always been resident for Taxation purposes in and only in the jurisdiction stated in the CK Witco Disclosure Memorandum with express reference to this paragraph (a) and has never been resident anywhere else at any time since its incorporation and will be so resident at Closing. For the avoidance of doubt, references to residence in this Warranty shall be construed as references to residence as determined by the local law of the jurisdiction stated in the CK Witco Disclosure Memorandum and not (unless required by the relevant local law) by reference to the provisions of any relevant double taxation agreement, treaty or convention. (b) The Company does not have and has never had a branch, agency or permanent establishment in, and is not liable to any Taxation in, any jurisdiction other than that in which it is stated in the Disclosure Memorandum to be resident for Taxation purposes. 4. Double Tax Treaties So far as CK Witco is aware, no relief or other Taxation Benefit which has been claimed by the Company or which the Company is entitled to claim under any double taxation agreement treaty or convention entered into between the jurisdiction in which it is resident for Taxation purposes and any other relevant jurisdiction, will or may be disallowed or withdrawn, postponed, restricted, clawed back or otherwise lost as a result of any Event occurring on or before Closing. 5. Tax Base Values and Costs of Acquisition (a) Sufficient provision for deferred tax under FAS 109 has been provided for in the Special Purpose Statement for any timing difference between the book tax basis in the assets of the Company and the US GAAP basis. (b) No action has been taken by the Company or, so far as CK Witco is aware, any company which is or has been a member of the same group for any Taxation purpose as the Company in relation to any asset it currently owns such that any loss on the disposal of that asset would be restricted or reduced for Taxation purposes. 6. Transactions not at Arm's Length (a) The Company does not own and has not within the past three years agreed to acquire, any asset, and has not during the past three years received or agreed to receive any services or facilities (including, without limitation, any loan or money or the benefit of any licences or agreements), the consideration for the acquisition or provision of which was or will be in excess of its market value, or otherwise than on an arm's length basis. (b) The Company has not during the past three years, disposed, and has not agreed to dispose, of any asset, and has not provided or agreed to provide any services or facilities (including, without limitation, any loan of money or the benefit of any licences or agreements), the consideration for the disposal or provision of which was or will be materially less than its market value, or otherwise than on an arm's length basis. (c) The Company has not, within the past three years, made or received any gift of any property or assets of any kind whatsoever and does not own any property received by way of gift. 7. Anti-Avoidance The Company has not been engaged in, or been a party to, any Event or Series of Events or scheme or arrangement of which the main purpose or one of the main purposes was the avoidance or deferral of liability to any Taxation in circumstances where the Company is or may become liable to any fine or penalty as a result or consequence thereof. 8. Value Added Tax ("VAT") and Turnover Tax The Company and any other company which has been treated as a member of the same group of companies as the Company for the purposes of VAT and (where relevant) turnover taxes have complied in all material respects with all laws, statutory requirements, orders, provisions, directions or other conditions made or imposed thereunder relating to VAT or such turnover taxes, including (for the avoidance of doubt) the terms of any agreement reached with respect thereto with any appropriate Taxation Authority. 9. Stamp Duty All documents to which the Company is a party, or which form part of the title to any asset owned or possessed by the Company, or which the Company may need to enforce or produce in evidence in any court of law have been duly stamped and (where appropriate) adjudicated. 10. Distributions No dividend or distribution has been made nor has anything which, for Taxation purposes, is deemed or construed as a dividend, been made or done by the Company during the six years ending on the date of this Agreement, except as provided for in the audited accounts of the Company. 11. Reorganisation and Closing (a) None of the Events effected or proposed to be effected as part of the Reorganisation or the Events contemplated by this Agreement, or the entry into, becoming unconditional or Closing of this Agreement, will give rise to any liability for Taxation or result in any Profits accruing or being deemed to accrue to the Company for Taxation purposes. (b) The Company has not agreed to make and is not required to make, any adjustment by reason of a change in accounting methods that affects any taxable year or other taxable period ending after Closing. No Taxation Authority has proposed to the Company any such adjustment or change in accounting methods that affects any taxable year or other taxable period ending after Closing. The Company has no application pending with any Taxation Authority requesting permission for any change in accounting methods that relates to its business or operations and that affects any taxable year or other taxable period ending after Closing. 12. Tax Equalisation Payments etc. (a) The company is not liable to make any payment for the utilisation, surrender or other transfer of any Taxation Benefit ("Taxation Equalisation Payment"), nor is any Taxation Equalisation Payment received by the Company liable to be refunded. (b) The Company is not under any obligation to surrender or otherwise transfer any Taxation Benefit and the Company is not a party to any Taxation sharing agreement with any company which is not a Company. (c) There are set out in the CK Witco Disclosure Memorandum, with express reference to this paragraph (c), full particulars of all surrenders or other transfer of any Taxation Benefit made or agreed to be made (whether conditionally or otherwise) by the Company since the Accounts Date. 13. Groups, Organschafts, Fiscal Unities etc. Save as disclosed in the CK Witco Disclosure Memorandum, the Company has never been treated for any Taxation purpose as a member of a group, a consolidated tax group, a group registration, an organschaft or fiscal unity and has never been subject to any consolidated tax return in respect of the Company and any other person. EX-4.8 3 EXECUTION COPY $50,000,000 CREDIT AGREEMENT dated as of December 23, 1999 among CK Witco Corporation, Each of the financial institutions as are or may become parties hereto as a Bank, and Merrill Lynch Capital Corporation, as Administrative Agent ____________________________________________ Merrill Lynch Capital Corporation, as Lead Arranger and Syndication Agent TABLE OF CONTENTS ----------------- ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions 1 SECTION 1.02. Accounting Terms and Determinations 10 SECTION 1.03. Types of Borrowings 11 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend 11 SECTION 2.02. Method of Borrowing 11 SECTION 2.03. Interest Elections 11 SECTION 2.04. Notice to Banks; Funding of Loans 12 SECTION 2.05. Notes 13 SECTION 2.06. Maturity of Loans 14 SECTION 2.07. Interest Rates 14 SECTION 2.08. Fees 16 SECTION 2.09. Optional Termination or Reduction of Commitments 17 SECTION 2.10. Mandatory Termination of Commitments 17 SECTION 2.11. Prepayments 17 SECTION 2.12. General Provisions as to Payments 18 SECTION 2.13. Funding Losses 18 SECTION 2.14. Computation of Interest and Fees 19 SECTION 2.15. Taxes 19 SECTION 2.16. Judgment Currency 20 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness 21 SECTION 3.02. Borrowings 22 i ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power 22 SECTION 4.02. Corporate and Governmental Authorization; No Contravention 22 SECTION 4.03. Binding Effect 23 SECTION 4.04. Financial Information 23 SECTION 4.05. Litigation 23 SECTION 4.06. Compliance with ERISA 23 SECTION 4.07. Environmental Matters 24 SECTION 4.08. Taxes 24 SECTION 4.09. Subsidiaries 24 SECTION 4.10. Not an Investment Company or a Public Utility Holding Company 24 SECTION 4.11. Full Disclosure 24 SECTION 4.12. Year 2000 25 ARTICLE 5 COVENANTS SECTION 5.01. Information 25 SECTION 5.02. Payment of Obligations 27 SECTION 5.03. Maintenance of Property; Insurance 27 SECTION 5.04. Conduct of Business and Maintenance of Existence 27 SECTION 5.05. Compliance with Laws 27 SECTION 5.06. Inspection of Property, Books and Records 28 SECTION 5.07. Financial Covenants 28 SECTION 5.08. Negative Pledge 28 SECTION 5.09. Consolidations, Mergers and Sales of Assets 29 SECTION 5.10. Use of Proceeds 29 SECTION 5.11. Additional Subsidiaries 29 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default 29 SECTION 6.02. Notice of Default 31 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization 31 ii SECTION 7.02. Agents and Affiliates 31 SECTION 7.03. Action by Agents 32 SECTION 7.04. Consultation with Experts 32 SECTION 7.05. Liability of Agents 32 SECTION 7.06. Indemnification 32 SECTION 7.07. Credit Decision 32 SECTION 7.08. Successor Administrative Agents 33 SECTION 7.09. No Fiduciary Relationship 33 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair 33 SECTION 8.02. Illegality 34 SECTION 8.03. Increased Cost and Reduced Return 34 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans 35 ARTICLE 9 [Reserved] ARTICLE 10 [Reserved] ARTICLE 11 MISCELLANEOUS SECTION 11.01. Notices 36 SECTION 11.02. No Waivers 36 SECTION 11.03. Expenses; Indemnification 36 SECTION 11.04. Sharing of Set-offs 37 SECTION 11.05. Amendments and Waivers 37 SECTION 11.06. Successors and Assigns 37 SECTION 11.07. Collateral 39 SECTION 11.08. Governing Law; Submission to Jurisdiction 40 SECTION 11.09. Counterparts; Integration 40 SECTION 11.10. Waiver of Jury Trial 41 SECTION 11.11. Confidentiality 41 iii PRICING SCHEDULE EXHIBIT A Note EXHIBIT B Opinion of John T. Ferguson, II, Esq., General Counsel of the Borrower EXHIBIT C Opinion of Wachtell Lipton Rosen & Katz, Special Counsel for the Borrower EXHIBIT D Assignment and Assumption Agreement EXHIBIT E Form of Subsidiary Guarantee Agreement EXHIBIT F Form of Indemnity, Subrogation and Contribution Agreement iv CREDIT AGREEMENT AGREEMENT dated as of December 23, 1999 among CK WITCO CORPORATION, each of the financial institutions as are or may become parties hereto as a Bank, and MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent. WHEREAS, the Borrower wishes to have a term loan credit facility under which it may on one occasion borrow funds, denominated in Dollars, from the Banks ratably in proportion to their respective Commitments; WHEREAS, the Banks are willing to extend said credit facility to the Borrower on the terms and conditions set forth herein; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Administrative Agent" means Merrill Lynch Capital Corporation, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Administrative Agent, duly completed by such Bank and submitted to the Administrative Agent (with a copy to the Borrower). "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. "Agents" means the Administrative Agent, the Syndication Agent and Merrill Lynch Capital Corporation, as Lead Arranger hereunder, and "Agent" means any of the foregoing. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "Applicable Percentage" means, with respect to any Bank, the percentage of the total Commitments and outstanding Loans represented by such Bank's Commitment and outstanding Loans. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 11.06(c). "Availability Period" means the period from and including the Effective Date to and including the Termination Date. "Bank" means each Person listed on the signature pages hereof, each Assignee or other Person which becomes a Bank pursuant to Section 11.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. Base Rate Loan" means a Loan to be made by a Bank as a Base Rate Loan, or converted into or continued as a Base Rate Loan, pursuant to the applicable Notice of Borrowing, Interest Election Request or Article 8. "Base Rate Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Borrower" means CK Witco Corporation, a Delaware corporation. "Borrower's S-4" means the Borrower's registration statement on Form S-4, as filed on July 28, 1999 with the Securities and Exchange Commission. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means a Loan to be made by a Bank as a CD Loan, or converted into or continued as a CD Loan, pursuant to the applicable Notice of Borrowing or Interest Election Request. "CD Reference Bank" means the financial institution acting as the Administrative Agent. "Closing Date" means the date on which Loans are made pursuant to Section 2.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.09 or 2.10 and as such amount may be reduced or increased from time to time pursuant to assignments to or by such Bank in accordance with Section 11.06. The initial aggregate amount of the Commitments is $50,000,000. "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. 2 "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except (a) trade accounts payable arising in the ordinary course of business, (b) obligations incurred in the ordinary course of business in connection with additions to property, plant or equipment which are deferred for no more than 120 days after the later of the acquisition or completion of installation of such additions, (c) other obligations arising in the ordinary course of business which are deferred for no more than 120 days after the date on which they would first be reflected as liabilities on a balance sheet of such Person and (d) obligations in connection with the compensation for services of officers, directors or employees of such Person, (iv) the capitalized amount of all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, (vi) all Debt of others Guaranteed by such Person and (vii) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit or letters of guaranty. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Derivatives Obligations" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "Dollars" and the sign "$" mean lawful money of the United States. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Domestic Subsidiary" means each Subsidiary that is organized under a jurisdiction which is any of the United States, any State thereof or the District of Columbia. 3 "EBITDA" means, for any period, the consolidated net income of the Borrower and its Consolidated Subsidiaries for such period plus, to the extent deducted in computing such consolidated net income for such period, the sum (without duplication) of (a) income tax expense, (b) Interest Expense, (c) depreciation and amortization expense, (d) non-recurring restructuring charges in an amount not to exceed $65 million in any fiscal year of the Borrower, (e) extraordinary and other non-recurring losses and (f) any other non-cash charges (including merger-related purchase accounting adjustments in an amount not to exceed $289 million made as a result of the merger of Crompton & Knowles Corporation and Witco Corporation), minus, to the extent added in computing such consolidated net income for such period, (a) consolidated interest income, (b) extraordinary and other non-recurring gains and (c) any other non-cash income. Anything contained in this definition or elsewhere in this Agreement to the contrary notwithstanding, in calculating EBITDA for the four fiscal-quarter periods ending on December 31, 1999, March 31, 2000 and June 30, 2000, respectively, EBITDA in fiscal quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 shall be deemed to equal the combined EBITDA of Crompton & Knowles Corporation and Witco Corporation for such fiscal quarters, as adjusted on a pro forma basis to give effect to the merger of Crompton & Knowles Corporation and Witco Corporation as if such merger had occurred on December 31, 1998. "Effective Date" means the date the obligations of the Banks to extend credit under this Agreement become effective in accordance with Section 3.01. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" at any time means the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated at such time as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. 4 "Euro-Dollar Loan" means a Loan that bears interest at a Euro-Dollar Rate, pursuant to the applicable Notice of Borrowing or Interest Election Request. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(c) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Bank" means the principal London office of the financial institution acting as the Administrative Agent. "Euro-Dollar Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreements" means (i) the Five-Year Credit Agreement dated as of October 28, 1999, among CK Witco Corporation, the Banks party thereto, The Chase Manhattan Bank, as Syndication Agent, Citibank, N.A., as Administrative Agent, and Bank of America, N.A. and Deutsche Bank Securities, Inc., as Co-Documentation Agents and (ii) the 364-Day Credit Agreement dated as of October 28, 1999, among CK Witco Corporation, the Banks party thereto, The Chase Manhattan Bank, as Syndication Agent, Citibank, N.A., as Administrative Agent, and Bank of America, N.A. and Deutsche Bank Securities, Inc., as Co-Documentation Agents. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. "Fee Letter" means the confidential fee letter dated as of December 23, 1999, between Merrill Lynch Capital Corporation and the Borrower. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or any combination of the foregoing. 5 "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Indemnity, Subrogation and Contribution Agreement" means the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit F hereto, among the Borrower, the Subsidiary Guarantors and the Administrative Agent. "Interest Coverage Ratio" means, on any date, the ratio of (a) EBITDA for the period of four consecutive fiscal quarters ended on or most recently prior to such date to (b) Interest Expense for the period of four consecutive fiscal quarters ended on or most recently prior to such date. "Interest Election Request" means a request by the Borrower to continue or convert a Borrowing in accordance with Section 2.03. "Interest Expense" means, for any period, the interest expense of the Borrower and its Consolidated Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles, including (i) the amortization of debt discounts to the extent included in interest expense in accordance with generally accepted accounting principles, (ii) the amortization of all fees (including fees with respect to interest rate protection agreements or other interest rate hedging arrangements) payable in connection with the incurrence of Debt to the extent included in interest expense in accordance with generally accepted accounting principles and (iii) the portion of any rents payable under capital leases allocable to interest expense in accordance with generally accepted accounting principles. Anything contained in this definition or elsewhere in this Agreement to the contrary notwithstanding, in calculating Interest Expense for the four fiscal-quarter periods ending on December 31, 1999, March 31, 2000 and June 30, 2000, respectively, Interest Expense in fiscal quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 shall be deemed to equal the combined Interest Expense of Crompton & Knowles Corporation and Witco Corporation for such fiscal quarters, as adjusted on a pro forma basis to give effect to the merger of Crompton & Knowles Corporation and Witco Corporation as if such merger had occurred on December 31, 1998. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter (or nine or twelve months thereafter if, at the time of the relevant Borrowing, an interest period of such duration is available to all Banks), as the Borrower may elect in the applicable Notice of Borrowing; provided that: 6 (a) any Interest Period (except an Interest Period determined pursuant to clause (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day in a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day in a calendar month; and (c) any Interest Period which begins before the Maturity Date and would otherwise end after the Maturity Date shall end on the Maturity Date. (2) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (b) any Interest Period which begins before the Maturity Date and would otherwise end after the Maturity Date shall end on the Maturity Date. (3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; provided that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (b) any Interest Period which begins before the Maturity Date and would otherwise end after the Maturity Date shall end on the Maturity Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise. "Leverage Ratio" means, on any date, the ratio of (a) Total Debt on such date to (b) EBITDA for the period of four consecutive fiscal quarters ended on or most recently prior to such date. "Lien" means, with respect to any asset, any mortgage, lien, pledge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. 7 "Loan" means a Domestic Loan or a Euro-Dollar Loan, and "Loans" means Domestic Loans or Euro-Dollar Loans or any combination of the foregoing. "Loan Documents" means this Agreement, the Subsidiary Guarantee Agreement and the Indemnity, Subrogation and Contribution Agreement. "Loan Parties" means the Borrower and the Subsidiary Guarantors. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Debt" means Debt (other than the obligations under this Agreement) of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal or face amount exceeding $25,000,000. "Material Financial Obligations" means a principal or face amount of Debt and/or payment or collateralization obligations in respect of Derivatives Obligations of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate amount exceeding $25,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $25,000,000. "Material Subsidiary" means at any time any Subsidiary, except Subsidiaries which at such time have been designated by the Borrower (by notice to the Administrative Agent, which may be amended from time to time) as nonmaterial, none of which singly would meet the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission and all of which, if aggregated and considered as a single Subsidiary, would not have total assets (determined on a consolidated basis for such Subsidiaries and their consolidated subsidiaries) in excess of 15% of the consolidated assets of the Borrower and its Consolidated Subsidiaries at such time. "Maturity Date" means December 23, 2000, or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group (i) is then making or accruing an obligation to make contributions or (ii) for purposes of Section 6.01(i) only, has within the preceding five plan years made contributions, including for purposes of this clause (ii) any Person which ceased to be a member of the ERISA Group during such five year period. "New York Office" means, at any time, the office of the Administrative Agent in New York specified in or pursuant to Section 11.01 at such time. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. 8 "Notice of Borrowing" is defined in Section 2.02. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 11.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) for purposes of Section 6.01(i) only, has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Pricing Schedule attached hereto. "Prime Rate" means the rate of interest publicly announced by Citibank, N.A. in New York City from time to time as its Prime Rate. "Principal Officer" means any of the following officers of the Borrower: the Chairman of the Board, the President, the chief executive officer, the chief financial officer, the treasurer, the controller and the general counsel. If the titles of the Borrower's officers are changed after the date hereof, the term "Principal Officer" shall thereafter mean any officer performing substantially the same functions as are presently performed by one or more of the officers listed in the first sentence of this definition. "Reference Bank" means the CD Reference Bank or the Euro-Dollar Reference Bank, as the context may require. "Refunding Borrowing" means a Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Loans made by any Bank to the Borrower. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. 9 "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, having Loans amounting to more than 50% of the aggregate unpaid principal amount of the Loans. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Subsidiary Guarantee Agreement" means the Subsidiary Guarantee Agreement substantially in the form of Exhibit E hereto, among the Borrower, the Subsidiary Guarantors, and the Administrative Agent. "Subsidiary Guarantors" means, collectively, each Domestic Subsidiary of the Borrower that is a party to the Subsidiary Guarantee Agreement and the Indemnity, Subrogation and Contribution Agreement as of the date hereof, and each Domestic Subsidiary that, pursuant to Section 5.11, becomes a party to such agreements by execution of supplements in the forms provided therein. "Syndication Agent" means Merrill Lynch Capital Corporation, in its capacity as syndication agent for the Banks hereunder. "Termination Date" means the earlier of (i) December 20, 1999 and (ii) the Closing Date. "Total Debt" means, at any date, all Debt of the Borrower and its Consolidated Subsidiaries at such date to the extent such Debt should be reflected on a consolidated balance sheet of the Borrower at such date in accordance with generally accepted accounting principles. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefit liabilities under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such liabilities (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares or nominal shares of foreign entities) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in 10 Article 5 to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Banks wish to amend Article 5 for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes an aggregation of Loans to be made by the Banks to the Borrower pursuant to Section 2.01, or converted or continued pursuant to Section 2.03, on the same day, all of which Loans (i) are of the same type (subject to Article 8) and (ii) have the same initial Interest Period. Borrowings may be classified for purposes of this Agreement by reference to the pricing of the Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans). ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make term loans to the Borrower on the Closing Date in an aggregate amount equal to the Commitment of such Bank. The Borrowing under this Section shall be made from the several Banks ratably in the amounts of their respective Commitments. Amounts repaid in respect of Loans may not be reborrowed. SECTION 2.02. Method of Borrowing. The Borrower shall give the Administrative Agent notice (the "Notice of Borrowing") not later than 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day before the Closing Date, specifying: (i) in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) whether the Loans comprising each Borrowing to be made on the Closing Date are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (iii) in the case of each Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Interest Elections. (a) Each Borrowing initially shall be of the type specified in the Notice of Borrowing and shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower may elect to convert such Borrowing to a different type or to continue such Borrowing and may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Banks, and the Loans comprising each such portion shall be considered a separate Borrowing. 11 (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by (w) the date of the effectiveness of such election, in the case of a Borrowing converted to or continued as a Base Rate Borrowing, (x) the second Domestic Business Day before the effectiveness of such election, in the case of a Borrowing converted to or continued as a CD Borrowing, and (y) the Third Euro-Dollar Business Day before the effectiveness of such election, in the case of a Borrowing converted to or continued as a Euro-Dollar Borrowing. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02 of this Section: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Euro-Dollar Business Day or a Domestic Business Day, as applicable; (iii) whether the resulting Borrowing is to be a Base Rate Borrowing, a CD Borrowing or a Euro-Dollar Borrowing; and (iv) the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Bank of the details thereof and of such Bank's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued as a Base Rate Borrowing. No Borrowing may be converted to or continued as a CD Borrowing or a Euro-Dollar Borrowing if after giving effect thereto the Interest Period therefor would end after the Maturity Date. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Banks, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Euro-Dollar Borrowing and (ii) unless repaid, each Euro-Dollar Borrowing shall be converted to a Base Rate Borrowing at the end of the Interest Period applicable thereto. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of 12 such Bank's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) On the date of each Borrowing, each Bank shall make available its share of such Borrowing in Dollars not later than 12:00 Noon (New York City time), in Federal or other funds immediately available in New York City, to the Administrative Agent at its New York Office. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower in its bank account maintained at the Administrative Agent's aforesaid address. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. In no event shall any payment by the Administrative Agent, or repayment by the Borrower, of any amount pursuant to this Section relieve the Bank that failed to make available its share of the related Borrowing of its obligations hereunder. SECTION 2.05. Notes. (a) The Loans of each Bank to the Borrower shall, upon request of the applicable Bank, be evidenced by a single Note of the Borrower payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to the Borrower. (b) Each Bank may, by notice to the Borrower and the Administrative Agent, request that its Loans of a particular type to the Borrower be evidenced by a separate Note of the Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note requested pursuant to Section 2.05(a), the Administrative Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it to the Borrower and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a 13 part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the Maturity Date. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of the Base Rate Margin for such day plus the applicable Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the applicable Adjusted CD Rate; provided that if any CD Loan shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such CD Loan shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Loan and (ii) the rate applicable to Base Rate Loans for such day. The "Adjusted CD Rate" applicable to a day during any Interest Period means a rate per annum determined pursuant to the following formula: CCBR ACDR = -------- + AR 1.00-DRP ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate ____________ * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1%. The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York 14 certificate of deposit dealers of recognized standing for the purchase at face value from the CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of the CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in Dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States of America. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits are offered to the Euro-Dollar Reference Bank in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of the Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. 15 (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered Rate applicable to such Loan and (ii) the sum of the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than one month as the Administrative Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to the Euro-Dollar Reference Bank are offered to the Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day). (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated hereby. If any Reference Bank does not furnish a timely quotation, the provisions of Section 8.01 shall apply. SECTION 2.08. Fees. (a) The Borrower shall pay to the Administrative Agent for the account of each Bank a facility fee calculated for each day at the Facility Fee Rate for such day (determined in accordance with the Pricing Schedule). Such facility fees shall accrue from and including the Effective Date to but excluding the Maturity Date, on the daily aggregate amount of the Commitments (whether used or unused) or, if the Commitments have terminated, on the outstanding amount of the Loans. Accrued fees under this Section shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31 and on the date of termination of the Commitments in their entirety (or, if later, the date the Loans shall be repaid in their entirety). (b) For each day on or after the Closing Date until the Loans shall have been repaid in full, the Borrower shall pay to the Administrative Agent for the account of each Bank a utilization fee at the per annum rate indicated in the Pricing Schedule on the aggregate amount of each Bank's outstanding Loans on such day. Accrued and unpaid utilization fees, if any, shall be payable on the last day of each March, June, September and December and on the date on which all Loans shall have been repaid in full. All utilization fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) The Borrower agrees to pay to the Administrative Agent the fees payable in the amounts and at the times separately agreed upon in the Fee Letter. 16 (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees and utilization fees, to the Banks entitled thereto. Fees paid shall not be refundable under any circumstances. SECTION 2.09. Optional Termination or Reduction of Commitments. During the Availability Period, the Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, terminate at any time, or proportionately reduce from time to time by an aggregate amount of at least $10,000,000 or any larger multiple of $1,000,000, the unused portions of the Commitments. SECTION 2.10. Mandatory Termination of Commitments. Unless previously terminated, the Commitments shall terminate at 5:00 p.m., New York City time, on the last day of the Availability Period. SECTION 2.11. Prepayments. (a) The Borrower may, upon at least one Domestic Business Day's notice to the Administrative Agent, prepay any Borrowing in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and, in the case of any prepayment of a Fixed Rate Borrowing, any breakage costs due under Section 2.13. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) If the Borrower becomes obligated to indemnify any Bank or the Administrative Agent for Taxes or Other Taxes pursuant to Section 2.15(c) and actions taken pursuant to Section 2.15(f) do not or will not eliminate such indemnity payments, then (i) the Borrower may, upon at least one Domestic Business Day's notice to the Administrative Agent, prepay all Borrowings in whole by paying the principal amount together with accrued interest thereon to the date of prepayment or (ii) the Borrower may, at its sole expense and effort, upon notice to such Bank and the Administrative Agent, require such Bank to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.06(c)), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Bank, if a Bank accepts such assignment); provided that (A) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (B) such Bank shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding Principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (C) such assignment will result in a reduction to the indemnity payable pursuant to Section 2.15(c). A Bank shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Bank or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. (c) In the event and on each occasion that any cash proceeds are received by or on behalf of the Borrower or any Subsidiary in respect of any incurrence of Debt for borrowed money by the Borrower or a Subsidiary in any offering or placement of bonds, debentures, notes or similar securities, the Borrower shall, immediately after such cash proceeds are received, prepay Loans 17 in an aggregate amount equal to such proceeds (net of any applicable discounts or fees received by or payable to underwriters, initial purchasers or placement agents). (d) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder not later than 11:00 A.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its New York Office. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. All payments by the Borrower shall be made without deduction for any counterclaim, defense, recoupment or setoff. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due from the Borrower to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent at the Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a) or 2.11, the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow or prepay, provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 18 SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Taxes. (a) For the purposes of this Section 2.15, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by any Loan Party pursuant to any Loan Document or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Administrative Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction (or any subdivision thereof) under the laws of which such Bank or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes a party to this Agreement or changes its Applicable Lending Office. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to any Loan Document or under any Note or from the execution or delivery of, or otherwise with respect to, any Loan Document or any Note. (b) Any and all payments by any Loan Party to or for the account of any Bank or the Administrative Agent under any Loan Document or under any Note shall be made without deduction for any Taxes or Other Taxes except as required by law; provided that, if any change in law occurring after any Bank or the Administrative Agent first becomes a party to this Agreement requires any Loan Party to deduct any Taxes or Other Taxes from any payments to any such Bank or the Administrative Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) such Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions, (iii) such Loan Party shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Loan Party shall furnish to the Administrative Agent, at its address referred to in Section 11.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section because of a change in law occurring after such Bank or the Administrative Agent first becomes a party to this Agreement paid by such Bank or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto as certified in good faith to the Borrower by each Bank or the Administrative Agent seeking indemnification pursuant to this Section 2.15(c). This indemnification 19 shall be paid within 30 days after such Bank or the Administrative Agent (as the case may be) makes demand therefor; provided, however, that the indemnification obligations of the Borrower under this Section 2.15 shall be reduced appropriately to take into account any Tax deduction, credit or benefit or Other Tax deduction, credit or benefit to which a Bank or the Administrative Agent is entitled as a result of its payment of Taxes or Other Taxes. If a Bank or the Administrative Agent receives a refund of indemnified Taxes or Other Taxes with respect to which the Borrower has made payment to such Bank or the Administrative Agent pursuant to this Section 2.15(c), such Bank or the Administrative Agent shall pay over such refund to the Borrower within 10 Days after receipt of such refund. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), and at any time it changes its Applicable Lending Office, shall provide the Borrower and the Administrative Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower or the Administrative Agent with the appropriate form pursuant to Section 2.15(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 2.15(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If any Loan Party is required to pay additional amounts to or for the account of any Bank pursuant to this Section, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. SECTION 2.16. Judgment Currency. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due from any Loan Party under any Loan Document in the currency expressed to be payable herein or therein (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent's New York office on the Euro-Dollar Business Day preceding that on which final judgment is given. The obligations of each Loan Party in respect of any sum due to any Bank or the Administrative Agent under any Loan Document or under any Note shall, not- 20 withstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Euro-Dollar Business Day following receipt by such Bank or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency, such Bank or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency so purchased is less than the sum originally due to such Bank or the Administrative Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Bank or the Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 11.04, such Bank or the Administrative Agent, as the case may be, agrees to remit such excess to the Borrower. ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness. The obligations of the Banks to extend credit under this Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 11.05): (a) receipt by the Administrative Agent of counterparts hereof and of each Loan Document signed by each of the parties hereto and thereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telex, facsimile transmission or other written confirmation from such party of execution of a counterpart hereof or thereof by such party); (b) receipt by the Administrative Agent of an opinion of John T. Ferguson II, Esq., General Counsel of the Borrower, substantially in the form of Exhibit B hereto, and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) receipt by the Administrative Agent of an opinion of Wachtell Lipton Rosen & Katz, special counsel for the Borrower, substantially in the form of Exhibit C hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Administrative Agent of evidence satisfactory to it that all fees and expenses payable for the account of the Banks and the Administrative Agent and their affiliates on or before the Effective Date have been paid in full in the amounts previously agreed upon on or prior to the Effective Date; and (e) receipt by the Administrative Agent of all documents it may reasonably request relating to the existence of the Loan Parties, the corporate authority for and the validity of this 21 Agreement, the other Loan Documents and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; provided that the Banks shall have no obligation to extend credit hereunder and their commitments under this Agreement shall become null and void unless all of the foregoing conditions are satisfied not later than January 5, 2000. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligations of any Bank to make a Loan on the occasion of the initial Borrowing are subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) the fact that, immediately after such Borrowing, the sum of the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; (d) the fact that the representations and warranties of the Borrower contained in this Agreement shall be true and correct on and as of the date of such Borrowing; and (e) the Agents shall have been paid all fees and reimbursed for all expenses as required under the Fee Letter. The initial Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing that the facts specified in clauses (b), (c) and (d) of this Section are true and correct. ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Loan Party is a party are within the corporate powers of such Loan Party, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or Regulation or of the certificate of incorporation or by-laws of 22 any Loan Party or of any agreement, judgment, injunction, order, decree or other instrument binding upon any Loan Party or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 4.03. Binding Effect. This Agreement and each Loan Document constitutes a valid and binding agreement of each Loan Party that is a party thereto and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower. SECTION 4.04. Financial Information. (a) The consolidated balance sheets of the Borrower and its consolidated subsidiaries as of September 30, 1999 (unaudited) and December 26, 1998 and the related statements of operations and cash flows, a copy of each of which has been delivered to the Administrative Agent, and the unaudited pro forma combined statements of operations and the other financial and operating information contained in the report of the Borrower on Form 8-K filed with the Securities and Exchange Commission on October 15, 1999, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its consolidated subsidiaries as of such dates and their consolidated results of operations for the applicable periods. (b) Since September 30, 1999, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. (c) the Management Projections contained in the Confidential Information Memorandum dated September, 1999, relating to the Existing Credit Agreements, were prepared in good faith on the basis of assumptions believed to be reasonable at the time such assumptions were made. SECTION 4.05. Litigation. Except as disclosed in the Borrower's S-4, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable likelihood of an adverse decision which would materially adversely affect the business (taken as a whole), consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries or which in any manner draws into question the validity or enforceability of any Loan Document or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all respect with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except for such noncompliance which would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan, or made any amendment to any Plan, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Ti- 23 tle IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA, except in the case of clause (iii) above for such liabilities which do not exceed $5,000,000 in the aggregate during the term of this Agreement. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Borrower conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Borrower has reasonably concluded that, except as disclosed in the Borrower's S-4, Environmental Laws are unlikely to have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.08. Taxes. United States Federal income tax returns of Crompton & Knowles Corporation and Witco Corporation have been examined and settled through December 31, 1997, for Crompton & Knowles Corporation, and through December 31, 1995, for Witco Corporation. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary, except for items being diligently contested in good faith and by appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.09. Subsidiaries. Each of the Borrower's Material Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.10. Not an Investment Company or a Public Utility Holding Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 4.11. Full Disclosure. All information heretofore furnished by the Borrower to the Administrative Agent or any of its Affiliates or any Bank in writing for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any of its Affiliates or any Bank in writing will be, taken as a whole, true and accurate in all material respects on the date as of which such information is stated or certified. The Borrower has disclosed to the Banks in writing any and all facts which materially and adversely affect or may affect (to the extent the Borrower can now reasonably foresee) the business, operations or financial condition of the Bor- 24 rower and its Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower or any other Loan Party to perform its obligations under this Agreement or any other Loan Document. SECTION 4.12. Year 2000. The Borrower and its Subsidiaries are taking commercially reasonable steps to ascertain the extent of, and to quantify and successfully address, business and financial risks facing the Borrower and its Subsidiaries as a result of what is commonly referred to as the "Year 2000 Problem" (i.e., the inability of certain computer applications to recognize correctly and perform date-sensitive functions involving certain dates prior to and after December 31, 1999), (b) the Borrower and its Subsidiaries reasonably believe that any remedial actions required to permit the proper functioning of any systems critical to the operations of the Borrower and its Subsidiaries, taken as a whole, despite the Year 2000 Problem have been or will be performed on or prior to December 31, 1999 and (c) the Borrower and its Subsidiaries reasonably believe that the Year 2000 Problem (including any preparations or remediations in response thereto) will not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, taken as a whole. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any Loan is outstanding: SECTION 5.01. Information. The Borrower will deliver to the Administrative Agent for distribution to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, cash flows and shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in accordance with generally accepted accounting principles by KPMG LLP or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of operations for such quarter and consolidated statements of operations and condensed cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in the case of the statement of operations in comparative form the figures for the corresponding quarter, in the case of the statements of operations and cash flows the figures for the corresponding portion of the Borrower's previous fiscal year and in the case of the balance sheet the figures for the previous year end, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer, treasurer or the controller or other chief accounting officer of the Borrower; 25 (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, treasurer or the controller or other chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.07 to 5.08, inclusive, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements relating only to Sections 5.07, 5.08(a), 5.08(c), 5.08(f), 5.08(g)(i), 5.08(g)(ii) and 5.08(h) and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; (e) within five Domestic Business Days after any Principal Officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the controller or other chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy, statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a 26 certificate of the chief financial officer or the controller or other chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (i) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Payment of Obligations. The Borrower will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity (or, in the case of tax liabilities, if later, before the same become subject to penalties), all their respective obligations and liabilities (including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings) if the failure to so pay and discharge would have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries considered as a whole, and will maintain, and will maintain for each Material Subsidiary or cause each Material Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property; Insurance. The Borrower will keep, and will cause each Material Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; will maintain, and will cause each Material Subsidiary to maintain (either in the name of the Borrower or in such Material Subsidiary's own name) with insurance companies which at the time such insurance is purchased or renewed are financially sound and reputable, insurance on all their property in at least such amounts (including self-insurance retentions) and against at least such risks as are usually insured against (including self-insurance retentions) in the same general area by companies of similar size engaged in the same or a similar business; and will furnish to the Banks, upon written request from the Administrative Agent, full information as to the insurance carried. SECTION 5.04. Conduct of Business and Maintenance of Existence. The Borrower and its Material Subsidiaries (on a consolidated basis) will continue to engage in business of the same general types as now conducted by the Borrower and its Material Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or the merger or consolidation of a Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Wholly-Owned Consolidated Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing, (ii) the termination of the corporate existence, rights, privileges or franchises of any Subsidiary if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks or (iii) any disposition of assets not prohibited by Section 5.09 hereof. SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause each Subsidiary to comply, in all respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws 27 and ERISA and the rules and regulations thereunder and all applicable laws, ordinances, rules, regulations and requirements of governmental authorities relating to the acquisition referred to in Section 5.10) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where failure to comply would not materially adversely affect the business (taken as a whole), consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries. SECTION 5.06. Inspection of Property, Books and Records. The Borrower will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Material Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired. SECTION 5.07. Financial Covenants. (a) The Borrower will not permit the Leverage Ratio at any time to exceed 3.50 to 1.00. (b) The Borrower will not permit the Interest Coverage Ratio at any time to be less than 3.00 to 1.00. SECTION 5.08. Negative Pledge. Neither the Borrower nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $75,000,000 (exclusive of Liens permitted by clause (h) of this Section); (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, constructing or improving such asset, provided that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof or completion of the construction or improvement thereto, as the case may be; (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; 28 (g) Liens not otherwise permitted by the foregoing clauses of this Section arising in the ordinary course of its business which (i) do not secure Debt, (ii) do not secure obligations in an amount exceeding $100,000,000 in the aggregate and (iii) do not materially impair the use of the assets subject thereto in the operation of the business of the Borrower and its Subsidiaries; or (h) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt or interest rate and currency swaps in an aggregate principal amount, notional principal and final exchange amount at any time outstanding not to exceed $50,000,000. SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Borrower and its Subsidiaries will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, any of the assets of the Borrower and its Subsidiaries, to any other Person; provided that (A) the Borrower or a Subsidiary may merge with another Person if (x) the Borrower or, in the case of a merger not involving the Borrower, a Subsidiary Guarantor is the corporation surviving such merger and (y) immediately after giving effect to such merger, no Default shall have occurred and be continuing, (B) each of the Borrower and its Subsidiaries may sell, lease or otherwise transfer any of its inventory in the ordinary course of business and any of its assets which, in the judgment of its officers, are obsolete, excess or unserviceable and (C) the Borrower and its Subsidiaries may sell, lease or transfer any of their assets with a market value that does not, in the aggregate together with all other sales, leases and transfers pursuant to this clause (C), exceed 25% of the total assets of the Borrower and its Subsidiaries as of the date hereof. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. SECTION 5.11. Additional Subsidiaries. The Borrower will ensure at all times that Domestic Subsidiaries are (or become within 10 Domestic Business Days of being formed or acquired) Subsidiary Guarantors so that (a) the total assets of the Borrower and the Subsidiary Guarantors comprise at least 85% by book value of the total assets of the Borrower and the Domestic Subsidiaries and (b) the total revenues of the Borrower and the Subsidiary Guarantors, as of the most recently ended fiscal quarter, comprise at least 85% of the total revenues of the Borrower and the Domestic Subsidiaries for such fiscal quarter; provided, that only Domestic Subsidiaries shall be required to become Subsidiary Guarantors. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay within three Domestic Business Days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; 29 (b) the Borrower shall fail to observe or perform any applicable covenant contained in Sections 5.07 to 5.10, inclusive; (c) any Loan Party shall fail to observe or perform any covenant or agreement contained in any Loan Document (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by any Loan Party in any Loan Document or in any certificate, financial statement or other document delivered pursuant to any Loan Document shall prove to have been incorrect in any material respect when made (or deemed made); (e) a "Default" occurs under either of the Existing Credit Agreements or the Borrower or any Subsidiary shall fail to make any payment of principal, face amount, interest, premium, fees or any similar obligation in respect of any Material Financial Obligations when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the 30 PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $25,000,000; (j) a judgment or order, or judgments or orders, for the payment of money in excess in the aggregate of $25,000,000 (in excess of available insurance coverage) shall be rendered against the Borrower or any Material Subsidiary and such judgment or order, or judgments or orders, shall continue unsatisfied and unstayed for a period of 30 days; or (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 35% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calendar months commencing after September 1, 1999, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) if requested by Banks holding more than 50% of the aggregate amount of the Loans, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, automatically, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 THE AGENTS SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes each Agent to take such action as its agent on its behalf and to exercise such powers under the Loan Documents and the Notes as are delegated to such Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agents and Affiliates. Each of the Agents shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the 31 same as though it were not an Agent, and each of the Agents and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not an Agent hereunder or an Affiliate thereof. SECTION 7.03. Action by Agents. The obligations of the Agents hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, none of the Agents shall be required to take any action with respect to any Default, except as expressly provided with respect to the Administrative Agent in Article 6. SECTION 7.04. Consultation with Experts. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable to any Bank for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agents. None of the Agents nor any of their respective affiliates or any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. None of the Agents nor any of their respective affiliates or any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of any Loan Document, the Notes or any other instrument or writing furnished in connection herewith. No Agent shall incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify each Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except in the case of each indemnitee such as result from such indemnitee's gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with any Loan Document or any action taken or omitted by such indemnitees hereunder or thereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. 32 SECTION 7.08. Successor Administrative Agents. The Administrative Agent may resign at any time by giving written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Administrative Agent, which successor shall (unless an Event of Default shall have occurred and be continuing) be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which successor shall (unless an Event of Default shall have occurred and be continuing) be reasonably acceptable to the Borrower, and which shall be a commercial bank or financial institution organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Administrative Agent. SECTION 7.09. No Fiduciary Relationship. Neither of the Lead Arranger nor the Syndication Agent shall have or be deemed to have any fiduciary relationship with any other Bank in connection herewith. ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any CD Loan or Euro-Dollar Loan: (a) the Administrative Agent is advised by the Reference Bank that deposits in dollars (in the applicable amounts) are not being offered to the Reference Bank in the relevant market for such Interest Period, or (b) Banks having 50% or more of the principal amount of outstanding Loans advise the Administrative Agent that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, (c) the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to bor- 33 row on such date, such Borrowing shall instead be made as a Base Rate Borrowing in the same aggregate amount as the requested Borrowing. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive promulgated on or after the date hereof (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to the Borrower and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to the Borrower shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, each Bank will use reasonable efforts to designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to the Borrower to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency made or promulgated after the date hereof shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (B) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans or its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount 34 deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or Regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will use reasonable efforts to designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to the Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans to the Borrower which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, to the Borrower shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. 35 ARTICLE 9 [Reserved] ARTICLE 10 [Reserved] ARTICLE 11 MISCELLANEOUS SECTION 11.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (a) in the case of the Borrower, at its address, facsimile number or telex number set forth on the signature pages hereof, (b) in the case of the Administrative Agent, at its address, facsimile number or telex number in New York City set forth on the signature pages hereof, (c) in the case of any Bank, at its address, facsimile number or telex number set forth in its Administrative Questionnaire or (d) in the case of any party, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answer back is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices under Article 2 or Article 8 shall not be effective until received. SECTION 11.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 11.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all out-of-pocket expenses of the Administrative Agent and the Syndication Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation and administration of the Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder or thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by any of the Administrative Agent and each Bank, including fees and disbursements of counsel (which counsel may be an employee of such Bank or the Administrative Agent), in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. 36 (b) The Borrower agrees to indemnify the Administrative Agent, the Syndication Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each, an "indemnitee") and hold each indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel (which counsel may be an employee of such indemnitee), which may be incurred by such indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of any Loan Document or any actual or proposed use of proceeds of Loans hereunder; provided that no indemnitee shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct or breach of its obligations under any Loan Document as determined by a court of competent jurisdiction. SECTION 11.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to the Loans owed to it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Loans owed to such other Bank, the Bank receiving such proportionately greater payment shall purchase participations in such Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 11.05. Amendments and Waivers. Any provision of this Agreement, the other Loan Documents or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any scheduled reduction or termination of any Commitment, or (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, or (v) release all or any substantial portion of the Subsidiary Guarantors from their Guarantees under the Subsidiary Guarantee Agreement, except as provided therein. SECTION 11.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and 37 assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 11.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit D hereto executed by such Assignee and such transferor Bank, with (and subject to) the consent of the Borrower and the Administrative Agent, such consents not to be unreasonably withheld; provided that if an Assignee is an affiliate of a Bank or was a Bank immediately prior to such assignment, no such consent shall be required, and if an Event of Default has occurred and is continuing, the consent of the Borrower shall not be required; and provided further that any assignment shall not be less than $10,000,000, or if less, shall constitute an assignment of all of such Bank's rights and obligations under this Agreement and the Notes. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.17. 38 (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Notwithstanding anything to the contrary contained herein, any Bank (a "Granting Bank") may grant to a special purpose funding vehicle (an "SPC") of such Granting Bank, identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to Section 2.01; provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by the Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Agreement for which a Bank would otherwise be liable, for so long as, and to the extent, the related Granting Bank makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 11.06 any SPC may (i) with notice to, but without the prior written consent of, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interest in any Loans to its Granting Bank or to any financial institutions providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC. This section may not be amended with respect to any SPC without the written consent of such SPC's Granting Bank. Notwithstanding any grant of rights to an SPC pursuant to this paragraph, the Granting Bank shall retain the sole right to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; provided that the Granting Bank may enter into and perform any agreement with the SPC as to the manner in which it will exercise such right. SECTION 11.07. Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. 39 SECTION 11.08. Governing Law; Submission to Jurisdiction. (a) This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. (b) The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement, the other Loan Documents or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. (c) The Borrower irrevocably designates and appoints CT Corporation System, having an office on the date hereof at 1633 Broadway, New York, New York 10102 as the Borrower's authorized agent, to accept and acknowledge on its behalf service of any and all process which may be served in any suit, action or proceeding referred to in subsection (b) above in any federal or New York State court sitting in New York City. The Borrower represents and warrants that such agent has agreed to accept such appointment. Said designation and appointment shall not be revocable by the Borrower until all principal, interest and other amounts payable hereunder shall have been paid in full in accordance with the provisions hereof. If such agent shall cease to act as agent for the Borrower, the Borrower agrees to designate irrevocably and appoint without delay another such agent satisfactory to the Administrative Agent. (d) The Borrower consents to process being served in any suit, action or proceeding referred to in subsection (b) above in any federal or New York State court sitting in New York City by service of process upon its agent appointed as provided in subsection (c) above; provided that, to the extent lawful and possible, notice of said service upon such agent shall be mailed by registered or certified air mail, postage prepaid, return receipt requested, to the Borrower at its address specified in or pursuant to Section 11.01. The Borrower irrevocably waives, to the fullest extent permitted by law, all claim of error by reason of service in such manner and agrees that such service shall be deemed in every respect effective service of process upon the Borrower in any such suit, action or proceeding and shall, to the fullest extent permitted by law, constitute valid and personal service upon and personal delivery to the Borrower. (e) Nothing in this Section shall affect the right of the Administrative Agent or any Bank to serve process in any other manner permitted by law or limit the right of the Administrative Agent or any Bank to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions. SECTION 11.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement, the other Loan Documents and the Fee Letter constitute the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. 40 SECTION 11.10. Waiver of Jury Trial. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 11.11. Confidentiality. Each Bank agrees to exercise all reasonable efforts to keep any information delivered or made available by the Borrower to it which is clearly indicated to be confidential information, confidential from anyone other than persons employed or retained by such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Bank from disclosing such information (i) to any other Bank, (ii) to its affiliates and its and their officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such Bank, (v) which has been publicly disclosed, (vi) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Bank, or their respective affiliates may be a party, (vii) to the extent reasonably required in connection with the exercise of any remedy hereunder, (viii) to such Bank's legal counsel and independent auditors, and (ix) to any actual or proposed participant or assignee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section. 41 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. CK WITCO CORPORATION By______________________________________ Name: John R. Jepsen Title: Treasurer By______________________________________ Name: Robert Marchitello Title: Assistant Treasurer CK Witco Corporation One American Lane Greenwich, CT 06831 Attention: Treasurer Copy to: Vice President and General Counsel Facsimile number: 203-552-2202 42 MERRILL LYNCH CAPITAL CORPORATION, individually and as Administrative Agent, Syndication Agent and Lead Arranger, By______________________________________ Name: Title: Commitment: $50,000,000 250 Vesey Street World Financial Center, 16th Floor New York, New York 10281-1316 Attention of: For Amendments, Financials, etc: Cesar Apostol Phone: 212-449-7441 Fax: 212-449-2372 or Carol Feeley Phone: 212-449-8414 Fax: 212-738-1649 43 For Loan Activity and Interest: Mark Campbell Phone: 212-449-6996/7019 Fax: 212-738-1719 44 PRICING SCHEDULE Each of "FACILITY FEE RATE", "EURO-DOLLAR MARGIN", "BASE RATE MARGIN" and "CD MARGIN" means, for any day, the rate set forth below in the row opposite such term and in the column corresponding to the Pricing Level that applies on such day as determined based on the ratings by Moody's and S&P: Level I Level II Level III Level IV Level V Pricing Level A-/A3 BBB+/Baa1 BBB/Baa2 BBB-/Baa3 EXHIBIT A NOTE New York, New York , 19 For value received, CK Witco Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of [name of Bank] (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Loan or as otherwise provided in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Merrill Lynch Capital Corporation, 250 Vesey Street, World Financial Center, 16th Floor, New York, NY 10281-1316. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof, provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Credit Agreement dated as of December 23, 1999 among CK Witco Corporation, each of the financial institutions as are or may become parties thereto as a bank, and Merrill Lynch Capital Corporation, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. CK WITCO CORPORATION By _____________________________________________________________________ Name: Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL Amount of Date Amount of Type of Principal Maturity Notation Loan Loan Repaid Date Made By 2 EXHIBIT B OPINION OF JOHN T. FERGUSON, II, ESQ., GENERAL COUNSEL OF THE BORROWER December 23, 1999 To the Banks and the Administrative Agent Referred to Below [ ] Dear Sirs: I am General Counsel of CK Witco Corporation (the "Borrower"). This opinion is being rendered to you pursuant to Section 3.01(b) of the Credit Agreement dated as of December 23, 1999 (the "Credit Agreement") among the Borrower, each of the financial institutions as are or may become parties thereto as a Bank and Merrill Lynch Capital Corporation, as Administrative Agent. Terms defined in the Credit Agreement are used herein as therein defined. I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and officers of the Borrower and its Subsidiaries and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. I have assumed, with your permission, that the signatures (other than those of officers of the Borrower and its Subsidiaries) on all the documents that I have examined are genuine. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers required to carry on its business as now conducted. Each of the Borrower's Subsidiaries which is a "significant subsidiary" within the meaning of Regulation S-X of the Securities and Exchange Commission is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers required to carry on its business as now conducted. 2. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and require no action by or in respect of, or filing with, any governmental agency or official. 3. The execution, delivery and performance by the Borrower of the Credit Agreement and by the other Loan Parties of the Loan Documents to which they are parties will not contravene, or constitute a default under, any provision of applicable law or Regulation or of the articles of incorporation or bylaws of any Loan Party or any agreement or instrument evidencing Debt of any Loan Party or, to the best of my knowledge, any other agreement, judgment, injunction, order, decree or other instrument binding upon any Loan Party or, to the best of my knowledge, result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. 4. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the other Loan Documents constitute valid and binding agreements of the Loan Parties that are party thereto. 5. Except as disclosed in the Borrower's S-4 as filed with the Securities and Exchange Commission on July 28, 1999, there is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business or consolidated financial position of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of the Credit Agreement, any other Loan Document or the Notes. For the purposes hereof, I have not regarded an action, suit or proceeding to be "threatened" against the Borrower or any of its Subsidiaries unless the potential litigant has manifested to the management of the Borrower in writing an intention to institute the same. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without my prior written consent. Very truly yours, 2 EXHIBIT C OPINION OF WACHTELL LIPTON ROSEN & KATZ, SPECIAL COUNSEL FOR THE COMPANY December 23, 1999 To the Banks and the Administrative Agent Referred to Below [ ] [ ] Dear Sirs: We have acted as special counsel to CK Witco Corporation, a Delaware corporation (the "Borrower"), in connection with the Credit Agreement (the "Credit Agreement") dated as of December 23, 1999 among the Borrower, each of the financial institutions as are or may become parties thereto as a Bank (the "Banks") and Merrill Lynch Capital Corporation, as Administrative Agent. This opinion is being delivered pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and its Notes are within the corporate powers of the Borrower, and have been duly authorized by a necessary corporate action. 2. The Loan Documents constitute valid and binding agreements of the Borrower and the Loan Parties party thereto, in each case enforceable against the Borrower and such Loan Parties in accordance with their respective terms, except to the extent the same may be limited by applicable bankruptcy, moratorium, insolvency, reorganization or similar laws of general application and by general principles of equity (whether considered in a proceeding at law or in equity). We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, 2 EXHIBIT D ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _______, 19_ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), [CK WITCO CORPORATION (the "Borrower")] and MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent. W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Credit Agreement dated as of December 23, 1999 among the Borrower, the Assignor, each of the financial institutions as are or may become party thereto as a Bank, and the Administrative Agent (as the same may be amended or modified from time to time, the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate amount at any time outstanding not to exceed $________________; WHEREAS, Loans made by the Assignor under the Credit Agreement in the aggregate amount of $_____ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its [Commitment/outstanding Loans] thereunder in an amount equal to $_________ (the "Assigned Amount"), and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, [the Borrower] and the Administrative Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with [a Commitment/outstanding Loans] in an amount equal to the Assigned Amount, and (ii) the [Commitment/outstanding Loans] of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof, in Dollars (in Federal Funds), the amount heretofore agreed between them.1 It is understood that facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the [Borrower] and the Administrative Agent pursuant to Section 11.06(c) of the Credit Agreement. The execution of this Agreement [by the Borrower] and the Administrative Agent is evidence of this consent. Pursuant to Section 11.06(c) the Borrower agrees, if requested by the Assignee, to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 2 1 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any up front fee to be paid by the Assignor to the Assignee. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By____________________________ Name: Title: [ASSIGNEE] By____________________________ Name: Title: [CK WITCO CORPORATION By____________________________ Name: Title: ] MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent By____________________________ Name: Title: 3 EXHIBIT E SUBSIDIARY GUARANTEE AGREEMENT (together with instruments executed and delivered pursuant to Section 19, this "Agreement") dated as of December 23, 1999, among each of the subsidiaries of CK Witco Corporation (the "Borrower") listed on Schedule I hereto (the "Subsidiary Guarantors"), and Merrill Lynch Capital Corporation ("Merrill Lynch"), as administrative agent (in such capacity, the "Administrative Agent") for the Banks (as defined in the Credit Agreement referred to below). Reference is made to the Credit Agreement dated as of December 23, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, each of the financial institutions as are or may become parties thereto as a Bank and the Administrative Agent. Capitalized terms used and not defined herein are used with the meanings assigned to such terms in the Credit Agreement. The Banks have agreed to make Loans to the Borrower pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Subsidiary Guarantors is a Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Banks to the Borrower. The obligations of the Banks to make Loans are conditioned on, among other things, the execution and delivery by the Subsidiary Guarantors of a Subsidiary Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Banks to make Loans, the Subsidiary Guarantors are willing to execute this Agreement for the benefit of the Administrative Agent, the Banks and each counterparty to a Derivatives Obligation with the Borrower which was an Affiliate of a Bank at the time such Derivatives Obligation was entered into (collectively, the "Lending Parties"). Accordingly, the parties hereto agree as follows: SECTION 1. Subsidiary Guarantee. Each Subsidiary Guarantor unconditionally guarantees, jointly with the other Subsidiary Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Lending Parties under this Agreement, the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to this Agreement, the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents, and (d) unless otherwise agreed upon in writing by the applicable Bank party thereto, the due and punctual payment and performance of all obligations of the Borrower, monetary or otherwise, under each Derivatives Obligation entered into with any counterparty that was a Bank (or an Affiliate of a Bank) at the time such Derivatives Obligation was entered into (all the monetary and other obligations referred to in the preceding lettered clauses of this paragraph being referred to collectively as the "Obligations"). Each Subsidiary Guarantor waives notice of and hereby consents to any agreements or arrangements whatsoever by the Lending Parties with any other person pertaining to the Obligations, including agreements and arrangements for payment, extension, renewal, subordination, composition, arrangement, discharge or release of the whole or any part of the Obligations, or for the discharge or surrender of any or all security, or for the compromise, whether by way of acceptance of part payment or otherwise, and the same shall in no way impair such Subsidiary Guarantor's liability hereunder. SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Subsidiary Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other person of any of the Obligations, and also waives notice of acceptance of its guarantee, notice of protest for nonpayment, and all other formalities. To the fullest extent permitted by applicable law, the obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Loan Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Subsidiary Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any extension, renewal or increase of or in any of the Obligations, (c) any rescission, waiver, amendment or modification of, or any release from, any of the terms or provisions of this Agreement, the Credit Agreement, any other Loan Document, any guarantee or any other agreement or instrument, including with respect to any other Subsidiary Guarantor under this Agreement, (d) the release of (or the failure to perfect a security interest in) any of the security held by or on behalf of the Administrative Agent or any other Lending Party or (e) the failure or delay of any Lending Party to exercise any right or remedy against any other guarantor of the Obligations. SECTION 3. Security. Each of the Subsidiary Guarantors authorizes the Administrative Agent to, subject to the terms of any security agreement that may hereafter be entered into by the Administrative Agent and any Subsidiary Guarantor or Borrower, (a) take and hold security for the payment of this Subsidiary Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as it in its sole discretion may determine subject to the terms of any other Loan Documents and (c) release or substitute any one or more endorsees, other guarantors or other obligors. SECTION 4. Guarantee of Payment. Each Subsidiary Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any other Lending Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any other Lending Party in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense (other than a defense of payment) or setoff, coun- 2 terclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any other Lending Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document, any guarantee or any other agreement or instrument, by any amendment, waiver or modification of any provision of the Credit Agreement or any other Loan Document or other agreement or instrument, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act, omission or delay to do any other act that may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or that would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations) or which would impair or eliminate any right of such Subsidiary Guarantor to subrogation. SECTION 6. Defenses Waived. To the fullest extent permitted by applicable law, each of the Subsidiary Guarantors waives any defense based on or arising out of the unenforceability of the Obligations or any part thereof from any cause or the cessation from any cause of the liability (other than the final and indefeasible payment in full in cash of the Obligations) of the Borrower or any other person. The Administrative Agent and the other Lending Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Subsidiary Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each of the Subsidiary Guarantors waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Subsidiary Guarantor against the Borrower or any other guarantor or any security. SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Lending Party has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Subsidiary Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent or such other Lending Party as designated thereby in cash an amount equal to the unpaid principal amount of such Obligations then due, together with accrued and unpaid interest and fees on such Obligations. Upon payment by any Subsidiary Guarantor of any sums to the Administrative Agent or any Lending Party as provided above, all rights of such Subsidiary Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower or any Subsidiary now or hereafter held by any Subsidiary Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If at any time when any Obligation then due and owing has not been paid, any amount shall be paid to any Subsidiary Guarantor on account of (i) such subrogation, contribution, reim- 3 bursement, indemnity or similar right or (ii) any such indebtedness, such amount shall be held in trust for the benefit of the Lending Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. Each of the Subsidiary Guarantors assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Subsidiary Guarantor assumes and incurs hereunder and agrees that none of the Administrative Agent or the other Lending Parties will have any duty to advise any of the Subsidiary Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 9. Representations and Warranties. Each of the Subsidiary Guarantors represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct. SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate when (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on all Loans and (ii) all other obligations then due and owing, have in each case been indefeasibly paid in full and the Banks have no further commitment to lend under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time any payment, or any part thereof, on any Obligation is rescinded or must otherwise be restored by any Lending Party upon the bankruptcy or reorganization of the Borrower, or any Subsidiary Guarantor or otherwise. SECTION 11. Binding Effect; Several Agreement; Assignments; Releases. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Subsidiary Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Subsidiary Guarantor when a counterpart hereof (or a Supplement referred to in Section 19) executed on behalf of such Subsidiary Guarantor shall have been delivered to the Administrative Agent and a counterpart hereof (or a Supplement referred to in Section 19) shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Subsidiary Guarantor and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Subsidiary Guarantor, the Administrative Agent and the other Lending Parties, and their respective successors and assigns, except that no Subsidiary Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). This Agreement shall be construed as a separate agreement with respect to each Subsidiary Guarantor and may be amended, modified, supplemented, waived or released with respect to any Subsidiary Guarantor without the approval of any other Subsidiary Guarantor and without affecting the obligations of any other Subsidiary Guarantor. The Administrative Agent is hereby expressly authorized to, and agrees upon request of the Borrower it will, release any Subsidiary Guarantor from its obligations hereunder in the event (i) that all the capital stock of such Subsidiary Guarantor shall be sold, 4 transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower in a transaction permitted by Section 5.09 of the Credit Agreement or (ii) the Borrower requests such release in writing accompanied by a certificate of a Principal Officer certifying that no Default shall have occurred and be continuing and that the requirements of Section 5.11 of the Credit Agreement shall be met immediately following such release. SECTION 12. Waivers; Amendment. (a) No failure or delay of the Administrative Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent hereunder and of the other Lending Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Subsidiary Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Subsidiary Guarantors to which such waiver, amendment or modification relates and the Administrative Agent with consent required under the Credit Agreement. SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 14. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 11.01 of the Credit Agreement. All communications and notices hereunder to each Subsidiary Guarantor shall be given to it at its address set forth in Schedule I with a copy to the Borrower. SECTION 15. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by the Subsidiary Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Administrative Agent and the other Secured Parties and shall survive the making by the Banks of the Loans regardless of any investigation made by the Lending Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid. (b) In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision 5 in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 16. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 11. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 17. Jurisdiction; Consent to Service of Process. (a) Each Subsidiary Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Subsidiary Guarantor or its properties in the courts of any jurisdiction. (b) Each Subsidiary Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process by mail to the address provided in Section 14. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 18. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, 6 AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 18. SECTION 19. Additional Subsidiary Guarantors. Pursuant to 5.11 of the Credit Agreement, the Borrower must ensure that Subsidiaries are (or become within 10 Domestic Business Days of being formed or acquired) Subsidiary Guarantors so that certain asset and revenue criteria are met. Upon execution and delivery after the date hereof by the Administrative Agent and such a Subsidiary of a Supplement in the form of Annex 1, such Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor herein. The execution and delivery of any Supplement adding an additional Subsidiary Guarantor as a party to this Agreement shall not require the consent of any other Subsidiary Guarantor hereunder. The rights and obligations of each Subsidiary Guarantor hereunder (other than any Subsidiary Guarantor released pursuant to Section 11 hereof) shall remain in full force and effect notwithstanding (a) the addition of any new Subsidiary Guarantor as a party to this Agreement or (b) the release of any other Subsidiary Guarantor pursuant to Section 11 hereof. SECTION 20. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lending Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lending Party to or for the credit or the account of any Subsidiary Guarantor against any or all the obligations of such Subsidiary Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Lending Party, irrespective of whether or not the Administrative Agent or any Lending Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lending Party under this Section 20 are in addition to other rights and remedies (including other rights of setoff) which such Lending Party may have. 7 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO, By_____________________________ Name: Title: MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent, By_____________________________ Name: Title: 8 Schedule I to the Subsidiary Guarantee Agreement Subsidiary Guarantor Address Uniroyal Chemical Company, Inc. World Headquarters Benson Road Middlebury, CT 06749 Attn: Chief Financial Officer Annex to the Subsidiary Guarantee Agreement SUPPLEMENT NO. dated as of , to the Subsidiary Guarantee Agreement dated as of December 23, 1999 (the "Subsidiary Guarantee Agreement"), among each of the subsidiaries of CK Witco Corporation (the "Borrower") listed on Schedule I thereto (the "Subsidiary Guarantors"), and Merrill Lynch Capital Corporation ("Merrill Lynch"), as administrative agent (in such capacity, the "Administrative Agent") for the Lending Parties (as defined in the Subsidiary Guarantee Agreement). A. Reference is made to the Credit Agreement dated as of December 23, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, each of the financial institutions as are or may become parties thereto as a Bank and the Administrative Agent. B. Capitalized terms used and not otherwise defined herein are used with the meanings assigned to such terms in the Subsidiary Guarantee Agreement and the Credit Agreement. C. The Subsidiary Guarantors have entered into the Subsidiary Guarantee Agreement in order to induce the Banks to make Loans. Pursuant to Section 5.11 of the Credit Agreement, the Borrower must ensure that Domestic Subsidiaries are (or become within 10 Domestic Business Days of being formed or acquired) Subsidiary Guarantors so that certain asset and revenue criteria are met. Section 19 of the Subsidiary Guarantee Agreement provides that additional Subsidiaries may become Subsidiary Guarantors under the Subsidiary Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Subsidiary Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Guarantor under the Subsidiary Guarantee Agreement in order to induce the Banks to make additional Loans and as consideration for Loans previously made. Accordingly, the Administrative Agent and the New Subsidiary Guarantor agree as follows: SECTION 1. In accordance with Section 19 of the Subsidiary Guarantee Agreement, the New Subsidiary Guarantor by its signature below becomes a Subsidiary Guarantor under the Subsidiary Guarantee Agreement with the same force and effect as if originally named therein as a Subsidiary Guarantor and the New Subsidiary Guarantor hereby (a) agrees to all the terms and provisions of the Subsidiary Guarantee Agreement applicable to it as a Subsidiary Guarantor thereunder (including its guarantee of the Obligations) and (b) represents and warrants that the representations and warranties made by it as a Subsidiary Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a "Subsidiary Guarantor" in the Subsidiary Guarantee Agreement shall be deemed to include the New Subsidiary Guarantor. SECTION 2. The New Subsidiary Guarantor represents and warrants to the Administrative Agent and the other Lending Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Subsidiary Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Subsidiary Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Subsidiary Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 14 of the Subsidiary Guarantee Agreement. All communications and notices hereunder to the New Subsidiary Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. SECTION 8. The New Subsidiary Guarantor agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges of counsel for the Administrative Agent. 2 IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Administrative Agent have duly executed this Supplement to the Subsidiary Guarantee Agreement as of the day and year first above written. [Name Of New Subsidiary Guarantor], by _______________________________ Name: Title: Address:_________________________ ____________________________ ____________________________ MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent, by _______________________________ Name: Title: 3 EXHIBIT F INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT (together with instruments executed and delivered pursuant to Section 11, this "Agreement") dated as of December 23, 1999, among CK WITCO CORPORATION, a Delaware corporation (the "Borrower"), each subsidiary of the Borrower listed on Schedule I hereto (the "Subsidiary Guarantors") and MERRILL LYNCH CAPITAL CORPORATION, as administrative agent (in such capacity, the "Administrative Agent") for the Lending Parties (as defined below). Reference is made to (a) the Credit Agreement dated as of December 23, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, each of the financial institutions as are or may become parties thereto as a Bank and the Administrative Agent and (b) the Subsidiary Guarantee Agreement dated as of December 23, 1999 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Administrative Agent. Capitalized terms used herein and not defined herein are used with the meanings assigned to such terms in the Credit Agreement. The Banks have agreed to make Loans to the Borrower pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Subsidiary Guarantors have guaranteed such Loans and the other Obligations (as defined in the Subsidiary Guarantee Agreement) pursuant to the Subsidiary Guarantee Agreement. The obligations of the Banks to make Loans are conditioned on, among other things, the execution and delivery by the Borrower and the Subsidiary Guarantors of an agreement in the form hereof. Accordingly, the Borrower, each Subsidiary Guarantor and the Administrative Agent agree as follows: SECTION 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Subsidiary Guarantors may have under applicable law (but subject to Section 3), the Borrower agrees that in the event a payment shall be made by any Subsidiary Guarantor under the Subsidiary Guarantee Agreement, the Borrower shall indemnify such Subsidiary Guarantor for the full amount of such payment and, until such indemnification obligation shall have been satisfied, such Subsidiary Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment. SECTION 2. Contribution and Subrogation. Each Subsidiary Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Subsidiary Guarantor under the Subsidiary Guarantee and such other Subsidiary Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Borrower as provided in Section 1, the Contributing Guarantor shall, to the extent the Claiming Guarantor shall not have been so indemnified by the Borrower, indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto pursuant to Section 11, the date of the Supplement hereto executed and delivered by such Subsidiary Guarantor) and the denominator shall be the aggregate net worth of all the Subsidiary Guarantors on the date hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto pursuant to Section 11, the date of the Supplement hereto executed and delivered by such Subsidiary Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Guarantor under Section 1 to the extent of such payment. SECTION 3. Subordination. Notwithstanding any provision of this Agreement to the contrary, all rights of the Subsidiary Guarantors under Sections 1 and 2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Subsidiary Guarantor to make the payments required by Sections 1 and 2 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Subsidiary Guarantor with respect to its obligations hereunder, and each Subsidiary Guarantor shall remain liable for the full amount of the obligations of such Subsidiary Guarantor hereunder. SECTION 4. Termination. This Agreement shall survive and be in full force and effect so long as the Subsidiary Guarantee Agreement has not been terminated, and shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Lending Party upon the bankruptcy or reorganization of the Borrower, any Subsidiary Guarantor or otherwise. SECTION 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. No Waiver; Amendment. (a) No failure on the part of the Administrative Agent or any Subsidiary Guarantor to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Administrative Agent or any Subsidiary Guarantor preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. None of the Administrative Agent and the Subsidiary Guarantors shall be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by such parties. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Borrower, the Subsidiary Guarantors and the Administrative Agent, with any consent required under the Credit Agreement. SECTION 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreement or the Subsidiary Guarantee Agreement, as applicable, and addressed as specified therein. SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns 2 of such party; and all covenants, promises and agreements by or on behalf of the parties that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Neither the Borrower nor any Subsidiary Guarantor may assign or transfer any of its rights or obligations hereunder (and any such attempted assignment or transfer shall be void) without the prior written consent of the Required Banks. Notwithstanding the foregoing, at the time any Subsidiary Guarantor is released from its obligations under the Subsidiary Guarantee Agreement in accordance with the Subsidiary Guarantee Agreement and the Credit Agreement, such Subsidiary Guarantor will cease to have any rights or obligations under this Agreement. SECTION 9. Survival of Agreement; Severability. (a) All covenants and agreements made by the Borrower and each Subsidiary Guarantor herein and in the certificates or other instruments prepared or delivered in connection with this Agreement or the other Loan Documents shall be considered to have been relied upon by the Administrative Agent, the Banks and each Subsidiary Guarantor, shall survive the making by the Banks of the Loans and shall continue in full force and effect as long as the principal of or any accrued interest on any Loans or any other fee or amount payable under the Credit Agreement, this Agreement or any of the other Loan Documents is outstanding and unpaid or the Commitments have not been terminated. (b) In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 10. Counterparts. This Agreement may be executed in counter parts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall be effective with respect to any Subsidiary Guarantor when a counterpart bearing the signature of such Subsidiary Guarantor shall have been delivered to the Administrative Agent. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 11. Additional Subsidiary Guarantors; Release. Pursuant to Section 5.11 of the Credit Agreement, the Borrower must ensure that Domestic Subsidiaries are (or become within 10 Domestic Business Days of being formed or acquired) Subsidiary Guarantors so that certain asset and revenue criteria are met. Upon execution and delivery, after the date hereof, by the Administrative Agent and such a Subsidiary of an instrument in the form of Annex 1 hereto, such Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor hereunder. The execution and delivery of any instrument adding an additional Subsidiary Guarantor as a party to this Agreement shall not require the consent of any Subsidiary Guarantor hereunder. The rights and obligations of each Subsidiary Guarantor hereunder (other than any Subsidiary Guarantor released pursuant to this Section 11) shall remain in full force and effect notwithstanding (a) the addition of any new Subsidiary Guarantor as a party to this Agreement or (b) the release of any other Subsidiary Guarantor pursuant to Section 11 of the Subsidiary Guarantee Agreement. Each Subsidiary Guarantor 3 shall be released from its obligations under this Agreement without further action upon its release from its obligations under the Subsidiary Guarantee Agreement in accordance with Section 11 thereof. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first appearing above. CK WITCO CORPORATION, By____________________________ Name: Title: EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO, By____________________________ Name: Title: MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent, By____________________________ Name: Title: 5 SCHEDULE I to the Indemnity, Subrogation and Contribution Agreement Subsidiary Guarantor Address Uniroyal Chemical Company, Inc. World Headquarters Benson Road Middlebury, CT 06749 Attn: Chief Financial Officer Annex 1 to the Indemnity, Subrogation and Contribution Agreement SUPPLEMENT NO. (this "Supplement") dated as of [ ], to the Indemnity, Subrogation and Contribution Agreement dated as of December 23, 1999 (as the same may be amended, supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement"), among CK Witco Corporation, a Delaware corporation (the "Borrower"), each subsidiary of the Borrower listed on Schedule I thereto (the "Subsidiary Guarantors") and Merrill Lynch Capital Corporation, as administrative agent (in such capacity, the "Administrative Agent") for the Banks. A. Reference is made to (a) the Credit Agreement dated as of December 23, 1999, (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") among the Borrower, each of the financial institutions as are or may become parties thereto as a Bank and the Administrative Agent and (b) the Subsidiary Guarantee Agreement dated as of December 23, 1999 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Administrative Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indemnity, Subrogation and Contribution Agreement and the Credit Agreement. C. The Borrower and the Subsidiary Guarantors have entered into the Indemnity, Subrogation and Contribution Agreement in order to induce the Banks to make Loans. Pursuant to Section 5.11 of the Credit Agreement, the Borrower must ensure that Subsidiaries are (or become within 10 Domestic Business Days of being formed or acquired) Subsidiary Guarantors so that certain asset and revenue criteria are met. Section 11 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries may become Subsidiary Guarantors under the Indemnity, Subrogation and Contribution Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement in order to induce the Banks to make additional Loans and as consideration for Loans previously made. Accordingly, the Administrative Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 11 of the Indemnity, Subrogation and Contribution Agreement, the New Guarantor by its signature below becomes a Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Subsidiary Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as a Subsidiary Guarantor thereunder. Each reference to a "Subsidiary Guarantor" in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Guarantor. SECTION 2. The New Guarantor represents and warrants to the Administrative Agent and the Banks that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Indemnity, Subrogation and Contribution Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Indemnity, Subrogation and Contribution Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 7 of the Indemnity, Subrogation and Contribution Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature. SECTION 8. The New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Administrative Agent. IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly executed this Supplement to the Indemnity, Subrogation and Contribution Agreement as of the day and year first above written. [Name Of New Guarantor], by _________________________________ Name: Title: MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent, by _________________________________ Name: Title: 3 EX-4.9 4 OFFERING MEMORANDUM CONFIDENTIAL $25,000,000 CKWITCO FLOATING RATE NOTES DUE 2001 --------------------- We are offering the Floating Rate Notes due 2001 in a firm commitment placement. We will pay interest on the Floating Rate Notes on June 7, 2000, September 7, 2000, December 7, 2000 and at maturity. The Floating Rate Notes will mature on March 7, 2001. This offering memorandum contains additional information regarding the terms and conditions of the Floating Rate Notes, including transfer restrictions. For particular terms applicable to the Floating Rate Notes see "Terms of the Floating Rate Notes." The Floating Rate Notes will rank senior to all our existing and future subordinated indebtedness and will rank equally with all existing and future senior indebtedness including our $600,000,000 8.5% Senior Notes due 2005, which we are offering concurrently with the Floating Rate Notes. This cover page replaces the cover on the following page with respect to the offering by us of the Senior Notes. INVESTING IN THE FLOATING RATE NOTES INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE 9 OF THIS OFFERING MEMORANDUM. The Floating Rate Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction. Unless they are registered, the Floating Rate Notes may be offered only in transactions that are exempt from registration under the Securities Act or the securities laws of any other jurisdiction. Accordingly, we are offering and selling the Floating Rate Notes only to qualified institutional buyers. For further details about eligible offerees and resale restrictions, see "Notice to Investors." The Floating Rate Notes will be ready for delivery in book entry form through The Depository Trust Company on or about March 7, 2000. --------------------- MERRILL LYNCH & CO. --------------------- The date of this offering memorandum is March 2, 2000. EX-4.10 5 CK WITCO CORPORATION Floating Rate Notes due 2001 INDENTURE Dated as of March 1, 2000 CITIBANK, N.A. as Trustee TABLE OF CONTENTS Page ARTICLE I Definitions and Incorporation by Reference SECTION 1.1. Definitions 1 SECTION 1.2. Other Definitions 14 SECTION 1.3. Rules of Construction 15 ARTICLE II The Securities SECTION 2.1. Form, Dating and Terms 15 SECTION 2.2. Execution and Authentication 21 SECTION 2.3. Registrar and Paying Agent 22 SECTION 2.4. Paying Agent To Hold Money in Trust 23 SECTION 2.5. Securityholder Lists 23 SECTION 2.6. Transfer and Exchange 23 SECTION 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors 28 SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S 30 SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities 31 SECTION 2.10. Temporary Securities 32 SECTION 2.11. Cancellation 32 SECTION 2.12. Payment of Interest; Defaulted Interest 32 SECTION 2.13. CUSIP Numbers 34 ARTICLE III Covenants SECTION 3.1. Payment of Securities 34 SECTION 3.2. Reports by the Company 35 SECTION 3.3. Limitation on Mortgages 35 SECTION 3.4. Limitation on Sale and Leaseback Transactions 40 SECTION 3.5. Exempted Indebtedness 40 SECTION 3.6. Limitation on Subsidiary Indebtedness 41 SECTION 3.7. Sales of Accounts Receivable 43 SECTION 3.8. Waiver of Certain Covenants 44 SECTION 3.9. Maintenance of Office or Agency 45 SECTION 3.10. Money for Security Payments to be Held in Trust 45 SECTION 3.11. Corporate Existence 47 SECTION 3.12. Compliance Certificate 47 SECTION 3.13. Maintenance of Properties 47 SECTION 3.14. Payment of Taxes and Other Claims 48 SECTION 3.15. Statement by Officers as to Default 48 ARTICLE IV Consolidation, Merger, Conveyance, Transfer or Lease SECTION 4.1. Company May Consolidate, Etc., Only on Certain Terms 48 SECTION 4.2. Successor Substituted 49 ARTICLE V Defaults and Remedies SECTION 5.1. Events of Default 50 SECTION 5.2. Acceleration 52 SECTION 5.3. Other Remedies 53 SECTION 5.4. Waiver of Past Defaults 53 SECTION 5.5. Control by Majority 53 SECTION 5.6. Limitation on Suits 54 SECTION 5.7. Rights of Holders to Receive Payment 54 SECTION 5.8. Collection Suit by Trustee 55 SECTION 5.9. Trustee May File Proofs of Claim 55 SECTION 5.10. Priorities 56 SECTION 5.11. Undertaking for Costs 56 ARTICLE VI Trustee SECTION 6.1. Duties of Trustee 57 SECTION 6.2. Rights of Trustee 58 SECTION 6.3. Individual Rights of Trustee 59 SECTION 6.4. Trustee's Disclaimer. 