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Table of Contents
Index to Consolidated Financial Statements
As filed with the Securities and Exchange Commission on March 29, 2013
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2012 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR |
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o |
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-35370
LUXFER HOLDINGS PLC
(Exact name of Registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
Anchorage Gateway, 5 Anchorage Quay,
Salford, England M50 3XE
(Address of principal executive offices)
Dan Stracner, Investor Relations
3016 Kansas Avenue,
Riverside, California,
92507, United States
Telephone No. 001 951 341 2375, E-Mail: dan.stracner@luxfer.net
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
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Name of each exchange on which registered
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American Depositary Shares, each representing one-half of an Ordinary Share of £1 each | New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 13,406,326 Ordinary Shares of £1 each and 769,413,708,000 Deferred Ordinary Shares of £0.0001 each.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No ý
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 ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o | International Financial Reporting Standards as issued by the International Accounting Standards Board ý | Other o |
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
TABLE OF CONTENTS
GENERAL INFORMATION
In this annual report on Form 20-F ("Annual Report") references to "Company", "Luxfer", "Luxfer Group", "we", "us" and "our" are to Luxfer Holdings PLC and, except as the context requires, its consolidated subsidiaries.
PRESENTATION OF FINANCIAL AND OTHER DATA
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") as they apply to the financial statements of the Group. The consolidated financial statements have been prepared on a historical cost basis, except where IFRS requires or permits fair value measurement.
All references in this Annual Report to (i) "US Dollar", "USD" or "$" are to the currency of the United States, (ii) "Pounds Sterling", "GBP sterling", "pence", "p" or "£" are to the currency of the United Kingdom and (iii) "Euro" or "€" are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains certain statements, statistics and projections that are, or may be, forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding our future financial position, strategy, plans and objectives for the management of future operations, is not warranted or guaranteed. These statements typically contain words such as "believes", "intends", "expects", "anticipates", "estimates", "may", "will", "should" and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, factors identified in "Risk Factors", "Information on the Company" and "Operating and Financial Review and Prospects", or elsewhere in this Annual Report, as well as:
You are urged to read the sections "Risk Factors", "Information on the Company" and "Operating and Financial Review and Prospects" of this Annual Report for a more complete discussion of the factors that could affect our performance and the industry in which we operate.
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
A. Selected Financial Data
The following selected consolidated financial data of Luxfer as of December 31, 2012, 2011, 2010, 2009 and 2008 and for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements and the related notes appearing elsewhere in this Annual Report, which have been prepared in accordance with IFRS-IASB. Our historical results are not necessarily indicative of results to be expected for future periods.
This financial data should be read in conjunction with our audited consolidated financial statements and the related notes and Item 5, "Operating and Financial Review and Prospects" below.
Consolidated Statement of Income Data
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Year Ended December 31, | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | 2009 | 2008 | ||||||
|
(In $ million, except share and per share data)
|
||||||||||
Continuing operations |
|||||||||||
Revenue: |
|||||||||||
Elektron |
$265.3 | $287.5 | $203.5 | $184.8 | $241.5 | ||||||
Gas Cylinders |
246.3 | 223.3 | 199.2 | 186.5 | 234.4 | ||||||
|
$511.6 | $510.8 | $402.7 | $371.3 | $475.9 | ||||||
Cost of sales |
(385.7 | ) | (390.4 | ) | (305.1 | ) | (295.7 | ) | (381.8 | ) | |
Gross profit |
125.9 | 120.4 | 97.6 | 75.6 | 94.1 | ||||||
Other income/(costs) |
| 2.0 | 0.1 | 0.1 | 0.5 | ||||||
Distribution costs |
(6.9 | ) | (7.3 | ) | (7.4 | ) | (6.8 | ) | (8.3 | ) | |
Administrative expenses |
(50.1 | ) | (48.9 | ) | (44.5 | ) | (40.4 | ) | (44.4 | ) | |
Share of start-up costs of joint venture |
(0.1 | ) | (0.2 | ) | (0.1 | ) | (0.1 | ) | | ||
Trading profit |
$68.8 | $66.0 | $45.7 | $28.4 | $41.9 | ||||||
Restructuring and other income (expense) (1) |
(2.1 | ) | 0.2 | (0.8 | ) | (1.1 | ) | (3.2 | ) | ||
Operating profit |
$66.7 | $66.2 | $44.9 | $27.3 | $38.7 | ||||||
Acquisition costs (2) |
(0.6 | ) | | | (0.5 | ) | | ||||
Disposal costs of intellectual property (3) |
(0.2 | ) | (0.2 | ) | (0.4 | ) | | | |||
Finance income: |
|||||||||||
Interest received |
0.2 | 0.2 | 0.2 | 0.2 | 0.3 | ||||||
Gain on purchase of own debt |
| 0.5 | | | |||||||
Finance costs: |
|||||||||||
Interest costs |
(6.7 | ) | (9.2 | ) | (9.6 | ) | (11.8 | ) | (17.7 | ) | |
Profit on operations before taxation |
$59.4 | $57.0 | $35.6 | $15.2 | $21.3 | ||||||
Tax expense |
(17.0 | ) | (13.6 | ) | (9.9 | ) | (5.7 | ) | (8.2 | ) | |
Profit for the year |
$42.4 | $43.4 | $25.7 | $9.5 | $13.1 | ||||||
1
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Year Ended December 31, | ||||||||||
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2012 | 2011 | 2010 | 2009 | 2008 | ||||||
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(In $ million, except share and per share data)
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||||||||||
Profit for the year attributable to controlling interests |
$42.4 | $43.4 | $25.7 | $9.5 | $12.9 | ||||||
Profit for the year attributable to non controlling interest |
| | | | 0.2 | ||||||
Profit from continuing operations per ordinary share (4) : |
|||||||||||
Basic |
$3.95 | $4.39 | $2.61 | $0.97 | $1.31 | ||||||
Diluted |
$3.98 | $4.35 | $2.59 | $0.96 | $1.30 | ||||||
Weighted average ordinary shares outstanding (4) : |
|||||||||||
Basic |
10,741,677 | 9,884,145 | 9,851,204 | 9,824,326 | 9,824,326 | ||||||
Diluted |
10,927,446 | 9,980,055 | 9,919,104 | 9,894,726 | 9,894,726 | ||||||
Dividends declared and paid during the year per share (5) : |
$0.59 | | | | |
Consolidated Balance Sheet Data
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As of December 31, | ||||||||||
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2012 | 2011 | 2010 | 2009 | 2008 | ||||||
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(In $ million)
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||||||||||
Total assets |
$390.5 | $364.3 | $296.6 | $273.7 | $298.8 | ||||||
Total liabilities |
241.7 | 299.5 | 231.4 | 238.0 | 264.8 | ||||||
Total equity |
148.8 | 64.8 | 65.2 | 35.7 | 34.0 | ||||||
Cash and short term deposits |
40.2 |
22.2 |
10.3 |
2.9 |
2.9 |
||||||
Non-current bank and other loans |
63.5 | 129.4 | | 10.1 | | ||||||
Senior Loan Notes due 2012 |
| | 106.3 | 115.8 | 104.7 | ||||||
Current bank and other loans |
| 3.1 | 9.6 | | 39.3 |
Non-GAAP Financial Measures
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Year ended December 31, | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
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2012 | 2011 | 2010 | 2009 | 2008 | ||||||
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(In $ million)
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||||||||||
Adjusted net income (6) |
$45.0 | $43.4 | $26.1 | $10.5 | $15.1 | ||||||
Adjusted EBITDA (6) |
83.5 | 80.5 | 59.6 | 42.2 | 56.6 |
|
2012 | 2011 | 2010 | 2009 | 2008 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
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($ millions)
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||||||||||
(Charged) / Credited to Operating Profit |
|||||||||||
Rationalization of operations |
(1.3 | ) | | (0.2 | ) | (1.1 | ) | (2.0 | ) | ||
IPO related share based compensation charge |
(0.8 | ) | | | | | |||||
Non-trade legal & professional costs |
| (1.4 | ) | | | | |||||
Past service credit on retirement obligations |
| 1.6 | | | | ||||||
Loss on disposal of property, plant and equipment |
| | (0.6 | ) | | (0.9 | ) | ||||
Provision for Environmental costs |
| | | | (0.3 | ) | |||||
|
$(2.1 | ) | $0.2 | $(0.8 | ) | $(1.1 | ) | $(3.2 | ) | ||
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Rationalization of operations In 2012, the Gas Cylinders division incurred $1.1 million of rationalization costs while in the same period the Elektron division incurred an additional $0.2 million of rationalization costs. In 2010, the Elektron division incurred costs of $0.2 million (2009: $1.0 million), relating to rationalization activities conducted at the manufacturing plants to improve operating efficiencies. In 2009, $0.1 million of costs were incurred in relation to rationalization costs in the U.S. Gas Cylinders division. In 2008, the Group incurred a charge of $2.3 million and a credit of $0.3 million in relation to rationalization activities in the Elektron and Gas Cylinders Divisions, respectively.
IPO related share based compensation charge In 2012, a charge of $0.8 million was recognized in the income statement under IFRS 2 in relation to share options granted as part of the initial public offering.
Non-trade legal and professional costs In 2011, the Group incurred legal, audit and professional costs of $2.8 million in relation to the raising of equity funding. Of this, $1.4 million was expensed in the year mainly in relation to historical audit work and $1.4 million was deferred, which related to regulatory and legal documentation to support the transaction.
Past service credit on retirement benefit obligations In 2011, retired members of the Luxfer Group Pension Plan, the principal defined benefit plan in the U.K., were offered the option of altering the structure of their pension by receiving an immediate uplift in their pension in return for giving up rights to a portion of their future inflation-related pension increases. This reduced the costs and risks of operating the pension plan and resulted in a gain of $1.6 million and a corresponding reduction in the present value of the defined benefit obligations of the pension plan.
Loss on disposal of property, plant and equipment In 2010, a charge of $0.6 million, net of proceeds from a third party lessee of the building, was made for the demolition of a vacant property owned by the Group. In 2008, there was a charge of $0.9 million, of which $0.5 million related to the U.S. operations and $0.4 million related to the Rest of Europe.
3
|
Year Ended December, 31 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | 2009 | 2008 | ||||||
|
($ millions)
|
||||||||||
Net income for the year |
$42.4 | $43.4 | $25.7 | $9.5 | $13.1 | ||||||
Non-controlling interests |
| | | | (0.2 | ) | |||||
Acquisitions and disposal costs |
0.8 | 0.2 | 0.4 | 0.5 | | ||||||
Restructuring and other income / (expense) |
2.1 | (0.2 | ) | 0.8 | 1.1 | 3.2 | |||||
Gain on purchase of own debt |
| | (0.5 | ) | | | |||||
Tax thereon |
(0.3 | ) | | (0.3 | ) | (0.6 | ) | (1.0 | ) | ||
Adjusted net income |
$45.0 | $43.4 | $26.1 | $10.5 | $15.1 | ||||||
Add back: |
|||||||||||
Tax thereon |
0.3 | | 0.3 | 0.6 | 1.0 | ||||||
Non-controlling interests |
| | | | 0.2 | ||||||
Tax expense |
17.0 | 13.6 | 9.9 | 5.7 | 8.2 | ||||||
Interest costs |
6.7 | 9.2 | 9.6 | 11.8 | 17.7 | ||||||
Interest received |
(0.2 | ) | (0.2 | ) | (0.2 | ) | (0.2 | ) | (0.3 | ) | |
Trading profit |
$68.8 | $66.0 | $45.7 | $28.4 | $41.9 | ||||||
Depreciation & amortization |
14.7 | 14.5 | 13.9 | 13.8 | 14.7 | ||||||
Adjusted EBITDA |
$83.5 | $80.5 | $59.6 | $42.2 | $56.6 | ||||||
Adjusted EBITDA consists of profit for the year before tax expense, interest costs, gain on purchase of own debt, interest received, acquisition costs, disposal costs of intellectual property, redundancy and restructuring costs, income and costs relating to demolition of vacant property, non-trade legal and professional costs, past service credit on retirement benefit obligations, depreciation and amortization and loss on disposal of property, plant and equipment. Depreciation and amortization amounts include impairments to fixed assets, and they are reflected in our financial statements as increases in accumulated depreciation or amortization.
Adjusted net income consists of profit for the year before amounts attributable to minority interest, acquisition costs, disposal costs of intellectual property, redundancy and restructuring costs, income and costs relating to demolition of vacant property, non-trade legal and professional costs, past service credit on retirement benefit obligations and the gain on the purchase of own debt.
We prepare and present Adjusted net income and Adjusted EBITDA to eliminate the effect of items that we do not consider indicative of our core operating performance. Management believes that each of Adjusted net income and Adjusted EBITDA is a key performance indicator used by the investment community and that the presentation of Adjusted net income and Adjusted EBITDA will enhance an investor's understanding of our results of operations. However, Adjusted net income and Adjusted EBITDA should not be considered in isolation by investors as an alternative to profit for the year, as an indicator of our operating performance or as a measure of our profitability. Adjusted net income and Adjusted EBITDA are not measures of financial performance under IFRS-IASB, may not be indicative of historic operating results and are not meant to be predictive of potential future results. Adjusted net income and Adjusted EBITDA measures presented herein may not be comparable to other similarly titled measures of other companies. While Adjusted net income and Adjusted EBITDA are not measures of financial performance under IFRS-IASB, the Adjusted net income and Adjusted EBITDA amounts presented have been computed using IFRS-IASB amounts.