59 SECTION 6.5. Notice of Defaults 59 SECTION 6.6. Reports by Trustee to Holders 60 SECTION 6.7. Compensation and Indemnity 60 SECTION 6.8. Replacement of Trustee 61 SECTION 6.9. Successor Trustee by Merger 62 SECTION 6.10. Eligibility; Disqualification 63 SECTION 6.11. Resignation and Removal; Appointment of Successor 63 SECTION 6.12 Acceptance of Appointment by Successor 64 SECTION 6.13. Trustee's Application for Instructions from the Company 65 ARTICLE VII Discharge of Indenture; Defeasance; Covenant Defeasance SECTION 7.1. Discharge of Liability on Securities; Defeasance; Covenant Defeasance 66 SECTION 7.2. Conditions to Defeasance or Covenant Defeasance 67 SECTION 7.3. Application of Trust Money 70 SECTION 7.4. Repayment to Company 70 SECTION 7.5. Indemnity for U.S. Government Obligations 71 SECTION 7.6. Reinstatement 71 ARTICLE VIII Amendments SECTION 8.1. Without Consent of Holders 71 SECTION 8.2. With Consent of Holders 72 SECTION 8.3. Revocation and Effect of Consents and Waivers 73 SECTION 8.4. Notation on or Exchange of Securities 73 SECTION 8.5. Trustee To Sign Amendments 74 ARTICLE IX Redemption of Securities SECTION 9.1. Redemption 74 SECTION 9.2. Applicability of Article 74 SECTION 9.3. Election to Redeem; Notice to Trustee 74 SECTION 9.4. Selection by Trustee of Securities to be Redeemed 75 SECTION 9.5. Notice of Redemption 75 SECTION 9.6. Deposit of Redemption Price 76 SECTION 9.7. Securities Payable on Redemption Date 77 SECTION 9.8. Securities Redeemed in Part 77 ARTICLE X Miscellaneous SECTION 10.1. Notices 78 SECTION 10.2. Communication by Holders with other Holders 78 SECTION 10.3. Certificate and Opinion as to Conditions Precedent 78 SECTION 10.4. Statements Required in Certificate or Opinion 79 SECTION 10.5. Rules by Trustee, Paying Agent and Registrar 79 SECTION 10.6. Legal Holidays 79 SECTION 10.7. Governing Law 79 SECTION 10.8. No Recourse Against Others 80 SECTION 10.9. Successors 80 SECTION 10.10.Multiple Originals 80 SECTION 10.11.Variable Provisions 80 SECTION 10.12.Table of Contents; Headings 80 EXHIBIT A Form of Floating Rate Note ANNEX A Form of Pledge Agreement INDENTURE dated as of March 1, 2000, between CK Witco Corporation, a Delaware corporation (the "Company"), and Citibank, N.A., a national banking association duly organized and existing under the laws of the United States (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's Floating Rate Notes due 2001 (the "Securities"). ARTICLE I Definitions and Incorporation by Reference SECTION 1.1. Definitions. "Accounts Receivable Subsidiary" means a Subsidiary of the Company (i) which is formed solely for the purpose of, and which engages in no activities other than activities in connection with, financing accounts receivable and/or notes receivable and related assets of the Company and/or its Restricted Subsidiaries, (ii) which is designated by the Board of Directors as an Accounts Receivables Subsidiary pursuant to a resolution set forth in an Officers' Certificate and delivered to the Trustee, (iii) that has total assets at the time of such designation with a book value not exceeding $100,000 plus the reasonable fees and expenses required to establish such Accounts Receivable Subsidiary and any accounts receivable financing, (iv) no portion of Indebtedness or any other obligation (contingent or otherwise) of which (a) is at any time recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way, other than pursuant to (I) representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with the sale of accounts receivable and/or notes receivable to such Accounts Receivable Subsidiary or (II) any guarantee of any such accounts receivable financing by a Restricted Subsidiary that is permitted to be incurred pursuant to the covenant described in Section 3.6(a), or (b) subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to (I) representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with sales of accounts receivables and/or notes receivable or (II) any guarantee of any such accounts receivable financing by a Restricted Subsidiary that is permitted to be incurred pursuant to Section 3.6(a), (v) with which neither the Company nor any Restricted Subsidiary of the Company has any contract, agreement, arrangement or understanding other than contracts, agreements, arrangements or understandings entered into the ordinary course of business in connection with sales of accounts receivable and/or notes receivable in accordance with Section 3.7 and fees payable in the ordinary course of business in connection with servicing accounts receivable and/or notes receivable and (vi) with respect to which neither the Company nor any Restricted Subsidiary of the Company has any obligation (a) to subscribe for additional shares of Capital Stock or other Equity Interests therein or make any additional capital contribution or similar payment or transfer thereto other than in connection with the sale of accounts receivable and/or notes receivable to such Accounts Receivable Subsidiary in accordance with Section 3.7 or (b) to maintain or preserve solvency or any balance sheet item, financial condition, level of income or results of operations thereof. "Acquired Indebtedness" means Subsidiary Indebtedness (other than Permitted Subsidiary Indebtedness) of a Person: (1) existing at the time such Person becomes a Restricted Subsidiary, or (2) assumed in connection with the acquisition of assets by such Person, in each case, other than Subsidiary Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, as the case may be. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Debt" means, as to any particular lease relating to a sale and leaseback transaction of a Principal Property under which any Person is at the time liable, at any date as of which the amount thereof is to be determined, the total net amount of rent (discounted from the respective due dates thereof at the interest rate from time to time being used by the Company to determine its liability in respect of capitalized leases) required to be paid by such Person under such lease during the remaining term thereof. The net amount of rent required to be paid under any such lease for any such period shall be the total amount of the rent payable by the lessee with respect to such period, but may exclude amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, utilities, operating and labor costs and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount of rent shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board of Directors with respect to the relevant matter. "Business Day" means any day except a Saturday, Sunday or a legal holiday in The City of New York on which banking institutions are authorized or required by law, regulation or executive order to close and that is also a London business day. "London business day" means any day on which dealings in U.S. dollars are transacted in the London interbank market. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with generally accepted accounting principles, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with generally accepted accounting principles; and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poors Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in this definition. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means CK Witco Corporation until a successor replaces it and, thereafter, means such successor. "Consolidated Net Tangible Assets" means total consolidated assets of the Company and its Subsidiaries, less the following: (1) current liabilities of the Company and its Subsidiaries; (2) all depreciation and valuation reserves and all other reserves (except (a) reserves for contingencies which have not been allocated to any particular purpose, and (b) deferred credits, including deferred federal and foreign income taxes and deferred investment tax credits) of the Company and its Subsidiaries; (3) the net book amount of all intangible assets of the Company and its Subsidiaries, including the unamortized portions of such items as goodwill, trademarks, trade names, patents and debt discount and expense less debt premium; and (4) appropriate adjustments on account of minority interests of other Persons holding stock in Subsidiaries. "Default" means any event or condition that is, or after notice or passage of time or both would be, an Event of Default. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the Stated Maturity of the Securities. "Depositary" means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Foreign Subsidiary" means any Subsidiary that is formed under the laws of any jurisdiction outside of the United States of America and its territories and possessions or substantially all of the operating assets of which are located, and substantially all of the business of which is carried on outside the United States of America and its territories and possessions, and includes any Subsidiary formed under the laws of any State of the United States of America which is primarily engaged in financing the operations of the Company or its Subsidiaries, or both, outside the United States of America and its territories and possessions. "Guarantee" means the unconditional and unsubordinated guarantee by the Guarantor of the due and punctual payment of principal of and interest on the Securities when and as the same shall become due and payable, whether at the Stated Maturity, by acceleration, call for redemption or otherwise in accordance with the terms of the Securities and this Indenture. "Guarantor" means any Restricted Subsidiary, other than Foreign Subsidiaries, that after the date of this Indenture executes a guarantee of the Securities contemplated by Section 3.6 until a successor replaces such party pursuant to the applicable provisions of this Indenture, or until otherwise released in accordance with the terms of this Indenture. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements or other agreements or arrangements designed to protect such Person against fluctuations in interest rates and (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates, in each case provided that such obligations are entered into solely to protect such Person against fluctuations in interest rates or currency exchange rates and not for purposes of speculation. "Holder" or "Securityholder" means the Person in whose name a Security is registered in the Note Register. "Indebtedness" means (i) all items of indebtedness or liability (except capital and surplus) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date as of which indebtedness is to be determined, (ii) indebtedness secured by any Mortgage existing on property owned subject to such Mortgage, whether or not the indebtedness secured thereby shall have been assumed, provided that if such indebtedness shall not have been assumed the amount of such obligation shall be deemed to be the lesser of the value of such property or the amount of the indebtedness so secured and (iii) guarantees, endorsements (other than for purposes of collection) and other contingent obligations in respect of, or to purchase or otherwise acquire, indebtedness of others, unless the amount thereof is included in indebtedness under the preceding clauses (i) or (ii). "Indenture" means this Indenture as amended or supplemented from time to time. "Institutional Accredited Investor" means an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Issue Date" means the date on which the Securities are originally issued. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Mortgage" means and includes any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance. "Obligation" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities and obligations payable under the documentation governing any Indebtedness. "Officer" means any of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer and Principal Accounting Officer any Vice President, the Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by two or more Officers. "Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (1) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (2) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (3) Securities as to which Defeasance has been effected pursuant to Section 7.1(c); (4) Securities which have been paid pursuant to Section 2.9 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (A) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Permitted Subsidiary Indebtedness" means (i) any Indebtedness existing on March 7, 2000; (ii) any Indebtedness owed to the Company or a Restricted Subsidiary; (iii) any Indebtedness secured by a Mortgage not prohibited by Section 3.3; (iv) any Indebtedness incurred by any Restricted Subsidiary to extend, refinance, renew or replace an equivalent or lesser amount of Indebtedness of such Restricted Subsidiary referred to in clause (i) above, including any premium, prepayment penalties or fees or expenses incurred in connection therewith; (v) Indebtedness incurred by an Accounts Receivables Subsidiary in connection with a transaction pursuant to and in compliance with Section 3.7 hereof; (vi) the guarantee by any Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this Indenture; (vii) the incurrence by the Restricted Subsidiaries of Hedging Obligations incurred with respect to any Indebtedness or Obligation that is permitted by the terms of this Indenture to be outstanding; (viii) Indebtedness incurred by Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers' compensation claims or self-insurance, surety bonds or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (ix) Indebtedness arising from agreements of a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, asset or Restricted Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided, however, that the maximum aggregate liability of all such Indebtedness shall at no time exceed 50% of the gross proceeds actually received in connection with such disposition; (x) the incurrence of Indebtedness of Restricted Subsidiaries (including letters of credit) in respect of performance bonds, bankers' acceptances, letters of credit, performance, bid, surety or appeal bonds or similar bonds and completion guarantees provided by Restricted Subsidiaries in the ordinary course of their business and consistent with past practices and which do not secure other Indebtedness; (xi) Indebtedness that constitutes an accrued expense or trade payable; (xii) Indebtedness of a Restricted Subsidiary, to the extent the net proceeds thereof are promptly deposited to defease the Securities as described under Section 7.1; (xiii) Indebtedness that constitutes a liability for federal, state, local or other taxes and (xiv) Indebtedness that constitutes an obligation to pay salary or benefits to officers, employees and directors in the ordinary course of business. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.9 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "Principal Property" means any manufacturing facility located within the United States of America owned or leased by the Company or any Subsidiary except (a) any such manufacturing facility which the Board of Directors by resolution declares is not of material importance to any business segment of the Company or its Subsidiaries and (b) any such manufacturing facility that has total assets of less than $25 million. "QIB" means any "qualified institutional buyer" (as defined in Rule 144A under the Securities Act). "Redemption Date" means the date fixed for the redemption of any Security by or pursuant to this Indenture. "Redemption Price" means the price at which any Security is to be redeemed pursuant to this Indenture. "Restricted Period" means the 40 consecutive days beginning on and including the later of (A) the day on which the Securities are offered to persons other than distributors (as defined in Regulation S under the Securities Act) and (B) the Issue Date. "Restricted Securities Legend" has the meaning assigned thereto in clause (A) of Section 2.1(c). "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to the Global Securities (as appointed by the Depositary), or any successor Person thereto and shall initially be the Trustee. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means a corporation or other business entity of which more than 50% of the outstanding voting share capital or other voting ownership interests are owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Subsidiary Indebtedness" means, with respect to any Restricted Subsidiary on any date of determination (without duplication): (1) the principal in respect of (A) Indebtedness of such Restricted Subsidiary for money borrowed and (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Restricted Subsidiary is responsible or liable, including, in each case, any premium on such Indebtedness to the extent such premium has become due and payable; (2) all Capital Lease Obligations of such Restricted Subsidiary and all Attributable Debt in respect of sale and leaseback transactions entered into by such Restricted Subsidiary; (3) all obligations of such Restricted Subsidiary issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Restricted Subsidiary and all obligations of such Restricted Subsidiary under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) all obligations of such Restricted Subsidiary for the reimbursement of any obligor, other than the Company or a Restricted Subsidiary, on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of the Company and its Restricted Subsidiaries as a whole to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit); (5) the amount of all obligations of such Restricted Subsidiary with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Restricted Subsidiary thereof, the liquidation preference with respect to any Preferred Stock (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons (other than Restricted Subsidiaries) and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee; and (7) all obligations of the type referred to in clauses (1) through (6) of other Persons (other than the Company and its Restricted Subsidiaries) secured by any Mortgage on any property or asset of such Restricted Subsidiary (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured. The amount of Subsidiary Indebtedness of any Restricted Subsidiary at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as amended, as in effect on the date hereof. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and, thereafter, means such successor. "Trust Officer" any officer within the Global Agency & Trust Services department of the Trustee, including any vice president, assistant vice president, senior trust officer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Mortgage on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that the Subsidiary to be so designated has total assets of $1,000 or less. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that no Default shall result therefrom or shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. SECTION 1.2. Other Definitions. Term Defined in Section "Agent Members" 2.1(d) "Authenticating Agent" 2.2 "Company Order" 2.2 "Corporate Trust Office" 3.7 "Covenant Defeasance" 7.1(d) "Defaulted Interest" 2.12 "Defeasance" 7.1(c) "Definitive Securities" 2.1(e) "Event of Default" 5.1 "Financier" 3.7 "Foreign Restricted Subsidiary" 3.6(a) "Foreign Stock Pledge" 3.6(a) "Global Securities" 2.1(a) "IAI Global Note" 2.1(a) "IAI Notes" 2.1(a) "legal defeasance option" 7.1(b) "Note Register" 2.3 "Promissory Note" 3.7 "Purchase Agreement 2.1(a) "Registrar" 2.3 "Regulation S" 2.1(a) "Regulation S Note" 2.1(a) "Regulation S Global Note" 2.1(a) "Resale Restriction Termination Date" 2.1(a) "Rule 144A" 2.1(a) "Securities" Preamble "Special Record Date" 2.12(a) "U.S. Governmental Obligations" 7.2 SECTION 1.3. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; and (6) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP. ARTICLE II The Securities SECTION 2.1. Form, Dating and Terms. (a) The Securities are being offered and sold by the Company pursuant to a Purchase Agreement, dated March 2, 2000, among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Chase Securities Inc., Deutsche Bank Securities Inc., Goldman Sachs and Co., and Salomon Smith Barney Inc. (the "Purchase Agreement"). Securities offered and sold to QIBs pursuant to Rule 144A under the Securities Act ("Rule 144A") in the United States of America (the "Rule 144A Note") will be issued on the Issue Date in the form of a single, permanent global Security in definitive, fully registered book-entry form substantially in the form of Exhibit A, which is hereby incorporated by reference and expressly made a part of this Indenture (the "Rule 144A Global Note"), registered in the name of a nominee of the Depositary, deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Rule 144A Global Note may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Securities offered and sold outside the United States of America (the "Regulation S Note") in reliance on Regulation S under the Securities Act ("Regulation S") shall be issued in the form of a single, permanent global Security in definitive, fully registered book-entry form substantially in the form of Exhibit A (the "Regulation S Global Note") registered in the name of Cede & Co., as nominee of the Depositary, deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, as custodian for the Depositary, for credit to the respective accounts of the purchasers (or to such other accounts as they may direct) at Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System, or Clearstream Banking, societe anonyme, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Regulation S Global Note may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Securities resold to Institutional Accredited Investors in the United States of America (the "IAI Note") will be issued in the form of a single, permanent global Security in definitive, fully registered book-entry form substantially in the form of Exhibit A (the "IAI Global Note") registered in the name of a nominee of the Depositary deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The IAI Global Note may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the IAI Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. The Rule 144A Global Note, the Regulation S Global Note and the IAI Global Note are sometimes collectively herein referred to as the "Global Securities." The principal of (premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage, in addition to those set forth on Exhibits A. The Company and the Trustee shall approve the forms of the Securities and any notation, endorsement or legend on them. Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A are part of the terms of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms. (b) Denominations. The Securities shall be issuable only in fully registered form, without coupons, and only in denominations of $1,000 and any integral multiple thereof. (c) Restrictive Legends. The Securities shall bear the following legend (the "Restricted Securities Legend") on the face thereof: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF (I) EXCEPT IN COMPLIANCE WITH THE TERMS OF THE INDENTURE AND (II) IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT, OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR", IN EITHER CASE IN A MINIMUM PRINCIPAL AMOUNT OF SECURITIES OF $250,000 OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (B) All Global Securities shall bear the following legend on the face thereof: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (d) Book-Entry Provisions. (i) This Section 2.1(d) shall apply only to Global Securities deposited with the Trustee, as custodian for the Depositary. (ii) Each Global Security initially shall (x) be registered in the name of the Depositary for such Global Security or the nominee of such Depositary, (y) be delivered to the Trustee as custodian for such Depositary and (z) bear legends as set forth in Section 2.1(c). (iii) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (iv) In connection with any transfer of a portion of the beneficial interest in a Global Security pursuant to clause (e) of this Section to beneficial owners who are required to hold Definitive Securities (as defined below), the Security Custodian shall reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Securities of like tenor and amount. (v) In connection with the transfer of an entire Global Security to beneficial owners pursuant to clause (e) of this Section, such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. (e) Definitive Securities. Except as provided below, owners of beneficial interests in Global Securities will not be entitled to receive certificated Securities ("Definitive Securities"). If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain Definitive Securities in exchange for their beneficial interests in a Global Security upon written request in accordance with the Depositary's and the Registrar's procedures. In addition, Definitive Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Security if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or the Depositary ceases to be a "Clearing Agency" registered under the Exchange Act, at a time when the Depositary is required to be so registered in order to act as Depositary, and in each case a successor depositary is not appointed by the Company within 40 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary. (f) Any Definitive Security delivered in exchange for an interest in a Global Security pursuant to Section 2.1(d)(iv) and (v) shall, except as otherwise provided by paragraph (d) of Section 2.6, bear the applicable legend regarding transfer restrictions applicable to the Definitive Security set forth in Section 2.1(c) and be subject to the applicable certification requirements set forth in this Indenture. (g) The registered holder of a Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 2.2. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually authenticates the Security. The signature of the Trustee on a Security shall be conclusive evidence that such Security has been duly and validly authenticated and issued under this Indenture. At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery Securities for original issue in an aggregate principal amount of $25 million upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company (the "Company Order"). Such Company Order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities Outstanding at any time may not exceed $25 million, except as provided in Section 2.9. The Trustee may appoint an agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. In case the Company, pursuant to Article IV, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article IV, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such order for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 2.2 in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time Outstanding for Securities authenticated and delivered in such new name. SECTION 2.3. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Securities and of their transfer and exchange (the "Note Register"). The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to the Indenture. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee in writing of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 6.7. The Company or any of its domestically incorporated Subsidiaries may act as Paying Agent, Registrar, co- registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities. SECTION 2.4. Paying Agent To Hold Money in Trust. At or prior to 10:00 a.m (New York City time) on the date on which any principal of, premium, if any, or interest on any Security is due and payable, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal, premium, if any, or interest when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of the Securityholders or the Trustee all money held by such Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.6. Transfer and Exchange. (a) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Security and such account shall be credited in accordance with such order with a beneficial interest in the Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Security from which such interest is being transferred. (b) The following provisions shall apply with respect to any proposed transfer of a Rule 144A Note or an IAI Note prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any Affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"): (i) a transfer of a Rule 144A Note or an IAI Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Rule 144A Note or an IAI Note or a beneficial interest therein to an Institutional Accredited Investor shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 hereof from the proposed transferee and, if requested by the Company, the delivery of an opinion of counsel, certifications and/or other information satisfactory to each of them; and (iii) a transfer of a Rule 144A Note or an IAI Note or a beneficial interest therein to a non U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 hereof from the proposed transferee and, if requested by the Company, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them. (c) The following provisions shall apply with respect to any proposed transfer of a Regulation S Note prior to the expiration of the Restricted Period: (i) a transfer of a Regulation S Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Regulation S Note or a beneficial interest therein to an Institutional Accredited Investor shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 hereof from the proposed transferee and, if requested by the Company, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and (iii) a transfer of a Regulation S Note or a beneficial interest therein to a non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 hereof from the proposed transferee and, if requested by the Company, receipt by the Trustee or its agent of an opinion of counsel, certification and/or other information satisfactory to each of them. After the expiration of the Restricted Period, interests in a Regulation S Note may be transferred without requiring certification set forth in Section 2.8 or any additional certification. (d) Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities not bearing a Restricted Securities Legend, the Registrar shall deliver Securities that do not bear a Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities bearing the Restricted Securities Legend, the Registrar shall deliver only Securities that bear such Restricted Securities Legend unless there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (e) The Security Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.1 or this Section 2.6. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Security Registrar. (f) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall, subject to the other terms and conditions of this Article II, execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charges payable upon exchange or transfer pursuant to Section 8.4). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning (1) 15 Business Days before the mailing of a notice of an offer to repurchase Securities and ending at the close of business on the day of such mailing or (2) 15 Business Days before an interest payment date and ending on such interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (g) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in, the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice or the payment of any amount or delivery of any Securities (or other security or property) under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors. [Date] Citibank, N.A 111 Wall Street, 5th Floor New York, NY 10005 Attention: Global Agency & Trust Services Re: CK Witco Corporation Floating Rate Notes due 2001 Ladies and Gentlemen: This certificate is delivered to request a transfer of $ aggregate principal amount of the Floating Rate Notes due 2001 (the "Securities") of CK Witco Corporation (the "Company"). The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Securities and we invest in or purchase securities similar to the Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any Affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Securities are eligible for resale pursuant to Rule 144A, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in either case in a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (c), (d) or (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE: BY SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S. [Date] Citibank, N.A. 111 Wall Street, 5th Floor New York, NY 10005 Attention: Global Agency & Trust Services Re: CK Witco Corporation Floating Rate Notes due 2001 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (a) the offer of the Securities was not made to a person in the United States; (b) either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (c) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (d) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:____________________ ____________________ Authorized Signature Signature Medallion Guaranteed SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co- registrar from any loss that any of them may suffer if a Security is replaced, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously Outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company and any other obligor upon the Securities, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.10. Temporary Securities. Until Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall in all respects be entitled to the same benefits under this Indenture as a holder of Definitive Securities. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and return to the Company all Securities surrendered for registration of transfer, exchange, payment or cancellation by delivering a certificate of such destruction to the Company. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation. SECTION 2.12. Payment of Interest; Defaulted Interest. Interest on any Security which is payable, and is punctually paid or duly provided for, on any interest payment date shall be paid to the Person in whose name such Security (or one or more predecessor Securities) is registered at the close of business on the regular record date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 2.3. Any interest on any Security which is payable, but is not paid when the same becomes due and payable and such nonpayment continues for a period of 30 days shall forthwith cease to be payable to the Holder on the regular record date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Securities (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective predecessor Securities) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date (not less than 30 days after such notice) of the proposed payment (the "Special Interest Payment Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a record date (the "Special Record Date") for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the Special Interest Payment Date and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor to be given in the manner provided for in Section 10.1, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor having been so given, such Defaulted Interest shall be paid on the Special Interest Payment Date to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and their reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE III Covenants SECTION 3.1. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 3.2. Reports by the Company. The Company shall file with the Trustee and the SEC and transmit to Securityholders, such information, documents and other reports (including annual and quarterly reports); provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the SEC. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 3.3. Limitation on Mortgages. The Company will not create or assume and will not permit any Restricted Subsidiary other than a Foreign Subsidiary to create or assume any Mortgage of or upon any of its Principal Properties now owned or hereafter acquired, of or upon any income or profits therefrom, without making effective provision, and the Company covenants that in any such case it will make or cause to be made effective provision, whereby the Securities shall be secured by such Mortgage equally and ratably with any and all other obligations and Indebtedness thereby secured, or shall be secured by a senior Mortgage, so long as any such other obligations and Indebtedness shall be so secured; provided that the foregoing covenant shall not apply to any of the following: (1) The creation of any Mortgage on any property hereafter acquired by the Company or any Restricted Subsidiary, contemporaneously with such acquisition or within 270 days thereafter, to secure or provide for the payment of any part of the purchase price of such property, or the assumption by the Company or any Restricted Subsidiary of any Mortgage upon any property hereafter acquired by the Company or any Restricted Subsidiary existing at the time of such acquisition, provided that the principal amount of any Indebtedness secured by any such Mortgage created or assumed shall not exceed the cost to the Company or Restricted Subsidiary, as the case may be, of the property covered by such Mortgage (including, in the case of the assumption of such Mortgage, the principal amount of the Indebtedness secured thereby), or the fair value (if and as determined by the Board of Directors) of such property at the time the Mortgage is created or assumed, whichever shall be less. (2) Any Mortgage on any property acquired by the Company or any Restricted Subsidiary existing at the time of such acquisition and any Mortgage executed by any corporation or other entity acquired by the Company or any Restricted Subsidiary and exclusively securing any Indebtedness in a principal amount existing at the time of such acquisition, and, in each case, not assumed by the Company or any Restricted Subsidiary. (3) Any Mortgage executed (i) by any Restricted Subsidiary and exclusively securing any Indebtedness incurred by such Restricted Subsidiary to the Company or to one or more other Restricted Subsidiaries or (ii) by the Company and exclusively securing any Indebtedness incurred by the Company to any Restricted Subsidiary. (4) The creation of one or more Mortgages for the sole purpose of extending, renewing, refinancing or refunding in whole or in part one or more of the Mortgages referred to in clauses (1), (2), or (3) of this Section or one or more of the Mortgages existing on March 7, 2000 on any assets of the Company or a Restricted Subsidiary or one or more Mortgages permitted by this paragraph 4; provided that the aggregate principal amount of Indebtedness secured by any such extension, renewal, refinancing or refunding Mortgage shall not exceed the aggregate amount of Indebtedness secured by the Mortgage or Mortgages being extended, renewed, refinanced or refunded at the time of such extension, renewal, refinancing or refunding and that such extending, renewing, refinancing or refunding Mortgage shall be limited to (A) all or any part of the same property (and improvements thereon) which secured the Mortgage extended, renewed, refinanced or refunded or (B) in the case of a simultaneous extension, renewal, refinancing or refunding of one or more Mortgages on contiguous property (and improvements thereon), all or any part of the same contiguous property which secured the Mortgage extended, renewed, refinanced or refunded; and provided further that in the case of any extension, renewal, refinancing or refunding of a Mortgage of the type referred to in clause (3) or this clause, neither the Company nor any Restricted Subsidiary (other than the Restricted Subsidiary whose property is subject thereto) that has not theretofore assumed the Indebtedness secured thereby shall assume any Indebtedness secured by such extending, renewing, refinancing or refunding Mortgage. (5) Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due or being contested in good faith. (6) Liens in favor of the United States of America, or any State or subdivision thereof, or any other county or subdivision thereof where the Company or any Restricted Subsidiary may transact any of its business, or any governmental agency, to the extent required in the ordinary course of business. (7) Liens for taxes or assessments or governmental charges or levies, if such taxes, assessments, governmental charges or levies shall not at the time be due and payable, or if the same thereafter can be paid without penalty, or if the same are being contested in good faith by appropriate proceedings. (8) Pledges or deposits to secure payment of worker's compensation or insurance premiums, or in connection with tenders, bids or contracts (other than contracts for the payment of money) or leases, deposits to secure surety, appeal or performance bonds, pledges or deposits in connection with contracts made with or at the request of the United States of America or any State or any agency of the United States or any such State, and pledges or deposits for purposes similar to any of the above in the ordinary course of business. (9) Liens created by or resulting from any litigation or legal or administrative proceeding which at the time is currently being contested in good faith by appropriate proceedings. (10) Leases made or existing (i) on property acquired in the ordinary course of business or (ii) on individual properties subject to the lease having a value of less than $1 million per property or $25 million in the aggregate. (11) Landlords' liens on property held under lease. (12) Liens incurred in the ordinary course of business with respect to obligations that (i) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or any of its Restricted Subsidiaries. (13) Liens with respect to Permitted Subsidiary Indebtedness incurred pursuant to clauses (vii), (viii) and (x) of the definition of Permitted Subsidiary Indebtedness. (14) Any Mortgage securing Indebtedness, the net proceeds of which are promptly deposited to defease the Securities as described under Section 7.1. (15) Any Mortgage created pursuant to and in compliance with the provisions of Section 3.7. Notwithstanding the foregoing provisions of this Section, the Company or any Restricted Subsidiary may grant such easements for ingress and egress over property owned by the Company or such Restricted Subsidiary in favor of the United States or any State, or any department, agency, instrumentality or political subdivision of either, as is necessary to permit the attachment or removal of any equipment or other property designed primarily for the purpose of pollution control, solid waste and waste water treatment and with respect to which the Company or any Restricted Subsidiary may have granted a lien or transferred title to such government or governmental agency pursuant to the foregoing provisions of this Section or of Section 3.4 in connection with the financing of such equipment or other property; provided that any such lien on equipment or other property designed primarily for the purpose of pollution control shall not apply to any other property owned by the Company or any Restricted Subsidiary and any such transfer of title to equipment or other property designed primarily for the purpose of pollution control shall not include transfer of title to any other property owned by the Company or any Restricted Subsidiary. The sale or other transfer of oil, gas or other minerals in place for a period of time until, or in an amount such that, the transferee will realize therefrom a specified amount (however determined) of money for such minerals, or the sale or other transfer of any other interest in property of the character commonly referred to as a production payment shall not be deemed to create, for purposes of this Section, any Mortgage upon the assets of the Company or any Restricted Subsidiary. If at any time the Company or any Restricted Subsidiary shall create or assume any Mortgage not excepted from this Section as above provided, and not exempted under Section 3.5, the Company will promptly deliver to the Trustee (1) an Officers' Certificate stating that the covenant of the Company contained in the first paragraph of this Section has been complied with, and (2) an Opinion of Counsel stating that, in the opinion of such counsel, such covenant has been complied with and that any instruments executed by the Company in performance of such covenant comply with the requirements thereof. In the event that the Company shall hereafter secure the Securities equally and ratably with, or senior to, any other obligation or Indebtedness pursuant to the provisions of this Section, the Trustee is hereby authorized to enter into an amendment to this Indenture or agreement supplemental hereto and to take such action, if any, as it may deem advisable to enable it to enforce effectively the rights of the Holders of the Securities so secured equally and ratably with such other obligation or Indebtedness. The Trustee shall be entitled to receive, and subject to the provisions of Section 6.1 and Section 6.2 hereof, shall be fully protected in relying upon, an Opinion of Counsel as conclusive evidence that any amendment hereto or action taken equally and ratably to secure the Securities complies with the provisions of this Section. In the event that the Company or any Restricted Subsidiary shall be entitled in accordance with the provisions of this Indenture to a release of any Mortgage granted to secure the Securities, the Trustee is hereby authorized to take such action and execute and deliver such documents and instruments as the Company or such Restricted Subsidiary may request to implement and evidence the release of such Mortgage. Subject to the provisions of Section 3.4, nothing herein contained shall be deemed to prevent the Company or any Restricted Subsidiary from selling any property with the intention of taking back a lease of such property. The covenant contained in this Section 3.3 is subject to the provision for exempted Indebtedness in Section 3.5. SECTION 3.4. Limitation on Sale and Leaseback Transactions. The Company will not, nor will it permit any Restricted Subsidiary, other than a Foreign Subsidiary, to enter into any arrangement with any person providing for the leasing by the Company or any Restricted Subsidiary of any Principal Property (except for temporary leases of not more than three years and except for leases between the Company and a Subsidiary or between Subsidiaries), which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such person unless either (a) the Company or such Restricted Subsidiary would be entitled pursuant to Section 3.3 to incur Indebtedness secured by a Mortgage on the property to be leased equal in amount to the Attributable Debt with respect to such sale and lease-back transaction without equally and ratably securing the Securities; or (b) the Company shall apply an amount at least equal to the net proceeds of such sale or transfer or the fair value as determined by the Board of Directors of such property, whichever is greater, to the redemption or retirement, within 120 days of the effective date of any such arrangement of Indebtedness of the Company which is not subordinate or junior in right of payment to the Securities; provided, however, that in lieu of applying all or any part of such amount to such redemption or retirement of such Indebtedness, the Company may, within 75 days after such sale voluntarily retire Indebtedness, excluding redemption and retirement of Indebtedness pursuant to mandatory sinking fund or mandatory prepayment provisions or by payment at maturity, and thereby reduce the amount of cash which the Company shall be required to apply to the redemption or retirement of Indebtedness under this Section by an amount equal to the aggregate of the principal amount of the Indebtedness, as the case may be, so redeemed or retired. The covenant contained in this Section is subject to the provision for exempted Indebtedness in Section 3.5. SECTION 3.5. Exempted Indebtedness. Notwithstanding the provisions contained in Sections 3.3 and 3.4, the Company and its Subsidiaries may, without securing any Securities, secure obligations or Indebtedness which would otherwise be subject to the limitations of Section 3.3 or may, without redeeming or retiring Indebtedness, enter into sale and lease-back transactions which would otherwise be subject to the limitations of Section 3.4, or there may be a combination of such transactions, if after giving effect to any such security arrangements and any such sale and lease-back transactions the sum (computed without double-counting) of (1) the aggregate amount of all such obligations and Indebtedness then outstanding the securing of which would otherwise have been prohibited at the time the security was granted by the limitations of Section 3.3, and (2) the aggregate amount of all Attributable Debt then outstanding under all then existing leases under sale and lease- back transactions which would otherwise be or have been prohibited by the provisions of Section 3.4, does not at any such time exceed 10% of Consolidated Net Tangible Assets. SECTION 3.6. Limitation on Subsidiary Indebtedness. (a) The Company will not cause or permit any Restricted Subsidiary that is not a Foreign Subsidiary and is not a Guarantor of the Securities, directly or indirectly, to create, incur, assume, guarantee or otherwise in any manner become liable for the payment of or otherwise incur (collectively, "incur") any Subsidiary Indebtedness, including any Acquired Indebtedness but excluding any Permitted Subsidiary Indebtedness, unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture providing for a Guarantee of the Securities. The Company will not cause or permit any Restricted Subsidiary that is a Foreign Subsidiary ("Foreign Restricted Subsidiary"), the stock of which is not already pledged to secure the Company's obligations with respect to the Securities, directly or indirectly to incur any Subsidiary Indebtedness, including any Acquired Indebtedness but excluding any Permitted Subsidiary Indebtedness, unless 100% of the nonvoting stock and 65% of the voting stock of such Foreign Restricted Subsidiary is pledged to secure the Company's obligations with respect to the Securities and the Company executes a pledge agreement substantially in the form of Annex I hereto (a "Foreign Stock Pledge"). Notwithstanding the foregoing, any Restricted Subsidiary may incur Subsidiary Indebtedness which would otherwise be prohibited by the restrictions hereunder if immediately thereafter, the sum (computed without double-counting) of (i) all outstanding Subsidiary Indebtedness (excluding Permitted Subsidiary Indebtedness), (ii) all outstanding obligations or Indebtedness secured by Mortgages that would be prohibited by Section 3.3 (without taking into account Section 3.5) and (iii) all Attributable Debt relating to all then existing leases under sale and lease-back transactions which would have been prohibited by the provisions of Section 3.4 (without taking into account Section 3.5), does not at the time of incurrence thereof exceed 10% of Consolidated Net Tangible Assets. (b) For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Subsidiary Indebtedness described in the definition of Permitted Subsidiary Indebtedness, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness will be treated as having been incurred pursuant to only one of such clauses. Accrual of interest and the accretion of accreted value will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. (c) Notwithstanding anything foregoing to the contrary, any Guarantee by a Restricted Subsidiary or a Foreign Stock Pledge shall provide by its terms that it, and any liens securing the same, shall be automatically and unconditionally released and discharged upon: (i) any sale or transfer to, or exchange with, any Person of all of the Company's equity interests in, or all or substantially all the assets of, such Restricted Subsidiary, which transaction is in compliance with the terms of this Indenture and such Restricted Subsidiary is released from all guarantees, if any, by it of other Subsidiary Indebtedness of the Company or any Restricted Subsidiaries, (ii) the payment in full of all obligations under the Subsidiary Indebtedness the incurrence of which required the delivery of such Guarantee or a Foreign Stock Pledge if the Restricted Subsidiary has no other outstanding Subsidiary Indebtedness that would require the delivery of such Guarantee or Foreign Stock Pledge, (iii) with respect to Subsidiary Indebtedness constituting guarantees of Indebtedness, the release by the holders of such Indebtedness of the guarantee by such Restricted Subsidiary, including any deemed release upon payment in full of all obligations under such Indebtedness, at such time as (A) no other Indebtedness, the incurrence of which required the delivery of a Guarantee or a Foreign Stock Pledge, constituting Subsidiary Indebtedness has been guaranteed by such Restricted Subsidiary, or (B) the holders of all such other Indebtedness constituting Subsidiary Indebtedness which is guaranteed by such Restricted Subsidiary, the incurrence of which required the delivery of a Guarantee or a Foreign Stock Pledge, also release the guarantee by such Restricted Subsidiary, including any deemed release upon payment in full of all obligations under such Indebtedness. (d) For purposes of this Section 3.6, any Acquired Indebtedness shall not be deemed to have been incurred until 270 days from the date: (A) the Person obligated on such Acquired Indebtedness becomes a Restricted Subsidiary or (B) the acquisition of assets in connection with which such Acquired Indebtedness was assumed is consummated. (e) In the event that the Company or any Subsidiary shall be entitled in accordance with the provisions of this Indenture to a release of any Guarantee or a Foreign Stock Pledge granted to secure the Securities, the Trustee is hereby authorized to take such action and execute and deliver such documents and instruments as the Company or such Subsidiary may request to implement and evidence the release of such Guarantee or a Foreign Stock Pledge. SECTION 3.7. Sales of Accounts Receivable. The Company may, and any of its Restricted Subsidiaries may, sell at any time and from time to time, accounts receivable and notes receivable and related assets to an Accounts Receivable Subsidiary; provided that (i) the aggregate consideration received in each such sale is at least equal to the aggregate fair market value of the receivables sold, as determined by the Board of Directors in good faith, (ii) no less than 80% of the consideration received in each such sale consists of either cash or a promissory note (a "Promissory Note") which is subordinated to no Indebtedness or obligation (except that it may be subordinated to the financial institutions or other entities providing the financing to the Accounts Receivable Subsidiary with respect to such accounts receivable (the "Financier")) or an equity interest in such Accounts Receivable Subsidiary; provided, further that the initial sale will include all accounts receivable of the Company and/or its Restricted Subsidiaries that are party to such arrangements that constitute eligible receivables under such arrangements and (iii) the Company and its Restricted Subsidiaries will sell all accounts receivable that constitute eligible receivables under such arrangements to the Accounts Receivable Subsidiary no less frequently than on a monthly basis. The Company (i) will not permit any Accounts Receivable Subsidiary to sell any accounts receivable purchased from the Company or any of its Restricted Subsidiaries to any other Person except on an arm's length basis and solely for consideration in the form of cash or Cash Equivalents; (ii) will not permit the Accounts Receivable Subsidiary to engage in any business or transaction other than the purchase, financing and sale of accounts receivable of the Company and its Restricted Subsidiaries and activities incidental thereto, (iii) will not permit any Accounts Receivable Subsidiary to incur Indebtedness in an amount in excess of the book value of such Accounts Receivable Subsidiary's total assets, as determined in accordance with generally accepted accounting principles and (iv) will, at least as frequently as monthly, cause the Accounts Receivable Subsidiary to remit to the Company as payment on the outstanding balance of the Promissory Notes, all available cash or Cash Equivalents not held in a collection account pledged to a Financier, to the extent not applied to pay or maintain reserves for reasonable operating expenses of the Accounts Receivable Subsidiary or to satisfy reasonable minimum operating capital requirements. SECTION 3.8. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 3.3, 3.4, 3.5 and 3.6 if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities, shall, by notice to the Trustee, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. SECTION 3.9. Maintenance of Office or Agency. The Company will maintain in The City of New York an office or agency where the Securities may be presented or surrendered for payment, where, if applicable, the Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The corporate trust office of the Trustee, which initially shall be located at 111 Wall Street, 5th Floor New York, N.Y. 10005 Attention: Global Agency & Trust Services (the "Corporate Trust Office") shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. SECTION 3.10. Money for Security Payments to be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (or premium, if any) or interest on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal of (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee in writing of its action or failure to so act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (or premium, if any) or interest on any Securities, deposit with any Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) that shall be available to the Trustee by 10:00 a.m. New York City time on such due date sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of such action or any failure to so act. The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee written notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Subject to any applicable abandoned property law, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest on any Security and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Order, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment to the Company, may at the expense of the Company mail to the Holders of the Securities as to which the money to be repaid was held in trust, as their names and addresses appear in the Security Register, a notice that such moneys remain unclaimed and that, after a date specified in the notice, which shall not be less than 30 days from the date on which the notice was first mailed to the Holders of the Securities as to which the money to be repaid was held in trust, any unclaimed balance of such moneys then remaining will be paid to the Company free of the trust formerly impressed upon it. SECTION 3.11. Corporate Existence. Subject to Article IV, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. SECTION 3.12. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate, one of the signers of which shall be the principal executive, principal financial or principal accounting officer of the Company, stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and whether or not the signers know of any Default or Event or Default that occurred during such period. If they do, the certificate shall describe the Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 3.13. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 3.14. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 3.15 Statement by Officers as to Default. The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto. ARTICLE IV Consolidation, Merger, Conveyance, Transfer or Lease SECTION 4.1. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership, limited liability company or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an amendment to this Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if an indenture supplemental hereto is required in connection with such transaction, such amendment complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 4.2. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 4.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE V Defaults and Remedies SECTION 5.1. Events of Default. "Event of Default", whenever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in any payment of any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days; (2) default in the payment of the principal of or premium, if any, on, or the redemption price of, any Security, at its Maturity; (3) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (4) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company (including this Indenture) with a principal amount then outstanding, individually or in the aggregate, in excess of $25,000,000, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or which results from the nonpayment of such indebtedness at its stated maturity, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled within a period of 10 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities, a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; (5) the entry by a court having jurisdiction in the premises of (A) a decree or order for a relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order in effect for a period of 60 consecutive days; and (6) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. SECTION 5.2. Acceleration. If an Event of Default with respect to the Outstanding Securities occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal amount of all of the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities, which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default other than the non-payment of the principal, which has become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.4. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.3. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on any Securities or to enforce the performance of any provision of any Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 5.4. Waiver of Past Defaults. The Holders of a majority in principal amount of the Outstanding Securities, by notice to the Trustee, may waive an existing Default or Event of Default and its consequences except (i) a Default or Event of Default in the payment of the principal of or any premium or interest on a Security, or (ii) in respect of a covenant or provision hereof which under Article VIII cannot be modified or amended without the consent of each Securityholder affected. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 5.5. Control by Majority. The Holders of a majority in principal amount of the Outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action under this Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 5.6. Limitation on Suits. No Holder shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity acceptable to the Trustee against the costs, expenses and liabilities (including reasonable legal fees and expenses) to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more of such Holders shall have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 5.7. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium (if any) or interest on the Securities held by such Holder, on or after the respective Stated Maturities expressed in such Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 5.8. Collection Suit by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 5.9. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 6.7. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 5.10. Priorities. If the Trustee collects any money or property pursuant to this Article V, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 6.7; SECOND: to Securityholders for amounts due and unpaid for principal of and any premium and interest on the Securities, in respect of which or for the benefit of which such money or property has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and any premium of and any premium and interest on the Securities, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 5.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 5.7 or a suit by Holders of more than 10% in principal amount of Outstanding Securities. ARTICLE VI Trustee SECTION 6.1. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.5. (d) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 6.2. Rights of Trustee. (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond or other paper or document; but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (g) The Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Section 5.1(1) and 5.1(2), or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained "actual knowledge." "Actual knowledge" shall mean the actual fact or statement of knowing without independent investigation with respect thereto. SECTION 6.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 6.10 and 6.11. SECTION 6.4. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication or for the use or application of any funds received by any Paying Agent other than the Trustee. SECTION 6.5. Notice of Defaults. If a Default or Event of Default occurs and is continuing, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it occurs provided that in the case of Default or Event of Default described in Section 5.1(3) no such notice shall be given until at least 30 days after such Default or Event of Default occurs and provided further that except in the case of a Default or Event of Default in payment of principal of, premium (if any), or interest on any Security, the Trustee may withhold the notice if and so long as its board of directors, a committee of its board of directors or a committee of its Trust Officers and/or a Trust Officer of the Trustee in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 6.6. Reports by Trustee to Holders. As promptly as practicable after each December 31 beginning with December 31, 2000, and in any event prior to March 1 in each year, the Trustee shall mail to each Securityholder a brief report dated as of such December 31 that complies with TIA ss. 313(a). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee in writing whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 6.7. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation for its services as the parties shall agree in writing from time to time. The Trustee's compensation shall not be limited by any law to compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out- of-pocket expenses incurred or made by it, including, but not limited to, costs of collection, costs of preparing and reviewing reports, certificates and other documents, costs of preparation and mailing of notices to Securityholders and reasonable costs of counsel retained by the Trustee in connection with the delivery of an Opinion of Counsel or otherwise, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify each of the Trustee, any predecessor Trustee and each of its officers, directors, counsel and agents, against any and all loss, liability, claim, damage or expense (including, but not limited to, reasonable attorneys' fees and expenses and taxes other than taxes based on the income of the Trustee) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 6.7) and of defending itself against any claims (whether asserted by any Securityholder, the Company or otherwise). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct or negligence, subject to the exceptions contained in Section 6.1(c) hereof. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and any premium and interest on particular Securities. The Trustee's right to receive payment of any amounts due under this Section 6.7 shall not be subordinate to any other liability or indebtedness of the Company. The Company's payment obligations pursuant to this Section and any lien arising hereunder shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.1(4), (5) or (6) with respect to the Company, the expenses are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 6.8. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Outstanding Securities may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 6.10; (2) the Trustee is adjudged a bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed and the Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 6.7. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Outstanding Securities may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 6.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section 6.8, the Company's obligations under Section 6.7 shall continue for the benefit of the retiring Trustee. SECTION 6.9. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture, any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 6.10. Eligibility; Disqualification. The Trustee shall at all times shall be a corporation organized and doing business under the laws of the United States of America or any State thereof, authorized under such laws to exercise corporate trust powers. The Trustee shall have a combined capital and surplus of at least $50 million and shall be subject to the supervision or examination by United States Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 6.11. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.12 (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall cease to be eligible under Section 6.10 and shall fail to resign after written request therefor by the Company or by any Securityholder, or (2) the Trustee shall become incapable of acting, or (3) the Trustee shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.11, any Securityholder who has been a bona fide Holder of a Security for at least 6 months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee with respect to the Securities. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapacity, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Securityholders and accepted appointment in the manner hereinafter provided, any Securityholder who has been a bona fide Holder of a Security for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 6.12 Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the predecessor Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the predecessor Trustee; but, on request of the Company or the successor Trustee, such predecessor Trustee shall, upon payment of its reasonable charges, if any, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the predecessor Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such predecessor Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.7. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. In case of the appointment hereunder of a successor Trustee, the Company, the predecessor Trustee and each successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible with respect to that series under this Article. SECTION 6.13. Trustee's Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company, may at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. ARTICLE VII Discharge of Indenture; Defeasance; Covenant Defeasance SECTION 7.1. Discharge of Liability on Securities; Defeasance; Covenant Defeasance. (a) When (i) the Company delivers to the Trustee all Outstanding Securities (other than Securities replaced pursuant to Section 2.9) for cancellation or (ii) all Outstanding Securities have become due and payable at Maturity and the Company irrevocably deposits with the Trustee funds sufficient to pay at Maturity all such Outstanding Securities (other than Securities replaced pursuant to Section 2.9), including interest thereon to Maturity, and the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.1(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company (accompanied by an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture have been complied with) and at the cost and expense of the Company. (b) The Company may elect, at its option by resolution of the Board of Directors at any time, to have either Section 7.1(c) or Section 7.1(d) applied to the Outstanding Securities upon compliance with the conditions set forth below in this Article VII. (c) Upon the Company's exercise of the option provided in Section 7.1(b) to have this Section 7.1(c) applied to the Outstanding Securities, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities as provided in this Section 7.1(c) on and after the date the conditions set forth in Section 7.2 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under the Securities and this Indenture insofar as the Securities are concerned (and the trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders to receive, solely from the trust fund described in Section 7.2 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities when payments are due, (2) the Company's obligations with respect to such Securities under Sections 2.6, 2.9, 2.11, 3.9 and 3.10, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder, (4) the Company's obligations under Section 6.7 and (5) this Article VII. Subject to compliance with this Article VII, the Company may exercise its option provided in Section 7.1(b) to have this Section 7.1(c) applied to the Outstanding Securities notwithstanding the prior exercise of its option provided in Section 7.1(b) to have Section 7.1(d) applied to the Outstanding Securities. (d) Upon the Company's exercise of the option provided in Section 7.1(b) to have this Section 7.1(d) applied to the Outstanding Securities (1) the Company shall be released from its obligations under Sections 3.3, 3.4, 3.5, 3.6, 3.11, 3.13 and 3.14, and Section 4.1 and (2) the occurrence of any event specified in Section 5.1(3) (with respect to any of Sections 3.3, 3.4, 3.5, 3.6, 3.11, 3.13 and 3.14, and Section 4.1(2) and (3)) and 5.1(4) shall be deemed not to be or result in an Event of Default, in each case with respect to the Outstanding Securities as provided in this Section 7.1(d) on or after the date the conditions set forth in Section 7.2 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 5.1(3)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and the Security shall be unaffected thereby. Notwithstanding any Covenant Defeasance, the Company's obligations under section 6.7 shall survive said Covenant Defeasance with respect to any Securities deceased hereunder. (e) Notwithstanding the provisions of Sections 7.1(a) and (b), the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.9, 6.7, 6.8, 7.4, 7.5 and 7.6 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 6.7, 7.4 and 7.5 shall survive. SECTION 7.2. Conditions to Defeasance or Covenant Defeasance. The Company may exercise its Defeasance option or its Covenant Defeasance option with respect to the Outstanding Securities only if: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee that satisfies the requirements contemplated by Section 6.10 and agrees to comply with the provisions of this Article VII applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Securityholders (a) money in an amount, or (b) U.S. Government Obligations that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (c) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on the Securities on the respective Stated Maturities, in accordance with the terms of this Indenture and the Securities. As used herein, "U.S. Government Obligation" means (x) any security that is (i) a direct obligation of the United States of America for the payment of which full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by or acting as an agent or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation specified in clause (x) and held by such custodian for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any such U.S. Government Obligation, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. (2) In the case of an election under Section 7.1(c), the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date first set forth hereinabove, there has been a change in the applicable Federal income tax law, in either case (A) or (B) to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities, will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to the Securities, and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. (3) In the case of an election under Section 7.1(d), the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities, will not recognize gain or loss for Federal income tax purposes as a result of the deposit and Covenant Defeasance to be effected and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. (4) The Company shall have delivered to the Trustee an Officers' Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of such deposit. (5) No Event of Default or event that (after notice or lapse of time or both) would become an Event of Default shall have occurred and be continuing at the time of such deposit or, with regard to any Event of Default or any such event specified in Sections 5.1(5) and (6), at any time on or prior to the 123rd day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 123rd day). (6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act. (7) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is party or by which it is bound. (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with and the other statements listed under Section 10.4. (9) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be qualified under such Act or exempt from regulation thereunder. SECTION 7.3. Application of Trust Money. Subject to the provisions of the last paragraph of Section 3.10, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and Section 7.6, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 7.2 shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting on its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law. SECTION 7.4. Repayment to Company. Anything herein to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Order any money or U.S. Government Obligations held by it as provided in this Article VII which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect Defeasance or Covenant Defeasance, provided that the Trustee shall not be required to liquidate any U.S. Government Obligations in order to comply with the provisions of this paragraph. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company Order any money held by them for the payment of principal of or interest on the Securities that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as unsecured general creditors. SECTION 7.5. Indemnity for U.S. Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 7.6. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company under this Indenture and the Securities, shall be revived and reinstated as though no such deposit had occurred pursuant to this Article VII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VII; provided, however, that, if the Company has made any payment of principal of or any premium or interest on any Securities, following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE VIII Amendments SECTION 8.1. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article IV in respect of the assumption by a successor Person to the Company of an obligation of the Company under this Indenture; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (5) to comply with Sections 6.8 and 6.9 in respect of the assumption by a successor Trustee of an obligation of the Trustee under this Indenture; or (6) to make any change that does not adversely affect the rights of any Securityholder. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 8.2. With Consent of Holders. With the written consent of the Holders of not less than a majority in principal amount of the Outstanding Securities affected thereby, the Company and the Trustee may amend this Indenture or modify in any manner the rights of the Securityholders under this Indenture. However, without the consent of each Securityholder affected, an amendment may not: (a) change the Stated Maturity of the principal of, or any installment of principal of or any premium or interest on, any Security, reduce the principal amount thereof or the interest or any premium thereon, change the method of computing the amount of principal thereof or interest thereon on any date, change any place of payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment, on or after the redemption date or the repayment date, as the case may be); (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such modification or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain Defaults hereunder and their consequences provided for in this Indenture; or (c) modify any of the provisions of this Section, Section 3.6 or Section 5.4, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 8.3. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Securityholder shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver made pursuant to Section 8.2 shall become effective upon receipt by the Trustee of the requisite number of written consents. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall become valid or effective more than 120 days after such record date. SECTION 8.4. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 8.5. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article VIII if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. ARTICLE IX Redemption of Securities SECTION 9.1. Redemption. The Securities may or shall, as the case may be, be redeemed, as a whole or from time to time in part, subject to the conditions and at the Redemption Prices specified in the form of Securities, together with accrued interest to the Redemption Date. SECTION 9.2. Applicability of Article. Redemption of Securities at the election of the Company, as permitted by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 9.3. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 9.1 shall be evidenced by a resolution of the Board of Directors. In case of any partial redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Securities to be redeemed pursuant to Section 9.4. SECTION 9.4. Selection by Trustee of Securities to be Redeemed. If less than all the Securities are to be redeemed, selection of such Securities for redemption shall be made by the Trustee not more than 60 days prior to the Redemption Date, from the Securities Outstanding not previously called for redemption, in compliance with the requirements of the principal national securities exchange, if any, on which such Securities are listed, or, if such Securities are not so listed, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of Securities; provided, however, that no Securities of less than $1,000 shall be redeemed in part. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 9.5. Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 10.1 at least 30 but not more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed at such Holder's registered address. The Trustee shall give notice of redemption in the Company's name and at the Company's expense; provided, however, that the Company shall deliver to the Trustee, at least 30 days prior to the Redemption Date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the following items. All notices of redemption shall fully identify the Securities and shall state: (1) the Redemption Date, (2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 9.7, if any, (3) if less than all Securities Outstanding are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be Outstanding after such partial redemption, (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed, (5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 9.7) will become due and payable upon each such Security, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Securities called for redemption (or the portion thereof) will cease to accrue on and after said date, (6) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any, (7) the name and address of the Paying Agent, (8) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price, and (9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Securities. SECTION 9.6. Deposit of Redemption Price. At or prior to 10:00 a.m. New York City time on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 3.8) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Securities which are to be redeemed on that date. SECTION 9.7. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant regular record date or Special Record Date, as the case may be, according to their terms and the provisions of Section 2.12. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Securities. SECTION 9.8. Securities Redeemed in Part. Any Security which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 3.7 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided that each such new Security will be in a principal amount of $1,000 or integral multiple thereof. ARTICLE X Miscellaneous SECTION 10.1. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: CK Witco Corporation One American Lane Greenwich, CT 06831-2559 Attn: General Counsel if to the Trustee: Citibank, N.A. 111 Wall Street, 5th Floor New York, N.Y. 10005 Attn: Global Agency & Trust Services The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 10.2. Communication by Holders with other Holders. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 10.3. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.4. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 10.5. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 10.6. Legal Holidays. If a payment date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue for the intervening period. If a regular record date is not a Business Day, the record date shall not be affected. SECTION 10.7. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 10.8. No Recourse Against Others. An incorporator, director, officer, employee, stockholder or controlling person, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 10.9. Successors. All agreements of the Company in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.10. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 10.11. Variable Provisions. The Company initially appoints the Trustee as Paying Agent and Registrar and custodian with respect to any Global Securities. SECTION 10.12. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. CK WITCO CORPORATION By: Name: Title: CITIBANK, N.A. By: Name: Title: EX-4.11 6 =============================================================================== CK WITCO CORPORATION (a Delaware corporation) Floating Rate Notes due 2001 PURCHASE AGREEMENT Dated: March 2, 2000 =============================================================================== Table of Contents PURCHASE AGREEMENT SECTION 1. Representations and Warranties by the Company..................2 (a) Representations and Warranties............................2 (i) Offering Memorandum...............................2 (ii) Incorporated Documents............................2 (iii) Independent Accountants...........................3 (iv) Financial Statements..............................3 (v) No Material Adverse Change in Business............3 (vi) Good Standing of the Company......................3 (vii) Good Standing of Designated Subsidiaries..........4 (viii) Capitalization....................................4 (ix) Authorization of Agreement........................4 (x) Authorization of the Indenture....................4 (xi) Authorization of the Securities...................4 (xii) Description of the Securities and the Indenture...5 (xiii) Absence of Defaults and Conflicts.................5 (xiv) Absence of Labor Dispute..........................6 (xv) Absence of Proceedings............................6 (xvi) Possession of Intellectual Property...............6 (xvii) Absence of Further Requirements...................6 (xviii) Possession of Licenses and Permits................6 (xix) Title to Property.................................7 (xx) Environmental Laws................................7 (xxi) Investment Company Act............................8 (xxii) Similar Offerings.................................8 (xxiii) Rule 144A Eligibility.............................8 (xxiv) No General Solicitation...........................8 (xxv) No Registration Required..........................8 (xxvi) Reporting Company.................................8 (xxvii) No Directed Selling Efforts.......................8 (xxviii)Year 2000.........................................9 (b) Officer's Certificates....................................9 SECTION 2. Sale and Delivery to Initial Purchaser; Closing................9 (a) Securities................................................9 (b) Payment...................................................9 SECTION 3. Covenants of the Company......................................10 i (a) Offering Memorandum......................................10 (b) Notice and Effect of Material Events.....................10 (c) Amendment to Offering Memorandum and Supplements.........10 (d) Rating of Securities.....................................10 (e) DTC......................................................10 (f) Use of Proceeds..........................................11 (g) Restriction on Sale of Securities........................11 SECTION 4. Payment of Expenses...........................................11 (a) Expenses.................................................11 (b) Termination of Agreement.................................11 SECTION 5. Conditions of Initial Purchaser's Obligations.................11 (a) Opinion of Counsel for Company...........................11 (b) Opinion of Counsel for Initial Purchaser.................12 (c) Officers' Certificate....................................12 (d) Accountants' Comfort Letter..............................12 (e) Bring-down Comfort Letter................................12 (f) Maintenance of Rating....................................12 (g) Additional Documents.....................................13 (h) Termination of Agreement.................................13 SECTION 6. Subsequent Offers and Resales of the Securities...............13 (a) Offer and Sale Procedures................................13 (i) Offers and Sales only to Qualified Institutional Buyers or Non-U.S. Persons.........13 (ii) No General Solicitation..........................13 (iii) Purchases by Non-Bank Fiduciaries................14 (iv) Subsequent Purchaser Notification................14 (v) Restrictions on Transfer.........................14 (b) Covenants of the Company.................................14 (i) Integration......................................14 (ii) Rule 144A Information............................14 (iii) Restriction on Repurchases.......................14 (c) Qualified Institutional Buyer............................15 (d) Resale Pursuant to Rule 903 of Regulation S or Rule 144A................................................15 (e) Additional Representations and Warranties of Initial Purchaser........................................16 SECTION 7. Indemnification...............................................17 ii (a) Indemnification of Initial Purchaser.....................17 (b) Indemnification of Company...............................17 (c) Actions against Parties; Notification....................18 SECTION 8. Contribution..................................................19 SECTION 9. Representations, Warranties and Agreements to Survive Delivery..............................................20 SECTION 10. Termination of Agreement......................................20 (a) Termination; General.....................................21 (b) Liabilities..............................................21 SECTION 11. Notices.......................................................21 SECTION 12. Parties.......................................................21 SECTION 13. GOVERNING LAW AND TIME........................................21 SECTION 14. Effect of Headings............................................21 SCHEDULES Schedule A - Pricing Information...................................Sch A-1 EXHIBITS Exhibit A - Form of Opinion of Company's Counsel.......................A-1 iii CK WITCO CORPORATION (a Delaware corporation) $25,000,000 Floating Rate Notes due 2001 PURCHASE AGREEMENT March 2, 2000 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281 Ladies and Gentlemen: CK Witco Corporation, a Delaware corporation (the "Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchaser",), with respect to the issue and sale by the Company and the purchase by the Initial Purchaser, of $25,000,000 aggregate principal amount of the Company's Floating Rate Notes due 2001 (the "Securities"). The Securities are to be issued pursuant to an indenture dated as of March 1, 2000 (the "Indenture") between the Company and Citibank, N.A., as trustee (the "Trustee"). Securities will be issued to Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among the Company, the Trustee and DTC. The Company understands that the Initial Purchaser proposes to make an offering of the Securities on the terms and in the manner set forth herein and agrees that the Initial Purchaser may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers ("Subsequent Purchasers") at any time after this Agreement has been executed and delivered. The Securities are to be offered and sold through the Initial Purchaser without being registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors that acquire Securities may only resell or otherwise transfer such Securities if such Securities are hereafter registered under the 1933 Act or if an exemption from the registration requirements of the 1933 Act is available (including the exemption afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") of the rules and regulations promulgated under the 1933 Act by the Securities and Exchange Commission (the "Commission")). The Company has prepared and delivered to the Initial Purchaser copies of a preliminary offering memorandum dated February 28, 2000 (the "Preliminary Offering Memorandum") and has prepared and will deliver to the Initial Purchaser, on the date hereof or the next succeeding day, copies of a final offering memorandum dated March 2, 2000 (the "Final Offering Memorandum"), each for use by the Initial Purchaser in connection with its solicitation of purchases of, or offering of, the Securities. "Offering Memorandum" means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document), including exhibits, amendments or supplements thereto and any documents incorporated therein by reference, which has been prepared and delivered by the Company to the Initial Purchaser in connection with its solicitation of purchases of, or offering of, the Securities. All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Offering Memorandum; and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Offering Memorandum. SECTION 1. Representations and Warranties by the Company. (a) Representations and Warranties. The Company represents and warrants to the Initial Purchaser as of the date hereof and as of the Closing Time referred to in Section 2(b) hereof, and agrees with the Initial Purchaser, as follows: (i) Offering Memorandum. The Offering Memorandum does not, and at the Closing Time will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by the Initial Purchaser expressly for use in the Offering Memorandum. (ii) Incorporated Documents. The Offering Memorandum as delivered from time to time shall incorporate by reference the most recent Annual Reports of the Company and its predecessors on Form 10-K filed with the Commission and each Quarterly Report of the Company and its predecessors on Form 10-Q and each Current Report of the Company and its predecessors on Form 8-K filed with the Commission since the filing of the end of the fiscal year to which such Annual Report relates. The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum at the time they were or hereafter are filed with the Commission (as amended, supplemented or superseded by any later filing made prior to the date hereof) complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Offering Memorandum, at the time the Offering Memorandum was issued and at the Closing Time, did not and will not include an untrue 2 statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (iii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Offering Memorandum are independent public accountants with respect to the Company and its subsidiaries and predecessors within the meaning of Regulation S-X under the 1933 Act. (iv) Financial Statements. The financial statements, together with the related schedules and notes, included in the Offering Memorandum present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Offering Memorandum present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Offering Memorandum present fairly the information shown therein and, where derived from audited financial statements, have been compiled on a basis consistent with that of the audited financial statements included in the Offering Memorandum. The pro forma financial statements of the Company and its subsidiaries and the related notes thereto included in the Offering Memorandum have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (v) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings or business of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there have been no dividends paid by the Company, except for regular dividends on the common stock, par value $.01 per share, of the Company (the "Common Stock"). (vi) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the state of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of 3 property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (vii) Good Standing of Designated Subsidiaries. Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each a "Designated Subsidiary" and, collectively, the "Designated Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Offering Memorandum, all of the issued and outstanding capital stock of each Designated Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, except when the failure to do so would not result in a Material Adverse Effect; none of the outstanding shares of capital stock of the Designated Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Designated Subsidiary. (viii) Capitalization. The authorized, issued and outstanding capital stock of the Company is as set forth in the Offering Memorandum under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements, employee benefit plans referred to in the Offering Memorandum or pursuant to the exercise of convertible securities or options referred to in the Offering Memorandum). The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (ix) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company. (x) Authorization of the Indenture. The Indenture has been duly authorized by the Company and, when executed and delivered by the Company and the Trustee, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). (xi) Authorization of the Securities. The Securities have been duly authorized and, at the Closing Time, will have been duly executed by the Company and, when 4 authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers) reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. (xii) Description of the Securities and the Indenture. The Securities and the Indenture will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum. (xiii) Absence of Defaults and Conflicts. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which or any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (collectively, "Agreements and Instruments") except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement, the Indenture and the Securities and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby or in the Offering Memorandum and the consummation of the transactions contemplated herein and in the Offering Memorandum (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use of Proceeds") and compliance by the Company with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or a Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, the Agreements and Instruments except for such conflicts, breaches or defaults or liens, charges or encumbrances that, singly or in the aggregate, would not result in a Material Adverse Effect, nor will such action result in any significant violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. 5 (xiv) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiaries' principal suppliers, manufacturers, customers or contractors, which, in any case, may reasonably be expected to result in a Material Adverse Effect. (xv) Absence of Proceedings. Except as disclosed in the Offering Memorandum, there is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets of the Company and its subsidiaries as a whole or the consummation of the transactions contemplated by this Agreement or the performance by the Company of its obligations hereunder. No pending legal or governmental proceeding to which the Company or any of its subsidiaries is a party or of which any of their respective property or assets is the subject which are not described in the Offering Memorandum, including ordinary routine litigation incidental to the business, could reasonably be expected to result in a Material Adverse Effect. (xvi) Possession of Intellectual Property. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, except where the failure to do so would not have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xvii) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement or for the due execution, delivery or performance of the Indenture by the Company, except such as have been already obtained. (xviii) Possession of Licenses and Permits. The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regu- 6 latory agencies or bodies necessary to conduct the business now operated by them, except where the failure to do so would not have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xix) Title to Property. The Company and its subsidiaries have good and marketable title to all real property owned by the Company and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Offering Memorandum, (b) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries or (c) could not reasonably be expected to have a Material Adverse Effect; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, are in full force and effect, and neither the Company nor any of its subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of such the Company or any subsidiary thereof to the continued possession of the leased or subleased premises under any such lease or sublease. (xx) Environmental Laws. Except as described in the Offering Memorandum and except such matters as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the 7 basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or Environmental Laws. (xxi) Investment Company Act. The Company is not, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Offering Memorandum will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (xxii) Similar Offerings. Neither the Company nor any of its affiliates, as such term is defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the 1933 Act. (xxiii) Rule 144A Eligibility. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer quotation system. (xxiv) No General Solicitation. None of the Company, its Affiliates or any person acting on its or any of their behalf (other than the Initial Purchaser, as to whom the Company makes no representation) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the 1933 Act. (xxv) No Registration Required. Subject to compliance by the Initial Purchaser with the agreements, procedures, representations and warranties set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchaser and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act"). (xxvi) Reporting Company. The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the 1934 Act. (xxvii) No Directed Selling Efforts. With respect to those Securities sold in reliance on Regulation S, (A) none of the Company, its Affiliates or any person acting on its or their behalf (other than the Initial Purchaser, as to whom the Company makes no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (B) each of the Company and its Affiliates and any person acting on its or their behalf (other than the Initial Purchaser, as to whom the Company makes no 8 representation) has complied and will comply with the offering restrictions requirement of Regulation S. (xxviii) Year 2000. The Company and its subsidiaries have implemented a comprehensive, detailed program to analyze and address the risk that the computer hardware and software used by them may be unable to recognize and properly execute date-sensitive functions involving certain dates prior to and any dates after December 31, 1999 (the "Year 2000 Problem"), and has determined that any such risk that has not been remedied will be remedied on a timely basis without material expense and will not have a material adverse effect upon the financial condition and results of operations of the Company and its subsidiaries, taken as a whole; and to the Company's best knowledge, each supplier, vendor, customer or financial service organization used or serviced by the Company and its subsidiaries has remedied the Year 2000 Problem, although the failure by any such supplier, vendor, customer or financial service organization to remedy the Year 2000 Problem could have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole. The Company is in compliance with the Commission's staff legal bulletin No. 5 dated January 12, 1998 related to Year 2000 compliance. (b) Officer's Certificates. Any certificate signed by any duly authorized officer of the Company or any of its subsidiaries delivered to the Initial Purchaser or counsel to the Initial Purchaser shall be deemed a representation and warranty by the Company to the Initial Purchaser as to the matters covered thereby. SECTION 2. Sale and Delivery to Initial Purchaser; Closing. (a) Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, at the price set forth in Schedule A, $25,000,000 the aggregate principal amount of Securities. The Company shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be purchased as provided herein. (b) Payment. Payment of the purchase price for, and delivery of certificates for, the Securities shall be made at the office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, or at such other place as shall be agreed upon by the Initial Purchaser and the Company, at 9:00 A.M. (eastern time) on March 7, 2000, or such other time not later than ten business days after such date as shall be agreed upon by the Initial Purchaser and the Company (such time and date of payment and delivery being herein called the "Closing Time"). Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Initial Purchaser for the account of the Initial Purchaser of certificates for the Securities to be purchased by it. 9 SECTION 3. Covenants of the Company. The Company covenants with the Initial Purchaser as follows: (a) Offering Memorandum. The Company, as promptly as possible, will furnish to the Initial Purchaser, without charge, such number of copies of the Preliminary Offering Memorandum (until the Final Offering Memorandum is available), the Final Offering Memorandum and any amendments and supplements thereto and documents incorporated by reference therein as the Initial Purchaser may reasonably request. (b) Notice and Effect of Material Events. Until the earliest to occur of (i) the initial resale by the Initial Purchaser and (ii) 30 days from the date hereof (the "End Date"), the Company will as promptly as practicable notify the Initial Purchaser, and confirm such notice in writing, of (x) any filing made by the Company of information relating to the offering of the Securities with any securities exchange or any other regulatory body in the United States or any other jurisdiction, and (y) prior to the End Date, any material changes in or affecting the condition, financial or otherwise, or the earnings or business of the Company and its subsidiaries considered as one enterprise which (i) make any statement in the Offering Memorandum false or misleading or (ii) are not disclosed in the Offering Memorandum. In such event or if during such time prior to the End Date any event shall occur as a result of which it is necessary, in the reasonable opinion of any of the Company, its counsel, the Initial Purchaser or counsel for the Initial Purchaser, to amend or supplement the Final Offering Memorandum in order that the Final Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances then existing, the Company will forthwith amend or supplement the Final Offering Memorandum by preparing and furnishing to the Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Final Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchaser) so that, as so amended or supplemented, the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a Subsequent Purchaser, not misleading. (c) Amendment to Offering Memorandum and Supplements. Prior to the End Date, the Company will advise the Initial Purchaser promptly of any proposal to amend or supplement the Offering Memorandum. Neither the consent of the Initial Purchaser, nor the Initial Purchaser's delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof. (d) Rating of Securities. The Company shall take all reasonable action necessary to enable Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("Moody's") to provide their respective credit ratings of the Securities. (e) DTC. The Company will cooperate with the Initial Purchaser and use its reasonable best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of DTC. 10 (f) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Offering Memorandum under "Use of Proceeds". (g) Restriction on Sale of Securities. During a period ending on the earlier of (i) the date that the initial distribution of notes by the Initial Purchaser is complete and (ii) 30 days from the date of the Offering Memorandum, the Company will not, without the prior written consent of the Initial Purchaser, directly or indirectly, issue, sell, offer or agree to sell, grant any option for the sale of, or otherwise dispose of, any other debt securities of the Company that are substantially similar to the Securities or securities of the Company that are convertible into, or exchangeable for or otherwise represent a right to acquire, the Securities or such other debt securities. SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing, delivery to the Initial Purchaser and any filing of the Offering Memorandum (including financial statements and any schedules or exhibits and any document incorporated therein by reference) and of each amendment or supplement thereto, (ii) the printing and delivery to the Initial Purchaser of this Agreement, the Indenture and such other documents as may be required to be printed in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Initial Purchaser, including any transfer taxes, any stamp or other duties payable upon the sale, issuance and delivery of the Securities to the Initial Purchaser and any charges of DTC in connection therewith, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the reasonable fees and disbursements of counsel for the Initial Purchaser in connection with the preparation of the Blue Sky Survey, and any supplement thereto, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities, and (vii) any fees payable in connection with the rating of the Securities. (b) Termination of Agreement. If this Agreement is terminated by the Initial Purchaser in accordance with the provisions of Section 5 or Section 10(a)(i) hereof, the Company shall reimburse the Initial Purchaser for their reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Initial Purchaser. SECTION 5. Conditions of Initial Purchaser's Obligations. The obligations of the Initial Purchaser hereunder are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company or any of its subsidiaries delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) Opinion of Counsel for Company. At the Closing Time, the Initial Purchaser shall have received the favorable opinions, dated as of the Closing Time, of the General Counsel of the Company and of Wachtell, Lipton, Rosen & Katz, special counsel for the Company, in form and substance reasonably satisfactory to counsel for the Initial Purchaser, substantially to the effect set forth in Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters 11 governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Initial Purchaser. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (b) Opinion of Counsel for Initial Purchaser. At the Closing Time, the Initial Purchaser shall have received the favorable opinion, dated as of the Closing Time, of Cravath, Swaine & Moore, counsel for the Initial Purchaser, with respect to the matters set forth in (i), (ii), (vi) through (ix), inclusive, (xvi) and the penultimate paragraph of Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Initial Purchaser. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (c) Officers' Certificate. At the Closing Time, there shall not have been since the date hereof or since the respective dates as of which information is given in the Final Memorandum, exclusive of any amendments or supplements thereto after the date hereof, any Material Adverse Effect or any development involving a prospective Material Adverse Effect, and the Initial Purchaser shall have received a certificate of the President or a Vice President of the Company and of the chief financial or chief accounting officer of the Company, dated as of the Closing Time, to the effect that (i) there has been no such Material Adverse Effect or any development involving a prospective Material Adverse Effect, (ii) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time. (d) Accountants' Comfort Letter. At the time of the execution of this Agreement, the Initial Purchaser shall have received from KPMG LLP a letter dated such date, in form and substance reasonably satisfactory to the Initial Purchaser, containing statements and information of the type ordinarily included or as otherwise agreed in accountants' "comfort letters" to the Initial Purchaser with respect to the financial statements and certain financial information contained in the Offering Memorandum. (e) Bring-down Comfort Letter. At the Closing Time, the Initial Purchaser shall have received from KPMG LLP a letter, dated as of the Closing Time, to the effect that it reaffirms the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (f) Maintenance of Rating. At the Closing Time, the Securities shall be rated at least BAA3 by Moody's and BBB by S&P, and the Company shall have delivered to the Initial Purchaser a letter dated the Closing Time, from each such rating agency, or other evidence satisfactory to the Initial Purchaser, confirming that the Securities have such ratings; and since the date of this Agreement, there shall not have occurred a downgrading in the rating assigned to the Se- 12 curities or any of the Company's other securities by any "nationally recognized statistical rating agency", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such securities rating agency shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Securities or any of the Company's other securities. (g) Additional Documents. At the Closing Time, counsel for the Initial Purchaser shall have been furnished with such documents as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Initial Purchaser and counsel for the Initial Purchaser. (h) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Initial Purchaser by notice to the Company at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 7, 8 and 9 shall survive any such termination and remain in full force and effect. SECTION 6. Subsequent Offers and Resales of the Securities. (a) Offer and Sale Procedures. The Initial Purchaser and the Company hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (i) Offers and Sales only to Qualified Institutional Buyers or Non-U.S. Persons. Offers and sales of the Securities shall only be made (A) to persons whom the offeror or seller reasonably believes to be qualified institutional buyers, as defined in Rule 144A under the 1933 Act ("Qualified Institutional Buyers") and, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and in each case, in transactions in accordance with Rule 144A or (B) in the case of offers or sales made outside the United States, to non-U.S. persons outside the United States, as defined in Regulation S under the 1933 Act, to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the 1933 Act. The Initial Purchaser agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. (ii) No General Solicitation. No general solicitation or general advertising (within the meaning of Rule 502(c) under the 1933 Act) will be used in the United States in connection with the offering or sale of the Securities. 13 (iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank Subsequent Purchaser of a Security acting as a fiduciary for one or more third parties, each third party shall, in the judgment of the Initial Purchaser, be an Institutional Accredited Investor or a Qualified Institutional Buyer or a non-U.S. person outside the United States. (iv) Subsequent Purchaser Notification. The Initial Purchaser will take reasonable steps to inform, and cause each of its U.S. Affiliates to take reasonable steps to inform, persons acquiring Securities from the Initial Purchaser or affiliate, as the case may be, in the United States that the Securities (A) have not been and will not be registered under the 1933 Act, (B) are being sold to them without registration under the 1933 Act in reliance on Rule 144A or in accordance with another exemption from registration under the 1933 Act, as the case may be, and (C) may not be offered, sold or otherwise transferred except (1) to the Company, (2) outside the United States in accordance with Regulation S, or (3) inside the United States in accordance with (x) Rule 144A to a person whom the seller reasonably believes is a Qualified Institutional Buyer that is purchasing such Securities for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (y) pursuant to another available exemption from registration under the 1933 Act. (v) Restrictions on Transfer. The transfer restrictions and the other provisions set forth in the Offering Memorandum under the heading "Notice to Investors", including the legend required thereby, shall apply to the Securities except as otherwise agreed by the Company and the Initial Purchaser. (b) Covenants of the Company. The Company covenants with the Initial Purchaser as follows: (i) Integration. The Company agrees that it will not and will cause its Affiliates not to, directly or indirectly, solicit any offer to buy, sell or make any offer or sale of, or otherwise negotiate in respect of, securities of the Company of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the 1933 Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Securities by the Company to the Initial Purchaser, (ii) the resale of the Securities by the Initial Purchaser to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or otherwise. (ii) Rule 144A Information. The Company agrees that, in order to render the Securities eligible for resale pursuant to Rule 144A under the 1933 Act, while any of the Securities remain outstanding, it will make available, upon request, to any holder of Securities or prospective purchasers of Securities the information specified in Rule 144A(d)(4), unless the Company furnishes information to the Commission pursuant to Section 13 or 15(d) of the 1934 Act. (iii) Restriction on Repurchases. Until the expiration of two years after the original issuance of the Securities, the Company will not, and will cause its Affiliates not 14 to, resell any Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the 1933 Act), whether as beneficial owner or otherwise (except as agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker's transactions), except in compliance with the 1933 Act. (c) Qualified Institutional Buyer. The Initial Purchaser represents and warrants to, and agrees with, the Company that it is a Qualified Institutional Buyer and an "accredited investor" within the meaning of Rule 501(a) under the 1933 Act (an "Accredited Investor"). (d) Resale Pursuant to Rule 903 of Regulation S or Rule 144A. The Initial Purchaser understands that the Securities have not been and will not be registered under the 1933 Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the 1933 Act or pursuant to an exemption from the registration requirements of the 1933 Act. The Initial Purchaser represents, warrants and agrees, that, except as permitted by Section 6(a) above, it has offered and sold Securities and will offer and sell Securities (i) as part of their distribution at any time and (ii) otherwise until forty days after the later of the date upon which the offering of the Securities commences and the Closing Time, only in accordance with Rule 903 of Regulation S, Rule 144A under the 1933 Act or another applicable exemption from the registration requirements of the 1933 Act. Accordingly, neither the Initial Purchaser, its affiliates nor any persons acting on their behalf have engaged or will engage in any directed selling efforts with respect to the Securities pursuant to Regulation S, and the Initial Purchaser, its affiliates and any person acting on their behalf have complied and will comply with the offering restriction requirements of Regulation S. The Initial Purchaser agrees that, at or prior to confirmation of a sale of Securities pursuant to Regulation S it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it or through it during the restricted period a confirmation or notice to substantially the following effect: The Initial Purchaser represents, warrants and agrees with respect to offers and sales outside the United States that: (i) it understands that no action has been or will be taken in any jurisdiction by the Company that would permit a public offering of the Securities or possession or distribution of either Memorandum or any other offering or publicity material relating to the Securities, in any country or jurisdiction where action for that purpose is required; (ii) it will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has in its possession or distributes either Memorandum or any such other material, in all cases at its own expense; (iii) the Securities have not been and will not be registered under the 1933 Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulations S under the 1933 Act or pursuant to another exemption from the registration requirements of the 1933 Act; (iv) it has (1) not offered or sold and will not offer or sell in the United Kingdom, by means of any document, any Securities other than to any persons whose ordinary business it is to buy and sell shares or debentures, whether as a principal or agent, or in 15 circumstances which do not constitute an offer to the public within the meaning of the Companies Act 1985, as amended (2) complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (3) only issued or passed on and will only issue and pass onto any persons in the United Kingdom any document received by it in connection with the issue of the Securities if that person is of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisement) (Exemptions) Order 1988 or is a person to whom the document may otherwise lawfully by issued or passed on; (v) it understands that the Securities have not been and will not be registered under the Securities and Exchange Law of Japan, and represents that it has not offered or sold, and agrees that it will not offer or sell, and Securities, directly or indirectly in Japan or to or from any resident of Japan except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and (ii) in compliance with any other applicable requirements of Japanese Law; (vi) At or prior to confirmation of a sale of Securities pursuant to Regulation S it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it or through it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the United States Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to or for the account or benefit of U.S. persons (i) as part of their distribution at any time and (ii) otherwise until forty days after the later of the date upon which the offering of the Securities commenced and the date of closing, except in either case in accordance with Regulation S or Rule 144A under the Securities Act. Terms used above have the meaning given to them by Regulation S." Terms used in the above paragraph have the meanings given to them by Regulation S. (e) Additional Representations and Warranties of Initial Purchaser. The Initial Purchaser represents and agrees that it has not entered and will not enter into any contractual arrangements with respect to the distribution of the Securities, except with its affiliates or with the prior written consent of the Company. The Initial Purchaser hereby agrees that, prior to or simultaneously with the confirmation of sale by the Initial Purchaser to any purchaser of any of the Securities purchased by the Initial Purchaser from the Company pursuant to this Agreement, the Initial Purchaser shall deliver to all such purchasers with addresses in the United States and, to the extent required by applicable law, to other purchasers a copy of the Offering Memorandum (any and amendment or supplement thereto that the Company shall have furnished to the Initial Purchaser prior to the date of such confirmation of sale). The Initial Purchaser further agrees that, without the prior written consent of the Company, the Initial Purchaser will not disseminate any written materials to holders of the Securities for or in connection with the transactions contemplated by this Agreement other than the Offering Memorandum. 16 SECTION 7. Indemnification. (a) Indemnification of Initial Purchaser. The Company agrees to indemnify and hold harmless the Initial Purchaser and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever (at least quarterly) arising out of any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever (at least quarterly) to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 7(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, (at least quarterly) (including the reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser expressly for use in the Offering Memorandum (or any amendment thereto); provided, further, that, with respect to any loss, liability, claim, damage or expense arising out of any untrue statement or omission or alleged untrue statement or omission contained in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), the indemnity contained in this Section shall not inure to the benefit of the Initial Purchaser (or any person who controls the Initial Purchaser) if (i) a copy of the Final Offering Memorandum or amendment or supplement thereto was to be sent or given to such purchasers with addresses in the United States and, to the extent required by applicable law, to other purchasers, at or prior to the written confirmation of the sale of the applicable Securities together with all amendments or supplements thereto available at such time and was not sent or given and (ii) such untrue statement or omission or alleged untrue statement or omission was corrected in the Final Offering Memorandum or in any amendment or supplement thereto available at such time. (b) Indemnification of Company. The Initial Purchaser severally agrees to indemnify and hold harmless the Company and each person, if any, who controls the Company within the 17 meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser expressly for use in the Offering Memorandum, and shall reimburse the Company for any and all expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action. (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to the indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder except to the extent it is materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 7(a) above, counsel to the indemnified parties shall be selected by the Initial Purchaser and shall be reasonably acceptable to the Company, and, in the case of parties indemnified pursuant to Section 7(b) above, counsel to the indemnified parties shall be selected by the Company and shall be reasonably acceptable to the Initial Purchaser. An indemnifying party may participate at its own expense in the defense of any such action and, to the extent it wishes, shall be entitled to assume the defense of any such action with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (iv) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. In no event shall counsel to the indemnifying party (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Each indemnified party shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnified party seeking or otherwise eligible for indemnification or contribution hereunder will, 18 without the prior written consent of the indemnifying party (which shall not be unreasonably withheld), settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit, investigation or proceeding pursuant to which indemnity or contribution is or may be available hereunder. No indemnifying party shall, without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section or Section 8 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Notwithstanding, this Section 7(c), if at any time an indemnified party shall have requested the indemnifying party to reimburse the indemnified party for fees and expenses of counsel, the indemnifying party shall not be liable for any settlement of the nature contemplated by this Section 7(c) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent it considers such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement. SECTION 8. Contribution. If the indemnification provided for in Section 7 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchaser on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Initial Purchaser on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchaser on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Initial Purchaser, on the other, bear to the aggregate initial offering price of the Securities. The relative fault of the Company on the one hand and the Initial Purchaser on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Initial Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 19 The Company and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section, the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased and sold by it hereunder exceeds the amount of any damages which the Initial Purchaser has otherwise been required to pay under Section 7(b) by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Initial Purchaser, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. SECTION 9. Representations, Warranties and Agreements to Survive Delivery. Subject to the initial sentence of Section 1(a), all representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchaser or controlling person, or by or on behalf of the Company, and shall survive delivery of the Securities to the Initial Purchaser. SECTION 10. Termination of Agreement. (a) Termination; General. The Initial Purchaser may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Final Offering Memorandum exclusive of any amendment or supplement thereto after the date hereof, any material adverse change in the condition, financial or otherwise, or in the earnings or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Initial Purchaser, impracticable to market the Securities or to enforce contracts for the sale of 20 the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the NASDAQ System has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal or New York authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 7, 8 and 9 shall survive such termination and remain in full force and effect. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchaser shall be directed to it at North Tower, World Financial Center, New York, New York 10281, attention of Greg Kelly, Vice President; notices to the Company shall be directed to it at One American Lane, Greenwich, CT 06831- 2559, attention of Senior Vice President and General Counsel; with a copy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, NY 10019, attention of Steven A. Cohen, Esq. SECTION 12. Parties. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchaser and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchaser and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from the Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 14. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 21 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Initial Purchaser and the Company in accordance with its terms. Very truly yours, CK WITCO CORPORATION By: Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By Authorized Signatory 22 SCHEDULE A CK WITCO CORPORATION $25,000,000 Floating Rate Notes due 2001 1. The purchase price to be paid by the Initial Purchasers for the Floating Rate Notes shall be 99.85% of the principal amount thereof. 2. The interest rate on the Floating Rate Notes shall be LIBOR plus 1.00% per annum. Sch A-1 Exhibit A FORM OF OPINION OF COMPANY'S COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(a)* (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the state of Delaware.1 (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum (except where the failure to have such power and authority would not have a Material Adverse Effect) and to enter into and perform its obligations under the Purchase Agreement.1 (iii) The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.2 (iv) Each Designated Subsidiary has been duly incorporated and is validly existing as a corporation under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum. Each Designated Subsidiary organized under the laws of a state of the United States is in good standing under the laws of its organization and is duly qualified as a foreign corporation to transact business and is in good standing in each state in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; all of the issued and outstanding capital stock of each Designated Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and, to the best of our knowledge and information, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity.2 (v) The Purchase Agreement has been duly authorized, executed and delivered by the Company.1 (vi) The Indenture has been duly authorized, executed and delivered by the Company and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (in- - ---------------------- * The paragraphs followed by footnote 1 will be given both by the Company Counsel and WLR&K; paragraphs followed by footnote 2 will be given by the Company Counsel only; paragraphs followed by footnote 3 will be given by WLR&K only; and paragraphs followed by footnote 4 may be divided between the Company Counsel and WLR&K. A - 1 cluding, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).1 (vii) The Securities are in the form contemplated by the Indenture, have been duly authorized by the Company and, when executed by the Company and authenticated by the Trustee in the manner provided in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and issued and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium (including, without limitation, all laws relating to fraudulent transfers), or other similar laws relating to or affecting enforcement of creditor's rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be entitled to the benefits of the Indenture.1 (viii) The Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Offering Memorandum under "Description of the Notes".3 (ix) The documents incorporated by reference in the Offering Memorandum (other than the financial statements and supporting schedules therein, as to which no opinion need be rendered), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder.2 (x) There is not pending or, to the best of our knowledge, threatened any action, suit, proceeding, inquiry or investigation, to which the Company or any subsidiary is a party, or to which the property of the Company or any subsidiary thereof is subject, before or brought by any court or governmental agency or body, which might reasonably be expected to result in a Material Adverse Effect, or the consummation of the transactions contemplated in the Purchase Agreement or the performance by the Company of its obligations thereunder or the transactions contemplated by the Offering Memorandum.2 (xi) The information in the Offering Memorandum under "Summary-The Offering" "Description of the Notes", "Certain Federal Income Tax Considerations" and "Exchange Offer; Registration Rights," to the extent that it constitutes summaries of legal matters or legal proceedings, or legal conclusions, has been reviewed by us and fairly summarizes the matters described therein.3 (xii) All descriptions in the Offering Memorandum of contracts and other documents to which the Company or any of its subsidiaries are a party are accurate in all material respects; to the best of our knowledge, there are no franchises, contracts, indentures, mortgages, loan agreements, notes, leases or other instruments that would be required to be described in the Offering Memorandum that are not described or referred to in the Offering Memorandum other than those described or referred to therein or incorporated by reference thereto, and the descriptions thereof or references thereto are correct in all material respects.2 A - 2 (xiii) To the best of our knowledge, neither the Company nor any of its subsidiaries is in violation of its charter or by-laws and no default by the Company or any of its subsidiaries exists in the due performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument that is described or referred to in the Offering Memorandum or incorporated by reference therein, except as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole.2 (xiv) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign (other than such as may be required under the applicable securities laws of the various jurisdictions in which the Securities will be offered or sold, as to which we need express no opinion) by the Company or its subsidiaries is necessary or required in connection with the due authorization, execution and delivery of the Purchase Agreement or the due execution, delivery or performance of the Indenture by the Company or for the offering, issuance, sale or delivery of the Securities to the Initial Purchaser or the resale by the Initial Purchaser in accordance with the terms of the Purchase Agreement, provided that the foregoing is limited to the laws of the State of New York, the general corporation law of the State of Delaware, and the laws of the United States of America, that, in our experience, are normally applicable to transactions of the type provided in the Purchase Agreement and the Registration Rights Agreement.4 (xv) Assuming compliance by all parties with the terms and conditions of the Purchase Agreement and Indenture, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchaser and to each Subsequent Purchaser in the manner contemplated by the Purchase Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the Trust Indenture Act.3 (xvi) The execution, delivery and performance of the Purchase Agreement, the DTC Agreement, the Indenture and the Securities and the consummation of the transactions contemplated in the Purchase Agreement and in the Offering Memorandum (including the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use Of Proceeds") and compliance by the Company with its obligations under the Purchase Agreement, the Indenture and the Securities do not and will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined in Section 1(a)(xiii) of the Purchase Agreement) under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to us, to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary thereof is subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a Material Adverse Effect), nor will such action result in any violation of (A) the charter or by-laws of the Company or any of its subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to us, of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its Designated Subsidiaries or any of the respective properties, assets, or operations or (B) the General Corporation Law of the State of Delaware, the laws of the State of New York or the laws of the United States A - 3 of America. Such counsel need not express any opinion in this clause (xvi), however, as to (i) the blue sky laws of any state, (ii) laws other than those that, in our experience, are normally applicable to transactions of the type provided for by the Purchase Agreement and the Registration Agreement and (iii) any consent or authorization which may have become applicable to the Company as a result of the Initial Purchaser's involvement in the Purchase Agreement or the Registration Rights Agreement because of the Initial Purchaser's legal or regulatory status or because of any other facts specifically pertaining to the Initial Purchaser.4 (xvii) The Company is not an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the 1940 Act.3 Nothing has come to our attention that would lead us to believe that the Offering Memorandum or any amendment or supplement thereto (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom as to which we need make no statement and except as to documents incorporated by reference), at the time the Offering Memorandum was issued, at the time any such amended or supplemented Offering Memorandum was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.1 The foregoing opinions and statements may be subject to assumptions, qualifications and limitations customary in similar transactions. A - 4 EX-4.12 7 SUPPLEMENT TO OFFERING MEMORANDUM CONFIDENTIAL $600,000,000 CKWITCO 8 1/2% SENIOR NOTES DUE 2005 --------------------- The offering memorandum attached hereto is hereby supplemented by deleting the last two paragraphs on page 41 and replacing those paragraphs with the following: "If we are obligated, we will use our reasonable best efforts to file a shelf registration statement, as promptly as practicable after becoming so obligated and use our reasonable best efforts to cause the shelf registration statement to be declared effective by the Commission as promptly as practicable but no later than 150 days after becoming so obligated. We will use our reasonable best efforts to keep the shelf registration statement continuously effective until the second anniversary of the effective date of the shelf registration statement or such shorter period that will terminate when all the Registrable Notes covered by the shelf registration statement have been sold pursuant thereto or cease to be outstanding or otherwise to be Registrable Notes. A holder of notes that sell its notes under the shelf registration statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the registration rights agreement that are applicable to such holder (including certain indemnification and contribution obligations). If: . the Exchange Offer Registration Statement in not filed with the Commission on or prior to the 75th calendar day following the date of original issue of the notes, . the Exchange Offer Registration Statement has not been declared effective on or prior to the 150th calendar day following the date of original issue of the notes, or . the Exchange Offer is not consummated on or prior to the 180th calendar day following the date of original issue of the notes or a shelf registration statement is not declared effective within 150 days after the obligation arises to file the shelf registration statement. (each such event referred to in the above clauses, a "Registration Default"), the interest rate borne by the notes will increase ("Additional Interest") by 0.25% per annum upon the occurrence of each Registration Default. The rate will increase by an additional 0.25% after each 90-day period that a Registration Default is continuing, up to a maximum increase of 1.00% per annum. Following the cure of all Registration Defaults Additional Interest will cease to accrue and the interest rate will revert to the original rate." MERRILL LYNCH & CO. The date of this supplement to the offering memorandum is March 2, 2000. EX-4.13 8 CK WITCO CORPORATION 8 1/2% Senior Notes due 2005 INDENTURE Dated as of March 1, 2000 CITIBANK, N.A. as Trustee CROSS-REFERENCE TABLE TIA Section Indenture Section 310(a)(1) 6.10 (a)(2) 6.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 6.8; 6.10 (b) 6.8; 6.10 (c) N.A. 311(a) 6.11 (b) 6.11 (c) N.A. 312(a) 2.5 (b) 10.3 (c) 10.3 313(a) 6.6 (b)(1) N.A. (b)(2) 6.6 (c) 6.6 (d) 6.6 314(a) 3.2; 10.2 (b) N.A. (c)(1) 10.4 (c)(2) 10.4 (c)(3) N.A. (d) N.A. (e) 10.5 (f) 3.9 315(a) 6.1 (b) 6.5; 10.2 (c) 6.1 (d) 6.1 (e) 5.11 316(a)(last sentence) 10.6 (a)(1)(A) 5.5 (a)(1)(B) 5.4 (a)(2) N.A. (b) 5.7 317(a)(1) 5.8 (a)(2) 5.9 (b) 2.4 318(a) 10.1 N.A. means Not Applicable. Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS Page ARTICLE I Definitions and Incorporation by Reference SECTION 1.1. Definitions 1 SECTION 1.2. Other Definitions 14 SECTION 1.3. Incorporation by Reference of Trust Indenture Act 15 SECTION 1.4. Rules of Construction 16 ARTICLE II The Securities SECTION 2.1. Form, Dating and Terms 16 SECTION 2.2. Execution and Authentication 22 SECTION 2.3. Registrar and Paying Agent 24 SECTION 2.4. Paying Agent To Hold Money in Trust 24 SECTION 2.5. Securityholder Lists 25 SECTION 2.6. Transfer and Exchange 25 SECTION 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors 30 SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S 32 SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities 33 SECTION 2.10. Temporary Securities 34 SECTION 2.11. Cancellation 34 SECTION 2.12. Payment of Interest; Defaulted Interest 34 SECTION 2.13. Computation of Interest 36 SECTION 2.14. CUSIP Numbers 36 ARTICLE III Covenants SECTION 3.1. Payment of Securities 36 SECTION 3.2. Reports by the Company 37 SECTION 3.3. Limitation on Mortgages 37 SECTION 3.4. Limitation on Sale and Leaseback Transactions 42 SECTION 3.5. Exempted Indebtedness 43 SECTION 3.6. Limitation on Subsidiary Indebtedness 43 SECTION 3.7. Sales of Accounts Receivable 45 SECTION 3.8. Waiver of Certain Covenants 46 SECTION 3.9. Maintenance of Office or Agency 47 SECTION 3.10. Money for Security Payments to be Held in Trust 47 SECTION 3.11. Corporate Existence 49 SECTION 3.12. Compliance Certificate 49 SECTION 3.13. Maintenance of Properties 50 SECTION 3.14. Payment of Taxes and Other Claims 50 SECTION 3.15. Statement by Officers as to Default 50 ARTICLE IV Consolidation, Merger, Conveyance, Transfer or Lease SECTION 4.1. Company May Consolidate, Etc., Only on Certain Terms 50 SECTION 4.2. Successor Substituted 52 ARTICLE V Defaults and Remedies SECTION 5.1. Events of Default 52 SECTION 5.2. Acceleration 54 SECTION 5.3. Other Remedies 55 SECTION 5.4. Waiver of Past Defaults 55 SECTION 5.5. Control by Majority 56 SECTION 5.6. Limitation on Suits 56 SECTION 5.7. Rights of Holders to Receive Payment 57 SECTION 5.8. Collection Suit by Trustee 57 SECTION 5.9. Trustee May File Proofs of Claim 57 SECTION 5.10. Priorities 58 SECTION 5.11. Undertaking for Costs 58 ARTICLE VI Trustee SECTION 6.1. Duties of Trustee 59 SECTION 6.2. Rights of Trustee 60 SECTION 6.3. Individual Rights of Trustee 61 SECTION 6.4. Trustee's Disclaimer. 61 SECTION 6.5. Notice of Defaults 62 SECTION 6.6. Reports by Trustee to Holders 62 SECTION 6.7. Compensation and Indemnity 62 SECTION 6.8. Replacement of Trustee 63 SECTION 6.9. Successor Trustee by Merger 64 SECTION 6.10. Eligibility; Disqualification 65 SECTION 6.11. Preferential Collection of Claims Against Company 65 SECTION 6.12. Trustee's Application for Instructions from the Company 65 ARTICLE VII Discharge of Indenture; Defeasance; Covenant Defeasance SECTION 7.1. Discharge of Liability on Securities; Defeasance; Covenant Defeasance 66 SECTION 7.2. Conditions to Defeasance or Covenant Defeasance 67 SECTION 7.3. Application of Trust Money 70 SECTION 7.4. Repayment to Company 70 SECTION 7.5. Indemnity for U.S. Government Obligations 71 SECTION 7.6. Reinstatement 71 ARTICLE VIII Amendments SECTION 8.1. Without Consent of Holders 71 SECTION 8.2. With Consent of Holders 72 SECTION 8.3. Compliance with Trust Indenture Act 73 SECTION 8.4. Revocation and Effect of Consents and Waivers 73 SECTION 8.5. Notation on or Exchange of Securities 74 SECTION 8.6. Trustee To Sign Amendments 74 ARTICLE IX Redemption of Securities SECTION 9.1. Redemption 74 SECTION 9.2. Applicability of Article 74 SECTION 9.3. Election to Redeem; Notice to Trustee 74 SECTION 9.4. Selection by Trustee of Securities to be Redeemed 75 SECTION 9.5. Notice of Redemption 75 SECTION 9.6. Deposit of Redemption Price 77 SECTION 9.7. Securities Payable on Redemption Date 77 SECTION 9.8. Securities Redeemed in Part 77 ARTICLE X Miscellaneous SECTION 10.1. Trust Indenture Act Controls 78 SECTION 10.2. Notices 78 SECTION 10.3. Communication by Holders with other Holders 79 SECTION 10.4. Certificate and Opinion as to Conditions Precedent 79 SECTION 10.5. Statements Required in Certificate or Opinion 79 SECTION 10.6. Rules by Trustee, Paying Agent and Registrar 79 SECTION 10.7. Legal Holidays 79 SECTION 10.8. Governing Law 80 SECTION 10.9. No Recourse Against Others 80 SECTION 10.10. Successors 80 SECTION 10.11. Multiple Originals 80 SECTION 10.12. Variable Provisions 80 SECTION 10.13. Qualification of Indenture 80 SECTION 10.14. Table of Contents; Headings 81 EXHIBIT A Form of the Initial Note EXHIBIT B Form of the Exchange Note and Private Exchange Note INDENTURE dated as of March 1, 2000, between CK Witco Corporation, a Delaware corporation (the "Company"), and Citibank, N.A., a national banking association duly organized and existing under the laws of the United States (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 8 1/2% Senior Notes due 2005 (the "Initial Notes") and, if and when issued in exchange for Initial Notes, as provided in the Registration Rights Agreement (as hereinafter defined), the Company's 8 1/2% Senior Notes due 2005 (the "Exchange Notes"). Under certain circumstances, as described in the Registration Rights Agreement, the Company may issue private exchange notes in exchange for Initial Notes (the "Private Exchange Notes"). The Initial Notes together with the Exchange Notes and the Private Exchange Notes are hereinafter referred to as the "Securities" or the "Notes". ARTICLE I Definitions and Incorporation by Reference SECTION 1.1. Definitions. "Accounts Receivable Subsidiary" means a Subsidiary of the Company (i) which is formed solely for the purpose of, and which engages in no activities other than activities in connection with, financing accounts receivable and/or notes receivable and related assets of the Company and/or its Restricted Subsidiaries, (ii) which is designated by the Board of Directors as an Accounts Receivables Subsidiary pursuant to a resolution set forth in an Officers' Certificate and delivered to the Trustee, (iii) that has total assets at the time of such designation with a book value not exceeding $100,000 plus the reasonable fees and expenses required to establish such Accounts Receivable Subsidiary and any accounts receivable financing, (iv) no portion of Indebtedness or any other obligation (contingent or otherwise) of which (a) is at any time recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way, other than pursuant to (I) representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with the sale of accounts receivable and/or notes receivable to such Accounts Receivable Subsidiary or (II) any guarantee of any such accounts receivable financing by a Restricted Subsidiary that is permitted to be incurred pursuant to the covenant described in Section 3.6(a), or (b) subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to (I) representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with sales of accounts receivables and/or notes receivable or (II) any guarantee of any such accounts receivable financing by a Restricted Subsidiary that is permitted to be incurred pursuant to Section 3.6(a), (v) with which neither the Company nor any Restricted Subsidiary of the Company has any contract, agreement, arrangement or understanding other than contracts, agreements, arrangements or understandings entered into the ordinary course of business in connection with sales of accounts receivable and/or notes receivable in accordance with Section 3.7 and fees payable in the ordinary course of business in connection with servicing accounts receivable and/or notes receivable and (vi) with respect to which neither the Company nor any Restricted Subsidiary of the Company has any obligation (a) to subscribe for additional shares of Capital Stock or other Equity Interests therein or make any additional capital contribution or similar payment or transfer thereto other than in connection with the sale of accounts receivable and/or notes receivable to such Accounts Receivable Subsidiary in accordance with Section 3.7 or (b) to maintain or preserve solvency or any balance sheet item, financial condition, level of income or results of operations thereof. "Acquired Indebtedness" means Subsidiary Indebtedness (other than Permitted Subsidiary Indebtedness) of a Person: (1) existing at the time such Person becomes a Restricted Subsidiary, or (2) assumed in connection with the acquisition of assets by such Person, in each case, other than Subsidiary Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, as the case may be. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Debt" means, as to any particular lease relating to a sale and leaseback transaction of a Principal Property under which any Person is at the time liable, at any date as of which the amount thereof is to be determined, the total net amount of rent (discounted from the respective due dates thereof at the interest rate from time to time being used by the Company to determine its liability in respect of capitalized leases) required to be paid by such Person under such lease during the remaining term thereof. The net amount of rent required to be paid under any such lease for any such period shall be the total amount of the rent payable by the lessee with respect to such period, but may exclude amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, utilities, operating and labor costs and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount of rent shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board of Directors with respect to the relevant matter. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law to close in New York City. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with generally accepted accounting principles, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with generally accepted accounting principles; and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poors Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in this definition. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means CK Witco Corporation until a successor replaces it and, thereafter, means such successor. "Consolidated Net Tangible Assets" means total consolidated assets of the Company and its Subsidiaries, less the following: (1) current liabilities of the Company and its Subsidiaries; (2) all depreciation and valuation reserves and all other reserves (except (a) reserves for contingencies which have not been allocated to any particular purpose, and (b) deferred credits, including deferred federal and foreign income taxes and deferred investment tax credits) of the Company and its Subsidiaries; (3) the net book amount of all intangible assets of the Company and its Subsidiaries, including the unamortized portions of such items as goodwill, trademarks, trade names, patents and debt discount and expense less debt premium; and (4) appropriate adjustments on account of minority interests of other Persons holding stock in Subsidiaries. "Default" means any event or condition that is, or after notice or passage of time or both would be, an Event of Default. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; in each case on or prior to the Stated Maturity of the Securities. "Depositary" means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" shall have the meaning set forth in the Registration Rights Agreement. "Foreign Subsidiary" means any Subsidiary that is formed under the laws of any jurisdiction outside of the United States of America and its territories and possessions or substantially all of the operating assets of which are located, and substantially all of the business of which is carried on outside the United States of America and its territories and possessions, and includes any Subsidiary formed under the laws of any State of the United States of America which is primarily engaged in financing the operations of the Company or its Subsidiaries, or both, outside the United States of America and its territories and possessions. "Guarantee" means the unconditional and unsubordinated guarantee by the Guarantor of the due and punctual payment of principal of and interest on the Securities when and as the same shall become due and payable, whether at the Stated Maturity, by acceleration, call for redemption or otherwise in accordance with the terms of the Securities and this Indenture. "Guarantor" means any Restricted Subsidiary, other than Foreign Subsidiaries, that after the date of this Indenture executes a guarantee of the Securities contemplated by Section 3.6 until a successor replaces such party pursuant to the applicable provisions of this Indenture, or until otherwise released in accordance with the terms of this Indenture. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements or other agreements or arrangements designed to protect such Person against fluctuations in interest rates and (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates, in each case provided that such obligations are entered into solely to protect such Person against fluctuations in interest rates or currency exchange rates and not for purposes of speculation. "Holder" or "Securityholder" means the Person in whose name a Security is registered in the Note Register. "Indebtedness" means (i) all items of indebtedness or liability (except capital and surplus) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date as of which indebtedness is to be determined, (ii) indebtedness secured by any Mortgage existing on property owned subject to such Mortgage, whether or not the indebtedness secured thereby shall have been assumed, provided that if such indebtedness shall not have been assumed the amount of such obligation shall be deemed to be the lesser of the value of such property or the amount of the indebtedness so secured and (iii) guarantees, endorsements (other than for purposes of collection) and other contingent obligations in respect of, or to purchase or otherwise acquire, indebtedness of others, unless the amount thereof is included in indebtedness under the preceding clauses (i) or (ii). "Indenture" means this Indenture as amended or supplemented from time to time. "Institutional Accredited Investor" means an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Issue Date" means the date on which the Initial Notes are originally issued. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Mortgage" means and includes any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance. "Obligation" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities and obligations payable under the documentation governing any Indebtedness. "Officer" means any of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer and Principal Accounting Officer any Vice President, the Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by two or more Officers. "Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (1) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (2) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (3) Securities as to which Defeasance has been effected pursuant to Section 7.1(c); (4) Securities which have been paid pursuant to Section 2.9 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (A) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Permitted Subsidiary Indebtedness" means (i) any Indebtedness existing on March 7, 2000; (ii) any Indebtedness owed to the Company or a Restricted Subsidiary; (iii) any Indebtedness secured by a Mortgage not prohibited by Section 3.3; (iv) any Indebtedness incurred by any Restricted Subsidiary to extend, refinance, renew or replace an equivalent or lesser amount of Indebtedness of such Restricted Subsidiary referred to in clause (i) above, including any premium, prepayment penalties or fees or expenses incurred in connection therewith; (v) Indebtedness incurred by an Accounts Receivables Subsidiary in connection with a transaction pursuant to and in compliance with Section 3.7 hereof; (vi) the guarantee by any Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this Indenture; (vii) the incurrence by the Restricted Subsidiaries of Hedging Obligations incurred with respect to any Indebtedness or Obligation that is permitted by the terms of this Indenture to be outstanding; (viii) Indebtedness incurred by Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers' compensation claims or self-insurance, surety bonds or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (ix) Indebtedness arising from agreements of a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, asset or Restricted Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided, however, that the maximum aggregate liability of all such Indebtedness shall at no time exceed 50% of the gross proceeds actually received in connection with such disposition; (x) the incurrence of Indebtedness of Restricted Subsidiaries (including letters of credit) in respect of performance bonds, bankers' acceptances, letters of credit, performance, bid, surety or appeal bonds or similar bonds and completion guarantees provided by Restricted Subsidiaries in the ordinary course of their business and consistent with past practices and which do not secure other Indebtedness; (xi) Indebtedness that constitutes an accrued expense or trade payable; (xii) Indebtedness of a Restricted Subsidiary, to the extent the net proceeds thereof are promptly deposited to defease the Securities as described under Section 7.1; (xiii) Indebtedness that constitutes a liability for federal, state, local or other taxes and (xiv) Indebtedness that constitutes an obligation to pay salary or benefits to officers, employees and directors in the ordinary course of business. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.9 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "Principal Property" means any manufacturing facility located within the United States of America owned or leased by the Company or any Subsidiary except (a) any such manufacturing facility which the Board of Directors by resolution declares is not of material importance to any business segment of the Company or its Subsidiaries and (b) any such manufacturing facility that has total assets of less than $25 million. "QIB" means any "qualified institutional buyer" (as defined in Rule 144A under the Securities Act). "Redemption Date" means the date fixed for the redemption of any Security by or pursuant to this Indenture. "Redemption Price" means the price at which any Security is to be redeemed pursuant to this Indenture. "Registration Rights Agreement" means the registration rights agreement dated March 7, 2000, among the Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Chase Securities Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and Salomon Smith Barney Inc. "Restricted Period" means the 40 consecutive days beginning on and including the later of (A) the day on which the Initial Notes are offered to persons other than distributors (as defined in Regulation S under the Securities Act) and (B) the Issue Date. "Restricted Securities Legend" has the meaning assigned thereto in clause (A) of Section 2.1(c). "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "SEC" means the Securities and Exchange Commission. "Securities" or "Notes" means the Securities issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to the Global Securities (as appointed by the Depositary), or any successor Person thereto and shall initially be the Trustee. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means a corporation or other business entity of which more than 50% of the outstanding voting share capital or other voting ownership interests are owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Subsidiary Indebtedness" means, with respect to any Restricted Subsidiary on any date of determination (without duplication): (1) the principal in respect of (A) Indebtedness of such Restricted Subsidiary for money borrowed and (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Restricted Subsidiary is responsible or liable, including, in each case, any premium on such Indebtedness to the extent such premium has become due and payable; (2) all Capital Lease Obligations of such Restricted Subsidiary and all Attributable Debt in respect of sale and leaseback transactions entered into by such Restricted Subsidiary; (3) all obligations of such Restricted Subsidiary issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Restricted Subsidiary and all obligations of such Restricted Subsidiary under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) all obligations of such Restricted Subsidiary for the reimbursement of any obligor, other than the Company or a Restricted Subsidiary, on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of the Company and its Restricted Subsidiaries as a whole to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit); (5) the amount of all obligations of such Restricted Subsidiary with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Restricted Subsidiary thereof, the liquidation preference with respect to any Preferred Stock (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons (other than Restricted Subsidiaries) and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee; and (7) all obligations of the type referred to in clauses (1) through (6) of other Persons (other than the Company and its Restricted Subsidiaries) secured by any Mortgage on any property or asset of such Restricted Subsidiary (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured. The amount of Subsidiary Indebtedness of any Restricted Subsidiary at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as amended, as in effect on the date hereof (except as provided in Section 8.3) until such time as this Indenture is qualified under the TIA, and thereafter, as in effect on the date on which this Indenture is qualified under the TIA (except as provided in Section 8.3). "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and, thereafter, means such successor. "Trust Officer" any officer within the Global Agency & Trust Services department of the Trustee, including any vice president, assistant vice president, senior trust officer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Mortgage on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that the Subsidiary to be so designated has total assets of $1,000 or less. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that no Default shall result therefrom or shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. SECTION 1.2. Other Definitions. Term Defined in Section "Agent Members" 2.1(d) "Authenticating Agent" 2.2 "Company Order" 2.2 "Corporate Trust Office" 3.7 "Covenant Defeasance" 7.1(d) "Defaulted Interest" 2.12 "Defeasance" 7.1(c) "Definitive Securities" 2.1(e) "Event of Default" 5.1 "Exchange Global Note" 2.1(a) "Exchange Notes" Preamble "Financier" 3.7 "Foreign Restricted Subsidiary" 3.6(a) "Foreign Stock Pledge" 3.6(a) "Global Securities" 2.1(a) "IAI Global Note" 2.1(a) "IAI Notes" 2.1(a) "Initial Notes" Preamble "legal defeasance option" 7.1(b) "Note Register" 2.3 "Promissory Note" 3.7 "Private Exchange Notes" Preamble "Purchase Agreement 2.1(a) "Registrar" 2.3 "Regulation S" 2.1(a) "Regulation S Note" 2.1(a) "Regulation S Global Note" 2.1(a) "Resale Restriction Termination Date" 2.6 "Rule 144A" 2.1(a) "Rule 144A Note" 2.1(a) "Rule 144A Global Note" 2.1(a) "Special Interest Payment Date" 2.12(a) "Special Record Date" 2.12(a) "U.S. Governmental Obligations" 7.2 SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by the TIA by reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.4. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; and (6) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP. ARTICLE II The Securities SECTION 2.1. Form, Dating and Terms. (a) The Initial Notes are being offered and sold by the Company pursuant to a Purchase Agreement, dated March 2, 2000, among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Chase Securities Inc., Deutsche Bank Securities Inc., Goldman Sachs and Co., and Salomon Smith Barney Inc. (the "Purchase Agreement"). Initial Notes offered and sold to QIBs pursuant to Rule 144A under the Securities Act ("Rule 144A") in the United States of America (the "Rule 144A Note") will be issued on the Issue Date in the form of a single, permanent global Security in definitive, fully registered book-entry form substantially in the form of Exhibit A, which is hereby incorporated by reference and expressly made a part of this Indenture (the "Rule 144A Global Note"), registered in the name of a nominee of the Depositary, deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Rule 144A Global Note may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Initial Notes offered and sold outside the United States of America (the "Regulation S Note") in reliance on Regulation S under the Securities Act ("Regulation S") shall be issued in the form of a single, permanent global Security in definitive, fully registered book-entry form substantially in the form of Exhibit A (the "Regulation S Global Note") registered in the name of Cede & Co., as nominee of the Depositary, deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, as custodian for the Depositary, for credit to the respective accounts of the purchasers (or to such other accounts as they may direct) at Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System, or Clearstream Banking, societe anonyme, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Regulation S Global Note may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Initial Notes resold to Institutional Accredited Investors in the United States of America (the "IAI Note") will be issued in the form of a single, permanent global Security in definitive, fully registered book-entry form substantially in the form of Exhibit A (the "IAI Global Note") registered in the name of a nominee of the Depositary deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The IAI Global Note may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the IAI Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. The Exchange Notes and Private Exchange Notes, if any, exchanged for interests in the Rule 144A Note, Regulation S Note and IAI Note will each be issued in the form of a permanent global Note substantially in the form set forth in Exhibit B hereto, which is hereby incorporated by reference and expressly made a part of this Indenture, deposited with the Trustee as hereinafter provided, with the applicable legend set forth in Section 2.1(c) hereof (the "Exchange Global Note" and the "Private Exchange Global Note", respectively). The Exchange Global Note and the Private Exchange Global Note, as the case may be, may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate. The Rule 144A Global Note, the Regulation S Global Note, the IAI Global Note, the Exchange Global Note and the Private Exchange Global Note, if any, are sometimes collectively herein referred to as the "Global Securities." The principal of (premium, if any) and interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage, in addition to those set forth on Exhibits A and B. The Company and the Trustee shall approve the forms of the Securities and any notation, endorsement or legend on them. Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms. (b) Denominations. The Securities shall be issuable only in fully registered form, without coupons, and only in denominations of $1,000 and any integral multiple thereof. (c) Restrictive Legends. Unless and until (i) an Initial Note or Private Exchange Note is sold under an effective registration statement or (ii) an Initial Note is exchanged for an Exchange Note in connection with an effective registration statement, in each case pursuant to the Registration Rights Agreement, (A) such Initial Note and Private Exchange Note, as the case may be, shall bear the following legend (the "Restricted Securities Legend") on the face thereof: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF (I) EXCEPT IN COMPLIANCE WITH THE TERMS OF THE INDENTURE AND (II) IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT, OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON- U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR", IN EITHER CASE IN A MINIMUM PRINCIPAL AMOUNT OF SECURITIES OF $250,000 OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. (B) All Global Securities shall bear the following legend on the face thereof: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (d) Book-Entry Provisions. (i) This Section 2.1(d) shall apply only to Global Securities deposited with the Trustee, as custodian for the Depositary. (ii) Each Global Security initially shall (x) be registered in the name of the Depositary for such Global Security or the nominee of such Depositary, (y) be delivered to the Trustee as custodian for such Depositary and (z) bear legends as set forth in Section 2.1(c). (iii) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (iv) In connection with any transfer of a portion of the beneficial interest in a Global Security pursuant to clause (e) of this Section to beneficial owners who are required to hold Definitive Securities (as defined below), the Security Custodian shall reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Securities of like tenor and amount. (v) In connection with the transfer of an entire Global Security to beneficial owners pursuant to clause (e) of this Section, such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. (e) Definitive Securities. Except as provided below, owners of beneficial interests in Global Securities will not be entitled to receive certificated Securities ("Definitive Securities"). If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain Definitive Securities in exchange for their beneficial interests in a Global Security upon written request in accordance with the Depositary's and the Registrar's procedures. In addition, Definitive Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Security if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or the Depositary ceases to be a "Clearing Agency" registered under the Exchange Act, at a time when the Depositary is required to be so registered in order to act as Depositary, and in each case a successor depositary is not appointed by the Company within 40 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary. (f) Any Definitive Security delivered in exchange for an interest in a Global Security pursuant to Section 2.1(d)(iv) and (v) shall, except as otherwise provided by paragraph (d) of Section 2.6, bear the applicable legend regarding transfer restrictions applicable to the Definitive Security set forth in Section 2.1(c) and be subject to the applicable certification requirements set forth in this Indenture. (g) The registered holder of a Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 2.2. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually authenticates the Security. The signature of the Trustee on a Security shall be conclusive evidence that such Security has been duly and validly authenticated and issued under this Indenture. At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery: (1) Initial Notes for original issue in an aggregate principal amount of $600 million and (2) Exchange Notes and Private Exchange Notes, if any, for issue only in an Exchange Offer pursuant to the Registration Rights Agreement, and only in exchange for Initial Notes of an equal principal amount, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company (the "Company Order"). Such Company Order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Notes, Exchange Notes or Private Exchange Notes. The aggregate principal amount of Securities Outstanding at any time may not exceed $600 million, except as provided in Section 2.9. The Trustee may appoint an agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. In case the Company, pursuant to Article IV, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article IV, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Securities as specified in such order for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 2.2 in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time Outstanding for Securities authenticated and delivered in such new name. SECTION 2.3. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Securities and of their transfer and exchange (the "Note Register"). The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee in writing of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 6.7. The Company or any of its domestically incorporated Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities. SECTION 2.4. Paying Agent To Hold Money in Trust. At or prior to 10:00 a.m (New York City time) on the date on which any principal of, premium, if any, or interest on any Security is due and payable, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal, premium, if any, or interest when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of the Securityholders or the Trustee all money held by such Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.6. Transfer and Exchange. (a) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Security and such account shall be credited in accordance with such order with a beneficial interest in the Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Security from which such interest is being transferred. (b) The following provisions shall apply with respect to any proposed transfer of a Rule 144A Note or an IAI Note prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any Affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"): (i) a transfer of a Rule 144A Note or an IAI Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Rule 144A Note or an IAI Note or a beneficial interest therein to an Institutional Accredited Investor shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 hereof from the proposed transferee and, if requested by the Company, the delivery of an opinion of counsel, certifications and/or other information satisfactory to each of them; and (iii) a transfer of a Rule 144A Note or an IAI Note or a beneficial interest therein to a non U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 hereof from the proposed transferee and, if requested by the Company, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them. (c) The following provisions shall apply with respect to any proposed transfer of a Regulation S Note prior to the expiration of the Restricted Period: (i) a transfer of a Regulation S Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) a transfer of a Regulation S Note or a beneficial interest therein to an Institutional Accredited Investor shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7 hereof from the proposed transferee and, if requested by the Company, the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them; and (iii) a transfer of a Regulation S Note or a beneficial interest therein to a non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 hereof from the proposed transferee and, if requested by the Company, receipt by the Trustee or its agent of an opinion of counsel, certification and/or other information satisfactory to each of them. After the expiration of the Restricted Period, interests in a Regulation S Note may be transferred without requiring certification set forth in Section 2.8 or any additional certification. (d) Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities not bearing a Restricted Securities Legend, the Registrar shall deliver Securities that do not bear a Restricted Securities Legend. Upon the transfer, exchange or replacement of Securities bearing the Restricted Securities Legend, the Registrar shall deliver only Securities that bear such Restricted Securities Legend unless there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (e) The Security Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.1 or this Section 2.6. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Security Registrar. (f) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall, subject to the other terms and conditions of this Article II, execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charges payable upon exchange or transfer pursuant to Section 8.5). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning (1) 15 Business Days before the mailing of a notice of an offer to repurchase Securities and ending at the close of business on the day of such mailing or (2) 15 Business Days before an interest payment date and ending on such interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (g) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in, the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice or the payment of any amount or delivery of any Securities (or other security or property) under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.7. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors. [Date] Citibank, N.A 111 Wall Street, 5th Floor New York, NY 10005 Attention: Global Agency & Trust Services Re: CK Witco Corporation 8 1/2% Senior Notes due 2005 Ladies and Gentlemen: This certificate is delivered to request a transfer of $ aggregate principal amount of the 8 1/2% Senior Notes due 2005 (the "Securities") of CK Witco Corporation (the "Company"). The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Securities and we invest in or purchase securities similar to the Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any Affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Securities are eligible for resale pursuant to Rule 144A, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in either case in a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (c), (d) or (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE: BY SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S. [Date] Citibank, N.A. 111 Wall Street, 5th Floor New York, NY 10005 Attention: Global Agency & Trust Services Re: CK Witco Corporation 8 1/2% Senior Notes due 2005 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (a) the offer of the Securities was not made to a person in the United States; (b) either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (c) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (d) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:____________________ ____________________ Authorized Signature Signature Medallion Guaranteed SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co- registrar from any loss that any of them may suffer if a Security is replaced, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously Outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company and any other obligor upon the Securities, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.10. Temporary Securities. Until Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall in all respects be entitled to the same benefits under this Indenture as a holder of Definitive Securities. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and return to the Company all Securities surrendered for registration of transfer, exchange, payment or cancellation by delivering a certificate of such destruction to the Company. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation. SECTION 2.12. Payment of Interest; Defaulted Interest. Interest on any Security which is payable, and is punctually paid or duly provided for, on any interest payment date shall be paid to the Person in whose name such Security (or one or more predecessor Securities) is registered at the close of business on the regular record date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 2.3. Any interest on any Security which is payable, but is not paid when the same becomes due and payable and such nonpayment continues for a period of 30 days shall forthwith cease to be payable to the Holder on the regular record date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Securities (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective predecessor Securities) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date (not less than 30 days after such notice) of the proposed payment (the "Special Interest Payment Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a record date (the "Special Record Date") for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the Special Interest Payment Date and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor to be given in the manner provided for in Section 10.2, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor having been so given, such Defaulted Interest shall be paid on the Special Interest Payment Date to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.13. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.14. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and their reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE III Covenants SECTION 3.1. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 3.2. Reports by the Company. The Company shall file with the Trustee and the SEC, and transmit to Securityholders, such information, documents and other reports (including annual and quarterly reports), and such summaries thereof, as may be required pursuant to the TIA at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the SEC. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 3.3. Limitation on Mortgages. The Company will not create or assume and will not permit any Restricted Subsidiary other than a Foreign Subsidiary to create or assume any Mortgage of or upon any of its Principal Properties now owned or hereafter acquired, of or upon any income or profits therefrom, without making effective provision, and the Company covenants that in any such case it will make or cause to be made effective provision, whereby the Securities shall be secured by such Mortgage equally and ratably with any and all other obligations and Indebtedness thereby secured, or shall be secured by a senior Mortgage, so long as any such other obligations and Indebtedness shall be so secured; provided that the foregoing covenant shall not apply to any of the following: (1) The creation of any Mortgage on any property hereafter acquired by the Company or any Restricted Subsidiary, contemporaneously with such acquisition or within 270 days thereafter, to secure or provide for the payment of any part of the purchase price of such property, or the assumption by the Company or any Restricted Subsidiary of any Mortgage upon any property hereafter acquired by the Company or any Restricted Subsidiary existing at the time of such acquisition, provided that the principal amount of any Indebtedness secured by any such Mortgage created or assumed shall not exceed the cost to the Company or Restricted Subsidiary, as the case may be, of the property covered by such Mortgage (including, in the case of the assumption of such Mortgage, the principal amount of the Indebtedness secured thereby), or the fair value (if and as determined by the Board of Directors) of such property at the time the Mortgage is created or assumed, whichever shall be less. (2) Any Mortgage on any property acquired by the Company or any Restricted Subsidiary existing at the time of such acquisition and any Mortgage executed by any corporation or other entity acquired by the Company or any Restricted Subsidiary and exclusively securing any Indebtedness in a principal amount existing at the time of such acquisition, and, in each case, not assumed by the Company or any Restricted Subsidiary. (3) Any Mortgage executed (i) by any Restricted Subsidiary and exclusively securing any Indebtedness incurred by such Restricted Subsidiary to the Company or to one or more other Restricted Subsidiaries or (ii) by the Company and exclusively securing any Indebtedness incurred by the Company to any Restricted Subsidiary. (4) The creation of one or more Mortgages for the sole purpose of extending, renewing, refinancing or refunding in whole or in part one or more of the Mortgages referred to in clauses (1), (2), or (3) of this Section or one or more of the Mortgages existing on March 7, 2000 on any assets of the Company or a Restricted Subsidiary or one or more Mortgages permitted by this paragraph 4; provided that the aggregate principal amount of Indebtedness secured by any such extension, renewal, refinancing or refunding Mortgage shall not exceed the aggregate amount of Indebtedness secured by the Mortgage or Mortgages being extended, renewed, refinanced or refunded at the time of such extension, renewal, refinancing or refunding and that such extending, renewing, refinancing or refunding Mortgage shall be limited to (A) all or any part of the same property (and improvements thereon) which secured the Mortgage extended, renewed, refinanced or refunded or (B) in the case of a simultaneous extension, renewal, refinancing or refunding of one or more Mortgages on contiguous property (and improvements thereon), all or any part of the same contiguous property which secured the Mortgage extended, renewed, refinanced or refunded; and provided further that in the case of any extension, renewal, refinancing or refunding of a Mortgage of the type referred to in clause (3) or this clause, neither the Company nor any Restricted Subsidiary (other than the Restricted Subsidiary whose property is subject thereto) that has not theretofore assumed the indebtedness secured thereby shall assume any Indebtedness secured by such extending, renewing, refinancing or refunding Mortgage. (5) Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due or being contested in good faith. (6) Liens in favor of the United States of America, or any State or subdivision thereof, or any other county or subdivision thereof where the Company or any Restricted Subsidiary may transact any of its business, or any governmental agency, to the extent required in the ordinary course of business. (7) Liens for taxes or assessments or governmental charges or levies, if such taxes, assessments, governmental charges or levies shall not at the time be due and payable, or if the same thereafter can be paid without penalty, or if the same are being contested in good faith by appropriate proceedings. (8) Pledges or deposits to secure payment of worker's compensation or insurance premiums, or in connection with tenders, bids or contracts (other than contracts for the payment of money) or leases, deposits to secure surety, appeal or performance bonds, pledges or deposits in connection with contracts made with or at the request of the United States of America or any State or any agency of the United States or any such State, and pledges or deposits for purposes similar to any of the above in the ordinary course of business. (9) Liens created by or resulting from any litigation or legal or administrative proceeding which at the time is currently being contested in good faith by appropriate proceedings. (10) Leases made or existing (i) on property acquired in the ordinary course of business or (ii) on individual properties subject to the lease having a value of less than $1 million per property or $25 million in the aggregate. (11) Landlords' liens on property held under lease. (12) Liens incurred in the ordinary course of business with respect to obligations that (i) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or any of its Restricted Subsidiaries. (13) Liens with respect to Permitted Subsidiary Indebtedness incurred pursuant to clauses (vii), (viii) and (x) of the definition of Permitted Subsidiary Indebtedness. (14) Any Mortgage securing Indebtedness, the net proceeds of which are promptly deposited to defease the Securities as described under Section 7.1. (15) Any Mortgage created pursuant to and in compliance with the provisions of Section 3.7. Notwithstanding the foregoing provisions of this Section, the Company or any Restricted Subsidiary may grant such easements for ingress and egress over property owned by the Company or such Restricted Subsidiary in favor of the United States or any State, or any department, agency, instrumentality or political subdivision of either, as is necessary to permit the attachment or removal of any equipment or other property designed primarily for the purpose of pollution control, solid waste and waste water treatment and with respect to which the Company or any Restricted Subsidiary may have granted a lien or transferred title to such government or governmental agency pursuant to the foregoing provisions of this Section or of Section 3.4 in connection with the financing of such equipment or other property; provided that any such lien on equipment or other property designed primarily for the purpose of pollution control shall not apply to any other property owned by the Company or any Restricted Subsidiary and any such transfer of title to equipment or other property designed primarily for the purpose of pollution control shall not include transfer of title to any other property owned by the Company or any Restricted Subsidiary. The sale or other transfer of oil, gas or other minerals in place for a period of time until, or in an amount such that, the transferee will realize therefrom a specified amount (however determined) of money for such minerals, or the sale or other transfer of any other interest in property of the character commonly referred to as a production payment shall not be deemed to create, for purposes of this Section, any Mortgage upon the assets of the Company or any Restricted Subsidiary. If at any time the Company or any Restricted Subsidiary shall create or assume any Mortgage not excepted from this Section as above provided, and not exempted under Section 3.5, the Company will promptly deliver to the Trustee (1) an Officers' Certificate stating that the covenant of the Company contained in the first paragraph of this Section has been complied with, and (2) an Opinion of Counsel stating that, in the opinion of such counsel, such covenant has been complied with and that any instruments executed by the Company in performance of such covenant comply with the requirements thereof. In the event that the Company shall hereafter secure the Securities equally and ratably with, or senior to, any other obligation or Indebtedness pursuant to the provisions of this Section, the Trustee is hereby authorized to enter into an amendment to this Indenture or agreement supplemental hereto and to take such action, if any, as it may deem advisable to enable it to enforce effectively the rights of the Holders of the Securities so secured equally and ratably with such other obligation or Indebtedness. The Trustee shall be entitled to receive, and subject to the provisions of Section 6.1 and Section 6.2 hereof, shall be fully protected in relying upon, an Opinion of Counsel as conclusive evidence that any amendment hereto or action taken equally and ratably to secure the Securities complies with the provisions of this Section. In the event that the Company or any Restricted Subsidiary shall be entitled in accordance with the provisions of this Indenture to a release of any Mortgage granted to secure the Securities, the Trustee is hereby authorized to take such action and execute and deliver such documents and instruments as the Company or such Restricted Subsidiary may request to implement and evidence the release of such Mortgage. Subject to the provisions of Section 3.4, nothing herein contained shall be deemed to prevent the Company or any Restricted Subsidiary from selling any property with the intention of taking back a lease of such property. The covenant contained in this Section 3.3 is subject to the provision for exempted Indebtedness in Section 3.5. SECTION 3.4. Limitation on Sale and Leaseback Transactions. The Company will not, nor will it permit any Restricted Subsidiary, other than a Foreign Subsidiary, to enter into any arrangement with any person providing for the leasing by the Company or any Restricted Subsidiary of any Principal Property (except for temporary leases of not more than three years and except for leases between the Company and a Subsidiary or between Subsidiaries), which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such person unless either (a) the Company or such Restricted Subsidiary would be entitled pursuant to Section 3.3 to incur Indebtedness secured by a Mortgage on the property to be leased equal in amount to the Attributable Debt with respect to such sale and lease-back transaction without equally and ratably securing the Securities; or (b) the Company shall apply an amount at least equal to the net proceeds of such sale or transfer or the fair value as determined by the Board of Directors of such property, whichever is greater, to the redemption or retirement, within 120 days of the effective date of any such arrangement of Indebtedness of the Company which is not subordinate or junior in right of payment to the Securities; provided, however, that in lieu of applying all or any part of such amount to such redemption or retirement of such Indebtedness, the Company may, within 75 days after such sale voluntarily retire Indebtedness, excluding redemption and retirement of Indebtedness pursuant to mandatory sinking fund or mandatory prepayment provisions or by payment at maturity, and thereby reduce the amount of cash which the Company shall be required to apply to the redemption or retirement of Indebtedness under this Section by an amount equal to the aggregate of the principal amount of the Indebtedness, as the case may be, so redeemed or retired. The covenant contained in this Section is subject to the provision for exempted Indebtedness in Section 3.5. SECTION 3.5. Exempted Indebtedness. Notwithstanding the provisions contained in Sections 3.3 and 3.4, the Company and its Subsidiaries may, without securing any Securities, secure obligations or Indebtedness which would otherwise be subject to the limitations of Section 3.3 or may, without redeeming or retiring Indebtedness, enter into sale and lease-back transactions which would otherwise be subject to the limitations of Section 3.4, or there may be a combination of such transactions, if after giving effect to any such security arrangements and any such sale and lease-back transactions the sum (computed without double-counting) of (1) the aggregate amount of all such obligations and Indebtedness then outstanding the securing of which would otherwise have been prohibited at the time the security was granted by the limitations of Section 3.3, and (2) the aggregate amount of all Attributable Debt then outstanding under all then existing leases under sale and lease- back transactions which would otherwise be or have been prohibited by the provisions of Section 3.4, does not at any such time exceed 10% of Consolidated Net Tangible Assets. SECTION 3.6. Limitation on Subsidiary Indebtedness. (a) The Company will not cause or permit any Restricted Subsidiary that is not a Foreign Subsidiary, and is not a Guarantor of the Securities, directly or indirectly, to create, incur, assume, guarantee or otherwise in any manner become liable for the payment of or otherwise incur (collectively, "incur") any Subsidiary Indebtedness, including any Acquired Indebtedness but excluding any Permitted Subsidiary Indebtedness, unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture providing for a Guarantee of the Securities. The Company will not cause or permit any Restricted Subsidiary that is a Foreign Subsidiary ("Foreign Restricted Subsidiary"), the stock of which is not already pledged to secure the Company's obligations with respect to the Securities, directly or indirectly to incur any Subsidiary Indebtedness, including any Acquired Indebtedness but excluding any Permitted Subsidiary Indebtedness, unless 100% of the nonvoting stock and 65% of the voting stock of such Foreign Restricted Subsidiary is pledged to secure the Company's obligations with respect to the Securities and the Company executes a pledge agreement substantially in the form of Annex I hereto (a "Foreign Stock Pledge"). Notwithstanding the foregoing, any Restricted Subsidiary may incur Subsidiary Indebtedness which would otherwise be prohibited by the restrictions hereunder if immediately thereafter, the sum (computed without double-counting) of (i) all outstanding Subsidiary Indebtedness (excluding Permitted Subsidiary Indebtedness), (ii) all outstanding obligations or Indebtedness secured by Mortgages that would be prohibited by Section 3.3 (without taking into account Section 3.5) and (iii) all Attributable Debt relating to all then existing leases under sale and lease-back transactions which would have been prohibited by the provisions of Section 3.4 (without taking into account Section 3.5), does not at the time of incurrence thereof exceed 10% of Consolidated Net Tangible Assets. (b) For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Subsidiary Indebtedness described in the definition of Permitted Subsidiary Indebtedness, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness will be treated as having been incurred pursuant to only one of such clauses. Accrual of interest and the accretion of accreted value will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. (c) Notwithstanding anything foregoing to the contrary, any Guarantee by a Restricted Subsidiary or a Foreign Stock Pledge shall provide by its terms that it, and any liens securing the same, shall be automatically and unconditionally released and discharged upon: (i) any sale or transfer to, or exchange with any Person of all of the Company's equity interests in, or all or substantially all the assets of, such Restricted Subsidiary, which transaction is in compliance with the terms of this Indenture and such Restricted Subsidiary is released from all guarantees, if any, by it of other Subsidiary Indebtedness of the Company or any Restricted Subsidiaries, (ii) the payment in full of all obligations under the Subsidiary Indebtedness the incurrence of which required the delivery of such Guarantee or a Foreign Stock Pledge if the Restricted Subsidiary has no other outstanding Subsidiary Indebtedness that would require the delivery of such guarantee or Foreign Stock Pledge, (iii) with respect to Subsidiary Indebtedness constituting guarantees of Indebtedness, the release by the holders of such Indebtedness of the guarantee by such Restricted Subsidiary, including any deemed release upon payment in full of all obligations under such Indebtedness, at such time as (A) no other Indebtedness, the incurrence of which required the delivery of a Guarantee or a Foreign Stock Pledge, constituting Subsidiary Indebtedness has been guaranteed by such Restricted Subsidiary, or (B) the holders of all such other Indebtedness constituting Subsidiary Indebtedness which is guaranteed by such Restricted Subsidiary, the incurrence of which required the delivery of a Guarantee or a Foreign Stock Pledge, also release the guarantee by such Restricted Subsidiary, including any deemed release upon payment in full of all obligations under such Indebtedness. (d) For purposes of this Section 3.6, any Acquired Indebtedness shall not be deemed to have been incurred until 270 days from the date: (A) the Person obligated on such Acquired Indebtedness becomes a Restricted Subsidiary or (B) the acquisition of assets in connection with which such Acquired Indebtedness was assumed is consummated. (e) In the event that the Company or any Subsidiary shall be entitled in accordance with the provisions of this Indenture to a release of any Guarantee or a Foreign Stock Pledge granted to secure the Securities, the Trustee is hereby authorized to take such action and execute and deliver such documents and instruments as the Company or such Subsidiary may request to implement and evidence the release of such Guarantee or a Foreign Stock Pledge. SECTION 3.7. Sales of Accounts Receivable. The Company may, and any of its Restricted Subsidiaries may, sell at any time and from time to time, accounts receivable and notes receivable and related assets to an Accounts Receivable Subsidiary; provided that (i) the aggregate consideration received in each such sale is at least equal to the aggregate fair market value of the receivables sold, as determined by the Board of Directors in good faith, (ii) no less than 80% of the consideration received in each such sale consists of either cash or a promissory note (a "Promissory Note") which is subordinated to no Indebtedness or obligation (except that it may be subordinated to the financial institutions or other entities providing the financing to the Accounts Receivable Subsidiary with respect to such accounts receivable (the "Financier")) or an equity interest in such Accounts Receivable Subsidiary; provided, further that the initial sale will include all accounts receivable of the Company and/or its Restricted Subsidiaries that are party to such arrangements that constitute eligible receivables under such arrangements and (iii) the Company and its Restricted Subsidiaries will sell all accounts receivable that constitute eligible receivables under such arrangements to the Accounts Receivable Subsidiary no less frequently than on a monthly basis. The Company (i) will not permit any Accounts Receivable Subsidiary to sell any accounts receivable purchased from the Company or any of its Restricted Subsidiaries to any other Person except on an arm's length basis and solely for consideration in the form of cash or Cash Equivalents; (ii) will not permit the Accounts Receivable Subsidiary to engage in any business or transaction other than the purchase, financing and sale of accounts receivable of the Company and its Restricted Subsidiaries and activities incidental thereto, (iii) will not permit any Accounts Receivable Subsidiary to incur Indebtedness in an amount in excess of the book value of such Accounts Receivable Subsidiary's total assets, as determined in accordance with generally accepted accounting principles and (iv) will, at least as frequently as monthly, cause the Accounts Receivable Subsidiary to remit to the Company as payment on the outstanding balance of the Promissory Notes, all available cash or Cash Equivalents not held in a collection account pledged to a Financier, to the extent not applied to pay or maintain reserves for reasonable operating expenses of the Accounts Receivable Subsidiary or to satisfy reasonable minimum operating capital requirements. SECTION 3.8. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 3.3, 3.4, 3.5 and 3.6 if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities shall, by notice to the Trustee, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. SECTION 3.9. Maintenance of Office or Agency. The Company will maintain in The City of New York an office or agency where the Securities may be presented or surrendered for payment, where, if applicable, the Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The corporate trust office of the Trustee, which initially shall be located at 111 Wall Street, 5th Floor New York, N.Y. 10005 Attention: Global Agency & Trust Services (the "Corporate Trust Office") shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. SECTION 3.10. Money for Security Payments to be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (or premium, if any) or interest on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal of (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee in writing of its action or failure to so act. Whenever the Company shall have one or more Paying Agents for the Securities, it will, on or before each due date of the principal of (or premium, if any) or interest on any Securities, deposit with any Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) that shall be available to the Trustee by 10:00 a.m. New York City time on such due date sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of such action or any failure to so act. The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee written notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Subject to any applicable abandoned property law, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest on any Security and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Order, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment to the Company, may at the expense of the Company mail to the Holders of the Securities as to which the money to be repaid was held in trust, as their names and addresses appear in the Security Register, a notice that such moneys remain unclaimed and that, after a date specified in the notice, which shall not be less than 30 days from the date on which the notice was first mailed to the Holders of the Securities as to which the money to be repaid was held in trust, any unclaimed balance of such moneys then remaining will be paid to the Company free of the trust formerly impressed upon it. SECTION 3.11. Corporate Existence. Subject to Article IV, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. SECTION 3.12. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate, one of the signers of which is the principal executive, principal financial or principal accounting officer of the Company stating, that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and whether or not the signers know of any Default or Event or Default that occurred during such period. If they do, the certificate shall describe the Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA ss. 314(a)(4). SECTION 3.13. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 3.14. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 3.15 Statement by Officers as to Default. The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto. ARTICLE IV Consolidation, Merger, Conveyance, Transfer or Lease SECTION 4.1. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership, limited liability company or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an amendment to this Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if an indenture supplemental hereto is required in connection with such transaction, such amendment complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 4.2. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 4.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE V Defaults and Remedies SECTION 5.1. Events of Default. "Event of Default", whenever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in any payment of any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days; (2) default in the payment of the principal of or premium, if any, on, or the redemption price of, any Note, at its Maturity; (3) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (4) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company (including this Indenture) with a principal amount then outstanding, individually or in the aggregate, in excess of $25,000,000, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or which results from the nonpayment of such indebtedness at its stated maturity, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled within a period of 10 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities, a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; (5) the entry by a court having jurisdiction in the premises of (A) a decree or order for a relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order in effect for a period of 60 consecutive days; and (6) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. SECTION 5.2. Acceleration. If an Event of Default with respect to the Outstanding Securities occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal amount of all of the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities, which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default other than the non-payment of the principal, which has become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.4. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.3. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on any Securities or to enforce the performance of any provision of any Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 5.4. Waiver of Past Defaults. The Holders of a majority in principal amount of the Outstanding Securities, by notice to the Trustee, may waive an existing Default or Event of Default and its consequences except (i) a Default or Event of Default in the payment of the principal of or any premium or interest on a Note, or (ii) in respect of a covenant or provision hereof which under Article VIII cannot be modified or amended without the consent of each Securityholder affected. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 5.5. Control by Majority. The Holders of a majority in principal amount of the Outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action under this Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 5.6. Limitation on Suits. No Holder shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity acceptable to the Trustee against the costs, expenses and liabilities (including reasonable legal fees and expenses) to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more of such Holders shall have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 5.7. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium (if any) or interest on the Securities held by such Holder, on or after the respective Stated Maturities expressed in such Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 5.8. Collection Suit by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 5.9. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 6.7. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 5.10. Priorities. If the Trustee collects any money or property pursuant to this Article V, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 6.7; SECOND: to Securityholders for amounts due and unpaid for principal of and any premium and interest on the Securities, in respect of which or for the benefit of which such money or property has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and any premium of and any premium and interest on the Securities, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 5.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 5.7 or a suit by Holders of more than 10% in principal amount of Outstanding Securities. ARTICLE VI Trustee SECTION 6.1. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.5. (d) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 6.2. Rights of Trustee. (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond or other paper or document; but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (g) The Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Section 5.1(1) and 5.1(2), or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained "actual knowledge." "Actual knowledge" shall mean the actual fact or statement of knowing without independent investigation with respect thereto. SECTION 6.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 6.10 and 6.11. SECTION 6.4. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication or for the use or application of any funds received by any Paying Agent other than the Trustee. SECTION 6.5. Notice of Defaults. If a Default or Event of Default occurs and is continuing, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it occurs provided that in the case of Default or Event of Default described in Section 5.1(3) no such notice shall be given until at least 30 days after such Default or Event of Default occurs and provided further that except in the case of a Default or Event of Default in payment of principal of, premium (if any), or interest on any Security, the Trustee may withhold the notice if and so long as its board of directors, a committee of its board of directors or a committee of its Trust Officers and/or a Trust Officer of the Trustee in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 6.6. Reports by Trustee to Holders. As promptly as practicable after each December 31 beginning with December 31, 2000, and in any event prior to March 1 in each year, the Trustee shall mail to each Securityholder a brief report dated as of such December 31 that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b). The Trustee shall also transmit by mail all reports required by TIA ss. 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee in writing whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 6.7. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation for its services as the parties shall agree in writing from time to time. The Trustee's compensation shall not be limited by any law to compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out- of-pocket expenses incurred or made by it, including, but not limited to, costs of collection, costs of preparing and reviewing reports, certificates and other documents, costs of preparation and mailing of notices to Securityholders and reasonable costs of counsel retained by the Trustee in connection with the delivery of an Opinion of Counsel or otherwise, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify each of the Trustee, any predecessor Trustee and each of its officers, directors, counsel and agents, against any and all loss, liability, claim, damage or expense (including, but not limited to, reasonable attorneys' fees and expenses and taxes other than taxes based on the income of the Trustee) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 6.7) and of defending itself against any claims (whether asserted by any Securityholder, the Company or otherwise). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct or negligence, subject to the exceptions contained in Section 6.1(c) hereof. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and any premium and interest on particular Securities. The Trustee's right to receive payment of any amounts due under this Section 6.7 shall not be subordinate to any other liability or indebtedness of the Company. The Company's payment obligations pursuant to this Section and any lien arising hereunder shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.1(4), (5) or (6) with respect to the Company, the expenses are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 6.8. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Outstanding Securities may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 6.10; (2) the Trustee is adjudged a bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed and the Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 6.7. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Outstanding Securities may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 6.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section 6.8, the Company's obligations under Section 6.7 shall continue for the benefit of the retiring Trustee. SECTION 6.9. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture, any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 6.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA ss. 310(b). SECTION 6.