4
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
You should carefully consider the following risk factors described below, together with all of the other information in this Annual Report, including our financial statements and the related notes, before investing in our American Depositary Shares ("ADSs"). The risks and uncertainties described below are those significant risk factors, currently known and specific to us that we believe are relevant to an investment in our securities. If any of these risks materialize, our business, financial condition or results of operations could suffer, the price of the ADSs could decline and you could lose part or all of your investment. Additional risks and uncertainties not currently known to us or those we now deem immaterial may also harm us and adversely affect your investment in the ADSs.
Risks Relating to Our Operations
We depend on certain end-markets, including the automotive, self-contained breathing apparatus, aerospace, defense, medical and industrial gas end-markets, and an economic downturn in any of those end-markets could reduce sales.
We have significant exposures to certain key end-markets, including some end-markets that are cyclical in nature. To the extent that any of these cyclical end-markets are in decline or at a low point in their economic cycle, sales may be adversely affected and thereby negatively affect our ability to fund our business operations and service our indebtedness. It is possible that all or most of these end-markets could be in decline at the same time, such as during a recession, which could significantly harm our financial condition and result of operations due to decreased sales. For example, 26% of our 2012 sales were related to automotive end-markets, 12% to self-contained breathing apparatus ("SCBA"), 13% to the aerospace and defense markets, 10% to medical markets (including portable oxygen) and 9% to the printing and paper markets. Together, these five markets accounted for approximately 70% of our 2012 revenues. Dependence of either of our divisions on certain end-markets is even more pronounced. For example, in 2012, excluding rare earth surcharges, 22% of the Elektron division's sales were to customers in the automotive end-market, which slumped in 2009 and although global automotive production has since improved, European production fell again in 2012 and remains depressed.
Our global operations expose us to economic conditions, political risks and specific regulations in the countries in which we operate, which could have a material adverse impact on our business, financial condition and results of operations.
We derive our revenues and earnings from operations in many countries and are subject to risks associated with doing business internationally. We have wholly-owned facilities in the United States, Canada, France, Germany, the Czech Republic and China and joint venture facilities in India, South Korea and Japan. Doing business in foreign countries has risks, including the potential for adverse changes in the local political, financial or regulatory climate, difficulty in staffing and managing geographically diverse operations, and the costs of complying with a variety of laws and regulations. Because we have operations in many countries, we are also liable to pay taxes in many fiscal jurisdictions. The tax burden on us depends on the interpretation of local tax regulations, bilateral or multilateral international tax treaties and the administrative doctrines in each one of these jurisdictions. Changes in these tax regulations could have an impact on our tax burden.
5
Moreover, the principal markets for our products are located in North America, Europe and Asia, and any financial difficulties experienced in these markets may have a material adverse impact on our businesses. The maturity of some of our markets, particularly the U.S. medical oxygen cylinder market and the European fire extinguisher market, could require us to increase sales in developing regions, which may involve greater economic and political risks. We cannot provide any assurances that we will be able to expand sales in these regions.
Our operations rely on a number of large customers in certain areas of our business, and the loss of any of our major customers could negatively impact our sales.
If we fail to maintain our relationships with our major customers, or fail to replace lost customers, or if there is reduced demand from our customers or for the products produced by our customers, it could reduce our sales and have a material adverse effect on our financial condition and results of operations. In addition, we could experience a reduction in sales if any of our customers fail to perform or default on any payment pursuant to our contracts with them. Long-term relationships with customers are especially important for suppliers of intermediate materials and components, where we often work closely with customers to develop products that meet particular specifications as part of the design of a product intended for the end-user market, and the bespoke nature of many of our products could make it difficult to replace lost customers. Our top ten customers accounted for 36% of our revenue in 2012.
Competitive pressures can materially and adversely affect our sales, profit margins, financial condition and results of operations.
The markets for many of our products are now increasingly global and highly competitive, especially in terms of quality, price and service. We could lose market share as a result of these competitive pressures, which could materially and adversely affect our sales, profit margins, financial condition and results of operations.
Because of the highly competitive nature of some of the markets in which we operate, we may have difficulty raising customer prices to offset increases in costs of raw materials. For example, the U.S. medical oxygen cylinder market has a number of dedicated producers with excess capacity, making it very difficult for us to raise customer prices to offset aluminum cost increases. In addition, rising aluminum prices could lead to the development of alternative products that use lower cost materials, which could become favored by end-market users.
More generally, we may face potential competition from producers that manufacture products similar to our aluminum-, magnesium- and zirconium-based products using other materials, such as steel, plastics, composite materials or other metals, minerals and chemicals. Products manufactured by competitors using different materials might compete with our products in terms of price, weight, engineering characteristics, recyclability or other grounds.
Other parts of our operations manufacture and sell products that satisfy customer specifications. Competitors may develop lower cost or better-performing products and customers may not be willing to pay a premium for the advantages offered by our products, even if they are technically superior to competing technologies.
In recent years, we have also experienced increased competition from new geographic areas, including Asia, where manufacturers can benefit from lower labor costs. Competitors with operations in these regions may be able to produce goods at a lower cost than us, enabling them to compete in terms of price. Competition with respect to less complex zirconium chemicals has been particularly intense, with Chinese suppliers providing low cost feedstock to specialist competitors, making it especially difficult to compete in commodity products such as paint drying additives. Chinese magnesium also continues to be imported into Europe in large volumes, which may impact our competitive position in Europe regarding certain magnesium
6
alloys. We are also impacted by Western-based competitors that have chosen to relocate production to Asia to take advantage of lower labor costs.
In addition, governments may impose import and export restrictions, grant subsidies to local companies and implement tariffs and other trade protection regulations and measures that may give competitive advantages to certain of our competitors and adversely affect our business.
We depend upon our larger suppliers for a significant portion of our raw materials, and a loss of one of these suppliers or a significant supply interruption could negatively impact our financial performance.
If we fail to maintain relationships with key suppliers or fail to develop relationships with other suppliers, it could have a negative effect on our financial condition or results of operations. We rely, to varying degrees, on major suppliers for some of the principal raw materials of our engineered products, including aluminum, zirconium and carbon fiber. For example, in 2012, we obtained approximately 70% of our aluminum, the largest single raw material purchased by the Gas Cylinders division, from Rio Tinto Alcan and its associated companies. Moreover, demand for carbon fiber is increasing rapidly, leading to occasional periods of short supply in recent years, with a number of expanding applications competing for the same supply of this specialized raw material. We currently purchase most of our carbon fiber from Toray and Grafil, a subsidiary of Mitsubishi Chemical.
We generally purchase raw materials from suppliers on a spot basis, under standard terms and conditions. We are half-way through a two-year supply contract with Rio Tinto Alcan for a portion of our aluminum requirements. We also have a five-year magnesium supply contract for a portion of our magnesium requirements with U.S. Magnesium that expires on December 31, 2014. Other than under 'force majeure' conditions, neither Rio Tinto Alcan nor U.S. Magnesium may terminate the respective contracts other than as a result of our breach of the terms.
We have made efforts to build close commercial relationships with key suppliers to meet growing demand for our products. However, an interruption in the supply of essential materials used in our production processes, or an increase in the prices of materials due to market shortages, government quotas or natural disturbances, could significantly affect our ability to provide competitively priced products to customers in a timely manner, and thus have a material adverse effect on our business, results of operations or financial condition. In the event of a significant interruption in the supply of any materials used in our production processes, or a significant increase in their prices (as we have experienced, for example, at different times with aluminum, magnesium and rare earths), we may have to purchase these materials from alternative sources, build additional inventory of the raw materials, increase our prices, reduce our profit margins or possibly fail to fill customer orders by the deadlines required in contracts. We can provide no assurance that we would be able to obtain replacement materials quickly on similar terms or at all.
We are exposed to fluctuations in the prices of the raw materials that are used to manufacture our products, and such fluctuations in raw material prices could lead us to incur unexpected costs and could affect our margins or our results of operations.
The primary raw material used in the manufacturing of gas cylinders and superformed panels is aluminum. The price of aluminum is subject to both short-term price fluctuations and to longer-term cyclicality as a result of international supply and demand relationships. Aluminum prices have increased significantly in recent years, with the London Metal Exchange ("LME") three-month price of aluminum increasing from an average of $1,701 per metric ton in 2009; $2,198 per metric ton in 2010; and $2,419 per metric ton in 2011 before falling back to $2,049 per metric ton in 2012. We have also experienced significant price increases in other raw material costs such as primary magnesium, carbon fiber, zircon sand and rare earths. For example, starting in mid-2010, Chinese authorities greatly reduced the export quota for rare earths, which resulted in an increase in the price of cerium carbonate, priced in rare earth oxide contained weight, from $10 per kilogram in May 2010 to a peak of $270 per kilogram in July 2011. By the end of 2011, the
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price of cerium carbonate had decreased to approximately $80 per kilogram. The decrease in the price continued throughout 2012, so that by December 2012 the price was approximately $28 per kilogram. See "Item 4.B. Business Overview".
Fluctuations in the prices of these raw materials could affect margins in the businesses in which we use them. See "Item 5. Operating and Financial Review." We cannot always pass on price increases or increase our prices to offset increases in raw material immediately or at all, whether because of fixed price agreements with customers, competitive pressures that restrict our ability to pass on cost increases or increase prices, or other factors. It can be particularly difficult to pass on price increases or increase prices in product areas such as gas cylinders, where competitors offer similar products made from alternative materials, such as steel, if those materials are not subject to the same cost increases. As a result, a substantial increase in raw material costs could have a material adverse effect on our financial condition and results of operations. In such an event, there might be less cash available than necessary to fund our business operations effectively or to service our indebtedness. In addition, higher prices necessitated by large increases in raw material costs could make our current, or future, products unattractive compared to competing products made from alternative materials that have not been so affected by raw material cost increases or compared to products produced by competitors who have not incurred such large increases in their raw material costs. Historically, we have used derivative financial instruments to hedge our exposures to fluctuations in aluminum prices. Currently, our main method of hedging against this risk is to agree to forward prices with our largest supplier of aluminum log for manufacturing gas cylinders and to agree to some fixed pricing for up to twelve months from more specialist sheet suppliers to our Superform business. We also use LME-based derivative contracts to supplement our fixed price agreement strategy. Although it is our treasury policy to enter into these transactions only for hedging, and not for speculative purposes, we are exposed to market risk and credit risk with respect to the use of these derivative financial instruments. If the price of aluminum were to continue to rise, our increased exposure to changes in aluminum prices could have a material adverse impact on our results of operations to the extent that we cannot pass price increases on to our customers or manage exposure effectively through hedging instruments. See "Item 11. Quantitative & Qualitative Disclosures About Market Risk." In addition, if we have hedged our metal position, and have forward price agreements, a fall in the price of aluminum might give rise to hedging margin calls to the detriment of our borrowing position.
In the past few years, when appropriate, we have made additional purchases of large stocks of magnesium and some rare earth chemicals to delay the impact of potentially higher prices in the future. However, these strategic purchases increase our working capital needs, reducing our liquidity and cash flow and potentially resulting in an increased drawdown on our revolving credit facility (the "Revolving Credit Facility").
We are exposed to fluctuations in the prices of utilities that are used in the manufacture of our products, and such fluctuations in utility prices could lead us to incur unexpected costs and could affect our margins or our results of operations.
Our utility costs, which constitute another major input cost of our total expenses and include costs related to electricity, natural gas, and water, may be subject to significant variations. In recent years, the emergence of financial speculators in energy, increased taxation and other factors have contributed to a significant increase in utility costs for us, particularly with respect to the price that we pay for our U.K. energy supplies, which have been subject to a number of significant price increases.
Fluctuations in the prices of these utility costs could affect margins in the businesses in which we use them. We cannot always pass on price increases or increase our prices to offset increases in utility costs immediately or at all, whether because of fixed price agreements with customers, competitive pressures that restrict our ability to pass on cost increases or increase prices, or other factors. It can be particularly difficult to pass on price increases or increase prices in product areas such as gas cylinders, where competitors offer similar products made from alternative materials, such as steel, if those materials are not subject to the same cost increases. As a result, a substantial increase in utility costs could have a material
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adverse effect on our financial condition and results of operations. In such an event, there might be less cash available than necessary to fund our business operations effectively or to service our indebtedness.
Changes in foreign exchange rates could reduce margins on our sales, reduce the reported revenues of our non-U.S. operations and have a material adverse effect on our results of operations.
We conduct a large proportion of our commercial transactions, purchases of raw materials and sales of goods in various countries and regions, including the United Kingdom, United States, continental Europe, Australia and Asia. Our manufacturing operations based in the United States, continental Europe and Asia, usually sell goods denominated in their main domestic currency, but our manufacturing operations in the United Kingdom purchase raw materials and sell products often in currencies other than pound sterling. Changes in the relative values of currencies can decrease the profits of our subsidiaries when they incur costs in currencies that are different from the currencies in which they generate all or part of their revenue. These transaction risks principally arise as a result of purchases of raw materials in U.S. dollars, coupled with sales of products to customers in euros. This impact is most pronounced in our exports to continental Europe from the United Kingdom. In 2012, our U.K. operations sold approximately €47.4 million of goods into the euro zone. Our policy is to hedge a portion of our net exposure to fluctuations in exchange rates with forward foreign currency exchange contracts. Therefore, we are exposed to market risk and credit risk through the use of derivative financial instruments. Any failure of hedging policies could negatively impact our profits, and thus damage our ability to fund our operations and to service our indebtedness.