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. SECTION 6.12. Trustee's Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company, may at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. ARTICLE VII Discharge of Indenture; Defeasance; Covenant Defeasance SECTION 7.1. Discharge of Liability on Securities; Defeasance; Covenant Defeasance. (a) When (i) the Company delivers to the Trustee all Outstanding Securities (other than Securities replaced pursuant to Section 2.9) for cancellation or (ii) all Outstanding Securities have become due and payable at Maturity and the Company irrevocably deposits with the Trustee funds sufficient to pay at Maturity all such Outstanding Securities (other than Securities replaced pursuant to Section 2.9), including interest thereon to Maturity, and the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.1(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company (accompanied by an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture have been complied with) and at the cost and expense of the Company. (b) The Company may elect, at its option by resolution of the Board of Directors at any time, to have either Section 7.1(c) or Section 7.1(d) applied to the Outstanding Securities upon compliance with the conditions set forth below in this Article VII. (c) Upon the Company's exercise of the option provided in Section 7.1(b) to have this Section 7.1(c) applied to the Outstanding Securities, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities as provided in this Section 7.1(c) on and after the date the conditions set forth in Section 7.2 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under the Securities and this Indenture insofar as the Securities are concerned (and the trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders to receive, solely from the trust fund described in Section 7.2 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities when payments are due, (2) the Company's obligations with respect to such Securities under Sections 2.6, 2.9, 2.11, 3.9 and 3.10, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder, (4) the Company's obligations under Section 6.7 and (5) this Article VII. Subject to compliance with this Article VII, the Company may exercise its option provided in Section 7.1(b) to have this Section 7.1(c) applied to the Outstanding Securities notwithstanding the prior exercise of its option provided in Section 7.1(b) to have Section 7.1(d) applied to the Outstanding Securities. (d) Upon the Company's exercise of the option provided in Section 7.1(b) to have this Section 7.1(d) applied to the Outstanding Securities (1) the Company shall be released from its obligations under Sections 3.3, 3.4, 3.5, 3.6, 3.11, 3.13 and 3.14, and Section 4.1 and (2) the occurrence of any event specified in Section 5.1(3) (with respect to any of Sections 3.3, 3.4, 3.5, 3.6, 3.11, 3.13 and 3.14, and Section 4.1(2) and (3)) and 5.1(4) shall be deemed not to be or result in an Event of Default, in each case with respect to the Outstanding Securities as provided in this Section 7.1(d) on or after the date the conditions set forth in Section 7.2 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 5.1(3)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and the Note shall be unaffected thereby. Notwithstanding any Covenant Defeasance, the Company's obligations under section 6.7 shall survive said Covenant Defeasance with respect to any Securities deceased hereunder. (e) Notwithstanding the provisions of Sections 7.1(a) and (b), the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.9, 6.7, 6.8, 7.4, 7.5 and 7.6 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 6.7, 7.4 and 7.5 shall survive. SECTION 7.2. Conditions to Defeasance or Covenant Defeasance. The Company may exercise its Defeasance option or its Covenant Defeasance option with respect to the Outstanding Securities only if: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee that satisfies the requirements contemplated by Section 6.10 and agrees to comply with the provisions of this Article VII applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Securityholders (a) money in an amount, or (b) U.S. Government Obligations that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (c) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on the Securities on the respective Stated Maturities, in accordance with the terms of this Indenture and the Securities. As used herein, "U.S. Government Obligation" means (x) any security that is (i) a direct obligation of the United States of America for the payment of which full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by or acting as an agent or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation specified in clause (x) and held by such custodian for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any such U.S. Government Obligation, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. (2) In the case of an election under Section 7.1(c), the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date first set forth hereinabove, there has been a change in the applicable Federal income tax law, in either case (A) or (B) to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities, will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to the Securities, and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. (3) In the case of an election under Section 7.1(d), the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities, will not recognize gain or loss for Federal income tax purposes as a result of the deposit and Covenant Defeasance to be effected and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. (4) The Company shall have delivered to the Trustee an Officers' Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of such deposit. (5) No Event of Default or event that (after notice or lapse of time or both) would become an Event of Default shall have occurred and be continuing at the time of such deposit or, with regard to any Event of Default or any such event specified in Sections 5.1(5) and (6), at any time on or prior to the 123rd day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 123rd day). (6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act. (7) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is party or by which it is bound. (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with and the other statements listed under Section 10.5. (9) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be qualified under such Act or exempt from regulation thereunder. SECTION 7.3. Application of Trust Money. Subject to the provisions of the last paragraph of Section 3.10, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and Section 7.6, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 7.2 shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting on its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law. SECTION 7.4. Repayment to Company. Anything herein to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Order any money or U.S. Government Obligations held by it as provided in this Article VII which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect Defeasance or Covenant Defeasance, provided that the Trustee shall not be required to liquidate any U.S. Government Obligations in order to comply with the provisions of this paragraph. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company Order any money held by them for the payment of principal of or interest on the Securities that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as unsecured general creditors. SECTION 7.5. Indemnity for U.S. Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 7.6. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company under this Indenture and the Securities, shall be revived and reinstated as though no such deposit had occurred pursuant to this Article VII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VII; provided, however, that, if the Company has made any payment of principal of or any premium or interest on any Securities, following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE VIII Amendments SECTION 8.1. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article IV in respect of the assumption by a successor Person to the Company of an obligation of the Company under this Indenture; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (5) to comply with any requirements of the SEC in connection with qualifying this Indenture under the TIA; (6) to comply with Sections 6.8 and 6.9 in respect of the assumption by a successor Trustee of an obligation of the Trustee under this Indenture; or (7) to make any change that does not adversely affect the rights of any Securityholder. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 8.2. With Consent of Holders. With the written consent of the Holders of not less than a majority in principal amount of the Outstanding Securities affected thereby, the Company and the Trustee may amend this Indenture or modify in any manner the rights of the Securityholders under this Indenture. However, without the consent of each Securityholder affected, an amendment may not: (a) change the Stated Maturity of the principal of, or any installment of principal of or any premium or interest on, any Security, reduce the principal amount thereof or the interest or any premium thereon, change the method of computing the amount of principal thereof or interest thereon on any date, change any place of payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment, on or after the redemption date or the repayment date, as the case may be); (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such modification or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain Defaults hereunder and their consequences provided for in this Indenture; or (c) modify any of the provisions of this Section, Section 3.6 or Section 5.4, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 8.3. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 8.4. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Securityholder shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver made pursuant to Section 8.2 shall become effective upon receipt by the Trustee of the requisite number of written consents. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall become valid or effective more than 120 days after such record date. SECTION 8.5. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 8.6. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article VIII if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. ARTICLE IX Redemption of Securities SECTION 9.1. Redemption. The Securities may or shall, as the case may be, be redeemed, as a whole or from time to time in part, subject to the conditions and at the Redemption Prices specified in the form of Securities, together with accrued interest to the Redemption Date. SECTION 9.2. Applicability of Article. Redemption of Securities at the election of the Company, as permitted by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 9.3. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 9.1 shall be evidenced by a resolution of the Board of Directors. In case of any partial redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Securities to be redeemed pursuant to Section 9.4. SECTION 9.4. Selection by Trustee of Securities to be Redeemed. If less than all the Securities are to be redeemed, selection of such Securities for redemption shall be made by the Trustee not more than 60 days prior to the Redemption Date, from the Securities Outstanding not previously called for redemption, in compliance with the requirements of the principal national securities exchange, if any, on which such Securities are listed, or, if such Securities are not so listed, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of Securities; provided, however, that no Securities of less than $1,000 shall be redeemed in part. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 9.5. Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 10.2 at least 30 but not more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed at such Holder's registered address. The Trustee shall give notice of redemption in the Company's name and at the Company's expense; provided, however, that the Company shall deliver to the Trustee, at least 30 days prior to the Redemption Date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the following items. All notices of redemption shall fully identify the Securities and shall state: (1) the Redemption Date, (2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 9.7, if any, (3) if less than all Securities Outstanding are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be Outstanding after such partial redemption, (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed, (5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 9.7) will become due and payable upon each such Security, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Securities called for redemption (or the portion thereof) will cease to accrue on and after said date, (6) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any, (7) the name and address of the Paying Agent, (8) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price, and (9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Securities. SECTION 9.6. Deposit of Redemption Price. At or prior to 10:00 a.m., New York City time on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 3.8) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Securities which are to be redeemed on that date. SECTION 9.7. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant regular record date or Special Record Date, as the case may be, according to their terms and the provisions of Section 2.12. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Securities. SECTION 9.8. Securities Redeemed in Part. Any Security which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 3.7 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided that each such new Security will be in a principal amount of $1,000 or integral multiple thereof. ARTICLE X Miscellaneous SECTION 10.1. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. SECTION 10.2. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: CK Witco Corporation One American Lane Greenwich, CT 06831-2559 Attn: General Counsel if to the Trustee: Citibank, N.A. 111 Wall Street, 5th Floor New York, N.Y. 10005 Attn: Global Agency & Trust Services The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 10.3. Communication by Holders with other Holders. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 10.4. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.5. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 10.6. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 10.7. Legal Holidays. If a payment date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue for the intervening period. If a regular record date is not a Business Day, the record date shall not be affected. SECTION 10.8. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 10.9. No Recourse Against Others. An incorporator, director, officer, employee, stockholder or controlling person, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 10.10. Successors. All agreements of the Company in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.11. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 10.12. Variable Provisions. The Company initially appoints the Trustee as Paying Agent and Registrar and custodian with respect to any Global Securities. SECTION 10.13. Qualification of Indenture. The Company shall qualify this Indenture under the TIA in accordance with the terms and conditions of the Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys' fees and expenses for the Company and the Trustee) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of the Indenture and the Securities and printing this Indenture and the Securities. The Trustee shall be entitled to receive from the Company any such Officers' Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA. SECTION 10.14. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. CK WITCO CORPORATION By: Name: Title: CITIBANK, N.A. By: Name: Title: EX-4.14 9 - ------------------------------------------------------------------------------- CK WITCO CORPORATION (a Delaware corporation) 8.50% Senior Notes due 2005 PURCHASE AGREEMENT Dated: March 2, 2000 - ------------------------------------------------------------------------------- Table of Contents PURCHASE AGREEMENT SECTION 1. Representations and Warranties by the Company 2 (a) Representations and Warranties 2 (i) Offering Memorandum 2 (ii) Incorporated Documents 2 (iii) Independent Accountants 3 (iv) Financial Statements 3 (v) No Material Adverse Change in Business 3 (vi) Good Standing of the Company 3 (vii) Good Standing of Designated Subsidiaries 4 (viii) Capitalization 4 (ix) Authorization of Agreement 4 (x) Authorization of the Indenture 4 (xi) Authorization of the Securities 4 (xii) Description of the Securities and the Indenture 5 (xiii) Absence of Defaults and Conflicts 5 (xiv) Absence of Labor Dispute 5 (xv) Absence of Proceedings 6 (xvi) Possession of Intellectual Property 6 (xvii) Absence of Further Requirements 6 (xviii) Possession of Licenses and Permits 6 (xix) Title to Property 7 (xx) Environmental Laws 7 (xxi) Investment Company Act 7 (xxii) Similar Offerings 8 (xxiii) Rule 144A Eligibility 8 (xxiv) No General Solicitation 8 (xxv) No Registration Required 8 (xxvi) Reporting Company 8 (xxvii) No Directed Selling Efforts 8 (xxviii)Year 2000 8 (b) Officer's Certificates 9 SECTION 2. Sale and Delivery to Initial Purchasers; Closing 9 (a) Securities 9 (b) Payment 9 SECTION 3. Covenants of the Company 9 (a) Offering Memorandum 9 (b) Notice and Effect of Material Events 9 (c) Amendment to Offering Memorandum and Supplements 10 (d) Rating of Securities 10 (e) DTC 10 (f) Use of Proceeds 10 i (g) Restriction on Sale of Securities 10 SECTION 4. Payment of Expenses 11 (a) Expenses 11 (b) Termination of Agreement 11 SECTION 5. Conditions of Initial Purchasers' Obligations 11 (a) Opinion of Counsel for Company 11 (b) Opinion of Counsel for Initial Purchasers 11 (c) Officers' Certificate 12 (d) Accountants' Comfort Letter 12 (e) Bring-down Comfort Letter 12 (f) Maintenance of Rating 12 (g) Registration Rights Agreement 12 (h) Additional Documents 12 (i) Termination of Agreement 13 SECTION 6 Subsequent Offers and Resales of the Securities 13 (a) Offer and Sale Procedures 13 (i) Offers and Sales only to Qualified Institutional Buyers or Non-U.S. Persons 13 (ii) No General Solicitation 13 (iii) Purchases by Non-Bank Fiduciaries 13 (iv) Subsequent Purchaser Notification 13 (v) Restrictions on Transfer 14 (b) Covenants of the Company 14 (i) Integration 14 (ii) Rule 144A Information 14 (iii) Restriction on Repurchases 14 (c) Qualified Institutional Buyer 14 (d) Resale Pursuant to Rule 903 of Regulation S or Rule 144A 14 (e) Additional Representations and Warranties of Initial Purchasers 16 SECTION 7. Indemnification 16 (a) Indemnification of Initial Purchasers 16 (b) Indemnification of Company 17 (c) Actions against Parties; Notification 17 SECTION 8. Contribution 19 SECTION 9. Representations, Warranties and Agreements to Survive Delivery 20 SECTION 10. Termination of Agreement 20 (a) Termination; General 20 (b) Liabilities 20 SECTION 11. Default by One or More of the Initial Purchasers 20 SECTION 12. Notices 21 ii SECTION 13. Parties 21 SECTION 14. GOVERNING LAW AND TIME 21 SECTION 15. Effect of Headings 21 iii SCHEDULES Schedule A - List of Initial Purchasers Sch A-1 Schedule B - Pricing Information Sch B-1 EXHIBITS Exhibit A - Form of Opinion of Company's Counsel A-1 CK WITCO CORPORATION (a Delaware corporation) $600,000,000 8.50% Senior Notes due 2005 PURCHASE AGREEMENT March 2, 2000 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated as Representative of the several Initial Purchasers North Tower World Financial Center New York, New York 10281 Ladies and Gentlemen: CK Witco Corporation, a Delaware corporation (the "Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Initial Purchasers named in Schedule A hereto (collectively, the "Initial Purchasers", which term shall also include any initial purchaser substituted as hereinafter provided in Section 11 hereof), for whom Merrill Lynch is acting as representative (in such capacity, the "Representative"), with respect to the issue and sale by the Company and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts set forth in said Schedule A of $600,000,000 aggregate principal amount of the Company's 8.50% Senior Notes due 2005 (the "Securities"). The Securities are to be issued pursuant to an indenture dated as of March 1, 2000 (the "Indenture") between the Company and Citibank, N.A., as trustee (the "Trustee"). Securities will be issued to Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among the Company, the Trustee and DTC. The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers ("Subsequent Purchasers") at any time after this Agreement has been executed and delivered. The Securities are to be offered and sold through the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors that acquire Securities may only resell or otherwise transfer such Securities if such Securities are hereafter registered under the 1933 Act or if an exemption from the registration requirements of the 1933 Act is available (including the exemption afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") of the rules and regulations promulgated under the 1933 Act by the Securities and Exchange Commission (the "Commission")). The Company has prepared and delivered to each Initial Purchaser copies of a preliminary offering memorandum dated February 28, 2000 (the "Preliminary Offering Memorandum") and has prepared and will deliver to each Initial Purchaser, on the date hereof or the next succeeding day, copies of a final offering memorandum dated March 2, 2000 (the "Final Offering Memorandum"), each for use by such Initial Purchaser in connection with its solicitation of purchases of, or offering of, the Securities. "Offering Memorandum" means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document), including exhibits, amendments or supplements thereto and any documents incorporated therein by reference, which has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of purchases of, or offering of, the Securities. All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Offering Memorandum; and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Offering Memorandum. SECTION 1. Representations and Warranties by the Company. (a) Representations and Warranties. The Company represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Time referred to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows: (i) Offering Memorandum. The Offering Memorandum does not, and at the Closing Time will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser expressly for use in the Offering Memorandum. (ii) Incorporated Documents. The Offering Memorandum as delivered from time to time shall incorporate by reference the most recent Annual Reports of the Company and its predecessors on Form 10-K filed with the Commission and each Quarterly Report of the Company and its predecessors on Form 10-Q and each Current Report of the Company and its predecessors on Form 8-K filed with the Commission since the filing of the end of the fiscal year to which such Annual Report relates. The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum at the time they were or hereafter are filed with the Commission (as amended, supplemented or superseded by any later filing made prior to the date hereof) complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Offering 2 Memorandum, at the time the Offering Memorandum was issued and at the Closing Time, did not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (iii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Offering Memorandum are independent public accountants with respect to the Company and its subsidiaries and predecessors within the meaning of Regulation S-X under the 1933 Act. (iv) Financial Statements. The financial statements, together with the related schedules and notes, included in the Offering Memorandum present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Offering Memorandum present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Offering Memorandum present fairly the information shown therein and, where derived from audited financial statements, have been compiled on a basis consistent with that of the audited financial statements included in the Offering Memorandum. The pro forma financial statements of the Company and its subsidiaries and the related notes thereto included in the Offering Memorandum have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (v) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings or business of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there have been no dividends paid by the Company, except for regular dividends on the common stock, par value $.01 per share, of the Company (the "Common Stock"). (vi) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the state of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. 3 (vii) Good Standing of Designated Subsidiaries. Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each a "Designated Subsidiary" and, collectively, the "Designated Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Offering Memorandum, all of the issued and outstanding capital stock of each Designated Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, except when the failure to do so would not result in a Material Adverse Effect; none of the outstanding shares of capital stock of the Designated Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Designated Subsidiary. (viii) Capitalization. The authorized, issued and outstanding capital stock of the Company is as set forth in the Offering Memorandum under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements, employee benefit plans referred to in the Offering Memorandum or pursuant to the exercise of convertible securities or options referred to in the Offering Memorandum). The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (ix) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company. (x) Authorization of the Indenture. The Indenture has been duly authorized by the Company and, when executed and delivered by the Company and the Trustee, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). (xi) Authorization of the Securities. The Securities have been duly authorized and, at the Closing Time, will have been duly executed by the Company and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent 4 transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. (xii) Description of the Securities and the Indenture. The Securities and the Indenture will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum. (xiii) Absence of Defaults and Conflicts. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (collectively, "Agreements and Instruments") except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement, the Indenture and the Securities and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby or in the Offering Memorandum and the consummation of the transactions contemplated herein and in the Offering Memorandum (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use of Proceeds") and compliance by the Company with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or a Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, the Agreements and Instruments except for such conflicts, breaches or defaults or liens, charges or encumbrances that, singly or in the aggregate, would not result in a Material Adverse Effect, nor will such action result in any significant violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. (xiv) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiaries' principal suppliers, manufacturers, customers or contractors, which, in any case, may reasonably be expected to result in a Material Adverse Effect. 5 (xv) Absence of Proceedings. Except as disclosed in the Offering Memorandum, there is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets of the Company and its subsidiaries as a whole or the consummation of the transactions contemplated by this Agreement or the performance by the Company of its obligations hereunder. No pending legal or governmental proceeding to which the Company or any of its subsidiaries is a party or of which any of their respective property or assets is the subject which are not described in the Offering Memorandum, including ordinary routine litigation incidental to the business, could reasonably be expected to result in a Material Adverse Effect. (xvi) Possession of Intellectual Property. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, except where the failure to do so would not have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xvii) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement or for the due execution, delivery or performance of the Indenture by the Company, except such as have been already obtained. (xviii) Possession of Licenses and Permits. The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, except where the failure to do so would not have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any no- 6 tice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xix) Title to Property. The Company and its subsidiaries have good and marketable title to all real property owned by the Company and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Offering Memorandum, (b) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries or (c) could not reasonably be expected to have a Material Adverse Effect; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, are in full force and effect, and neither the Company nor any of its subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of such the Company or any subsidiary thereof to the continued possession of the leased or subleased premises under any such lease or sublease. (xx) Environmental Laws. Except as described in the Offering Memorandum and except such matters as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or Environmental Laws. (xxi) Investment Company Act. The Company is not, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Offering Memorandum will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). 7 (xxii) Similar Offerings. Neither the Company nor any of its affiliates, as such term is defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the 1933 Act. (xxiii) Rule 144A Eligibility. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer quotation system. (xxiv) No General Solicitation. None of the Company, its Affiliates or any person acting on its or any of their behalf (other than the Initial Purchasers, as to whom the Company makes no representation) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the 1933 Act. (xxv) No Registration Required. Subject to compliance by the Initial Purchasers with the agreements, procedures, representations and warranties set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act"). (xxvi) Reporting Company. The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the 1934 Act. (xxvii) No Directed Selling Efforts. With respect to those Securities sold in reliance on Regulation S, (A) none of the Company, its Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (B) each of the Company and its Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representation) has complied and will comply with the offering restrictions requirement of Regulation S. (xxviii) Year 2000. The Company and its subsidiaries have implemented a comprehensive, detailed program to analyze and address the risk that the computer hardware and software used by them may be unable to recognize and properly execute date-sensitive functions involving certain dates prior to and any dates after December 31, 1999 (the "Year 2000 Problem"), and has determined that any such risk that has not been remedied will be remedied on a timely basis without material expense and will not have a material adverse effect upon the financial condition and results of operations of the Company and its subsidiaries, taken as a whole; and to the Company's best knowledge, each supplier, vendor, customer or financial service organization used or serviced by the Company and its subsidiaries has remedied the Year 2000 Problem, although the failure by any such supplier, vendor, customer or financial service organization to remedy the Year 8 2000 Problem could have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole. The Company is in compliance with the Commission's staff legal bulletin No. 5 dated January 12, 1998 related to Year 2000 compliance. (b) Officer's Certificates. Any certificate signed by any duly authorized officer of the Company or any of its subsidiaries delivered to the Representative or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Company to each Initial Purchaser as to the matters covered thereby. SECTION 2. Sale and Delivery to Initial Purchasers; Closing. (a) Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Company, at the price set forth in Schedule B, the aggregate principal amount of Securities set forth in Schedule A opposite the name of such Initial Purchaser, plus any additional principal amount of Securities which such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 11 hereof. The Company shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be purchased as provided herein. (b) Payment. Payment of the purchase price for, and delivery of certificates for, the Securities shall be made at the office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, or at such other place as shall be agreed upon by the Representative and the Company, at 9:00 A.M. (eastern time) on March 7, 2000 (unless postponed in accordance with the provisions of Section 11), or such other time not later than ten business days after such date as shall be agreed upon by the Representative and the Company (such time and date of payment and delivery being herein called the "Closing Time"). Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Representative for the respective accounts of the Initial Purchasers of certificates for the Securities to be purchased by them. It is understood that each Initial Purchaser has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Securities which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Initial Purchasers, may (but shall not be obligated to) make payment of the purchase price for the Securities to be purchased by any Initial Purchaser whose funds have not been received by the Closing Time, but such payment shall not relieve such Initial Purchaser from its obligations hereunder. SECTION 3. Covenants of the Company. The Company covenants with each Initial Purchaser as follows: (a) Offering Memorandum. The Company, as promptly as possible, will furnish to each Initial Purchaser, without charge, such number of copies of the Preliminary Offering Memorandum (until the Final Offering Memorandum is available), the Final Offering Memorandum and any amendments and supplements thereto and documents incorporated by reference therein as such Initial Purchaser may reasonably request. (b) Notice and Effect of Material Events. Until the earliest to occur of (i) the initial resale by the Initial Purchasers and (ii) 30 days from the date hereof (the "End Date"), the Com- 9 pany will as promptly as practicable notify each Initial Purchaser, and confirm such notice in writing, of (x) any filing made by the Company of information relating to the offering of the Securities with any securities exchange or any other regulatory body in the United States or any other jurisdiction, and (y) prior to the End Date, any material changes in or affecting the condition, financial or otherwise, or the earnings or business of the Company and its subsidiaries considered as one enterprise which (i) make any statement in the Offering Memorandum false or misleading or (ii) are not disclosed in the Offering Memorandum. In such event or if during such time prior to the End Date any event shall occur as a result of which it is necessary, in the reasonable opinion of any of the Company, its counsel, the Initial Purchasers or counsel for the Initial Purchasers, to amend or supplement the Final Offering Memorandum in order that the Final Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances then existing, the Company will forthwith amend or supplement the Final Offering Memorandum by preparing and furnishing to each Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Final Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchasers) so that, as so amended or supplemented, the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a Subsequent Purchaser, not misleading. (c) Amendment to Offering Memorandum and Supplements. Prior to the End Date, the Company will advise each Initial Purchaser promptly of any proposal to amend or supplement the Offering Memorandum. Neither the consent of the Initial Purchasers, nor the Initial Purchaser's delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof. (d) Rating of Securities. The Company shall take all reasonable action necessary to enable Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("Moody's") to provide their respective credit ratings of the Securities. (e) DTC. The Company will cooperate with the Representative and use its reasonable best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of DTC. (f) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Offering Memorandum under "Use of Proceeds". (g) Restriction on Sale of Securities. During a period ending on the earlier of (i) the date that the initial distribution of notes by the Initial Purchasers is complete and (ii) 30 days from the date of the Offering Memorandum, the Company will not, without the prior written consent of Merrill Lynch, directly or indirectly, issue, sell, offer or agree to sell, grant any option for the sale of, or otherwise dispose of, any other debt securities of the Company that are substantially similar to the Securities or securities of the Company that are convertible into, or exchangeable for or otherwise represent a right to acquire, the Securities or such other debt securities. 10 SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing, delivery to the Initial Purchasers and any filing of the Offering Memorandum (including financial statements and any schedules or exhibits and any document incorporated therein by reference) and of each amendment or supplement thereto, (ii) the printing and delivery to the Initial Purchasers of this Agreement, any Agreement among Initial Purchasers, the Indenture and such other documents as may be required to be printed in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Initial Purchasers, including any transfer taxes, any stamp or other duties payable upon the sale, issuance and delivery of the Securities to the Initial Purchasers and any charges of DTC in connection therewith, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the reasonable fees and disbursements of counsel for the Initial Purchasers in connection with the preparation of the Blue Sky Survey, and any supplement thereto, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities, and (vii) any fees payable in connection with the rating of the Securities. (b) Termination of Agreement. If this Agreement is terminated by the Representative in accordance with the provisions of Section 5 or Section 10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for their reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Initial Purchasers. SECTION 5. Conditions of Initial Purchasers' Obligations. The obligations of the several Initial Purchasers hereunder are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company or any of its subsidiaries delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) Opinion of Counsel for Company. At the Closing Time, the Representative shall have received the favorable opinions, dated as of the Closing Time, of the General Counsel of the Company and of Wachtell, Lipton, Rosen & Katz, special counsel for the Company, in form and substance reasonably satisfactory to counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers substantially to the effect set forth in Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Representative. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (b) Opinion of Counsel for Initial Purchasers. At the Closing Time, the Representative shall have received the favorable opinion, dated as of the Closing Time, of Cravath, Swaine & Moore, counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers with respect to the matters set forth in (i), (ii), (v) through (viii), inclusive, (xv) and the penultimate paragraph of Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than 11 the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Representative. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (c) Officers' Certificate. At the Closing Time, there shall not have been since the date hereof or since the respective dates as of which information is given in the Final Memorandum, exclusive of any amendments or supplements thereto after the date hereof, any Material Adverse Effect or any development involving a prospective Material Adverse Effect, and the Representative shall have received a certificate of the President or a Vice President of the Company and of the chief financial or chief accounting officer of the Company, dated as of the Closing Time, to the effect that (i) there has been no such Material Adverse Effect or any development involving a prospective Material Adverse Effect, (ii) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time. (d) Accountants' Comfort Letter. At the time of the execution of this Agreement, the Representative shall have received from KPMG LLP a letter dated such date, in form and substance reasonably satisfactory to the Representative, together with signed or reproduced copies of such letter for each of the other Initial Purchasers containing statements and information of the type ordinarily included or as otherwise agreed in accountants' "comfort letters" to Initial Purchasers with respect to the financial statements and certain financial information contained in the Offering Memorandum. (e) Bring-down Comfort Letter. At the Closing Time, the Representative shall have received from KPMG LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (f) Maintenance of Rating. At the Closing Time, the Securities shall be rated at least BAA3 by Moody's and BBB by S&P, and the Company shall have delivered to the Representative a letter dated the Closing Time, from each such rating agency, or other evidence satisfactory to the Representative, confirming that the Securities have such ratings; and since the date of this Agreement, there shall not have occurred a downgrading in the rating assigned to the Securities or any of the Company's other securities by any "nationally recognized statistical rating agency", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such securities rating agency shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Securities or any of the Company's other securities. (g) Registration Rights Agreement. At the Closing Time, a registration rights agreement among the Company and the Initial Purchasers shall have been executed. (h) Additional Documents. At the Closing Time, counsel for the Initial Purchasers shall have been furnished with such documents as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of 12 any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Representative and counsel for the Initial Purchasers. (i) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Representative by notice to the Company at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 7, 8 and 9 shall survive any such termination and remain in full force and effect. SECTION 6. Subsequent Offers and Resales of the Securities. (a) Offer and Sale Procedures. Each of the Initial Purchasers and the Company hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (i) Offers and Sales only to Qualified Institutional Buyers or Non-U.S. Persons. Offers and sales of the Securities shall only be made (A) to persons whom the offeror or seller reasonably believes to be qualified institutional buyers, as defined in Rule 144A under the 1933 Act ("Qualified Institutional Buyers") and, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and in each case, in transactions in accordance with Rule 144A or (B) in the case of offers or sales made outside the United States, to non-U.S. persons outside the United States, as defined in Regulation S under the 1933 Act, to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the 1933 Act. Each Initial Purchaser severally agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. (ii) No General Solicitation. No general solicitation or general advertising (within the meaning of Rule 502(c) under the 1933 Act) will be used in the United States in connection with the offering or sale of the Securities. (iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank Subsequent Purchaser of a Security acting as a fiduciary for one or more third parties, each third party shall, in the judgment of the applicable Initial Purchaser, be an Institutional Accredited Investor or a Qualified Institutional Buyer or a non-U.S. person outside the United States. (iv) Subsequent Purchaser Notification. Each Initial Purchaser will take reasonable steps to inform, and cause each of its U.S. Affiliates to take reasonable steps to inform, persons acquiring Securities from such Initial Purchaser or affiliate, as the case may be, in the United States that the Securities (A) have not been and will not be registered under the 1933 Act, (B) are being sold to them without registration under the 1933 Act in reliance on Rule 144A or in accordance with another exemption from registration 13 under the 1933 Act, as the case may be, and (C) may not be offered, sold or otherwise transferred except (1) to the Company, (2) outside the United States in accordance with Regulation S, or (3) inside the United States in accordance with (x) Rule 144A to a person whom the seller reasonably believes is a Qualified Institutional Buyer that is purchasing such Securities for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (y) pursuant to another available exemption from registration under the 1933 Act. (v) Restrictions on Transfer. The transfer restrictions and the other provisions set forth in the Offering Memorandum under the heading "Notice to Investors", including the legend required thereby, shall apply to the Securities except as otherwise agreed by the Company and the Initial Purchasers. (b) Covenants of the Company. The Company covenants with each Initial Purchaser as follows: (i) Integration. The Company agrees that it will not and will cause its Affiliates not to, directly or indirectly, solicit any offer to buy, sell or make any offer or sale of, or otherwise negotiate in respect of, securities of the Company of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the 1933 Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Securities by the Company to the Initial Purchasers, (ii) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or otherwise. (ii) Rule 144A Information. The Company agrees that, in order to render the Securities eligible for resale pursuant to Rule 144A under the 1933 Act, while any of the Securities remain outstanding, it will make available, upon request, to any holder of Securities or prospective purchasers of Securities the information specified in Rule 144A(d)(4), unless the Company furnishes information to the Commission pursuant to Section 13 or 15(d) of the 1934 Act. (iii) Restriction on Repurchases. Until the expiration of two years after the original issuance of the Securities, the Company will not, and will cause its Affiliates not to, resell any Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the 1933 Act), whether as beneficial owner or otherwise (except as agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker's transactions), except in compliance with the 1933 Act. (c) Qualified Institutional Buyer. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company that it is a Qualified Institutional Buyer and an "accredited investor" within the meaning of Rule 501(a) under the 1933 Act (an "Accredited Investor"). (d) Resale Pursuant to Rule 903 of Regulation S or Rule 144A. Each Initial Purchaser understands that the Securities have not been and will not be registered under the 1933 Act and may not be offered or sold within the United States or to, or for the account or benefit of, 14 U.S. persons except in accordance with Regulation S under the 1933 Act or pursuant to an exemption from the registration requirements of the 1933 Act. Each Initial Purchaser severally represents, warrants and agrees, that, except as permitted by Section 6(a) above, it has offered and sold Securities and will offer and sell Securities (i) as part of their distribution at any time and (ii) otherwise until forty days after the later of the date upon which the offering of the Securities commences and the Closing Time, only in accordance with Rule 903 of Regulation S, Rule 144A under the 1933 Act or another applicable exemption from the registration requirements of the 1933 Act. Accordingly, neither the Initial Purchasers, their affiliates nor any persons acting on their behalf have engaged or will engage in any directed selling efforts with respect to the Securities pursuant to Regulation S, and the Initial Purchasers, their affiliates and any person acting on their behalf have complied and will comply with the offering restriction requirements of Regulation S. Each Initial Purchaser severally agrees that, at or prior to confirmation of a sale of Securities pursuant to Regulation S it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it or through it during the restricted period a confirmation or notice to substantially the following effect: Each Initial Purchaser, severally and not jointly, represents, warrants and agrees with respect to offers and sales outside the United States that: (i) it understands that no action has been or will be taken in any jurisdiction by the Company that would permit a public offering of the Securities or possession or distribution of either Memorandum or any other offering or publicity material relating to the Securities, in any country or jurisdiction where action for that purpose is required; (ii) it will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has in its possession or distributes either Memorandum or any such other material, in all cases at its own expense; (iii) the Securities have not been and will not be registered under the 1933 Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulations S under the 1933 Act or pursuant to another exemption from the registration requirements of the 1933 Act; (iv) it has (1) not offered or sold and will not offer or sell in the United Kingdom, by means of any document, any Securities other than to any persons whose ordinary business it is to buy and sell shares or debentures, whether as a principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Act 1985, as amended (2) complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (3) only issued or passed on and will only issue and pass onto any persons in the United Kingdom any document received by it in connection with the issue of the Securities if that person is of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisement) (Exemptions) Order 1988 or is a person to whom the document may otherwise lawfully by issued or passed on; (v) it understands that the Securities have not been and will not be registered under the Securities and Exchange Law of Japan, and represents that it has not offered or sold, and agrees that it will not offer or sell, and Securities, directly or indirectly in Japan or to or from any resident of Japan except (i) pursuant to an exemption from the registra- 15 tion requirements of the Securities and Exchange Law of Japan and (ii) in compliance with any other applicable requirements of Japanese Law; (vi) At or prior to confirmation of a sale of Securities pursuant to Regulation S it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it or through it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the United States Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to or for the account or benefit of U.S. persons (i) as part of their distribution at any time and (ii) otherwise until forty days after the later of the date upon which the offering of the Securities commenced and the date of closing, except in either case in accordance with Regulation S or Rule 144A under the Securities Act. Terms used above have the meaning given to them by Regulation S." Terms used in the above paragraph have the meanings given to them by Regulation S. (e) Additional Representations and Warranties of Initial Purchasers. Each Initial Purchaser severally represents and agrees that it has not entered and will not enter into any contractual arrangements with respect to the distribution of the Securities, except with its affiliates or with the prior written consent of the Company. Each Initial Purchaser hereby agrees that, prior to or simultaneously with the confirmation of sale by such Initial Purchaser to any purchaser of any of the Securities purchased by such Initial Purchaser from the Company pursuant to this Agreement, such Initial Purchaser shall deliver to all such purchasers with addresses in the United States and, to the extent required by applicable law, to other purchasers a copy of the Offering Memorandum (any and amendment or supplement thereto that the Company shall have furnished to such Initial Purchaser prior to the date of such confirmation of sale). Each Initial Purchaser further agrees that, without the prior written consent of the Company, such Initial Purchaser will not disseminate any written materials to holders of the Securities for or in connection with the transactions contemplated by this Agreement other than the Offering Memorandum. SECTION 7. Indemnification. (a) Indemnification of Initial Purchasers. The Company agrees to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever (at least quarterly) arising out of any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever (at least quarterly) to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to 16 Section 7(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, (at least quarterly) (including the reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser expressly for use in the Offering Memorandum (or any amendment thereto); provided, further, that, with respect to any loss, liability, claim, damage or expense arising out of any untrue statement or omission or alleged untrue statement or omission contained in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), the indemnity contained in this Section shall not inure to the benefit of any Initial Purchaser (or any person who controls such Initial Purchaser) if (i) a copy of the Final Offering Memorandum or amendment or supplement thereto was to be sent or given to such purchasers with addresses in the United States and, to the extent required by applicable law, to other purchasers, at or prior to the written confirmation of the sale of the applicable Securities together with all amendments or supplements thereto available at such time and was not sent or given and (ii) such untrue statement or omission or alleged untrue statement or omission was corrected in the Final Offering Memorandum or in any amendment or supplement thereto available at such time. (b) Indemnification of Company. Each Initial Purchaser severally agrees to indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum in reliance upon and in conformity with written information furnished to the Company by such Initial Purchaser through Merrill Lynch expressly for use in the Offering Memorandum, and shall reimburse the Company for any and all expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action. (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder except to the extent it is materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 7(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch and shall be reasonably acceptable to the Company, and, in the case of parties indemnified pursuant to Section 7(b) above, counsel to the indemnified parties shall be selected by the Company and shall be reasonably acceptable to Merrill Lynch. An indemnifying party may participate at its own expense in the defense of any such action and, to the extent it 17 wishes, shall be entitled to assume the defense of any such action with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (iv) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. In no event shall counsel to the indemnifying party (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Each indemnified party shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnified party seeking or otherwise eligible for indemnification or contribution hereunder will, without the prior written consent of the indemnifying party (which shall not be unreasonably withheld), settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit, investigation or proceeding pursuant to which indemnity or contribution is or may be available hereunder. No indemnifying party shall, without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section or Section 8 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Notwithstanding, this Section 7(c), if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, an indemnifying party shall not be liable for any settlement of the nature contemplated by this Section 7(c) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent it considers such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement. 18 SECTION 8. Contribution. If the indemnification provided for in Section 7 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Initial Purchasers, on the other, bear to the aggregate initial offering price of the Securities. The relative fault of the Company on the one hand and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased and sold by it hereunder exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay under Section 7(b) by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same 19 rights to contribution as such Initial Purchaser, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Initial Purchasers' respective obligations to contribute pursuant to this Section are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A hereto and not joint. SECTION 9. Representations, Warranties and Agreements to Survive Delivery. Subject to the initial sentence of Section 1(a), all representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or controlling person, or by or on behalf of the Company, and shall survive delivery of the Securities to the Initial Purchasers. SECTION 10. Termination of Agreement. (a) Termination; General. The Representative may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Final Offering Memorandum exclusive of any amendment or supplement thereto after the date hereof, any material adverse change in the condition, financial or otherwise, or in the earnings or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representative, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the NASDAQ System has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal or New York authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 7, 8 and 9 shall survive such termination and remain in full force and effect. SECTION 11. Default by One or More of the Initial Purchasers. If one or more of the Initial Purchasers shall fail at the Closing Time to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Representative shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Initial Purchasers, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representative shall not have completed such arrangements within such 24-hour period, then: 20 (a) if the number of Defaulted Securities does not exceed 10% of the aggregate principal amount of the Securities to be purchased hereunder, each of the non-defaulting Initial Purchasers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective purchase obligations hereunder bear to the purchase obligations of all non-defaulting Initial Purchasers, or (b) if the number of Defaulted Securities exceeds 10% of the aggregate principal amount of the Securities to be purchased hereunder, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser. No action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Representative or the Company shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Offering Memorandum or in any other documents or arrangements. As used herein, the term "Initial Purchaser" includes any person substituted for an Initial Purchaser under this Section. SECTION 12. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to the Representative at North Tower, World Financial Center, New York, New York 10281, attention of Greg Kelly, Vice President; notices to the Company shall be directed to it at One American Lane, Greenwich, CT 06831-2559, attention of Senior Vice President and General Counsel; with a copy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, NY 10019, attention of Steven A. Cohen, Esq. SECTION 13. Parties. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 15. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 21 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Initial Purchasers and the Company in accordance with its terms. Very truly yours, CK WITCO CORPORATION By:__________________________ Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ABN AMRO INCORPORATED BANC OF AMERICA SECURITIES LLC CHASE SECURITIES INC. DEUTSCHE BANK SECURITIES INC. GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY INC. By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By__________________ Authorized Signatory For themselves and as Representative of the other Initial Purchasers named in Schedule A hereto. 22 SCHEDULE A Principal Amount of Name of Initial Purchaser 8-1/2% Notes Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . . . . $240,000,000 ABN AMRO Incorporated . . . . .. . . . . . . . . . . . . . . . . . 60,000,000 Banc of America Securities LLC . . . . . . . . . . . . . . . . . 60,000,000 Chase Securities Inc. . . . . . . . . . . . . . . . . . . . . . . 60,000,000 Deutsche Bank Securities Inc. . . . . . . . . . . . . . . . . . . 60,000,000 Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . 60,000,000 Salomon Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . 60,000,000 ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$600,000,000 ------------ ------------ SCHEDULE B CK WITCO CORPORATION $600,000,000 8.50% Senior Notes due 2005 1. The initial public offering price of the 8.50% Notes shall be 99.559% of the principal amount thereof, plus accrued interest, if any, from the date of issuance. 2. The purchase price to be paid by the Initial Purchasers for the 8.50% Notes shall be 98.959% of the principal amount thereof. 3. The interest rate on the 8.50% Notes shall be 8.50% per annum. Sch B-1 Exhibit A FORM OF OPINION OF COMPANY'S COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(a)* (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the state of Delaware.1 (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum (except where the failure to have such power and authority would not have a Material Adverse Effect) and to enter into and perform its obligations under the Purchase Agreement.1 (iii) The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.2 (iv) Each Designated Subsidiary has been duly incorporated and is validly existing as a corporation under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum. Each Designated Subsidiary organized under the laws of a state of the United States is in good standing under the laws of its organization and is duly qualified as a foreign corporation to transact business and is in good standing in each state in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; all of the issued and outstanding capital stock of each Designated Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and, to the best of our knowledge and information, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity.2 (v) The Purchase Agreement has been duly authorized, executed and delivered by the Company.1 (vi) The Indenture has been duly authorized, executed and delivered by the Company and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by __________ * The paragraphs followed by footnote 1 will be given both by the Company Counsel and WLR&K; paragraphs followed by footnote 2 will be given by the Company Counsel only; paragraphs followed by footnote 3 will be given by WLR&K only; and paragraphs followed by footnote 4 may be divided between the Company Counsel and WLR&K. A-1 general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).1 (vii) The Securities are in the form contemplated by the Indenture, have been duly authorized by the Company and, when executed by the Company and authenticated by the Trustee in the manner provided in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and issued and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium (including, without limitation, all laws relating to fraudulent transfers), or other similar laws relating to or affecting enforcement of creditor's rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be entitled to the benefits of the Indenture.1 (viii) The Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Offering Memorandum under "Description of the Notes".3 (ix) The documents incorporated by reference in the Offering Memorandum (other than the financial statements and supporting schedules therein, as to which no opinion need be rendered), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder.2 (x) There is not pending or, to the best of our knowledge, threatened any action, suit, proceeding, inquiry or investigation, to which the Company or any subsidiary is a party, or to which the property of the Company or any subsidiary thereof is subject, before or brought by any court or governmental agency or body, which might reasonably be expected to result in a Material Adverse Effect, or the consummation of the transactions contemplated in the Purchase Agreement or the performance by the Company of its obligations thereunder or the transactions contemplated by the Offering Memorandum.2 (xi) The information in the Offering Memorandum under "Summary-The Offering" "Description of the Notes", "Certain Federal Income Tax Considerations" and "Exchange Offer; Registration Rights," to the extent that it constitutes summaries of legal matters or legal proceedings, or legal conclusions, has been reviewed by us and fairly summarizes the matters described therein.3 (xii) All descriptions in the Offering Memorandum of contracts and other documents to which the Company or any of its subsidiaries are a party are accurate in all material respects; to the best of our knowledge, there are no franchises, contracts, indentures, mortgages, loan agreements, notes, leases or other instruments that would be required to be described in the Offering Memorandum that are not described or referred to in the Offering Memorandum other than those described or referred to therein or incorporated by reference thereto, and the descriptions thereof or references thereto are correct in all material respects.2 (xiii) To the best of our knowledge, neither the Company nor any of its subsidiaries is in violation of its charter or by-laws and no default by the Company or any of its subsidiaries exists in the due performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or A-2 instrument that is described or referred to in the Offering Memorandum or incorporated by reference therein, except as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole.2 (xiv) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign (other than such as may be required under the applicable securities laws of the various jurisdictions in which the Securities will be offered or sold, as to which we need express no opinion) by the Company or its subsidiaries is necessary or required in connection with the due authorization, execution and delivery of the Purchase Agreement or the due execution, delivery or performance of the Indenture by the Company or for the offering, issuance, sale or delivery of the Securities to the Initial Purchasers or the resale by the Initial Purchasers in accordance with the terms of the Purchase Agreement, provided that the foregoing is limited to the laws of the State of New York, the general corporation law of the State of Delaware, and the laws of the United States of America, that, in our experience, are normally applicable to transactions of the type provided in the Purchase Agreement and the Registration Rights Agreement.4 (xv) Assuming compliance by all parties with the terms and conditions of the Purchase Agreement and Indenture, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by the Purchase Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the Trust Indenture Act.3 (xvi) The execution, delivery and performance of the Purchase Agreement, the DTC Agreement, the Indenture and the Securities and the consummation of the transactions contemplated in the Purchase Agreement and in the Offering Memorandum (including the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use Of Proceeds") and compliance by the Company with its obligations under the Purchase Agreement, the Indenture and the Securities do not and will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined in Section 1(a)(xiii) of the Purchase Agreement) under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to us, to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary thereof is subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a Material Adverse Effect), nor will such action result in any violation of (A) the charter or by-laws of the Company or any of its subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to us, of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its Designated Subsidiaries or any of the respective properties, assets, or operations or (B) the General Corporation Law of the State of Delaware, the laws of the State of New York or the laws of the United States of America. Such counsel need not express any opinion in this clause (xvi), however, as to (i) the blue sky laws of any state, (ii) laws other than those that, in our experience, are normally applicable to transactions of the type provided for by the Purchase Agreement and the Registration Agreement and (iii) any consent or authorization which may have become applicable to the Company as a result of the Initial Purchasers' involvement in the Purchase Agreement or the A-3 Registration Rights Agreement because of the Initial Purchasers' legal or regulatory status or because of any other facts specifically pertaining to the Initial Purchasers.4 (xvii) The Company is not an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the 1940 Act.3 Nothing has come to our attention that would lead us to believe that the Offering Memorandum or any amendment or supplement thereto (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom as to which we need make no statement and except as to documents incorporated by reference), at the time the Offering Memorandum was issued, at the time any such amended or supplemented Offering Memorandum was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.1 The foregoing opinions and statements may be subject to assumptions, qualifications and limitations customary in similar transactions. A-4 EX-4.17 10 Registration Rights Agreement Dated As of March 7, 2000 among CK Witco Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Chase Securities Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., and Salomon Smith Barney Inc. REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and entered into this 7th day of March, 2000, among CK Witco Corporation, a Delaware corporation (the "Company"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Chase Securities Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., and Salomon Smith Barney Inc. (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement, dated March 7, 2000, among the Company and the Initial Purchasers (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of an aggregate of $600,000,000 principal amount of the Company's 8.50% Senior Notes due 2005 (the "Securities"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights as set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of l934, as amended from time to time. "Closing Date" shall mean the Closing Time as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York. "Exchange Offer" shall mean the exchange offer by the Company of Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "Exchange Period" shall have the meaning set forth in Section 2.1 hereof. "Exchange Securities" shall mean the 8.50% Senior Notes due 2005 issued by the Company under the Indenture containing terms identical to the Securities in all material respects (except for references to certain interest rate provisions, restrictions on transfers and restrictive legends), to be offered to Holders of Securities in exchange for Registrable Securities pursuant to the Exchange Offer. "Holder" shall mean an Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture and each Participating Broker-Dealer that holds Exchange Securities for so long as such Participating Broker- Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities. "Indenture" shall mean the Indenture relating to the Securities, dated as of March 1, 2000, between the Company and Citibank, N.A., as trustee, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof. "Initial Purchaser" or "Initial Purchasers" shall have the meaning set forth in the preamble. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Outstanding (as defined in the Indenture) Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company and other obligors on the Securities or any Affiliate (as defined in the Indenture) of the Company shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount. "Participating Broker-Dealer" shall mean any of Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Chase Securities Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., and Salomon Smith Barney Inc. and any other broker-dealer which makes a market in the Securities and exchanges Registrable Securities in the Exchange Offer for Exchange Securities. "Person" shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Private Exchange" shall have the meaning set forth in Section 2.1 hereof. "Private Exchange Securities" shall have the meaning set forth in Section 2.1 hereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post- effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Securities" shall mean the Securities and, if issued, the Private Exchange Securities; provided, however, that Securities and, if issued, the Private Exchange Securities, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities have been sold to the public pursuant to Rule l44 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Securities shall have ceased to be outstanding or (iv) the Exchange Offer is consummated (except in the case of Securities purchased from the Company and continued to be held by the Initial Purchasers). "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained by any holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities and any filings with the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, (viii) the reasonable fees and expenses of the Initial Purchasers and Holders of Registrable Securities in connection with the Exchange Offer, including the reasonable fees and expenses of one firm of attorneys (in addition to any local counsel) to the Initial Purchasers and Holders of Registrable Securities in connection therewith, and (ix) any fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder. "Registration Statement" shall mean any registration statement of the Company which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Representative" shall mean Merrill Lynch, Pierce, Fenner & Smith Incorporated. "SEC" shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2.2 hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post- effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. 2. Registration Under the 1933 Act. 2.1 Exchange Offer. The Company shall, for the benefit of the Holders, at the Company's cost, use its reasonable best efforts to (A) prepare and, as soon as practicable but not later than 75 days following the Closing Date, file with the SEC an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Registrable Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act within 150 days of the Closing Date, (C) keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use its best efforts to cause the Exchange Offer to be consummated not later than 180 days following the Closing Date. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall use its reasonable best efforts to promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired directly from the Company for its own account, (c) acquired the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act or any limitations or restrictions under state securities or blue sky laws. In connection with the Exchange Offer, the Company shall: (a) in connection with the commencement, mail as promptly as practicable to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) once commenced, keep the Exchange Offer open for acceptance for a period of not less than 30 calendar days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the "Exchange Period"); (c) utilize the services of the Depositary for the Exchange Offer; (d) permit Holders to withdraw tendered Registrable Securities at any time prior to 5:00 p.m. (Eastern Time), on the last business day of the Exchange Period, through customary procedures therefor; (e) notify each Holder that any Registrable Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (f) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Company upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the "Private Exchange") for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company on a senior basis, that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Securities (the "Private Exchange Securities"). The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from such qualification and shall provide that the Exchange Securities shall not be subject to the transfer restrictions set forth in the Indenture but that the Private Exchange Securities shall be subject to such transfer restrictions. The Indenture or such indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter. The Private Exchange Securities shall be of the same series as and the Company shall use commercially reasonable efforts to have the Private Exchange Securities bear the same CUSIP number as the Exchange Securities. The Company shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities. As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Company shall: (i) accept for exchange all Registrable Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal, which shall be an exhibit thereto; (ii) deliver to the Trustee for cancellation all Registrable Securities so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Registrable Securities so accepted for exchange in a principal amount equal to the principal amount of the Registrable Securities of such Holder so accepted for exchange. Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Registrable Securities surrendered in exchange therefor or, if no interest has been paid on the Registrable Securities, from the date of original issuance. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Registrable Securities exchanged in the Exchange Offer shall have represented that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities and shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer or the Private Exchange which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer or the Private Exchange. The Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. 2.2 Shelf Registration. (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer Registration Statement is not declared effective within 150 days following the original issue of the Registrable Securities or the Exchange Offer is not consummated within 180 days after the original issue of the Registrable Securities, (iii) upon the request of any of the Initial Purchasers with respect to Securities held by such Initial Purchaser that are not eligible for exchange in the Exchange Offer if the Prospectus included in the Exchange Offer Registration Statement is not available for resales or (iv) if a Holder is not permitted to participate in the Exchange Offer or does not receive fully tradeable Exchange Securities pursuant to the Exchange Offer and if the Prospectus included in the Exchange Offer Registration Statement is not available for resales (it being understood that a requirement to deliver a Prospectus in connection with market-making activities or other trading shall not result in the applicable securities not being "fully tradeable"), then in case of each of clauses (i) through (iv) the Company shall, at its cost: (a) As promptly as practicable, use its reasonable best efforts to file with the SEC, and thereafter shall use its reasonable best efforts to cause to be declared effective as promptly as practicable but no later than 150 days after becoming obligated as set forth in each of clauses (i) through (iv) above, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement. (b) Use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the SEC, or for such shorter period that will terminate when all Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Securities (the "Effectiveness Period"); provided, however, that the Effectiveness Period in respect of the Shelf Registration Statement shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the 1933 Act and as otherwise provided herein. (c) Notwithstanding any other provisions hereof, use its best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. The Company shall not permit any securities other than the Registrable Securities to be included in the Shelf Registration Statement. The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. 2.3 Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. 2.4. Effectiveness. (a) The Company will be deemed not have used its best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company voluntarily takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless such action is required by applicable law. (b) An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. 2.5 Interest. The Indenture executed in connection with the Securities will provide that in the event that either (a) the Exchange Offer Registration Statement is not filed with the SEC on or prior to the 75th calendar day following the date of original issue of the Securities, (b) the Exchange Offer Registration Statement has not been declared effective on or prior to the 150th calendar day following the date of original issue of the Securities or (c) the Exchange Offer is not consummated on or prior to the 180th calendar day following the date of original issue of the Securities, or a Shelf Registration Statement is not declared effective on or prior to the 150th day after becoming obligated to file a Shelf Registration Statement (each such event referred to in clauses (a) through (c) above, a "Registration Default"), the interest rate borne by the Securities shall be increased ("Additional Interest") by 0.25% per annum upon the occurrence of each Registration Default, which rate will increase by an additional 0.25% after each 90-day period that such Additional Interest continues to accrue under any such circumstance, provided that the maximum aggregate increase in the interest rate will in no event exceed 1.00% per annum. Following the cure of all Registration Defaults (including, without limitation, by the filing or effectiveness of the Exchange Offer Registration Statement, the declaration of effectiveness or the consummation of the Exchange Offer at a date after the specified deadline) the accrual of Additional Interest will cease and the interest rate will revert to the original rate specified in the Securities. If the Shelf Registration Statement is unusable by the Holders for any reason, and the aggregate number of days in any consecutive twelve-month period for which the Shelf Registration Statement shall not be usable exceeds 30 days in the aggregate, then the interest rate borne by the Securities will be increased by 0.25% per annum of the principal amount of the Securities for the first 90-day period (or portion thereof) beginning on the 31st day that such Shelf Registration Statement ceases to be usable, which rate shall be increased by an additional 0.25% per annum of the principal amount of the Securities at the beginning of each subsequent 90-day period, provided that the maximum aggregate increase in the interest rate will in no event exceed 1.00% per annum. Any amounts payable under this paragraph shall also be deemed "Additional Interest" for purposes of this Agreement. Upon the Shelf Registration Statement once again becoming usable, the interest rate borne by the Securities will be reduced to the original interest rate if the Company is otherwise in compliance with this Agreement at such time. Additional Interest shall be computed based on the actual number of days elapsed in each 90-day period in which the Shelf Registration Statement is unusable. The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Additional Interest shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Registrable Securities, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due. The Additional Interest due shall be payable on each interest payment date to the record Holder of Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture. Each obligation to pay Additional Interest shall be deemed to accrue from and including the day following the applicable Event Date. It is hereby agreed that the Additional Interest provided for in this Section 2.5 constitutes a reasonable estimate of and shall constitute the sole damages and remedy in law or in equity that will be suffered by Holders by reason of the failure of (i) the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain usable, (iii) the Exchange Offer Registration Statement to be declared effective, (iv) the Exchange Offer to be consummated or (v) the Shelf Registration Statement to be declared effective, in each case to the extent required by this Agreement, and the right to seek any additional damages or remedy is hereby irrevocably waived. 3. Registration Procedures. In connection with the obligations of the Company with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company shall: (a) prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all respects with the requirements of Regulation S-T under the 1933 Act, and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the 1933 Act and comply with the provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof (including sales by any Participating Broker-Dealer); (c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holders that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders participating in the Shelf Registration; (ii) furnish to each Holder of Registrable Securities and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Registrable Securities; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (d) use its reasonable best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject; (e) notify promptly each Holder of Registrable Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Company that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below and, if requested by such Holder or Participating Broker-Dealer, confirm such notification in writing promptly (which notification pursuant to clauses (ii) through (vii) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made) (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which may make any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which may require the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading, (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (vii) of any determination by the Company that a post-effective amendment to such Registration Statement would be appropriate or supplement to any prospectus used thereunder; (f) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution" which section shall be reasonably acceptable to Merrill Lynch on behalf of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of Merrill Lynch on behalf of the Participating Broker-Dealers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer;" and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and (g) (i) in the case of an Exchange Offer, furnish to counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish to counsel for the Holders of Registrable Securities copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; (h) make reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (i) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested); (j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of Registrable Securities; (k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(v) and 3(e)(vi) hereof, as promptly as practicable after the occurrence of such an event, use its reasonable best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities or Participating Broker- Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such number of copies of the Prospectus as amended or supplemented, as such Holder may reasonably request; (l) in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Company as shall be reasonably requested by the Holders of Registrable Securities, or the Initial Purchasers on behalf of such Holders, available for discussion of such document; (m) obtain a CUSIP number for all Exchange Securities, Private Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Securities, Private Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary; (n) (i) cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (o) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) make such representations and warranties to the Holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them; (ii) obtain opinions of counsel to the Company and updates thereof (which opinions (in form, scope and substance) shall be customary and reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Registrable Securities being sold) addressed to the selling Holders and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters, subject in each case to appropriate limitations; (iii) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) addressed to the underwriters, if any, and use reasonable efforts to have such letter addressed to the selling Holders of Registrable Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Securities, which agreement shall be in form, substance and scope customary for similar offerings; (v) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 4 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and (vi) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Registrable Securities being sold and the managing underwriters, if any. The above shall be done at (i) the effectiveness of such Registration Statement (and each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder; (p) in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available for inspection by representatives of the Holders of the Registrable Securities, any underwriters participating in any disposition pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and any counsel or accountant retained by any of the foregoing, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement, and make such representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers, provided, however, that any information that is designated in writing by the Issuers, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (q) (i) in the case of an Exchange Offer Registration Statement, a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and to counsel to the Holders of Registrable Securities and make such changes in any such document prior to the filing thereof as the Initial Purchasers or counsel to the Holders of Registrable Securities may reasonably request and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Registrable Securities and counsel to the Holders of Registrable Securities shall not have previously been advised and furnished a copy of or to which the Initial Purchasers on behalf of the Holders of Registrable Securities or counsel to the Holders of Registrable Securities shall reasonably object, and make the representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and (ii) in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Securities, to the Initial Purchasers, to counsel for the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Securities, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request and not file any such document in a form to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Registrable Securities, counsel for the Holders of Registrable Securities or any underwriter shall not have previously been advised and furnished a copy of or to which the Majority Holders, the Initial Purchasers of behalf of the Holders of Registrable Securities, counsel to the Holders of Registrable Securities or any underwriter shall reasonably object, and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Holders of Registrable Securities, the Initial Purchasers on behalf of such Holders, counsel for the Holders of Registrable Securities or any underwriter. (r) in the case of a Shelf Registration, use its reasonable best efforts to cause all Registrable Securities to be listed on any securities exchange on which similar debt securities issued by the Company are then listed if requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any; (s) in the case of a Shelf Registration, use its reasonable best efforts to cause the Registrable Securities to be rated by the appropriate rating agencies, if so requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Registrable Securities, if any; (t) otherwise comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; (u) cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); and (v) upon consummation of an Exchange Offer or a Private Exchange, obtain a customary opinion of counsel to the Company addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or Private Exchange, and which includes an opinion that (i) the Company has duly authorized, executed and delivered the Exchange Securities and/or Private Exchange Securities, as applicable, and the related indenture, and (ii) each of the Exchange Securities and related indenture constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (with customary exceptions). In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Securities to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing, and the Company may exclude from such registration the Registrable Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in paragraphs (ii) through (vii) of Section 3(e) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof or until advised in writing by the Company that the use of the applicable prospectus may be resumed, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event that the Company fails to effect the Exchange Offer or file any Shelf Registration Statement and maintain the effectiveness of any Shelf Registration Statement as provided herein, the Company shall not file any Registration Statement with respect to any securities (within the meaning of Section 2(a)(1) of the 1933 Act) that constitute an offering of bonds, debentures or other evidence of indebtedness of the Company other than Registrable Securities. If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Registrable Securities included in such offering and shall be acceptable to the Company. No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 4. Indemnification; Contribution. (a) The Company agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker- Dealer, each Person who participates as an underwriter (any such Person being an "Underwriter") and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, (at least quarterly), arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, (at least quarterly), to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, (at least quarterly) (including the reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Holder or Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment thereto); provided, further, that with respect to any loss, liability, claim, damage or expense arising out of any untrue statement or omission or alleged untrue statement or omission contained in any prospectus (or any amendment or supplement thereto), the foregoing indemnity shall not inure to the benefit of any person if (A) a copy of the prospectus with all amendments or supplements thereto available at such time was to be sent or given by or on behalf of such person and such amendments or supplements were not sent or given and (B) such untrue statement or omission or alleged untrue statement or omission was corrected in the amendment or supplement thereto available at such time. (b) Each Holder severally agrees to indemnify and hold harmless the Company, the Initial Purchasers, each Underwriter and the other selling Holders, and each Person, if any, who controls the Company, the Initial Purchasers, any Underwriter or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder furnished to the Company by such Holder expressly for use in the Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto), and shall reimburse the Company for any and all expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder except to the extent it is materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 4(a) above, counsel to the indemnified parties shall be selected by the Representative and shall be reasonably acceptable to the Company, and, in the case of parties indemnified pursuant to Section 4(b) above, counsel to the indemnified parties shall be selected by the Company and shall be reasonably acceptable to the Representative. An indemnifying party may participate at its own expense in the defense of any such action and, to the extent it wishes, shall be entitled to assume the defense of any such action with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 4 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (iv) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. In no event shall counsel to the indemnifying party (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Each indemnified party shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnified party seeking or otherwise eligible for indemnification or contribution hereunder will, without the prior written consent of the indemnifying party (which shall not be unreasonably withheld), settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit, investigation or proceeding pursuant to which indemnity or contribution is or may be available hereunder. No indemnifying party shall, without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Notwithstanding this Section 4(c), if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, an indemnifying party shall not be liable for any settlement of the nature contemplated by this Section 4(c) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent it considers such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Holders or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 4, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Initial Purchasers' respective obligations to contribute pursuant to this Section 7 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint. 5. Miscellaneous. 5.1 Rule 144 and Rule 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder. If the Company ceases to be so required to file such reports, the Company covenants that it will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding any of the foregoing, nothing in this Section 5.1 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 5.2 No Inconsistent Agreements. The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements. 5.3 Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or departure. 5.4 Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers; and (b) if to the Company, initially at the Company's address and to its counsel set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 5.4. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture, at the address specified in such Indenture. 5.5 Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof. 5.6 Third Party Beneficiaries. The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Securities) shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. Each Holder of Registrable Securities shall be a third party beneficiary to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder. 5.7. Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Sections 2.1 through 2.4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 2.1 through 2.4 hereof subject to the last paragraph of Section 2.5. 5.8. Restriction on Resales. Until the expiration of two years after the original issuance of the Securities and the Guarantees, the Company and the Guarantor will not, and will cause their "affiliates" (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities and Guarantees which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and shall immediately upon any purchase of any such Securities and Guarantees submit such Securities and Guarantees to the Trustee for cancellation. 5.9 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 5.10 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. 5.12 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CK WITCO CORPORATION By: Name: Title: Confirmed and accepted as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ABN AMRO INCORPORATED BANK OF AMERICA SECURITIES LLC CHASE SECURITIES INC. DEUTSCHE BANK SECURITIES INC. GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY INC. BY: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: Name: Title: EX-4.18 11 UNIROYAL CHEMICAL CORPORATION (f/k/a UCC INVESTORS HOLDING, INC.) as Issuer UNIROYAL CHEMICAL COMPANY, INC. as successor to the Company and STATE STREET BANK AND TRUST COMPANY as Trustee ________________________ SECOND SUPPLEMENTAL INDENTURE Dated as of December 6, 1999 ________________________ $300,000,000 10 1/2 % Senior Notes due 2002 SECOND SUPPLEMENTAL INDENTURE, dated as of December 6, 1999 ("Second Supplemental Indenture"), among Uniroyal Chemical Company, Inc., a New Jersey corporation (the "Company"), and State Street Bank and Trust Company, a Massachusetts banking corporation, as Trustee (the "Trustee"). WHEREAS, the Company is the successor to Uniroyal Chemical Corporation (f/k/a UCC Investors Holding, Inc.), a Delaware corporation, to the Indenture, dated as of February 8, 1993, as amended and supplemented by the Supplemental Indenture, dated as of June 28, 1996, as amended and supplemented by the First Supplemental Indenture, dated as of December 9, 1998 (as it may be amended or supplemented from time to time, the "Indenture"), providing for the issuance of 10 1/2% Senior Notes due 2002 (the "Securities"), in the aggregate principal amount of $300,000,000; WHEREAS, the Company desires to delete or amend certain provisions of the Indenture as set forth herein; WHEREAS, there were outstanding immediately prior to the date hereof Securities in the aggregate principal amount of $150,263,000, of which $149,549,000 in principal amount tendered such Securities and consented in writing to the amendments contained herein pursuant to an offer to purchase for cash all outstanding Securities and related consent solicitation; WHEREAS, Section 8.02 of the Indenture provides that the Company and the Trustee may amend or supplement the Indenture with the written consent of the holders of at least a majority in principal amount of the Securities; WHEREAS, the Company has furnished the Trustee with an Officers' Certificate and, as to legal issues, an Opinion of Counsel, stating that this Second Supplemental Indenture is authorized under the Indenture; WHERAS, pursuant to Section 8.06 of the Indenture, in signing this Second Supplemental Indenture, the Trustee shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that this Second Supplemental Indenture is authorized under the Indenture; and WHEREAS, all things necessary to make this Second Supplemental Indenture a valid agreement, in accordance with its terms, have been done. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein, the Company and the Trustee, intending to be legally bound, mutually covenant and agree for the equal and ratable benefit of the respective holders from time to time of the Securities as follows (all capitalized terms used in this Second Supplemental Indenture which are not defined herein have the meanings assigned to them in the Indenture): Section 1. Deletion of Certain Sections of the Indenture. Sections 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.11 and 3.12 of the Indenture are hereby amended by deleting all such sections, all references thereto and all defined terms used exclusively therein in their entirety. Section 2. Amendment of Section 3.10 of the Indenture. Section 3.10 of the Indenture is hereby amended by replacing all references to "the Company" with references to "CK Witco Corporation," which is the corporation that owns all of the outstanding capital stock of the Company. Section 3. Amendments to Section 4.01 of Article IV. Section 4.01 of the Indenture is hereby amended to read in its entirety as follows: "SECTION 4.01. Merger and Consolidation. The Company shall not consolidate with or merge with or into any other corporation or transfer all or substantially all of its properties and assets as an entirety to any Person unless: (a) either the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company as an entirety are transferred (the "Successor Corporation"), shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, all the obligations of the Company under this Indenture and the Securities; (b) immediately before and immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Corporation or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Successor Corporation or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (c) the Company shall have delivered, or caused to be delivered, to the Trustee an Officers' Certificate and, as to legal issues, an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee stating that such consolidation, merger or transfer and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction and have been complied with; Notwithstanding the foregoing paragraph (b), (X) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Wholly Owned Subsidiary or Wholly Owned Subsidiaries and (Y) the Combination may be effected, and no violation of this Section shall be deemed to have occurred as a consequence thereof, as long as in each case the requirements of paragraphs (a) and (c) are satisfied in connection therewith." Section 4. Amendments to Section 5.01 of Article V. Section 5.01 of the Indenture is hereby amended to read in its entirety as follows: "SECTION 5.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (b) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at maturity or otherwise or fails to redeem or purchase Securities when required pursuant to this Indenture or the Securities; (c) the Company fails to comply with any of its other covenants or agreements in the Securities or this Indenture and the default continues for 30 days after the date on which written notice of such default is given to the Company by the Trustee or to the Company and the Trustee by Holders of at least 25% in principal amount of the Securities then outstanding hereunder; (d) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law; (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability to generally pay its debts as such debts become due; or takes any comparable action under any foreign laws relating to insolvency; (e) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Significant Subsidiary in an involuntary case, (ii) appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of its property, or (iii) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means title 11 of the U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Any notice of Default given by the Trustee or Securityholders under this Section must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time or both would become an Event of Default under clause (c) or (e) hereof. Subject to the provisions of Section 6.01 and 6.02, the Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to the Trustee by the Company, the Paying Agent, any Holder or an agent of any Holder." Section 5. Effectiveness; Termination. The provisions of this Second Supplemental Indenture will take effect immediately upon its execution and delivery by the Company and the Trustee in accordance with the terms of the Indenture. Prior to the Acceptance Date, the Company may terminate this Second Supplemental Indenture upon written notice to the Trustee. The Company shall give the Trustee prompt written notice of the Acceptance Date. Section 6. Acceptance by Trustee. The Trustee accepts the amendments to the Indenture effected by this Second Supplemental Indenture and agrees to execute the trusts created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture. Section 7. Governing Law. The laws of the State of New York govern this Second Supplemental Indenture and the Securities, without regard to the conflicts of laws rules thereof. Section 8. Counterparts. This Second Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the date first above written. UNIROYAL CHEMICAL COMPANY By Name: John Jepsen Title: Treasurer ATTEST: By Name: Barry J. Shainman Title: Secretary STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE By Name: Title: ATTEST: By Name: Title: EX-4.19 12 UNIROYAL CHEMICAL COMPANY, INC. and STATE STREET BANK AND TRUST COMPANY, Trustee ________________________ FIRST SUPPLEMENTAL INDENTURE Dated as of December 6, 1999 ________________________ $270,000,000 9% Senior Notes due 2000 FIRST SUPPLEMENTAL INDENTURE, dated as of December 6, 1999 ("First Supplemental Indenture"), between Uniroyal Chemical Company, Inc., a New Jersey corporation (the "Company"), and State Street Bank and Trust Company, a Massachusetts banking corporation, as Trustee (the "Trustee"). WHEREAS, the Company and the Trustee are parties to the Indenture, dated as of September 1, 1993 (as it may be amended or supplemented from time to time, the "Indenture"), providing for the issuance of 9% Senior Notes due 2000 (the "Securities"), in the aggregate principal amount of $270,000,000; WHEREAS, Section 8.02 of the Indenture provides that the Company and the Trustee may amend or supplement the Indenture with the written consent of the holders of at least a majority in principal amount of the Securities; WHEREAS, the Company desires to delete or amend certain provisions of the Indenture as set forth herein; WHEREAS, there were outstanding immediately prior to the date hereof Securities in the aggregate principal amount of $182,261,000, of which $180,606,000 in principal amount tendered such Securities and consented in writing to the amendments contained herein pursuant to an offer to purchase for cash all outstanding Securities and related consent solicitation; WHEREAS, the Company has furnished the Trustee with an Officers' Certificate and, as to legal issues, an Opinion of Counsel, stating that this Second Supplemental Indenture is authorized under the Indenture; WHERAS, pursuant to Section 8.06 of the Indenture, in signing this Second Supplemental Indenture, the Trustee shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that this Second Supplemental Indenture is authorized under the Indenture; and WHEREAS, all things necessary to make this First Supplemental Indenture a valid agreement, in accordance with its terms, have been done. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein, the Company and the Trustee, intending to be legally bound, mutually covenant and agree for the equal and ratable benefit of the respective holders from time to time of the Securities as follows (all capitalized terms used in this First Supplemental Indenture which are not defined herein have the meanings assigned to them in the Indenture): Section 1. Deletion of Certain Sections of the Indenture. Sections 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.11 and 3.12 of the Indenture are hereby amended by deleting all such sections, all references thereto and all defined terms used exclusively therein in their entirety. Section 2. Amendment of Section 3.10 of the Indenture. Section 3.10 of the Indenture is hereby amended by replacing all references to "the Company" with references to "CK Witco Corporation," which is the corporation that owns all of the outstanding capital stock of the Company. Section 3. Amendments to Section 4.01 of Article IV. Section 4.01 of the Indenture is hereby amended to read in its entirety as follows: "SECTION 4.01. Merger and Consolidation. The Company shall not consolidate with or merge with or into any other corporation or transfer all or substantially all of its properties and assets as an entirety to any Person unless: (a) either the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company as an entirety are transferred (the "Successor Corporation"), shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, all the obligations of the Company under this Indenture and the Securities; (b) immediately before and immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Corporation or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Successor Corporation or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (c) the Company shall have delivered, or caused to be delivered, to the Trustee an Officers' Certificate and, as to legal issues, an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee stating that such consolidation, merger or transfer and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction and have been complied with; Notwithstanding the foregoing paragraph (b), (X) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Wholly Owned Subsidiary or Wholly Owned Subsidiaries and (Y) the Combination may be effected, and no violation of this Section shall be deemed to have occurred as a consequence thereof, as long as in each case the requirements of paragraphs (a) and (c) are satisfied in connection therewith." Section 4. Amendments to Section 5.01 of Article V. Section 5.01 of the Indenture is hereby amended to read in its entirety as follows: "SECTION 5.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (b) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at maturity or otherwise or fails to redeem or purchase Securities when required pursuant to this Indenture or the Securities; (c) the Company fails to comply with any of its other covenants or agreements in the Securities or this Indenture and the default continues for 30 days after the date on which written notice of such default is given to the Company by the Trustee or to the Company and the Trustee by Holders of at least 25% in principal amount of the Securities then outstanding hereunder; (d) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law; (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability to generally pay its debts as such debts become due; or takes any comparable action under any foreign laws relating to insolvency; (e) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Significant Subsidiary in an involuntary case, (ii) appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of its property, or (iii) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means title 11 of the U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Any notice of Default given by the Trustee or Securityholders under this Section must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time or both would become an Event of Default under clause (c) or (e) hereof. Subject to the provisions of Section 6.01 and 6.02, the Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to the Trustee by the Company, the Paying Agent, any Holder or an agent of any Holder." Section 5. Effectiveness; Termination. The provisions of this First Supplemental Indenture will take effect immediately upon its execution and delivery by the Company and the Trustee in accordance with the terms of the Indenture. Prior to the Acceptance Date, the Company may terminate this First Supplemental Indenture upon written notice to the Trustee. The Company shall give the Trustee prompt written notice of the Acceptance Date. Section 6. Acceptance by Trustee. The Trustee accepts the amendments to the Indenture effected by this First Supplemental Indenture and agrees to execute the trusts created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture. Section 7. Governing Law. The laws of the State of New York govern this First Supplemental Indenture and the Securities, without regard to the conflicts of laws rules thereof. Section 8. Counterparts. This First Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed as of the date first above written. UNIROYAL CHEMICAL COMPANY By Name: John Jepsen Title: Treasurer ATTEST: By Name: Barry Shainman Title: Secretary STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE By Name: Title: ATTEST: By Name: Title: EX-10.263 13 RECEIVABLES PURCHASE AGREEMENT Dated as of June 10, 1999 Among WITCO FUNDING CORPORATION as the Seller and CIESCO L.P. as the Investor and CITIBANK, N.A. as the initial Bank and CITICORP NORTH AMERICA, INC. as the Agent and WITCO CORPORATION as Collection Agent and Originator TABLE OF CONTENTS Page PRELIMINARY STATEMENT 1 ARTICLE I DEFINITIONS 1 SECTION 1.01. Certain Defined Terms 1 SECTION 1.02. Other Terms 20 ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES 21 SECTION 2.01. Purchase Facility 21 SECTION 2.02. Making Purchases 21 SECTION 2.03. Receivable Interest Computation 22 SECTION 2.04. Settlement Procedures 22 SECTION 2.05. Fees 25 SECTION 2.06. Payments and Computations, Etc. 25 SECTION 2.07. Dividing or Combining Receivable Interests 26 SECTION 2.08. Increased Costs 26 SECTION 2.09. Additional Yield on Receivable Interests Bearing a Eurodollar Rate 27 SECTION 2.10. Intention of the Parties. 27 ARTICLE III CONDITIONS OF PURCHASES 28 SECTION 3.01. Conditions Precedent to Initial Purchase 28 SECTION 3.02. Conditions Precedent to All Purchases and Reinvestments. 29 ARTICLE IV REPRESENTATIONS AND WARRANTIES 30 SECTION 4.01. Representations and Warranties of the Seller 30 SECTION 4.02. Representations and Warranties of the Collection Agent 33 ARTICLE V COVENANTS 34 SECTION 5.01. Covenants of the Seller 34 SECTION 5.02. Covenant of the Seller and the Originator 40 SECTION 5.03. Post Closing Opinion 41 ARTICLE VI ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES 41 SECTION 6.01. Designation of Collection Agent 41 SECTION 6.02. Duties of Collection Agent 41 SECTION 6.03. Certain Rights of the Agent 43 SECTION 6.04. Rights and Remedies 44 SECTION 6.05. Further Actions Evidencing Purchases 44 SECTION 6.06. Covenants of the Collection Agent and the Originator 44 SECTION 6.07. Indemnities by the Collection Agent 45 ARTICLE VII EVENTS OF TERMINATION 46 SECTION 7.01. Events of Termination 46 ARTICLE VIII THE AGENT 49 SECTION 8.01. Authorization and Action 49 SECTION 8.02. Agent's Reliance, Etc 49 SECTION 8.03. CNAI and Affiliates 50 SECTION 8.04. Bank's Purchase Decision 50 ARTICLE IX INDEMNIFICATION 50 SECTION 9.01. Indemnities by the Seller 50 ARTICLE X MISCELLANEOUS 52 SECTION 10.01. Amendments, Etc 52 SECTION 10.02. Notices, Etc 53 SECTION 10.03. Assignability 53 SECTION 10.04. Costs, Expenses and Taxes 54 SECTION 10.05. No Proceedings 55 SECTION 10.06. Confidentiality 55 SECTION 10.07. GOVERNING LAW 56 SECTION 10.08. Execution in Counterparts 56 SECTION 10.09. Survival of Termination 56 SCHEDULES SCHEDULE I - Lock-Box Banks SCHEDULE II - Credit and Collection Policy ANNEXES ANNEX A - Form of Seller Report ANNEX B-1 - Form of Control Agreement for Designated Accounts ANNEX B-2 - Form of Lock-Box Agreement for all other Lock-Box Accounts ANNEX C - Form of Opinion of Cravath, Swaine & Moore, special counsel to the Seller and the Originator ANNEX D - Assignment and Acceptance ANNEX E - Form of OPA Assignment ANNEX F - Form of Funds Transfer Letter RECEIVABLES PURCHASE AGREEMENT Dated as of June 10, 1999 WITCO FUNDING CORPORATION, a Delaware corporation (the "Seller"), CIESCO L.P., a New York limited partnership, CITIBANK, N.A. a national banking association ("Citibank"), and CITICORP NORTH AMERICA, INC., a Delaware corporation ("CNAI"), as agent (the "Agent") for the Investors and the Banks (as defined herein), and WITCO CORPORATION, a Delaware corporation, as Collection Agent and Originator, agree as follows: PRELIMINARY STATEMENT. The Seller has acquired, and may continue to acquire Receivables from the Originator (as hereinafter defined), either by purchase or by contribution to the capital of the Seller, as determined from time to time by the Seller and the Originator. The Seller is prepared to sell undivided fractional ownership interests (referred to herein as "Receivable Interests") in the Receivables. Ciesco may, in its sole discretion, purchase such Receivable Interests, and Citibank and the other Banks from time to time, if any, are prepared to purchase such Receivable Interests, in each case on the terms set forth herein. Accordingly, the parties agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted Eurodollar Rate" means, for any Settlement Period, an interest rate per annum equal to the rate per annum obtained by dividing (i) the Eurodollar Rate for such Settlement Period by (ii) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Settlement Period. "Adverse Claim" means a lien, security interest or other charge or any other encumbrance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or, with respect to an individual, is a director or officer of such Person. "Affiliated Obligor" means any Obligor that is an Affiliate of another Obligor. "Agent's Account" means the special account (account number 3885-8248) of the Agent maintained at the office of Citibank at 399 Park Avenue, New York, New York. "Alternate Base Rate" means a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time as Citibank's base rate; (b) 0.50% above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent; and (c) the Federal Funds Rate. "Asset Purchase Agreement" means in the case of any Bank other than Citibank, the asset purchase agreement entered into by such Bank concurrently with the Assignment and Acceptance pursuant to which it became party to this Agreement. "Assignee Rate" for any Settlement Period for any Receivable Interest means an interest rate per annum equal to 1.00% per annum above the Eurodollar Rate for such Settlement Period; provided, however, that in case of: (i) any Settlement Period on or prior to the first day of which an Investor or Bank shall have notified the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Investor or Bank to fund such Receivable Interest at the Assignee Rate set forth above (and such Investor or Bank shall not have subsequently notified the Agent that such circumstances no longer exist), (ii) any Settlement Period of one to (and including) 29 days, (iii) any Settlement Period as to which the Agent does not receive notice, by no later than 12:00 noon (New York City time) on the third Business Day preceding the first day of such Settlement Period, that the related Receivable Interest will not be funded by issuance of commercial paper, or (iv) any Settlement Period for a Receivable Interest the Capital of which allocated to the Investors or the Banks is less than $500,000, the "Assignee Rate" for such Settlement Period shall be an interest rate per annum equal to the Alternate Base Rate in effect on the first day of such Settlement Period; provided further that the Agent and the Seller may agree in writing from time to time upon a different "Assignee Rate". "Assignment and Acceptance" means an assignment and acceptance agreement entered into by a Bank, an Eligible Assignee and the Agent, pursuant to which such Eligible Assignee may become a party to this Agreement, in substantially the form of Annex D hereto. "Average Maturity" means at any time that period of days equal to the average maturity of the Pool Receivables calculated by the Collection Agent in the then most recent Seller Report; provided if the Agent reasonably disputes any such calculation, the Agent may recalculate such Average Maturity. "Bank" or "Banks" means Citibank and each Eligible Assignee that shall become a party to this Agreement pursuant to Section 10.03. "Bank Commitment" of any Bank means, (a) with respect to Citibank, $150,000,000 or such amount as reduced by any Assignment and Acceptance entered into between Citibank and other Banks; or (b) with respect to a Bank that has entered into an Assignment and Acceptance, the amount set forth therein as such Bank's Bank Commitment, in each case as such amount may be reduced by an Assignment and Acceptance entered into between such Bank and an Eligible Assignee, and as may be further reduced (or terminated) pursuant to the next sentence. Any reduction (or termination) of the Purchase Limit pursuant to the terms of this Agreement shall reduce ratably (or terminate) each Bank's Bank Commitment. "Business Day" means any day on which (i) banks are not authorized or required to close in New York City, and (ii) if this definition of "Business Day" is utilized in connection with the Eurodollar Rate, dealings are carried out in the London interbank market. "Capital" of any Receivable Interest means the original amount paid to the Seller for such Receivable Interest at the time of its purchase by Ciesco or a Bank pursuant to this Agreement, or such amount divided or combined in accordance with Section 2.07, in each case reduced from time to time by Collections distributed on account of such Capital pursuant to Section 2.04(d) or otherwise; provided that if such Capital shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Capital shall be increased by the amount of such rescinded or returned distribution, as though it had not been made. "Ciesco" means Ciesco L.P., and any successor or assign of Ciesco that is a receivables investment company managed by CNAI or an Affiliate of CNAI which in the ordinary course of its business issues commercial paper or other securities to fund its acquisition and maintenance of receivables. "Closing Date" means the date and time of the initial purchase hereunder following the fulfillment or waiver of the conditions precedent set forth in Section 3.01 hereof. "Collection Agent" means at any time the Person then authorized pursuant to Section 6.01 to administer and collect Pool Receivables. "Collection Agent Fee" has the meaning specified in Section 2.05(a). "Collection Agent Default" means any of the following events: (i) the Collection Agent (if the Originator or any of its Affiliates) shall fail to perform or observe any term, covenant or agreement under Section 6.02 and such failure shall remain unremedied (in the reasonable judgment of the Agent) for 10 days following delivery of written notice of such failure from the Agent; or (ii) the Collection Agent (if the Originator or any of its Affiliates) shall fail to make when due any payment or deposit to be made by it under this Agreement; or (iii) the occurrence and continuance of any Event of Termination under Section 7.01(b), Section 7.01(c) (with respect to any representation or warranty made by the Collection Agent), Section 7.01(e), Section 7.01(f), Section 7.01(g), Section 7.01(j) (with respect to the Collection Agent), Section 7.01(l) or Section 7.01(m). "Collections" means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, all cash proceeds of Related Security with respect to such Receivable, and any Collection of such Receivable deemed to have been received pursuant to Section 2.04. "Commitment Termination Date" means the earliest of (a) June 8, 2000, unless, prior to such date (or the date so extended pursuant to this clause), upon the Seller's request, made not more than 90 nor less than 45 days prior to the then Commitment Termination Date, one or more Banks having 100% of the Purchase Limit shall in their sole discretion consent, which consent shall be given not more than 30 days prior to the then Commitment Termination Date, to the extension of the Commitment Termination Date to the date occurring 364 days after the then Commitment Termination Date; provided, however, that any failure of any Bank to respond to the Seller's request for such extension shall be deemed a denial of such request by such Bank, (b) the Facility Termination Date, (c) the date determined pursuant to Section 7.01, and (d) the date the Purchase Limit reduces to zero pursuant to Section 2.01(b). "Concentration Limit" for any Obligor means at any time 2.5%, or such other percentage ("Special Concentration Limit") for such Obligor designated by the Agent in a writing delivered to the Seller; provided that in the case of an Obligor with any Affiliated Obligor, the Concentration Limit shall be calculated as if such Obligor and such Affiliated Obligor are one Obligor; provided further that the Agent may cancel any Special Concentration Limit upon three Business Days' notice to the Seller effective with respect to Eligible Receivables thereafter transferred to the Seller by the Originator. "Contract" means an agreement now or hereafter existing between the Originator and an Obligor pursuant to or under which such Obligor shall be obligated to pay for the provision or sale of specialty chemical products or services of the Originator from time to time. "Control Agreement" means a Control Agreement with respect to Designated Banks in substantially the form attached hereto as Annex B-1. "Credit and Collection Policy" means those receivables credit and collection policies and practices of the Originator in effect on the date of this Agreement and described in Schedule II hereto, as modified in compliance with this Agreement. "Debt" means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (v) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA, and (vi) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above. "Default Ratio" means the ratio (expressed as a percentage) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables that were Defaulted Receivables on such day or that would have been Defaulted Receivables on such day had they not been written off the books of the Originator or the Seller during such month by (ii) the aggregate Outstanding Balance of all Pool Receivables on such day. "Defaulted Receivable" means an Originator Receivable: (i) as to which any payment, or part thereof, remains unpaid for more than 90 days from the original due date for such payment; (ii) as to which the Obligor thereof or any other Person obligated thereon or providing any Related Security in respect thereof has taken any action, or suffered any event to occur, of the type described in Section 7.01(g); or (iii) which, consistent with the Credit and Collection Policy, would be written off the Originator's or the Seller's books as uncollectible. "Deferred Purchase Price" has the meaning set forth in the Originator Purchase Agreement. "Delinquency Ratio" means the ratio (expressed as a percentage) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables that were Delinquent Receivables on such day by (ii) the aggregate Outstanding Balance of all Pool Receivables on such day. "Delinquent Receivable" means a Pool Receivable that is not a Defaulted Receivable and: (i) as to which any payment, or part thereof, remains unpaid for more than 30 days and less than or equal to 90 days from the original due date for such payment; or (ii) which, consistent with the Credit and Collection Policy, would be classified as delinquent by the Originator or the Seller. "Designated Account" or "Designated Accounts" means one or more bank accounts established for the deposit of all Collections at a Designated Bank and subject to an executed Control Agreement. "Designated Bank" means any bank or banks selected by the Collection Agent from time to time (initially, to be Mellon Bank) and approved by the Agent (such approval not to be unreasonably withheld) to establish a Designated Account. "Designated Obligor" means, at the time, each Obligor; provided, however, that any Obligor shall cease to be a Designated Obligor, based on the Agent's analysis of the creditworthiness of such Obligor (as determined by the Agent in its sole reasonable discretion), upon three Business Days' notice by the Agent to the Seller effective with respect to Eligible Receivables thereafter transferred by the Originator to the Seller. "Diluted Receivable" means that portion (and only that portion) of any Pool Receivable which is reduced or canceled as a result of (i) any defective, rejected or returned merchandise or services or any failure by the Originator to deliver any merchandise or provide any services or otherwise to perform under the underlying Contract or invoice, (ii) any change in the terms of or cancellation of, a Contract or invoice or any cash discount, discount for quick payment or other adjustment by the Originator which reduces the amount payable by the Obligor on the related Receivable (except any such change or cancellation resulting from or relating to the financial inability to pay or insolvency of the Obligor of such Receivable) or (iii) any set- off by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related Pool Receivable; provided that Diluted Receivables are calculated assuming that all chargebacks are resolved in the Obligor's favor and do not include contractual adjustments to the amount payable by an Obligor that are eliminated from the Receivables balance sold to the Seller through a reduction in the purchase price for the related Receivable. "Dilution Horizon Factor" means, as of any date, a ratio computed by dividing (i) the aggregate original Outstanding Balance of all Pool Receivables created by the Originator during the three most recently ended calendar months, by (ii) the excess of (a) the Outstanding Balance of Pool Receivables as at the last day of the most recently ended calendar month, minus (b) the aggregate Outstanding Balance of all Pool Receivables that became Defaulted Receivables as at the last day of such month. "Dilution Percentage" means, as of any date, the product of (a) the sum of (i) the product of (x) two, multiplied by (y) the average of the Dilution Ratios for each of the 12 most recently ended calendar months, plus (ii) the Dilution Volatility Ratio as at the last day of the most recently ended calendar month, multiplied by (b) the Dilution Horizon Factor as of such date. "Dilution Ratio" means, as of any date, the ratio (expressed as a percentage) computed for the most recently ended calendar month by dividing (i) the aggregate amount of Pool Receivables which became Diluted Receivables during such calendar month by (ii) the aggregate Outstanding Balance (in each case, at the time of creation) of all Pool Receivables created during the calendar month immediately preceding such calendar month. "Dilution Reserve" means for any Receivable Interest as of any date, (x) when the Originator has maintained a rating of all of the Originator's long term public senior debt securities at not less than BBB by S&P and not less than Baa2 by Moody's, an amount equal to 1.1 multiplied by the highest Dilution Ratio for any calendar month during the immediately prior 24 months, multiplied by the sum of (i) Capital plus (ii) the Yield/Fee Reserve, in each case, of such Receivable Interest on such date, and (y) when the Originator has not maintained both such ratings, an amount equal to: DP x (C + YFR) where: DP = the Dilution Percentage for such Receivable Interest on such date. C = the Capital of such Receivable Interest on such date. YFR = the Yield/Fee Reserve for such Receivable Interest on such date. "Dilution Volatility Ratio" means, as of any date, a ratio (expressed as a percentage) equal to the product of (a) the highest of the Dilution Ratios calculated for each of the 12 most recently ended calendar months minus the average of the Dilution Ratios for each of the twelve most recently ended calendar months, and (b) a ratio calculated by dividing the highest of the Dilution Ratios calculated for each of the twelve most recently ended calendar months by the average of the Dilution Ratios for each of the twelve most recently ended calendar months. "E-Mail Seller Report"has the meaning specified in Section 10.02. "Eligible Assignee" means (i) Citibank and any other Bank or the Investor that previously became a party to this Agreement pursuant to Section 10.03, (ii) any of their respective Affiliates, (iii) any Person managed by Persons included in clauses (i) or (ii) above, or (iv) any other financial or other institution identified by the Agent and consented to by the Seller, such consent not to be unreasonably withheld; provided, that if an Event of Termination is continuing at the time of the proposed assignment, the consent of the Seller shall not be required. "Eligible Receivable" means, at any time, a Receivable: (i) the Obligor of which is a United States resident, is not an Affiliate of any of the parties hereto, and is not a government or a governmental subdivision or agency; (ii) the Obligor of which, at the time of the initial creation of an interest therein under this Agreement, is a Designated Obligor and is not the Obligor of any Defaulted Receivables which in the aggregate constitute 10% or more of the aggregate Outstanding Balance of all Receivables of such Obligor; (iii) which at the time of the initial creation of an interest therein under this Agreement is not a Defaulted or Delinquent Receivable; (iv) which, according to the Contract related thereto, is required to be paid in full within 60 days of the original billing date therefor; (v) which is an obligation representing allor part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended; (vi) the purchase of which from the Seller with the proceeds of notes would constitute a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended; (vii) which is an "account" within the meaning of Section 9-106 of the UCC of the applicable jurisdictions governing the perfection of the interest created by a Receivable Interest; (viii) which is denominated and payable only in United States dollars in the United States; (ix) which arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable and is not subject to any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor); (x) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which none of the Seller, the Originator or the Obligor is in violation of any such law, rule or regulation in any material respect; (xi) which arises under a Contract which does not require the Obligor thereunder to consent to the transfer, sale or assignment of payment rights of the Seller or the Originator thereunder; (xii) which was generated in the ordinary course of the Originator's business; (xiii) which, at the time of the initial creation of an interest therein under this Agreement, has not been extended, rewritten or otherwise modified from the original terms thereof except in a manner permitted under the Credit and Collection Policy; (xiv) which (A) satisfies all applicable requirements of the Credit and Collection Policy and (B) complies with such other reasonable criteria and requirements (relating to the Receivables) as the Agent may from time to time specify to the Seller upon 30 days' notice; and (xv) as to which, at or prior to the time of the initial creation of an interest therein under this Agreement, the Agent has not notified the Seller that such Receivable (or class of Receivables) is no longer acceptable for purchase by Ciesco and the Banks hereunder for bona fide credit-related reasons. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Rate" means, for any Settlement Period, an interest rate per annum equal to the rate per annum at which deposits in U.S. dollars are offered by the principal office of Citibank in London, England to prime banks in the London interbank market at 11:00 A.M. (London Time) two Business Days before the first day of such Settlement Period in an amount substantially equal to the Capital associated with such Settlement Period on such first day and for a period equal to such Settlement Period. "Eurodollar Rate Reserve Percentage" of any Investor or Bank for any Settlement Period in respect of which Yield is computed by reference to the Eurodollar Rate means the reserve percentage applicable two Business Days before the first day of such Settlement Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) (or if more than one such percentage shall be applicable, the daily average of such percentages for those days in such Settlement Period during which any such percentage shall be so applicable) for determining the maximum applicable reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Investor or Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Liabilities is determined) having a term equal to such Settlement Period. "Event of Termination" has the meaning specified in Section 7.01. "Facility Termination Date" means the earliest of (a) June 10, 2002 or (b) the date of termination determined pursuant to Section 7.01 or (c) the date the Purchase Limit is reduced to zero pursuant to Section 2.01(b). "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" has the meaning specified in Section 2.05(b). "Fees" has the meaning specified in Section 2.05(b). "Final Termination Date" means the latest of (i) the Facility Termination Date, and (ii) the date on which no Capital of or Yield on any Receivable Interest shall be outstanding, all other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid in full and all purchase obligations of the Banks have been terminated. "Foreign Receivable" means, at any time, a receivable the Obligor of which is not a United States resident. "Funds Transfer Letter" means a letter in substantially the form of Annex F hereto executed and delivered by the Seller to the Agent, as the same may be amended or restated in accordance with the terms thereof. "Incipient Event of Termination" means an event that but for notice or lapse of time or both would constitute an Event of Termination. "Investor" means Ciesco and all other owners by assignment or otherwise of a Receivable Interest originally purchased by Ciesco and, to the extent of the undivided interests so purchased, shall include any participants. "Investor Rate" for any Settlement Period for any Receivable Interest means the per annum rate equivalent to the weighted average of the per annum rates paid or payable by Ciesco from time to time as interest on or otherwise (by means of interest rate hedges or otherwise) in respect of those promissory notes issued by Ciesco that are allocated, in whole or in part, by the Agent (on behalf of Ciesco) to fund the purchase or maintenance of such Receivable Interest during such Settlement Period as determined by the Agent (on behalf of Ciesco) and reported to the Seller and, if the Collection Agent is not the Seller, the Collection Agent, which rates shall reflect and give effect to the commissions of placement agents and dealers in respect of such promissory notes, to the extent such commissions are allocated, in whole or in part, to such promissory notes by the Agent (on behalf of Ciesco); provided, however, that if any component of such rate is a discount rate, in calculating the Investor Rate for such Settlement Period the Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. "Liquidation Day" means, for any Receivable Interest, (i) each day during a Settlement Period for such Receivable Interest on which the conditions set forth in Section 3.02 are not satisfied, and (ii) each day which occurs on or after the Termination Date for such Receivable Interest. "Liquidation Fee" means, for any Settlement Period during which a Liquidation Day occurs, the amount, if any, by which (i) the additional Yield (calculated without taking into account any Liquidation Fee or any shortened duration of such Settlement Period pursuant to clause (iii) of the definition thereof) which would have accrued during such Settlement Period on the reductions of Capital of the Receivable Interest relating to such Settlement Period had such reductions remained as Capital, exceeds (ii) the income, if any, received by the Investors' investing the proceeds of such reductions of Capital. "Lock-Box Bank" means (i) each Designated Bank, and (ii) prior to December 31, 1999, any of the other banks listed on Schedule I that are the subject of an undated Lock-Box Agreement. "Lock-Box Account" means any Designated Account and any other bank account at a Lock-Box Bank subject to a Lock-Box Agreement. "Lock-Box Agreement" means a Lock-Box Agreement with respect to all Lock-Box Banks (other than Designated Banks) in substantially the form attached hereto as Annex B-2. "Loss Percentage" means for any Receivable Interest as of any date, the greatest of (i) three times the highest Default Ratio as of the last day of each of the twelve months ended immediately preceding such date, (ii) four times the Concentration Limit, and (iii) 10%. "Loss-to-Liquidation Ratio" means the ratio (expressed as a percentage) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables written off by the Originator or the Seller, or which should have been written off by the Originator or the Seller in accordance with the Credit and Collection Policy, during the twelve calendar month period ending on such last day, by (ii) the aggregate amount of Collections of Pool Receivables actually received during such period. "Loss Reserve" means, for any Receivable Interest on any date, an amount equal to LP x Capital (1 - LP) where: LP = the Loss Percentage for such Receivable Interest on such date. Capital = the Capital of such Receivable Interest on such date. "Material Adverse Effect" means any condition, event or series of events that has a material adverse effect on: (i) the Receivable Interests or the collectibility of any material amount of funds with respect thereto; (ii) the rights of the Agent, the Banks or the Investors with respect to the Receivable Interests and the rights set forth in this Agreement; (iii) the business, consolidated financial position, consolidated results of operation of the Collection Agent (if it is the Originator or an Affiliate of the Originator), the Originator and its Subsidiaries; (iv) the ability of the Seller, the Collection Agent or the Originator to perform their respective duties and obligations or exercise their rights and remedies under this Agreement and the Transaction Documents; or (v) the legality, validity or enforceability of the Transaction Documents. "Moody's" means Moody's Investors Service, Inc. "Net Receivables Pool Balance" means at any time the Outstanding Balance of Eligible Receivables then in the Receivables Pool reduced by the sum of (i) the Outstanding Balance of such Eligible Receivables that are then Defaulted Receivables, (ii) the aggregate amount by which the Outstanding Balance of Eligible Receivables (other than Defaulted Receivables) of each Obligor then in the Receivables Pool exceeds the product of (A) the Concentration Limit for such Obligor multiplied by (B) the Capital of the Eligible Receivables then in the Receivables Pool, (iii) the aggregate amount by which the Outstanding Balance of Eligible Receivables (other than Defaulted Receivables) then in the Receivables Pool which, according to the Contracts related thereto are required to be paid in full between 31 and 45 days of the original billing date therefor, exceeds 15% of the Outstanding Balance of the Eligible Receivables then in the Receivables Pool, (iv) the aggregate amount by which the Outstanding Balance of Eligible Receivables (other than Defaulted Receivables) then in the Receivables Pool which, according to the Contracts related thereto are required to be paid in full between 46 and 60 days of the original billing date therefor, exceeds 15% of the Outstanding Balance of Eligible Receivables then in the Receivables Pool, and (v) the aggregate amount of Collections on hand at such time for payment on account of any Eligible Receivables, the Obligor of which has not been identified. "Obligor" means a Person obligated to make payments pursuant to a Contract. "OPA Assignment" means the assignment agreement, pursuant to which the Seller is assigning to the Agent the Originator Purchase Agreement, duly acknowledged and consented to by the Originator, in substantially the form of Annex E hereto. "Originator" means Witco Corporation, a Delaware corporation. "Originator Purchase Agreement" means the Purchase and Contribution Agreement dated as of the date of this Agreement between the Originator, as seller, and the Seller, as purchaser, as the same may be amended, modified or restated from time to time. "Originator Receivable" means the indebtedness of any Obligor, other than an Obligor which is not a United States resident, resulting from the provision or sale of specialty chemical merchandise or services by the Originator under a Contract, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto. "Other Companies" means the Originator and all of its Subsidiaries except the Seller. "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof. "Percentage" of any Bank means, (a) with respect to Citibank, the percentage set forth on the signature page to this Agreement, or such amount as reduced by any Assignment and Acceptance entered into with an Eligible Assignee, or (b) with respect to a Bank that has entered into an Assignment and Acceptance, the amount set forth therein as such Bank's Percentage, or such amount as reduced by an Assignment and Acceptance entered into between such Bank and an Eligible Assignee. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Pool Receivable" means a Receivable in the Receivables Pool. "Purchase Limit" means $150,000,000, as such amount may be reduced pursuant to Section 2.01(b). References to the unused portion of the Purchase Limit shall mean, at any time, the Purchase Limit, as then reduced pursuant to Section 2.01(b), minus the then outstanding Capital of Receivable Interests under this Agreement. "Receivable" means any Originator Receivable which has been acquired by the Seller from the Originator by purchase or by capital contribution pursuant to the Originator Purchase Agreement. "Receivable Interest" means, at any time, an undivided percentage ownership interest of the Investors or the Banks in (i) all then outstanding Pool Receivables arising prior to the time of the most recent computation or recomputation of such undivided percentage interest pursuant to Section 2.03, (ii) all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables. Such undivided percentage interest shall be computed as C + YFR + LR + DR NRPB where: C = the Capital of such Receivable Interest at the time of computation. YFR = the Yield/Fee Reserve of such Receivable Interest at the time of computation. LR = the Loss Reserve of such Receivable Interest at the time of computation. DR = the Dilution Reserve of such Receivable Interest at the time of computation. NRPB = the Net Receivables Pool Balance attributable to such Receivable Interest at the time of computation. Each Receivable Interest shall be determined from time to time pursuant to the provisions of Section 2.03. "Receivables Pool" means at any time the aggregation of each then outstanding Eligible Receivable or Originator Receivable that was represented to be an Eligible Receivable on the date of the initial creation of an interest in such Receivable under this Agreement. "Receivables Turnover Days" means at any time, the average, for the immediately prior three months, of the Outstanding Balance of Eligible Receivables at the end of each such month, divided by Collections received during such month, multiplied by 36.75 days. "Related Security" means with respect to any Receivable: (i) all of the Seller's interest in any merchandise (including returned merchandise) relating to any sale giving rise to such Receivable; (ii) all security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable; (iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; and (iv) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) relating to such Receivable and the related Obligor. "S&P" means Standard & Poor's Rating Services, a division of McGraw-Hill Companies, Inc. "Seller Report" means a report in substantially the form of Annex A hereto and containing such additional information as the Agent may reasonably request from time to time, furnished by the Collection Agent to the Agent pursuant to Section 6.02(g). "Settlement Period" means, with respect to any Receivable Interest: (a) in the case of any Settlement Period in respect of which Yield is computed by reference to the Investor Rate, each successive period commencing on each Settlement Period Date for such Receivable Interest and ending on the next succeeding Settlement Period Date for such Receivable Interest; and (b) in the case of any Settlement Period in respect of which Yield is computed by reference to the Assignee Rate, each successive period of from one to and including 29 days, or a period of one month, as the Seller shall select and the Agent may approve on notice by the Seller received by the Agent (including notice by telephone, confirmed in writing) not later than 11:00 A.M. (New York City time) on (A) the day which occurs three Business Days before the first day of such Settlement Period (in the case of Settlement Periods in respect of which Yield is computed by reference to the Eurodollar Rate) or (B) the first day of such Settlement Period (in the case of Settlement Periods in respect of which Yield is computed by reference to the Alternate Base Rate), each such Settlement Period for such Receivable Interest to commence on the last day of the immediately preceding Settlement Period for such Receivable Interest (or, if there is no such Settlement Period, on the date of purchase of such Receivable Interest), except that if the Agent shall not have received such notice, or the Agent and the Seller shall not have so mutually agreed, before 11:00 A.M. (New York City time) on such day, such Settlement Period shall be one day; provided, however, that: (i) any Settlement Period (other than of one day) which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day (provided, however, if Yield in respect of such Settlement Period is computed by reference to the Eurodollar Rate, and such Settlement Period would otherwise end on a day which is not a Business Day, and there is no subsequent Business Day in the same calendar month as such day, such Settlement Period shall end on the next preceding Business Day); (ii) in the case of any Settlement Period of one day, (A) if such Settlement Period is the initial Settlement Period for a Receivable Interest, such Settlement Period shall be the day of the purchase of such Receivable Interest; (B) any subsequently occurring Settlement Period which is one day, if the immediately preceding Settlement Period is more than one day, shall be the last day of such immediately preceding Settlement Period and, if the immediately preceding Settlement Period is one day, shall be the day next following such immediately preceding Settlement Period; and (C) if such Settlement Period occurs on a day immediately preceding a day which is not a Business Day, such Settlement Period shall be extended to the next succeeding Business Day; and (iii) in the case of any Settlement Period for any Receivable Interest which commences before the Termination Date for such Receivable Interest and would otherwise end on a date occurring after such Termination Date, such Settlement Period shall end on such Termination Date and the duration of each Settlement Period which commences on or after the Termination Date for such Receivable Interest shall be of such duration (including, without limitation, a period of one day) as shall be selected by the Agent. "Settlement Period Date" means, for any Receivable Interest, the date of purchase of such Receivable Interest and thereafter, the 15th day of each calendar month (or, if such day is not a Business Day, the immediately succeeding Business Day) or any other day as shall have been agreed to in writing by the Agent and the Seller prior to the first day of the preceding Settlement Period for such Receivable Interest or, if there is no preceding Settlement Period, prior to the first day of such Settlement Period; provided, that, the first Settlement Period Date after the Closing Date shall be the 15th day of the calendar month succeeding the calendar month on such Closing Date; provided, further, that, with respect to any Settlement Period for which Yield is computed with reference to the Assignee Rate for purposes of the payment of Yield, the Collection Agent Fee, and fees under the Fee Letter, the Settlement Date shall be the last day of the Settlement Period. "Subsidiary" means any corporation or other entity of which securities having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Seller or the Originator, as the case may be, or one or more Subsidiaries, or by the Seller or the Originator, as the case may be, and one or more Subsidiaries. "Tangible Net Worth" means at any time the excess of (i) the Outstanding Balance of all Receivables plus cash and cash equivalents of the Seller, minus (ii) the sum of (a) the Outstanding Balance of Receivables that have become Defaulted Receivables, plus (b) Capital, Yield/Fee Reserve, Loss Reserve and Dilution Reserve. "Termination Date" for any Receivable Interest means (i) in the case of a Receivable Interest owned by an Investor, the earlier of (a) the Business Day which the Seller or the Agent so designates by notice to the other at least one Business Day in advance for such Receivable Interest and (b) the Facility Termination Date and (ii) in the case of a Receivable Interest owned by a Bank, the earlier of (a) the Business Day which the Seller so designates by notice to the Agent at least one Business Day in advance for such Receivable Interest and (b) the Commitment Termination Date. "Transaction Documents" means this Agreement, the Originator Purchase Agreement, each Lock-Box Agreement, each Control Agreement, the OPA Assignment and all other agreements and documents delivered hereto or thereto. "UCC" means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction. "Year 2000 Problem" means the risk that computer applications used by the Collection Agent and its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999. "Yield" means: (i) for each Receivable Interest for any Settlement Period to the extent Ciesco will be funding such Receivable Interest through the issuance of commercial paper, IR x C x AD + LF 360 (ii) for each Receivable Interest for any Settlement Period to the extent (x) the Investors will not be funding such Receivable Interest through the issuance of commercial paper or (y) the Banks will be funding such Receivable Interest, AR x C x AD + LF 360 where: AR = the Assignee Rate for such Receivable Interest for such Settlement Period; C = the Capital of such Receivable Interest during such Settlement Period; IR = the Investor Rate for such Receivable Interest for such Settlement Period; AD = the actual number of days elapsed during such Settlement Period; LF = the Liquidation Fee, if any, for such Receivable Interest for such Settlement Period; provided that no provision of this Agreement shall require the payment or permit the collection of Yield in excess of the maximum permitted by applicable law; and provided further that Yield for any Receivable Interest shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason. "Yield/Fee Reserve" means, for any Receivable Interest on any date, an amount equal to (C x YFRP) + AUYF where: C = the Capital of such Receivable Interest at the close of business of the Collection Agent on such date. YFRP = the Yield/Fee Reserve Percentage on such date. AUYF = accrued and unpaid Yield, Collection Agent Fee, and fees under the Fee Letter on such date. "Yield/Fee Reserve Percentage" means, for any Receivable Interest on any date, a percentage equal to: [(AER x 1.5) + AS + PF + CAF] x RTDF 360 where: AER = the one-month Adjusted Eurodollar Rate in effect on such date. AS = the percentage per annum contained in the definition of "Assignee Rate" in effect on such date. PF = the sum of the percentages per annum used in the calculation of the Program Fee (as defined in the Fee Letter), in effect on such date. CAF = the percentage per annum used in the calculation of the Collection Agent Fee in effect on such date. RTDF = the highest monthly Receivable Turnover Days during the most recently ended 12 months, plus 10 days. SECTION 1.02. Other Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES SECTION 2.01. Purchase Facility. (a) On the terms and conditions hereinafter set forth, Ciesco may, in its sole discretion, and the Banks shall, ratably in accordance with their respective Bank Commitments, purchase Receivable Interests from the Seller from time to time during the period from the Closing Date to the Facility Termination Date (in the case of Ciesco) and to the Commitment Termination Date (in the case of the Banks). Under no circumstances shall Ciesco make any such purchase, or the Banks be obligated to make any such purchase, if after giving effect to such purchase, the aggregate outstanding Capital would exceed the Purchase Limit. (b) The Seller may, upon at least five Business Days' notice to the Agent, terminate the facility provided for in this Agreement in whole or, from time to time, reduce in part the unused portion of the Purchase Limit; provided that each partial reduction shall be in the amount of at least $1,000,000 or an integral multiple thereof. (c) At any time prior to the Termination Date, the Agent, on behalf of the Investors which own Receivable Interests, shall have the Collections attributable to such Receivable Interests automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making an appropriate readjustment of such Receivable Interests. The Agent, on behalf of the Banks which own Receivable Interests, shall have the Collections attributable to such Receivable Interests automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making an appropriate readjustment of such Receivable Interests. SECTION 2.02. Making Purchases. (a) Each purchase by Ciesco or the Banks shall be made on at least three Business Days' written notice from the Seller to the Agent. Each such notice of a purchase shall specify (i) the amount requested to be paid to the Seller (such amount, which shall not be less than $2,000,000, being referred to herein as the initial "Capital" of the Receivable Interest then being purchased), (ii) the date of such purchase (which shall be a Business Day), and (iii) if the Assignee Rate is to apply to such Receivable interest, the duration of the initial Settlement Period for such Receivable Interest. The Agent shall promptly thereafter notify the Seller (and shall use its reasonable efforts to so notify on the same Business Day if it receives notice prior to 2:00 p.m.) whether Ciesco has determined to make a purchase and, if so, whether all of the terms specified by the Seller are acceptable to Ciesco. If Ciesco has determined not to make a proposed purchase, the Agent shall promptly send notice (and shall use its reasonable efforts to send such notice on the same Business Day if it receives notice prior to 2:00 p.m.) of the proposed purchase to all of the Banks concurrently by telecopier, telex or cable specifying the date of such purchase, each Bank's Percentage multiplied by the aggregate amount of Capital of Receivable Interest being purchased, whether the Yield for the Settlement Period for such Receivable Interest is calculated based on the Eurodollar Rate (which may be selected only if such notice is given at least two Business Days prior to the purchase date) or the Alternate Base Rate, and the duration of the Settlement Period for such Receivable Interest (which shall be one day if the Seller has not selected another period). (b) On the date of each such purchase of a Receivable Interest, Ciesco or the Banks, as the case may be, shall, upon satisfaction of the applicable conditions set forth in Article III, make available to the Seller in same day funds an amount equal to the initial Capital of such Receivable Interest, at the account set forth in the Funds Transfer Letter. (c) Effective on the date of each purchase pursuant to this Section 2.02 and each reinvestment pursuant to Section 2.04, the Seller hereby sells and assigns to the Agent, for the benefit of the parties making such purchase, an undivided percentage ownership interest, to the extent of the Receivable Interest then being purchased, in each Pool Receivable then existing and in the Related Security and Collections with respect thereto. (d) Notwithstanding the foregoing, a Bank shall not be obligated to make purchases under this Section 2.02 at any time in an amount which would exceed such Bank's Bank Commitment less the outstanding and unpaid amount of any purchases made by such Bank under the Asset Purchase Agreement. Each Bank's obligation shall be several, such that the failure of any Bank to make available to the Seller any funds in connection with any purchase shall not relieve any other Bank of its obligation, if any, hereunder to make funds available on the date of such purchase, but no Bank shall be responsible for the failure of any other Bank to make funds available in connection with any purchase. SECTION 2.03. Receivable Interest Computation. Each Receivable Interest shall be initially computed on its date of purchase. Thereafter until the Termination Date for such Receivable Interest, such Receivable Interest shall be automatically recomputed (or deemed to be recomputed) on each day other than a Liquidation Day. Any Receivable Interest, as computed (or deemed recomputed) as of the day immediately preceding the Termination Date for such Receivable Interest, shall thereafter remain constant. Such Receivable Interest shall become zero when Capital thereof and Yield thereon shall have been paid in full, and all Fees and other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid and the Collection Agent shall have received the accrued Collection Agent Fee thereon. SECTION 2.04. Settlement Procedures. (a) Collection of the Pool Receivables shall be administered by a Collection Agent, in accordance with the terms of Article VI of this Agreement. The Seller shall provide to the Collection Agent (if other than the Seller) on a timely basis all information needed for such administration, including notice of the occurrence of any Liquidation Day and current computations of each Receivable Interest. (b) The Collection Agent shall, on each day on which Collections of Pool Receivables are received by it with respect to any Receivable Interest: (i) set aside on its books and records, which shall be deemed to be held in trust (although the Collection Agent shall not be required to segregate such amounts) for the benefit of the Agent on behalf of the Investors or the Banks that hold such Receivable Interest, out of the percentage of such Collections represented by such Receivable Interest, an amount equal to the Yield, Fees and Collection Agent Fee accrued through such day for such Receivable Interest and not previously set aside; (ii) if such day is not a Liquidation Day for such Receivable Interest, reinvest with the Seller on behalf of the Investors or the Banks that hold such Receivable Interest the percentage of such Collections represented by such Receivable Interest, to the extent representing a return of Capital, by recomputation (or deemed recomputation) of such Receivable Interest pursuant to Section 2.03; (iii) if such day is a Liquidation Day for such Receivable Interest, set aside and hold in trust (and, at the request of the Agent following the occurrence of an Event of Termination, segregate) for the Investors or the Banks that hold such Receivable Interest the entire remainder of such percentage of Collections; provided that if amounts are set aside and held in trust on any Liquidation Day occurring prior to the Termination Date, and thereafter during such Settlement Period the conditions set forth in Section 3.02 are satisfied or waived by the Agent, such previously set aside amounts shall, to the extent representing a return of Capital, be reinvested in accordance with the preceding subsection (ii) on the day of such subsequent satisfaction or waiver of conditions; and (iv) during such times as amounts are required to be reinvested in accordance with the foregoing subsection (ii) or the proviso to subsection (iii), release to the Seller for its own account any Collections in excess both of such amounts and of the amounts that are required to be set aside pursuant to subsection (i) above. (c) The Collection Agent shall deposit into the Agent's Account, on the last day of each Settlement Period for a Receivable Interest, Collections held for the Investors or the Banks that relate to such Receivable Interest pursuant to Section 2.04(b); provided, however, that if Yield with respect to such Receivable Interest was computed by reference to the Investor Rate during such Settlement Period and no Liquidation Day then exists, Collections held for the Investors pursuant to subsection (i) of Section 2.04(b) shall be deposited to the Agent's Account on the second Business Day after the last date of such Settlement Period instead of such last day. (d) Upon receipt of funds deposited into the Agent's Account, the Agent shall distribute them as follows: (i) if such distribution occurs on a day that is not a Liquidation Day, first to the Investors or the Banks that hold the relevant Receivable Interest and to the Agent in payment in full of all accrued Yield and Fees and then to the Collection Agent in payment in full of all accrued Collection Agent Fee. (ii) if such distribution occurs on a Liquidation Day, first to the Investors or the Banks that hold the relevant Receivable Interest and to the Agent in payment in full of all accrued Yield and Fees, second to such Investors or Banks in reduction to zero of all Capital, third to such Investors, Banks or the Agent in payment of any other amounts owed by the Seller hereunder, and fourth to the Collection Agent in payment in full of all accrued Collection Agent Fee. After the Capital, Yield, Fees and Collection Agent Fee with respect to a Receivable Interest, and any other amounts payable by the Seller to the Investors, the Banks or the Agent hereunder, have been paid in full, all additional Collections with respect to such Receivable Interest shall be paid to the Seller for its own account. (e) For the purposes of this Section 2.04: (i) if on any day the Outstanding Balance of any Pool Receivable is reduced or adjusted as a result of any defective, rejected or returned merchandise or services, or any cash discount, discount for quick payment or other adjustment made by the Seller or the Originator, or any setoff, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in the amount of such reduction or adjustment; (ii) if on any day any of the representations or warranties contained in Section 4.01(h) is no longer true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full; (iii) except as provided in subsection (i) or (ii) of this Section 2.04(e), or as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivables shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables; and (iv) if and to the extent the Agent, the Investors or the Banks shall be required for any reason to pay over to an Obligor any amount received on its behalf hereunder, such amount shall be deemed not to have been so received but rather to have been retained by the Seller and, accordingly, the Agent, the Investors or the Banks, as the case may be, shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof. SECTION 2.05. Fees. (a) Each Investor and Bank shall pay to the Collection Agent a fee (the "Collection Agent Fee") of 0.75% per annum on the average daily Capital of each Receivable Interest owned by such Investor or Bank, from the date of purchase of such Receivable Interest until the later of the Termination Date for such Receivable Interest or the date on which such Capital is reduced to zero, payable on the last day of each Settlement Period for such Receivable Interest (or, if the proviso in Section 2.04(c) is then applicable, the second Business Day after the last day of such Settlement Period). Upon three Business Days' notice to the Agent, the Collection Agent (if not the Originator, the Seller or its designee or an Affiliate of the Seller) may elect to be paid, as such fee, another percentage per annum on the average daily Capital of such Receivable Interest, but in no event in excess for all Receivable Interests relating to a single Receivables Pool of 110% of the reasonable costs and expenses of the Collection Agent in administering and collecting the Receivables in such Receivables Pool. The Collection Agent Fee shall be payable only from Collections pursuant to, and subject to the priority of payment set forth in, Section 2.04. So long as the Originator is acting as the Collection Agent hereunder, amounts paid as the Collection Agent Fee pursuant to this Section 2.05(a) shall reduce, on a dollar-for-dollar basis, the obligation of the Seller to pay the "Collection Agent Fee" pursuant to Section 6.03 of the Originator Purchase Agreement, provided that such obligation of the Seller shall in no event be reduced below zero. (b) The Seller shall pay to the Agent certain fees (collectively, the "Fees") in the amounts and on the dates set forth in a separate fee letter of even date between the Seller and the Agent, as the same may be amended or restated from time to time (the "Fee Letter"). SECTION 2.06. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Collection Agent hereunder shall be paid or deposited no later than 11:00 A.M. (New York City time) on the day when due in same day funds to the Agent's Account. (b) Each of the Seller and the Collection Agent shall, to the extent permitted by law, pay interest on any amount not paid or deposited by it when due hereunder, at an interest rate per annum equal to 1.00% per annum above the Alternate Base Rate, payable on demand. (c) All computations of interest under subsection (b) above and all computations of Yield, Fees, and other amounts hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit. SECTION 2.07. Dividing or Combining Receivable Interests. Either the Seller or the Agent may, upon notice to the other party received at least three Business Days prior to the last day of any Settlement Period in the case of the Seller giving notice, or up to the last day of such Settlement Period in the case of the Agent giving notice, either (i) divide any Receivable Interest into two or more Receivable Interests having aggregate Capital equal to the Capital of such divided Receivable Interest, or (ii) combine any two or more Receivable Interests originating on such last day or having Settlement Periods ending on such last day into a single Receivable Interest having Capital equal to the aggregate of the Capital of such Receivable Interests; provided, however, that no Receivable Interest owned by Ciesco may be combined with a Receivable Interest owned by any Bank. SECTION 2.08. Increased Costs. (a) If CNAI, any Investor, any Bank, any entity which enters into a commitment to purchase Receivable Interests or interests therein, or any of their respective Affiliates (each an "Affected Person") determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of the capital required or expected to be maintained by such Affected Person and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of or otherwise to maintain the investment in Pool Receivables or interests therein related to this Agreement or to the funding thereof and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Agent), the Seller shall immediately pay to the Agent for the account of such Affected Person (as a third-party beneficiary), from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Seller and the Agent by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements referred to in Section 2.09) in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Investor or Bank of agreeing to purchase or purchasing, or maintaining the ownership of Receivable Interests in respect of which Yield is computed by reference to the Eurodollar Rate, then, upon demand by such Investor or Bank (with a copy to the Agent), the Seller shall immediately pay to the Agent, for the account of such Investor or Bank (as a third-party beneficiary), from time to time as specified by such Investor or Bank, additional amounts sufficient to compensate such Investor or Bank for such increased costs. A certificate as to such amounts submitted to the Seller and the Agent by such Investor or Bank shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.09. Additional Yield on Receivable Interests Bearing a Eurodollar Rate. The Seller shall pay to any Investor or Bank, so long as such Investor or Bank shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional Yield on the unpaid Capital of each Receivable Interest of such Investor or Bank during each Settlement Period in respect of which Yield is computed by reference to the Eurodollar Rate, for such Settlement Period, at a rate per annum equal at all times during such Settlement Period to the remainder obtained by subtracting (i) the Eurodollar Rate for such Settlement Period from (ii) the rate obtained by dividing such Eurodollar Rate referred to in clause (i) above by that percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Investor or Bank for such Settlement Period, payable on each date on which Yield is payable on such Receivable Interest. Such additional Yield shall be determined by such Investor or Bank and notice thereof given to the Seller through the Agent within 30 days after any Yield payment is made with respect to which such additional Yield is requested. The affected Bank or Investor shall take reasonable efforts to provide the Seller with prompt notice of such additional yield charges and a certificate as to such additional Yield submitted to the Seller and the Agent by such Investor or Bank shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.10. Intention of the Parties. The parties hereto have structured this Agreement with the intention that each purchase of undivided interests in Receivables hereunder be treated as a sale of such Receivables by the Seller to the Investor or the Banks, as the case may be, for all purposes, other than federal and state income tax purposes. This Agreement is, and the parties intend this Agreement to be, a security agreement, as such term is understood under Article 9 of the UCC. Section 9-105 of the UCC provides that a " 'Security agreement' means an agreement which creates or provides for a security interest", and Section 1-201 of the UCC provides that a "security interest" under the UCC " . . . also includes any interest of a buyer of accounts or chattel paper which is subject to Article 9 . . ." of the UCC. ARTICLE III CONDITIONS OF PURCHASES SECTION 3.01. Conditions Precedent to Initial Purchase. The initial purchase of a Receivable Interest under this Agreement on the Closing Date is subject to the conditions precedent that the Agent shall have received on or before the date of such purchase the following, each (unless otherwise indicated) dated such date, in form and substance reasonably satisfactory to the Agent: (a) Certified copies of the resolutions of the Board of Directors of each of the Seller and the Originator approving this Agreement and the Originator Purchase Agreement and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, as the case may be, and the Originator Purchase Agreement. (b) A certificate of the Secretary or Assistant Secretary of the Seller and the Originator certifying the names and true signatures of the officers of the Seller and the Originator authorized to sign the Originator Purchase Agreement and this Agreement and the other documents to be delivered by it hereunder and thereunder. (c) Acknowledgment copies of proper financing statements, duly filed on or before the date of such initial purchase under the UCC of all jurisdictions that the Agent may deem necessary or desirable in order to perfect the ownership interests contemplated by this Agreement and the Originator Purchase Agreement. (d) Acknowledgment copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in (i) the Receivables, Contracts or Related Security previously granted by the Seller or the Originator and (ii) the collateral security referred to in Section 2.10 previously granted by the Seller. (e) Completed requests for information, dated on or before the date of such initial purchase, listing the financing statements referred to in subsection (c) above and all other effective financing statements filed in the jurisdictions referred to in subsection (c) above that name the Seller or the Originator as debtor, together with copies of such other financing statements (none of which shall cover any Receivables, Contracts, Related Security or the collateral security referred to in Section 2.10). (f) Executed copies of the Control Agreement to the initial Designated Bank and the undated executed copies of the Lock-Box Agreements to the other Lock-Box Banks. (g) A favorable opinion of (i) Cravath, Swaine & Moore, as counsel for the Seller and the Originator and (ii) internal counsel to the Seller and the Originator, substantially in the forms of Annex C hereto and as to such other matters as the Agent may reasonably request. (h) The Fee Letter. (i) The Funds Transfer Letter. (j) An executed copy of the Originator Purchase Agreement and an executed copy of the OPA Assignment. (k) A copy of the by-laws of the Seller, certified by the Secretary or Assistant Secretary of the Seller. (l) A copy of the certificate or articles of incorporation of the Seller, certified as of a recent date by the Secretary of State or other appropriate official of the state of its organization, and a certificate as to the good standing of the Seller from such Secretary of State or other official, dated as of a recent date. (m) A favorable opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel for the Agent, as to such matters as the Agent may reasonably request. SECTION 3.02. Conditions Precedent to All Purchases and Reinvestments. Each purchase (including the initial purchase) and each reinvestment shall be subject to the further conditions precedent that (a) in the case of each purchase, the Collection Agent shall have delivered to the Agent at least one Business Day prior to such purchase, in form and substance satisfactory to the Agent, a completed Seller Report containing information covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g) and demonstrating that after giving effect to such purchase no Event of Termination or Incipient Event of Termination under Section 7.01(i) would occur, (b) in the case of each reinvestment, on or prior to the date of such reinvestment the Collection Agent shall have delivered to the Agent as and when due in accordance with this Agreement, in form and substance satisfactory to the Agent, a completed Seller Report containing information covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g), (c) on the date of such purchase or reinvestment the following statements shall be true (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true): (i) The representations and warranties contained in Section 4.01 are correct on and as of the date of such purchase or reinvestment as though made on and as of such date, (ii) No event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes an Event of Termination or an Incipient Event of Termination, (iii) The Originator shall have sold or contributed to the Seller, pursuant to the Originator Purchase Agreement, all Originator Receivables arising on or prior to such date, (iv) With respect to all purchases and reinvestments made on or after January 1, 2000, the Agent shall have received evidence satisfactory to it that Collections are not being sent to any bank account other than a Designated Account, and (v) The Agent shall have received such other approvals, opinions or documents as it may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller. The Seller hereby represents and warrants as follows: (a) The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified. (b) The execution, delivery and performance by the Seller of the Transaction Documents to which it is a party and the other documents to be delivered by it hereunder, including the Seller's use of the proceeds of purchases and reinvestments, (i) are within the Seller's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) the Seller's charter or by-laws, (2) any law, rule or regulation applicable to the Seller, (3) any contractual restriction binding on or affecting the Seller or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Seller or its property, and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties (except for the interest created pursuant to this Agreement). Each of the Transaction Documents to which the Seller is a party has been duly executed and delivered by the Seller. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Seller of the Transaction Documents to which it is a party or any other document to be delivered thereunder, except for the filing of UCC financing statements which are referred to therein. (d) Each of the Transaction Documents constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. (e) The balance sheets of the Originator and its consolidated Subsidiaries as at December 31, 1998, and the related statements of income and retained earnings of the Originator and its consolidated Subsidiaries for the fiscal year then ended, copies of which have been furnished to the Agent, fairly present the financial condition of the Originator and its consolidated Subsidiaries as at such date and the results of the operations of the Originator and its consolidated Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since March 31, 1999 there has been no change in the business (taken as a whole), consolidated financial condition or consolidated results of operation of the Originator and its consolidated Subsidiaries that reasonably could be expected to result in a Material Adverse Effect. (f) The opening pro forma balance sheet of the Seller as at June 10, 1999, giving effect to the initial purchase to be made under this Agreement, a copy of which has been furnished to the Agent, fairly presents the financial condition of the Seller as at such date, in accordance with generally accepted accounting principles, and since June 10, 1999 there has been no material adverse change in the business, operations or financial position of the Seller. (g) Except as disclosed in the Form 10-Q filed with the Securities and Exchange Commission on May 7, 1999, there is no action, suit or proceeding pending against or, to the knowledge of the Seller or any of its Subsidiaries, threatened against or affecting the Seller or any of its Subsidiaries before any court or arbitrator, any governmental body, agency or official that reasonably could be expected to result in a Material Adverse Effect. (h) Neither the Originator nor any Subsidiary is in default with respect to any order of any court, arbitration or governmental body except for defaults with respect to orders of governmental agencies that reasonably could be expected to result in a Material Adverse Effect. (i) The Seller is the legal and beneficial owner of the Pool Receivables and Related Security free and clear of any Adverse Claim; upon each purchase or reinvestment, the Investors or the Banks, as the case may be, shall acquire a valid and perfected first priority undivided percentage ownership interest to the extent of the pertinent Receivable Interest in each Pool Receivable then existing or thereafter arising and in the Related Security and Collections with respect thereto. No effective financing statement or other instrument similar in effect covering any Contract or any Pool Receivable or the Related Security or Collections with respect thereto is on file in any recording office, except those filed in favor of the Agent relating to this Agreement and those filed by the Seller pursuant to the Originator Purchase Agreement. (j) Each Seller Report (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the Seller or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Agent, the Investors or the Banks in connection with this Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Agent, Investors or the Banks, as the case may be, at such time) as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. (k) The principal place of business and chief executive office of the Seller and the office where the Seller keeps its records concerning the Pool Receivables are located at the address or addresses referred to in Section 5.01(b). (l) The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts of the Seller at such Lock-Box Banks, are as specified in Schedule I hereto, as such Schedule I may be updated from time to time pursuant to Section 5.01(g). (m) Each purchase of a Receivable Interest from the Seller and each reinvestment of Collections in Pool Receivables of the Seller will constitute (i) a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended, and (ii) a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended. (n) The Seller is not known by and does not use any tradename or doing-business-as name. (o) The Seller was incorporated on June 4, 1999, and the Seller did not engage in any business activities prior to the date of this Agreement. The Seller has no Subsidiaries. (p)(i) The fair value of the property of the Seller is greater than the total amount of liabilities, including contingent liabilities, of the Seller, (ii) the present fair salable value of the assets of the Seller is not less than the amount that will be required to pay all probable liabilities of the Seller on its debts as they become absolute and matured, (iii) the Seller does not intend to, and does not believe that it will, incur debts or liabilities beyond the Seller's abilities to pay such debts and liabilities as they mature and (iv) the Seller is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which the Seller's property would constitute unreasonably small capital. (q) With respect to each Pool Receivable, the Seller (i) shall have received such Pool Receivable as a contribution to the capital of the Seller by the Originator or (ii) shall have purchased such Pool Receivable from the Originator in exchange for payment (made by the Seller to the Originator in accordance with the provisions of the Originator Purchase Agreement) of cash, Deferred Purchase Price, or a combination thereof, in an amount which constitutes fair consideration and reasonably equivalent value. Each such sale referred to in clause (ii) of the preceding sentence shall not have been made for or on account of an antecedent debt owed by the Originator to the Seller and no such sale is or may be voidable or subject to avoidance under any section of the Federal Bankruptcy Code. SECTION 4.02. Representations and Warranties of the Collection Agent . The Collection Agent hereby represents and warrants as follows: The Collection Agent is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and is duly qualified to do business, and is in good standing, in New York and every other jurisdiction where the nature of its business requires it to be so qualified, except to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. (b) The execution, delivery and performance by the Collection Agent of this Agreement and any other documents to be delivered by it hereunder (i) are within the Collection Agent's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) the Collection Agent's charter or by-laws, (2) any law, rule or regulation applicable to the Collection Agent, (3) any contractual restriction binding on or affecting the Collection Agent or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Collection Agent or its property, and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties. This Agreement has been duly executed and delivered by the Collection Agent. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Collection Agent of this Agreement or any other document to be delivered by it hereunder. (d) This Agreement constitutes the legal, valid and binding obligation of the Collection Agent enforceable against the Collection Agent in accordance with its terms. (e) The balance sheets of the Collection Agent and its consolidated Subsidiaries as at December 31, 1998, and the related statements of income and retained earnings of the Collection Agent and its consolidated Subsidiaries for the fiscal year then ended, copies of which have been furnished to the Agent, fairly present the financial condition of the Collection Agent and its consolidated Subsidiaries as at such date and the results of the operations of the Collection Agent and its consolidated Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since March 31, 1999 there has been no change in the business (taken as a whole), consolidated financial position or consolidated results of operation of the Collection Agent and its consolidated Subsidiaries that has resulted in or reasonably could be expected to result in a Material Adverse Effect. (f) Except as disclosed in the Form 10-Q filed with the Securities and Exchange Commission on May 7, 1999, there is no action, suit or proceeding pending against or, to the knowledge of the Seller or any of its Subsidiaries, threatened against or affecting the Seller or any of its Subsidiaries before any court or arbitrator, any governmental body, agency or official that has resulted in or reasonably could be expected to result in a Material Adverse Effect. (g) The Collection Agent and its Subsidiaries have reviewed the areas within their business and operations that could be adversely affected by, and have a developed a program to address on a timely basis, the Year 2000 Problem. To the extent it reasonably deems appropriate, the Collection Agent agrees to make related appropriate inquiry of its material suppliers and vendors whose performance may materially affect the Collection Agent's performance hereunder. Based on such review and program, the Collection Agent believes that the Year 2000 Problem is not reasonably expected to result in a Material Adverse Effect. ARTICLE V COVENANTS SECTION 5.01. Covenants of the Seller . Until the latest of the Facility Termination Date or the date on which no Capital of or Yield on any Receivable Interest shall be outstanding or the date all other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid in full: (a) Compliance with Laws, Etc. The Seller will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications, and privileges except to the extent to the extent that the failure to do so comply could reasonably be expected to result in a Material Adverse Effect (b) Offices, Records and Books of Account. The Seller will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Pool Receivables at the address of the Seller set forth under its name on the signature pages to this Agreement or, upon 30 days' prior written notice to the Agent, at any other locations in jurisdictions where all actions reasonably requested by the Agent to protect and perfect the interest in the Pool Receivables have been taken and completed. The Seller also will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Pool Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Pool Receivables (including, without limitation, records adequate to permit the daily identification of each Pool Receivable and all Collections of and adjustments to each existing Pool Receivable). (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Pool Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Pool Receivable and the related Contract. (d) Sales, Liens, Etc. The Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, the Seller's undivided interest in any Pool Receivable, Related Security, related Contract or Collections, or upon or with respect to any account to which any Collections of any Pool Receivable are sent, or assign any right to receive income in respect thereof, other than liens for taxes not yet due and payable. (e) Extension or Amendment of Receivables. Except as provided in Section 6.02(c), the Seller will not extend, amend or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any payment provisions of any Contract related thereto (f) Change in Business or Credit and Collection Policy. The Seller will not make any change in the character of its business or in the Credit and Collection Policy that would, in either case, materially adversely affect the collectibility of the Receivables Pool or the ability of the Seller to perform its obligations under this Agreement. (g) Change in Payment Instructions to Obligors. The Seller will not add any bank as a Lock-Box Bank to those listed in Schedule I to this Agreement. The Seller will not add any bank as a Designated Bank unless the Agent shall have received notice of such addition (including an updated Schedule I) and a fully executed copy of a Control Agreement for each new Designated Bank. The Seller will terminate each Lock-Box Account (other than the Designated Accounts) on or prior to December 31, 1999. Following the delivery of any Lock-Box Agreement or Control Agreement, as applicable, the Seller will not make any change in its instructions to Obligors regarding payments to be made to the Seller or payments to be made to any Lock-Box Bank, other than instructing Obligors that are making payments to a Lock-Box Account that is not a Designated Account to make payments to a Designated Account. (h) Deposits to Lock-Box Accounts. At all times on and prior to December 31, 1999, the Seller will deposit, or cause to be deposited, all Collections of Receivables solely into Lock-Box Accounts. At all times subsequent to December 31, 1999, the Seller will deposit, or cause to be deposited, all Collections of Receivables solely into a Designated Account. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections of Receivables and shall promptly (and in any event within two Business Days) cause any Collections deposited in a Lock-Box Account and not relating to Receivables to be removed from the applicable Lock-Box Account. (i) Marking of Records. At its expense, the Seller will mark its master data processing records evidencing Pool Receivables with a legend evidencing that Receivable Interests related to such Pool Receivables and related Contracts have been sold in accordance with this Agreement. (j) Further Assurances. The Seller agrees from time to time, at its expense, promptly to execute and deliver all further instruments and documents, and to take all further reasonable actions requested by the Agent, that may be reasonably necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Receivable Interests purchased under this Agreement, or to enable the Investors, the Banks or the Agent to exercise and enforce their respective rights and remedies under this Agreement. Without limiting the foregoing, the Seller will, upon the request of the Agent, execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or evidence such Receivable Interests. (ii) The Seller authorizes the Agent to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Pool Receivables and the Related Security, the related Contracts and the Collections with respect thereto without the signature of the Seller where permitted by law. A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement where permitted by law. (k) Reporting Requirements. The Seller will provide to the Agent (in multiple copies, if requested by the Agent) the following: (i) as soon as available and in any event within 60 days after the end of the first three quarters of each fiscal year of the Originator, consolidated balance sheets of the Originator and its Subsidiaries as of the end of such quarter and consolidated statements of income and retained earnings of the Originator and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer, controller or other chief accounting officer of the Originator; (ii) as soon as available and in any event within 120 days after the end of each fiscal year of the Originator, a copy of the annual report for such year for the Originator and its Subsidiaries, containing financial statements for such year audited by a "Big 5" accounting firm or other independent public accountants acceptable to the Agent; (iii) as soon as possible and in any event within five days after the Seller obtains knowledge of the occurrence of each Event of Termination or Incipient Event of Termination, to the extent that such event is continuing, a statement of the chief financial officer of the Seller setting forth details of such Event of Termination or event and the action that the Seller has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports that the Originator sends to any of its security holders, and copies of all reports and registration statements that the Originator or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; (v) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or any Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition which could, in the aggregate, result in the imposition of liability on the Seller and/or any such Affiliate in excess of $10,000,000; (vi) at least ten Business Days prior to any change in the name of the Originator or the Seller, a notice setting forth the new name and the effective date thereof; (vii) promptly after the Seller obtains knowledge thereof, notice of any "Event of Termination" or "Facility Termination Date" under the Originator Purchase Agreement and, if such event is continuing, a description of the nature thereof; (viii) so long as any Capital shall be outstanding, as soon as possible and in any event no later than the day of occurrence thereof, notice that the Originator has stopped selling or contributing to the Seller, pursuant to the Originator Purchase Agreement, all newly arising Originator Receivables that constitute or are believed to constitute Eligible Receivables; (ix) at the time of the delivery of the financial statements provided for in clauses (i) and (ii) of this paragraph, a certificate of the chief financial officer or the treasurer of the Seller to the effect that, to the best of such officer's knowledge, no Event of Termination has occurred and is continuing or, if any Event of Termination has occurred and is continuing, specifying the nature and extent thereof; (x) promptly after receipt thereof, copies of all notices received by the Seller from the Originator under the Originator Purchase Agreement, or under any Control Agreement or Lock-Box Agreement; and (xi) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller as the Agent may from time to time reasonably request. (l) Corporate Separateness. (i) The Seller shall at all times maintain at least one independent director who (x) is not currently and has not been during the five years preceding the date of this Agreement an officer, director or employee of an Affiliate of the Seller or any Other Company, (y) is not a current or former officer or employee of the Seller and (z) is not a stockholder of any Other Company or any of their respective Affiliates. (ii) The Seller shall not direct or participate in the management of any of the Other Companies' operations. (iii) The Seller shall conduct its business from an office separate from that of the Other Companies (but which may be located in the same facility as one or more of the Other Companies). The Seller shall have stationery and other business forms and a mailing address and a telephone number separate from that of the Other Companies. (iv) The Seller shall at all times be adequately capitalized in light of its contemplated business. (v) The Seller shall at all times provide for its own operating expenses and liabilities from its own funds. (vi) The Seller shall maintain its assets and transactions separately from those of the Other Companies and reflect such assets and transactions in financial statements separate and distinct from those of the Other Companies and evidence such assets and transactions by appropriate entries in books and records separate and distinct from those of the Other Companies. The Seller shall hold itself out to the public under the Seller's own name as a legal entity separate and distinct from the Other Companies. The Seller shall not hold itself out as having agreed to pay, or as being liable, primarily or secondarily, for, any obligations of the Other Companies. (vii) The Seller shall not maintain any joint account with any Other Company or become liable as a guarantor or otherwise with respect to any Debt or contractual obligation of any Other Company. (viii) The Seller shall not make any payment or distribution of assets with respect to any obligation of any Other Company or grant an Adverse Claim on any of its assets to secure any obligation of any Other Company. (ix) The Seller shall not make loans, advances or otherwise extend credit to any of the Other Companies other than as contemplated under the Originator Purchase Agreement. (x) The Seller shall hold regular duly noticed meetings of its Board of Directors and make and retain minutes of such meetings. (xi) The Seller shall have bills of sale (or similar instruments of assignment) and, if appropriate, UCC-1 financing statements, with respect to all assets purchased from any of the Other Companies. (xii) The Seller shall not engage in any transaction with any of the Other Companies, except as permitted by this Agreement and as contemplated by the Originator Purchase Agreement. (xiii) The Seller shall comply with (and cause to be true and correct) each of the facts and assumptions contained in Sections 2 through 4 on pages 5-8 of the opinion of Cravath, Swaine & Moore delivered pursuant to Section 3.01(g) and designated as Annex C to this Agreement. (m) Originator Purchase Agreement. The Seller will not amend, waive or modify any provision of the Originator Purchase Agreement (provided that the Seller may extend the "Facility Termination Date" thereunder) or waive the occurrence of any "Event of Termination" under the Originator Purchase Agreement, without in each case the prior written consent of the Agent. The Seller will perform all of its obligations under the Originator Purchase Agreement in all material respects and will enforce the Originator Purchase Agreement in accordance with its terms in all material respects. (n) Nature of Business. The Seller will not engage in any business other than the purchase of Receivables, Related Security and Collections from the Originator and the transactions contemplated by this Agreement. The Seller will not create or form any Subsidiary. (o) Mergers, Etc. The Seller will not merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets or capital stock or other ownership interest of, or enter into any joint venture or partnership agreement with, any Person, other than as contemplated by this Agreement and the Originator Purchase Agreement. (p) Distributions, Etc. The Seller will not declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of capital stock of the Seller, or return any capital to its shareholders as such, or purchase, retire, defease, redeem or otherwise acquire for value or make any payment in respect of any shares of any class of capital stock of the Seller or any warrants, rights or options to acquire any such shares, now or hereafter outstanding; provided, however, that the Seller may declare and pay cash dividends on its capital stock to its shareholders so long as (i) no Event of Termination shall then exist or would occur as a result thereof, (ii) such dividends are in compliance with all applicable law including the General Corporation Law of the State of Delaware, and (iii) such dividends have been approved by all necessary and appropriate corporate action of the Seller. (q) Debt. The Seller will not incur any Debt, other than any Debt incurred pursuant to this Agreement and the Deferred Purchase Price. (r) Certificate of Incorporation. The Seller will not amend or delete Articles III, IV or XI of its certificate of incorporation. (s) Tangible Net Worth. The Seller will maintain Tangible Net Worth at all times equal to at least 3% of the Outstanding Balance of the Receivables at such time. SECTION 5.02. Covenant of the Seller and the Originator . Until the Final Termination Date, each of the Seller and the Originator will, at their respective expense, from time to time during regular business hours and following reasonable notice to the Seller and Originator permit the Agent or its agents or representatives (including independent public accountants, which may be the Seller's or the Originator's independent public accountants), (i) to conduct periodic audits of the Receivables, the Related Security and the related books and records and collections systems of the Seller or the Originator, as the case may be, relating to Receivables generation and collection, (ii) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Seller or the Originator, as the case may be, relating to Pool Receivables and the Related Security, including, without limitation, the Contracts, and (iii) to visit the offices and properties of the Seller or the Originator, as the case may be, for the purpose of examining such materials described in clause (ii) above, and to discuss matters relating to Pool Receivables and the Related Security or the Seller's or the Originator's performance under the Transaction Documents or under the Contracts with any of the officers or employees of the Seller or the Originator, as the case may be, having knowledge of such matters; provided, however, prior to the occurrence and continuance of any Event of Termination or Incipient Event of Termination, audits, examinations and visits described in (i), (ii) and (iii) above (together with the audit rights set forth in Section 6.06(a) hereof and Section 5.01(g) of the Originator Purchase Agreement) shall occur no more frequently than annually. In addition, upon the Agent's request at least once per year, the Seller will, at its expense, appoint independent public accountants (which, so long as no Event of Termination is continuing, shall be the Seller's regular independent public accountants), or utilize the Agent's representatives or auditors, to prepare and deliver to the Agent a written report with respect to the Receivables and the Credit and Collection Policy (including, in each case, the systems, procedures and records relating thereto) on a scope and in a form reasonably requested by the Agent. SECTION 5.03. Post Closing Opinion. On or before June 25, 1999, the Seller shall arrange for its counsel, Cravath, Swaine & Moore, to deliver to the Agent a favorable opinion in form and substance reasonably satisfactory to the Agent addressing issues related to the representation contained in Section 4.01(m)(i) and consistent with the discussions held between counsel to the Agent and counsel to the Seller. ARTICLE VI ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES SECTION 6.01. Designation of Collection Agent. The servicing, administration and collection of the Pool Receivables shall be conducted by the Collection Agent so designated hereunder from time to time. The Originator is hereby designated as, and hereby agrees to perform the duties and obligations of the Collection Agent pursuant to the terms hereof. Upon the occurrence of a Collection Agent Default, the Agent may designate as Collection Agent any Person (including itself) to succeed the Originator or any successor Collection Agent, if such Person shall consent and agree to the terms hereof. The Collection Agent may, with the prior consent of the Agent (such consent not to be unreasonably withheld), subcontract with any other Person for the servicing, administration or collection of the Pool Receivables. Any such subcontract shall not affect the Collection Agent's liability for performance of its duties and obligations pursuant to the terms hereof. SECTION 6.02. Duties of Collection Agent . The Collection Agent shall take or cause to be taken all such actions as may be reasonably necessary or advisable to collect each Pool Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. The Seller and the Agent hereby appoint the Collection Agent, from time to time designated pursuant to Section 6.01, as agent for themselves and for the Investors and the Banks to enforce their respective rights and interests in the Pool Receivables, the Related Security and the related Contracts. In performing its duties as Collection Agent, the Collection Agent shall exercise the same care and apply the same policies as it would exercise and apply if it owned such Receivables and shall act in a manner consistent with the Credit and Collection Policy and in the best interests of the Seller, the Investors and the Banks. (b) The Collection Agent shall administer the Collections in accordance with the procedures described in Section 2.04. (c) If no Event of Termination or Incipient Event of Termination shall have occurred and be continuing, the Originator, while it is the Collection Agent, may, in accordance with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Receivable as the Originator deems appropriate, or otherwise amend or adjust the payment terms under the related Contract in a manner consistent with the Credit and Collection Policy, to maximize Collections thereof, provided that the classification of any such Receivable as a Delinquent Receivable or Defaulted Receivable shall not be affected by any such extension. (d) The Collection Agent shall hold in trust for the Seller and each Investor and Bank, in accordance with their respective interests, all documents, instruments and records (including, without limitation, computer tapes or disks) which evidence or relate to Pool Receivables. The Collection Agent shall cause the Originator to mark, legend or otherwise designate its master data processing records indicating that an interest in the Pool Receivables has been transferred hereunder. (e) The Collection Agent shall, as soon as practicable following receipt, turn over to the Seller any cash collections or other cash proceeds received with respect to Receivables not constituting Pool Receivables. (f) The Collection Agent shall, from time to time at the request of the Agent, furnish to the Agent (promptly after any such request) a calculation of the amounts set aside for the Investors and the Banks pursuant to Section 2.04. (g) Prior to the 10th Business Day of each month, the Collection Agent shall prepare and forward to the Agent a Seller Report relating to the Receivable Interests outstanding on the last day of the immediately preceding month. In connection with the preparation by the Collection Agent of the "Dilution", "Collections" and "Sales" figures contained in Seller Report, the Agent acknowledges the Collection Agent does not have the systems capability to exclude Foreign Receivables from such figures and the current Seller Report includes Foreign Receivables. So long as Foreign Receivables do not exceed 20% of the total aggregate Receivables appearing in any Seller Report, the inclusion of Foreign Receivables in the "Dilution", "Collections" and "Sales" figures of any Seller Report shall comply with the Collection Agent's reporting requirements and shall not constitute a default or violation of the Collection Agent's representations and warranties or covenants or in the performance of its duties. The Collection Agent hereby covenants and agrees to utilize its best efforts to eliminate the inclusion of Foreign Receivables in the "Dilution", "Collections" and "Sales" figures of each Seller Report as soon as practicable and in no event later than December 31, 1999 (unless the Collection Agent and the Agent agree to another mutually acceptable reporting modification). SECTION 6.03. Certain Rights of the Agent. The Seller hereby transfers to the Agent the exclusive ownership and control of the Lock-Box Accounts to which the Obligors of Pool Receivables shall make payments. (b) At any time following the designation of a Collection Agent other than the Originator pursuant to Section 6.01 or following and during the continuance of an Event of Termination or an Incipient Event of Termination: (i) The Agent may direct the Obligors of Pool Receivables that all payments thereunder be made directly to the Agent or its designee. (ii) The Agent may deliver a Lock-Box Agreement to the Lock-Box Banks with open Lock-Box Accounts as at such date. (iii) At the Agent's request and at the Seller's expense, the Seller shall notify (i) each Obligor of Pool Receivables of the ownership of Receivable Interests under this Agreement and direct that payments be made directly to such account (including a Designated Account) as instructed by Agent or its designee, and (ii) all other obligors to redirect funds and make payment with respect to amounts owing to the Originator to accounts of the Originator other than a Designated Account. (iv) At the Agent's request and at the Seller's expense, the Seller and the Collection Agent shall (A) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Pool Receivables and the related Contracts and Related Security, or that are otherwise necessary or desirable to collect the Pool Receivables, and shall make the same available to the Agent at a place selected by the Agent or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Pool Receivables in a manner acceptable to the Agent and, promptly upon receipt, remit all such cash, checks and instruments, duly indorsed or with duly executed instruments of transfer, to the Agent or its designee. (v) The Seller authorizes the Agent to take any and all steps in the Seller's name and on behalf of the Seller that are necessary or desirable, in the determination of the Agent, to collect amounts due under the Pool Receivables, including, without limitation, endorsing the Seller's name on checks and other instruments representing Collections of Pool Receivables and enforcing the Pool Receivables and the Related Security and related Contracts. SECTION 6.04. Rights and Remedies. If the Collection Agent fails to perform any of its obligations under this Agreement, the Agent may (but shall not be required to) itself perform, or cause performance of, such obligation; and the Agent's costs and expenses incurred in connection therewith shall be payable by the Collection Agent. (b) The Seller and the Originator shall perform their respective obligations under the Contracts related to the Pool Receivables to the same extent as if Receivable Interests had not been sold and the exercise by the Agent on behalf of the Investors and the Banks of their rights under this Agreement shall not release the Collection Agent or the Seller from any of their duties or obligations with respect to any Pool Receivables or related Contracts. Neither the Agent, the Investors nor the Banks shall have any obligation or liability with respect to any Pool Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of the Seller thereunder. (c) In the event of any conflict between the provisions of Article VI of this Agreement and Article VI of the Originator Purchase Agreement, the provisions of this Agreement shall control. SECTION 6.05. Further Actions Evidencing Purchases . The Originator agrees from time to time, at its expense, to promptly execute and deliver all further instruments and documents, and to take all further actions, that may be reasonably necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Receivable Interests purchased hereunder, or to enable the Investors, the Banks or the Agent to exercise and enforce their respective rights and remedies hereunder. Without limiting the foregoing, the Originator will upon the request of the Agent (i) execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be reasonably necessary or desirable, or that the Agent may reasonably request, to perfect, protect or evidence such Receivable Interests; and (ii) mark, legend or otherwise designate its master data processing records and, following the occurrence and during the continuance of an Event of Termination or Incipient Event of Termination Event, the Contracts, in each case, indicating that such Pool Receivables have been transferred hereunder. SECTION 6.06. Covenants of the Collection Agent and the Originator . Audits. The Collection Agent will, from time to time during regular business hours as requested by the Agent, and following reasonable notice to the Collection Agent, permit the Agent, or its agents or representatives (including independent public accountants, which may be the Collection Agent's independent public accountants), (i) to conduct periodic audits of the Receivables, the Related Security and the related books and records and collections systems of the Collection Agent relating to Receivables generation and collection, (ii) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Collection Agent relating to Pool Receivables and the Related Security, including, without limitation, the Contracts, and (iii) to visit the offices and properties of the Collection Agent for the purpose of examining such materials described in clause (ii) above, and to discuss matters relating to Pool Receivables and the Related Security or the Collection Agent's performance hereunder with any of the officers or employees of the Collection Agent having knowledge of such matters; provided however, prior to the occurrence of and continuance of a Collection Agent Default or Incipient Event of Termination, audits described in (i), (ii) and (iii) above (together with the audit rights set forth in Section 5.02 hereof and Section 5.01(g) of the Originator Purchase Agreement) shall occur no more frequently than annually. (b) Change in Credit and Collection Policy. The Originator will not make any change in the Credit and Collection Policy that would impair the collectibility of any Pool Receivable or the ability of the Originator (if it is acting as Collection Agent) to perform its obligations under this Agreement. SECTION 6.07. Indemnities by the Collection Agent . Without limiting any other rights that the Agent, any Investor, any Bank or any of their respective Affiliates (each, a "Special Indemnified Party") may have hereunder or under applicable law, and in consideration of its appointment as Collection Agent, the Collection Agent hereby agrees to indemnify each Special Indemnified Party from and against any and all claims, losses and liabilities (including reasonable attorneys' fees) (all of the foregoing being collectively referred to as "Special Indemnified Amounts") arising out of or resulting from any of the following (excluding, however, (a) Special Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Special Indemnified Party, (b) recourse for uncollectible Receivables or (c) any income taxes or any other tax or fee measured by income incurred by such Special Indemnified Party arising out of or as a result of this Agreement or the ownership of Receivable Interests or in respect of any Receivable or any Contract): (i) any representation or warranty or statement made or deemed made by the Collection Agent under or in connection with this Agreement which shall have been incorrect in any material respect when made; (ii) the failure by the Collection Agent to comply with any applicable law, rule or regulation with respect to any Pool Receivable or Contract; or the failure of any Pool Receivable or Contract to conform to any such applicable law, rule or regulation; (iii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool, the Contracts and the Related Security and Collections in respect thereof, whether at the time of any purchase or reinvestment or at any subsequent time; (iv) any failure of the Collection Agent to perform its duties or obligations in accordance with the provisions of this Agreement; (v) the commingling of Collections of Pool Receivables at any time by the Collection Agent with other funds; (vi) any action or omission by the Collection Agent reducing or impairing the rights of the Investors or the Banks with respect to any Pool Receivable or the value of any Pool Receivable; (vii) any restriction applicable to the Agent, the Investors or the Banks in their ability to exercise their rights under this Agreement due to a confidentiality provision in a Contract that purports to restrict the ability of the Investors or the Banks to exercise their rights under this Agreement, including, without limitation, their right to review the Contract; (viii) any Collection Agent Fees or other costs and expenses payable to any replacement Collection Agent, to the extent in excess of the Collection Agent Fees payable to the Collection Agent hereunder; or (ix) any claim brought by any Person other than a Special Indemnified Party arising from any activity by the Collection Agent or its Affiliates in servicing, administering or collecting any Receivable; or (x) the failure of the Collection Agent's computer applications to resolve the Year 2000 Problem. ARTICLE VII EVENTS OF TERMINATION SECTION 7.01. Events of Termination . If any of the following events ("Events of Termination") shall occur and be continuing: (a) The occurrence of any Collection Agent Default; or (b) The Seller or the Originator shall fail following a Collection Agent Default, to transfer to the Agent when requested, any rights pursuant to this Agreement or the OPA Assignment, which the Seller or the Originator then has as Collection Agent, or (ii) to make any payment required under Section 2.04; or (c) Any representation or warranty made or deemed made by the Seller or the Collection Agent under this Agreement or any other Transaction Document or any written information or report (including, without limitation, any E-Mail Seller Report) delivered by the Seller or the Collection Agent pursuant to this Agreement or any other Transaction Document shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered, and such condition, to the extent it is capable of being remedied, shall remain unremedied for 10 days; or (d) The Seller or the Originator shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Seller by the Agent; or (e) The Seller or the Originator shall fail to pay any payment of principal, face amount, interest, premium, fees or any similar obligation in respect of any Debt in an aggregate amount exceeding $25,000,000 when due or within any applicable grace period (provided, that if Section 6.01(e) of the Originator's existing $500,000,000 credit agreement, dated as of March 31, 1997, is amended to provide that no "Event of Default" under such credit agreement will result until such Debt is declared to be or otherwise becomes due and payable in such aggregate amount, then this clause (e) shall not constitute an Event of Termination hereunder unless such Debt is declared to be or otherwise becomes due and payable in such aggregate amount); or (f) Any purchase or any reinvestment pursuant to this Agreement shall for any reason (other than pursuant to the terms hereof) cease to create, or any Receivable Interest shall for any reason cease to be, a valid and perfected first priority undivided percentage ownership or security interest (as understood under the UCC) to the extent of the pertinent Receivable Interest in each applicable Pool Receivable and the Related Security and Collections with respect thereto; or the interest created under the OPA Assignment shall for any reason cease to be a valid and ownership interest thereunder; or (g) The Seller or the Originator shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller or the Originator seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller or the Originator shall take any corporate action to authorize any of the actions set forth above in this subsection (g); or (h) As of the last day of any calendar month, the three month rolling average of (w) the Dilution Ratio shall exceed 5.3%, (x) the Default Ratio shall exceed 6%, (y) the Delinquency Ratio shall exceed 5.2%, or (z) the Loss-to-Liquidation Ratio shall exceed 1%; or (i) The Net Receivables Pool Balance shall on any Business Day be less than 100% of the sum of the aggregate outstanding Capital of all Receivable Interests or the sum of the Receivable Interests shall on any 5 consecutive Business Day be greater than 95%; or (j) There shall have occurred any event or events that results in a Material Adverse Effect; or (k) An "Event of Termination", "Incipient Event of Termination" or "Facility Termination Date" shall occur and be continuing under the Originator Purchase Agreement, or any material provision in the Originator Purchase Agreement shall cease to be in full force and effect; or (l) All of the outstanding capital stock of the Seller shall cease to be owned, directly or indirectly, by the Originator; or (m) Any of the Originator's long term public senior unsecured debt securities (having a rating not dependant on any guaranty) are no longer rated at least BBB- by S&P and at least Baa3 by Moody's, or the Originator has not maintained both such ratings; then, and in any such event, any or all of the following actions may be taken by notice to the Seller: (x) the Investor or the Agent may declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred), (y) the Agent may declare the Commitment Termination Date to have occurred (in which case the Commitment Termination Date shall be deemed to have occurred), and (z) if such Event of Termination coincides with or also constitutes a Collection Agent Default, and without limiting any right under this Agreement to replace the Collection Agent, the Agent may designate another Person to succeed the Originator as the Collection Agent; provided, that, automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in paragraph (g) of this Section 7.01, the Facility Termination Date and the Commitment Termination Date shall occur, the Originator (if it is then serving as the Collection Agent) shall cease to be the Collection Agent, and the Agent or its designee shall become the Collection Agent. Upon any such declaration or designation or upon such automatic termination, the Investors, the Banks and the Agent shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. ARTICLE VIII THE AGENT SECTION 8.01. Authorization and Action . Each Investor and each Bank hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. SECTION 8.02. Agent's Reliance, Etc . Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them as Agent under or in connection with this Agreement (including, without limitation, the Agent's servicing, administering or collecting Pool Receivables as Collection Agent), except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent: (a) may consult with legal counsel (including counsel for the Seller and the Collection Agent), independent certified public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Investor or Bank (whether written or oral) and shall not be responsible to any Investor or Bank for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Seller or the Collection Agent or to inspect the property (including the books and records) of the Seller or the Collection Agent; (d) shall not be responsible to any Investor or Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (e) shall incur no liability under or in respect of this Agreement by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by telecopier or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 8.03. CNAI and Affiliates . The obligation of Citibank to purchase Receivable Interests under this Agreement may be satisfied by CNAI or any of its Affiliates. With respect to any Receivable Interest or interest therein owned by it, CNAI shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent. CNAI and any of its Affiliates may generally engage in any kind of business with the Seller, the Collection Agent or any Obligor, any of their respective Affiliates and any Person who may do business with or own securities of the Seller, the Collection Agent or any Obligor or any of their respective Affiliates, all as if CNAI were not the Agent and without any duty to account therefor to the Investors or the Banks. SECTION 8.04. Bank's Purchase Decision . Each Bank acknowledges that it has, independently and without reliance upon the Agent, any of its Affiliates or any other Bank and based on such documents and information as it has deemed appropriate, made its own evaluation and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent, any of its Affiliates or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under this Agreement. ARTICLE IX INDEMNIFICATION SECTION 9.01. Indemnities by the Seller . Without limiting any other rights that the Agent, the Investors, the Banks or any of their respective Affiliates (each, an "Indemnified Party") may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, losses and liabilities (including reasonable attorneys' fees) (all of the foregoing being collectively referred to as "Indemnified Amounts") arising out of or resulting from this Agreement or the other Transaction Documents or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests or in respect of any Receivable or any Contract, excluding, however, (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party, (b) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables or (c) any income taxes incurred by such Indemnified Party arising out of or as a result of this Agreement or the ownership of Receivable Interests or in respect of any Receivable or any Contract. Without limiting or being limited by the foregoing, the Seller shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following: (i) the creation of an undivided percentage ownership interest in any Receivable which purports to be part of the Net Receivables Pool Balance but which is not at the date of the creation of such interest an Eligible Receivable; (ii) reliance on any representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement and the other Transaction Documents which shall have been incorrect in any material respect when made; (iii) the failure by the Seller or the Originator to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract; or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation; (iv) the failure to vest in the Investors or the Banks, as the case may be, (a) a perfected undivided percentage ownership interest, to the extent of each Receivable Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, or (b) a perfected security interest as provided in Section 2.10, in each case free and clear of any Adverse Claim; (v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, whether at the time of any purchase or reinvestment or at any subsequent time; (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller or any of its Affiliates acting as Collection Agent); (vii) any failure of the Seller to perform its duties or obligations in accordance with the provisions hereof or to perform its duties or obligations under the Contracts; (viii) any products liability or other claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract; (ix) the commingling of Collections of Pool Receivables at any time with other funds; (x) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests or in respect of any Receivable or Related Security or Contract; (xi) any failure of the Seller to comply with its covenants contained in Section 5.01; (xii) any claim brought by any Person other than an Indemnified Party arising from any activity by the Seller or any Affiliate of the Seller in servicing, administering or collecting any Receivable; or (xiii) the failure of the Seller's computer applications to resolve the Year 2000 Problem. ARTICLE X MISCELLANEOUS SECTION 10.01. Amendments, Etc . No amendment or waiver of any provision of this Agreement or consent to any departure by the Seller therefrom shall be effective unless in a writing signed by the Agent, as agent for the Investors and the Banks (and, in the case of any amendment, also signed by the Seller), and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by the Collection Agent in addition to the Agent, affect the rights or duties of the Collection Agent under this Agreement. No failure on the part of the Investors, the Banks or the Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. SECTION 10.02. Notices, Etc . All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and faxed or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received. (b) The Collection Agent may, with the consent of the Agent (which consent may be withdrawn at any time by notice from the Agent to the Collection Agent and the Seller) accept delivery of Seller Reports by electronic mail (each, an "E-Mail Seller Report"), subject to the following conditions: (i) The Collection Agent shall have made arrangements with VeriSign, Inc. (or another authenticating organization acceptable to the Agent) to enable the Collection Agent to generate digital signatures, (ii) The Collection Agent shall be solely responsible for safeguarding keys, access codes or other means of generating its digital signature, (iii) Each E-Mail Seller Report shall be formatted in a manner designated by the Agent from time to time, shall be digitally signed, and shall be sent to an electronic mail address designated by the Agent, and (iv) The Agent shall be authorized to rely on any E-Mail Seller Report for the purposes of this Agreement to the same extent as if the contents thereof had been otherwise delivered to the Agent in accordance with Section 10.02(a). SECTION 10.03. Assignability . This Agreement and the Investors' rights and obligations herein (including ownership of each Receivable Interest) shall be assignable by the Investors, with the prior consent of the Seller, which consent shall not be unreasonably withheld. Each assignor of a Receivable Interest or any interest therein shall notify the Agent and the Seller of any such proposed assignment. Each assignor of a Receivable Interest or any interest therein may, in connection with a proposed assignment or participation, disclose to the assignee or participant any information relating to the Seller or the Originator, including the Receivables, furnished to such assignor by or on behalf of the Seller or by the Agent ; provided that, prior to any such disclosure, the assignee or participant agrees to preserve the confidentiality of any confidential information relating to the Seller or the Originator received by it from any of the foregoing entities. (b) Each Bank may assign to any Eligible Assignee or to any other Bank all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Bank Commitment and any Receivable Interests or interests therein owned by it). The parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance. In addition, Citibank or any of its Affiliates may assign any of its rights (including, without limitation, rights to payment of Capital and Yield) under this Agreement to any Federal Reserve Bank without notice to or consent of the Seller or the Agent. (c) This Agreement and the rights and obligations of the Agent herein shall be assignable by the Agent and its successors and assigns (i) prior to the occurrence of any Event of Termination, with the prior consent of the Seller, which consent shall not be unreasonably withheld, and (ii) following the occurrence of any Event of Termination, without consent of any nature. (d) The Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Agent. SECTION 10.04. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted under Section 9.01 hereof, the Seller agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic auditing and the other activities contemplated in Section 5.02) of this Agreement, any Asset Purchase Agreement and the other documents and agreements to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent, CNAI, Ciesco, Citibank and their respective Affiliates with respect thereto and with respect to advising the Agent, CNAI, Ciesco, Citibank and their respective Affiliates as to their rights and remedies under this Agreement, and all costs and expenses, if any (including reasonable counsel fees and expenses), of the Agent, CNAI, the Investors, the Banks and their respective Affiliates, in connection with the enforcement of this Agreement and the other documents and agreements to be delivered hereunder. (b) In addition, the Seller shall pay (i) any and all commissions of placement agents and dealers in respect of commercial paper notes issued to fund the purchase or maintenance of any Receivable Interest, (ii) any and all costs and expenses of any issuing and paying agent or other Person responsible for the administration of Ciesco's commercial paper program in connection with the preparation, completion, issuance, delivery or payment of commercial paper notes issued to fund the purchase or maintenance of any Receivable Interest, and (iii) any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. A certificate as to such amounts submitted to the Seller shall be conclusive and binding for all purposes, absent manifest error. (c) The Seller also shall pay on demand all other costs, expenses and taxes (excluding income taxes) incurred by Ciesco or any partner of Ciesco ("Other Costs"), including the cost of auditing Ciesco's books by certified public accountants, the cost of rating Ciesco's commercial paper by independent financial rating agencies, the taxes (excluding income taxes) resulting from Ciesco's operations, and the reasonable fees and out-of- pocket expenses of counsel for any partner of Ciesco with respect to advising as to rights and remedies under this Agreement, the enforcement of this Agreement or advising as to matters relating to Ciesco's operations; provided that the Seller and any other Persons who from time to time sell receivables or interests therein to Ciesco ("Other Sellers") each shall be liable for such Other Costs ratably in accordance with the usage under their respective facilities; and provided further that if such Other Costs are attributable to the Seller and not attributable to any Other Seller, the Seller shall be solely liable for such Other Costs. SECTION 10.05. No Proceedings . Each of the Seller, the Agent, the Collection Agent, each Investor, each Bank, each assignee of a Receivable Interest or any interest therein and each entity which enters into a commitment to purchase Receivable Interests or interests therein hereby agrees that it will not institute against Ciesco any proceeding of the type referred to in Section 7.01(g) so long as any commercial paper or other senior indebtedness issued by Ciesco shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such commercial paper or other senior indebtedness shall have been outstanding. SECTION 10.06. Confidentiality . Unless otherwise required by applicable law or regulation, the Seller and the Collection Agent each agrees to maintain the confidentiality of this Agreement in communications with third parties and otherwise; provided that this Agreement may be disclosed to (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent, (b) the legal counsel and auditors of the Seller and the Collection Agent if they agree to hold it confidential, and (c) to rating agencies rating the Originator's equity and debt instruments. (b) Unless otherwise required by applicable law or regulation (including, without limitation, state and federal banking authorities), the Investors and the Banks each agrees to maintain the confidentiality of this Agreement in communications with third parties and otherwise; provided that this Agreement may be disclosed to (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent, (b) the legal counsel and auditors of the Seller and the Collection Agent if they agree to hold it confidential, and (c) to rating agencies rating the commercial paper issued by the Investors. SECTION 10.07. GOVERNING LAW. THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION; PROVIDED THAT THE PROVISIONS RELATING TO THE PERFECTION AND PRIORITY OF RECEIVABLE INTERESTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CONNECTICUT AND THE UNIFORM COMMERCIAL CODE IN EFFECT IN THE STATE OF CONNECTICUT. SECTION 10.08. Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 10.09. Survival of Termination . This Agreement shall become effective on the Closing Date and shall terminate on the Final Termination Date. The provisions of Sections 2.08, 2.09, 6.07, 9.01, 10.04, 10.05 and 10.06 shall survive the Final Termination Date. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. INVESTOR: CIESCO L.P. By: Citicorp North America, Inc., as Attorney-in-Fact By Vice President 450 Mamaroneck Avenue Harrison, N.Y. 10528 Attention: U.S. Securitization Facsimile No. 914-899-7890 AGENT: CITICORP NORTH AMERICA, INC., as Agent By Vice President 450 Mamaroneck Avenue Harrison, N.Y. 10528 Attention: U.S. Securitization Facsimile No. 914-899-7890 BANK: CITIBANK, N.A. By: Attorney-in-Fact Percentage Interest: 100% 450 Mamaroneck Avenue Harrison, N.Y. 10528 Facsimile No. 914-899-7890 SELLER WITCO FUNDING CORPORATION By: Title: One American Lane Greenwich, Connecticut 06831-2559 Attention: ______________ Telephone: _____________ Fax: _________________ ORIGINATOR AND WITCO CORPORATION COLLECTION AGENT: By: Title: One American Lane Greenwich, Connecticut 06831-2559 Attention: ______________ Telephone: _____________ Fax: _________________ EX-10.264 14 PURCHASE AND CONTRIBUTION AGREEMENT Dated as of June 10, 1999 Between WITCO CORPORATION as Seller and WITCO FUNDING CORPORATION as Purchaser TABLE OF CONTENTS Page PRELIMINARY STATEMENTS 1 ARTICLE I DEFINITIONS 1 SECTION 1.01. Certain Defined Terms 1 Adverse Claim 1 Affiliate 1 Alternate Base Rate 1 Business Day 2 Collection Agent 2 Collection Agent Default 2 Collection Agent Fee 2 Collections 2 Contract 3 Contributed Receivable 3 Credit and Collection Policy 3 Debt 3 Defaulted Receivable 3 Deferred Purchase Price 3 Delinquent Receivable 4 Designated Account" or "Designated Accounts 4 Designated Bank 4 Designated Obligor 4 Dilution 4 Discount 4 Eligible Receivable 4 ERISA 6 Event of Termination 6 Facility 6 Facility Termination Date 6 Federal Funds Rate 6 General Trial Balance 7 Incipient Event of Termination 7 Indemnified Amounts 7 Lock-Box Account 7 Lock-Box Bank 7 Obligor 7 Outstanding Balance 7 Person 7 Purchase 8 Purchase Date 8 Purchase Price 8 Purchased Receivable 8 Purchaser Loan 8 Receivable 8 Related Security 8 Sale Agreement 9 Seller Report 9 Settlement Date 9 Transferred Receivable 9 UCC 9 SECTION 1.02. Other Terms 9 ARTICLE II AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS 9 SECTION 2.01. Facility 9 SECTION 2.02. Making Purchases 10 SECTION 2.03. Collections. 10 SECTION 2.04. Settlement Procedures 11 SECTION 2.05. Payments and Computations, Etc. 12 SECTION 2.06. Contributions 12 ARTICLE III CONDITIONS OF PURCHASES 12 SECTION 3.01. Conditions Precedent to Initial Purchase from the Seller 12 SECTION 3.02. Conditions Precedent to All Purchases 13 ARTICLE IV REPRESENTATIONS AND WARRANTIES 14 SECTION 4.01. Representations and Warranties of the Seller 14 ARTICLE V COVENANTS 17 SECTION 5.01. Covenants of the Seller 17 SECTION 5.02. Covenant of the Seller and the Purchaser 22 ARTICLE VI ADMINISTRATION AND COLLECTION 22 SECTION 6.01. Designation of Collection Agent 22 SECTION 6.02. Duties of Collection Agent 22 SECTION 6.03. Collection Agent Fee 23 SECTION 6.04. Certain Rights of the Purchaser 23 SECTION 6.05. Rights and Remedies. 24 SECTION 6.06. Transfer of Records to Purchaser. 25 ARTICLE VII EVENTS OF TERMINATION 25 SECTION 7.01. Events of Termination 25 ARTICLE VIII INDEMNIFICATION 27 SECTION 8.01. Indemnities by the Seller 27 ARTICLE IX MISCELLANEOUS 29 SECTION 9.01. Amendments, Etc. 29 SECTION 9.02. Notices, Etc. 30 SECTION 9.03. Binding Effect; Assignability 30 SECTION 9.04. Costs, Expenses and Taxes 30 SECTION 9.05. No Proceedings 31 SECTION 9.06. Confidentiality 31 SECTION 9.07. GOVERNING LAW 31 SECTION 9.08. Third Party Beneficiary 31 SECTION 9.09. Execution in Counterparts 31 EXHIBITS EXHIBIT A Form of Opinion of Counsel for the Seller EXHIBIT B Credit and Collection Policy EXHIBIT C Lock-Box Banks EXHIBIT D Form of Deferred Purchase Price Note PURCHASE AND CONTRIBUTION AGREEMENT Dated as of June 10, 1999 WITCO CORPORATION, a Delaware corporation (the "Seller"), and WITCO FUNDING CORPORATION, a Delaware corporation (the "Purchaser"), agree as follows: PRELIMINARY STATEMENTS . (1) Certain terms which are capitalized and used throughout this Agreement (in addition to those defined above) are defined in Article I of this Agreement. (2) The Seller has Receivables that it wishes to sell to the Purchaser, and the Purchaser is prepared to purchase such Receivables on the terms set forth herein. (3) The Seller may also wish to contribute Receivables to the capital of the Purchaser on the terms set forth herein. NOW, THEREFORE, the parties agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adverse Claim " means a lien, security interest or other charge or any other encumbrance. "Affiliate "means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or, with respect to an individual, is a director or officer of such Person. "Alternate Base Rate " means a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the highest of: (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time as Citibank, N.A.'s base rate; (b) 0.50% above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent; and (c) the Federal Funds Rate. "Business Day " means any day on which banks are not authorized or required to close in New York City. "Collection Agent " means at any time the Person then authorized pursuant to Section 6.01 to administer and collect Transferred Receivables. "Collection Agent Default " means any of the following events: (i) the Collection Agent (if the Seller or any of its Affiliates) shall fail to perform or observe any term, covenant or agreement under Section 6.02 and such failure shall remain unremedied (in the reasonable judgment of the Purchaser) for 10 days following delivery of written notice of such failure from the Purchaser; or (ii) the Collection Agent (if the Seller or any of its Affiliates) shall fail to make when due any payment or deposit to be made by it under this Agreement; or (iii) the occurrence and continuance of any Event of Termination under Section 7.01(b), Section 7.01(c) (with respect to any representation or warranty made by the Collection Agent), Section 7.01(e), Section 7.01(f), Section 7.01(g), Section 7.01(j) (with respect to the Collection Agent), Section 7.01(i) (with respect to the Collection Agent) or Section 7.01(j). "Collection Agent Fee " has the meaning specified in Section 6.03. "Collections " means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, all cash proceeds of Related Security with respect to such Receivable, and all funds deemed to have been received by the Seller or any other Person as a Collection pursuant to Section 2.04. "Contract " means an agreement now or hereafter existing between the Seller and an Obligor pursuant to or under which such Obligor shall be obligated to pay for the provision or sale of specialty chemical products or services from time to time. "Contributed Receivable " has the meaning specified in Section 2.06. "Control Agreement" means a Control Agreement with respect to Designated Banks in substantially the form attached hereto as Annex B-1. "Credit and Collection Policy " means those receivables credit and collection policies and practices of the Seller in effect on the date of this Agreement applicable to the Receivables and described in Exhibit B hereto, as modified in compliance with this Agreement. "Debt " means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (v) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA and (vi) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above. "Defaulted Receivable " means a Receivable: (i) as to which any payment, or part thereof, remains unpaid for more than 90 days from the original due date for such payment; (ii) as to which the Obligor thereof or any other Person obligated thereon or providing any Related Security in respect thereof has taken any action, or suffered any event to occur, of the type described in Section 7.01(g); or (iii) which, consistent with the Credit and Collection Policy, would be written off the Seller's books as uncollectible. "Deferred Purchase Price " means the portion of the Purchase Price of Purchased Receivables purchased on any Purchase Date exceeding the amount of the Purchase Price under Section 2.02 to be paid in cash, which portion when added to the cumulative amount of all previous Deferred Purchase Prices (after giving effect to any payments made on account thereof) shall not exceed 25% of the Outstanding Balance of the Transferred Receivables. The obligations of the Purchaser in respect of the Deferred Purchase Price shall be evidenced by the Purchaser's subordinated promissory note in the form of Exhibit D hereto. "Delinquent Receivable " means a Receivable that is not a Defaulted Receivable and: (i) as to which any payment, or part thereof, remains unpaid for more than 30 days and less than or equal to 90 days from the original due date for such payment or (ii) which, consistent with the Credit and Collection Policy, would be classified as delinquent by the Seller. "Designated Account" or "Designated Accounts " means one or more bank accounts established for the deposit of all Collections at a Designated Bank and subject to an executed Control Agreement. "Designated Bank "means any bank or banks selected by the Collection Agent from time to time (initially, to be Mellon Bank) and approved by the Agent (such approval not to be unreasonably withheld) to establish a Designated Account. "Designated Obligor " means, at any time, each Obligor; provided, however, that any Obligor shall cease to be a Designated Obligor based on an analysis of the creditworthiness of such Obligor (as determined by the Purchaser (or its assignee) in its sole reasonable discretion), upon three Business Days' notice by the Purchaser to the Seller effective with respect to Eligible Receivables thereafter transferred by the Seller to the Purchaser. "Dilution " means, with respect to any Receivable, the aggregate amount of any reductions or adjustments in the Outstanding Balance of such Receivable as a result of any defective, rejected, returned, repossessed or foreclosed merchandise or services or any cash discount, discount for quick payment or other adjustment or setoff, excluding adjustments, reductions or cancellations in respect of such Obligor's bankruptcy or financial inability to pay. "Discount " means, in respect of each Purchase, 3% of the Outstanding Balance of the Receivables that are the subject of such Purchase; provided, however, the foregoing Discount may be revised prospectively by request of either of the parties hereto to reflect changes in recent experience with respect to write- offs, timing and cost of Collections and cost of funds, provided that such revision is consented to by both of the parties (it being understood that each party agrees to duly consider such request but shall have no obligation to give such consent). "Eligible Receivable " means a Receivable: (i) the Obligor of which is a United States resident, is not an Affiliate of any of the parties hereto, and is not a government or a governmental subdivision or agency; (ii) the Obligor of which, at the time of the initial creation of an interest therein under this Agreement, is a Designated Obligor and is not the Obligor of any Defaulted Receivables which in the aggregate constitute 10% or more of the aggregate Outstanding Balance of all Receivables of such Obligor; (iii) which at the time of the initial creation of an interest therein under this Agreement is not a Defaulted or Delinquent Receivable; (iv) which, according to the Contract related thereto, is required to be paid in full within 60 days of the original billing date therefor; (v) which is an obligation representing all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended; (vi) the purchase of which from the Purchaser with the proceeds of notes would constitute a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended; (vii) which is an "account" within the meaning of Section 9-106 of the UCC of the applicable jurisdictions governing the perfection of the interest created by a Receivable Interest; (viii) which is denominated and payable only in United States dollars in the United States; (ix) which arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable and is not subject to any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor); (x) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which none of the Purchaser, the Seller or the Obligor is in violation of any such law, rule or regulation in any material respect; (xi) which arises under a Contract which does not require the Obligor thereunder to consent to the transfer, sale or assignment of payment rights of the Purchaser or the Seller thereunder; (xii) which was generated in the ordinary course of the Seller's business; (xiii) which, at the time of the initial creation of an interest therein under this Agreement, has not been extended, rewritten or otherwise modified from the original terms thereof except in a manner permitted under the Credit and Collection Policy; (xiv) which (A) satisfies all applicable requirements of the Credit and Collection Policy and (B) complies with such other reasonable criteria and requirements (relating to the Receivables) as the Purchaser may from time to time specify to the Seller upon 30 days' notice; and (xv) as to which, at or prior to the time of the initial creation of an interest therein under this Agreement, the Purchaser has not notified the Seller that such Receivable (or class of Receivables) is no longer acceptable for purchase by Ciesco and the Banks under the Sale Agreement for bona fide credit-related reasons. "ERISA " means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Event of Termination " has the meaning specified in Section 7.01. "Facility " means the willingness of the Purchaser to consider making Purchases of Receivables from the Seller from time to time pursuant to the terms of this Agreement. "Facility Termination Date " means the earliest of (i) June 10, 2002, (ii) the date of termination of the Facility pursuant to Section 7.01 and (iii) the date which the Seller designates by at least two Business Days' notice to the Purchaser. "Federal Funds Rate " means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Citibank, N.A. from three Federal funds brokers of recognized standing selected by it. "General Trial Balance " of the Seller on any date means the Seller's accounts receivable trial balance (whether in the form of a computer printout, magnetic tape or diskette) on such date, listing Obligors and the Receivables respectively owed by such Obligors on such date together with the aged Outstanding Balances of such Receivables, in form and substance satisfactory to the Purchaser. "Incipient Event of Termination " means an event that but for notice or lapse of time or both would constitute an Event of Termination. "Indemnified Amounts " has the meaning specified in Section 8.01. "Lock-Box Account " means any Designated Account and any other bank account at a Lock-Box Bank subject to a Lock-Box Agreement. "Lock-Box Bank " means (i) each Designated Bank, and (ii) prior to December 31, 1999, any of the other banks listed on Schedule I that are the subject of an undated Lock-Box Agreement. "Material Adverse Effect" means any condition, event or series of events that has a material adverse effect on: (i) the Receivables or the collectibility of any material amount of funds with respect thereto; (ii) the rights of the Purchaser with respect to the Receivables and the rights set forth in this Agreement; (iii) the business, consolidated financial position, consolidated results of operation of the Seller and its Subsidiaries; (iv) the ability of the Purchaser, the Collection Agent or the Seller to perform their respective duties and obligations or exercise their rights and remedies under this Agreement and the Transaction Documents; or (v) the legality, validity or enforceability of the Transaction Documents. "Obligor " means a Person obligated to make payments to the Seller pursuant to a Contract. "OPA Assignment" means the assignment agreement, pursuant to which the Purchaser is assigning this Agreement to Citibank North America, Inc., as Agent under Sale Agreement, duly acknowledged and consented to by the Seller, in substantially the form of Annex E to the Sale Agreement. "Outstanding Balance " of any Receivable at any time means the then outstanding principal balance thereof. "Person " means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Purchase " means a purchase by the Purchaser of Receivables from the Seller pursuant to Article II. "Purchase Date " means each day on which a Purchase is made pursuant to Article II. "Purchase Price " for any Purchase means an amount equal to the Outstanding Balance of the Receivables that are the subject of such Purchase as set forth in the Seller's General Trial Balance, minus the Discount for such Purchase. "Purchased Receivable " means any Receivable which is purchased by the Purchaser pursuant to Section 2.02. "Purchaser Loan " means any loan made by the Purchaser, at its option, to the Seller, upon the Seller's request, provided that (a) the aggregate principal amount at any one time outstanding of Purchaser Loans shall not exceed $30 million and (b) no such Purchaser Loans may be made if an Event of Termination or an Incipient Event of Termination has occurred and is continuing, or would occur after giving effect thereto, or if any amounts are outstanding under the Deferred Purchase Price. Purchaser Loans made by the Purchaser hereunder shall be evidenced by promissory notes of the Seller in substantially the form of Exhibit E hereto. "Receivable " means the indebtedness of any Obligor, other than an Obligor which is not a United States resident, under a Contract, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto. "Related Security " means with respect to any Receivable: (i) all of the Seller's interest in any merchandise (including returned merchandise) relating to any sale giving rise to such Receivable; (ii) all security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable; (iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; and (iv) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) relating to such Receivable and the related Obligor. "Sale Agreement " means that certain Receivables Purchase Agreement, dated as of the date hereof, among the Purchaser, as seller, Ciesco L.P., as purchaser, Citibank, N.A., Citicorp North America, Inc., as agent, and the Seller, as collection agent, as amended or restated from time to time. "Seller Report " means a report, in form and substance satisfactory to the Purchaser, furnished by the Collection Agent to the Purchaser pursuant to Section 6.02(b). "Settlement Date " means the 15th day of each calendar month (or if such day is not a Business Day, the immediately succeeding Business Day); provided, however, that following the occurrence of an Event of Termination, Settlement Dates shall occur on such days as are selected from time to time by the Purchaser or its designee in a written notice to the Collection Agent. "Transaction Documents" means this Agreement, the Sale Agreement, each Lock-Box Agreement, each Control Agreement, the OPA Assignment and all other agreements and documents delivered hereto or thereto. "Transferred Receivable " means a Purchased Receivable or a Contributed Receivable. "UCC " means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction. SECTION 1.02. Other Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. ARTICLE II AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS SECTION 2.01. Facility . On the terms and conditions hereinafter set forth and without recourse to the Seller (except to the extent as is specifically provided herein), the Seller may at its option sell or contribute to the Purchaser all Receivables originated by it from time to time and the Purchaser may at its option purchase or accept as a contribution from the Seller all Receivables of the Seller from time to time, in each case during the period from the date hereof to the Facility Termination Date. SECTION 2.02. Making Purchases . (a) Initial Purchase. The Seller shall give the Purchaser at least one Business Day's notice of its request for the initial purchase hereunder, which request shall specify the date of such Purchase (which shall be a Business Day) and the proposed Purchase Price for such Purchase. The Purchaser shall promptly notify the Seller whether it has determined to make such Purchase. On the date of such Purchase, the Purchaser shall, upon satisfaction of the applicable conditions set forth in Article III pay the Purchase Price for such Purchase in the manner provided in Section 2.02(c). (b) Subsequent Purchases. On each Business Day following the initial Purchase, unless either party shall notify the other party to the contrary, the Seller shall sell to the Purchaser and the Purchaser shall purchase from the Seller all Receivables originated by the Seller which have not previously been sold or contributed to the Purchaser; provided, however, that the Seller may, at its option on any Purchase Date, contribute all or any of such Receivables to the Purchaser pursuant to Section 2.06, instead of selling such Receivables to the Purchaser pursuant to this Section 2.02(b). On the date of each such Purchase, the Purchaser shall, upon satisfaction of the applicable conditions set forth in Article III, pay the Purchase Price for such Purchase in the manner provided in Section 2.02(c). (c) Payment of Purchase Price. The Purchase Price for each Purchase shall be paid on the Purchase Date therefor by means of any one or a combination of the following: (i) a deposit in same day funds to the Seller's account designated by the Seller, (ii) an increase in the Deferred Purchase Price (subject at all times to the limitations contained in the definition thereof), or (iii) a credit against interest and/or principal owed by the Seller with respect to any Purchaser Loan. The allocation of the Purchase Price as among such methods of payment shall be subject in each instance to the approval of the Purchaser and the Seller. (d) Ownership of Receivables and Related Security. On each Purchase Date, after giving effect to the Purchase (and any contribution of Receivables) on such date, the Purchaser shall own all Receivables originated by the Seller as of such date (including Receivables which have been previously sold or contributed to the Purchaser hereunder). The Purchase or contribution of any Receivable shall include all Related Security with respect to such Receivable. SECTION 2.03. Collections. (a) Unless otherwise agreed, the Collection Agent shall, on each Settlement Date, deposit into an account of the Purchaser or the Purchaser's assignee all Collections of Transferred Receivables then held by the Collection Agent. (b) In the event that the Seller believes that Collections which are not Collections of Transferred Receivables have been deposited into an account of the Purchaser or the Purchaser's assignee, the Seller shall so advise the Purchaser and, on the Business Day following such identification, the Purchaser shall remit, or shall cause to be remitted, all Collections so deposited which are identified, to the Purchaser's satisfaction, to be Collections of Receivables which are not Transferred Receivables to the Seller. (c) On each Settlement Date, the Purchaser shall pay to the Seller accrued interest on the Deferred Purchase Price and the Purchaser may, at its option, prepay in whole or in part the principal amount of the Deferred Purchase Price; provided that each such payment shall be made solely from (i) Collections of Transferred Receivables after all other amounts then due from the Purchaser under the Sale Agreement have been paid in full and all amounts then required to be set aside by the Purchaser or the Collection Agent under the Sale Agreement have been so set aside or (ii) excess cash flow from operations of the Purchaser which is not required to be applied to the payment of other obligations of the Purchaser; and provided further, that no such payment shall be made at any time when an Event of Termination shall have occurred and be continuing. At such time following the Facility Termination Date when all Capital, Yield and other amounts owed by the Purchaser under the Sale Agreement shall have been paid in full, the Purchaser shall apply, on each Settlement Date, all Collections of Transferred Receivables received by the Purchaser pursuant to Section 2.03(a) (and not previously distributed) first to the payment of accrued interest on the Deferred Purchase Price, and then to the reduction of the principal amount of the Deferred Purchase Price. SECTION 2.04. Settlement Procedures . (a) If on any day the Outstanding Balance of any Purchased Receivable is reduced or adjusted as a result of any defective, rejected, returned, repossessed or foreclosed merchandise or services or any cash discount, discount for quick payment or other adjustment made by the Seller, or any set-off or dispute in respect of any claim by the Obligor thereof against the Seller (whether such claim arises out of the same or a related transaction or an unrelated transaction but excluding adjustments, reductions or cancellations on account of the insolvency, bankruptcy, or financial inability to pay of the applicable Obligor, whether pursuant to an adjustment of the payment amount for such Receivable in accordance with Section 6.02(c) or otherwise), the Seller shall be deemed to have received on such day a Collection of such Purchased Receivable in the amount of such reduction or adjustment. If the Seller is not the Collection Agent, the Seller shall pay to the Collection Agent on or prior to the next Settlement Date all amounts deemed to have been received pursuant to this subsection. (b) Upon discovery by the Seller or the Purchaser of a breach of any of the representations and warranties made by the Seller in Section 4.01(j) with respect to any Transferred Receivable, such party shall give prompt written notice thereof to the other party, as soon as practicable and in any event within three Business Days following such discovery. The Seller shall, upon not less than two Business Days' notice from the Purchaser or its assignee or designee, repurchase such Transferred Receivable on the next succeeding Settlement Date for a repurchase price equal to the Outstanding Balance of such Transferred Receivable. Each repurchase of a Transferred Receivable shall include the Related Security with respect to such Transferred Receivable. The proceeds of any such repurchase shall be deemed to be a Collection in respect of such Transferred Receivable. If the Seller is not the Collection Agent, the Seller shall pay to the Collection Agent on or prior to the next Settlement Date the repurchase price required to be paid pursuant to this subsection. (c) Except as stated in subsection (a) or (b) of this Section 2.04 or as otherwise required by law or the underlying Contract, all Collections from an Obligor of any Transferred Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables. SECTION 2.05. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Collection Agent hereunder shall be paid or deposited no later than 11:00 A.M. (New York City time) on the day when due in same day funds to an account designated by the Purchaser from time to time, which account shall initially be account no. 910-4-005385 at Chase Manhattan Bank. (b) The Seller shall, to the extent permitted by law, pay to the Purchaser interest on any amount not paid or deposited by the Seller (whether as Collection Agent or otherwise) when due hereunder at an interest rate per annum equal to 1.00% per annum above the Alternate Base Rate, payable on demand. (c) All computations of interest and all computations of fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit. SECTION 2.06. Contributions . The Seller may from time to time at its option, by notice to the Purchaser on or prior to the date of the proposed contribution, identify Receivables which it proposes to contribute to the Purchaser as a capital contribution. On the date of each such contribution and after giving effect thereto, the Purchaser shall own in fee simple the Receivables so identified and contributed (collectively, the "Contributed Receivables") and all Related Security with respect thereto. The foregoing notwithstanding, on the date of the initial Purchase hereunder the Seller agrees to contribute to the Purchaser all Receivables which are not included in such initial Purchase. ARTICLE III CONDITIONS OF PURCHASES SECTION 3.01. Conditions Precedent to Initial Purchase from the Seller . The initial Purchase of Receivables from the Seller hereunder is subject to the conditions precedent that the Purchaser shall have received on or before the date of such Purchase the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Purchaser: (a) Certified copies of the resolutions of the Board of Directors of the Seller approving this Agreement and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement. (b) A certificate of the Secretary or Assistant Secretary of the Seller certifying the names and true signatures of the officers of the Seller authorized to sign this Agreement and the other documents to be delivered by it hereunder. (c) Acknowledgment copies of proper financing statements, duly filed on or before the date of the initial Purchase, naming the Seller as the seller/debtor and the Purchaser as the purchaser/ secured party, or other similar instruments or documents, as the Purchaser may deem necessary or desirable under the UCC of all appropriate jurisdictions or other applicable law to perfect the Purchaser's ownership of and security interest in the Transferred Receivables and Related Security and Collections with respect thereto. (d) Acknowledgment copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Transferred Receivables, Contracts or Related Security previously granted by the Seller. (e) Completed requests for information, dated on or before the date of such initial Purchase, listing the financing statements referred to in subsection (c) above and all other effective financing statements filed in the jurisdictions referred to in subsection (c) above that name the Seller as debtor, together with copies of such other financing statements (none of which shall cover any Transferred Receivables, Contracts or Related Security). (f) A favorable opinion of (i) Cravath, Swaine & Moore, counsel for the Seller, and (ii) internal counsel to the Seller, substantially in the form of Exhibit A hereto, and as to such other matters as the Purchaser may reasonably request. (g) An executed copy of the Control Agreement with the initial Designated Bank and undated executed copies of Lock-Box Agreements to the other Lock-Box Banks. SECTION 3.02. Conditions Precedent to All Purchases . Each Purchase (including the initial Purchase) hereunder shall be subject to the further conditions precedent that: (a) with respect to any such Purchase, on or prior to the date of such Purchase, the Seller shall have delivered to the Purchaser, (i) if requested by the Purchaser, the Seller's General Trial Balance (which if in magnetic tape or diskette format shall be compatible with the Purchaser's computer equipment) as of a date not more than 31 days prior to the date of such Purchase, and (ii) a written report identifying, among other things, the Receivables to be included in such Purchase and the then outstanding Purchased Receivables and the aged balance thereof, in each case correlated to Purchases; (b) with respect to any such Purchase, on or prior to the date of such Purchase, the Collection Agent shall have delivered to the Purchaser, in form and substance satisfactory to the Purchaser, a completed Seller Report for the most recently ended reporting period for which information is required pursuant to Section 6.02(b) and containing such additional information as may reasonably be requested by the Purchaser; (c) The Seller shall have marked its master data processing records and, at the request of the Purchaser during the continuance of a Termination Event or Incipient Event of Termination, each Contract giving rise to Purchased Receivables and all other relevant records evidencing the Receivables which are the subject of such Purchase with a legend, acceptable to the Purchaser, stating that such Receivables, the Related Security and Collections with respect thereto, have been sold in accordance with this Agreement; and (d) on the date of such Purchase the following statements shall be true (and the Seller, by accepting the amount of such Purchase, shall be deemed to have certified that): (i) The representations and warranties contained in Section 4.01 are correct on and as of the date of such Purchase as though made on and as of such date, (ii) No event has occurred and is continuing, or would result from such Purchase, that constitutes an Event of Termination or would constitute an Incipient Event of Termination, (iii) The Purchaser shall not have delivered to the Seller a notice that the Purchaser shall not make any further Purchases hereunder, and (iv) With respect to all Purchases made on or after January 1, 2000, the Purchaser shall have received evidence satisfactory to it that Collections are not being sent to any bank account other than a Designated Account; and (e) the Purchaser shall have received such other approvals, opinions or documents as the Purchaser may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller . The Seller represents and warrants as follows: (a) The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified except to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. (b) The execution, delivery and performance by the Seller of this Agreement and the other documents to be delivered by it hereunder, including the Seller's sale and contribution of Receivables hereunder and the Seller's use of the proceeds of Purchases, (i) are within the Seller's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) the Seller's charter or by-laws, (2) any law, rule or regulation applicable to the Seller, (3) any contractual restriction binding on or affecting the Seller or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Seller or its property, and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties (except for the transfer of the Seller's interest in the Transferred Receivables pursuant to this Agreement). This Agreement has been duly executed and delivered by the Seller. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Seller of this Agreement or any other document to be delivered by it hereunder. (d) This Agreement constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. (e) Sales and contributions made pursuant to this Agreement will constitute a valid sale, transfer, and assignment of the Transferred Receivables to Purchaser, enforceable against creditors of, and purchasers from, the Seller. The Seller shall have no remaining property interest in any Transferred Receivable. (f) The balance sheets of the Seller and its consolidated Subsidiaries as at December 31, 1998, and the related statements of income and retained earnings of the Seller and its consolidated Subsidiaries for the fiscal year then ended, copies of which have been furnished to the Agent under the Sale Agreement, fairly present the financial condition of the Seller and its consolidated Subsidiaries as at such date and the results of the operations of the Seller and its consolidated Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since March 31, 1999 there has been no change in the business (taken as a whole), consolidated financial condition or consolidated results of operation of the Seller and its consolidated Subsidiaries that reasonably could be expected to result in a Material Adverse Effect. (g) Except as disclosed in the Form 10-Q filed with the Securities and Exchange Commission on May 7, 1999, there is no action, suit or proceeding pending against or, to the knowledge of the Seller or any of its Subsidiaries, threatened against or affecting the Seller or any of its Subsidiaries before any court or arbitrator, any governmental body, agency or official that reasonably could be expected to result in a Material Adverse Effect. (h) No transaction contemplated hereby requires compliance with any bulk sales act or similar law. (i) Each Receivable sold by the Seller hereunder (unless expressly purported not to be an Eligible Receivable) is an Eligible Receivable, and each such Receivable and each Transferred Receivable, together with the Related Security, is owned (prior to its sale or contribution hereunder) by the Seller free and clear of any Adverse Claim (other than any Adverse Claim arising solely as the result of any action taken by the Purchaser). When Purchaser makes a Purchase it shall acquire valid and perfected first priority ownership of each Purchased Receivable and the Related Security and Collections with respect thereto free and clear of any Adverse Claim (other than any Adverse Claim arising solely as the result of any action taken by the Purchaser), and no effective financing statement or other instrument similar in effect covering any Transferred Receivable, any interest therein, the Related Security or Collections with respect thereto is on file in any recording office except such as may be filed in favor of Purchaser in accordance with this Agreement or in connection with any Adverse Claim arising solely as the result of any action taken by the Purchaser. (j) Each Seller Report (if prepared by the Seller, or to the extent that information contained therein is supplied by the Seller), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by the Seller to the Purchaser in connection with this Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Purchaser at such time) as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. (k) The principal place of business and chief executive office of the Seller and the office where the Seller keeps its records concerning the Transferred Receivables are located at the address or addresses referred to in Section 5.01(b). (l) The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Exhibit C (as the same may be updated from time to time pursuant to Section 5.01(h)). (m) The Seller is not known by and does not use any tradename or doing-business-as name. (n) The purchase of each Receivable from the Seller and each reinvestment of Collections in Receivables of the Seller will constitute (i) a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended, and (ii) a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended. (o) With respect to any programs used by the Seller in the servicing of the Receivables, no sublicensing agreements are necessary in connection with the designation of a new Collection Agent pursuant to Section 6.01(b) so that such new Collection Agent shall have the benefit of such programs (it being understood that, however, the Collection Agent, if other than the Seller, shall be required to be bound by a confidentiality agreement reasonably acceptable to the Seller). (p) The transfers of Transferred Receivables by the Seller to the Purchaser pursuant to this Agreement, and all other transactions between the Seller and the Purchaser, have been and will be made in good faith and without intent to hinder, delay or defraud creditors of the Seller. ARTICLE V COVENANTS SECTION 5.01. Covenants of the Seller . From the date hereof until the first day following the Facility Termination Date on which all of the Transferred Receivables are either collected in full or become Defaulted Receivables: (a) Compliance with Laws, Etc. The Seller will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications, and privileges would not materially adversely affect the collectibility of the Transferred Receivables or the ability of the Seller to perform its obligations under this Agreement. (b) Offices, Records and Books of Account. The Seller will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Transferred Receivables at the address of the Seller set forth under its name on the signature page to this Agreement or, upon 30 days' prior written notice to the Purchaser, at any other locations in jurisdictions where all actions required by Section 5.01(j) shall have been taken and completed. The Seller also will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Transferred Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Transferred Receivables (including, without limitation, records adequate to permit the daily identification of each new Transferred Receivable and all Collections of and adjustments to each existing Transferred Receivable). The Seller shall make a notation in its books and records, including its computer files, to indicate which Receivables have been sold or contributed to the Purchaser hereunder. (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Transferred Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Transferred Receivable and the related Contract. Without limiting the generality of the foregoing, the Seller will not reduce or suffer or permit reductions in the amounts payable by Obligors on the Receivables in the form of "volume rebate credits" (including, without limitation, with respect to Zeneca, Griffin, Monsanto and Occidental); provided, that, prior to the occurrence and continuance of any Event of Termination or Incipient Event of Termination, the Seller may grant "volume rebate credits" in an aggregate amount not to exceed $500,000 annually with respect to all Obligors. (d) Sales, Liens, Etc. Except for the sales and contributions of Receivables contemplated herein, the Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Transferred Receivable, Related Security, related Contract or Collections, or upon or with respect to any account to which any Collections of any Transferred Receivable are sent, or assign any right to receive income in respect thereof, other than liens for taxes not yet due and payable. (e) Extension or Amendment of Transferred Receivables. Except as provided in Section 6.02(c), the Seller will not extend, amend or otherwise modify the terms of any Transferred Receivable, or amend, modify or waive any payment provisions of any Contract related thereto. (f) Change in Credit and Collection Policy. The Seller will not make any change in the Credit and Collection Policy that would, in either case, materially adversely affect the collectibility of the Transferred Receivables or the ability of the Seller to perform its obligations under this Agreement. (g) Audits. The Seller will, from time to time during regular business hours and following reasonable notice to the Seller, permit the Purchaser, or its agents, representatives or assigns, (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Seller relating to Transferred Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of the Seller for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Transferred Receivables and the Related Security or the Seller's performance hereunder or under the Contracts with any of the officers or employees of the Seller having knowledge of such matters; provided, however, prior to the occurrence and continuance of any Event of Termination or Incipient Event of Termination, audits, examinations and visits described in (i) and (ii) above (together with the audit rights set forth in Sections 5.02 and 6.06(a) of the Sale Agreement) shall occur no more frequently than annually. (h) Change in Payment Instructions to Obligors. The Seller will not add any bank or bank account as a Lock-Box Bank or Lock-Box Account to those listed in Exhibit C to this Agreement. The Seller will not add any bank as a Designated Bank unless the Purchaser shall have received notice of such addition (including an updated Exhibit C) and a fully executed copy of a lock-box notice agreement for each new Designated Bank. The Seller will terminate each Lock-Box Account (other than the Designated Accounts) on or prior to December 31, 1999. Following the delivery of any lock-box notice or lock-box notice agreement, the Seller will not make any change in its instructions to Obligors regarding payments to be made to the Seller or payments to be made to any Lock-Box Bank, other than instructing Obligors that are making payments to a Lock-Box Account which is not a Designated Account to make payments to a Designated Account. (i) Deposits to Lock-Box Accounts. At all times on and prior to December 31, 1999, the Seller will deposit, or cause to be deposited, all Collections of Receivables solely into Lock-Box Accounts. At all times subsequent to December 31, 1999, the Seller will deposit, or cause to be deposited, all Collections of Receivables solely into a Designated Account. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections of Receivables and shall promptly (and in any event within two Business Days) cause any Collections deposited in a Lock-Box Account and not relating to Receivables to be removed from the applicable Lock-Box Account. (j) Further Assurances. (i) The Seller agrees from time to time, at its expense, promptly to execute and deliver all further instruments and documents, and to take all further reasonable actions, that may be reasonably necessary or desirable, or that the Purchaser or its assignee may reasonably request, to perfect, protect or more fully evidence the sale and contribution of Receivables under this Agreement, or to enable the Purchaser or its assignee to exercise and enforce its respective rights and remedies under this Agreement. Without limiting the foregoing, the Seller will, upon the request of the Purchaser or its assignee, (A) execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be necessary or desirable to perfect, protect or evidence such Transferred Receivables; and (B) deliver to the Purchaser copies of all Contracts relating to the Transferred Receivables and all records relating to such Contracts and the Transferred Receivables, whether in hard copy or in magnetic tape or diskette format (which if in magnetic tape or diskette format shall be compatible with the Purchaser's computer equipment). (ii) The Seller authorizes the Purchaser or its assignee to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Transferred Receivables and the Related Security, the related Contracts and the Collections with respect thereto without the signature of the Seller where permitted by law. A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement where permitted by law. (iii) The Seller shall perform its obligations under the Contracts related to the Transferred Receivables to the same extent as if the Transferred Receivables had not been sold or transferred. (k) Reporting Requirements. The Seller will provide to the Purchaser the following: (i) as soon as available and in any event within 60 days after the end of the first three quarters of each fiscal year of the Seller, consolidated balance sheets of the Seller and its Subsidiaries as of the end of such quarter and consolidated statements of income and retained earnings of the Seller and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer, controller or other chief accounting officer of the Seller; (ii) as soon as available and in any event within 120 days after the end of each fiscal year of the Seller, a copy of the annual report for such year for the Seller and its Subsidiaries, containing financial statements for such year audited by a "Big 4" accounting firm or other independent public accountants acceptable to the Purchaser; (iii) as soon as possible and in any event within five days after the Seller obtains knowledge of the occurrence of each Event of Termination or Incipient Event of Termination, to the extent that such event is continuing, a statement of the chief financial officer of the Seller setting forth details of such Event of Termination or event and the action that the Seller has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports that the Seller sends to any of its security holders, and copies of all reports and registration statements that the Seller or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; (v) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or any Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition which could, in the aggregate, result in the imposition of liability on the Seller and/or any such Affiliate in excess of $10,000,000; (vi) at least ten Business Days prior to any change in the name of the Seller, a notice setting forth the new name and the effective date thereof; and (vii) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller as the Purchaser may from time to time reasonably request. (l) Separate Conduct of Business. The Seller will: (i) maintain separate corporate records and books of account from those of the Purchaser; (ii) conduct its business from an office separate from that of the Purchaser; (iii) ensure that all oral and written communications, including without limitation, letters, invoices, purchase orders, contracts, statements and applications, will be made solely in its own name; (iv) have stationery and other business forms and a mailing address and a telephone number separate from those of the Purchaser; (v) not hold itself out as having agreed to pay, or as being liable for, the obligations of the Purchaser; (vi) not engage in any transaction with the Purchaser except as contemplated by this Agreement or as permitted by the Sale Agreement; (vii) continuously maintain as official records the resolutions, agreements and other instruments underlying the transactions contemplated by this Agreement; and (viii) prepare and disclose on its annual financial statements (A) the effects of the transactions contemplated by this Agreement in accordance with generally accepted accounting principles and (B) in manner that is wholly consistent with the conclusion that the assets of the Purchaser are not available to pay its creditors; and (ix) otherwise comply with (and cause to be true and correct) each of the facts and assumptions contained in Sections 2 through 4 on pages 5-8 of the opinion of Cravath, Swaine & Moore delivered pursuant to Section 3.01(g) and designated as Exhibit A to this Agreement. SECTION 5.02. Covenant of the Seller and the Purchaser . The Seller and the Purchaser have structured this Agreement with the intention that each Purchase of Receivables hereunder be treated as a sale of such Receivables by the Seller to the Purchaser for all purposes and each contribution of Receivables hereunder shall be treated as an absolute transfer of such Receivables by the Seller to the Purchaser for all purposes. The Seller and the Purchaser shall record each Purchase and contribution as a sale or purchase or capital contribution, as the case may be, on its books and records, and reflect each Purchase and contribution in its financial statements and tax returns as a sale or purchase or capital contribution, as the case may be. ARTICLE VI ADMINISTRATION AND COLLECTION SECTION 6.01. Designation of Collection Agent . The servicing, administration and collection of the Transferred Receivables shall be conducted by such Person (the "Collection Agent") so designated hereunder from time to time. The Seller is hereby designated as, and hereby agrees to perform the duties and obligations of, the Collection Agent pursuant to the terms hereof. Upon the occurrence of a Collection Agent Default, the Purchaser or its assignee may designate as Collection Agent any Person (including itself) to succeed the Seller or any successor Collection Agent, if such Person shall consent and agree to the terms hereof. Upon the Seller's receipt of such notice, the Seller agrees that it will terminate its activities as Collection Agent hereunder in a manner which the Purchaser (or its designee) believes will facilitate the transition of the performance of such activities to the new Collection Agent, and the Seller shall use its best efforts to assist the Purchaser (or its designee) to take over the servicing, administration and collection of the Transferred Receivables, including, without limitation, providing access to and copies of all computer tapes or disks and other documents or instruments that evidence or relate to Transferred Receivables maintained in its capacity as Collection Agent and access to all employees and officers of the Seller responsible with respect thereto. The Collection Agent may, with the prior consent of the Purchaser, (such consent not to be unreasonably withheld) subcontract with any other Person for the servicing, administration or collection of Transferred Receivables. Any such subcontract shall not affect the Collection Agent's liability for performance of its duties and obligations pursuant to the terms hereof. SECTION 6.02. Duties of Collection Agent . (a) The Collection Agent shall take or cause to be taken all such actions as may be reasonably necessary or advisable to collect each Transferred Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. The Purchaser hereby appoints the Collection Agent, from time to time designated pursuant to Section 6.01, as agent to enforce its ownership and other rights in the Transferred Receivables, the Related Security and the Collections with respect thereto. In performing its duties as Collection Agent, the Collection Agent shall exercise the same care and apply the same policies as it would exercise and apply if it owned the Transferred Receivables and shall act in a manner consistent with the Credit and Collection Policy and in the best interests of the Purchaser and its assignees. (b) Prior to the 10th Business Day of each month, the Collection Agent shall prepare and forward to the Purchaser (i) a Seller Report, relating to all then outstanding Transferred Receivables, and the Related Security and Collections with respect thereto, in each case, as of the close of business of the Collection Agent on the last day of the immediately preceding month, and (ii) if requested by the Purchaser, a listing by Obligor of all Transferred Receivables, together with an aging report of such Transferred Receivables. (c) If no Event of Termination or Incipient Event of Termination shall have occurred and be continuing, the Seller, while it is the Collection Agent, may, in accordance with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Transferred Receivable as the Seller deems appropriate, or otherwise amend or adjust the payment terms under the related Contract in a manner consistent with the Credit and Collection Policy, to maximize Collections thereof, provided that the classification of any such Transferred Receivable as a Delinquent Receivable or Defaulted Receivable shall not be affected by any such extension. (d) The Seller shall deliver to the Collection Agent, and the Collection Agent shall hold in trust for the Seller and the Purchaser in accordance with their respective interests, all documents, instruments and records (including, without limitation, computer tapes or disks) which evidence or relate to Transferred Receivables. (e) The Collection Agent shall as soon as practicable following receipt turn over to the Seller any cash collections or other cash proceeds received with respect to Receivables not constituting Transferred Receivables, less, in the event the Seller is not the Collection Agent, all reasonable and appropriate out-of-pocket costs and expenses of the Collection Agent of servicing, collecting and administering the Receivables to the extent not covered by the Collection Agent Fee received by it. (f) The Collection Agent also shall perform the other obligations of the "Collection Agent" set forth in this Agreement with respect to the Transferred Receivables. SECTION 6.03. Collection Agent Fee . The Purchaser shall pay to the Collection Agent, so long as it is acting as the Collection Agent hereunder, a periodic collection fee (the "Collection Agent Fee") of 0.75% per annum on the average daily aggregate Outstanding Balance of the Transferred Receivables, payable on the 15th day of each month (or, if such day is not a Business Day, the immediately succeeding Business Day) or such other day during each calendar month as the Purchaser and the Collection Agent shall agree. SECTION 6.04. Certain Rights of the Purchaser . (a) The Seller hereby transfers to the Purchaser (and its assigns and designees) the exclusive ownership and control of the Lock-Box Accounts maintained by the Seller for the purpose of receiving Collections. (b) At any time following the designation of a Collection Agent other than the Seller pursuant to Section 6.01 or following and during the continuance of an Event of Termination or an Incipient Event of Termination: the Purchaser may give notice of ownership and/or direct the Obligors of Transferred Receivables and any Person obligated on any Related Security, or any of them, that payment of all amounts payable under any Transferred Receivable shall be made directly to the Purchaser or its designee; and the Seller shall, upon the Purchaser's request and at the Seller's expense, (i) give notice of such ownership to each Obligor of Transferred Receivables and direct that payments of all amounts payable under such Transferred Receivables be made directly to the Purchaser or its designee, and (ii) notify all other obligors to redirect funds and make payment with respect to amounts owing to the Seller to accounts of the Seller other than a Designated Account. (c) At the Purchaser's request and at the Seller's expense, the Seller and the Collection Agent shall (A) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Transferred Receivables and the related Contracts and Related Security, or that are otherwise necessary or desirable to collect the Transferred Receivables, and shall make the same available to the Purchaser at a place selected by the Purchaser or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Transferred Receivables in a manner acceptable to the Purchaser and, promptly upon receipt, remit all such cash, checks and instruments, duly indorsed or with duly executed instruments of transfer, to the Purchaser or its designee. (d) The Seller authorizes the Purchaser to take any and all steps in the Seller's name and on behalf of the Seller that are necessary or desirable, in the determination of the Purchaser, to collect amounts due under the Transferred Receivables, including, without limitation, endorsing the Seller's name on checks and other instruments representing Collections of Transferred Receivables and enforcing the Transferred Receivables and the Related Security and related Contracts. SECTION 6.05. Rights and Remedies. (a) If the Seller or the Collection Agent fails to perform any of its obligations under this Agreement, the Purchaser may (but shall not be required to) itself perform, or cause performance of, such obligation, and, if the Seller (as Collection Agent or otherwise) fails to so perform, the costs and expenses of the Purchaser incurred in connection therewith shall be payable by the Seller as provided in Section 8.01 or Section 9.04 as applicable. (b) The Seller shall perform all of its obligations under the Contracts related to the Transferred Receivables to the same extent as if the Seller had not sold or contributed Receivables hereunder and the exercise by the Purchaser of its rights hereunder shall not relieve the Seller from such obligations or its obligations with respect to the Transferred Receivables. The Purchaser shall not have any obligation or liability with respect to any Transferred Receivables or related Contracts, nor shall the Purchaser be obligated to perform any of the obligations of the Seller thereunder. (c) The Seller shall cooperate with the Collection Agent in collecting amounts due from Obligors in respect of the Transferred Receivables. (d) The Seller hereby grants to Collection Agent an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of the Seller all steps necessary or advisable to endorse, negotiate or otherwise realize on any writing or other right of any kind held or transmitted by the Seller or transmitted or received by Purchaser (whether or not from the Seller) in connection with the collection and enforcement of any Transferred Receivable. SECTION 6.06. Transfer of Records to Purchaser. Each Purchase and contribution of Receivables hereunder shall include the transfer to the Purchaser of all of the Seller's right and title to and interest in the records relating to such Receivables and shall include an irrevocable non-exclusive license to the use of the Seller's computer software system to access and create such records. Such license shall be without royalty or payment of any kind, is coupled with an interest, and shall be irrevocable until all of the Transferred Receivables are either collected in full or become Defaulted Receivables. The Seller shall take such action requested by the Purchaser, from time to time hereafter, that may be necessary or appropriate to ensure that the Purchaser has an enforceable ownership interest in the records relating to the Transferred Receivables and rights (whether by ownership, license or sublicense) to the use of the Seller's computer software system to access and create such records. In recognition of the Seller's need to have access to the records transferred to the Purchaser hereunder, the Purchaser hereby grants to the Seller an irrevocable license to access such records in connection with any activity arising in the ordinary course of the Seller's business or in performance of its duties as Collection Agent, provided that (i) the Seller shall not disrupt or otherwise interfere with the Purchaser's use of and access to such records during such license period and (ii) the Seller consents to the assignment and delivery of the records (including any information contained therein relating to the Seller or its operations) to any assignees or transferees of the Purchaser provided they agree to hold such records confidential. ARTICLE VII EVENTS OF TERMINATION SECTION 7.01. Events of Termination . If any of the following events ("Events of Termination") shall occur and be continuing: (a) The occurrence of any Collection Agent Default; or (b) The Seller shall fail (i) following a Collection Agent Default, to transfer to the Purchaser when requested rights, pursuant to this Agreement, which the Seller then has as Collection Agent, or (ii) to make any payment required under Section 2.04; or (c) Any representation or warranty made or deemed made by the Seller or the Collection Agent under this Agreement or any other Transaction Document or any written information or report (including, without limitation, any E-Mail Seller Report) delivered by the Seller pursuant to this Agreement shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered and such condition, to the extent it is capable of being remedied, shall remain unremedied for 10 days; or (d) The Seller shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Seller by the Purchaser; or (e) The Seller shall fail to pay any payment of principal, face amount, interest, premium, fees or any similar obligation in respect of any Debt in an aggregate amount exceeding $25,000,000 when due or within any applicable grace period (provided, that if Section 6.01(e) of the Seller's existing $500,000,000 credit agreement, dated as of March 31, 1997, is amended to provide that no "Event of Default" under such credit agreement will result until such Debt is declared to be or otherwise becomes due and payable in such aggregate amount, then this clause (e) shall not constitute an Event of Termination hereunder unless such Debt is declared to be or otherwise becomes due and payable in such aggregate amount); or (f) Any Purchase or contribution of Receivables hereunder, the Related Security and the Collections with respect thereto shall for any reason cease to constitute valid and perfected ownership of such Receivables, Related Security and Collections free and clear of any Adverse Claim; or (g) The Seller shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller shall take any corporate action to authorize any of the actions set forth above in this subsection (g); or (h) an Event of Termination shall have occurred under the Sale Agreement; or (i) There shall have occurred any event or events that result in a Material Adverse Effect; or (j) Any of the Seller's long term public senior unsecured debt securities (having a rating not dependant on any guaranty) are no longer rated at least BBB- by Standard & Poor's Rating Services and at least Baa3 by Moody's Investors Service, Inc., or the Seller has not maintained both such ratings; then, and in any such event, the Purchaser may, by notice to the Seller, take either or both of the following actions: (x) declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred) and (y) if such Event of Termination coincides with or also constitutes a Collection Agent Default, and without limiting any right under this Agreement to replace the Collection Agent, designate another Person to succeed the Seller as Collection Agent; provided, that, automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in paragraph (g) of this Section 7.01, the Facility Termination Date shall occur, the Seller (if it is then serving as the Collection Agent) shall cease to be the Collection Agent, and the Purchaser (or its assigns or designees) shall become the Collection Agent. Upon any such declaration or designation or upon such automatic termination, the Purchaser shall have, in addition to the rights and remedies under this Agreement, all other rights and remedies with respect to the Receivables provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. ARTICLE VIII INDEMNIFICATION SECTION 8.01. Indemnities by the Seller . Without limiting any other rights which the Purchaser may have hereunder or under applicable law, the Seller hereby agrees to indemnify the Purchaser and its assigns and transferees (each, an "Indemnified Party") from and against any and all damages, claims, losses, liabilities and related costs and expenses, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts"), awarded against or incurred by any Indemnified Party arising out of or as a result of this Agreement or the purchase or contribution of any Transferred Receivables or in respect of any Transferred Receivable or any Contract, including, without limitation, arising out of or as a result of: (i) the inclusion, or purported inclusion, in any Purchase of any Receivable (unless expressly purported not to be an Eligible Receivable) that is not an Eligible Receivable on the date of such Purchase, or the characterization in any Seller Report or other statement made by the Seller of any Transferred Receivable as an Eligible Receivable which is not an Eligible Receivable as of the date of such Seller Report or statement; (ii) reliance on any representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement, which shall have been incorrect in any material respect when made; (iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Transferred Receivable or the related Contract; or the failure of any Transferred Receivable or the related Contract to conform to any such applicable law, rule or regulation; (iv) the failure to vest in the Purchaser absolute ownership of the Receivables that are, or that purport to be, the subject of a Purchase or contribution under this Agreement and the Related Security and Collections in respect thereof, free and clear of any Adverse Claim; (v) the failure of the Seller to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables that are, or that purport to be, the subject of a Purchase or contribution under this Agreement and the Related Security and Collections in respect thereof, whether at the time of any Purchase or contribution or at any subsequent time; (vi) any restriction applicable to Persons other than the Seller that inhibits their ability to exercise their rights under this Agreement due to a confidentiality provision in a Contract that purports to restrict the ability of such Persons to exercise their rights under this Agreement, including, without limitation, their right to review the Contract; (vii) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable that is, or that purports to be, the subject of a Purchase or contribution under this Agreement (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller acting as Collection Agent); (viii) any failure of the Seller, as Collection Agent or otherwise, to perform its duties or obligations in accordance with the provisions hereof or to perform its duties or obligations under any Contract related to a Transferred Receivable; (ix) any products liability or other claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract; (x) the commingling of Collections of Transferred Receivables by the Seller or a designee of the Seller, as Collection Agent or otherwise, at any time with other funds of the Seller or an Affiliate of the Seller; (xi) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Purchases or the ownership of Receivables, the Related Security, or Collections with respect thereto or in respect of any Receivable, Related Security or Contract; (xii) any failure of the Seller to comply with its covenants contained in Section 5.01; (xiii) any Collection Agent Fees or other costs and expenses payable to any replacement Collection Agent, to the extent in excess of the Collection Agent Fees payable to the Seller hereunder; (xiv) any claim brought by any Person other than an Indemnified Party arising from any activity by the Seller or any Affiliate of the Seller in servicing, administering or collecting any Transferred Receivable; or (xv) any Dilution with respect to any Transferred Receivable. It is expressly agreed and understood by the parties hereto (i) that the foregoing indemnification is not intended to, and shall not, constitute a guarantee of the collectibility or payment of the Transferred Receivables and (ii) that nothing in this Section 8.01 shall require the Seller to indemnify any Person (A) for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the applicable Obligor, (B) for damages, losses, claims or liabilities or related costs or expenses resulting from such Person's gross negligence or willful misconduct, or (C) for any income taxes or franchise taxes incurred by such Person arising out of or as a result of this Agreement or in respect of any Transferred Receivable or any Contract. ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or consent to any departure by the Seller therefrom shall be effective unless in a writing signed by the Purchaser and, in the case of any amendment, also signed by the Seller, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Purchaser to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. SECTION 9.02. Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be faxed or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received. SECTION 9.03. Binding Effect; Assignability . (a) This Agreement shall be binding upon and inure to the benefit of the Seller, the Purchaser and their respective successors and assigns; provided, however, that the Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Purchaser. In connection with any sale or assignment by the Purchaser of all or a portion of the Transferred Receivables, the buyer or assignee, as the case may be, shall, to the extent of its purchase or assignment, have all rights of the Purchaser under this Agreement (as if such buyer or assignee, as the case may be, were the Purchaser hereunder) except to the extent specifically provided in the agreement between the Purchaser and such buyer or assignee, as the case may be. (b) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time, after the Facility Termination Date, when all of the Transferred Receivables are either collected in full or become Defaulted Receivables; provided, however, that rights and remedies with respect to any breach of any representation and warranty made by the Seller pursuant to Article IV and the provisions of Article VIII and Sections 9.04, 9.05 and 9.06 shall be continuing and shall survive any termination of this Agreement. SECTION 9.04. Costs, Expenses and Taxes . (a) In addition to the rights of indemnification granted to the Purchaser pursuant to Article VIII hereof, the Seller agrees to pay on demand all costs and expenses in connection with the preparation, execution and delivery of this Agreement and the other documents and agreements to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Purchaser with respect thereto and with respect to advising the Purchaser as to its rights and remedies under this Agreement, and the Seller agrees to pay all costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and the other documents to be delivered hereunder excluding, however, any costs of enforcement or collection of Transferred Receivables which are not paid on account of the insolvency, bankruptcy or financial inability to pay of the applicable Obligor. (b) In addition, the Seller agrees to pay any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and the Seller agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 9.05. No Proceedings . The Seller hereby agrees that it will not institute against the Purchaser any proceeding of the type referred to in Section 7.01(g) so long as there shall not have elapsed one year plus one day since the later of (i) the Facility Termination Date and (ii) the date on which all of the Transferred Receivables are either collected in full or become Defaulted Receivables. SECTION 9.06. Confidentiality . Unless otherwise required by applicable law or regulation, each party hereto agrees to maintain the confidentiality of this Agreement in communications with third parties and otherwise; provided that this Agreement may be disclosed to (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the other party hereto, and such party's assignee, (b) the legal counsel and auditors of the Seller and the Purchaser if they agree to hold it confidential, and (c) to rating agencies rating the Seller's equity and debt instruments. SECTION 9.07. GOVERNING LAW . THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION; PROVIDED THAT THE PROVISIONS RELATING TO THE PERFECTION OF THE PURCHASER'S OWNERSHIP INTEREST IN THE RECEIVABLES SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CONNECTICUT. SECTION 9.08. Third Party Beneficiary . Each of the parties hereto hereby acknowledges that the Purchaser is assigning its rights (but not its obligations) under this Agreement to Citicorp North America, Inc., as agent under the Sale Agreement, that such assignee and any subsequent assignees may (except as otherwise agreed to by such assignees) further assign their rights under this Agreement, and the Seller hereby consents to any such assignments. All such assignees, including parties to the Sale Agreement in the case of assignment to such parties, shall be third party beneficiaries of, and shall be entitled to enforce the Purchaser's rights and remedies under, this Agreement to the same extent as if they were parties thereto, except to the extent specifically limited under the terms of their assignment. SECTION 9.09. Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SELLER: WITCO CORPORATION By: ___________________________ Title: ____________________ Address: One American Lane Greenwich, Connecticut 06831-2559 Attention: ____________________ Facsimile No.: (___) ___-____ PURCHASER: WITCO FUNDING CORPORATION By: ___________________________ Title: ____________________ Address: One American Lane Greenwich, Connecticut 06831-2559 Attention: ____________________ Facsimile No.: (___) ___-____ EX-10.32 15 Merger Synergy Restricted Stock Agreement This Agreement, made and entered into as of October 19, 1999, (the "Agreement") by and between CK Witco Corporation (the "Corporation") and Name (the "Executive") of Town. WHEREAS, Crompton & Knowles Corporation ("C&K") and Witco Corporation ("Witco") merged on September 1, 1999, to form the Corporation; WHEREAS, the merger of C&K and Witco presents an opportunity for the Corporation to realize significant cost savings through synergies resulting from the merger; and WHEREAS, by virtue of the Executive's position with the Corporation, the Executive can make a valuable contribution toward achievement by the Corporation of merger related cost savings, and the Corporation is offering incentives to the Executive and other senior executives of the Corporation to work to achieve $60 million in annual savings from such synergies; NOW, THEREFORE, the Executive and the Corporation hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Performance Period" shall mean the period September 1, 1999, to December 31, 2001. (b) "Synergy Cost Savings" shall mean total annual savings as follows: (i) Savings from headcount reductions. Payroll and benefit savings from headcount reductions will be determined by comparison to a baseline of June 30, 1999. Spending for payroll and benefits based on the employee census as of the baseline date will be annualized and compared to actual spending (adjusted to eliminate wage and benefit increases that are effective on or after January 1, 2000) for each of fiscal years 2000 and 2001. (ii) Savings from expense reductions. Non- capitalized expense reductions with respect to consultants, travel and entertainment, logistics, purchasing, insurance, rent, purchased supplies and services and communications will be determined by the comparison of actual annual spending for those categories of expense in each of fiscal years 2000 and 2001 to the total combined spending of Crompton & Knowles, Witco and CK Witco for the same categories of expense in 1999. (iii) Manufacturing savings. Manufacturing savings from consolidation and shutdown of plants and other facilities and improvements in manufacturing operations will be determined by comparison of actual spending in each of fiscal years 2000 and 2001 to a baseline of June 30, 1999. (iv) Interest expense and tax savings. Savings from lower interest expense for each of fiscal years 2000 and 2001 will be determined by the comparison of actual interest expense in those years to combined interest expense for Crompton & Knowles, Witco and CK Witco for 1999. Savings, if any, from a lower effective tax rate will be measured based on any improvement in the effective consolidated tax rate in years after 1999 from 39.2% (the pro forma tax rate for CK Witco as if the merger had occurred on January 1, 1999). KPMG LLP will report to the Organization, Compensation and Governance Committee of the Corporation's board of directors (the "Committee") on the savings achieved as of the last day of each complete fiscal year of the Corporation during the Performance Period. (c) "Retirement" shall mean cessation of the Executive's employment with the Corporation or a subsidiary of the Corporation occurring on or after the Executive's sixty-second (62nd) birthday. (d) "Cause" shall mean (i) the Executive's willful and continued failure to substantially perform assigned duties with the Corporation or its subsidiary corporations (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for Good Reason), after a demand for substantial performance is delivered to the Executive by the Board of Directors of the Corporation by which the Executive is employed (the "Board"), specifically identifying the manner in which the Board believes that the duties have not been substantially performed, or (ii) the Executive's willful conduct which is demonstrably and materially injurious to the Corporation or any subsidiary corporation by which the Executive is employed. For purposes of this subsection 2(c), no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Corporation and the subsidiary corporation, if any, by which the Executive is employed. (e) "Good Reason" shall mean (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles, and reporting requirements), authority, duties or responsibilities as contemplated by any employment agreement between the Executive and the Corporation or a subsidiary of the Corporation, or any other action by the Corporation or the subsidiary corporation, if any, by which the Executive is employed which results in a diminishment in such position, authority, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation or such subsidiary corporation promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Corporation or the subsidiary corporation, if any, by which the Executive is employed to comply with any of the provisions of any employment agreement between the Executive and the Corporation or such subsidiary corporation, other than an insubstantial and inadvertent failure which is remedied by the Corporation or such subsidiary corporation promptly after receipt of notice thereof given by the Executive; (iii) any change not concurred in by the Executive in the location of the office at which the Executive is principally based on the date hereof, except for travel reasonably required in the performance of the Executive's responsibilities and substantially consistent with prior business travel obligations of the Executive; or (iv) any purported termination by the Corporation or the subsidiary corporation, if any, by which the Executive is employed of the Executive's employment otherwise than as permitted by any employment agreement between the Executive and the Corporation or such subsidiary corporation. (f) "Change in Control" shall have the meaning set forth in Section 10 of the Crompton & Knowles Corporation 1998 Long Term Incentive Plan (the "Plan"). 2. Grant. In accordance with the terms and conditions of the Plan and of this Agreement, the Executive is granted the opportunity to earn "Shares" shares of the common stock of the Corporation (the shares earned by the Executive, if any, hereinafter being called the "Award") during the Performance Period. 3. Performance Objective. (a) An Award shall be earned upon the achievement by the Corporation during the Performance Period of $60 million in Synergy Cost Savings. (b) Total Synergy Cost Savings shall be determined as of the last day of each complete fiscal year of the Corporation during the Performance Period, and any Award that is earned shall vest and be paid in accordance with Section 7 hereof. 4. Termination of Employment During Performance Period and Prior to an Award's Having Been Earned. (a) If the Executive's employment with the Corporation or a subsidiary of the Corporation terminates during the Performance Period and prior to an Award's having been earned because of death, disability or Retirement, the Committee may, in its sole discretion, make a pro rata Award to the Executive. (b) If, following a Change in Control occurring after the date of this Agreement and prior to an Award's having been earned, the Executive's employment with the Corporation or a subsidiary of the Corporation is terminated by the Executive for Good Reason or by the Corporation by which the Executive is employed other than for Cause, the Executive shall become immediately vested in, and shall be promptly paid an Award. (c) In the event that the Executive's employment with the Corporation terminates during the Performance Period and prior to an Award's having been earned for any reason other than as specified in subsections 4(a) and 4(b) hereof, the Executive shall not be entitled to receive any Award for the Performance Period. 5. Voting of Shares. After the date of any Award to the Executive hereunder, and prior to the transfer to the Executive of all of the shares of the Corporation comprising the Award, the Executive shall have the right to instruct the trustee of the Crompton & Knowles Corporation Long Term Incentive Plan Trust (the "Trustee") as to the voting of such number of shares of the Corporation comprising the Award as are held by the Trustee, together with any other shares held by the Trustee in any account which may be established by the Trustee on or after the date of the Award in the name of the Executive. 6. Dividends. The Executive shall be paid, at the time any shares earned by him are transferred to him, such sum of money or, at the sole discretion of the Corporation, such additional shares or other property, as shall be equal to the Executive's pro rata share of the Trust earnings to the date of and attributable to such payment, but less such cash or shares, if any, as the Corporation shall in its sole discretion determine are required to be withheld to pay taxes due on the cash or shares then being transferred to the Executive. The Executive shall have the right to defer any portion of the earned Award. 7. Vesting and Payment of Award. Any Award earned by the Executive hereunder shall vest in and be paid to the Executive as follows: (i) if earned on or before December 31, 2000 33.33% on January 1, 2001 33.33% on January 1, 2002 33.33% on January 1, 2003 (ii) if earned after December 31, 2000 33.33% on January 1, 2002 33.33% on January 1, 2003 33.33% on January 1, 2004 Notwithstanding any other provision of this Section 7, upon the termination of the Executive's employment with the Corporation on or after December 31, 2000, due to death, disability, Retirement or for any reason following a Change in Control occurring after December 31, 2000, any Award theretofore earned by the Executive hereunder shall immediately become fully vested in him, and be payable in shares, or the cash equivalent of the fair market value on the date so vested. Termination of the Executive's employment with the Corporation on or after December 31, 2000, for any reason other than those specified in the preceding sentence shall cause the forfeiture of any portion of an Award not vested prior to the date of such termination of employment. 8. Certain Further Payments by the Company. In the event that any amount paid or distributed to the Executive pursuant to this Agreement (taken together with any amounts otherwise paid or distributed to the Executive in connection with a change of control referred to in Section 280G(b)(i)) are subject to an excise tax under Section 4999 of the Code or any successor or similar provision thereto (the "Excise Tax"), the Corporation shall pay to the Executive an additional amount such that, after taking into account all taxes (including federal, state, local and foreign income, excise and other taxes) incurred by the Executive on the receipt of such additional amount, the Executive is left with the same after-tax amount the Executive would have been left with had no Excise Tax been imposed. 9. At Will Employment. This Agreement does not alter the "at will" nature of the Executive's employment, which employment may be terminated at any time by the Executive or the Corporation by which the Executive is employed. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. CK Witco Corporation By: Its: Name EX-10.33 16 1999-2001 Long Term Performance Award Agreement This Agreement, dated as of February 1, 1999, (the "Agreement") is made by and between Crompton & Knowles Corporation (the "Corporation") and (the "Executive"). WHEREAS, the Corporation has adopted the 1998 Long Term Incentive Plan (the "Plan") for the purpose of attracting, motivating and retaining key employees by offering them long term performance-based incentives and an opportunity to acquire ownership of shares of the Corporation's common stock. NOW, THEREFORE, the Executive, a key employee of the Corporation, is granted the opportunity to earn shares of common stock of the Corporation in accordance with the terms and conditions of the Plan and this Agreement. 1. The Executive is granted the opportunity to earn a maximum of shares of the common stock of the Corporation (the actual number of shares earned by the Executive, if any, hereinafter being called the "Award") during the Performance Period. 2. Definitions For purposes of this Agreement, the following terms shall have the following meanings: (a) "Performance Period" shall mean the period January 1, 1999, to December 31, 2001. (b) "Retirement" shall mean cessation of the Executive's employment with the Corporation or a subsidiary of the Corporation on or after the first day of the month on or next after the Executive's sixth-second (62nd) birthday. (c) "Cause" shall mean (i) the Executive's willful and continued failure to substantially perform assigned duties with the Corporation or its subsidiary corporations (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for Good Reason), after a demand for substantial performance is delivered to the Executive by the Board of Directors of the Corporation by which the Executive is employed (the "Board"), specifically identifying the manner in which the Board believes that the duties have not been substantially performed, or (ii) the Executive's willful conduct which is demonstrably and materially injurious to the Corporation or any subsidiary corporation by which the Executive is employed. For purposes of this subsection 2(c), no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Corporation and the subsidiary corporation, if any, by which the Executive is employed. (d) "Good Reason" shall mean (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including staus, offices, titles, and reporting requirements), authority, duties or responsibilities as contemplated by any employment agreement between the Executive and the Corporation or a subsidiary of the Corporation, or any other action by the Corporation or the subsidiary corporation, if any, by which the Executive is employed which results in a diminishment in such position, authority, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation or such subsidiary corporation promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Corporation or the subsidiary corporation, if any, by which the Executive is employed to comply with any of the provisions of any employment agreement between the Executive and the Corporation or such subsidiary corporation, other than an insubstantial and inadvertent failure which is remedied by the Corporation or such subsidiary corporation promptly after receipt of notice thereof given by the Executive; (iii) any change not concurred in by the Executive in the location of the office at which the Executive is principally based on the date hereof, except for travel reasonably required in the performance of the Executive's responsibilities and substantially consistent with prior business travel obligations of the Executive; or (iv) any purported termination by the Corporation or the subsidiary corporation, if any, by which the Executive is employed of the Executive's employment otherwise than as permitted by any employment agreement between the Executive and the Corporation or such subsidiary corporation. (e) "Change in Control" shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on January 1, 1998, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, such a "Change in Control" shall be deemed to have occurred if (x) a third person, including a "group" as such term is used in Section 13(d)(3) of the Exchange Act, other than the trustee of any employee benefit plan of the Corporation, becomes the beneficial owner, directly or indirectly, of 20% or more of the combined voting power of the Corporation's outstanding voting securities ordinarily having the right to vote for the election of directors of the Corporation; (y) during any period of 24 consecutive months individuals who, at the beginning of such consecutive 24-month period, constitute the Board of Directors of the Corporation (the "Crompton & Knowles Board" generally and, as of the date of this Agreement, the "Incumbent Board") cease for any reason (other than Retirement upon reaching normal Retirement age, disability, or death) to constitute at least a majority of the Crompton & Knowles Board; provided that any person becoming a director of the Corporation subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three quarters of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (z) the Corporation shall cease to be a publicly owned corporation having its outstanding common stock listed on the New York Stock Exchange, the NASDAQ Stock Market or the American Stock Exchange. 3. Performance Objectives There shall be two Performance Objectives used to determine the amount of the Award, if any, earned by the Executive, as follows: (a) Return on Capital Objective This objective, which must be achieved in order for the Executive to earn an Award, shall be the achievement by the Corporation of an average annual return on capital for the Performance Period equal to or greater than the lesser of (i) twelve percent (12%) or (ii) the average annual return on capital achieved by a select group of specialty chemical companies as monitored by the Corporation. (b) Earnings Per Share ("EPS") Objective This objective shall be the achievement by the Corporation of cumulative earnings per share for the Performance Period of not less than $4.84 per common share. The following table shows by way of example the cumulative earnings per share which will be realized by the Corporation if the earnings per share increase annually during the Performance Period at rates of eight, ten and thirteen percent from the 1998 base of $1.38 per share and the Award associated with cumulative earnings per share at each of those levels: Threshold Award Target Award Maximum Award Cumulative $4.84 $5.02 $5.31 EPS Award Earned The actual Award, if any, earned by the Executive shall be based upon the actual cumulative earnings per share achieved by the Corporation during the Performance Period, and except in the event that cumulative earnings per share for the Performance Period are equal to the amounts shown in the above table, shall be determined by interpolation from the values shown in the table. 4. Termination of Employment During Performance Period (a) If the Executive's employment with the Corporation or a subsidiary of the Corporation terminates during the Performance Period because of death, disability or Retirement, the Executive Compensation Committee of the Crompton & Knowles Board (the "Committee") may, in its sole discretion, make a pro rata Award to the Executive. (b) If, following a Change in Control occurring after the date of this Agreement, the Executive's employment with the Corporation or a subsidiary of the Corporation is terminated during the Performance Period by the Executive for Good Reason or by the Corporation by which the Executive is employed other than for Cause, the Executive shall become immediately vested in, and shall be promptly paid a pro rata Award which Award shall be determined on the basis of the cumulative earnings per share achieved by the Corporation during the Performance Period through the date of such termination of the Executive's employment and a proration (based on the number of days in the Performance Period which have elapsed on the date of such termination of the Executive's employment) of the share and cumulative earnings per share quantities specified in section 3 hereof. The Executive shall be entitled to a prorated Award pursuant to this subsection (b) without regard to whether or not the Corporation has achieved the return on capital objective specified in section 3 hereof. (c) In the event that the Executive's employment with the Corporation terminates during the Performance Period for any reason other than as specified in subsections 4(a) and 4(b) hereof, the Executive shall not be entitled to receive any Award for the Performance Period. 