In addition to subsidiaries in the United States, we have subsidiaries located in the United Kingdom, France, the Czech Republic, Canada and China, as well as joint ventures in Japan, South Korea and India, whose revenue, costs, assets and liabilities are denominated in local currencies. Because our consolidated accounts are reported in U.S. dollars, we are exposed to fluctuations in those currencies when those amounts are translated for purposes of reporting our consolidated accounts, which may cause declines in results of operations as results denominated in different currencies are translated to U.S. dollars for reporting purposes. The largest risk is from our operations in the United Kingdom, which in 2012 generated operating profits of $24.0 million from sales revenues of $167.2 million. Fluctuations in exchange rates, particularly between the U.S. dollar and the pound sterling, can have a material effect on our consolidated income statement and balance sheet. In 2012 the strengthening of the average U.S. dollar had a negative impact on revenues of $6.2 million while in 2011 the weakening of the average U.S. dollar exchange rate had a positive impact on reported revenues of $9.9 million. Changes in translation exchange rates in 2012 increased net assets by $2.9 million and reduced net assets by $5.5 million in 2011. For additional information on these risks and the historical impact on our results see "Item 11. Quantitative & Qualitative Disclosure About Market Risk."
Our defined benefit pension plans have significant funding deficits and are exposed to market forces that could require us to make increased ongoing cash contributions in response to changes in market conditions, actuarial assumptions and investment decisions and that could expose us to significant short-term liabilities if a wind-up trigger occurred in relation to such plans, each of which could have a material adverse effect on our financial condition and results of operations.
We have defined benefit pension arrangements in the United Kingdom, the United States and France. See "Note 30" of the audited Consolidated Financial Statements attached to this Annual Report. Our largest defined benefit plan, the Luxfer Group Pension Plan, which closed to new members in 1998 but remains open for accrual of future benefits based on career-average salary, is funded according to the regulations in effect in the United Kingdom and, as of December 31, 2012 and December 31, 2011, had an IAS 19 accounting deficit of $76.8 million and $58.5 million, respectively. Luxfer Group Limited is the principal employer under the Luxfer Group Pension Plan, and other U.K. subsidiaries also participate under the plan. Our other defined benefit plans are less significant than the Luxfer Group Pension Plan and, as of December 31, 2012 and December 31, 2011, had an IAS 19 accounting deficit of $19.9 million and
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$23.9 million, respectively. The largest of these additional plans is the BA Holdings, Inc. Pension Plan in the United States, which was closed to further benefit accruals in December 2005. According to the actuarial valuation of the Luxfer Group Pension Plan as at April 5, 2012, the Luxfer Group Pension Plan had a deficit of £49.9 million on the plan specific basis. Should a wind-up trigger occur in relation to the Luxfer Group Pension Plan, the buy-out deficit of that plan will become due and payable by the employers. The aggregate deficit of the Luxfer Group Pension Plan on a buy-out basis was estimated at £140 million as at April 5, 2012. The trustees have the power to wind-up the Luxfer Group Pension Plan if they consider that in the best interests of members there is no reasonable purpose in continuing the Luxfer Group Pension Plan.
We are exposed to various risks related to our defined benefit plans, including the risk of loss of market value of the plan assets, the risk of actual investment returns being less than assumed rates of return, the trustees of the Luxfer Group Pension Plan switching investment strategy (which does require consultation with the employer) and the risk of actual experience deviating from actuarial assumptions for such things as mortality of plan participants. In addition, fluctuations in interest rates cause changes in the annual cost and benefit obligations. As a result of the actuarial valuation as at April 5, 2012, we are required to make increased ongoing cash contributions, over and above the normal contributions required to meet the cost of future accrual, to the Luxfer Group Pension Plan. These additional payments are intended to reduce the funding deficit. We have agreed with the trustees to a schedule of payments to reduce the deficit. This schedule has been provided to the UK Pensions Regulator (the "Pensions Regulator"), and we are waiting for their confirmation of the payment scheme. The schedule of payments provides for minimum annual contributions of £3.4 million per year, together with additional variable contributions based on one-fifth of net earnings of Luxfer Holdings PLC in excess of £12 million. The total contributions are subject to an annual cap of £5 million. These contribution rates are to apply until the deficit is eliminated (expected to take between ten and 12 years, depending on the variable contributions), but in practice the schedule will be reviewed, and may be revised, following the next actuarial valuation. There is a limited ability to delay payments in the event of another severe economic downturn. Increased regulatory burdens have also proven to be a significant risk, such as the United Kingdom's Pension Protection Fund ("PPF") Levy, which was $1.6 million in 2012. Following closure of the defined benefit plans described above, we have offered new employees membership in defined contribution pension arrangements or 401(k) arrangements, and these do not carry the same risks to the company as the defined benefit plans.
The Pensions Regulator in the United Kingdom has power in certain circumstances to issue contribution notices or financial support directions which, if issued, could result in significant liabilities arising for us.
The Pensions Regulator may issue a contribution notice to the employers that participate in the Luxfer Group Pension Plan or any person who is connected with or is an associate of these employers where the Pensions Regulator is of the opinion that the relevant person has been a party to an act, or a deliberate failure to act, which had as its main purpose (or one of its main purposes) the avoidance of pension liabilities or where such act has a materially detrimental effect on the likelihood of payment of accrued benefits under the Luxfer Group Pension Plan being received. A person holding alone or together with his or her associates directly or indirectly one-third or more of our voting power could be the subject of a contribution notice. The terms "associate" and "connected person," which are taken from the Insolvency Act 1986, are widely defined and could cover our significant shareholders and others deemed to be shadow directors. If the Pensions Regulator considers that a plan employer is "insufficiently resourced" or a "service company" (which have statutory definitions), it may impose a financial support direction requiring it or any member of the Group, or any person associated or connected with an employer, to put in place financial support in relation to the Luxfer Group Pension Plan. Liabilities imposed under a contribution notice or financial support direction may be up to the difference between the value of the assets of the Luxfer Group Pension Plan and the cost of buying out the benefits of members and other beneficiaries of the Luxfer Group Pension Plan. In practice, the risk of a contribution notice being imposed may restrict our
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ability to restructure or undertake certain corporate activities. Additional security may also need to be provided to the trustees of the Luxfer Group Pension Plan before certain corporate activities can be undertaken (such as the payment of an unusual dividend) and any additional funding of the Luxfer Group Pension Plan may have an adverse effect on our financial condition and the results of our operations.
Our ability to remain profitable depends on our ability to protect and enforce our intellectual property, and any failure to protect and enforce such intellectual property could have a material adverse impact on our business, financial condition and results of operations.
We cannot ensure that we will always have the ability to protect proprietary information and our intellectual property rights. We protect our intellectual property rights (within the United States, Europe and other countries) through various means, including patents and trade secrets. For example, most of our sales of automotive catalysis products are now subject to patent protection and new product developments such as the smartflow regulator are patent protected. In particular, we patent products and processes (or certain parts of them) that could also be easily duplicated, while protecting other products and most of our processes as trade secrets. Because of the difference in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in other countries as they would in the United States or the United Kingdom. The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Further, we cannot assure you that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition. In addition, our patents will only be protected for the duration of the patent. The minimum amount of time remaining in respect to any of our material patents is three years (which relates to certain patents used in our gas cylinder business).
With respect to our unpatented proprietary technology, it is possible that others will independently develop the same or similar technology or obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected. We rely on our trademarks, trade names, and brand names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.
Expiration or termination of our right to use certain intellectual property granted by third parties, the right of those third parties to grant the right to use the same intellectual property to our competitors and the right of certain third parties to use certain intellectual property used as part of our business could have a material adverse impact on our business, financial condition and results of operations.
We have negotiated, and may from time to time in the future negotiate, licenses with third parties with respect to third-party proprietary technologies used in certain of our manufacturing processes and products. If any of these licenses expires or terminates, we will no longer retain the rights to use the relevant third-party proprietary technologies in our manufacturing processes and products, which could have a material adverse effect on our business, results of operations and financial condition. Further, the rights granted to
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us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property.
Some of our patents may cover inventions that were conceived or first reduced to practice under, or in connection with, government contracts or other government funding agreements or grants. With respect to inventions conceived or first reduced to practice under such government funding agreements, a government may retain a nonexclusive, irrevocable, royalty-free license to practice or have practiced for or on behalf of the relevant country the invention throughout the world. In addition, if we fail to comply with our reporting obligations or to adequately exploit the developed intellectual property under these government funding agreements, the relevant country may obtain additional rights to the developed intellectual property, including the right to take title to any patents related to government funded inventions or to license the same to our competitors. Furthermore, our ability to exclusively license or assign the intellectual property developed under these government funding agreements to third parties may be limited or subject to the relevant government's approval or oversight. These limitations could have a significant impact on the commercial value of the developed intellectual property.
We often enter into research and development agreements with academic institutions where they generally retain certain rights to the developed intellectual property. The academic institutions generally retain rights over the technology for use in non-commercial academic and research fields, including in some cases the right to license the technology to third parties for use in those fields. It is difficult to monitor and enforce such noncommercial academic and research uses, and we cannot predict whether the third party licensees would comply with the use restrictions of these licenses. We could incur substantial expenses to enforce our rights against such licensees. In addition, even though the rights that academic institutions obtain are generally limited to the noncommercial academic and research fields, they may obtain rights to commercially exploit developed intellectual property in certain instances. Furthermore, under research and development agreements with academic institutions, our rights to intellectual property developed thereunder is not always certain, but instead may be in the form of an option to obtain license rights to such intellectual property. If we fail to timely exercise our option rights and/or we are unable to negotiate a license agreement, the academic institution may offer a license to the developed intellectual property to third parties for commercial purposes. Any such commercial exploitation could adversely affect our competitive position and have a material adverse effect on our business.
If third parties claim that intellectual property used by us infringes upon their intellectual property, our operating profits could be adversely affected.
We may, from time to time, be notified of claims that we are infringing upon patents, copyrights, or other intellectual property rights owned by third parties, and we cannot provide assurances that other companies will not, in the future, pursue such infringement claims against us or any third-party proprietary technologies we have licensed. If we were found to infringe upon a patent or other intellectual property right, or if we failed to obtain or renew a license under a patent or other intellectual property right from a third party, or if a third party that we are licensing technologies from was found to infringe upon a patent or other intellectual property rights of another third party, we may be required to pay damages, suspend the manufacture of certain products or reengineer or rebrand our products, if feasible, or we may be unable to enter certain new product markets. Any such claims could also be expensive and time consuming to defend and divert management's attention and resources. Our competitive position could suffer as a result. In addition, if we have omitted to enter into a valid non-disclosure or assignment agreement for any reason, we may not own the invention or our intellectual property and may not be adequately protected.
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Any failure of our research and development activity to improve our existing products and develop new products could cause us to lose market share and impact our financial position.
Our products are highly technical in nature, and in order to maintain and improve our market position, we depend on successful research and development activity to continue to improve our existing products and develop new products. We cannot be certain that we will have sufficient research and development capability to respond to changes in the industries in which we operate. These changes could include changes in the technological environment in which we currently operate, increased demand for new products or the development of alternatives to our products. For example, the development of lighter-weight steel alloys has made the use of steel in gas cylinders a more competitive alternative to aluminum than it had been previously. In addition, our superformed aluminum components compete with new high-performance composite materials developed for use in the aerospace industry. Without the timely introduction of new products or enhancements to existing products, our products could become obsolete over time, in which case our business, results of operations and financial condition could be adversely affected. In our efforts to develop and market new products and enhancements to our existing products, we may fail to identify new product opportunities successfully or develop and timely bring new products to market. We may also experience delays in completing development of, enhancements to or new versions of our products. In addition, product innovations may not achieve the market penetration or price stability necessary for profitability. In addition to benefiting from our research collaboration with universities, we spent $8.9 million, $11.1 million and $9.8 million (including revenue and capital items but before funding grants received) in 2012, 2011 and 2010, respectively, on our own research and development activities. We expect to fund our future capital expenditure requirements through operating profit cash flows and restricted levels of indebtedness, but if operating profit decreases, we may not be able to invest in research and development or continue to develop new products or enhancements.
Some of our key operational equipment is relatively old and may need significant capital expenditures for repair or replacement.
High levels of maintenance and repair costs could result from the need to maintain our older plants, property and equipment, and machinery breakdowns could result in interruptions to the business causing lost production time and reduced output. Machinery breakdowns or equipment failures may hamper or cause delays in the production and delivery of products to our customers and increase our operating costs, thus reducing cash flow from operations. Any failure to deliver products to our customers in a timely manner could adversely affect our customer relationships and reputation. We already incur considerable expense on maintenance, including preventative maintenance, and repairs. Any failure to implement required investments, whether because of requirements to divert funds to repair existing physical infrastructure, debt service obligations, unanticipated liquidity constraints or other factors, could have a material effect on our business and on our ability to service our indebtedness. The breakdown of some of our older equipment, such as the large hot rolling mill at our Madison, Illinois plant, could be difficult to repair and would be very costly should it need to be replaced.
Our operations may prove harmful to the environment, and any clean-up or other related costs could have a material adverse effect on our operating results or financial condition.
We are exposed to substantial environmental costs and liabilities, including liabilities associated with divested assets and prior activities performed on sites before we acquired an interest in them. Our operations, including the production and delivery of our products, are subject to a broad range of continually changing environmental laws and regulations in each of the jurisdictions in which we operate. These laws and regulations increasingly impose more stringent environmental protection standards on us and affect, among other things, air emissions, waste-water discharges, the use and handling of hazardous materials, noise levels, waste disposal practices, soil and groundwater contamination and environmental clean-up. Complying with these regulations involves significant and recurring costs. We have spent
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approximately $2.7 million between 2010 and 2012 on environmental remediation efforts including investigations at the Redditch, United Kingdom, site of our closed tubes plant, and a landfill at our Swinton, United Kingdom site. We estimate that improvement activities and environmental compliance at these and other sites will cost $1.8 million in 2013. See "Item 4.B. Business Overview" for details of our environmental management program and the environmental issues that we are currently addressing.
We cannot predict our future environmental liabilities and cannot assure investors that our management is aware of every fact or circumstance regarding potential liabilities or that the amounts provided and budgeted to address such liabilities will be adequate for all purposes. In addition, future developments, such as changes in regulations, laws or environmental conditions, may increase environmental costs and liabilities and could have a material adverse effect on our operating results and consolidated financial position in any given financial year, which could negatively affect our cash flows and hinder our ability to service our indebtedness.
The health and safety of our employees and the safe operation of our businesses is subject to various health and safety regulations in each of the jurisdictions in which we operate. These regulations impose various obligations on us, including the provision of safe working environments and employee training on health and safety matters. Complying with these regulations involves recurring costs.
Certain of our operations are highly regulated by different agencies, which require products to comply with their rules and procedures and can subject our operations to penalties or adversely affect production.
Certain of our operations are in highly regulated industries, which require us to maintain regulatory approvals and, from time to time, obtain new regulatory approvals from various countries. This can involve substantial time and expense. In turn, higher costs reduce our cash flow from operations. For example, manufacturers of gas cylinders throughout the world must comply with high local safety and health standards and obtain regulatory approvals in the markets where they sell their products. In addition, military organizations require us to comply with applicable government regulations and specifications when providing products or services to them directly or as subcontractors. In addition, we are required to comply with U.S. and other export regulations with respect to certain products and materials. The European Union has also passed legislation governing the registration, evaluation and authorization of chemicals, known as REACH, pursuant to which we are required to register chemicals and gain authorization for the use of certain substances. Although we make reasonable efforts to obtain all the licenses and certifications that are required by countries in which we operate, there is always a risk that we may be found not to comply with certain required procedures. This risk grows with increased complexity and variance in regulations across the globe. Because the regulatory schemes vary by country, we may also be subject to regulations of which we are not presently aware and could be subject to sanctions by a foreign government that could materially and adversely affect our operations in the relevant country.
Governments and their agencies have considerable discretion to determine whether regulations have been satisfied. They may also revoke or limit existing licenses and certifications or change the laws and regulations to which we are subject at any time. If our operations fail to obtain, experience delays in obtaining or lose a needed certification or approval, we may not be able to sell our products to our customers, expand into new geographic markets or expand into new product lines, which will ultimately have a material adverse effect on our business, financial position and results of operations. In addition, new or more stringent regulations, if imposed, could have an adverse effect on our results of operations because we may experience difficulty or incur significant costs in connection with compliance with them. Non-compliance with these regulations could result in administrative, civil, financial, criminal or other sanctions against us, which could have negative consequences on our business and financial position. Furthermore, as we begin to operate in new countries, we may need to obtain new licenses, certifications and approvals.
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New and pending legislation or regulation of carbon dioxide and other greenhouse gas emissions may have a material adverse impact on our results of operations, financial condition and cash flows.
Although we are working to improve our energy efficiency, our manufacturing processes, and the manufacturing processes of many of our suppliers and customers, are still energy intensive and use or generate, directly or indirectly, greenhouse gases. Political and scientific debates related to the impacts of emissions of carbon dioxide and other greenhouse gases on the global climate are ongoing. In recent years, new U.S. Environmental Protection Agency ("USEPA") rules, the European Union Emissions Trading Scheme and the CRC Energy Efficiency Scheme in the United Kingdom, each of which regulates greenhouse gas emissions from certain large industrial plants, have come into effect. While the ultimate impact of the new greenhouse gas emissions rules on our business is not yet known, it is possible that these new rules could have a material adverse effect on our results of operations and financial condition because of the costs of compliance and the impact of the legislation on energy costs. Additional regulation or legislation aimed at reducing carbon dioxide and greenhouse gas emissions, such as a "cap-and-trade program," is currently being considered, or has been adopted, by several states in the United States and globally. Such regulation or legislation, if adopted or enacted in a more demanding form, could also have a material adverse effect on our business, results of operations and financial condition.
Because of the nature and use of the products that we manufacture, we may in the future face large liability claims.
We are subject to litigation in the ordinary course of our business, which could be costly to us and which may arise in the future. We are exposed to possible claims for personal injury, death or property damage, which could result from a failure of a product manufactured by us or of a product integrating one of our products. For example, improperly manufactured gas cylinders could explode at high pressure, which can cause substantial personal and property damage. We also supply many components into aerospace applications, where the potential for significant liability exposures necessitates additional insurance costs.
Many factors beyond our control could lead to liability claims, including:
If we cannot successfully defend ourselves against claims, we may incur substantial liabilities. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
We could be required to pay a material amount if a claim is made against us that is not covered by insurance or otherwise subject to indemnification, or that exceeds the insurance coverage that we maintain.
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Moreover, we do not currently carry insurance to cover the expense of product recalls, and litigation involving significant product recalls or product liability could have a material adverse effect on our financial condition or results of operations.
Our businesses could suffer if we lose certain of our employees or cannot attract and retain qualified employees.
We rely upon a number of key executives and employees, particularly Brian Purves, our CEO, and other members of the executive management board. If these and certain other employees ceased to work for us, we would lose valuable expertise and industry experience and could become less profitable. In addition, future operating results depend in part upon our ability to attract and retain qualified engineering and technical personnel. As a result of intense competition for talent in the market, we cannot ensure that we will be able to continue to attract and retain such personnel. While our key employees are generally subject to non-competition agreements for a limited period of time following the end of their employment, if we were to lose the services of key executives or employees, it could have an adverse effect on operations, including our ability to maintain our technological position. We do not carry "key-man" insurance covering the loss of any of our executives or employees.
Any expansion or acquisition may prove risky.
As part of our strategy, we have and may continue to supplement organic growth by acquiring companies or operations engaged in similar or complementary businesses. If the consummation of acquisitions and integration of acquired companies and businesses diverts too much management attention from the operations of our core businesses, operating results could suffer. Any acquisition made could be subject to a number of risks, including:
We cannot ensure that every acquisition will ultimately provide the benefits originally anticipated.
We also face certain challenges as a result of organic growth. For example, in order to grow while maintaining or decreasing per unit costs, we will need to improve efficiency, effectively manage operations and employees and hire enough qualified technical personnel. We may not be able to adequately meet these challenges. Any failure to do so could result in costs increasing more rapidly than any growth in sales, thus resulting in lower operating income from which to finance operations and indebtedness. In addition, we may need to borrow money to complete acquisitions or finance organic growth, which will increase our debt service requirements. There can be no assurance that we will be able to do so in the future on favorable terms or at all.
We could suffer a material interruption in our operations as a result of unforeseen events or operating hazards.
Our production facilities are located in a number of different locations throughout the world. Any of our facilities could suffer an interruption in production, either at separate times or at the same time, because of various and unavoidable occurrences, such as severe weather events (e.g., hurricanes, floods and earthquakes), from casualty events (e.g., explosions, fires or material equipment breakdown), from acts of terrorism, from pandemic disease, from labor disruptions or from other events (e.g., required maintenance
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shutdowns). For example, a severe hailstorm caused extensive damage to glazed panels at our Madison, Illinois plant in 2012, and our operations in California are subject to risks related to earthquakes. In addition, some of our products are highly flammable, and there is a risk of fire inherent in their production process. For example, in 2010, two furnaces were destroyed in a fire at our Madison, Illinois plant. Certain residents of the area near the plant have filed claims against us in relation to nuisance allegedly resulting from the fire, and we have responded to these claims. In addition, the Illinois Attorney General filed a complaint against us in 2010 in relation to this incident that we have been responding to since then. Such hazards could cause personal injury or death, serious damage to or destruction of property and equipment, suspension of operations, substantial damage to the environment and/or reputational harm. The risk is particularly high in the production of fine magnesium powders, which are highly flammable and explosive in certain situations. Similar disruptions in the operations of our suppliers or customers could materially affect our business and operations. Although we carry certain levels of business interruption insurance, the coverage on certain catastrophic events or natural disasters, including earthquakes, a failure of energy supplies and certain other events, is limited, and it is possible that the occurrence of such events may have a significant adverse impact on our business and, as a result, on our cash flows.
Employee strikes and other labor-related disruptions may adversely affect our operations.
Our business depends on a large number of employees who are members of various trade union organizations. Strikes or labor disputes with our employees may adversely affect our ability to conduct business. We cannot assure you that there will not be any strike, lock-out or material labor dispute in the future. Work interruptions or stoppages could have a material adverse effect on our business, results of operations and financial condition.
We could incur future liability claims arising from previous businesses now closed or sold.
We previously operated Baco Contracts, a building cladding contracting business, and although the business has been closed for many years, the warranties on several of the business' contracts have several years remaining, thereby exposing us to continuing potential liabilities.
As a holding company, our main source of cash is distributions from our operating subsidiaries.
We, Luxfer Holdings PLC, conduct all of our operations through our subsidiaries. Accordingly, our main cash source is dividends from these subsidiaries. The ability of each subsidiary to make distributions depends on the funds that a subsidiary has from its operations in excess of the funds necessary for its operations, obligations or other business plans. Since our subsidiaries are wholly-owned by us, our claims will generally rank junior to all other obligations of the subsidiaries. If our operating subsidiaries are unable to make distributions, our growth may slow after the proceeds of this offering are exhausted, unless we are able to obtain additional debt or equity financing. In the event of a subsidiary's liquidation, there may not be assets sufficient for us to recoup our investment in the subsidiary.
Our failure to perform under purchase or sale contracts could result in the payment of penalties to customers or suppliers, which could have a negative impact on our results of operations or financial condition.
A failure to perform under purchase or sale contracts could result in the payment of penalties to suppliers or customers, which could have a negative impact on our results of operations or financial condition. Certain contracts with suppliers could also obligate us to purchase a minimum product volume (clauses known as "take or pay") or contracts with customers may impose firm commitments for the delivery of certain quantities of products within certain time periods. The risk of incurring liability under a "take-or-pay" supply contract would be increased during an economic crisis, which would increase the likelihood of a sharp drop in demand for our products.
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We could be adversely affected by violations of the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.
The U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making or, in the case of the U.K. Bribery Act, receiving, improper payments to, or from, government officials or, in the case of the U.K. Bribery Act, third parties, for the purpose of obtaining or retaining business. Failing to prevent bribery is also an offence under the U.K. Bribery Act. Our policies mandate compliance with these laws. Despite our compliance program, we cannot assure you that our internal control policies and procedures will always protect us from reckless, negligent or improper acts committed by our employees or agents. The costs of violations of these laws, or allegations of such violations, could have a negative impact on our business, results of operations and reputation.
We have a significant amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants, make payments on our indebtedness, pay dividends and respond to changes in our business or take certain actions.
As of December 31, 2012, we had $65 million of indebtedness on a consolidated basis under our senior notes due 2018 (the "Loan Notes due 2018"). We also have a Revolving Credit Facility which as at December 31, 2012 was not utilized.
Our indebtedness could have important consequences to you. For example, it could make it more difficult for us to satisfy obligations with respect to indebtedness, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under agreements governing our indebtedness. Further, our indebtedness could require us to dedicate a substantial portion of available cash flow to pay principal and interest on our outstanding debt, which would reduce the funds available for working capital, capital expenditures, dividends, acquisitions and other general corporate purposes. Our indebtedness could also limit our ability to operate our business, including the ability to engage in strategic transactions or implement business strategies. Factors related to our indebtedness could materially and adversely affect our business and our results of operations. Furthermore, our interest expense could increase if interest rates rise because certain portions of our debt facilities bear interest at floating rates. If we do not have sufficient cash flow to service our debt, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or sell securities, none of which we can guarantee we will be able to do.
In addition, the agreements that govern the terms of our indebtedness contain, and any future indebtedness would likely contain, a number of restrictive covenants imposing significant operating and financial restrictions on us, including restrictions that may limit our ability to engage in acts that may be in our long-term best interests, including:
These restrictive covenants are subject to a number of qualifications and exceptions. The operating and financial restrictions and covenants in our existing debt agreements and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.
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We may be able to incur significant additional indebtedness in the future. Although the agreements governing our indebtedness contain restrictions on the incurrence of certain additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. If we incur new indebtedness, the related risks, including those described above, could intensify.
Absence of a liquid trading market for the ADSs or ordinary shares.
Our ADSs have been listed on the New York Stock Exchange since our initial public offering in October 2012. During the post-IPO lock-up period, however, the trading volume has been low, and we cannot predict at this time if our ADSs will trade more actively in the market. The low liquidity could make it difficult for you to sell your ADSs. In addition, the market price of the ADSs may be volatile. The factors below may have a material effect on the market price of the ADSs:
During recent years, securities markets in the United States and worldwide have experienced significant volatility in prices and trading volumes. This volatility could have a material adverse effect on the market price of the ADSs, irrespective of our results of operations and financial condition.