5. After the date of any Award to the Executive hereunder, and prior to the transfer to the Executive of all of the shares of the Corporation comprising the Award, the Executive shall have the right to instruct the trustee of the Crompton & Knowles Corporation Long Term Incentive Plan Trust (the "Trustee") as to the voting of such number of shares of the Corporation comprising the Award as are held by the Trustee, together with any other shares held by the Trustee in any account which may be established by the Trustee on or after the date of the Award in the name of the Executive. 6. The Executive shall be paid, at the time any shares earned by him are transferred to him, such sum of money or, at the sole discretion of the Corporation, such additional shares or other property, as shall be equal to the Executive's pro rata share of the Trust earnings to the date of and attributable to such payment, but less such cash or shares, if any, as the Corporation shall in its sole discretion determine are required to be withheld to pay taxes due on the cash or shares then being transferred to the Executive. The Executive shall have the right to defer any portion of the earned Award. 7. Any Award made to the Executive hereunder shall vest in the Executive and the Executive shall be entitled to receive the Award only as follows: 25% on December 31, 2001 25% on December 31, 2002 25% on December 31, 2003 25% on Retirement of the Executive Notwithstanding any other provision of this Section 7, upon the termination of the Executive's employment with the Corporation on or after December 31, 2001, due to death, disability, Retirement or for any reason following a Change in Control occurring after December 31, 2001, any Award theretofore earned by the Executive hereunder shall immediately become fully vested in him. Termination of the Executive's employment with the Corporation on or after December 31, 2001, for any reason other than those specified in the preceding sentence shall cause the forfeiture of any portion of an Award not vested prior to the date of such termination of employment. 8. This Agreement does not alter the "at will" nature of the Executive's employment, which employment may be terminated at any time by the Executive or the Corporation by which the Executive is employed. 9. In the event that the shareholders of the Corporation do not approve the Crompton & Knowles Corporation 1998 Long Term Incentive Plan on or before April 27, 1999, this Agreement shall be null and void and of no further force or effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. CROMPTON & KNOWLES CORPORATION By: The Executive EX-10.34 17 2000-2002 Long Term Performance Award Agreement This Agreement, dated as of February 24, 2000, (the "Agreement") is made by and between CK Witco Corporation (the "Corporation") and Name (the "Executive") of Town. WHEREAS, the Corporation has adopted the 1998 Long Term Incentive Plan (the "Plan") for the purpose of attracting, motivating and retaining key employees by offering them long term performance-based incentives and an opportunity to acquire ownership of shares of the Corporation's common stock. NOW, THEREFORE, the Executive, a key employee of the Corporation, is granted the opportunity to earn shares of common stock of the Corporation in accordance with the terms and conditions of the Plan and this Agreement. 1. The Executive is granted the opportunity to earn a maximum of Maximum shares of the common stock of the Corporation (the actual number of shares earned by the Executive, if any, hereinafter being called the "Award") during the Performance Period. 2. Definitions For purposes of this Agreement, the following terms shall have the following meanings: (a) "Performance Period" shall mean the period January 1, 2000, to December 31, 2002. (b) "Retirement" shall mean cessation of the Executive's employment with the Corporation or a subsidiary of the Corporation occurring on or after the Executive's sixty-second (62nd) birthday. (c) "Cause" shall mean (i) the Executive's willful and continued failure to substantially perform assigned duties with the Corporation or its subsidiary corporations (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for Good Reason), after a demand for substantial performance is delivered to the Executive by the Board of Directors of the Corporation by which the Executive is employed (the "Board"), specifically identifying the manner in which the Board believes that the duties have not been substantially performed, or (ii) the Executive's willful conduct which is demonstrably and materially injurious to the Corporation or any subsidiary corporation by which the Executive is employed. For purposes of this subsection 2(c), no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Corporation and the subsidiary corporation, if any, by which the Executive is employed. (d) "Good Reason" shall mean (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles, and reporting requirements), authority, duties or responsibilities as contemplated by any employment agreement between the Executive and the Corporation or a subsidiary of the Corporation, or any other action by the Corporation or the subsidiary corporation, if any, by which the Executive is employed which results in a diminishment in such position, authority, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation or such subsidiary corporation promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Corporation or the subsidiary corporation, if any, by which the Executive is employed to comply with any of the provisions of any employment agreement between the Executive and the Corporation or such subsidiary corporation, other than an insubstantial and inadvertent failure which is remedied by the Corporation or such subsidiary corporation promptly after receipt of notice thereof given by the Executive; (iii) any change not concurred in by the Executive in the location of the office at which the Executive is principally based on the date hereof, except for travel reasonably required in the performance of the Executive's responsibilities and substantially consistent with prior business travel obligations of the Executive; or (iv) any purported termination by the Corporation or the subsidiary corporation, if any, by which the Executive is employed of the Executive's employment otherwise than as permitted by any employment agreement between the Executive and the Corporation or such subsidiary corporation. (e) "Change in Control" shall have the meaning set forth in Section 10 of the Crompton & Knowles Corporation 1998 Long Term Incentive Plan (the "Plan"). (f) "Fair Market Value" shall have the meaning set forth in Section 2 (j) of the Plan 3. Performance Objectives There shall be two Performance Objectives used to determine the amount of the Award, if any, earned by the Executive, as follows: (a) Return on Equity Objective This objective, which must be achieved in order for the Executive to earn an Award, shall be the achievement by the Corporation of a return on equity for the fiscal year ending December 31, 2002, of not less than seventeen and a half percent (17.5%). (b) Earnings Per Share ("EPS") Objective This objective shall be the achievement by the Corporation of cumulative earnings per share for the Performance Period of not less than $4.32 per common share. The following table shows the Award associated with cumulative earnings per share for the Performance Period at three different levels: Threshold Award Target Award Maximum Award Cumulative $4.32 $4.49 $4.65 EPS Award Earned Threshold Target Maximum The actual Award, if any, earned by the Executive shall be based upon the actual cumulative earnings per share achieved by the Corporation during the Performance Period, and except in the event that cumulative earnings per share for the Performance Period are equal to the amounts shown in the above table, shall be determined by interpolation from the values shown in the table. 4. Termination of Employment During Performance Period (a) If the Executive's employment with the Corporation or a subsidiary of the Corporation terminates during the Performance Period because of death, disability or Retirement, the Executive Compensation Committee of the CK Witco Board (the "Committee") may, in its sole discretion, make a pro rata Award to the Executive. (b) If, following a Change in Control occurring after the date of this Agreement, the Executive's employment with the Corporation or a subsidiary of the Corporation is terminated during the Performance Period by the Executive for Good Reason or by the Corporation by which the Executive is employed other than for Cause, the Executive shall become immediately vested in, and shall be promptly paid a pro rata Award which Award shall be determined on the basis of the cumulative earnings per share achieved by the Corporation during the Performance Period through the date of such termination of the Executive's employment and a proration (based on the number of days in the Performance Period which have elapsed on the date of such termination of the Executive's employment) of the cumulative earnings per share objectives specified in section 3 hereof. In no case shall the Award be less than the Target Award. The Executive shall be entitled to an Award pursuant to this subsection (b) without regard to whether or not the Corporation has achieved the return on equity objective specified in section 3 hereof. (c) In the event that the Executive's employment with the Corporation terminates during the Performance Period for any reason other than as specified in subsections 4(a) and 4(b) hereof, the Executive shall not be entitled to receive any Award for the Performance Period. 5. Voting of Shares After the date of any Award to the Executive hereunder, and prior to the transfer to the Executive of all of the shares of the Corporation comprising the Award, the Executive shall have the right to instruct the trustee of the CK Witco Corporation Long Term Incentive Plan Trust (the "Trustee") as to the voting of such number of shares of the Corporation comprising the Award as are held by the Trustee, together with any other shares held by the Trustee in any account which may be established by the Trustee on or after the date of the Award in the name of the Executive. 6. Vesting and Payment of Award Any Award made to the Executive hereunder shall vest in the Executive and the Executive shall be entitled to receive the Award only as follows: 33.3% on January 1, 2003 33.3% on January 1, 2004 33.3% on January 1, 2005 Notwithstanding any other provision of this Section 6, upon the termination of the Executive's employment with the Corporation on or after December 31, 2002, due to death, disability, Retirement or for any reason following a Change in Control occurring after December 31, 2002, any Award theretofore earned by the Executive hereunder shall immediately become fully vested in him, and be payable in shares, or the cash equivalent of the Fair Market Value of the shares constituting the Award on the date so vested. Termination of the Executive's employment with the Corporation on or after December 31, 2002, for any reason other than those specified in the preceding sentence shall cause the forfeiture of any portion of an Award not vested prior to the date of such termination of employment. 7. Certain Further Payments by the Company. In the event that any amount paid or distributed to the Executive pursuant to this Agreement (taken together with any amounts otherwise paid or distributed to the Executive in connection with a change of control referred to in Section 280G(b)(i)) is subject to an excise tax under Section 4999 of the Code or any successor or similar provision thereto (the "Excise Tax"), the Corporation shall pay to the Executive an additional amount such that, after taking into account all taxes (including federal, state, local and foreign income, excise and other taxes) incurred by the Executive on the receipt of such additional amount, the Executive is left with the same after-tax amount the Executive would have been left with had no Excise Tax been imposed. 8. At Will Employment This Agreement does not alter the "at will" nature of the Executive's employment, which employment may be terminated at any time by the Executive or the Corporation by which the Executive is employed. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. CK WITCO CORPORATION By: Its: Name EX-10.35 18 SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT dated as of , ("Agreement"), by and between of , ("Employee") and CK Witco Corporation, a Delaware corporation ("Corporation"). WITNESSETH: WHEREAS, the Corporation and the Employee are parties to a Supplemental Retirement Agreement dated as of , ; and WHEREAS, the Corporation and the Employee wish to amend and restate in its entirety the aforementioned Supplemental Retirement Agreement; NOW, THEREFORE, the Employee and the Corporation hereby agree that the Supplemental Retirement Agreement between the Employee and the Corporation dated as of , shall be amended and restated in its entirety to read as follows: 1. The Corporation has entered into this Agreement to induce the Employee to continue in its employ, recognizing that in the case of a limited number of key executive employees, including the Employee, the ordinary retirement benefits provided under the Corporation's retirement system do not afford sufficient incentive in terms of economic security, when compared with retirement arrangements available from other prospective employers who have been, are, or may be competing for their services. Nothing herein shall be deemed a contract of employment for any minimum fixed term, or shall restrict the freedom of the Corporation or the Employee to terminate the employment relationship between them at any time. 2. All references herein to the Corporation shall be deemed to include any subsidiary corporation as to which the Corporation owns, directly or indirectly, one hundred percent of the voting stock. 3. For the purposes of this Agreement, the following terms shall have the following meanings: (a) "Actuarial Equivalent" shall mean an amount or benefit of equivalent value computed using the UP 1994 Mortality Table and an interest rate equal to the average of the 10-year Moody's Aaa Municipal Bond Yield Average for the fourth, fifth and sixth full weeks immediately preceding the date on which payments are to commence. (b) "Cause" shall mean (i) the Employee's willful and continued failure to substantially perform assigned duties with the Corporation (other than any such failure resulting from incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination for Good Reason (as defined in subsection 3(f) hereof), after a demand for substantial performance is delivered to the Employee by the Board of Directors of the Corporation, specifically identifying the manner in which the Board believes that the duties have not been substantially performed, or (ii) the Employee's willful conduct which is demonstrably and materially injurious to the Corporation. For purposes of this subsection (b), no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that such action or omission was in the best interest of the Corporation. (c) "Change in Control" shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date of this Agreement, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, such a "Change in Control" shall be deemed to have occurred if: (i) a third person, including a "group" as such term is used in Section 13(d)(3) of the Exchange Act, other than the trustee of any employee benefit plan of the Corporation, becomes the beneficial owner, directly or indirectly, of 20% or more of the combined voting power of the Corporation's outstanding voting securities ordinarily having the right to vote for the election of directors of the Corporation; (ii) during any period of 24 consecutive months individuals who, at the beginning of such consecutive 24-month period, constitute the Board of Directors of the Corporation (the "Board" generally and, as of the date of this Agreement, the "Incumbent Board") cease for any reason (other than retirement upon reaching normal retirement age, disability, or death) to constitute at least a majority of the Board; provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three quarters of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) the Corporation shall cease to be a publicly owned corporation having its outstanding Common Stock listed on the New York Stock Exchange, the NASDAQ Stock Market or the American Stock Exchange. (d) "Company Plan Benefit" shall mean the amount of benefit payable to or for the account of the Employee from the Corporation's Individual Account Retirement Plan or any other retirement plan sponsored by the Corporation which may hereafter be adopted in lieu of or in addition to said Individual Account Retirement Plan. (e) "Compensation" shall mean all of the Employee's cash compensation for a calendar year, including salary, any amount contributed by the Employee to a cash or deferred plan under Section 401(k) of the Internal Revenue Code of 1986, as amended from time to time, and any incentive compensation award or bonus with respect to such year (even if paid in a subsequent year), but excluding any incentive compensation award or bonus paid during such year with respect to a prior year and extraordinary earnings such as insurance costs or gains on exercise of stock options. (f) "Good Reason" shall mean (i) the assignment to the Employee of any duties inconsistent in any respect with the Employee's position (including status, offices, titles, and reporting requirements), authority, duties, or responsibilities as contemplated by any Employment Agreement between the Employee and the Corporation, or any other action by the Corporation which results in a diminishment in such position, authority, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation promptly after receipt of notice thereof given by the Employee; (ii) any failure by the Corporation to comply with any of the provisions of any Employment Agreement between the Employee and the Corporation, other than an insubstantial and inadvertent failure which is remedied by the Corporation promptly after receipt of notice thereof given by the Employee; (iii) any change not concurred in by the Employee in the location of the office at which the Employee is principally based, except for travel reasonably required in the performance of the Employee's responsibilities and substantially consistent with prior business travel obligations of the Employee; or (iv) any purported termination by the Corporation of the Employee's employment otherwise than as permitted by any Employment Agreement between the Employee and the Corporation. (g) "Normal Retirement Date" shall mean the first day of the first full month commencing on or after the Employee's sixty-second (62nd) birthday. (h) "Projected Compensation" shall mean (i) for any calendar year throughout which the Employee is employed by the Corporation, his Compensation (as defined in subsection 3(e) hereof) for such year, and (ii) for any calendar year during or after which his employment has been terminated, the compensation the Employee would have received for such year if he had received (A) salary at a rate determined by projecting his annual rate of salary at the end of the last full calendar year of his employment forward at an annual rate of increase equal to 5% in excess of the annual percentage change in the Consumer Price Index as published by the U.S. Bureau of Labor Statistics for the last full year of his employment and (B) a bonus each year equal to fifty percent (50%) of his salary as thus projected. 4. If, prior to his Normal Retirement Date, the Employee shall voluntarily terminate his employment with the Corporation without Good Reason or his employment shall be terminated by the Corporation for Cause, he shall thereby forfeit all rights and benefits under this Agreement. If the employment of the Employee shall be terminated on or after his Normal Retirement Date, the Employee shall voluntarily terminate his employment for Good Reason or the employment of the Employee shall be terminated by the Corporation without Cause, this Agreement shall continue in full force and effect, and the Employee shall become entitled to the rights and benefits hereinafter set forth upon the occurrence of the events respectively giving rise thereto. 5. If the Employee shall remain in the employ of the Corporation until and shall reach his Normal Retirement Date, he shall be entitled to receive a supplemental retirement benefit under this Agreement which shall be at an annual rate equal to fifty percent (50%) of the Employee's average annual Compensation during those five (5) calendar years in which such Compensation was highest during the ten (10) calendar years immediately preceding his actual retirement date. Such supplemental retirement benefit shall commence on the Employee's actual retirement date and shall be payable in one of the benefit payment forms described in subsection 9(a), as the Employee shall elect. 6. If the Employee's employment by the Corporation shall be terminated (other than by reason of his death or disability or following a Change in Control as described in section 7 of this Agreement) prior to his Normal Retirement Date under circumstances not resulting in his forfeiture of benefits and rights under section 4 of this Agreement, he shall be entitled to receive a reduced supplemental retirement benefit under this Agreement which shall be at an annual rate computed as follows: (a) There shall first be determined the amount which is equal to fifty percent (50%) of the Employee's average annual Compensation during those five (5) calendar years in which such Compensation was highest during the ten (10) calendar years immediately preceding the year in which the termination of his employment occurs. (b) The amount thus determined shall be multiplied by a fraction in which the numerator shall be the number of full years of continuous service the Employee shall have completed with the Corporation prior to the termination of his employment and the denominator shall be the number of full years of continuous service he would have completed had he remained in the continuous service of the Corporation until his Normal Retirement Date. Such reduced supplemental retirement benefit shall commence on the first day of the month following the Employee's termination of employment and shall be payable in one of the benefit payment forms described in subsection 9(a), as the Employee shall elect. 7. Anything in sections 4 or 6 of this Agreement to the contrary notwithstanding, if, prior to his Normal Retirement Date but after a Change in Control of the Corporation shall have occurred, the Corporation shall terminate the Employee's employment other than for Cause, disability, or death or the employment of the Employee shall be terminated voluntarily by the Employee for Good Reason, he shall be entitled to receive one of the following supplemental retirement benefits: (a) If the Employee has not attained the age of 55 on the date his termination of employment occurs, a supplemental retirement benefit which shall be at an annual rate equal to the amount by which fifty percent (50%) of the Employee's average annual Projected Compensation during those five (5) calendar years in which such Projected Compensation is highest during the ten (10) calendar years immediately preceding the year in which he would have attained age 55. Such supplemental retirement benefit shall commence on the first day of the month following the month in which the Employee attains age 62 and shall be payable in one of the benefit payment forms described in subsection 9(a), as the Employee shall elect. (b) If the employee has attained age 55 on the date his termination of employment occurs, a supplemental retirement benefit which shall be at an annual rate equal to fifty percent (50%) of the Employee's average annual Compensation during those five (5) calendar years in which such Compensation was highest during the ten (10) calendar years immediately preceding the year in which the termination of his employment occurs. Such supplemental retirement benefit shall commence on the first day of the month following the month in which the Employee attains age 62 and shall be payable in one of the benefit payment forms described in subsection 9(a), as the Employee shall elect. (c) At the election of the Employee, a lump sum payment in an amount which shall be the single sum Actuarial Equivalent value as of the date of termination of the Employee's employment by the Corporation of the benefit to which the Employee would have been entitled under subsections 7(a) or 7(b) of this Agreement. Such supplemental retirement benefit shall be paid to the Employee not later than fifteen (15) days following the date of termination of the Employee's employment by the Corporation. 8. If in the opinion of the Corporation the Employee becomes totally and permanently disabled at any time while in the employment of the Corporation, he shall become entitled to a disability benefit which shall be at an annual rate equal to the amount by which (a) seventy-five percent (75%) of the Employee's average annual Compensation during those five (5) calendar years in which such Compensation was highest during the ten (10) calendar years preceding the year in which his disability occurs exceeds (b) the annual benefit which the Employee would be entitled to receive under the Corporation's long term disability insurance program if he was then eligible for benefits thereunder (regardless of whether he participates in said program); provided, however, that if the Employee is not entitled to receive any benefit under said program, the disability benefit to which he is entitled hereunder shall be in an amount equal to forty percent (40%) of the Employee's average annual Compensation determined as provided in subsection 8(a) above, and provided further that the disability benefit to which the Employee is entitled hereunder shall in no event be less than five percent (5%) of his average annual Compensation determined as provided in subsection 8(a) above. Such disability benefit shall be payable in equal monthly installments, the first payment to be made on the first day of the month following that in which the Employee's salary is terminated because of such disability, and payments shall be made on the first day of each month thereafter so long as such total disability subsists and the Employee lives; provided, however, if the Employee lives until his Normal Retirement Date, he may thereupon elect to receive, in lieu of the disability benefit he had been receiving under this section 8, the supplemental retirement benefit to which he would then be entitled under section 6 if his employment by the Corporation had terminated other than by reason of disability on the date his disability occurred. 9. (a) The normal form in which the benefit payable under sections 5, 6, 7(a) or 7(b) of this Agreement shall be paid shall be a monthly benefit payable for life and without refund. In lieu of such normal benefit payment form, the Employee may elect to receive his benefit hereunder in the form of a monthly benefit payable for life with a period certain of up to 180 months, in the form of a monthly benefit payable for a period certain, or in the form of a monthly benefit payable for life with continuation of such payments (or a specified percentage thereof) to such beneficiary as the Employee may designate for the life of such beneficiary ("Joint and Survivor Annuity"). The amount of benefit payable under each such alternative benefit payment form shall be the Actuarial Equivalent of the benefit payable in the normal form to which the Employee would otherwise be entitled hereunder. Any election of an alternative benefit payment form shall be made in writing and may be changed or rescinded by the Employee at any time prior to the date on which benefit payments are to commence. The Employee shall have the right to designate in writing the beneficiary or beneficiaries to receive the benefit, if any, which is payable under any benefit payment form after the Employee's death and may change his designation of beneficiary from time to time, at any time prior to the date on which benefit payments are to commence. If there shall be no beneficiary designated and surviving at the Employee's death, the estate of the Employee shall be the beneficiary. Whenever any benefits hereunder become payable to the beneficiary of the Employee, the Corporation may, in its discretion, authorize payment of such benefits to the beneficiary in a single lump sum which is the Actuarial Equivalent of such benefits. (b) Anything in this subsection 9(a) to the contrary notwithstanding, at any time after the date on which benefit payments commence, the Employee may elect to receive his benefits hereunder in a single lump sum in an amount which is equal to 90% of the Actuarial Equivalent of the benefit payable in the normal form to which the Employee is otherwise entitled hereunder on the date as of which such election is made. 10. (a) If the Employee shall die while currently receiving a benefit under the provisions of sections 5, 6, 7(a) or 7(b) of this Agreement and the Employee shall have elected a benefit payment form other than a monthly benefit payable for life with no period certain, any benefits payable after his death shall be paid to his beneficiary in accordance with the provisions of the benefit payment form elected by the Employee. If the Employee shall die after having reached his Normal Retirement Date but prior to his actual retirement date and the Employee shall have elected a benefit payment form other than a monthly benefit payable for life with no period certain, benefits shall be paid to his beneficiary as if the Employee had commenced to receive benefits hereunder on the first day of the month in which his death occurred. If the Employee shall die while in the active employ of the Corporation but prior to his Normal Retirement Date, or if the Employee shall die after having become entitled to receive a disability benefit under section 8 but prior to his Normal Retirement Date, a death benefit shall be paid to the Employee's beneficiary, in lieu of any other benefit under this Agreement, which shall be at an annual rate equal to fifty percent (50%) of the Employee's average annual Compensation during those five (5) calendar years in which such Compensation was highest during the ten (10) calendar years immediately preceding the year in which his death occurs or the year in which his disability occurred, as the case may be. Such death benefit, which shall be in addition to any Company Plan Benefit or benefits under any group life insurance plan sponsored by the Corporation which is payable on account of the Employee's death, shall be payable in equal monthly installments beginning on the first day of the month following that in which the death of the Employee occurs and continuing thereafter for a period certain of 120 months; provided that the Beneficiary entitled thereto may elect to have such benefit paid in any of the forms described in section 9, except a Joint and Survivor Annuity, in an amount which is the Actuarial Equivalent of the form of benefit otherwise payable under this section 10. (b) If the Employee shall die after having become entitled to a benefit under subsections 7(a) or 7(b) hereof but prior to attaining age 62, a death benefit shall be paid to the Employee's beneficiary, in lieu of any other benefit under this Agreement, which shall be the single sum Actuarial Equivalent value as of the Employee's death of the benefit to which he would have been entitled had he survived to age 62. Such death benefit shall be payable in a lump sum as soon as practicable after the Employee's death; provided that the beneficiary entitled thereto may elect to have such death benefit paid in any of the forms described in section 9 except a Joint and Survivor Annuity. 11. Anything in this Agreement to the contrary notwithstanding, if at any time following termination of his employment with the Corporation the Employee shall directly or indirectly compete with the Corporation (which shall be deemed to include any subsidiary or affiliate of the Corporation), whether as an individual proprietor or entrepreneur or as an officer, employee, partner, stockholder, or in any capacity connected with any enterprise, in any business in which the Corporation is engaged at the time of the termination of the Employee's employment within any state or possession of the United States of America or any foreign country within which business is then specifically planned by the Corporation to be conducted, the Corporation may suspend the payment of any benefits hereunder to the Employee until such competition shall have ceased, and in the event such competition by the Employee shall not have ceased to the satisfaction of the Corporation within 90 days after the Corporation shall have given written notice to the Employee to cease the conduct thereof, the Corporation may at any time thereafter terminate its obligations under this Agreement. For the purpose of the preceding sentence, conducting business, doing business, or engaging in business shall be deemed to embrace sales to customers or performance of services for customers who are within a relevant geographical area, without any necessity of any presence of the Corporation therein. Nothing herein, however, shall prohibit the Employee from acquiring or holding any issue of stock or securities of any company which has any securities listed on a national exchange or quoted in the daily listing of over-the-counter market securities, provided that at any one time he and members of his immediate family do not own more than five percent (5%) of the voting securities of any such company. 12. This Agreement is an unfunded plan maintained for the purpose of providing deferred compensation for one of a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974. The Corporation will make all benefit payments hereunder solely on a current disbursement basis out of the general assets of the Corporation, including without limitation from assets held in any grantor trust established by the Corporation for the purpose of making some or all of such payments. 13. This Agreement shall bind and run to the benefit of the successors and assigns of the Corporation, including any corporation or other form of business organization with which it may merge or consolidate or to which it may transfer substantially all of its assets. 14. The rights of the Employee under this Agreement shall not be assigned, hypothecated, or otherwise transferred in any manner. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. IN WITNESS WHEREOF, the Employee has hereunto signed his name and CK Witco Corporation has caused this instrument to be executed in its name and on its behalf by its duly authorized officer, as of the day of , . Employee CK WITCO CORPORATION By: Its: EX-13 19 CK WITCO CORPORATION 1999 ANNUAL REPORT GLOBAL SOLUTIONS ABOUT THE COMPANY CK Witco is a global producer and marketer of polymer products and specialty chemicals and was formed with the 1999 merger of Crompton & Knowles Corporation and Witco Corporation. The company has about 8,600 employees in research, manufacturing, sales, and administrative facilities in every major market around the world. Available in 120 countries, our products and services solve customer problems and add value to customers' products. Our 114 million shares of common stock are traded on the New York Stock Exchange under the symbol CNW. Up-to-date information about the company is available at www.ckwitco.com. The company has more than 50 manufacturing facilities in 20 countries and receives 43% of its revenues from customers outside of the United States. MANUFACTURING LOCATIONS NORTH AMERICA LATIN/SOUTH AMERICA ASIA/PACIFIC Alabama Brazil Australia Connecticut Mexico China Illinois Indonesia Louisiana EUROPE Malaysia New Jersey Singapore North Carolina Belgium South Korea Pennsylvania Denmark Taiwan Tennessee France Thailand Texas Germany West Virginia Italy Bahamas Netherlands Canada United Kingdom CONTENTS Financial highlights............................................. 1 Chairman's letter................................................ 2 Review of business............................................... 6 Management's discussion & analysis............................... 26 Consolidated financial statements................................ 34 Notes to consolidated financial statements....................... 38 Responsibility for financial statements.......................... 53 Independent auditors' report..................................... 53 Five-year selected financial data................................ 54 Responsible Care(R) statement.................................... 55 Corporate management............................................. 56 Board of Directors and corporate data (INSIDE BACK COVER) 1999 ADJUSTED SALES* [PIE CHART] Polymer Additives 34% Polymers 10% Polymer Processing Equipment 10% OrganoSilicones 15% Crop Protection 13% Other 18% 1999 ADJUSTED OPERATING PROFIT* [PIE CHART] Polymer Additives 28% Polymers 22% Polymer Processing Equipment 5% OrganoSilicones 15% Crop Protection 22% Other 8% The company has six primary business segments divided into two groups: POLYMER PRODUCTS $1.7 Billion In Sales* POLYMER ADDITIVES The largest worldwide producer of heat stabilizers for polyvinyl chloride. A leading worldwide producer of additives for plastics and rubber. KEY PRODUCTS Plastics additives include alkyls, amides, stearates, white oils, heat stabilizers, plasticizers, lubricants, olefin additives, tin specialties, antioxidants, antistats, polymer modifiers, foaming agents, polymerization inhibitors, chemical intermediates, curatives, and dispersants. Rubber chemicals include antioxidants, antiozonants, accelerators, and miscellaneous specialty products. Urethane chemicals include polyester polyols, polyurethane dispersions, microcellular systems, silicones, amine catalysts, and specialty modifiers. MARKETS SERVED Products are sold to producers, compounders, extruders, and molders of vinyl, rubber, styrenics, polyolefins, and fiberglass. Rubber and plastic applications in construction, - ------------------- * Pro forma as adjusted for divested businesses. automotive, transportation, packaging, flooring, and synthetic fibers. Coatings and adhesives for industrial and marine uses. POLYMERS The number one world supplier of castable urethane prepolymers. The number one manufacturer of EPDM in North America. World's largest dedicated nitrile rubber production facility. KEY PRODUCTS Abrasion and wear-resistant castable urethane prepolymers. Heat-, sunlight-, and ozone-resistant EPDM rubber. Oil-resistant nitrile rubber polymers. MARKETS SERVED Urethane end products include industrial and printing rolls, mining machinery and equipment, mechanical goods, solid industrial tires & wheels, and sporting/recreational goods. EPDM is used in automotive applications as well as in roofing, hose, and wire & cable insulation. Nitrile rubber is used in automotive hoses, seals, O-rings, and other consumer and industrial applications. POLYMER PROCESSING EQUIPMENT The number one worldwide producer of plastics and rubber extruders and extrusion systems. KEY PRODUCTS Integrated single-screw, twin-screw and compounding extruders, and extrusion systems with advanced electronic controls. MARKETS SERVED Packaging, automotive, construction, appliance, medical, power & communications cables, plastics. 1999 ADJUSTED REGIONAL SALES* PIE CHART] United States 57% Canada 4% Asia/Pacific 7% Europe/Africa 28% Latin America 4% 1999 END MARKET SALES [PIE CHART] Auto & Transport 25% Construction/Home Furnishings 24% Agriculture 12% Non-Tire Rubber 9% Packaging/Paper 7% Apparel 7% Other 16% ------------------------- SPECIALTY PRODUCTS $1.4 Billion in sales* ORGANOSILICONES World's leading supplier of specialty silicones and organofunctional silanes serving a wide variety of industrial and consumer markets. KEY PRODUCTS Silane coupling agents and adhesion promoters. Silicone surfactants, foam control agents, and other specialty silicones. Urethane foam additives, including surfactants and catalysts. MARKETS SERVED Rubber, coatings, fiberglass, adhesives & sealants used for automotive, transportation and tires, construction, and other industrial applications. Urethane foam for automotive, appliances and construction. Textiles and non-wovens, agriculture, personal care. CROP PROTECTION A world leader in seed treatment products, with the largest seed treatment company in North America, our Gustafson joint venture with Bayer Corporation. KEY PRODUCTS Fungicides, miticides, insecticides, herbicides, growth regulants, seed treatments, and surfactants. MARKETS SERVED Focus on high-value crops such as fruits, nuts, cotton, turf and ornamentals. Seed treatments cross all major crop segments and geographies. OTHER SPECIALTIES World's leading supplier of amine antioxidants serving the lubricants industry. A leading global supplier of sodium sulfonates for the metalworking industry. Leading producer of industrial dyes. KEY PRODUCTS Petroleum and lubricant additives. USP white mineral oils, petrolatums, microcrystalline waxes, cable-filling compounds. Industrial dyes. Fatty acids and glycerines. MARKETS SERVED Petroleum and lubricant additive components for automotive, marine and metalworking. Paper, coatings and inks. Personal care, household, and institutional. FINANCIAL HIGHLIGHTS (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) (a) 1999 1998 ----------------------- Net sales $2,092,358 $1,796,119 Operating profit $ 1,383 $ 218,298 Interest expense $ 69,833 $ 78,520 Net earnings (loss) $ (175,038) $ 161,755 Basic earnings (loss) per share $ (2.10) $ 2.20 Diluted earnings (loss) per share $ (2.10) $ 2.14 Total assets $3,726,618 $1,408,893 Long-term debt $1,309,812 $ 646,857 Operating profit, EBITDA and net earnings before special items (refer to page 54) are as follows: EBITDA before special items (b) $ 342,549 $ 340,394 Operating profit before special items $ 225,901 $ 259,858 Net earnings before special items $ 94,988 $ 117,270 - -------------------------------------------------------------------------------- Sales $ IN BILLIONS [BAR GRAPH] 1995 - $1,744.8 1996 - $1,804.0 1997 - $1,851.2 1998 - $1,796.1 1999 - $2,092.4 RETURN ON AVERAGE TOTAL CAPITAL BEFORE SPECIAL ITEMS [BAR GRAPH] 1995 - 14.2% 1996 - 12.8% 1997 - 16.5% 1998 - 18.6% 1999 - 11.4% EBITDA (b) BEFORE SPECIAL ITEMS $ IN MILLIONS [BAR GRAPH] 1995 - $305.5 1996 - $301.2 1997 - $332.1 1998 - $340.4 1999 - $342.5 LONG-TERM DEBT $ IN BILLIONS [BAR GRAPH] 1995 - $ 974.2 1996 - $1,055.0 1997 - $ 896.3 1998 - $ 646.9 1999 - $1,309.8 (a) The 1999 amounts include the results of operations of Crompton & Knowles Corporation for the twelve months ended December 1999 and the results of operations of Witco Corporation for the months of September through December 1999. The 1995 to 1998 amounts represent the results of Crompton & Knowles Corporation. (b) EBITDA represents operating profit plus depreciation and amortization and excludes special items. -2- FELLOW SHAREHOLDERS: We are pleased to report that 1999 marked the attainment of another milestone in management's strategic plan to build a world-scale specialty chemical company. We accomplished this by merging Crompton & Knowles with Witco, creating CK Witco Corporation, a $3.1 billion company with core strengths in polymer products and technology, crop protection and specialty organosilicones. The combination gives our new company leadership positions in a majority of our product lines, supported by global research and development and production capacity able to meet customer needs with increased quality, speed and reliability. As a result we have enhanced our platforms for growth, increased our flexibility to optimize our business portfolio, and set the stage for accelerated growth in revenues and earnings. Our strengths are significant, and we're excited by the opportunities. Nevertheless, we remain focused on a single overarching principle that guides all of our thinking as well as our actions: TO INCREASE SHAREHOLDER VALUE. Global scale, improved customer service and growth, in our view, are only vehicles for delivering improved returns to shareholders. Our confidence in our ability to achieve this is borne out by our accomplishments in the seven months since the completion of the merger on September 1, 1999. OUTSTANDING BUSINESS OPPORTUNITIES We continue to integrate the businesses making up the two operating groups of our company -- Polymer Products and Specialty Products -- and the synergies are powerful. Our broad-based and diversified business portfolio positions us to grow our share of existing markets and open new markets through product innovation, advanced technology and production economies in the 120 countries where we do business. In Polymer Products, with annual adjusted sales of $1.7 billion, our worldwide product mix is unparalleled by any of our competitors regardless of their size. The combined businesses, consisting of polymer additives, polymers and polymer processing equipment, have leading technology in elastomer and rubber and leadership positions in polymer and urethane chemistry. Our substantial market position and broad range of product offerings are enabling us to simplify our supply chain for our customers, pulling through more sales in growth markets. The synergistic benefits are obvious to our customers as we deliver solutions unavailable before our combination. An illustration of this is our ability to test and market new plastics additives using the extrusion processing expertise of our Davis-Standard laboratories, the world's confirmed leader in plastics extrusion systems. Specialized knowledge, internal access and cooperative development of this nature gives us and our customers a quantifiable edge in the marketplace. Our Specialty Products group, with annual adjusted sales of $1.4 billion, consists of OrganoSilicones, Crop Protection and Petroleum Additives, businesses which offer an array of value-added products that solve customers' problems and create profitable opportunities for them -3- to improve their products and processes. The complementary nature of our product lines and overlapping customer bases have already enabled us to increase sales of our products. That customer overlap is very evident in our OrganoSilicones and Rubber Chemicals businesses, both of which are leading suppliers of essential products to the worldwide tire industry. Our antiozonants and antioxidants continue to improve the life and performance of rubber tires as our silanes replace carbon black, producing more fuel efficient and longer-lasting tires. To satisfy accelerated growth in this market for silanes, we are investing $70 million in expanded proprietary production capacity. [PHOTOGRAPH OF VINCENT A. CALARCO, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER] The bottom line is that our core operating businesses have new opportunities for enhanced profitability, growth and new product development as a result of our merger. These developments have been very well received by our customers as evidenced by increased sales with key accounts. Our combined businesses also benefit from increased geographic reach. The United States continues to be our single largest market, but international operations now account for approximately 43 percent of our revenues. In Europe, with about $850 million in sales, we have a manufacturing infrastructure in place with well established customer access. Asia, with sales of more than $200 million, has the capacity to meet the growing opportunities in China and India. Similarly, in Canada and Latin America, our $250 million in sales gives us a good footprint for expansion and growth. With this strong base we fully expect to drive international sales to more than 50 percent of our company's revenues within the next five years even as we continue to grow our domestic business. PRODUCTIVITY GAINS AND COST SAVINGS We began this merger with specific actions to improve our new company's productivity and to reduce costs. We are well on our way to fulfilling our commitment to take out $60 million in costs in 2000. We have reduced our workforce by 600 employees, and reduced the cost of logistics, insurance, consultants, and other outside services. We are also benefiting from the efficiencies of a global purchasing organization, which buys in excess of $1.2 billion in raw materials and utilities annually. Facilities consolidations will also improve our productivity in the new year. Plant closures in Brooklyn, New York and Gretna, Louisiana and sales office combinations in Asia, Europe and Latin America have already been accomplished with other opportunities for consolidation currently being analyzed. FINANCIAL STRATEGIES Concurrent with the cost reductions throughout our company, we have taken other steps to improve our performance and to strengthen our financial position. -4- We improved our portfolio by divesting two underperforming business units: textile colors and oleochemicals. Witco sold the oleochemicals operation in August, before the merger, and used the $249 million in cash to pay down debt. The textile colors operation was sold in December for $86.5 million and generated $78 million in cash that was used to buy back our company's common stock under a Board authorization to repurchase 10 percent of the 119 million shares then outstanding. We have identified additional businesses, with annual sales of approximately $400 million, for potential divestment. We will continue to review our portfolio of businesses to concentrate our investments in growth areas, and to dispose of non-core operations. At the end of 1999, we also repurchased our 10.5% and 9% notes in order to secure more favorable financing terms and eliminate some restrictive financial covenants. In the first quarter of 2000, we completed a $600 million bond offering at a coupon rate of 8.5%. Our company's total year-end debt was $1.4 billion, and a key corporate objective is to reduce it by approximately $125 million annually. We believe this objective is reasonable in light of the $150 to $200 million in free cash flow we will generate annually. Following the merger, our Board set a five cents per share regular quarterly dividend in line with our peer group in the specialty chemicals industry. LONG-TERM PERFORMANCE GOALS We are focused on accelerating the growth of our individual businesses and improving their long-term strategic positions in order to improve our return on invested capital. This is how shareholder value is created. We are continually evaluating our businesses in the context of both financial performance and market-driven parameters to determine which businesses will be components of our corporation in the future. The criteria we use to assess the potential to achieve and sustain performance over the long term is simple and straightforward. The first financial measure is operating profit margin of more than 15 percent, on a sustainable, long-term basis. This has to be accompanied by operating profit growth of more than 10 percent per year and a return on capital employed of more than 18 percent at the operating level. Our non-financial, market-driven criteria for each business is related specifically to sustainability of leadership positions, and each business should have a mix of these characteristics. First, each should have a leading market position, being number one or two in its identifiable market. Second, the business should have a proprietary or unique product or process technology that provides a competitive advantage, and, third, each should be a low-cost producer. Additionally, the business should have a new product pipeline that would sustain or put it in a position to meet the other criteria. Most of our combined businesses have these market-driven attributes and should be able to achieve our financial goals as we make progress in implementing our programs. More details about these opportunities are outlined in the business and markets review section of this report. -5- We are pleased to report that in early 2000, as part of our strategy to enhance our growth opportunities via e-commerce, we made an equity investment in ChemConnect Inc., the largest global internet exchange for chemicals and plastics. We expect that our internet strategy will improve customer service, grow sales and gain efficiencies throughout our company. BOARD CHANGES Since the completion of the merger there have been several changes in our Board of Directors. In November, E. Gary Cook, chairman of CK Witco, and former chairman, president and chief executive officer of Witco Corporation, retired from the company and the Board. At year-end, Don L. Blankenship, chairman, president and chief executive officer of A.T. Massey Coal Company, Inc, retired from the Board. In January, Richard M. Hayden, limited partner of Goldman Sachs, retired from the Board. Not standing for election at the April 2000 annual meeting of shareholders will be James A. Bitonti, chairman and chief executive officer of BITCO International, Inc., and Nicholas Pappas, president, chief executive officer and vice chairman of BioTraces, Inc., who have reached our mandatory retirement age, and Simeon Brinberg, senior vice president of BRT Realty Trust, who has chosen to retire. We thank them for their service to CK Witco and our predecessor companies. In summary, the merger of Crompton & Knowles and Witco was an astute move for both companies. We have created a new and powerful global force in the specialty chemical industry with significant business efficiencies and growth opportunities in all of our core businesses. The potential for value creation is significant, and we are highly confident of the ability of our 8,600 employees to deliver on this potential. We will achieve our goals by adhering to this management's guiding principles of keeping everyone focused on meeting customers' needs and working to improve every day. By assuring the success of our customers, we will succeed with them and thereby reward our shareholders. While 1999 was a year of great change for our company, and while there are significant challenges ahead, we fully expect to have a record year in 2000 that will set us on a course for continued prosperity and success in the new century. The specialty chemical industry will, no doubt, continue to consolidate as companies seek competitive global advantage. We view this as an opportunity to strategically reinforce our market positions and to further broaden our core business strengths. Our objective remains constant -- profitable growth. -6- Thank you for your support. We look forward to keeping you informed of our progress. Respectfully yours, /s/ V. A. Calarco Vincent A. Calarco Chairman, President and Chief Executive Officer March 15, 2000 -7- SOLUTION: UNIPRENE(R) THERMOPLASTIC VULCANIZATES [PHOTO] Our Royalene(R) EPDM technology is used in Uniprene(R) thermoplastic vulcanizates (TPVs) to provide the functional performance of vulcanized rubber combined with the processability of plastics. We have partnered with Teknor Apex Company in Pawtucket, Rhode Island by contributing our EPDM technology and technical service to its technical, manufacturing and marketing efforts for the Uniprene product. (UNIPRENE IS A REGISTERED TRADEMARK OF TEKNOR APEX COMPANY) [PHOTO CAPTION]: INSET LEFT: AUGUST PETERSEN (RIGHT), OUR TECHNICAL SALES SERVICE REPRESENTATIVE FOR ELASTOMERS, DISCUSSES PRODUCT BENEFITS OF UNIPRENE(R) PELLETS WITH JITENDER BATRA, TEKNOR APEX'S UNIPRENE TECHNICAL MANAGER. THIS COOPERATIVE EFFORT WILL ALLOW BOTH CK WITCO AND TEKNOR APEX TO ACCELERATE THE PENETRATION OF TPVS INTO THE CONSUMER, AUTOMOTIVE AND CONSTRUCTION MARKETS. With the merger of Crompton & Knowles and Witco, we have created a new global force in the chemical industry, a company with world-class product lines and service capabilities in polymer products and specialty chemicals. The superior service, technology and performance of our individual business units provide our customers with the tools to excel in their markets. As a result of the merger, our businesses have new products and services, new talent and knowledge, and new product development and production capability. The customer-focused cultures of both companies have been combined into a market-driven enterprise. The managers of our business units are experienced in growing businesses and building value through our entrepreneurial business approach. Our managers are accountable for performance, and they are rewarded for achieving maximum targeted returns on the capital entrusted to them. Our businesses operate as independent units while seeking opportunities for synergies with other business units. They respond to customers with speed, innovation and flexibility, knowing our success is dependent on the success of our customers. The merger has given us operating and market strengths that are unique in the chemical industry. Over 60 percent of our sales are to markets where we have leading positions, and many of our products are sold to common markets. The product lines are complementary not competitive, and we can achieve remarkable efficiencies in sales and service through the improved integration of our supply chains and the loyalty of long-time customers. We are building on decades of Crompton & Knowles and Witco successes that resulted from listening closely and working hard to understand customers' businesses and markets. From product development and manufacturing to logistics and technical service, our people strive to anticipate customer needs, and to identify and solve their problems. We respond with maximum effort to make sure our customers' products and processes are better than the competition. When our customers are more competitive, we are more competitive, and our shared successes build long-term relationships. -8- Customer service starts with our specialized sales forces of trained scientists, engineers and technicians with an in-depth knowledge of our specific products and their market applications, and our customers' products and markets. Our technology is based on a customer-first approach to research & development, concentrating on projects with the greatest market potential. Our R&D activities are closely aligned with our customers' business objectives. Our performance is measured by our ability to deliver quality materials that are key to our customers' success by making their products better, less expensive, easier to manufacture or more environmentally friendly. Service, technology and performance add value to our customers' products and to their businesses. SOLUTION: MARK(R)VINYL ADDITIVES [PHOTO] Marley Mouldings depends on our Mark(R) organotin stabilizers for the efficient production of its wide variety of vinyl products for the construction market. Our stabilizers protect Marley's products from heat degradation and discoloration during the extrusion process. The ability to produce consistent quality form extrusions at economical rates helps make Marley a leading global supplier of residential mouldings, window and other vinyl profiles used in a wide variety of construction applications. In addition to stabilizers, we offer a complete line of additives to provide manufacturing solutions for PVC (polyvinyl chloride) producers including lubricants and plasticizers. Our polymer additives are critical not only to PVC production, but also to olefinic and styrenic polymers, rubber, and polyurethanes. [PHOTO CAPTION]: CHRIS BOND (LEFT), OUR RIGID- VINYL PRODUCT MANAGER, DISCUSSES THE USE OF MARK(R) STABILIZERS IN MARLEY MOULDING PRODUCTS WITH LOWELL CARPENTER, MARLEY'S BLENDING MANAGER. Our POLYMER ADDITIVES unit has one of the broadest and most extensive product lines for the polymer industry providing products across the entire industry's supply chain from polymerization to compounding to fabrication. Our products are critical in the manufacture of polyvinyl chloride, olefinic and styrenic polymers, rubber, and polyurethanes. We are benefiting from a strong demand for plastics in general and engineered plastics in particular. We are the world's largest producer of polymer additives for PVC, offering a complete line of metal and metal-free vinyl stabilizers. Our products for the olefins and styrenics markets are used in every stage of the manufacturing process. We are a world leader in rubber chemicals with a comprehensive line of more than 100 different products used in rubber processing. -9- Our urethane chemicals provide key products to global polyurethane processors. We are benefiting from growing demand for PVC in the global construction and automotive markets and from our market position and product development strengths. In 1999, we debottlenecked our PVC stabilizer line in Louisiana, adding 25 percent more capacity for tin stabilizers, and we signed an agreement with Songwon of Korea to market its methlytin heat stabilizers outside of Korea, China and Taiwan. This product supplements our tin stabilizer capacity and will help fuel our growth in Asia and enable us to compete aggressively in key PVC growth segments around the world. In addition to stabilizers, our complete product line for PVC manufacturers includes lubricants, plasticizers and other solutions for our customers' manufacturing challenges. Working with the readily available technology of our Davis-Standard polymer processing equipment, we can both adjust the recipe of additives used in materials, and better understand the process conditions to deliver unique value to our customers for their production. Our experienced and highly trained sales force has been able to introduce new products into the PVC additives market including Paracril(R) nitrile rubber and blowing agents. Makers of plastics around the world depend on us to specify the appropriate products to meet their production needs and ensure the performance of their end products. Our Naugard(R) antioxidants significantly extend the life of products such as wire and cable, and our additives are essential to a broad range of new plastic products. For example, these additives enhance the performance and durability of plastics enabling automobile manufacturers to increase the use of plastics that reduce the weight of vehicles thus improving gas mileage. Our polymer modifiers, Royaltuf(R) modified EPDM, used to toughen engineered thermoplastics, and Polybond(R) coupling agents, critical to the production of advanced composite materials, are among the fastest growing segments of the specialty chemicals industry. Last year, we introduced a new Polybond(R) coupling agent with easier mixing and enhanced performance characteristics for wire and cable insulation and wood-filled compounds. Our new Royaltuf 498 gives Nylon 6 superior low-temperature impact resistance for use in sporting goods and hand-held power tool housings. Our polymer modifier business is growing with these and other new products including Polybond 3109 for toughened nylon and Polybond 1158 for bonding polyethylene and polypropylene to metal. We have growing opportunities in cutting-edge technologies such as nanocomposites that offer the automotive industry and other plastic users products with dramatic improvements in mechanical, thermal and flame-retardant properties. In 1999, we acquired the Unite(R) product line of polypropylene coupling agents from Aristech Chemical Corporation. Complementing our existing line of high value-added products, Unite(R) products serve the glass-filled polypropylene market with uses from swimming pools to automobiles. -10- SOLUTION: ROYALEDGE(R)/ROYALENE(R) EPDM [PHOTO] A new grade of RoyalEdge(R) EPDM polymer was recently introduced in response to growing customer needs for a high-performance EPDM material for the wire & cable market. American Insulated Wire in Pawtucket, Rhode Island uses Davis-Standard machinery to extrude RoyalEdge(R) and Royalene(R) EPDM strips into wire & cable insulations for industrial, utility, automotive, and residential applications. We also provide Silcat(R) silanes and silane technology, Paracril(R) nitrile rubber, Witcogel(R) filling compounds, and other synthetic, mineral-oil, natural, and polymer-based compounds to this growing market. [PHOTO CAPTION]: INSET LEFT: LOWELL LISKER (RIGHT), VICE PRESIDENT OF ENGINEERING FOR AMERICAN INSULATED WIRE (AIW), AND BOUNITA FAVORITE, OUR TECHNICAL SALES REPRESENTATIVE, DISCUSS THE PERFORMANCE OF ROYALEDGE(R) EPDM IN LOW-TO-MEDIUM VOLTAGE INSULATION FOR WIRE & CABLE. CUSTOMERS LIKE AIW RELY ON OUR TECHNICAL EXPERTISE TO HELP THEM DEVELOP NEW PRODUCTS FOR THEIR EVOLVING MARKET NEEDS. Our Naugard(R) polymerization inhibitors that prevent the formation of polymers during the production of monomers, and our new Naugard(R) polyol stabilizer for flexible foam achieved significant market acceptance in 1999. We are continuing to develop new grades of inhibitors, polymer modifiers and antioxidants to serve expanding international plastics markets. Our Delac(R) accelerators, Flexzone(R) antiozonants, Naugard(R) antioxidants, and other additives are recognized around the world for their ability to effectively process and protect rubber from ozone, oxygen, heat, and light, dramatically extending product life and lowering costs. While we provide these products to a broad range of rubber producers including makers of hose, sponge, belts, weather stripping, and wire and cable, over 50 percent of sales are to tire manufacturers. Technologically, we capitalize on our 100-year-old heritage in rubber chemicals and our proprietary catalysts, specialty equipment and multi-step processing. We are positioning a number of our products for accelerated growth in rubber applications over the next five years including silanes, bonding agents, accelerators, silicone-modified EPDM, solid polyurethanes, and liquid polymers. These products will be at the core of a thrust to acquire synergistic rubber chemical products and technologies in order to expand markets and develop new products. Asia is projected to be the strongest growth area for rubber production over the next decade, and we have expanded our presence there by buying out our joint venture partner in Korea and increasing our joint-venture ownership in Thailand. We are also looking at opportunities to increase our presence elsewhere in Asia and Europe. The merger allowed us to increase sales of urethane chemicals to our Adiprene(R)/Vibrathane(R) castable urethanes business where polyester polyols are important raw materialS that give the product its wear resistance characteristics. Our Fomrez(R) products are also critical in flexible foams for a wide range of products from automotive to packaging. -11- We are experiencing strong demand for Witcobond(R) aqueous polyurethane dispersions in automotive coatings, fiberglass and textile-laminating markets. Witcobond(R) dispersions provide a hard, clear topcoat for automotive finishes that stretch and bend and keep on shining. Witcothane(R) microcellular systems provide increased wear and lightweight characteristics to footwear and industrial applications. Our Baxenden joint venture in the United Kingdom provides Trixene(R) for waterborne polyurethanes for leather and textiles. Our POLYMERS business is benefiting from strong global demand for Royalene(R) EPDM and Adiprene(R)/Vibrathane(R) castable urethanes. We are the largest North American manufacturer of EPDM, commonly known as "crackless rubber" because it can withstand sunlight and ozone without deteriorating. With three production lines devoted to Royalene(R) EPDM, we have significant production flexibility and high-volume production capability with consistent product quality to meet a full range of customer demands. We produce over 30 different variations of this polymer primarily for applications in automotive parts including hoses, belts, weather stripping, brake components, and seals and gaskets, as well as in roofing, industrial hose and wire and cable. Royalene(R) EPDM is used by most of the world's auto makers, and the typical new car contains 20 pounds of EPDM rubber. We expect that will grow to 25 pounds over the next five years as new uses, such as engine mounts, are refined. SOLUTION: ADIPRENE(R) URETHANES [PHOTO] Adiprene(R) LFTDI castable urethane prepolymers improve the durability and performance of golf ball covers and are used extensively in top-performing golf ball brands around the world. We also supply Witcobond(R) polyurethane dispersions for coating systems for golf balls and Royalene(R) EPDM synthetic rubber for golf club grips. [PHOTO CAPTION]: PERFORMANCE CHARACTERISTICS SUCH AS RESILIENCE, TOUGHNESS, DISTANCE, AND SPIN RATES ARE KEY TO THE NEXT-GENERATION OF PREMIER GOLF BALLS. CHET ZAWACKI (LEFT), WORLDWIDE MARKETING MANAGER FOR ADIPRENE(R)/VIBRATHANE(R) URETHANES, AND RON ROSENBERG, R&D MANAGER, CHECK THE PROPERTIES OF A GOLF BALL COVERED WITH OUR URETHANES MATERIAL. We are enjoying considerable success with RoyalEdge(R), a new generation of EPDM introduced two years ago for the weather seal and wire and cable markets. In July, we introduced a new RoyalEdge(R) product with improved electrical stability and processing properties for wire and cable. The new product was developed in response to customers' requests for custom-formulated material for low-to-medium voltage applications. EPDM demand continues to be strong. In 1998, we completed the debottlenecking of our Geismar, Louisiana plant, and we were sold out of the full increase in capacity in 1999. We are evaluating options for increasing production capacity in Europe, where demand is growing. -12- We are confident that we will maintain our leadership position and retain the loyalty of our customers with aggressive marketing efforts and new product innovations in EPDM. In addition, we expect that our profitability will continue to benefit from improved production efficiencies. We are the world's largest supplier of castable urethanes with over 200 prepolymers in our product line. Golf ball covers are one of the newest applications for Adiprene(R)/Vibrathane(R) urethanes adding to a growing use in sporting goods applications. We are supplying our urethane material to major golf ball manufacturers to use as covers on their new lines of premium balls. Our products impart a unique combination of durability and performance. The unique abrasion resistance and durability characteristics of our castable urethane products continue to open new markets. Our customer service, technical support and ability to customize products ensure our leadership position in the market. A number of new urethane prepolymers achieved market success last year. Adiprene(R) LFTDI (low-free toluene diisocyanate) prepolymers offer strong growth potential in transportation and industrial markets by providing improved processability, performance and workplace safety for the user and higher performance in end-use applications. Adiprene(R) PPDI (para-phenylene diisocyanate) urethane prepolymers are responding to growing market demand for ultra-high-performance products such as wheels for "People Mover" transit systems and amusement park rides and bearing seals for steel mill rolls. We have developed a proprietary process to produce these PPDI-based polymers in more environmentally friendly low-free forms. In the second quarter of 2000, we will open our first Adiprene(R) LFTDI plant in Europe in response to growing demand for high-performance products with environmentally sound characteristics. The plant in Latina, Italy will provide customers with products that contribute to workplace safety and provide a superior material for use in high-speed, high-load-bearing applications such as industrial rolls and tires. Meanwhile, we completed expansion of our Adiprene(R) low-free PPDI plant in Gastonia, North Carolina, in the first quarter of 2000. Again, the product satisfies the customers' industrial hygiene concerns while providing a product with exceptional dynamic properties for use in products such as hydraulic seals, drive belts and sheave liners. Our innovative products are backed by our advanced manufacturing technology such as our Ribbon Flow(R) Systems, a moldless casting alternative to traditional hot casting, which is making substantial inroads into new applications. This economic combination of rotational casting and room temperature curing provides a more cost-effective system to produce high-performance rolls for the paper and steel industries. -13- SOLUTION: DAVIS-STANDARD EXTRUSION SYSTEMS AND PARACRIL(R) NITRILE RUBBER [PHOTO] Quabaug Corporation in North Brookfield, Massachusetts relies on Davis-Standard extruders to help it convert our Paracril(R) nitrile rubber for use in Vibram(R) shoe soles. The Vibram brand name is recognized worldwide as the leader in high-performance soling products for rugged outdoor, work and service footwear. (VIBRAM IS A REGISTERED TRADEMARK OF QUABAUG CORPORATION) The merger has given us the immediate benefit of vertical integration in manufacturing urethanes. Witco had been the primary supplier of polyester polyols for Adiprene(R)/ Vibrathane(R) urethanes, supplying over 50 percent of this critical raw material. Our production capacity for oil-resistant Paracril(R) nitrile rubber will double as the result of a joint venture with DESC, a diversified Mexican chemical company. In 1999, we closed a high-cost plant in Ohio and moved production to a state-of-the-art, 40,000 metric ton facility near Tampico, Mexico, the largest dedicated nitrile rubber plant in the world. We expect that this expanded capacity will allow us to supply new automotive and industrial customers worldwide. Customers will also benefit from a new line of Paraclean(TM) NBR polymers that prevent mold deposits from forming in today's high-speed injection molding machines. [PHOTO CAPTION]: INSET LEFT: CHITTA LAHIRI (RIGHT), OUR RESEARCH SCIENTIST FOR PARACRIL(R) NBR, EXPLAINS THE ENVIRONMENTAL AND PERFORMANCE ADVANTAGES OF PARACLEAN(TM) NBR POLYMERS TO DAN HIBBARD (LEFT), SUPERVISOR, AND TIM MINER, LABORATORY MANAGER, BOTH OF QUABAUG CORPORATION. [PHOTO CAPTION]: DAVIS-STANDARD IS THE LEADING WORLDWIDE SUPPLIER OF PLASTIC AND RUBBER EXTRUDERS, ELECTRONIC CONTROLS AND EXTRUSION SYSTEMS. POLYMER PROCESSING EQUIPMENT customers rely on Davis-Standard for the most responsive customer service and the most advanced and productive systems available for polymer processing. Our integrated systems, which combine extruders with advanced computer-based controls and other equipment, produce rubber and plastic extruded forms for a wide range of everyday products. These include: food, snack and display packaging, construction products such as window profiles, insulated wire, appliance housings, automotive seals and tubing, medical tubing and bags, copper and fiber communication cables, footwear, picnic coolers, toys, and outdoor furniture. With backlog in excess of $100 million at year-end and improved order intake, we expect to rebound in the spring of 2000 from a cyclical slowdown in orders that began in the second quarter of 1999. We have restructured the business in response to market conditions and strengthened our development labs and technical centers in the U.S. and Europe. The restructuring en- -14- hanced our ability to develop new products and processes for the equipment market as well as new polymer materials and additives for our polymer customers. With over 50 years of experience in developing the most advanced systems for polymer processing, our technological expertise also supports our leading market positions in polymers and polymer additives. With a common customer base with polymers and polymer additives, Davis-Standard systems can be used to test the elasticity, viscosity and plasticity of new materials saving our customers significant time in commissioning new products. Our ability to service the market with technically proven products is unique in the industry, and allows us to bring both equipment and polymer products to market faster and at lower cost than our competition. Our impetus for technological product innovation is the driving factor that allows us to provide the productivity improvements demanded by our customers. By combining several state-of-the-art products, we produce comprehensive systems that allow our customers to reduce manufacturing steps and increase the return on their investment. Our twin-screw, in-line compounding systems are used in conjunction with our single-screw extruders to process engineered plastics into very technically sophisticated products. SOLUTION: SILQUEST(R) SILANES [PHOTO] Silica-tires, the next generation of passenger car tires, use sulfur silanes to couple silica with rubber. Using silica instead of carbon black in tires decreases rolling resistance, and improves comfort, safety and fuel economy. The tires are also referred to as "Greentyres" because of their environmentally friendly properties of better vehicle fuel economy and longer wear life. We are a leading global supplier of rubber chemicals with a comprehensive line of more than 100 different products used in rubber processing. In pursuit of the goals of zero defects and timely delivery, we have opened a 40,000 square foot testing area, adjacent to our Connecticut production plant, where we set up, wire and test complete systems prior to shipping. To improve service to our customers, we assign assembly specialists to new complex systems when production begins. The specialist follows the machine through manufacturing, inspection, testing, and shipment, so an intimate knowledge of the product is brought to the customer site when the system is reassembled and installed. The benefit is a dramatic reduction in the time spent on the final installation at the customer's facility. With a thorough understanding of our customers' requirements, we continue to develop new products to serve new markets. By combining our twin-screw and single- screw technologies, Davis-Standard has been able to supply lumber systems which produce a variety of wood-type products utilizing plastic and wood filler. The ability to provide extrusion systems that can produce products at economical rates and with consistent quality is the cornerstone of Davis-Standard. Lumber products, that are expected to combine up to 60 percent wood fiber with 40 percent polymer, will be manufactured on our systems that will enable manufacturers to use a broad range of natural fibers including sawdust. We have patents pending on several new -15- product developments including a new barrier screw technology that improves melt and mixing performance and is expected to surpass industry expectations. We have expanded our European presence through acquisitions in Germany, France and the United Kingdom, and we are growing in Asia and Latin America with aggressive marketing and sales efforts. In 1999, we acquired Kunstsoff und Kabelmaschinenbau of Haan, Germany. Its technology made a substantial contribution to our ability to serve the European wire and cable market. Our business plan is to reinforce our position as the leading full-line supplier of extrusion equipment to worldwide markets. [PHOTO CAPTION]: HARWICK CHEMICAL MANUFACTURING CORP. OF AKRON, OHIO PRODUCES AN EASY-TO-HANDLE DRY SILANE CONCENTRATE FROM OUR LIQUID SILQUEST(R) ORGANOFUNCTIONAL SILANES. IN THIS FORM, HARWICK SUPPLIES THE SILANE PRODUCT TO THE GOODYEAR RUBBER COMPANY FOR USE AS A COUPLING AGENT IN MINERAL-FILLED RUBBER COMPOUNDS USED FOR GASOLINE HOSES AND A VARIETY OF OTHER PRODUCTS. PICTURED AT HARWICK (LEFT TO RIGHT) ARE: ART FRITZ, GENERAL MANAGER OF HARWICK, PAUL SCHUMACHER, OUR ACCOUNT EXECUTIVE, AND SUSAN DECKARD OF GOODYEAR'S INDUSTRIAL PRODUCTS GROUP. Our ORGANOSILICONES business is the world's leading supplier of organofunctional silanes that are used in a wide variety of materials including rubber products, adhesives and sealants, coatings, thermoplastics, and fiberglass. Silanes are critical as coupling agents between organic and inorganic materials allowing the cross-linking of materials and imparting outstanding adhesion, durability and abrasion-resistant properties. We are able to offer customers state-of-the-art products and services by working closely with them at their facilities to develop products they need and find answers to their technical questions. While we are solving current problems, we are anticipating future needs. Our sulfur silanes have been instrumental in the development of "Greentyres", the most advanced product offering in the passenger car tire market. Our silanes act as a coupling agent allowing tire makers to use silica instead of carbon black in the rubber compound. Silica lowers the rolling resistance of tires improving handling characteristics and fuel economy. The automobile industry expects the growth of "Greentyres" to equal or surpass the explosive growth of radial tires 30 years ago. OrganoSilicones is a significant force in this market with most of the world's major tire companies as customers. Our silanes technology continues to enable recent product advances in the coatings industry. Silanes have always provided substantial benefits in adhesion and durability for coatings, but until recently, the use of silanes in waterborne coatings had been restricted. Their extreme water reactivity made it impossible to take full advantage of the benefits silanes can offer waterborne coatings. We have developed breakthrough, patented chemistry that has opened an expanded market for a unique line of water-stable silanes in paints, sealants, adhesives, and polymer solutions. Using these new silanes, environmentally friendly waterborne coatings and adhesives can compete with solvent-based products. -16- SOLUTION: NIAX(R) AND FOMREZ(R) URETHANE ADDITIVES [PHOTO] With products in over 180 vehicle models, Woodbridge Foam is the world's largest independent supplier of polyurethane foam components for the automotive industry. Woodbridge values dependable and innovative partners in its global supply chain, and our proprietary urethane additives and technology are important to Woodbridge products including seating components, energy-absorbing safety foams and acoustical foams. [PHOTO CAPTION]: WOODBRIDGE FOAM, HEADQUARTERED IN TORONTO, IS A LEADING MANUFACTURER OF SPECIALTY URETHANE FOAMS. WOODBRIDGE DRAWS ON OUR GLOBAL MANUFACTURING CAPABILITY AND SUPPLY CHAIN TO DELIVER QUALITY PRODUCTS AND SERVICES TO ITS 39 FACILITIES IN EUROPE, ASIA, AUSTRALIA, THE MIDDLE EAST, NORTH AMERICA, AND LATIN AMERICA. PIERRE MARTINEAU (LEFT), OUR WOODBRIDGE ACCOUNT REPRESENTATIVE, AND ROBERT BRULOTTE (RIGHT), OUR CANADIAN BUSINESS DIRECTOR, DISCUSS THE PROPERTIES NEEDED IN FOAM SEATING WITH DR. HAMDY KHALIL, WOODBRIDGE'S CORPORATE DIRECTOR OF CHEMICAL RESEARCH AND DEVELOPMENT. As a result of our innovative, customer-driven product and process improvements, we are market leaders in silanes, and we have an aggressive growth plan in place to build on this leadership position that is supported by innovative thinking and appropriate capital investments. Our direct TMS (Trimethoxysilane) process has been commercialized at our facility in Termoli, Italy, and is an integral part of our $50 million expansion now underway. This is an efficient, environmentally friendly process that provides significant waste reduction over traditional methods, eliminating chlorides. Additional process improvements are expected to cut waste even further in future expansions. This direct TMS process was the recipient of the 1999 Kirkpatrick Achievement Award, the most prestigious technology award in the chemical process industry. The delivery of continuous product innovations and technology improvements that benefit our customers will continue to drive the growth of our silanes business. For the consumer market, our Silsoft(R) OrganoSilicone copolymers are just one example of products that enhance performance for consumers in a number of major brands. Silsoft(R) OrganoSilicone copolymers provide for exceptional hair conditioning without buildup in products such as shampoos, conditioners and styling products. Our Magnasoft(R) brands of organo-modified silicones are the preferred choice of the textile industry to provide superior softening for high-end fabrics for garments, bedding and toweling. Our seven manufacturing and blending sites located around the world allow us to react swiftly to changing needs in the marketplace. The broad product lines of SAG(R) and Sentry(R) foam control additives find theiR way into such diverse markets as food and beverage processing, pharmaceuticals and waste water treatment. In 1999, we fully commercialized the most effective silicone-based foam control agent for high-speed pulp and paper manufacturing, allowing producers to effectively eliminate the use of a potentially harmful additive. -17- Performance, quality and consistency are attributes that customers have come to expect from our urethane additives. We are among the leaders in the urethane industry with a broad range of product offerings including Niax(R) silicone surfactants, amine and Fomrez(R) tin catalysts, and performance additives such as Geolite(R) modifiers, antioxidants and processing aids. We are known for our problem-solving innovation in an industry that is challenged with transitioning to alternative processing technology in all significant market segments. Our products are indispensable in many applications important to the consumer. To keep up with emission requirements in specialty foam manufacturing used in furniture and bedding, new surfactant technology has been designed and introduced to meet the challenges of processing foam blown with environmentally acceptable carbon dioxide. Our rigid surfactant technology improves dimensional stability and insulation integrity in refrigeration, transportation and construction applications, including small home refrigeration units, heated insulated trucks and insulated panels for housing. Product offerings for molded foam markets improve comfort at an acceptable cost for automotive seating. As interior car parts are designed to improve safety margins and promote a quieter ride, urethane foam formulations, using our unique and in many cases proprietary additives, are replacing other materials. As urethane foam is considered for carpet backing, laser printing components and decorative floor coverings, our products and services are valued by our customers. SOLUTION: COMITE(R) MITICIDE [PHOTO] Australia's $1.1 billion cotton crop was threatened by a severe mite infestation in 1999. In a record sales effort, Comite(R) miticide protected the crop against mite damage and improved the performance of other products used to control bollworms. As with all of our crop protection products, success requires not only the best chemistry but also service and technology based on careful planning and close monitoring of climatic conditions and other agriculture variables. Mites, tiny parasitic arachnids, are a global threat to many crops. We have a major share of the $525 million miticide market with Comite(R), Omite(R), Micromite(R), and the newly introduced Floramite(R). [PHOTO CAPTION]: INSET LEFT: RICHARD WRIGHT (FAR RIGHT), OUR SALES AGRONOMIST IN MOREE, NEW SOUTH WALES, AUSTRALIA, WORKED CLOSELY WITH HIS COLLEAGUES FROM IAMA LTD. TO CONTROL THE MITE OUTBREAK IN AUSTRALIAN COTTON IN JANUARY 1999. PICTURED FROM LEFT TO RIGHT ARE; MAURIE FAY, IAMA SENIOR COTTON AGRONOMIST; GREG MCLAREN, IAMA COMITE(R) COORDINATOR; AND NICOLE ROOKE, IAMA DEMAND MANAGER. IAMA IS OUR SINGLE-STEP DISTRIBUTION PARTNER FOR COTTON PRODUCTS IN AUSTRALIA. [PHOTO CAPTION]: ABOVE: JOHN WESTCOTT (LEFT), WORLDWIDE BUSINESS DIRECTOR-INSECTICIDES, REVIEWS HIS 12-MONTH ROLLING PRODUCTION/SUPPLY PLAN FOR COMITE(R) MITICIDE WITH CHRIS HAYNER, OPERATIONS COORDINATOR. Our CROP PROTECTION business provides farmers in over 120 countries with products and services to improve crop quality and increase yields. We focus our marketing efforts on high-value crops such as nuts, citrus, cotton, rice, tree and vine fruits, and ornamental plants. -18- With the merger, we added strong technology and products in agricultural surfactants that increase the effectiveness of the active ingredients in fungicides, herbicides and insecticides. Surfactants also have a broad range of uses in oilfield chemicals used in well drilling, production and enhanced oil recovery. Our specialized crop protection product lines include fungicides, miticides, insecticides, herbicides, and growth regulants formulated for specific crops and geographic regions. Our superior service based on formulation expertise and application advice is responsible for a loyal and expanding customer base. Our focus on high-value market niches is based on our knowledge of the crops and growing conditions of specific geographic areas and enables us to generate higher sales margins. Larger commodity markets such as cotton and corn are served with targeted, value-added products. Our Harvade(R) defoliant aids in the harvesting of cotton, canola and sunflowers. We are constantly expanding our presence in niche markets by developing new products, obtaining new use registrations, and acquiring new labels. In 1999, our Harvade(R) defoliant for cotton received EPA registration for new use as a cotton herbicide. With spray directed under the young cotton plant, Harvade(R) is very effective in weed control and is later used as a defoliant at harvest time. One Tennessee cotton farmer reported 100 percent control of troublesome sicklepod and morning glory vines and a 25 percent cost savings over last season's product application. Our newly developed Floramite(R) miticide sold out after its summer registration for the ornamental market. It received accelerated review by the EPA as a reduced risk product. In 2000, we expect to receive registration for food crops including apples, citrus and tea in Japan and Korea, where we will introduce the product under the tradename Acramite(TM). Floramite(R) complements our highly successful line of Omite(R), Comite(R) and Micromite(R) miticides that already have a major share of the annual $525 million worldwide market. A new granular formulation of Micromite(R) miticide for citrus makes the product more user friendly and easier to measure and mix. In 1999, we received registration for use of Dimilin(R) to combat rice water weevils. This opens a new market with a much more ecologically friendly alternative to chemistry now in use. Over 65 percent of our sales are offshore and geographic expansion is essential to achieving continuing sales growth as third-world economic growth improves the diets of people around the world. In Poland, we have entered a joint venture with FMC and Rohm & Haas to sell our products directly in one of Europe's largest agricultural economies. In Brazil, the world's fourth-largest agricultural economy, we introduced Pantera(R) herbicide that promises solid sales growth after it was used with success on 60,000 acres of soybeans. In addition, we added FMC's citrus products to our Brazilian sales lines in 1999. In China, we expanded our direct sales force of Chinese nationals and achieved substantial sales growth especially in Omite(R) for citrus. We are a world leader in seed treatment products to assure germination and healthy seedlings. Our Vitavax(R) fungicide is one of the world's best-selling seed treatment -19- products and stimulates growth as well as controlling disease. About half of our Crop Protection business, including the Gustafson joint venture, is related to seed treatment products and application systems. Our Gustafson joint venture with Bayer is the largest seed treatment company in North America. The partnership is a powerful combination of agricultural chemical strengths: Bayer is a leading developer of active ingredients for seed treatment, and Gustafson is a leader in formulating and delivering seed treatment products. SOLUTION: CALCINATE(R)/NAUGALUBE(R) PETROLEUM ADDITIVES [PHOTO] Cutting-edge best describes our additives for the industrial lubricant market. In metalworking fluids, our products protect manufacturers' investments in sophisticated machinery and insure the quality of finished machined products. Calcinate(R) calcium sulfonate provides the lubricant with anti-corrosion and anti-wear properties, and Naugalube(R) additives protect fluids from oxidation. In 1999, Gustafson received three new product registrations for use on grains, and we expect substantial success starting with spring wheat applications in the 2000 planting season. We anticipate accelerating growth in seed treatment because of the enhanced environmental attractiveness of the localized use of chemicals at very low application rates. In Australia, our Hannaford Seedmaster Services subsidiary holds a major share of the seed treatment market and has leveraged that market position to expand its product offerings to crop application chemicals with direct selling. We had a record Comite(R) miticide sales season in Australia driven by our aggressive direct product distribution program and high mite infestations in cotton. [PHOTO CAPTION]: WITH THE MERGER, WE HAVE OPENED NEW OPPORTUNITIES FOR ONE OF THE MOST COMPLETE PRODUCT OFFERINGS IN THE PETROLEUM ADDITIVES INDUSTRY. WE SERVE A WIDE RANGE OF CUSTOMERS WHO FORMULATE AND MANUFACTURE PRODUCTS FOR THE TRANSPORTATION, INDUSTRIAL, GREASE, AND FUELS MARKETS. MARINE TRANSPORTATION IS AMONG THE INDUSTRIES THAT CAN BENEFIT FROM OUR SYNTON(R) AND TRILENE(R) PRODUCTS TO HELP INCREASE THE PERFORMANCE EFFICIENCY OF LUBRICANT SYSTEMS. Our INDUSTRIAL SURFACTANTS business serves global agriculture markets with an impressive product line. Our wetting agents, primarily used in herbicides and insecticides, reduce the surface tension of the product, increasing its ability to spread and penetrate. Farmers can cover more acreage with less active ingredients and lower spray volume, providing both economic and ecological benefits. We find solutions to farmers' problems in the field. This customer focus is instrumental in how we develop specialty products such as our patented Silwet(R) super-spreading dispersants, that enable customers to reduce the amount of active chemicals required to protect crops, and our Morwet(R) silicone surfactants, that contribute to the success of a wide range of products marketed by the crop protection industry. -20- In the oil field market, our industrial surfactants are achieving increased customer acceptance with growing oil exploration and production activity. Applications technology centers in Switzerland, Singapore and Brazil have improved our ability to support customers' needs with promising new gas hydrate inhibitors and enhanced oilfield recovery (EOR) technologies. Gas hydrate inhibitors are used in deep water gas wells to prevent gas from crystallizing at cold temperatures and high pressure. Our innovative EOR products and technologies allow customers to efficiently and profitably extend the life of existing underground oil reservoirs. Prior to EOR advancements, drillers were forced to leave as much as 60 to 70 percent of available oil in the ground. EOR provides an environmentally acceptable method for oil companies to extract as much as 40 percent more oil from a reservoir than the traditional pressure or water-based extraction methods. It is estimated that EOR will add over one billion barrels of oil to current U.S. reserves. Our PETROLEUM ADDITIVES unit offers one of the most comprehensive product lines of components to lubricant additive package formulators and manufacturers of products for the transportation, industrial, grease, and fuels markets. With the merger, we have achieved a synergy that opens broader new markets for one of the largest product offerings in the industry. Our performance components allow our customers to formulate products that can meet demanding new industry specifications driven by more demanding performance and environmental requirements. We have combined Crompton & Knowles' century of experience in sulfur-nitrogen chemistry with Witco's advanced detergent technology to provide performance enhancements in lubricants and fuels. Proposed new and more stringent lubricant specifications that our customers will be required to meet will provide us with new product opportunities in friction modifiers, antioxidants, anti-wear compounds, and deposit control additives, all of which are critical to cleaner, more efficient lubricant systems. SOLUTION: SILQUEST(R) SILANES [PHOTO] Prestone(R) antifreeze/coolant uses our organofunctional silanes to provide stability to the product's performance. Used in small additive proportions, this silane, proprietary to Prestone(R), is an important enhancer to the world's best-selling antifreeze. The global automotive market depends on our silanes for silica-tires, the most advanced product in passenger car tires, and for durable clear coat automotive finishes. [PHOTO CAPTION]: INSET LEFT: MELANIE BISACCIO (RIGHT), OUR TECHNICAL SALES REPRESENTATIVE, DISCUSSES PRESTONE'S SILANES DELIVERY SCHEDULES WITH PRESTONE PERSONNEL, LEFT TO RIGHT: CHRISTINE HOH, MATERIAL COORDINATOR, GABRIELLE DALY, PURCHASING/DISTRIBUTION MANAGER, AND ERNESTINE HINES, PURCHASING COORDINATOR. [PHOTO CAPTION]: DEEP-DYED SPECIALTY NAPKINS ARE AMONG THE BROAD RANGE OF PRODUCTS THAT BENEFIT FROM OUR HIGH-QUALITY INDUSTRIAL DYES. -21- With the merger, the benefits of liquid polymers and synthetic fluids to increase performance efficiency are now available to the metalworking and marine transportation industries, markets that Synton(R) PAO (poly alpha olefins) and Trilene(R) liquid polymers had not focused on previously. For automotive and industrial lubricants makers, Synton(R) PAO synthetic fluids can lower life-cycle costs by extending drain intervals and enhancing high-temperature performance in machinery and gear-boxes. PAO-based lubricants have excellent thermal and oxidative stability in demanding applications. This capability is now offered to makers of products for the metalworking industry that have stringent safety and environmental requirements as well as high performance demands. In 2000, we will complete our fifth plant expansion in the past five years in Elmira, Ontario, Canada for Synton(R) PAO, doubling the capacity while improving the manufacturing process. We expect this new capacity to be sold out quickly, and we will continue to invest in new capacity to support the rapidly increasing demand for these high-performance products. Responding to the demands of the transportation industry, we are developing new dispersants to enable diesel engines to operate more cleanly. We are also working on new Naugalube(R) antioxidants, MolyFM(TM) friction modifiers, and enhanced grades of Trilene(R) liquid polymers to protect engines while enhancing efficiency that improves fuel economy for larger vehicles. After a thorough evaluation of the potential of the textile dyes business and the options available to us, we elected to exit the business and sold Textile Colors in December. We are now concentrating on the paper, plastics and other specialized areas of the industrial marketplace in North and South America. Our INDUSTRIAL COLORS business accounts for about $50 million in annual sales. Good progress was made in 1999 in growing our market share for liquid and powder direct dyes to the paper industry with our strong domestic manufacturing position and technical service capabilities combined with our customer-focused technical programs. One example of what was accomplished is our new position as the long-term exclusive dyestuff supplier to a market leader in the production of deep-dyed specialty napkin goods for the U.S. hospitality industry. Our consistent high-quality, powdered, direct dyes in accurate pre-weighed, repulpable paper bags, that minimize waste and environmental impact by eliminating direct handling and measurement, assure us of this strong market position. Industrial Colors is also growing in a wide range of user industries including specialty printing inks and wood stains as a result of our technical capabilities and intense service and marketing efforts. Our REFINED PRODUCTS business serves a broad range of industries including cosmetics, inks and industrial markets with white oils, cable fillers and refrigeration oils. Last year, the cosmetics industry embraced our new Hydrobrite(R) 1000 white mineral oil that we introduced -22- for skin care creams and lotions. This unique product has all the moisturizing qualities of petrolatum but remains in a liquid form. Sonolube(R), a blend of white oils and performance additives that serves industrial customers, has been accepted by industrial users as a superior product for protecting machinery from wear and rust. Our Witcogel(R) patented white oil and polymer blend is a leading fiber-optic cable filler for the telecommunications market. -23- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION AND LIQUIDITY LIQUIDITY AND CAPITAL RESOURCES The December 31, 1999 working capital balance of $141.8 million decreased $61.6 million from the December 26, 1998 balance of $203.4 million, while the current ratio decreased to 1.1 from 1.5 in 1998. The decrease in working capital and the current ratio were primarily due to the merger (the "Merger") of Crompton and Knowles Corporation (Crompton) and Witco Corporation (Witco) effective September 1, 1999. Days sales in receivables averaged 46 days in 1999, versus 54 days in 1998, principally due to the impact of the accounts receivable securitization programs. Inventory turnover averaged 3.4, compared to 3.1 in 1998. Net cash provided by operations of $88.6 million decreased $80.9 million from the net cash provided by operations of $169.5 million in 1998, due primarily to lower earnings. Net cash provided by operations, acquired cash of Witco, additional credit agreement and short-term borrowings, and the proceeds from the sales of the specialty ingredients business and the textile colors business, were used primarily to repurchase common shares, finance capital expenditures, pay merger costs, make dividend payments, repurchase the 9% and 10.5% Senior Notes, and pay $48.2 million of income taxes related to the 1998 Gustafson gain. The Company's debt to total capital ratio decreased to 65% from 91% in 1998, primarily as a result of the Merger. The Company's liquidity needs, including debt servicing, are expected to be financed from operations. On October 28, 1999, the Company entered into a $600 million 364-day senior unsecured revolving credit facility and a $400 million five-year senior unsecured credit facility with a syndicate of lenders. Borrowings on these facilities are at various rate options to be determined on the date of borrowing. Borrowings under these facilities totaled $680 million at December 31, 1999, with a weighted average interest rate of 7%. In addition, the Company has available accounts receivable securitization programs to sell up to $232 million of domestic accounts receivable to agent banks. As of December 31, 1999, $164.7 million of domestic accounts receivable had been sold under these agreements. In September 1998, the Company announced a share repurchase program to buy back 7.5 million shares, or approximately 10% of the common shares then outstanding. In January 1999, the Company announced a share repurchase program for 6.8 million shares, or approximately 10% of the common shares then outstanding. From September 1998 through the completion of these programs in 1999, the Company repurchased 9.5 million common shares at an average price of $17.85 per share. In November 1999, the Board of Directors approved another share repurchase program for 10% of the common shares then outstanding, or approximately 11.9 million shares. As of December 31, 1999, the Company had repurchased 2.2 million common shares under that program at an average price of $12.16 per share. -24- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) In November 1999, the Company announced that it is committed to a cost savings program that will enable it to reduce costs by $60 million in 2000. Cost savings of $44 million are expected to be achieved through salaried staff reductions. The remaining savings are expected to be achieved through the consolidation of plants and offices, purchasing and logistics efficiencies, and the elimination of outside services and consultants. As of December 31, 1999, the Company reduced its workforce by 478 employees. In January 1999, the Company sold its specialty ingredients business to Chr. Hansen Holding A/S of Denmark for $103 million, which resulted in a pre-tax gain of $42.1 million in the first quarter of 1999. In December 1999, the Company sold its textile colors business to Yorkshire Group PLC for $86.5 million ($78 million in cash proceeds and a 12.4% equity interest in Yorkshire valued at approximately $8.5 million). The sale resulted in a pre-tax loss of $83.3 million. Capital expenditures for 1999 amounted to $131.8 million as compared to $66.6 million in 1998. The increase is primarily due to the Merger, year 2000 related expenditures and cost savings initiatives. Capital expenditures are expected to approximate $175 million in 2000, primarily for the Company's replacement needs and improvement of domestic and foreign facilities. YEAR 2000 ISSUES The Company successfully implemented its SAP and non-SAP projects prior to December 31, 1999. As a result, the Company did not experience any significant Year 2000 related system failures. The total costs associated with the SAP and non-SAP projects were $19.4 million (including $13.4 million capitalized and $6 million expensed). Expenditures of $14.6 million were made during 1999 ($11.5 million capitalized and $3.1 million expensed). NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 1999, the FASB issued Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133" which delays the effective date of FASB Statement No. 133 to fiscal years beginning after June 15, 2000. The Company plans to adopt the provisions of this statement in the first quarter of 2001. The Company has not yet determined what the effect of FASB Statement No. 133 will be on its earnings and financial position. ENVIRONMENTAL MATTERS The Company is involved in claims, litigation, administrative proceedings and investigations of various types in a number of jurisdictions. A number of such matters involve claims for a material amount of damages and relate to or allege environmental liabilities, in- -25- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) cluding clean-up costs associated with hazardous waste disposal sites, natural resource damages, property damage and personal injury. The Company and some of its subsidiaries have been identified by federal, state or local governmental agencies, and by other potentially responsible parties (each a "PRP") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or comparable state statutes, as a PRP with respect to costs associated with waste disposal sites at various locations in the United States. In addition, the Company is involved with environmental remediation and compliance activities at some of its current and former sites in the United States and abroad. Each quarter, the Company evaluates and reviews estimates for future remediation and other costs to determine appropriate environmental reserve amounts. For each site a determination is made of the specific measures that are believed to be required to remediate the site, the estimated total cost to carry out the remediation plan, the portion of the total remediation costs to be borne by the Company and the anticipated time frame over which payments toward the remediation plan will occur. As of December 31, 1999, the Company's reserves for environmental remediation activities totaled $198 million. It is reasonably possible that the Company's estimates for environmental remediation liabilities may change in the future should additional sites be identified, further remediation measures be required or undertaken, the interpretation of current laws and regulations be modified or additional environmental laws and regulations be enacted. The Company intends to assert all meritorious legal defenses and all other equitable factors which are available to it with respect to the above matters. The Company believes that the resolution of these environmental matters will not have a material adverse effect on its consolidated financial position. While the Company believes it is unlikely, the resolution of these environmental matters could have a material adverse effect on its consolidated results of operations in any given year if a significant number of these matters are resolved unfavorably. MARKET RISK & RISK MANAGEMENT POLICIES The operations of the Company are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates. The Company uses derivative financial instruments to mitigate its exposure to these risks. The Company does not use derivative financial instruments for trading or speculative purposes. The Company's primary interest rate risk exposure results from changes in the fair value of its long-term, U.S. dollar fixed rate debt, as well as cash flow risk associated with long-term variable rate debt. The Company used interest rate swap contracts to convert a portion of its long-term, variable rate foreign denominated debt to fixed rate debt. Each interest rate swap contract is designated with the principal balance and the term of the specific debt obligation. These contracts involve the exchange of interest payments over the life of the contract without an exchange of the notional amount upon which the payments are based. The differential to be paid or received as interest rates change is accrued as other liabilities or assets and recognized as an adjustment to interest expense. The changes in the fair value of the swap contracts due to changes in market interest rates are not recognized in the financial statements. In the event of early extinguishment of the designated debt obligations, any realized or unrealized gain -26- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) or loss from the swap would be recognized in income coincident with the extinguishment gain or loss. The following table provides information about the Company's derivative and other financial instruments that are sensitive to changes in interest rates. For long-term financial instruments, the table presents principal cash flows and related weighted average interest rates by expected maturity date. Weighted average variable interest rates are based on the applicable floating rate index as of the reporting date. For interest rate swaps, the table presents the notional amount and weighted average interest rates by maturity date. The notional amounts are used to calculate the contractual cash flows to be exchanged under the respective contracts. -27- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) INTEREST RATE SENSITIVITY
Fair 2005 and Value at (IN THOUSANDS) 2000 2001 2002 2003 2004 Thereafter Total 12/31/99 - ------------------------------------------------------------------------------------------------------------- NOTE RECEIVABLE: Fixed rate $9,000 $ 9,000 $8,694 Average interest 6.54% rate LONG-TERM PAYABLE: Fixed rate $2,597 $2,597 $1,947 $1,298 $ 8,439 $ 7,720 Average interest rate 6.30% 6.30% 6.30% 6.30% LONG-TERM DEBT: Fixed rate $4,033 $1,806 $2,039 $166,361 $1,454 $702,411 $878,104 $799,509 Average interest rate 7.32% 7.31% 7.28% 7.29% 7.48% 7.49% Variable rate-swapped $66,298 $66,298 $66,298 Average interest rate AIBOR AIBOR AIBOR AIBOR +.80% +.80% +.80% +.80% Other variable rate $400,000 $ 8,500 $408,500 $408,500 Average interest rate(a) 6.55% 6.55% 6.55% 6.55% 6.55% 5.60% INTEREST RATE SWAPS: Total pay fixed/receive variable $66,298 $66,298 $ (635) Average pay rate 5.20% 5.20% 5.20% 5.20% Average receive rate AIBOR AIBOR AIBOR AIBOR +.80% +.80% +.80% +.80% - -------------------------------------------------------------------------------------------------------------------------