Substantial future sales of the ADSs in the public market, or the perception that these sales could occur, could cause the price of the ADSs to decline.
Additional sales of our ordinary shares or ADSs in the public market after this offering, or the perception that these sales could occur, could cause the market price of the ADSs to decline. A large percentage of our ordinary shares outstanding will become available for sale upon the expiration of a lock-up period related to our initial public offer, which we expect will expire at midnight on April 1, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. When the lock-up period expires, if these shares are sold into the market, the market price of the ADSs could decline.
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Our ability to pay regular dividends on our ordinary shares is subject to the discretion of our board of directors and will depend on many factors, including our results of operations, cash requirements, financial condition, contractual restrictions, applicable laws and other factors, and may be limited by our structure and statutory restrictions and restrictions imposed by the Revolving Credit Facility and Notes due 2018 as well as any future agreements.
We may declare cash dividends on our ordinary shares as described in "Item 8, Financial Information." However, the payment of future dividends will be at the discretion of our board of directors. Any recommendation by our board to pay dividends will depend on many factors, including our results of operations, cash requirements, financial condition, contractual restrictions, applicable laws and other factors. In addition, our Revolving Credit Facility and Loan Notes due 2018 limit our ability to pay dividends or make other distributions on our shares, and in the future we may become subject to debt instruments or other agreements that further limit our ability to pay dividends. Under English law, any payment of dividends would be subject to the Companies Act 2006 of England and Wales (the "Companies Act"), which requires, among other things, that we can only pay dividends on ordinary shares out of profits available for distribution determined in accordance with the Companies Act. Additionally, any change in the level of our dividends or the suspension of the payment thereof could adversely affect the market price of our ADSs.
You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.
Holders of the ADSs will not be able to exercise voting rights attaching to the ordinary shares evidenced by the ADSs on an individual basis. Holders of the ADSs will instead appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the ordinary shares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
You may be subject to limitations on the transfer of your ADSs.
Your ADSs, which may be evidenced by American depositary receipts ("ADRs"), are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason.
As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the Securities and Exchange Commission than a U.S. company. This may limit the information available to holders of the ADSs.
We are a "foreign private issuer," as defined in the Securities and Exchange Commission's ("SEC") rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to companies organized within the United States. For example, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public
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companies. Accordingly, there may be less publicly available information concerning our company than there is for U.S. public companies.
As a foreign private issuer, we are not subject to certain New York Stock Exchange corporate governance rules applicable to U.S. listed companies.
We rely on a provision in the New York Stock Exchange's Listed Company Manual that allows us to follow English corporate law and the Companies Act with regard to certain aspects of corporate governance. This allows us to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on the New York Stock Exchange.
For example, we are exempt from New York Stock Exchange regulations that require a listed U.S. company, among other things, to:
Although formally exempt from these requirements, we do adopt several features as a matter of good corporate governance, including having a majority of independent non-executive directors on the board and having audit and remuneration committees composed entirely of independent non-executive directors.
In accordance with our New York Stock Exchange listing, our Audit Committee is required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and Rule 10A-3 of the Exchange Act, both of which are also applicable to New York Stock Exchange-listed U.S. companies. Because we are a foreign private issuer, however, our Audit Committee is not subject to additional New York Stock Exchange requirements applicable to listed U.S. companies, including:
Furthermore, the New York Stock Exchange's Listed Company Manual requires listed U.S. companies to, among other things, seek shareholder approval for the implementation of certain equity compensation plans and issuances of common stock.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
We are a "foreign private issuer," as such term is defined in Rule 405 under the Securities Act, and, therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer's most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2013. There is a risk that we will lose our foreign private issuer status.
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In the future, we would lose our foreign private issuer status if, for example, more than 50% of our assets are located in the United States and we continue to fail to meet additional requirements necessary to maintain our foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We would be required under current SEC rules to prepare our financial statements in accordance with U.S. generally accepted accounting principles and modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers such as the ones described above and exemptions from procedural requirements related to the solicitation of proxies.
If we fail to establish or maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our shares may, therefore, be adversely impacted.
We are subject to reporting obligations under U.S. securities laws. Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Our management and our independent registered public accounting firm will be required to report on the effectiveness of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, in preparation for which we will need to perform system and process evaluation and testing of our internal controls over financial reporting.
Prior to our initial public offering on October 3, 2012, we were an unlisted public company and therefore not subject to the regulations and corporate governance requirements applicable to NYSE-listed companies .We have been implementing a number of measures to improve our internal control over financial reporting in order to obtain reasonable assurance regarding the reliability of our financial statements. Although we have not, using our current procedures, identified any material weaknesses or significant deficiencies relating to our internal controls over financial reporting, we have not yet fully implemented a system of internal controls over financial reporting that complies with the requirements of Section 404 of the Sarbanes-Oxley Act. We do not currently have a full-time internal audit function.
We intend to implement measures to improve our internal controls over financial reporting to meet the deadline imposed by Section 404 of the Sarbanes-Oxley Act for the filing of our annual report on Form 20-F in respect of fiscal year 2013. If we fail to timely implement, and maintain the adequacy of, our internal controls, we may not be able to conclude that we have effective internal control over financial reporting. Moreover, effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important to help prevent fraud. As a result, our failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the market price of the ADSs or ordinary shares. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 of the Sarbanes-Oxley Act.
Finally, on April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the "JOBS Act"). The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We are an "emerging growth company," as defined in the JOBS Act and, for as long as we continue to be an emerging growth company, we are permitted to rely on exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including an exemption from the requirement to comply with the auditor attestation
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requirements of Section 404 of the Sarbanes-Oxley Act. We will remain an emerging growth company up to the last day of the fifth fiscal year following the date of the offering, although (i) if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an emerging growth company as of the following December 31; (ii) if our annual gross revenues are $1 billion or more during any fiscal year before that time, we would cease to be an emerging growth company as of the last day of such fiscal year; and (iii) if during any three-year period before that time we issue an aggregate of over $1 billion in non-convertible debt, we would cease to be an emerging growth company upon the date of such issuance.
It may be difficult to effect service of U.S. process and enforce U.S. legal process against the directors of Luxfer.
Luxfer is a public limited company incorporated under the laws of England and Wales. A number of our directors and officers reside outside of the United States, principally in the United Kingdom. A substantial portion of our assets, and the assets of such persons, are located outside of the United States. Therefore, it may not be possible to effect service of process within the United States upon Luxfer or these persons in order to enforce judgements of U.S. courts against Luxfer or these persons based on the civil liability provisions of the U.S. federal securities laws. There is doubt as to the enforceability in England and Wales, in original actions or in actions for enforcement of judgements of U.S. courts, of civil liabilities solely based on the U.S. federal securities laws.
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Item 4. Information On The Company
A. History and Development of the Luxfer Group
General
Although the origins of some of our operations date back to the early part of the 19th century, we trace our business as it is today back to the 1982 merger of The British Aluminium Company Limited and Alcan Aluminium U.K. Limited, which created British Alcan. The original Luxfer Group was formed in February 1996 in connection with the management buy-in (the "Management Buy-In") of certain downstream assets of British Alcan. Our current Chief Executive, Brian Purves, and our current Director of Administration, Stephen Williams, were members of the Management Buy-In team. The Management Buy-In was financed by a syndicate of private equity investors. Upon completion of a capital reorganization in 2007, these investors fully exited their original investment in the business.
Our Company was incorporated on December 31, 1998 with the name Neverealm Limited (we re-registered as a public limited company and changed our name to Luxfer Holdings PLC on April 1, 1999), for the purpose of acquiring all of the outstanding share capital of the original Luxfer Group Limited in connection with a leveraged recapitalization that occurred in April 1999. As part of the 1999 recapitalization, Luxfer Holdings PLC became the parent holding company of our operating subsidiaries around the world. To facilitate the 1999 recapitalization, Luxfer Holdings PLC issued £160 million of Senior Notes due 2009 and took on £140 million of bank debt.
In February 2007, Luxfer Holdings PLC completed a capital reorganization, which substantially reduced its debt burden and realigned its share capital. A key part of this reorganization was the release and cancellation of the Senior Notes due 2009 in consideration for, among other things, the issuance of a lower principal amount of new Senior Notes due 2012. Senior noteholders, other than Luxfer Group Limited, also acquired 87% of the voting share capital of Luxfer Holdings PLC from exiting shareholders, with management and the ESOP retaining 13% of the voting share capital.
Since the 2007 capital reorganization, we have considerably improved the profitability of the businesses and reduced debt, repaying the Senior Notes due 2012 early.
We have re-shaped the business since 1996 through a significant number of acquisitions and disposals. Recently, in July 2012, we entered into an arrangement agreement with Dynetek Industries Ltd. ("Dynetek"), a Canadian business listed on the Toronto Stock Exchange, to acquire all of the common shares of Dynetek at a price of CAD$0.24 per share, for a total equity value of CAD$5 million. We assumed approximately CAD$7 million of bank debt, for a total purchase cost of approximately CAD$12 million. The acquisition closed on September 17, 2012. Dynetek designs and manufactures high-pressure aluminum and carbon fiber gas cylinders and systems for compressed natural gas, low emission vehicles and compressed hydrogen, zero-emission fuel cell vehicles. Dynetek's system applications include, but are not limited to, passenger automobiles, light and heavy-duty trucks, transit vehicles and school buses, bulk hauling of compressed gases and stationary storage or ground storage refueling applications. Dynetek's publicly-reported 2011 sales revenue was CAD$19.8 million, generated from two manufacturing sites in Calgary, Canada and Ratingen, Germany, near Dusseldorf.
In October 2012 Luxfer Holdings PLC successfully listed its shares (in the form of American Depositary Shares evidenced by American Depositary Receipts) on the New York Stock Exchange.
Corporate
Luxfer Holdings PLC is registered as a public limited company under the laws of England and Wales with its registered office at Anchorage Gateway, 5 Anchorage Quay, Salford, M50 3XE, England and our telephone number is +44(0) 161 300 0600.
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We are a publically traded company, listed on the New York Stock Exchange under the symbol "LXFR".
Our agent in the United States is Corporation Service Company, 2711 Centreville Road, Wilmington, Delaware 19808.
B. Business Overview
We are a global materials technology company specializing in the design, manufacture and supply of high-performance materials, components and gas cylinders to customers in a broad range of growing end-markets. Our key end-markets are environmental technologies, healthcare technologies, protection and specialty technologies. Our customers include both end-users of our products and manufacturers that incorporate our products into their finished goods. Our products include specialty chemicals used as catalysts in automobile engines to remove noxious gases; corrosion, flame and heat-resistant magnesium alloys used in safety-critical, aerospace, automotive and defense applications; photo-sensitive plates used for embossing and gold-foiling in the luxury packaging and greetings card industries; high-pressure aluminum and composite gas cylinders used by patients with breathing difficulties for mobile oxygen therapy, by firefighters in breathing apparatus equipment and by manufacturers of vehicles that run on CNG; and metal panels that can be "superformed" into complex shapes to provide additional design freedom for a wide variety of industries, including aerospace, high-end automotive and rail transportation.
Our area of expertise covers the chemical and metallurgical properties of aluminum, magnesium, zirconium, rare earths and certain other materials, and we have pioneered the application of these materials in certain high-technology industries. For example, we were the first to develop and patent a rare earth containing magnesium alloy (EZ33A) for use in high-temperature aerospace applications such as helicopter gearboxes; we are at the forefront of the commercial development of zirconia-rich mixed oxides for use in automotive catalysis; we were the first to manufacture a high-pressure gas cylinder out of a single piece of aluminum using cold impact extrusion; and we developed and patented the superforming process and the first superplastic aluminum alloy (AA2004) and were the first to offer superformed aluminum panelwork commercially. We have a long history of innovation derived from our strong technical base, and we work closely with customers to apply innovative solutions to their most demanding product needs. Our proprietary technology and technical expertise, coupled with best-in-class customer service and global presence provide significant competitive advantages and have established us as leaders in the markets in which we operate. We believe that we have leading positions, technically and by market share, in key product areas, including magnesium aerospace alloys, photo-engraving plates, zirconium chemicals for automotive catalytic converters and aluminum and composite cylinders for breathing applications.
We have a global presence, employing approximately 1,700 people on average in 2012, and operating 18 manufacturing plants in the United Kingdom, United States, Canada, France, Germany, the Czech Republic and China. We also have joint ventures in Japan, South Korea and India. Our total revenue, Adjusted EBITDA and net income for the year in 2012 were $511.6 million, $83.5 million and $42.4 million, respectively. See "Item 3A Selected Financial Data" for the definition of Adjusted EBITDA and reconciliations to profit for the year. In 2012, we manufactured and sold approximately 15,000 metric tons of our magnesium products, approximately 3,300 metric tons of our zirconium products and approximately 2.2 million gas cylinders. For a breakdown of our total revenue in 2012, 2011 and 2010 by geographic origin, see "Note 2Revenue and segmental analysis" to our audited consolidated financial statements included in this Annual Report.
Our company is organized into two operational divisions, Elektron and Gas Cylinders, which represented 52% and 48%, respectively, of our total revenue in 2012.
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Elektron
The Elektron division focuses on specialty materials based on magnesium, zirconium and rare earths. Within this division, we sell our products through two brands. Under our Magnesium Elektron brand, we develop and manufacture specialist lightweight, corrosion-resistant and heat- and flame-resistant magnesium alloys, extruded magnesium products, magnesium powders, magnesium plates and rolled sheets and photo-engraving plates for the aerospace (lightweight alloys and components), automotive (lightweight alloys and components), defense (powders for countermeasure flares) and printing (photo-engraving sheets) industries. Under our MEL Chemicals brand, we develop and manufacture specialty zirconium compounds for use in automotive applications (exhaust catalysts), electronics (ceramic sensors), structural ceramics, aerospace (thermal barrier coatings) and chemical synthesis (industrial catalysts).
Gas Cylinders
The Gas Cylinders division focuses on products based on aluminum, composites and other metals using technically advanced processes. Within this division, we sell our products through two brands. Under our Luxfer Gas Cylinders brand, we develop and manufacture advanced high-pressure aluminum and composite aluminum/carbon fiber gas containment cylinders for use in healthcare (oxygen), breathing apparatus (air), electronics (industrial gases), fire-fighting (carbon dioxide), transportation (CNG), and many other applications. Under our S uperform brand, we design and manufacture highly complex-shaped, sheet-based products for a wide range of industries, including aerospace (engine air intakes), specialist automotive (body panels and door inners), rail transport (train fronts and window frames) and healthcare (non-magnetic equipment casings).
Our End-Markets
The key end-markets for our products fall into four categories:
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Our Strengths:
Market leading positions. We believe all of our main brands, Magnesium Elektron , MEL Chemicals , Luxfer Gas Cylinders and Superform , are market leaders and strive to achieve best-in-class performance and premium price positions. We believe we are the leading manufacturer in the western world of high-performance magnesium alloys, powders, plates, and rolled sheets used in the aerospace, defense, and photo-engraving industries. We believe we are a leading manufacturer of specialty zirconium compounds for use in the global market for washcoats of catalytic converters in gasoline engine vehicles. In addition, we believe we are (i) the most global manufacturer of high pressure aluminum and composite gas cylinders; (ii) a leading global supplier of cylinders for medical gases, fire extinguishers and breathing apparatus; and (iii) the largest manufacturer of portable high pressure aluminum and composite cylinders in the world. Drawing on our expertise in the metallurgy of aluminum, we invented the superplastic forming process, and we believe we are the largest independent supplier of superplastically-formed aluminum components in the western world.
Focus on innovation and product development for growing specialist end-markets. We recognize the importance of fostering the creative ability of our employees and have developed a culture where any employee can take an active involvement in the innovation process. As a result of this culture of ingenuity, we have, in close collaboration with research departments in universities around the world, developed and continue to develop a steady stream of new products, including carbon composite ultra-lightweight gas cylinders, L7X extra high pressure aluminum gas cylinders, fourth generation (G4) doped zirconium chemicals for automotive and chemical catalysis, Isolux zirconium-based separation products used in water purification and ELEKTRON magnesium alloys for advanced aerospace and specialty automotive applications.
Strong technical expertise and know-how. We specialize in advanced materials where our expertise in metallurgy and material science enables us to develop products and materials with superior performance to satisfy the most demanding requirements in the most extreme environments. We design some products to withstand temperatures of absolute zero and others to withstand contact with molten steel. We produce materials that operate in a complete vacuum and absolute zero temperature, and cylinders that safely contain gases at over 300 atmospheres of pressure. Our technical excellence is driven in part by safety-critical products, including aerospace alloys and high-pressure gas cylinders that are subject to extensive regulation and are approved only after an extensive review process that in some cases can take years. Further, we benefit from the fact that a growing number of our products, including many of the alloys and zirconium compounds we sell, are patented.
Diversified blue chip customer base with long-standing relationships. We have developed and seek to maintain and grow our long-term and diverse customer base of global leaders. We put the customer at the heart of our strategy and we have long-standing relationships with many of our customers including global leaders in our key markets. Our businesses have cultivated a number of these relationships over the course of many decades. The diversity and breadth of our customer base also mitigates the reliance on any one customer. In 2012, our ten largest customers represented 36% of our total revenue. In 2012, our ten largest customers for the Elektron division represented 47% of its revenue, and our ten largest customers for the Gas Cylinders division represented 48% of its revenue
Resilient business model. Although the recent downturn in the global economy represented one of the most challenging economic environments for manufacturers in decades, in 2009, we generated cash and made a net profit every quarter. In 2010, our operating profit rebounded by 64% as compared to 2009 to $44.9 million, and further increased to $66.2 million and $66.7 million in 2011 and 2012 respectively. We have protected our margins to a large extent by successfully passing on to customers increases in raw material cost and overhead expense. We have also increased our margins over time by (i) disposing of low margin and cash intensive operations such as the Elektron division's magnesium and zinc die casting operations in 2006, and the BA Tubes aluminum tubes business in 2007; (ii) increasing our focus on
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high-performance value-added product lines and markets; and (iii) investing in automation and operational efficiencies at our manufacturing facilities. Our return on sales ratio, which is operating profit divided by sales revenue, was 8.3% in 2008, fell only to 7.4% during the 2009 economic downturn and improved to 11.1% in 2010 and has been at 13.0% in both 2011 and 2012.
Highly experienced and effective management team. We are led by an experienced executive management board, many of whom have been with us since the management buy-in (the "Management Buy-In") of certain downstream assets of British Alcan in 1996. Our current executive management board has played a significant role in developing our strategy and in delivering our stability and growth in recent years. We also highly value the quality of our local senior management. Our board of directors actively supports our business and contributes a wealth of industrial and financial experience.
Our Business Strategy
Our business strategy is underpinned by the "Luxfer Model" which consists of five key themes:
Each of our businesses has developed a strategic roadmap based on a balanced scorecard methodology and driven by the Luxfer Model. These strategic roadmaps contain business-specific initiatives, actions and measures necessary to guide the businesses towards achieving financial objectives set by our board of directors. With the Luxfer Model as its backbone, our company-wide strategy includes the following key elements:
Continued focus on innovation, R&D and protection of intellectual property. We have always recognized the importance of research in material science and innovation in the development of our products. We plan to continue this history of innovation through investment in our own research and development teams, as well as through extensive collaboration with universities, industry partners and customers around the world. Further, given the high level of research and development and technology content inherent in our products, we intend to aggressively protect our inventions and innovations by patenting them when appropriate and by actively monitoring and managing our existing intellectual property portfolio.
Increase the flow of innovative, higher value-added products targeting specialist markets. We plan to continue to focus on high growth, specialist end-markets, including environmental, healthcare and protection technologies. In response to increasing demand in these markets for higher value-added products, we plan to utilize our metallurgical and chemical expertise to develop new products and applications for existing products in these markets. We also seek to identify alternative applications for our products that leverage the existing capabilities of our products and our existing customer base.
Enhance awareness of Luxfer brands. We intend to maintain and improve global awareness of our four brands: Magnesium Elektron , MEL Chemicals , Luxfer Gas Cylinders and Superform . Our efforts will include promoting our leading technologies at trade shows, industry conferences and other strategic forums. We also plan to expand our online presence by maximizing the visibility and utility of our website and web-based access. Whenever possible, we insist that our corporate logos are visible on products sold by our customers,
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especially products such as medical cylinders that remain in active circulation and tend to be widely visible in the public domain.
Focus on continued gains in operational and manufacturing efficiencies. We seek to continuously improve operational and manufacturing efficiencies, investing in modern enterprise resource planning systems and using external auditors to measure our performance against rigorous, world-class standards. In order to do so, we look for ways to automate our processes to provide protection against competition based in low labor-cost economies. While we plan to maintain our focus on ways to reduce our operational and manufacturing costs, we also seek to modernize machinery and equipment at minimal costs when necessary to prevent bottlenecks in the manufacturing process.
Selectively pursue value-enhancing acquisitions. We have undertaken several successful complementary acquisitions over the past fifteen years, and we believe there will be opportunities to pursue synergistic acquisitions at attractive valuations in the future. We plan to assess these opportunities with a focus on broadening our product and service offerings, expanding our technological capabilities and capitalizing on potential operating synergies.
Our Business Divisions
We are organized into two operational divisions, Elektron and Gas Cylinders. The following table illustrates the revenue and trading profit of each division in 2012, 2011 and 2010.
|
Year Ended December 31, 2012 | ||||||||
---|---|---|---|---|---|---|---|---|---|
|
Revenue | Trading Profit (1) | |||||||
|
Amount | Percentage | Amount | Percentage | |||||
|
(in $ millions)
|
(%)
|
(in $ millions)
|
(%)
|
|||||
Elektron |
$265.3 | 51.9 | % | $53.0 | 77.0 | % | |||
Gas Cylinders |
246.3 | 48.1 | % | 15.8 | 23.0 | % |
|
Year Ended December 31, 2011 | ||||||||
---|---|---|---|---|---|---|---|---|---|
|
Revenue | Trading Profit (1) | |||||||
|
Amount | Percentage | Amount | Percentage | |||||
|
(in $ millions)
|
(%)
|
(in $ millions)
|
(%)
|
|||||
Elektron |
$287.5 | 56.3 | % | $54.1 | 82.0 | % | |||
Gas Cylinders |
223.3 | 43.7 | % | 11.9 | 18.0 | % |
|
Year Ended December 31, 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|
|
Revenue | Trading Profit (1) | |||||||
|
Amount | Percentage | Amount | Percentage | |||||
|
(in $ millions)
|
(%)
|
(in $ millions)
|
(%)
|
|||||
Elektron |
$203.5 | 50.5 | % | $33.5 | 73.3 | % | |||
Gas Cylinders |
199.2 | 49.5 | % | 12.2 | 26.7 | % |
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Elektron Division
Our Elektron division sells products under two brands: Magnesium Elektron and MEL Chemicals . The Elektron division represented 52% and 77% of our total revenue and trading profit, respectively, in 2012. The table below provides a summary of the products, applications and principal markets and illustrative customers and end-users within each brand in the Elektron division.
Products
|
Application/principal
markets supplied |
Illustrative customers
and end-users |
||
---|---|---|---|---|
Magnesium Elektron: | ||||
Magnesium alloys | Aerospace and specialist automotive | United Technologies, Fansteel-Wellman, Boeing, Lockheed Martin | ||
Magnesium powders | Defense (anti-tank practice rounds, sea water batteries and decoy flares) | Esterline, Chemring | ||
Fabricated products, sheets and plates |
Automotive
Photo-engraving |
Volkswagen
Hallmark |
||
MEL Chemicals: |
|
|
|
|
Zirconium compounds | Automotive (catalytic converters) | Umicore, BASF, Johnson Matthey | ||
Electro-ceramics (oxygen sensors, capacitors, microwave relays) | Bosch, EPCOS | |||
Engineering ceramics
Aerospace ceramics Chemical synthesis Fuel cells Refinery catalysis Reflective coatings |
HiTech
Sulzer Metco BASF SOFC Power UOP (Honeywell) 3M |
The principal geographic markets for the Elektron division are Europe and North America and the percentage of revenue by geographic destination and geographic origin and by key end-markets in 2012 is shown below:
Elektron DivisionRevenue by Geographic Destination
2012
Geographic Region
|
Percentage of
Elektron Revenue |
||
---|---|---|---|
North America |
49 | % | |
Euro zone |
22 | % | |
Asia Pacific |
13 | % | |
Non Euro Zone & Other Europe |
3 | % | |
United Kingdom |
6 | % | |
South & Central America |
4 | % | |
Africa |
3 | % |
30
Elektron DivisionRevenue by Geographic Origin
2012
Geographic Region
|
Percentage of
Elektron Revenue |
||
---|---|---|---|
North America |
58 | % | |
United Kingdom |
35 | % | |
Other Europe |
7 | % |
Elektron DivisionEnd-Market Sales Analysis
2012
End-Market
|
Percentage of
Elektron Revenue |
|||
---|---|---|---|---|
Environmental: |
||||
AerospaceLightweight Materials |
10% | |||
AutomotiveCatalysis (excluding surcharges) |
15% | |||
Rare earth surcharge (predominately automotive) |
15% | |||
AutomotiveLightweight Materials |
9% | |||
Specialty Chemicals |
10% | |||
Environmental Total |
59% | |||
Healthcare Total |
3% |
|||
Protection: |
||||
Countermeasures |
8% | |||
Defense |
2% | |||
Ceramics |
2% | |||
Protection Total |
12% | |||
Specialty: |
||||
Graphic Arts |
17% | |||
Industrial |
7% | |||
Chemicals |
1% | |||
Electronics |
1% | |||
Specialty Total |
26% | |||
Divisional and geographical information relating to revenue is disclosed in note 2, "Revenue and segmental analysis" of the Consolidated Audited Financial Statements, attached to this Annual Report.
Magnesium Elektron
We believe we are the leading manufacturer in the western world of high-performance magnesium alloys, powders, plates and rolled sheets used in the aerospace, defense and photo-engraving industries. Magnesium Elektron operates plants in Swinton, United Kingdom, the Czech Republic, numerous plants in the United States and a plant in Ontario, Canada.
31
Magnesium alloys offer significant advantages over aluminum alloys, as they are around a third lighter, while exhibiting similar properties in terms of strength and stability. Customers typically utilize our specialized magnesium alloys when lightweight, high-strength or extreme temperature stability characteristics are important, such as in jet fighters and in helicopter gearboxes, which need to be able to operate at high temperatures and without lubrication in emergency situations.