AIBOR - Amsterdam Interbank Offered Rate (a) Average variable interest rate is based on rates in effect at December 31, 1999. The Company's short-term exposure to changes in foreign currency exchange rates results from transactions entered into by the Company and its foreign subsidiaries in currencies other than their local currency (primarily trade payables and receivables). The Company manages these transactional currency risks on a consolidated basis, which allows it to net its trade payable and receivable exposure. The Company is also exposed to currency risk on intercompany transactions. The Company purchases foreign currency forward contracts, primarily denominated in Hong Kong dollars, British pounds, Singapore dollars, Canadian dollars and the Euro, to hedge its transaction exposure. Contracts to hedge its net payable/receivable transaction exposure are generally outstanding for one to six months and contracts to hedge intercompany transactions are settled on a monthly basis. Realized and unrealized gains and losses on foreign currency forward contracts that are designated and effective as hedges of recorded transactions are recognized in earnings to offset the impact of valuing recorded foreign currency trade payables, receivables and intercompany transactions. Unrealized gains and losses are cumulatively measured as the differential between the spot exchange rate at the contract's inception and the spot exchange rate as of the balance sheet date and are included in other current assets. Discounts and premiums on foreign currency forward contracts that are designated and effective as hedges are recorded as a deferred asset and amortized over the respective contract life. Realized and unrealized gains and losses on contracts that do not satisfy the requirements of an effective hedge are reported as other expense (income). The fair value of the foreign currency forward contracts used to hedge the Company's intercompany loan, trade payable and trade receivable exposures are not significant. -28- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The Company's long-term foreign currency exchange risk exposure results from its net investments in international subsidiaries (including long-term intercompany loans). The Company uses foreign currency swap contracts denominated in German marks and Italian lira to reduce its exposure to foreign currency risk from its net investments in its international subsidiaries. For foreign currency swap contracts designated and effective as hedges, realized and unrealized gains and losses, net of related taxes, are included in the accumulated other comprehensive income component of shareholders' equity. Discounts or premiums resulting from the differential between the contractual payments and receipts are amortized over the life of the contract. The related amounts due to or from counterparties are included in other assets. The following table summarizes information on the foreign currency swap contacts, including the notional amounts and the related weighted average contract rates by contractual maturity date. The notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. The table does not include the net investments for which the foreign exchange translation adjustments would offset the realized and unrealized gains and losses on the related swap contracts. EXPOSURES RELATED TO DERIVATIVE CONTRACTS WITH EUROPEAN FUNCTIONAL CURRENCIES
Fair 2005 and Value at (IN THOUSANDS) 2000 2001 2002 2003 2004 Thereafter Total 12/31/99 - ------------------------------------------------------------------------------------------------------------- SWAP CONTRACT TO BUY U.S. DOLLARS: PAY GERMAN MARKS Notional amount $162,974 $162,974 $21,987 Average contract .6519 .6519 rate SWAP CONTACT TO BUY GERMAN MARKS: PAY ITALIAN LIRA Notional amount $7,814 $7,814 $(570) Average contract .000994 .000994 rate
EURO CONVERSION On January 1, 1999, certain member countries of the European Union adopted the Euro as their common legal currency. Between January 1, 1999 and July 1, 2002, transactions may be conducted in either the Euro or the participating countries' national currency. However, by July 1, 2002, the participating countries will withdraw their national currency as legal tender and complete the conversion to the Euro. The Company conducts business in Europe and does not expect the conversion to the Euro to have an adverse effect on its competitive position or consolidated financial position. The Company believes that the implementation of its SAP Project will allow the Company to conduct business transactions in both the Euro as well as the participating countries' national currency. The Company has determined that failure to implement systems that are able to process both the Euro and participating countries' national currency may cause disruptions to -29- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) operations including, among other things, a temporary inability to process transactions, send invoices or engage in normal business activities. These problems could be substantially alleviated with manual processing. However, this would cause delays in certain normal business activities. FORWARD-LOOKING STATEMENTS Certain statements made in this annual report are forward-looking statements that involve risks and uncertainties. These statements are based on currently available information and the Company's actual results may differ significantly from the results discussed. Investors are cautioned that there can be no assurance that the actual results will not differ materially from those suggested in such forward-looking statements. OPERATING RESULTS -- 1999 COMPARED TO 1998 OVERVIEW Consolidated net sales increased 16% to $2.09 billion in 1999 from $1.8 billion in 1998. After adjusting 1998 net sales to exclude $216.1 million from deconsolidated joint ventures and the divestiture of the specialty ingredients business, and to include $550.8 million from Witco operations for the months of September through December 1998, net sales decreased 2%. This decrease is primarily the result of lower sales in the Polymer Processing Equipment and Crop Protection businesses. International sales, including U.S. exports, were 45% of total sales, up from 40% in 1998. The net loss for 1999 was $175 million, or $2.10 per common share basic and diluted, as compared to net earnings of $161.8 million, or $2.20 per common share basic and $2.14 per common share diluted in 1998. Earnings before after-tax special items (as detailed on page 54) were $95 million, or $1.14 per common share basic and diluted, as compared to $117.3 million, or $1.59 per common share basic and $1.55 per common share diluted, in 1998. Gross margin as a percentage of sales decreased to 34.9% from 36.2% in 1998. The decrease was primarily due to the impact of including four months of Witco results, lower pricing and unfavorable product mix. Consolidated operating profit before special items decreased $34 million to $225.9 million from $259.9 million in 1998. After further adjusting to exclude $19.6 million from the consolidated joint ventures and the divestiture of the specialty ingredients business, and to include $24 million from Witco operations for the months of September through December 1998, operating profit decreased 14.5% from $264.3 million in 1998. -30- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(IN THOUSANDS) 1999 1998 ------------------ ------------------------------------------------------------- Witco Operations Four Months AS As Ended Deconsolidated Divested As REPORTED Reported December 31 Joint Ventures Business Adjusted --------- ----------------------------------------------------------------- NET SALES Polymer Products Polymer Additives $620,188 $391,964 $214,608 $ -- $ -- $606,572 Polymers 316,300 342,527 -- (41,520) -- 301,007 Polymer Processing Equipment 300,016 344,480 -- -- -- 344,480 Eliminations (3,469) -- -- -- -- -- --------- ------------------------------------------------------------------ 1,233,035 1,078,971 214,608 (41,520) -- 1,252,059 --------- ------------------------------------------------------------------- Specialty Products OrganoSilicones 158,925 -- 144,718 -- -- 144,718 Crop Protection 294,798 348,000 49,376 (84,966) -- 312,410 Other 405,600 369,148 142,075 -- (89,590) 421,633 ---------- -------------------------------------------------------------------- 859,323 717,148 366,169 (84,966) (89,590) 878,761 ---------- -------------------------------------------------------------------- Total net sales $2,092,358 $1,796,119 $ 550,777 $(126,486) $(89,590) $2,130,820 ========== ==================================================================== OPERATING PROFIT Polymer Products Polymer Additives $ 67,880 $ 49,215 $ 16,325 $ -- $ -- $ 65,540 Polymers 82,951 79,892 -- (709) -- 79,183 Polymer Processing Equipment Eliminations 19,981 46,653 -- -- -- 46,653 --------- -------------------------------------------------------------------- 170,812 175,760 16,325 (709) -- 191,376 --------- -------------------------------------------------------------------- Specialty Products OrganoSilicones 16,784 -- 16,621 -- -- 16,621 Crop Protection 69,194 84,882 820 (10,840) -- 74,862 Other 25,144 35,760 1,544 -- (7,863) 29,441 --------- -------------------------------------------------------------------- 111,122 120,642 18,985 (10,840) (7,863) 120,924 --------- -------------------------------------------------------------------- General corporate expense including amortization (56,033) (36,544) (11,273) (187) -- (48,004) --------- ------------------------------------------------------------------ Total operating profit before special items 225,901 259,858 $ 24,037 $ (11,736) $(7,863) 264,296 ==================================================== Special items (a) (224,518) (41,560) --------- --------- Total operating profit $ 1,383 $218,298 ========= ========
(a) Special items affecting operating profit include the following expenses:
1999 1998 - ----------------------------------------------------------------------------------------------------- Write-off of in-process and development $195,000 $ -- Merger related costs 29,518 -- Facility closure costs -- 33,600 Other -- 7,960 - ----------------------------------------------------------------------------------------------------- Total special items $224,518 $41,560 =====================================================================================================
POLYMER PRODUCTS Polymer products sales of $1.23 billion represent a decrease of 2% from an adjusted $1.25 billion for 1998. Operating profit for polymer products of $170.8 million declined 11% from an adjusted $191.4 million for 1998. -31- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Polymer additives sales of $620.2 million increased 2% from an adjusted $606.6 million for 1998 primarily due to volume growth of 6%, partially offset by 2% declines attributable to lower pricing and foreign currency translation. Plastic additives sales were up 4% primarily as a result of higher volume, partially offset by lower foreign currency translation. Rubber chemicals sales were essentially unchanged from 1998 as greater volume of 5% was offset by lower pricing. Urethane chemicals sales rose 3% primarily due to higher volume of 8%, partially offset by lower foreign currency translation of 3% and lower pricing of 2%. Polymer additives operating profit of $67.9 million rose 4% from an adjusted $65.5 million in 1998 primarily as a result of higher sales volume, partially offset by lower pricing in rubber chemicals. Polymers sales of $316.3 million rose 5% versus an adjusted $301 million for 1998 primarily due to volume growth of 4% and improved pricing of 2%. Urethane sales were up 6% primarily as a result of higher volume. EPDM sales increased 4% primarily due to improved pricing. Polymers operating profit of $83 million increased 5% from an adjusted $79.2 million in 1998 primarily as a result of improved pricing and greater sales volume, partially offset by higher EPDM raw material costs. Polymer processing equipment sales of $300 million decreased 13% from 1998 primarily due to lower sales volume and pricing which was reflective of the downward cycle experienced by the plastics machinery market during the second half of 1999. Operating profit of $20 million decreased 57% from 1998 primarily as a result of competitive pricing pressure, lower volume and increased sales of lower margin equipment systems. The equipment order backlog totaled $113 million at the end of 1999 compared to $118 million at the end of 1998. SPECIALTY PRODUCTS Specialty products sales of $859.3 million represent a decrease of 2% from an adjusted $878.8 million for 1998. Operating profit of $111.1 million decreased 8% from an adjusted $120.9 million for 1998. OrganoSilicones sales of $158.9 million were 10% above an adjusted $144.7 million for 1998 primarily due to volume growth of 14%, partially offset by lower foreign currency translation of 4%. The business benefited from a recovering Asian economy, new product introductions, growth in the "greentyre" market and increased orders with major customers. Operating profit of $16.8 million was 1% above an adjusted $16.6 million for 1998 primarily due to increased sales volume, partially offset by higher 1999 consulting costs and certain non-recurring items that had a favorable impact on 1998 earnings. Crop protection sales of $294.8 million declined 6% from an adjusted $312.4 million in 1998 primarily due to lower volume particularly in the herbicides and fungicides businesses. These businesses were adversely affected by a general weakness in the U.S. and European farm economies, unfavorable weather conditions and increased competition associated with genetically engineered seeds. Operating profit of $69.2 million decreased 8% from an adjusted $74.9 million in 1998 primarily as a result of lower sales volume. -32- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Other sales of $405.6 million declined 4% from an adjusted $421.6 million in 1998 primarily due to lower pricing of 3% and lower foreign currency translation of 1%. Colors sales were down 14% primarily due to lower volume and pricing for textile colors. The textile colors business was sold in December 1999. Glycerine/fatty acids sales rose 5% primarily due to volume growth, partially offset by lower pricing. Refined products and petroleum additives sales increased 12% and 7%, respectively, primarily as a result of higher sales volume. Other operating profit of $25.1 million decreased 15% from an adjusted $29.4 million in 1998 primarily due to lower pricing in the colors business, partially offset by higher sales volume in the remaining businesses. OTHER Selling, general and administrative expenses of $331.1 million increased 25% versus 1998 primarily due to the Merger, offset partially by the impact of the deconsolidation of the joint ventures and the divestiture of the specialty ingredients business. Depreciation and amortization (up 45%) and research and development costs (up 29%) also increased as a result of the Merger. Interest expense of $69.8 million decreased 11% primarily due to lower levels of indebtedness prior to the Merger, which more than offset the four months impact of the debt acquired in the Merger. Other expense of $48 million in 1999 includes a loss on the sale of Colors for $83.3 million, a gain on the sale of Specialty Ingredients for $42.1 million and fees related to the accounts receivable securitization for $6.3 million. Other income of $158.9 million in 1998 includes a gain of $153.4 million resulting from the sale of a 50% interest in the Gustafson seed treatment business. The effective tax rate, excluding the impact of special items was 36.4% compared to 37.2% in 1998. OPERATING RESULTS -- 1998 COMPARED TO 1997 OVERVIEW Consolidated net sales decreased 3% to $1.80 billion from $1.85 billion in 1997. The decrease was primarily attributable to lower volume of 2% and lower foreign currency translation of 1%. International sales, including U.S. exports, increased slightly as a percentage of total sales to 40% from 39% in 1997. Net earnings for 1998 were $161.8 million, or $2.20 per share basic and $2.14 per share diluted, compared to earnings of $86.8 million, or $1.18 per share basic and $1.15 per share diluted, in 1997. Before after-tax special items (as detailed on page 54), net earnings were $117.3 million, or $1.59 per share basic and $1.55 per share diluted, compared with $92.1 million, or $1.25 per share basic and $1.22 per share diluted, in 1997. Gross margins as a percentage of net sales increased to 36.2% from 35.4% in the prior year. The increase was primarily attributable to lower raw material costs, improved pricing and product mix. Consolidated operating profit of $218.3 million declined 3% from the prior year; however, excluding the impact of special items, operating profit increased 3% to $259.9 million from $252.3 million in the prior year. -33- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) POLYMER PRODUCTS Polymer products sales of $1.08 billion represent an increase of 1% from 1997. Operating profit of $175.8 increased 6% from 1997. Polymer additives sales of $392 million decreased 6% versus 1997 primarily attributable to lower pricing of 3%, lower volume of 2% and lower foreign currency translation of 1%. Rubber chemical sales were 9% lower than 1997 primarily due to lower volume and pricing. Plastic additive sales were essentially unchanged as higher volume of 1% was offset by lower foreign currency translation. Polymer additives operating profit of $49.2 million decreased 31% from 1997. The decrease was primarily attributable to lower volume, unfavorable manufacturing variances and an unfavorable product mix. Polymers sales of $342.5 million were essentially unchanged from 1997 as improved pricing of 4% was offset primarily by lower volume. EPDM sales increased 6% from 1997 primarily due to improved pricing. Urethane and nitrile rubber sales were lower by 3% and 9%, respectively, due primarily to lower volume. Polymers operating profit of $79.9 million increased 38% from 1997 primarily attributable to improved pricing and lower raw material costs in the EPDM business. Polymer processing equipment sales of $344.5 million increased 11% from 1997 primarily due to higher volume. Operating profit of $46.7 million increased 26% from 1997 due to increased volume and improved product mix. The equipment order backlog totaled $118 million at the end of 1998 compared to $106 million at the end of 1997. SPECIALTY PRODUCTS Specialty products sales of $717.1 million represent a decrease of 8% from 1997. Operating profit for specialty products was $120.6 million compared to $123.6 in 1997. Crop protection sales of $348 million decreased 6% versus 1997 primarily due equally to the deconsolidation of the Gustafson seed treatment business in December 1998 and lower volume, particularly in the insecticide business. Operating profit of $84.9 million increased 2% from 1997 primarily due to lower operating costs, and improved pricing and product mix. Other sales of $369.1 million decreased 10% versus 1997 primarily attributable to lower volume of 8%, lower pricing of 1% and lower foreign currency translation of 1%. Petroleum additives sales were 5% lower primarily due to lower volume. Colors sales decreased 11% primarily due to lower volume in apparel dyes. Specialty ingredients sales decreased 11% also principally due to lower volume. This business was sold effective the first day of fiscal 1999. Operating profit of $35.8 decreased 11% versus 1997, due primarily to lower volume. OTHER Selling, general and administrative expenses of $264.7 million decreased 2% versus 1997, but as a percentage of sales remained essentially unchanged at 14.7%. Depreciation -34- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) and amortization of $80.5 million increased 1% from 1997 primarily as a result of a higher fixed asset base. Research and development costs of $52.8 million decreased 2% from 1997, but as a percentage of sales remained constant at 2.9%. Facility closure costs of $33.6 million represent primarily the write-off of plant and equipment, severance and other costs related to the closure of the Company's nitrile rubber facility in Painesville, Ohio. Interest expense of $78.5 million decreased 24% from 1997 primarily due to lower levels of indebtedness and lower interest cost on borrowings used to redeem high cost debt in 1998. Other income of $158.9 million in 1998 includes a gain in the amount of $153.4 million resulting from the sale of a 50% interest in the Gustafson seed treatment business. Other income of $27.8 million in 1997 includes a gain of $28 million relating to a settlement with the U.S. Department of the Army. The effective tax rate excluding the impact of special items was 37.2% compared to 38.1% in 1997. -35- CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal years ended 1999, 1998, and 1997
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1999 1998 1997 --------------------------------------------- NET SALES $ 2,092,358 1,796,119 1,851,180 COSTS AND EXPENSES Cost of products sold 1,361,373 1,146,200 1,196,030 Selling, general and administrative 331,050 264,710 269,405 Depreciation and amortization 116,648 80,536 79,856 Research and development 67,954 52,775 53,611 Equity (income) loss (10,568) -- -- Acquired in-process research and development 195,000 -- -- Merger and related costs 29,518 -- -- Facility closure costs -- 33,600 -- Severance and other costs -- -- 13,000 Special environmental change -- -- 15,000 --------------------------------------------- OPERATING PROFIT 1,383 218,298 224,278 Interest expense 69,833 78,520 103,349 Other expense (income) 47,979 (158,938) (27,817) --------------------------------------------- EARNINGS Earnings (loss) before income taxes and extraordinary loss (116,429) 298,716 148,746 Income Taxes 42,922 115,493 56,675 --------------------------------------------- Earnings (loss) before extraordinary loss (159,351) 183,223 92,071 Extraordinary loss on early extinguishment of debt (15,687) (21,468) (5,242) --------------------------------------------- Net earnings (loss) $ (175,038) $ 161,755 $ 86,829 --------------------------------------------- BASIC EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) before extraordinary loss $ (1.91) $ 2.48 $ 1.25 Extraordinary loss (.19) (.28) (.07) --------------------------------------------- Net earnings (loss) (2.10) 2.20 1.18 --------------------------------------------- DILUTED EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) before extraordinary loss $ (1.91) $ 2.42 $ 1.22 Extraordinary loss (.19) (.28) (.07) --------------------------------------------- Net earnings (loss) (2.10) 2.14 1.15 =============================================
See accompanying notes to consolidated financial statements CK WITCO CORPORATION AND SUBSIDIARIES -36- CONSOLIDATED BALANCE SHEETS Fiscal years ended 1999 and 1998
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1999 1998 --------------------------------- ASSETS CURRENT ASSETS Cash $ 10,543 $ 12,104 Accounts receivable 411,536 173,668 Inventories 523,363 334,562 Other current assets 174,311 77,422 ------------------------------- Total current assets 1,119,753 597,756 NON-CURRENT ASSETS 1,262,345 473,403 Property, plant and equipment 969,625 166,184 Cost in excess of acquired net assets 374,895 171,550 -------------------------------- Other assets $ 3,726,618 $ 1,408,893 -------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 81,162 $ 17,305 Accounts payable 330,591 117,338 Accrued expenses 422,252 139,401 Income taxes payable 121,366 103,179 Other current liabilities 22,599 17,149 -------------------------------- Total current liabilities 977,970 394,372 -------------------------------- NON-CURRENT LIABILITIES Long-term debt 1,309,812 646,857 Postretirement health care liability 216,797 142,727 Other liabilities 462,127 158,234 STOCKHOLDERS' EQUITY Common stock, $.01 and $.10 par value - issued 119,071,693 and 77,332,751 shares 1,191 7,733 Additional paid-in capital 1,047,518 238,615 Accumulated deficit (200,374) (15,985) Accumulated other comprehensive income (61,238) (38,414) Treasury stock at cost (27,185) (125,246) -------------------------------- Total stockholders' equity 759,912 66,703 -------------------------------- $ 3,726,618 $ 1,408,893 ================================ See accompanying notes to consolidated financial statements CK WITCO CORPORATION AND SUBSIDIARIES
-37- CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal years ended 1999, 1998 and 1997
Increase (decrease) to cash (In thousands of dollars) 1999 1998 1997 ----------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) $ (175,038) $ 161,755 $ 86,829 Adjustments to reconcile net earnings (loss) to net cash provided by operations: Acquired in-process research and development 195,000 -- -- Loss on sale of textile colors 83,333 -- -- Gain on sale of specialty ingredients (42,060) -- -- Merger and related costs 29,518 -- -- Extraordinary loss on early debt extinguishment 15,687 21,468 5,242 Gustafson joint venture gain -- (153,429) -- Facility closure costs -- 33,600 -- Depreciation and amortization 116,648 80,536 79,856 Equity income (10,568) -- -- Deferred taxes (26,281) (5,366) 18,184 Changes in assets and liabilities: Accounts receivable 4,539 497 (2,997) Inventories (25,475) 7,314 (3,960) Other current assets 25,422 (11,508) 5,688 Other assets 7,333 3,358 2,165 Accounts payable and accrued expenses (73,963) (32,188) 8,573 Income taxes payable (10,776) 79,568 13,055 Other current liabilities 4,983 (10,562) 7,244 Postretirement health care liability (2,342) (3,727) (32,460) Other liabilities (24,624) (7,161) 12,306 Other (2,712) 5,367 16,062 ------------------------------------------------ Net cash provided by operations 88,624 169,522 215,787 ------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of specialty ingredients 103,000 -- -- Proceeds from sale of textile colors 75,322 -- -- Proceeds from Gustafson joint venture -- 180,000 -- Capital expenditures (131,782) (66,628) (50,176) Acquired cash of Witco Corporation 236,658 -- -- Other investing activities (32,941) (9,717) 5,569 ------------------------------------------------ Net cash provided by (used in) investing activities 250,257 103,655 (44,607) ------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term notes (356,449) (460,034) (76,860) Proceeds (payments) on credit agreement 93,720 199,894 (91,529) borrowings Proceeds (payments) on short-term borrowings 61,267 15,535 (5,903) Proceeds from sale of accounts receivable -- 80,000 -- Premium paid on early extinguishment of debt (20,431) (22,984) (7,065) Treasury stock acquired (101,781) (94,974) -- Dividends paid (9,351) (3,721) (3,671) Other financing activities (6,222) 14,425 4,240 ------------------------------------------------ Net cash used in financing activities (339,247) (271,859) (180,788) ------------------------------------------------ CASH Effect of exchange rates on cash (1,195) 179 (905) ------------------------------------------------ Change in cash (1,561) 1,497 (10,513) Cash at beginning of period 12,104 10,607 21,120 ------------------------------------------------ Cash at end of period $ 10,543 $ 12,104 $ 10,607 ================================================
See accompanying notes to consolidated financial statements CK WITCO CORPORATION AND SUBSIDIARIES -38- CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) Fiscal years ended 1999, 1998 and 1997 (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
Accumulated Additional Other Common Paid-in Accumulated Comprehensive Treasury Stock Capital Deficit Income Stock Total -------------------------------------------------------------------------------------- BALANCE, DECEMBER 28, 1996 $ 7,724 $ 232,010 $ (257,177) $ (30,892) $ (48,083) $ (96,418) Comprehensive income: Net earnings 86,829 86,829 Equity adjustment for translation of foreign currencies (16,453) (16,453) Other 1,556 1,556 Total comprehensive income 71,932 Cash dividends ($.05 per share) (3,671) (3,671) Stock options, warrants and other issuances (668,552 shares) 9 203 7,855 8,067 -------------------------------------------------------------------------------------- BALANCE, DECEMBER 27, 1997 7,733 232,213 (174,019) (45,789) (40,228) (20,090) -------------------------------------------------------------------------------------- Comprehensive income: Net earnings 161,755 161,755 Equity adjustment for translation of foreign currencies 5,427 5,427 Other 1,948 1,948 Total comprehensive income 169,130 Cash dividends ($.05 per share) (3,721) (3,721) Stock options, warrants and other issuances (1,130,258 shares) 6,402 9,956 16,358 Treasury stock acquired (5,368,600 shares) (94,974) (94,974) --------------------------------------------------------------------------------------- BALANCE, DECEMBER 26, 1998 7,733 238,615 (15,985) (38,414) (125,246) 66,703 --------------------------------------------------------------------------------------- Comprehensive income: Net loss (175,038) (175,038) Equity adjustment for translation of foreign currencies (22,984) (22,984) Other 160 160 Total comprehensive income (197,862) Cash dividends ($.10 per share) (9,351) (9,351) Stock options and other issuances (17,030 common shares and 243,017 treasury shares) 3,703 2,132 5,835 Treasury stock acquired (6,366,900 shares) (101,781) (101,781) Change in par value (5,893) 5,893 - Cancellation of treasury stock (11,850,119 shares) (1,185) (196,525) 197,710 - Acquisition of Witco (53,572,031 shares) 536 995,832 996,368 -------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1999 $ 1,191 $ 1,047,518 $ (200,374) $ (61,238) $ (27,185) $ 759,912 ======================================================================================
See accompanying notes to consolidated financial statements CK WITCO CORPORATION AND SUBSIDIARIES -39- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MERGER On September 1, 1999, the shareholders of Crompton and Knowles Corporation (Crompton) and Witco Corporation (Witco) approved a tax-free stock-for-stock merger of Crompton and Witco (the "Merger"). The terms of the Merger provided that (a) Crompton merge with and into CK Witco Corporation (the "Company") and (b) immediately thereafter, Witco merge with and into the Company, so that the Company is the surviving corporation. Also, under the terms of the Merger, each share of Crompton's common stock was automatically converted into one share of the Company's common stock, and each share of Witco's common stock was exchanged for 0.9242 shares of the Company's common stock. The Merger was accounted for as a purchase and accordingly, the results of operations of Witco have been included in the consolidated financial statements from the date of acquisition. An allocation of the purchase price resulted in cost in excess of the estimated fair value of acquired net assets (goodwill) of approximately $834 million. This is being amortized on a straight-line basis over forty years. ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of all majority-owned subsidiaries. Other affiliates in which the Company has a 20% to 50% ownership are accounted for in accordance with the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. Effective with the Merger, the Company adopted a fiscal year ending on December 31. Prior to the Merger, Crompton's fiscal year ended on the last Saturday in December. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles which requires the Company to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ from these estimates. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with the current year presentation. INVENTORY VALUATION Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) basis. -40- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost, less accumulated depreciation. Depreciation expense ($89.2 million in 1999, $59.4 million in 1998 and $58.7 million in 1997) is computed generally on the straight-line method using the following ranges of asset lives: buildings and improvements: 10 to 40 years, machinery and equipment: 3 to 25 years, and furniture and fixtures: 3 to 10 years. Renewals and improvements which extend the useful lives of the assets are capitalized. Capitalized leased assets and leasehold improvements are depreciated over their useful lives or the remaining lease term, whichever is shorter. Expenditures for maintenance and repairs are charged to expense as incurred. LONG-LIVED ASSETS The Company evaluates the recoverability of the carrying value of long-lived assets, including intangible assets, of each of its businesses by assessing whether the projected cash flows of each of its businesses is sufficient to recover the existing unamortized cost of these assets. In addition, the Company periodically evaluates the future period over which the benefit of long-lived assets will be received, based on the undiscounted value of future cash flows. If the Company determines that any assets have been permanently impaired, the amount of the impaired assets is written-off against earnings in the quarter in which the impairment is determined. INTANGIBLE ASSETS The excess cost over the fair value of net assets of businesses acquired is being amortized on a straight-line basis over 20 to 40 years. Accumulated amortization was $49.4 million and $44.6 million in 1999 and 1998, respectively. Patents, unpatented technology, trademarks and other intangibles (net) of $152.3 million in 1999 and $59 million in 1998, included in other assets, are being amortized principally on a straight-line basis over their estimated useful lives ranging from 6 to 40 years. Accumulated amortization was $135.5 million and $120.9 million in 1999 and 1998, respectively. FINANCIAL INSTRUMENTS Financial instruments are presented in the accompanying consolidated financial statements at either cost or fair value as required by generally accepted accounting principles. TRANSLATION OF FOREIGN CURRENCIES Balance sheet accounts denominated in foreign currencies are translated generally at the current rate of exchange as of the balance sheet date, while revenues and expenses are translated at average rates of exchange during the periods presented. The cumulative foreign currency adjustments resulting from such translation are included in accumulated other comprehensive income. For foreign subsidiaries operating in highly inflationary economies, monetary balance sheet accounts and related revenue and expenses are translated at current rates of exchange while non-monetary balance sheet accounts and related revenues and expenses are trans- -41- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) lated at historical exchange rates. The resulting translation gains and losses related to those countries are reflected in operations and are not significant in any of the years presented. RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred. COMPREHENSIVE INCOME Effective in the first quarter of 1998, the Company adopted FASB Statement No. 130 "Reporting Comprehensive Income." The Statement establishes standards for reporting "Comprehensive Income" and its components in the consolidated financial statements. The adoption of this statement had no impact on the Company's net earnings (loss) or stockholders' equity. Further information is provided in the footnote on Comprehensive Income. STATEMENTS OF CASH FLOWS Cash includes bank term deposits of three months or less. Cash payments during the fiscal years ended 1999, 1998 and 1997 included interest payments of $89.6 million, $79.5 million and $90.8 million and income tax payments of $67 million, $33.5 million and $28.3 million, respectively. OTHER DISCLOSURES Included in accounts receivable are allowances for doubtful accounts in the amount of $23.4 million in 1999 and $9.8 million in 1998. Included in accrued expenses are environmental liabilities of $47.8 million in 1999 and $18.4 in 1998 and merger related accruals of $110.7 million in 1999. Included in other liabilities are environmental liabilities in the amount of $150.2 million in 1999 and $75.6 million in 1998 and pension liabilities of $148.5 million in 1999 and $51.6 million in 1998. In 1997, the Company incurred a $13 million charge related to severance ($6.9 million) and other non-recurring costs ($6.1 million). As of December 31, 1999 all amounts had been realized. ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT Acquired in-process research and development (IPR&D) represents the value assigned in a purchase business combination to research and development projects of the acquired business that had commenced, but had not yet been completed at the date of acquisition, and which, if unsuccessful, have no alternative future use in research and development activities or otherwise. In accordance with FASB Statement No. 2 "Accounting for Research and Development Costs" as clarified by FASB Interpretation No. 4, amounts assigned to purchased IPR&D that meet the above stated criteria must be charged to expense as part of the allocation of the purchase price of the business combination. Accordingly, charges totaling $195 million were re- -42- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) corded in the third quarter of 1999 as part of the allocation of the purchase price related to the acquisition of Witco. The Company engaged an independent appraiser to provide a basis for allocating a portion of the purchase price of Witco to the purchased IPR&D. The fair value assigned to purchased IPR&D was determined by the independent appraiser applying the income approach and a valuation model, incorporating revenue and expense projections, probability of commercial and technological success, stage of development and present value factors. The more significant IPR&D projects were principally in the Polymer Additives and OrganoSilicones segments. The following is a summary of the IPR&D projects and the values assigned: Projected IPR&D Business Percent Completion Value Segment Complete Date (In thousands) - ------------------------------------------------------------------------------- Polymer Additives (a) 24-86% 2000-2003 $ 62,000 OrganoSilicones (b) 8-65% 2000-2001 106,000 Crop Protection (c) 21-37% 2000-2004 27,000 - ------------------------------------------------------------------------------- Total IPR&D $195,000 - ------------------------------------------------------------------------------- (a) Includes the development of an internal anti-static agent for use in acrylic sheets and pellets for extrusion and injection molding ($18,000), replacement of lead-based stabilizers utilized in PVC ($15,000) and approximately 35 other projects ($29,000). (b) Includes the development of a family of chemicals utilized in finished tires, which are expected to provide improved compounding and dispersion of silica in a single compounding pass ($11,000), production of a chemical to be used in the manufacture of silica tires, resulting in improved performance and longer life ($21,000) and approximately 78 other projects ($74,000). (c) Includes approximately 29 projects. Due to the uniqueness of each of the projects, the costs and effort required are estimated based on the latest available information. Additionally, the completion date reflects management's best estimate of the time that the company will begin to benefit from cash inflows or cost reductions from the projects. However, there is a risk that certain projects may not be completed successfully for a variety of reasons including change in strategies, changes in market demand or customer requirements, technology issues, etc. However, the projected revenues, costs, and margins in the cash flow forecasts are substantially consistent with projections utilized by management in evaluating the feasibility of research and development projects. PRO FORMA FINANCIAL INFORMATION The following pro forma unaudited results of operations for the twelve months ended 1999 and 1998, assume the merger had been consummated as of January 1, 1998, and exclude the write-off of acquired in-process research and development of $195 million: -43- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1999 1998 ---------- ------------ Net sales $3,421,651 $3,797,742 ---------- ------------ Earnings before extraordinary loss (a) $ 52,611 $ 234,652 ---------- ------------ Net earnings (a) $ 36,924 $ 213,184 ---------- ------------ Net earnings before extraordinary loss per basic common share $ 0.44 $ 1.85 ---------- ------------ Net earnings before extraordinary loss per diluted common share $ 0.44 $ 1.82 ---------- ------------ Net earnings per basic common share $ 0.31 $ 1.68 ---------- ------------ Net earnings per diluted common share $ 0.31 $ 1.65 ---------- ------------ Weighted average basic shares outstanding 119,489 126,854 ---------- ------------ Weighted average diluted shares outstanding 120,846 128,961 --------------------------- (a) The pro forma net earnings before extraordinary loss and net earnings include the following after-tax special items: (IN THOUSANDS) 1999 1998 ---------- ------------ Restructuring charges (credits) - net $ 1,954 $ (21,100) Environmental charge - 13,435 (Gain) loss on sale of businesses and investment - net 38,731 (95,288) Merger and related costs 20,608 - Facility closure costs - 21,100 Other - 5,000 ---------- ------------ (Earnings) loss from special items $ 61,293 $ (76,853) ---------- ------------ MERGER ACCRUALS As a result of the Merger, the Company recorded $176.1 million of merger related accruals as a component of the cost in excess of acquired net assets (goodwill), summarized as follows: 1999 (IN THOUSANDS) Accrual Payments Balance --------------------------------- Severance and related accruals $ 128,261 $ 53,961 $ 74,300 Merger related fees 41,619 10,400 31,219 Other merger related costs 6,174 967 5,207 --------------------------------- $ 176,054 $ 65,328 $ 110,726 --------------------------------- Also, as a result of the Merger, the Company recorded a charge of $29.5 million during the fourth quarter of 1999, summarized as follows: -44- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1999 (IN THOUSANDS) Charge Realized Balance --------------------------------- Severance and other employee benefit related costs $ 18,959 $ 8,942 $ 10,017 Facility closure and maintenance costs 8,988 125 8,863 Other merger related costs 1,571 406 1,165 ---------------------------------- $ 29,518 $ 9,473 $ 20,045 ---------------------------------- JOINT VENTURES AND DIVESTITURES In December 1999, the Company sold its textile colors business to Yorkshire Group PLC for $86.5 million ($78 million in cash proceeds and a 12.4% equity interest in Yorkshire valued at approximately $8.5 million). The sale resulted in a pre-tax loss of $83.3 million. In January 1999, the Company sold its specialty ingredients business to Chr. Hansen Holding A/S of Denmark for $103 million, which resulted in a pre-tax gain of $42.1 million in the first quarter of 1999. In November 1998, the Company and Bayer Corporation formed a 50/50 joint venture to serve the agricultural seed treatment markets in North America. The basis of the joint venture is the Company's Gustafson seed treatment business. The Company received cash proceeds of $180 million in the transaction which resulted in a fourth quarter 1998 pre-tax gain of $153.4 million. Also, in November 1998, the Company announced the formation of a joint venture with GIRSA, a subsidiary of DESC, S.A. de C.V. to produce nitrile rubber products in Mexico. The joint venture resulted in the closure of the Company's existing nitrile rubber facility in Painesville, Ohio. In connection with the facility closure, the Company incurred a charge of $33.6 million summarized as follows: 1998 1999 (IN THOUSANDS) Charge Realized Balance --------------------------------- Write-off of long lived assets $ 13,811 $ 13,811 $ - Facility closure and maintenance costs 12,239 4,505 7,734 Severance and other costs 7,550 7,550 - --------------------------------- $ 33,600 $ 25,866 $ 7,734 --------------------------------- ACCOUNTS RECEIVABLE PROGRAM The Company has entered into two separate agreements to sell domestic accounts receivable to agent banks. The first agreement, dated December 1998, is a five year agreement to sell up to $82 million in receivables, of which $80 million had been sold at December 31, 1999 and December 26, 1998 at a cost of approximately 6.43% and 5.85%, respectively. The second agreement, dated June 1999, is a three year agreement to sell up to $150 million in receivables, of which $84.7 million had been sold at December 31, 1999 at a cost of approximately 6.12%. These programs reduce financing costs versus borrowings under the revolving credit agreement and diversifies the Company's sources of financing. -45- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) INVENTORIES (IN THOUSANDS) 1999 1998 --------------------------- Finished goods $ 410,513 $ 226,663 Work in process 27,394 45,237 Raw materials and supplies 85,456 62,662 --------------------------- $ 523,363 $ 334,562 --------------------------- PROPERTY, PLANT AND EQUIPMENT (IN THOUSANDS) 1999 1998 --------------------------- Land and improvements $ 50,922 $ 30,380 Buildings and improvements 189,982 155,578 Machinery and equipment 1,264,954 634,136 Furniture and fixtures 41,170 37,989 Construction in progress 163,663 50,000 --------------------------- 1,710,691 908,083 Less accumulated depreciation 448,346 434,680 --------------------------- $ 1,262,345 $ 473,403 --------------------------- LEASES At December 31, 1999, minimum rental commitments related to continuing operations under non-cancelable operating leases amounted to $27.8 million (2000), $24.2 million (2001), $22.2 million (2002), $20.2 million (2003), $19.3 million (2004) and $149.4 million (2005 and thereafter). Rental expenses under operating leases were $20.9 million (1999), $15.8 million (1998) and $16.8 million (1997). Future minimum lease payments under capital leases at December 31, 1999, were as follows: (IN THOUSANDS) - ------------------------------------------------------------------------------- 2000 $ 1,327 2001 1,327 2002 1,327 2003 1,327 2004 1,327 2005 and thereafter 3,981 - ------------------------------------------------------------------------------- Total minimum lease payments 10,616 Amounts representing interest (3,298) - ------------------------------------------------------------------------------- Present value of net minimum lease payments 7,318 Current portion (689) - ------------------------------------------------------------------------------- Long-term obligation $ 6,629 - ------------------------------------------------------------------------------- -46- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Real estate taxes, insurance and maintenance expenses generally are obligations of the Company and, accordingly, are not included as part of rental payments. It is expected that, in the normal course of business, leases that expire will be renewed or replaced by similar leases. INDEBTEDNESS LONG-TERM DEBT (IN THOUSANDS) 1999 1998 ------------------------ Credit facilities $ 680,000 $ 286,280 6.60% Notes due 2003 net of unamortized discount of $5,752, with an effective interest rate of 159,248 - 7.67% 6.125% Notes due 2006, net of unamortized discount of $14,501, with an effective interest rate of 135,499 - 7.71% 6.875% Debentures due 2026, net of unamortized discount of $27,485, with an effective interest rate of 7.58% 122,515 - 7.75% Debentures due 2023, net of unamortized discount of $1,696, with an effective interest rate of 7.82% 108,304 - AIBOR Based Bank Loans due 2003 66,298 - 9% Senior Notes due 2000 1,655 182,261 10.5% Senior Notes due 2002 714 173,128 Other 35,579 5,188 ------------------------- $1,309,812 $ 646,857 ------------------------- The Company's long-term debt instruments are recorded at face value, net of unamortized discounts and premiums. Such discounts and premiums will be amortized to interest expense over the life of the related debt instrument. At December 31, 1999, the Company had outstanding interest rate swap contracts with an aggregate notional amount of $66.3 million. These contracts are used to convert the Company's variable interest rate (AIBOR - Amsterdam Interbank Offered Rate), Dutch guilder denominated debt to fixed rate debt. The weighted average fixed interest rate on these swap contracts was 5.2% at December 31, 1999. DEBT REDEMPTIONS AND REPURCHASES On November 4, 1999, the Company offered to purchase for cash any and all of its outstanding 9% Senior Notes and 10.5% Senior Notes. As a result of the offer, during the fourth quarter of 1999, the Company repurchased $180.6 million of 9% Senior Notes and $149.5 million of 10.5% Senior Notes at a purchase price of 102% and 110%, respectively, plus accrued -47- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) and unpaid interest. Also during 1999, the Company repurchased in the open market $22.9 million of 10.5% Senior Notes. As a result of these repurchases, the Company recognized an extraordinary loss of $15.7 million, net of a tax benefit of $8.9 million. During 1998, the Company redeemed the outstanding 11% Senior Subordinated Notes at a price of 105.5% of the principal amount thereof and the 12% Subordinated Discount Notes at a price of 100% of the principal amount thereof. In addition, the Company repurchased in the open market $44.4 million of 9% Senior Notes and $62.8 million of 10.5% Senior Notes. As a result of the redemptions and repurchases, the Company recognized an extraordinary loss of $21.5 million, net of tax benefit of $13.1 million. During 1997, the Company repurchased in the open market $24 million of 9% Senior Notes, $47.1 million of 10.5% Senior Notes, $3.5 million of 11% Senior Subordinated Notes, and $2.5 million of 12% Subordinated Discount Notes. As a result of the repurchases, the Company recognized an extraordinary loss of $5.3 million, net of tax benefit of $3.5 million. CREDIT FACILITIES On October 28, 1999, the Company entered into a $600 million 364-day senior unsecured revolving credit facility (with an option to renew for an additional year) and a $400 million five-year senior unsecured credit facility with a syndicate of lenders. Borrowings on these facilities are at various rate options to be determined on the date of borrowing. In addition, the Company must pay a facility fee on the aggregate amount of the 364-day and the five-year credit facilities (currently these rates are .15% and .20%, respectively). The Company is also required to pay a utilization fee on the outstanding balance of each of the credit facilities, if such balances are in excess of 33% of the available credit (currently the rate is .25% for both facilities). At December 31, 1999, borrowings under the 364-day and the five-year credit facilities were $280 million and $400 million, respectively, with weighted average interest rates of 7.16% and 6.86%. The Company has classified the 364-day credit facility as long-term based on its ability and intent to refinance this facility with an offering of new long-term notes. On March 7, 2000, $600 million of 8.5% Senior Notes due 2005 and $25 million of floating rate Senior Notes due 2001 were issued via a private placement. The Company also has access to short-term uncommitted facilities based on current money market rates. At December 31, 1999, borrowings under these short-term uncommitted facilities were $75.3 million, with a weighted average interest rate of 6.72%. The Company also has arrangements with various banks for lines of credit for its international subsidiaries aggregating $19.9 million, of which $2.8 million was outstanding at December 31, 1999. DEBT COVENANTS The Company's various debt agreements contain covenants which limit the ability to incur additional debt, create or assume mortgages or engage in mergers, consolidations, and certain sales or leases of assets. In addition, the credit agreement requires the Company to maintain certain financial ratios. -48- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MATURITIES At December 31, 1999, the scheduled maturities of long-term debt during the next five fiscal years are: 2000 - $4 million; 2001 - $2.5 million; 2002 - $2.8 million; 2003 - $233.5 million; and 2004 - $402.4 million. FINANCIAL INSTRUMENTS The Company purchases foreign currency forward contracts that are designated and effective as hedges of recorded transactions (principally foreign currency trade receivables and payables, as well as intercompany debt), which otherwise would expose the Company to foreign currency risk. The Company uses foreign currency swap contracts to reduce its exposure to foreign currency fluctuations from its net investment (including long-term intercompany loans) in its international subsidiaries. The Company also enters into interest rate swap contracts to modify the interest characteristics of its outstanding debt. Further information is provided in the Market Risk and Risk Management Policies section of Management's Discussion and Analysis of Financial Condition and Results of Operations. At December 31, 1999, the Company had outstanding foreign currency forward contracts with aggregate notional amounts of approximately $138 million, to hedge foreign currency risk on accounts receivable and payable and intercompany debt. These forward contracts are generally outstanding for one to six months and are primarily denominated in German marks, Italian lira, Dutch guilders, Swiss and French francs, Hong Kong dollars, and British pounds. At December 31, 1999, the Company had outstanding foreign currency swap contracts with aggregate notional amounts of approximately $170.8 million, to hedge its foreign net investments. At December 31, 1999 the swap contracts are primarily in German marks, which expire in March 2003. At December 31, 1999, the Company had outstanding interest rate swap contracts with an aggregate notional amount of approximately $66.3 million. These contracts are used to convert the Company's variable interest rate Dutch guilder denominated debt to fixed rate debt. At December 26, 1998 the Company had an interest rate lock contract ("Interest Hedge") for $230 million at a rate of 6.04%. The settlement value of the Interest Hedge as of December 26, 1998 was approximately $17 million. During the second quarter of 1999, the Company settled the Interest Hedge. The Interest Hedge would have expired on September 1, 2000. All contracts have been entered into with major financial institutions. The risk associated with these transactions is the cost of replacing these agreements, at current market rates, in the event of default by the counterparties. Management believes the risk of incurring such losses is remote. The carrying amounts for cash, accounts receivable, accounts payable and other current liabilities approximate their fair value because of the short-term maturities of these instruments. The fair value of the note receivable is estimated by discounting the future cash flows -49- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) using the interest rates at which similar loans would be made under current conditions. The fair value of the long-term payable is estimated by discounting the future cash flows using the Company's incremental borrowing rate. The fair value of long-term debt is based on quoted market values. For all other long-term debt which have no quoted market values, the fair value is estimated by discounting projected future cash flows using the Company's incremental borrowing rate. The fair value of interest rate swap and foreign currency forward and swap contracts is the amount at which the contracts could be settled based on quotes provided by investment banking firms. The following table presents the carrying amounts and estimated fair values of material financial instruments used by the Company in the normal course of its business. 1999 --------------------------- CARRYING FAIR (IN THOUSANDS) AMOUNT VALUE - ------------------------------------------------------------------------------- Note receivable $ 8,767 $ 8,694 Long-term payable $ 7,427 $ 7,720 Long-term debt $ 1,309,812 $ 1,280,936 Interest rate swap contracts $ 1,389 $ 635 Foreign currency forward and swap contracts $ 16,732 $ 21,607 - ------------------------------------------------------------------------------- --------------------------- 1998 --------------------------- Carrying Fair (IN THOUSANDS) Amount Value - ------------------------------------------------------------------------------- Long-term debt $ 646,857 $ 685,900 Interest hedge $ -- $ 17,000 - ------------------------------------------------------------------------------- At December 31, 1999, the carrying amount of the note receivable is included in other current assets, the carrying amounts of the long-term payable and the interest rate swap contracts are included in other liabilities, and the carrying amounts of the foreign currency forward and swap contracts are included in other assets. INCOME TAXES The components of earnings (loss) before income taxes and extraordinary loss, and the provision for income taxes are as follows: (IN THOUSANDS) 1999 1998 1997 ------------------------------------ Pretax Earnings (Loss): Domestic $ (153,347) $ 207,595 $ 104,886 Foreign 36,918 91,121 43,860 ------------------------------------ $ (116,429) $ 298,716 $ 148,746 ------------------------------------ Income Taxes: Domestic Current $ 27,949 $ 95,386 $ 22,506 Deferred (10,833) (7,381) 16,989 ---------------------------------- 17,116 88,005 39,495 ---------------------------------- -50- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 1999 1998 1997 ------------------------------------ Foreign Current 41,254 25,473 15,985 Deferred (15,448) 2,015 1,195 ---------------------------------- 25,806 27,488 17,180 ---------------------------------- Total Current 69,203 120,859 38,491 Deferred (26,281) (5,366) 18,184 ---------------------------------- $ 42,922 $ 115,493 $ 56,675 ---------------------------------- The provision (benefit) for income taxes differs from the Federal statutory rate for the following reasons: (IN THOUSANDS) 1999 1998 1997 ------------------------------------ Provision (benefit) at statutory rate $ (40,750) $ 104,551 $ 52,061 Non-deductible acquired IPR&D 68,250 -- -- Impact of valuation allowance 3,216 3,598 (3,616) Goodwill amortization 4,016 4,395 1,619 Foreign income tax rate differential 10,766 (5,686) 674 State income taxes, net of federal benefit (2,105) 7,629 5,141 Other, net (471) 1,006 796 ---------------------------------- Actual provision for income taxes $ 42,922 $ 115,493 $ 56,675 ---------------------------------- Provisions have been made for deferred taxes based on differences between financial statement and tax bases of assets and liabilities using currently enacted tax rates and regulations. The components of the net deferred tax assets and liabilities are as follows: (IN THOUSANDS) 1999 1998 ----------------------- Deferred tax assets: Pension and other postretirement $ 118,989 $ 81,398 Accruals for environmental remediation 59,802 28,992 Merger related accruals 17,226 -- Other accruals 129,660 45,860 NOL and credit carryforwards 79,070 15,774 Inventories and other 4,448 17,147 Deferred tax liabilities: Property, plant and equipment (108,966) (65,771) Intangibles (23,267) (5,862) Financial instruments (29,353) -- Other (10,267) (5,769) ----------------------- Net deferred tax asset before valuation allowance $ 237,342 $ 111,769 Valuation allowance (53,562) (16,064) -51- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Net deferred tax asset after valuation allowance $ 183,780 $ 95,705 ----------------------- Net deferred taxes include $127.8 million and $46.9 million in current assets and $56 million and $48.8 million in long-term assets in 1999 and 1998, respectively. At December 31, 1999, the Company had an aggregate of $147.8 million of net operating loss carryforwards (NOL's) ($116.9 million generated domestically and $30.9 million related to the Company's foreign subsidiaries), $20.9 million of excess foreign tax credits and $4 million of local foreign tax credit carryforwards. The Company has concluded that it is uncertain if it will be able to utilize all of the NOL's or the excess foreign tax credits and the other local foreign tax credits, thus a valuation allowance has been established. The valuation allowance includes $28.6 million related to the NOL's, $4 million for the other local foreign tax credits and $20.9 million related to excess foreign tax credits for which subsequently recognized tax benefits will be applied to reduce goodwill. The Company's NOL's are subject to certain limitations and will begin to expire in 2005. The Company's excess foreign tax credits begin to expire in 2000 and the local foreign tax credits will begin to expire in 2000. A provision has not been made for U.S. taxes which would be payable if undistributed earnings of the foreign subsidiaries of approximately $246 million at December 31,1999, were distributed to the Company in the form of dividends, since certain foreign countries limit the extent of repatriation of earnings, while for others, the Companies intention is to permanently reinvest such foreign earnings. The determination of the amount of the unrecognized deferred tax liability related to undistributed earnings is not practicable. The Company has not recognized a deferred tax liability for the difference between the book basis and the tax basis of its investment in the common stock of its subsidiaries (such difference relates primarily to unremitted earnings of foreign subsidiaries of approximately $247 million) because the Company does not expect this basis to become subject to tax at the parent level as it is the Company's intention to permanently reinvest such foreign earnings. EARNINGS PER COMMON SHARE The computation of basic earnings (loss) per common share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common and common equivalent shares outstanding. The computation of diluted loss per share for fiscal year 1999 equals the basic calculation since common stock equivalents were antidilutive. (IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 ---------------------------------- Earnings (loss) before extraordinary loss $ (159,351) $ 183,223 $ 92,071 ---------------------------------- Net earnings (loss) $ (175,038) $ 161,755 $ 86,829 ---------------------------------- BASIC Weighted average shares outstanding 83,507 73,696 73,373 ---------------------------------- Earnings (loss) before extraordinary loss $ (1.91) $ 2.48 $ 1.25 ---------------------------------- -52- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 ---------------------------------- Net earnings (loss) $ (2.10) $ 2.20 $ 1.18 ---------------------------------- DILUTED Weighted average shares outstanding 83,507 73,696 73,373 Stock options, warrants and other -- 2,004 1,985 equivalents ---------------------------------- Weighted average shares adjusted for 83,507 75,700 75,358 dilution Earnings (loss) before extraordinary $ (1.91) $ 2.42 $ 1.22 loss --------------------------------- Net earnings (loss) $ (2.10) $ 2.14 $ 1.15 --------------------------------- CAPITAL STOCK The Company is authorized to issue 500 million shares of $.01 par value common stock. Prior to the Merger, Crompton was authorized to issue 250 million shares of $.10 par value common stock. There were 119,071,693 and 77,332,751 shares issued at year-end 1999 and 1998, respectively, of which 2,236,500 and 7,962,736 shares were held in the treasury in 1999 and 1998, respectively. In November 1999, the Board of Directors approved a share repurchase program for 10% of the common shares then outstanding, or approximately 11.9 million shares. As of December 31, 1999, the Company had repurchased 2.2 million common shares under that program at an average price of $12.16 per share. In September 1998, the Board of Directors authorized a plan to repurchase 7.5 million shares of the Company's common shares then outstanding. In January 1999, the Company announced a share repurchase program for 6.8 million shares, or approximately 10% of the common shares then outstanding. From September 1998 through the completion of these programs in 1999, the Company repurchased 9.5 million common shares at an average price of $17.85 per share. The Company is authorized to issue 250,000 shares of preferred stock without par value, none of which are outstanding. At the time of the Merger, Crompton's existing preferred share purchase rights were terminated. On September 3, 1999, the Company declared a dividend distribution of one Preferred Share Purchase Right (Rights) on each outstanding share of common stock. These Rights entitle stockholders to purchase one one-hundredth of a share of a new series of junior participating preferred stock at an exercise price of $100. The Rights are only exercisable if a person or group acquires 15% or more of the Company's common stock or announces a tender offer which, if successful, would result in ownership of 15% or more of the Company's common stock. COMPREHENSIVE INCOME Components of accumulated other comprehensive income are as follows: (IN THOUSANDS) 1999 1998 ----------------------- Foreign currency translation adjustment $ (59,602) $ (36,618) Other (1,636) (1,796) ----------------------- Accumulated other comprehensive income $ (61,238) $ (38,414) ----------------------- -53- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) STOCK INCENTIVE PLANS The 1988 Long-Term Incentive Plan (1988 Plan), as amended, authorized the Board to grant stock options, stock appreciation rights, restricted stock and long-term performance awards covering up to 10 million shares to the officers and other key employees of the Company over a period of ten years through October 1998. Non-qualified and incentive stock options were granted under the 1988 plan at prices not less than 100% of the market value on the date of the grant. All outstanding options will expire not more than ten years and one month from the date of grant. The 1993 Stock Option Plan for Non-Employee Directors, as amended in 1996, authorized 200,000 options to be granted to non-employee directors. The options vest over a two year period and are exercisable over a ten year period from the date of grant, at a price equal to the fair market value on the date of grant. The 1998 Long-Term Incentive Plan (1998 Plan) was approved by the shareholders of Crompton in 1999. This plan authorizes the Board to grant stock options, stock appreciation rights, restricted stock and long-term performance awards to eligible employees and stock options to non-employee directors over a ten year period. During 1999, non-qualified and incentive stock options were granted under the 1998 plan at prices not less than 100% of the market value on the date of grant. All outstanding options will expire not more than ten years and one month from the date of grant. The 1998 Plan authorizes the Company to grant shares and options for shares of common stock equal to the sum of (i) shares available for award under the 1988 Plan and the 1993 Stock Option Plan for Non-Employee Directors as of October 18, 1998 and (ii) shares awarded under prior plans of the Company which were forfeited, expired, lapsed, not earned or tendered to pay the exercise price of options or withholding taxes. In 1999, the number of common shares reserved for issuance under the 1998 plan was increased by 2.8 million shares, and pursuant to the Merger, increased by an additional 5 million shares. Under the terms of the Merger, the shareholders also approved the conversion of all outstanding Witco options into options to purchase the Company's common stock. These 4.7 million converted options expired 30 days after the Merger, and are now available for grant under the 1998 Plan. Under the 1988 Plan, 1,261,000 common shares have been transferred to an independent trustee to administer restricted stock awards for the Company's long-term incentive program. At December 31, 1999 deferred compensation relating to such shares in the amount of $0.7 million is being amortized over an estimated service period of six to fifteen years. In 1996, the Company granted long-term incentive awards from the 1988 Plan in the amount of 824,250 shares which were earned at the end of 1998 based upon the achievement of certain financial criteria. The shares earned in 1998 vest ratably at 25% per year with the final installment at retirement. Compensation expense related to such shares is accrued over a six year period. In 1999, the Company granted long-term incentive awards in the amount of 1,207,500 shares to be earned at the end of 2001 if certain financial criteria were met. At the time of the Merger, these awards were cancelled, and upon cancellation, cash payments were made to award recipients. -54- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In October 1999, the Company granted long-term incentive awards in the amount of 2,175,000 shares of restricted stock from the 1998 Plan. These shares will vest over a three year period ending on January 1, 2003 or 2004, depending on when and if certain financial goals are achieved. The compensation expense relating to these shares is being accrued ratably over a three year period. In January 2000, the Company granted long-term incentive awards from the 1998 Plan in the amount of 2,745,750 shares, to be earned at the end of 2002, if certain financial criteria are met. The shares covered by this grant vest ratably over a three year period, upon achievement of the financial criteria, and the compensation expense relating to these shares will be accrued over a six year period. Effective in 1996, the Company adopted the provisions of FASB Statement No. 123 "Accounting and Disclosure of Stock-Based Compensation." As permitted, the Company elected to continue its present method of accounting for stock-based compensation. Accordingly, compensation expense has not been recognized for stock based compensation plans other than restricted stock awards under the Company's long-term incentive programs. Had compensation cost for the Company's stock option and long-term incentive awards been determined under the fair value method, net earnings (loss) (in thousands) would have been $(182,747), $158,641, and $84,660 for the years 1999, 1998 and 1997, respectively. Net earnings (loss) per common share (basic) would have been $(2.19), $2.15, and $1.15 and net earnings (loss) per common share (diluted) would have been $(2.19), $2.06, and $1.11 for the years 1999, 1998 and 1997, respectively. The average fair value per share of options granted was $3.42 in 1999, $5.46 in 1998, and $10.53 in 1997. The fair value of options granted was estimated using the Black-Scholes option pricing model with the following assumptions for 1999, 1998 and 1997, respectively: dividend yield 2.1%, .35%, and .19%, expected volatility 33%, 31%, and 28%, risk-free interest rate 6.3%, 4.6%, and 6.1%, and expected life 8 years, 6 years, and 6 years. Changes during 1999, 1998 and 1997 in shares under option are summarized as follows: Price Per Share --------------------------- Range Average Shares ------------------------------------------- Outstanding at 12/28/96 $ 2.47-23.75 $ 12.47 6,271,975 Granted 19.31-26.41 26.39 613,251 Exercised 2.47-19.31 6.69 (667,733) Lapsed 9.31-19.31 14.62 (86,917) Outstanding at 12/27/97 3.13-26.41 14.46 6,130,576 Granted 14.34 14.34 1,077,112 Exercised 3.13-19.31 9.74 (966,664) Lapsed 13.00-26.41 19.06 (34,543) Outstanding at 12/26/98 3.13-26.41 15.15 6,206,481 Granted 8.34-17.13 9.36 4,320,500 Exercised 5.22-16.88 8.38 (177,865) Lapsed 8.34-26.41 16.24 (115,870) Outstanding at 12/31/99 $ 3.13-26.41 $ 12.81 10,233,246 -55- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Price Per Share --------------------------- Range Average Shares ------------------------------------------- Exercisable at 12/27/97 $ 3.13-23.75 $ 12.32 3,866,992 Exercisable at 12/26/98 $ 3.13-26.41 $ 14.16 3,650,289 Exercisable at 12/31/99 $ 3.13-26.41 $ 15.15 4,461,652 Shares available for grant at year-end 1999 and 1998 were 8,697,610 and 2,552,948, respectively. The following table summarizes information concerning currently outstanding and exercisable options: Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise at end of Contractual Exercise at end of Exercise Prices 1999 Life Price 1999 Price - -------------------------------------------------------------------------------- $ 3.13-5.22 225,139 2.5 $ 4.93 225,139 $ 4.93 $ 8.34-9.31 3,896,532 9.6 $ 8.37 115,032 $ 9.30 $11.75-13.57 1,232,356 3.8 $12.20 1,232,356 $12.20 $14.34-17.13 3,799,856 6.5 $15.15 1,955,637 $15.07 $18.31-26.41 1,079,363 5.2 $22.94 933,488 $22.39 --------------------------------------------------------------- 10,233,246 7.1 $12.81 4,461,652 $15.15 The Company has an Employee Stock Ownership Plan that is offered to eligible employees of the Company and certain of its subsidiaries. The Company makes contributions equivalent to a stated percentage of employee contributions. The Company's contributions were $4.2 million in 1999 and $2 million in 1998 and 1997. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company has several defined benefit and defined contribution pension plans covering substantially all of its domestic employees and certain international employees. Benefits are primarily based on the employees' years of service and compensation during employment. The Company's funding policy for the defined benefit plans is based on contributions at the minimal annual amounts required by law plus such amounts as the Company may deem appropriate. Contributions for the defined contribution plans are determined as a percentage of each covered employees' salary. Plan assets consist of publicly traded securities and investments in commingled funds administered by independent investment advisors. Employees of international locations are covered by various pension benefit arrangements, some of which are considered to be defined benefit plans for financial reporting purposes. Assets of the plans are comprised primarily of insurance contracts and equity securities. Benefits under these plans are primarily based upon levels of compensation. Funding policies are based on legal requirements, tax considerations and local practices. The Company also provides health and life insurance benefits for certain retired and active employees and their beneficiaries and covered dependents for substantially all of its -56- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) domestic employees and certain international employees. These plans are generally not pre-funded and are paid by the Company as incurred.
CHANGE IN BENEFIT OBLIGATION: Pension Plans Post-Retirement Plans ----------------------------------------------- (IN THOUSANDS) 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------- Benefit obligation at beginning $251,798 $ 244,364 $ 151,440 $ 154,829 of year Service cost 7,791 7,635 1,272 1,256 Interest cost 28,345 16,044 10,820 9,958 Plan participants' contributions 328 122 301 91 Plan amendments -- -- -- (238) Actuarial gains (39,936) (2,649) (26,271) (5,374) Foreign currency exchange rate (6,150) (1,724) 258 (432) changes Acquisitions 547,377 -- 78,395 -- Benefits paid (25,051) (13,520) (12,960) (8,650) Curtailments (14,183) 1,526 341 -- - ---------------------------------------------------------------------------------------- Benefit obligation at end of $750,319 $251,798 $203,596 $151,440 year - ----------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS: Pension Plans Post-Retirement Plans ----------------------------------------------- (IN THOUSANDS) 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------- Fair value of plan assets at $203,247 $197,229 $ 40,953 $ 40,002 beginning of year Actual return on plan assets 64,573 17,004 4,966 3,271 Foreign currency exchange rate (3,012) (1,949) -- -- changes Employer contributions 10,296 4,361 10,251 6,239 Plan participants' contributions 328 122 301 91 Acquisitions 471,590 - -- -- Benefits paid (25,051) (13,520) (12,960) (8,650) - ----------------------------------------------------------------------------------------- Fair value of plan assets at $721,971 $203,247 $ 43,511 $ 40,953 end of year - -----------------------------------------------------------------------------------------
FUNDED STATUS: Pension Plans Post-Retirement Plans ----------------------------------------------- (IN THOUSANDS) 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------- Funded status $ (28,348) $(48,551) $(160,085) $(110,487) Unrecognized transition asset 3,499 1,257 -- -- Unrecognized actuarial (gain) loss (78,994) 4,017 (32,298) (2,379) Unrecognized prior service cost 6,377 (2,339) (24,414) (29,861) - ----------------------------------------------------------------------------------------- Net amount recognized $ (97,466) $(45,616) $(216,797) $(142,727) - -----------------------------------------------------------------------------------------
The amounts recognized in the consolidated balance sheets consist of the following:
Pension Plans Post-Retirement Plans ----------------------------------------------- (IN THOUSANDS) 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------- Prepaid benefit costs $ 48,030 $ 1,597 $ -- $ -- Accrued benefit liabilities (148,478) (51,603) (216,797) (142,727) Intangible asset 2,048 3,437 -- -- Accumulated other comprehensive 934 953 -- -- income - ----------------------------------------------------------------------------------------- Net amount recognized $ (97,466) $(45,616) $(216,797) $(142,727) - -----------------------------------------------------------------------------------------
-57- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
COMPONENTS OF NET PERIODIC BENEFIT COST (CREDIT): Pension Plans Post-Retirement Plans --------------------------------------------------------------- (IN THOUSANDS) 1999 1998 1997 1999 1998 1997 - ----------------------------------------------------------------------------------------------------- Service cost $ 7,791 $ 7,635 $ 6,599 $ 1,272 $ 1,256 $1,174 Interest cost 28,345 16,044 15,171 10,820 9,958 10,298 Expected return on plan (31,045) (15,610) (14,328) (3,175) (3,271) (910) assets Amortization of prior 1,166 410 577 (5,561) (6,196) (6,148) service cost Amortization of unrecognized transition obligation (asset) 36 58 (131) -- -- -- Recognized actuarial 5,883 74 136 (1,269) (1,367) (671) (gains) losses Curtailment (gain) loss (14,449) 2,570 -- 196 -- -- recognized - ----------------------------------------------------------------------------------------------------- Net periodic benefit cost $ (2,273) $ 11,181 $ 8,024 $ 2,283 $ 380 $ 3,743 (credit) - -----------------------------------------------------------------------------------------------------
The assumed health care cost trend rate ranged from 7% - 8.8% and is assumed to decrease gradually to a range of 4% - 6.1% in 2020 and remain level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects: One-Percentage One-Percentage Point Point (IN THOUSANDS) Increase Decrease - -------------------------------------------------------------------------------- Effect on the aggregate of the service and interest cost components of net periodic post-retirement health care benefit cost for 1999 $ 1,041 $ (927) Effects on accumulated post-retirement benefit obligation for health care benefits as of December 31, 1999 $17,804 $(15,822) - -------------------------------------------------------------------------------- For plans with benefit obligations in excess of plan assets, the aggregate benefit obligation was $292.2 million in 1999 and $229.2 million in 1998, and the aggregate fair value of plan assets was $188.2 million in 1999 and $178.6 million in 1998. The weighted-average discount rate used to calculate the projected benefit obligation ranged from 5.75% - 7.75% in 1999 and 5.75% - 7% in 1998. The expected long-term rate of return on plan assets ranged from 7% - 9% in 1999 and 7.75% - 9% in 1998. The assumed rate of compensation increase ranged from 2.5% - 4.5% in 1999 and 2% - 4% in 1998. The Company's net cost of pension plans, including defined contribution plans, was $11.2 million, $19 million, and $15 million in 1999, 1998, and 1997, respectively. CONTINGENCIES The Company is involved in claims, litigation, administrative proceedings and investigations of various types in various jurisdictions. A number of such matters involve claims for a material amount of damages and relate to or allege environmental liabilities, including clean-up costs associated with hazardous waste disposal sites, natural resource damages, property damage and personal injury. The Company and some of its subsidiaries have been identified by federal, state or local governmental agencies, and by other potentially responsible parties (each a "PRP") under the Comprehensive Environmental Response, Compensation and Liability -58- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Act of 1980, as amended, or comparable state statutes, as a PRP with respect to costs associated with waste disposal sites at various locations in the United States. In addition, the Company is involved with environmental remediation and compliance activities at some of its current and former sites in the United States and abroad. Each quarter, the Company evaluates and reviews estimates for future remediation and other costs to determine appropriate environmental reserve amounts. For each site, a determination is made of the specific measures that are believed to be required to remediate the site, the estimated total cost to carry out the remediation plan, the portion of the total remediation costs to be borne by the Company and the anticipated time frame over which payments toward the remediation plan will occur. The total amount accrued for such environmental liabilities at December 31, 1999 was $198 million. The Company estimates its potential environmental liability to range from $181 million to $222 million at December 31, 1999. It is reasonably possible that the Company's estimates for environmental remediation liabilities may change in the future should additional sites be identified, further remediation measures be required or undertaken, the interpretation of current laws and regulations be modified or additional environmental laws and regulations be enacted. On May 21, 1997, the United States District Court, Eastern District of Arkansas, entered an order finding that Uniroyal Chemical Co./Cie. (a wholly-owned subsidiary of the Company) is jointly and severally liable to the United States and Hercules Incorporated and Uniroyal Chemical Co./Cie. are liable to each other in contribution with respect to the remediation of the Vertac Chemical Corporation site in Jacksonville, Arkansas. On October 23, 1998, the Court entered an order granting the United State's motion for summary judgment against Uniroyal Chemical Co./Cie and Hercules for removal and remediation costs of $102.9 million at the Vertac site. On February 3, 2000, after trial on the allocation of these costs, the Court entered an order finding Uniroyal Chemical Co./Cie liable to the United States for approximately $2.3 million and liable to Hercules in contribution for approximately $700,000 of these costs. Uniroyal Chemical Co./Cie and Hercules have each appealed to the United States Court of Appeals for the Eighth Circuit. The Company is a defendant in two similar actions arising out of the Company's involvement in the polybutylene resin manufacturing business in the 1970's. The following cases are currently pending in California state courts: Alameda County Water District v. Mobil Oil Corporation, et al., filed in April 1996, and Marin Municipal Water District v. Shell Oil Company, et al., filed in May 1996, both pending in Superior Court for the County of San Mateo. The actions generally allege that the Company and several other defendants negligently misrepresented the performance of polybutylene pipe and fittings installed in water distribution systems. Other allegations include breach of the California Unfair Practices Act, and breach of warranty, fraud and strict liability. It is possible that the Company may be named as a defendant in future actions arising out of its past involvement in the polybutylene resin manufacturing business. The Company intends to assert all meritorious legal defenses and all other equitable factors which are available to it with respect to the above matters. The Company believes that the resolution of these matters will not have a material adverse effect on its consolidated financial position. While the Company believes it is unlikely, the resolution of these matters could -59- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) have a material adverse effect on its consolidated results of operations in any given year if a significant number of these matters are resolved unfavorably. BUSINESS SEGMENT DATA Effective in 1998, the Company adopted FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" which established revised standards for reporting information about operating segments. Pursuant to Statement No. 131 and the Merger, the Company redefined its reporting segments into two major business categories, "Polymer Products" and "Specialty Products." Polymer Products includes reporting segments of Polymer Additives (plastic additives, rubber chemicals and urethane chemicals), Polymers (EPDM, urethanes and nitrile rubber) and Polymer Processing Equipment (specialty processing equipment and controls). Specialty Products includes reporting segments of OrganoSilicones (silanes and specialty silicones), Crop Protection (actives, seed treatment and surfactants) and Other (petroleum additives, refined products, colors and glycerine/fatty acids). The accounting policies of the operating segments are the same as those described in the summary of accounting policies. The Company evaluates a segment's performance based on several factors, of which a primary financial measure is operating profit. In computing operating profit, the following items have not been deducted: amortization, interest expense, other income and income taxes. Corporate assets are principally cash, intangible assets and other assets maintained for general corporate purposes. Prior to 1999, inter-segment sales were not significant. A summary of business data for the Company's reportable segments for the years 1999, 1998 and 1997 follows. INFORMATION BY BUSINESS SEGMENT (IN THOUSANDS) 1999 1998 1997 -------------------------------------------------- SALES Polymer Products Polymer Additives $ 620,188 $ 391,964 $ 417,204 Polymers 316,300 342,527 342,154 Polymer Processing Equipment 300,016 344,480 311,673 Eliminations (3,469) -- -- -------------------------------------------------- 1,233,035 1,078,971 1,071,031 -------------------------------------------------- Specialty Products OrganoSilicones 158,925 -- -- Crop Protection 294,798 348,000 370,091 Other 405,600 369,148 410,058 -------------------------------------------------- 859,323 717,148 780,149 -------------------------------------------------- $ 2,092,358 $ 1,796,119 $ 1,851,180 -------------------------------------------------- (IN THOUSANDS) 1999 1998 1997 -------------------------------------------------- OPERATING PROFIT Polymer Products Polymer Additives $ 67,880 $ 49,215 $ 71,184 Polymers 82,951 79,892 57,824 -60- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 1999 1998 1997 -------------------------------------------------- Polymer Processing Equipment 19,981 46,653 36,983 -------------------------------------------------- 170,812 175,760 165,991 -------------------------------------------------- Specialty Products OrganoSilicones 16,784 -- -- Crop Protection 69,194 84,882 83,478 Other 25,144 35,760 40,104 -------------------------------------------------- 111,122 120,642 123,582 __________________________________________________ General corporate expenses (56,033) (36,544) (37,295) Special items (224,518) (41,560) (28,000) -------------------------------------------------- $ 1,383 $ 218,298 $ 224,278 -------------------------------------------------- DEPRECIATION AND AMORTIZATION Polymer Products Polymer Additives $ 30,054 $18,043 $19,786 Polymers 13,957 14,008 14,453 Polymer Processing Equipment 2,951 3,481 3,111 -------------------------------------------------- 46,962 35,532 37,350 -------------------------------------------------- Specialty Products OrganoSilicones 6,929 -- -- Crop Protection 9,414 8,616 8,252 Other 19,615 15,779 13,635 -------------------------------------------------- 35,958 24,395 21,887 __________________________________________________ Corporate 33,728 20,609 20,619 -------------------------------------------------- $ 116,648 $80,536 $79,856 -------------------------------------------------- SEGMENT ASSETS Polymer Products Polymer Additives $ 788,062 $340,621 $381,389 Polymers 226,678 192,172 225,838 Polymer Processing Equipment 128,679 132,911 156,961 -------------------------------------------------- 1,143,419 665,704 764,188 -------------------------------------------------- Specialty Products OrganoSilicones 384,392 -- -- Crop Protection 316,733 181,036 213,915 Other 438,699 318,073 327,658 -------------------------------------------------- 1,139,824 499,109 541,573 __________________________________________________ Corporate 1,443,375 244,080 243,059 -------------------------------------------------- $ 3,726,618 $1,408,893 $1,548,820 -------------------------------------------------- -61- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) 1999 1998 1997 -------------------------------------------------- CAPITAL EXPENDITURES Polymer Products Polymer Additives $ 49,005 $20,408 $18,833 Polymers 23,938 15,937 8,708 Polymer Processing Equipment 3,204 4,733 2,676 -------------------------------------------------- 76,147 41,078 30,217 -------------------------------------------------- Specialty Products OrganoSilicones 8,586 -- -- Crop Protection 17,458 10,234 8,696 Other 21,333 14,888 11,140 -------------------------------------------------- 47,377 25,122 19,836 -------------------------------------------------- Corporate 8,258 428 123 -------------------------------------------------- $ 131,782 $66,628 $50,176 -------------------------------------------------- EQUITY METHOD INVESTMENTS Polymer Products Polymer Additives $33,051 $31,090 $20,900 Polymers 7,551 -- -- Polymer Processing Equipment -- -- -- -------------------------------------------------- 40,602 31,090 20,900 -------------------------------------------------- Specialty Products OrganoSilicones 52 -- -- Crop Protection 22,262 11,909 -- Other 11,194 -- -- -------------------------------------------------- 33,508 11,909 -- -------------------------------------------------- $74,110 $42,999 $20,900 -------------------------------------------------- GEOGRAPHIC INFORMATION Sales are attributed based on location of customer. (IN THOUSANDS) 1999 1998 1997 -------------------------------------------------- SALES United States $1,140,401 $1,077,190 $1,125,121 Canada 108,041 106,230 107,386 Latin America 132,674 133,870 116,734 Europe/Africa 505,597 359,760 348,294 Asia/Pacific 205,645 119,069 153,645 -------------------------------------------------- $2,092,358 $1,796,119 $1,851,180 -------------------------------------------------- -62- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) PROPERTY, PLANT AND EQUIPMENT United States $ 938,555 $360,241 $374,395 Canada 47,869 22,158 21,040 Latin America 15,021 7,213 6,016 Europe/Africa 233,836 71,168 62,180 Asia/Pacific 27,064 12,623 11,261 -------------------------------------------------- $1,262,345 $473,403 $474,892 -------------------------------------------------- SUMMARIZED UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 ---------------------------------------------------- FIRST SECOND THIRD FOURTH ---------------------------------------------------- Net sales $ 396,292 $409,174 $500,429 $786,463 Gross profit 148,997 160,592 170,799 250,597 Earnings (loss) before extraordinary loss 59,203 37,969 (179,920) (76,603) Net earnings (loss) 59,203 36,884 (180,128) (90,997) Earnings (loss) before extraordinary loss per common share Basic .87 .58 (2.21) (.64) Diluted .86 .57 (2.21) (.64) Net earnings (loss) per common share: Basic .87 .56 (2.21) (.77) Diluted .86 .55 (2.21) (.77) Common dividends per share - .05 - .05 Market price per common share: High 21 3/8 20 15/16 20 7/16 14 15/16 Low 15 5/16 14 15/16 13 7/8 7 1/8 The sum of earnings per common share for the four quarters do not equal the total earnings per common share for 1999 due to changes in the average number of shares outstanding. 1999 ---------------------------------------------------- First Second Third Fourth ---------------------------------------------------- Net sales $477,219 $474,337 $442,768 $401,795 Gross profit 174,754 182,246 163,168 129,751 Earnings before extraordinary loss 31,943 39,795 30,592 80,893 Net earnings 29,992 25,952 24,918 80,893 Earnings before extraordinary loss per common share Basic .43 .53 .41 1.13 Diluted .42 .52 .40 1.11 Net earnings per common share: Basic .40 .35 .34 1.13 Diluted .39 .34 .33 1.11 Common dividends per share - .05 - - Market price per common share: High 31 1/16 32 13/16 26 7/8 21 9/16 Low 25 7/16 23 13 3/8 13 1/4 -63- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The sum of earnings per common share for the four quarters do not equal the total earnings per common share for 1998 due to changes in the average number of shares outstanding. -64- RESPONSIBILITY FOR FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles and have been audited by KPMG LLP, Independent Certified Public Accountants, whose report is presented herein. Management of the Company assumes responsibility for the accuracy and reliability of the financial statements. In discharging such responsibility, management has established certain standards which are subject to continuous review and are monitored through the Company's financial management and internal audit group. The Board of Directors pursues its oversight role for the financial statements through its Audit Committee which consists of outside directors. The Audit Committee meets on a regular basis with representatives of management, the internal audit group and KPMG LLP. -65- INDEPENDENT AUDITORS' REPORT THE BOARD OF DIRECTORS AND STOCKHOLDERS CK WITCO CORPORATION We have audited the accompanying consolidated balance sheets of CK Witco Corporation and subsidiaries (the Company) as of December 31, 1999 and December 26, 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1999 and December 26, 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. (KPMG signature) Stamford, Connecticut January 31, 2000, except for the private placement information described in the note captioned "Credit Facilities" as to which the date is March 7, 2000 -66-
FIVE YEAR SELECTED FINANCIAL DATA (In millions of dollars, except per share data) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Net sales $ 2,092.4 1,796.1 1,851.2 1,804.0 1,744.8 Cost of products sold $ 1,361.4 1,146.2 1,196.0 1,170.6 1,126.2 Selling, general and administrative $ 331.1 264.7 269.4 279.8 270.3 Depreciation and amortization $ 116.6 80.5 79.9 82.6 80.1 Research and development $ 68.0 52.8 53.6 52.4 50.1 Equity income $ (10.6) -- -- -- -- Acquired in-process research and $ 195.0 -- -- -- -- development Merger and related costs $ 29.5 -- -- 85.0 -- Facility closure costs $ -- 33.6 -- -- -- Severance and other costs $ -- -- 13.0 -- -- Special environmental charge $ -- -- 15.0 30.0 -- Operating profit $ 1.4 218.3 224.3 103.6 218.1 Interest expense $ 69.8 78.5 103.3 114.2 122.4 Other expense (income) $ 48.0 (158.9) (27.8) (1.3) (2.7) Earnings (loss) before income taxes $ (116.4) 298.7 148.8 (9.3) 98.4 and extraordinary loss Provision (benefit) for income $ 42.9 115.4 56.7 12.7 (41.5) taxes Earnings (loss) before $ (159.3) 183.3 92.1 (22.0) 139.9 extraordinary loss Extraordinary loss $ (15.7) (21.5) (5.3) (.5) (8.3) Net earnings (loss) $ (175.0) 161.8 86.8 (22.5) 131.6 Special items, net of tax (included above): Acquired in-process research and $ (195.0) -- -- -- -- development Merger and related costs $ (20.6) -- -- (68.1) -- Textile colors loss $ (65.5) -- -- -- -- Specialty ingredients gain $ 26.8 -- -- -- -- Seed treatment gain $ -- 92.1 -- -- -- Facility closure costs $ -- (21.1) -- -- -- Severance and other costs $ -- -- (7.8) -- -- Special environmental charge $ -- -- (9.0) (18.5) -- Postretirement settlement gain $ -- -- 16.8 -- -- Early extinguishment of debt $ (15.7) (21.5) (5.3) (.5) (8.3) Change in deferred tax valuation $ -- -- -- -- 78.9 allowance Other $ -- (5.0) -- -- 4.4 Total special items, net of tax $ (270.0) 44.5 (5.3) (87.1) 75.0 PER SHARE STATISTICS Basic Earnings (loss) before $ (1.91) 2.48 1.25 (.31) 2.13 extraordinary loss Net earnings (loss) $ (2.10) 2.20 1.18 (.31) 2.01 Diluted Earnings (loss) before $ (1.91) 2.42 1.22 (.31) 2.11 extraordinary loss Net earnings (loss) $ (2.10) 2.14 1.15 (.31) 1.99 Dividends $ .10 .05 .05 .27 .52 Book value $ 8.82 .32 (.27) (1.32) (.83) Common stock trading range: High 21 3/8 32 13/16 27 3/8 20 1/8 20 Low 7 1/8 13 1/4 17 7/8 13 12 Average shares outstanding 83,507 73,696 73,373 72,026 65,572 (thousands) - Basic Average shares outstanding 83,507 75,700 75,358 72,026 66,269 (thousands) - Diluted FINANCIAL POSITION Current assets $ 1,119.8 597.8 715.0 742.2 697.0 Non-current assets $ 2,606.8 811.1 833.8 915.0 958.8 Total assets $ 3,726.6 1,408.9 1,548.8 1,657.2 1,655.8 Current liabilities $ 978.0 394.4 363.1 357.5 420.6 Long-term debt $ 1,309.8 646.9 896.3 1,055.0 974.2 Other liabilities $ 678.9 300.9 309.5 341.1 320.2 Stockholders' equity (deficit) $ 759.9 66.7 (20.1) (96.4) (59.2) Current ratio 1.1 1.5 2.0 2.1 1.7 Total capital $ 2,150.9 730.9 878.0 967.9 1,020.1 Total debt-to-capital % 64.7 90.9 102.3 110.0 105.8 PROBABILITY STATISTICS (BEFORE SPECIAL ITEMS) % Operating profit on sales 10.8 14.5 13.6 12.1 12.2 % Earnings on sales 4.5 6.5 5.0 3.6 3.2 % Earnings on average total capital 11.4 18.6 16.5 12.8 14.2 OTHER STATISTICS EBITDA before special items $ 342.5 340.4 332.1 301.2 305.5 Capital spending $ 131.8 66.6 50.2 39.2 87.7
-67-
FIVE YEAR SELECTED FINANCIAL DATA (In millions of dollars, except per share data) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Depreciation $ 89.2 59.4 58.7 59.2 57.4 Number of employees 8,612 5,536 5,583 5,725 5,641
-68- RESPONSIBLE CARE(R) STATEMENT [PHOTO] After an extensive collaboration with federal and state regulators, local stakeholders and national environmental groups, our Sistersville, West Virginia facility became the first chemical plant in the U.S. to initiate an approved project under the EPA's Project XL. Project XL encourages companies to undertake innovative and often cost-saving approaches in lieu of restrictive federal environmental regulations. Under the Sistersville program, we installed efficient vent emission controls that reduce our emissions by about 200,000 pounds a year. Under the deferred federal regulatory requirements, controls on the plant's wastewater treatment facility would have reduced our emissions by 130,000 pounds annually. The cost to the Sistersville plant was $700,000, versus $5 million that the federal regulations would have required. Also as part of the project, we have recycled over one million pounds of methanol for beneficial reuse. Sistersville has an active Pollution Prevention Council, made up of a broad cross-section of employees, that has implemented projects to substantially reduce waste while saving the company $1 million annually. All of CK Witco is dedicated to the Responsible Care principles of the Chemical Manufacturers Association that call for "continuous progress toward the vision of no accidents, injuries or harm to the environment." [LOGO] [PHOTO CAPTION]: ABOVE: WILD TURKEYS AND OTHER WILDLIFE ARE TESTIMONIALS TO THE ENVIRONMENTAL PROTECTION PROGRAM AT SISTERSVILLE. HERE TURKEYS FEED ABOVE A CAPPED LANDFILL AT THE FACILITY. -69- CORPORATE MANAGEMENT [PHOTO] [PHOTO CAPTION]: STANDING (LEFT TO RIGHT): JAMES J. CONWAY, WILLIAM A. STEPHENSON, ALFRED F. INGULLI, VINCENT A. CALARCO, ROBERT W. ACKLEY, JOSEPH B. EISENBERG, WALTER K. RUCK, AND MARY GUM. SEATED (LEFT TO RIGHT): JOHN T. FERGUSON II, CHARLES J. MARSDEN, MARVIN H. HAPPEL, AND PETER BARNA. VINCENT A. CALARCO Organization and Chairman, President and Administration Chief Executive Officer CHARLES J. MARSDEN ROBERT W. ACKLEY Senior Vice President Executive Vice President Strategy and Development Polymer Processing Equipment WALTER K. RUCK Senior Vice President JAMES J. CONWAY Operations Executive Vice President Performance Chemicals and OTHER CORPORATE Elastomers OFFICERS JOSEPH B. EISENBERG BRIAN J. DICK Executive Vice President Vice President, Finance Polymer Additives JOHN R. JEPSEN MARY GUM Vice President, Treasurer Executive Vice President OrganoSilicones MICHAEL F. VAGNINI Corporate Controller ALFRED F. INGULLI Executive Vice President GERALD H. FICKENSCHER Crop Protection Regional Vice President Europe, Africa & the Middle WILLIAM A. STEPHENSON East Executive Vice President Urethanes and Petroleum EDWARD L. HAGEN Additives Regional Vice President Asia-Pacific PETER BARNA Senior Vice President and MICHEL J. DUCHESNE Chief Financial Officer Regional Vice President Latin America JOHN T. FERGUSON II Senior Vice President general Counsel and Secretary MARVIN H. HAPPEL Senior Vice President -70- BOARD OF DIRECTORS CORPORATE DATA JAMES A. BITONTI (3) CORPORATE HEADQUARTERS Chief Executive Officer DSS/BITCO International One American Lane Greenwich, CT 06831 SIMEON BRINBERG (1,4) (203) 552-2000 Senior Vice President www.ckwitco.com BRT Realty Trust AUDITORS VINCENT A. CALARCO KPMG LLP Chairman of the Board Stamford Square President 3001 Summer Street and Chief Executive Officer Stamford, CT 06905 ROBERT A. FOX (1,4) President and Chief Executive Officer TRANSFER AGENT AND REGISTRAR Foster Farms ChaseMellon Shareholder Services L.L.C. Roger L. Headrick (2,3) 85 Challenger Road Managing General Partner Ridgefield Park, NJ 07660 HMCH Ventures (800) 288-9541 www.chasemellon.com Leo I. Higdon, Jr. (2) President ANNUAL MEETING Babson College The annual meeting of stockholders will be held at 11:15 a.m. on Tuesday, April 25, 2000, at the Sheraton Stamford Hotel, HARRY G. HOHN (2,3) 2701 Summer Street, Stamford, CT 06905 Retired Chairman and Chief Executive Officer New York Life Insurance Company FORM 10-K NICHOLAS PAPPAS, PH.D. (4) A copy of the Company's report on Form Vice Chairman of the Board 10-K for 1999, as filed with the BioTraces, Inc. Securities and Exchange Commission, may Retired Executive Vice President be obtained free of charge by writing to E.I. du Pont de Nemours and Company the Secretary of the Corporation, Benson Road, Middlebury, CT 06749 INVESTOR RELATIONS C.A. PICCOLO (1,4) President and William A. Kuser Chief Executive Officer CK Witco Corporation HealthPic Consultants, Inc. One American Lane Greenwich, CT 06831 Bruce F. Wesson (1) (203) 552-2000 President bill-kuser@ckwitco.com Galen Associates General Partner PUBLIC RELATIONS Galen Partners, L.P. Robert P. Harwood PATRICIA K. WOOLF, PH.D. (1,4) CK Witco Corporation Private Investor and Lecturer Benson Road Department of Molecular Biology Middlebury, CT 06749 Princeton University (203) 573-2000 robert-harwood@ckwitco.com 1 Member of Audit Committee (C) 2000 CK Witco Corporation. All 2 Member of Finance and Pension Committee rights reserved. 3 Member of Organization, Compensation (R) and TM indicate registered and and Governance Committee unregistered trade and service 4 Member of Safety, Health and marks. Environment Committee CK WITCO CORPORATION ONE AMERICAN LANE, GREENWICH, CT 06831 WWW.CKWITCO.COM EX-21 20 SUBSIDIARIES OF CK WITCO CORPORATION Percentage of Voting Securities Owned Directly or State or Indirectly by Country of CK Witco Corporation Organization 9056-0921 Quebec Inc. 100.0 Canada Agro ST Inc. 100.0 Delaware Assured Insurance Company 100.0 Vermont Baxenden Chemicals Limited 53.5 United Kingdom Baxenden Scandinavia AS 53.5 Denmark CNK Disposition Corporation 100.0 Florida CNK One B.V. 100.0 The Netherlands CNK Two B.V. 100.0 The Netherlands CNK Italiana SRL 100.0 Italy CK Holding Corporation 100.0 Delaware CK Witco Asia Pacific PTE Ltd. 100.0 Singapore CK Witco China Limited. 100.0 China CK Witco Europe Financial Services Co. 100.0 Delaware CK Witco Financial Services Co. 100.0 Ireland CK Witco Funding Corporation 100.0 Delaware CK Witco Hong Kong Limited 100.0 Hong Kong CK Witco International Corporation 100.0 New Jersey CK Witco International Services Corporation 100.0 Connecticut CK Witco Singapore Private Limited 100.0 Singapore Crompton & Knowles Acceptance Corporation 100.0 Massachusetts Crompton & Knowles Canada Ltd. 100.0 Canada Crompton & Knowles Chemische Produckte GmbH & Co. K.G. 100.0 Dusseldorf Crompton & Knowles Colors Incorporated 100.0 Delaware Crompton & Knowles Europe S.P.R.L 100.0 Belgium Crompton & Knowles International, Inc. 100.0 US Virgin Islands Crompton & Knowles International SARL 100.0 France Crompton & Knowles I.P.R. Corporation 100.0 Delaware Crompton & Knowles Overseas Corporation 100.0 Delaware Crompton & Knowles Realty Corporation 100.0 Pennsylvania Crompton & Knowles Receivables Corporation 100.0 Delaware Crompton & Knowles Services S.P.R.L. 100.0 Belgium Crompton & Knowles Specialties Holdings B.V. 100.0 The Netherlands Davis-Standard Corporation 100.0 Delaware Davis-Standard (France) SARL 100.0 France Davis-Standard (Deutschland) GmbH 100.0 Germany Davis-Standard Limited 100.0 England & Wales Enenco, Incorporated 50.0 New York ER-WE-PA Davis-Standard GmbH 100.0 Germany Ecart, Inc 100.0 Nevada Firma W/K Witco EPA 50.0 The Netherlands GT Seed Treatment, Inc. 100.0 Minnesota Gustafson International Company 100.0 Texas Gustafson LLC 50.0 Delaware Gustafson Partnership 50.0 Ontario Hannaford Seedmaster Services (Australia) Pty. Ltd. 100.0 Australia Industrias Gustafson S.A. de C.V. 100.0 Mexico Immobiliaria Huilquimex, S.A. de C.V. 100.0 Mexico Interbel Trading, Inc. 100.0 Florida Jonk BV 100.0 The Netherlands Kem Manufacturing Corporation 100.0 Georgia Kem International Corporation 100.0 Delaware Lokar Enterprises, Inc. 100.0 Delaware Naugatuck Treatment Company 100.0 Connecticut Nerap Expeditie BV 100.0 The Netherlands ParaTec S.A. de C.V. 49.0 Mexico OSi Specialties Inc. (Chile) Limitada 100.0 Chile ParaTec Elastomers LLC 51.0 Delaware PT Witco Indonesia. 100.0 Indonesia Quebec, Inc. 100.0 Canada Rubicon Inc. 50.0 Louisiana TOA Uni Chemicals Ltd. 48.98 Thailand TOA Uni Chemical Manufacturing Ltd 48.94 Thailand Trace Chemicals LLC 100.0 Delaware Unicorb Limited 100.0 England Uniroyal Chemica Srl 100.0 Italy Uniroyal Chemical Asia, Ltd. 100.0 Delaware Uniroyal Chemical Asia Pte. Ltd. 100.0 Singapore Uniroyal Chemical B.V. 100.0 The Netherlands Uniroyal Chemical Brazil Holding, Inc. 100.0 Delaware Uniroyal Chemical Co./Cie. 100.0 Canada Uniroyal Chemical Company, Inc. 100.0 New Jersey Uniroyal Chemical Company Limited 100.0 Bahamas/ Delaware Uniroyal Chemical (Europe) B.V. 100.0 The Netherlands Uniroyal Chemical European Holdings B.V. 100.0 The Netherlands Uniroyal Chemical Export Limited 100.0 Delaware Uniroyal Chemical Holding S.A. de C.V. 100.0 Mexico Uniroyal Chemical Holdings B.V. 100.0 The Netherlands Uniroyal Chemical International Company 100.0 Texas Uniroyal Chemical International Sales Corp. 100.0 Barbados Uniroyal Chemical Investments Ltd. 100.0 Canada Uniroyal Chemical Korea Inc. 100.0 Korea Uniroyal Chemical Leasing Company, Inc. 100.0 Delaware Uniroyal Chemical Limited 100.0 Scotland Uniroyal Chemical Netherlands B.V. 100.0 The Netherlands Uniroyal Chemical Overseas B.V. 100.0 The Netherlands Uniroyal Chemical Partipacoes Ltda 100.0 Brazil Uniroyal Chemical (Proprietary) Limited 100.0 South Africa Uniroyal Chemical Pty. Ltd. 100.0 Australia Uniroyal Chemical S.A 100.0 Spain Uniroyal Chemical S.A. de C.V. 100.0 Mexico Uniroyal Chemical S.A.R.L. 100.0 Switzerland Uniroyal Chemical Specialties, Inc. 100.0 Delaware Uniroyal Chemical Taiwan Ltd. 80.0 Taiwan Uniroyal Chemical Technology B.V. 100.0 The Netherlands Uniroyal Quimica S.A. 100.0 Brazil Uniroyal Quimica Sociedad Anonima Comerciale Industrial 100.0 Argentina Witco (Europe) S.A. 100.0 Switzerland Witco Australia Pty Limited 100.0 Australia Witco Benelux N.V 100.0 Belgium Witco BV 100.0 The Netherlands Witco Canada Inc. 100.0 Canada Witco Corporation (Malaysia) Sdn Bhd. 100.0 Malaysia Witco Corporation UK Osil Group Limited 100.0 United Kingdom Witco Corporation UK Limited 100.0 United Kingdom Witco Deutschland GmbH 100.0 Germany Witco do Brasil Ltda 100.0 Brazil Witco Dominion Financial Services Company, Ltd. 100.0 Canada Witco Ecuador S.A. 100.0 Ecuador Witco Espana, S.L. 100.0 Spain Witco Europe Investment Partners 100.0 Delaware Witco Foreign Sales Corporation 100.0 Barbados Witco GmbH 100.0 Germany Witco Grand Banks, Inc. 100.0 Canada Witco Handels GmbH. 100.0 Austria Witco Investment Holdings BV 100.0 The Netherlands Witco Investments BV 100.0 The Netherlands Witco Investments SNC 100.0 France Witco Ireland Investment Company Limited 100.0 Ireland Witco Italiana SrL 100.0 Italy Witco Korea Ltd. 100.0 Korea Witco Mexico S.A. de C.V. 100.0 Mexico Witco Polymers and Resins BV. 100.0 The Netherlands Witco S.A. 100.0 France Witco Solvay Duromer GmbH 50.0 Germany Witco Specialties (Thailand) Ltd. 100.0 Thailand Witco Specialties Italia S.p.A. 100.0 Italy Witco Specialties PTE Ltd. 100.0 Singapore Witco Surfactants GmbH 100.0 Germany Witco Taiwan Ltd. 100.0 Taiwan Witco Warmtekracht BV 100.0 The Netherlands EX-23 21 Independent Auditors' Report and Consent The Board of Directors and Stockholders CK Witco Corporation: Under date of January 31, 2000, except for the private placement information described in the note captioned "Credit Facilities" as to which the date is March 7, 2000, we reported on the consolidated balance sheets of CK Witco Corporation and subsidiaries (the Company) as of December 31, 1999 and December 26, 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended December 31,1999, which are incorporated by reference in this Form 10 K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule included in this Form 10 K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audit. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to the incorporation by reference in the registration statements (Nos. 33-21246, 33-42280, 33-67600, 333-62429 and 333- 87035) on Form S-8 of CK Witco Corporation of our report, dated January 31, 2000, except for the private placement information described in the note captioned "Credit Facilities" as to which the date is March 7, 2000, relating to the consolidated balance sheets of CK Witco Corporation and subsidiaries as of December 31, 1999 and December 26, 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 1999, which report is incorporated by reference in the December 31, 1999 Annual Report on Form 10-K of CK Witco Corporation. Stamford, Connecticut March 29, 2000 EX-24 22 POWER OF ATTORNEY We, the undersigned officers and directors of CK Witco Corporation, hereby constitute and appoint Vincent A. Calarco, Peter Barna and John T. Ferguson II, and each of them severally, our true and lawful attorneys or attorney, with full power to them and each of them to execute for us, and in our names in the capacities indicated below, and to file with the Securities and Exchange Commission the Annual Report on Form 10-K of CK Witco Corporation for the fiscal year ended December 31, 1999, and any and all amendments thereto. IN WITNESS WHEREOF, we have signed this Power of Attorney in the capacities indicated on January 25, 2000. /s/Peter Barna /s/James A. Bitonti Peter Barna James A. Bitonti Principal Financial Officer Director Senior Vice President and Chief Financial Officer /s/Simeon Brinberg /s/Vincent A. Calarco Simeon Brinberg Vincent A. Calarco Director Principal Executive Officer, Chairman, President, CEO and Director /s/Brian Dick /s/Robert A. Fox Brian Dick Robert A. Fox Principal Accounting Officer Director Vice President - Finance /s/Roger L. Headrick /s/Leo I. Higdon, Jr. Roger L. Headrick Leo I. Higdon, Jr. Director Director /s/Harry G. Hohn /s/Nicholas Pappas Harry G. Hohn Nicholas Pappas Director Director /s/C.A. Piccolo /s/Bruce F. Wesson C. A. Piccolo Bruce F. Wesson Director Director /s/Patricia K. Woolf Patricia K. Woolf Director EX-27 23
5 0001091862 CK WITCO CORPORATION 1,000 12-MOS DEC-31-1999 DEC-31-1999 10,543 0 411,536 23,356 523,363 1,119,753 1,262,345 448,346 3,726,618 977,970 1,309,812 0 0 1,191 758,721 3,726,618 2,092,358 2,092,358 1,361,373 2,090,975 47,979 3,937 69,833 (116,429) 42,922 (159,351) 0 (15,687) 0 (175,038) (2.10) (2.10)
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