We have developed a large percentage of the high-performance magnesium alloys that are available in major markets, including the United States. For example, we have developed 12 of the 18 magnesium alloys approved by the American Society for Testing Material's ("ASTM") Standard Specification for Magnesium-Alloy Sand Castings. In the last 30 years, five out of six new alloys added to the list have been developed and patented by Magnesium Elektron. The ASTM's Standard Specification for Magnesium-Alloy Extruded Bars, Rods, Profiles, Tubes, and Wire lists nine currently used alloys, and Magnesium Elektron has developed five of them. Furthermore, we believe we are the largest manufacturer of atomized magnesium powders in the world. Our magnesium powder manufacturing facilities have been manufacturing ground magnesium powders since 1941 and atomized powders since the 1960s.
Our growth strategy for Magnesium Elektron is to build on the strength of the brand name and worldwide reputation for developing and producing high performance magnesium alloys. This includes maintaining a continued focus on developing value-added products leveraging our extensive knowledge in magnesium metallurgy for a number of specialist markets, including the aerospace, defense, medical, high-end graphic arts and consumer packaging markets. Although we ultimately sell tangible products, we believe our customers place significant value on our technical know-how and ability to help them effectively utilize our materials in their products. Our strategy is to patent new materials and sometimes the processes used to make them, when appropriate. In the future, we may also charge a royalty fee for the use of some of our materials (e.g., medical applications), however, we currently price our materials to cover the cost of providing such technical expertise.
Magnesium Elektron serves a wide range of customers globally and has close and collaborative relationships with its customers. The top ten customers for magnesium products accounted for 21% of the Elektron division's revenue in 2012. Our largest Magnesium Elektron customer accounted for 3% of divisional revenue in 2012.
Magnesium Elektron competes in various specialist niches, including in the production of military powders and high-performance alloys. Competition is fragmented and varies from sector to sector, and includes competition from Chinese suppliers of magnesium die-casting alloys. We do not normally compete directly against primary magnesium producers, which supply pure magnesium and simple alloys.
We have a number of patented and off-patent products, which helps us maintain our competitive leverage in the markets we serve. Due to the significant complexity of producing our specific alloys, we believe that competitors are likely to have difficulty manufacturing certain of these alloys even after the patents that protect the composition have expired. Our principal competitor in magnesium powders is ESM, a U.S.-based subsidiary of the German company SKW Stahl-Metallurgie.
MEL Chemicals
We believe we are a leader in the manufacture of specialty zirconium compounds. MEL Chemicals chemically-derived zirconium products are more versatile, pure, and suitable for demanding applications than thermally derived products or natural zirconia, thus commanding a significantly higher value-added premium. These are sold in a powder or solution form and have a broad range of applications, including as the wash coats for catalytic converters that remove noxious gases in gasoline engine vehicles, electronics, structural and functional ceramics, paper production, chemical catalysis, solid oxide fuel cells and water purification. Our zirconium products are key components in a range of products, from automotive catalytic converters to microwave telecommunications and back-lighting technology found in mobile phones. MEL
32
Chemicals operates two main manufacturing facilities in Swinton, United Kingdom and in Flemington, New Jersey. We also have a joint venture with Nippon Light Metal in Japan that is primarily devoted to research and analysis.
The zirconium plants use a multi-stage process based on proprietary technology to produce zirconium salts and zirconium oxides, which are differentiated by their chemical purity and physical properties. While zircon sand is the base raw material in the manufacturing process, the division also uses a number of rare earths and commodity chemical products to produce its zirconium compounds. Yttria-stabilized zirconia, for example, exhibits a hardness, chemical inertness, and low heat conductivity that make it suitable in applications as diverse as dentistry and gas turbines.
The demand for our products is mainly driven by environmental concerns and environmental legislation, since our environmentally-friendly products can replace toxic chemicals in many applications, such as replacing formaldehyde in paper-coating and removing environmental toxins, such as arsenic from waste effluent. We aim to buttress market demand for our products by developing new applications for our zirconium products, which will assist our customers address rising environmental, health and safety concerns in various industries related to chemical emissions, global environmental considerations and public health regulation and legislation. Key growth areas are catalytic applications for emission control systems for automotive and chemical industries, advanced ceramics in electronics and engineering, water purification technologies and biomedical applications.
With a leading position in the zirconium compounds market, MEL Chemicals has established itself over a number of years as an approved supplier to a number of blue-chip customers. These relationships have, in turn, facilitated the sharing of technical knowledge to develop new products and applications. The top ten customers of zirconium products accounted for 38% of the Elektron division's revenue in 2012. Our largest zirconium customer accounted for 13% of divisional revenue in 2012.
MEL Chemicals has experienced significant competition in simple zirconium compounds from Chinese suppliers, either directly or through the availability of low cost Chinese zirconium stock to specialist competitors. Markets with relatively low technology needs, such as lead replacement products for paint drying, have low margins due to aggressive pricing by Chinese suppliers who now have a majority share in such low technology markets. Rather than compete in these low margin areas, we have shifted our focus to more advanced products that require our leading technological knowledge, which we market to our clients to develop customized products to match their needs. There are a limited number of direct competitors in these specialized markets, where the products sold are complex chemical compounds with catalytic, electrical and ceramic properties. In such markets, we compete primarily with Daiichi Kigenso Kagaku Kogyo (DKKK) of Japan, Rhodia of France, Molycorp of Canada and Tosoh of Japan.
33
Gas Cylinders Division
Our Gas Cylinders division sells products under two core brands: Luxfer Gas Cylinders and Superform . The Gas Cylinders division represented 48% and 23% of our total revenue and trading profit, respectively, in 2012. The table below shows the products, applications and principal markets and illustrative customers and end-users within each brand in the Gas Cylinders division.
Products
|
Application/principal
markets supplied |
Illustrative customers
and end-users |
||
---|---|---|---|---|
Luxfer Gas Cylinders: | ||||
High-pressure aluminum and composite gas containment cylinders |
Medical
Beverage Fire extinguisher |
BOC Linde, Air Products
Coca-Cola, Pepsi Ansul (Tyco), Chubb/Kidde (UTC) |
||
|
|
Fire-fighters breathing apparatus |
|
Scott International (Tyco), MSA, Sperian (Honeywell) |
|
|
Industrial gases Scuba Alternative fuels Bulk gas transportation |
|
BOC Linde, Air Liquide XS Scuba Agility Fuel Systems IGX-GTM Technologies |
Superform: |
|
|
|
|
Superplastically-formed products | Aerospace | BF Goodrich (UTC), Lockheed Martin, BAE Systems, Honeywell | ||
|
|
Automotive |
|
Rolls-Royce (BMW), Aston Martin, Morgan, Bentley (VW) |
|
|
Medical |
|
Siemens |
|
|
Rail |
|
Bombardier |
The principal geographic markets for the Gas Cylinders division are the United States, Europe and Asia Pacific and the percentage of sales revenue by geographic destination and geographic origin and by end-markets for 2011 is shown below:
Gas Cylinders DivisionRevenue by Geographic Destination
2012
Geographic Region
|
Percentage of Gas
Cylinders Revenue |
||
---|---|---|---|
North America |
40% | ||
Euro zone |
18% | ||
Asia Pacific |
15% | ||
Non Euro Zone & Other Europe |
6% | ||
United Kingdom |
18% | ||
South & Central America |
3% |
34
Gas Cylinders DivisionRevenue by Geographic Origin
2012
Geographic Region
|
Percentage of Gas
Cylinders Revenue |
||
---|---|---|---|
North America |
51% | ||
United Kingdom |
30% | ||
Euro Zone |
17% | ||
Asia Pacific |
2% |
Gas Cylinders DivisionEnd-Market Sales Analysis
2012
End-Market
|
Percentage of Gas
Cylinders Revenue |
|||
---|---|---|---|---|
Environmental: |
||||
AerospaceLightweight Materials |
6% | |||
Alternative Fuels |
9% | |||
AutomotiveLightweight Materials |
5% | |||
RailLightweight Materials |
2% | |||
Environmental Total |
22% | |||
Healthcare: |
||||
Oxygen |
20% | |||
Medical Equipment |
1% | |||
Healthcare Total |
21% | |||
Protection: |
||||
SCBA |
24% | |||
Fire |
9% | |||
Defense |
2% | |||
Scuba |
2% | |||
Protection Total |
37% | |||
Specialty: |
||||
Industrial Gases |
11% | |||
Other |
9% | |||
Specialty Total |
20% | |||
Divisional and geographical information relating to revenue is disclosed in note 2, "Revenue and segmental analysis" of the Consolidated Audited Financial Statements, attached to this Annual Report.
35
Luxfer Gas Cylinders
Luxfer Gas Cylinders manufactured and sold approximately 2.2 million cylinders in 2012, making us, we believe, the largest manufacturer of portable high pressure aluminum and composite cylinders worldwide. The business has achieved its leadership position through a long history of innovation and a commitment to setting a leading standard in product specifications and customer service. In 2012, we manufactured gas cylinders at seven manufacturing facilities: two in the United States and one each in the United Kingdom, France, Germany, Canada and China. In 2009, we established a presence in India through a 51% interest in a joint venture with a local business partner based in Delhi. All of our Luxfer Gas Cylinder manufacturing facilities also maintain sales and distribution functions. We have also established sales, distribution and service centers in Australia and Italy.
Overall growth in the Luxfer Gas Cylinders business has historically been driven by the inherent benefits of aluminum over steel for high pressure cylinders and, in 2012, sales of our aluminum cylinders accounted for approximately 41% of Gas Cylinders divisional revenue. Steel was the first material used for the containment of high pressure gas, but aluminum cylinders have the following recognized benefits:
Luxfer Gas Cylinders has also led the industry's development of carbon composite cylinders, which include thin-walled aluminum lined cylinders wrapped in carbon fiber and, in 2012, sales of our composite cylinders accounted for approximately 43% of Gas Cylinders divisional revenue. Over the last decade, our composite cylinder business has enjoyed higher growth rates and stronger margins than our aluminum cylinder business. We believe demand for carbon composite cylinders will continue to grow driven by many of the additional benefits of carbon composite cylinders over aluminum and steel, namely the following:
Demand has been driven by increased usage by the emergency services sector which is attracted to the advantages of the lightweight characteristics for life-support applications. Therefore, we see further growth opportunities in composite cylinders and associated new specialty products such as our patented SmartFlow flow control device, currently under development, and in alternative-fuel cylinder technology.
Luxfer Gas Cylinders has a very broad customer base, both geographically and by number. In total, the top ten customers accounted for 48% of the Gas Cylinder division's revenue in 2012. The division's largest customer accounted for 11% of its revenue in 2012. Customers in certain markets such as the medical, SCBA and fire extinguisher markets tend to be highly concentrated as there are relatively few end-user distributors. Within the SCBA market, we have achieved a very high level of market penetration by providing composite gas cylinders to the three major suppliers to the Western market, which we believe supply approximately 90% of the U.S. market: MSA, Tyco and Sperian (Honeywell).
Supported by a strong worldwide distribution network, we believe that Luxfer Gas Cylinders is the most global manufacturer of high pressure aluminum and composite gas cylinders worldwide. Over recent years, the high pressure gas cylinder market has been subject to some consolidation. Over the last three years, Worthington Industries, originally a steel cylinder competitor in the United States and Europe, has purchased three U.S. based competitors, the composite cylinder manufacturer SCI and two small aluminum cylinder manufacturers, Piper Metal Forming and Hy-mark Cylinders. Other competitors include Catalina
36
Cylinders, an aluminum cylinder manufacturer in the United States, Faber, a steel and composite manufacturer from Italy, and MES Cylinders, an aluminum cylinder competitor based in Turkey. In the alternative fuel cylinder sector, our main competitor is the Norwegian-owned Hexagon Composites, which produces composite cylinders for CNG-powered vehicles. In September 2012, Luxfer purchased Dynetek Industries, a specialist manufacturer of alternative fuel systems, with plants in Canada and Germany.
In Asia, the market for aluminum cylinders is less developed and the larger competitors are predominantly steel-focused. Larger manufacturers include Everest Kanto Cylinder, based in India, and Beijing Tianhai Industry, based in China. However, the use of composite cylinders is growing in the Asia Pacific region and several competitors are now also manufacturing composite cylinders.
Superform
Superform developed the superplastic forming process, wherein controlled heat and air pressure are applied to special aluminum alloy sheets to elongate and form them into complex, bespoke shapes. These light, complex-shaped aluminum and carbon composite components are principally for use in the specialist automotive, electronics, aerospace, medical and rail transportation end-markets. Although superplastically-formed aluminum components are currently a relatively small, niche market, we believe that Superform is the largest independent supplier of such superplastically-formed aluminum components in the western world. Superform has operations in the United Kingdom and the United States.
Superform offers customers highly customized project development with the freedom to create complex geometric shapes that conventional stamping equipment cannot produce. Superform's technology is particularly well-suited to the manufacture of low to medium volumes of complex shapes in aluminum and composite materials, where the advantage of low-cost tooling resulting from the low-impact, low-pressure process more than offsets a generally higher component price than alternatives because of the material and length of process. The nature of this precision manufacturing process is conducive to highly machined aerospace and specialty automotive parts. The Superform business is also now offering titanium formings, and is working with the magnesium operations within our Elektron division to develop the market for ultra-lightweight magnesium superplastically-formed parts for our customers.
Demand in our Superform business has grown generally due to the automotive industry's increasing need to reduce weight in vehicles. In addition, demand has also grown as a result of an increasing variety of automotive bodywork in terms of shapes and sizes, especially in specialty and limited-edition automobiles, and, in 2012, Superform sales accounted for approximately 14% of Gas Cylinders divisional revenue.
Superform's customers tend to vary with the specific projects that it undertakes, but its key end-markets are aerospace, specialty automotive, rail transport and medical equipment.
As Superform invented the superplastic forming process, direct competition with our technology tends to be limited. Competition mainly arises from alternative technologies such as cold pressing and hydroforming. Cold pressing uses standard alloys and high-tonnage presses with matched tooling. While the cold pressing process is very rapid, taking only a few seconds, and the materials are relatively inexpensive, both the press and tooling are heavy and expensive, while the capability of the process is limited as pressing deep shapes using this process can excessively thin, or even tear, the material. Hydroforming is a specialized type of die forming that uses a high pressure hydraulic fluid to press material into a die at room temperature. A sheet of aluminum is placed inside a negative mold that has the shape of the desired end product. Hydraulic pumps then inject fluid at very high pressure, which forces the sheet of aluminum into the mold. The process is slower than cold pressing but uses less energy.
KTK in China is a competitor, and Magna International has established a forming operation in Ireland targeting slightly higher volume applications and using slightly different technology. Ford and Audi have in-house "fastforming" capabilities, which is a hybrid process in which a medium-duty cold press is first
37
used to produce a partially formed part, which is then finished using a superforming process. In addition, Boeing purchased a license to use our then-still-patented Superforming process from us in 1998, providing them with in-house superforming capability.
Our Key End-Markets
Environmental (41% of 2012 Revenue)
We believe many of our products serve a growing need to protect the environment and conserve its resources. Increasing environmental regulation, "green" taxes, and the increasing cost of fossil fuels have driven growth in this area. Our Elektron lightweight magnesium alloys and lightweight Superform aluminum, magnesium and titanium panels and components made with our alloys are widely used in aircraft, trains, trucks, buses and cars to reduce weight and improve fuel efficiency. Our composite gas cylinders are used in CNG-powered vehicles. For many years, we have sold zirconium-based chemicals for catalytic converters in gasoline engines, and we have recently developed similar products for the catalysis of emissions from diesel engines. Our zirconium chemical products are used to remove heavy metals (e.g., arsenic) from drinking water and have recently been developed to do the same from industrial effluent.
Area of focus
|
Product | End-Market Drivers | ||
---|---|---|---|---|
Alternative Fuels |
CNG fuel cylinders Exhaust catalysts CO2 capture Bulk gas transportation cylinders |
"Clean air" initiatives Abundance of natural gas Favorable tax treatment Increasing CNG filling infrastructure |
||
Environmental Catalysts (cleaning of exhaust emissions) |
Zirconium compounds with specific properties used in auto-cat washcoats |
Emissions legislation generally Application of tighter regulations on diesel engines in United States and Europe Cost effective for vehicle manufacturers as they avoid using precious metals |
||
Specialty/High end Automotive |
Superformed complex body panels, door inners and other components Magnesium extrusions |
Fuel efficiency for a given level of performance Increased flexibility to vehicle designers Strong demand for top-end cars from wealthy individuals in emerging markets |
||
Recycling |
Recycling service converting magnesium scrap into good die-casting ingot |
Marketing "whole of life" costing for vehicles Legislation requiring recycling at end of vehicle's life cycle |
||
Sensors, piezoelectrics and electro-ceramics |
Zirconium-based ceramic materials used in sensors of engine management systems |
Engine efficiency Control of exhaust gases |
38
Area of focus
|
Product | End-Market Drivers | ||
---|---|---|---|---|
Water purification |
ISOLUX technology (removal of heavy metals from drinking water) |
Tightened World Health Organization guidelines on levels of heavy metals in drinking water and associated legislation |
||
Rail transport |
Superformed train front cab and internal components |
Government investment in public transport Fuel efficiency Safety requirements moving from plastic to metal for internal components |
||
Military and civil aerospace |
Superform (wing leading edges, engine nacelle skins) ELEKTRON aerospace alloys in cast, extruded, and sheet form |
Growing aircraft build rate Increasing cost of fuel |
||
Helicopters |
Magnesium sand casting alloys, superformed panels |
Light-weighting Fuel efficiency |
||
Paper |
Bacote and Zirmel, both formaldehyde-free insolubilizers that aid high quality printing |
Elimination of toxic chemicals |
Healthcare (12% of 2012 Revenue)
We have a long history in the healthcare end-market and see this as a major area of opportunity for new product technologies. We believe we offer the world's most comprehensive range of cylinders designed to contain medical gases, including specialized composite cylinders popular in emergency medical services. Our materials are also being used in medical treatments and are featured in certain medical equipment, including MRI scanners. Our recently announced innovations, which are still in development, include the lightweight IOS medical oxygen delivery system featuring our patented L7X higher-strength aluminum alloy and carbon composite cylinders integrated with our patented SmartFlow valve-regulator technology. We have also developed a bio-absorbable magnesium alloy branded SynerMag to be used for vascular intervention and skeletal tissue repair and zirconium MELSorb materials for use, among other things, as the active ingredient in the development of wearable dialysis equipment.
Area of focus
|
Product | End-Market Drivers | ||
---|---|---|---|---|
Medical Gases |
Portable aluminum and
composite cylinders
Medical oxygen delivery system |
Growing use of medical
gases
Shift to paramedics, who
need portable, lightweight products
Growing trend to provide oxygen therapy in the home and to keep patients mobile
Increasingly aging population
Increase in respiratory diseases |
39
Area of focus
|
Product | End-Market Drivers | ||
---|---|---|---|---|
Medical Equipment Casings |
Superformed panels (e.g. for MRI scanners) |
Growing use of equipment using powerful magnets and consequent need for non-ferrous, but hygienic casings |
||
Pharmaceutical Industry |
Magnesium powders as a catalyst for chemical synthesis called the Grignard process |
Growth in pharmaceutical industry |
||
Orthopedics |
Magnesium sheets |
Improved mobility through use of easy-to-wear, lightweight braces and trusses |
||
Sorbents |
Melsorb material as active ingredient in wearable dialysis equipment |
Growth in kidney
problems
Need to reduce time
spent in hospital on dialysis
Invention of AWAK (wearable artificial kidney) |
Protection Technologies (24% of 2012 Revenue)
We offer a number of products that are used to protect individuals and property. Principal factors driving growth in this end-market include increasing societal expectations regarding the protection of individuals and armed forces personnel, tightening health and safety regulations and the significant cost of investing in and replacing technologically-advanced military property. We manufacture ultra-lightweight breathing-air cylinders that lighten the load on emergency services personnel working in dangerous environments, miniature cylinders for use in personal escape sets, aluminum cylinders for fire extinguishers and lightweight composite cylinders used to inflate aircraft emergency escape slides. Our ultra-fine atomized magnesium powder is a principal ingredient in counter-measure flares used to protect aircraft from heat-seeking missiles. Further, we are currently developing lightweight magnesium alloy armor plates for use on personnel carriers and patrol vehicles.
Area of focus
|
Product | End-Market Drivers | ||
---|---|---|---|---|
Life support breathing apparatus |
Composite gas cylinders used in SCBA |
Increased awareness of
importance of properly equipping fire-fighting services post 9/11
Demand for lightweight products to upgrade from heavy all-metal cylinders
Periodic upgrade of New U.S. National Institute for Occupational Safety and Health standards and natural replacement cycles
Asian and European fire services looking to adopt more modern SCBA equipment |
40
Area of focus
|
Product | End-Market Drivers | ||
---|---|---|---|---|
Fire protection |
Cylinders (carbon-dioxide-filled fire extinguisher) |
New commercial
buildings
Cylinder replacement during annual servicing |
||
Countermeasures |
Ultra-fine magnesium powder for flares used in the protection of fixed wing aircraft and helicopters from attack by heat-seeking missile |
Use in training and
combat
Maintenance of fresh reserve stocks of countermeasure powders |
||
Military Vehicles |
ELEKTRON magnesium alloys in cast, rolled, and extruded form |
Maintaining high level of protection while reducing weight to improve maneuverability and fuel economy |
Specialty Technologies (23% of 2012 Revenue)
Our core technologies have enabled us to exploit various other niche and specialty markets and applications. We are a leading producer of magnesium photo-engraving plates used by graphic arts printers and sign makers to produce high-quality packaging (e.g., book covers, labels for bottles of high-end spirits). We have also developed a range of cylinders for specialty applications, including inert-inner gas cylinders for rare gas and high-purity gas applications such as in the manufacture of semiconductors and other electronic products. Other applications include gas cylinders for portable welding and cutting equipment, carbon dioxide cylinders for beverage dispensing and cylinders for leisure applications such as paintball.
Area of focus
|
Product | End-Market Drivers | ||
---|---|---|---|---|
Specialty Industrial Gases |
Inert-interior aluminum cylinders for the electronics industry |
Semiconductor
industry
Oil exploration |
||
Graphic Arts |
Photo-engraving plates |
Focus on luxury packaging as part of marketing high-end products |
||
Leisure activities |
Cylinders for leisure markets including paintballing, dragster racing |
Leisure time
Growth of middle class in emerging markets |
||
General Engineering |
Magnesium billets, sheets,
coil, tooling plates
Ceramic compounds |
Economic growth |
Suppliers and Raw Materials
Elektron
The key raw materials used by our Elektron division are magnesium, zircon sand and rare earths.
The world market for magnesium is around 800,000 metric tons per year, with China being the dominant country of supply, representing around 80% of world supply. Western primary production is, however, significant, with U.S. Magnesium based in the United States, Dead Sea Magnesium based in Israel, RIMA Industrial based in Brazil and two smelters in Russia. We purchase approximately half of our magnesium needs from China. We use only U.S. sourced materials for U.S. production for sale in the United States and in key markets like military applications, where U.S. and Canadian material and technology sourcing is
41
mandatory. In 2010, we entered into a five-year magnesium supply contract with back-to-back pricing to support contracts for U.S. military countermeasure applications.
We purchase zircon sand for direct processing from suppliers based in Australia and South Africa and buy an intermediate zirconium product from various suppliers in China. Zircon sand is a by-product of mining for titanium dioxide, and global production is estimated at approximately 1.2 million metric tons. We purchase around 6,000 metric tons of zircon sand per annum. We purchase only zircon sand of the highest-quality grades from Rio Tinto in South Africa and Iluka in Australia. We also purchase intermediate zirconium chemicals from suppliers in China. We decide whether to purchase intermediate zircon or directly process zircon sand ourselves based on market prices, which determines the amount of zircon sand that we buy.
There are 17 rare earth metals that are reasonably common in nature and are usually found mixed together with other mineral deposits. Their magnetic and light-emitting properties make them invaluable to high-tech manufacturers. Demand for rare earths has expanded over the last few years because they serve as key inputs in the manufacturing of a number of zirconium chemical and magnesium alloy products, but our main requirement is for cerium for use in automotive catalysis compounds, where it has particular oxygen storage capabilities.
Following a decade or more of low prices that drove most Western mines out of business, China developed a virtual monopoly on supply, producing 97% of the world's supply of rare earths in 2009. Supply of rare earths from China has been impacted since mid-2010 by Chinese export quotas, which limit the export of these raw materials from China, resulting in significant increases in pricing, including an increase in the price of cerium carbonate, priced in rare earth oxide contained weight, from $10 per kilogram in May 2010 to a peak of $270 per kilogram in July 2011. The high prices appear to have destroyed low-value applications, and the Chinese export quotas are not, at present, a supply constraint. During the second half of 2011 and throughout 2012, rare earth prices fell, with cerium carbonate ending 2012 at approximately $28 per kilogram. In an effort to protect ourselves and our customers from significant fluctuation in the pricing of rare earths, we are being proactive in arranging sourcing of a growing proportion of our rare earths from non-Chinese suppliers. There are many projects currently underway to mine and refine rare earths outside China, and we have commenced discussions with a small number of potential suppliers, which are currently in the process of developing production capability. We expect two Western-based producers to be in the market in early 2013. Notwithstanding the extremely large impact of the peak in rare earth pricing, we have been able to recover the rise in these rare earth costs through a customer surcharge.
Gas Cylinders
The largest single raw material purchased by the Gas Cylinders division is aluminum. In 2012, we purchased 70% of our aluminum needs from Rio Tinto Alcan and its associated companies. Aluminum costs were 66% of the division's raw material costs in 2011.
Since 2005, the cost of aluminum has been somewhat volatile, with several periods of high pricing, which has required us to implement significant price increases on our products. While we pass on most of the price increases to our customers, in some cases through contractual cost-sharing formulas, we have found that passing on price increases can be more difficult, or takes longer, for certain products that are more commoditized, such as cylinders for use as fire extinguishers. As a result, we have historically hedged a portion of our exposure to fluctuations in the price of aluminum.
As a means of hedging against increases in the price of aluminum, we use fixed price supply contracts made directly with Rio Tinto Alcan, supplemented with hedging on the London Metal Exchange ("LME") through the use of LME derivative contracts. Typically, we agree to a price directly with Rio Tinto Alcan when placing orders for delivery of metal within the following eighteen months based on the prices quoted on the LME. We place these orders progressively and thereby gradually build our hedge position. As of
42
December 31, 2012, fixed price purchase contracts covered approximately 15% of our estimated primary aluminum needs for the following twelve months and LME derivative contracts covered approximately 50% of our estimated primary aluminum needs for the following twelve months The sheet used in the Superform operations is specialized and sourced from a number of different suppliers and distributors. Some highly specialized aluminum sheet is manufactured in-house by our Elektron division using equipment designed for casting and rolling of magnesium sheet.
Other key materials include carbon fiber used in composite products. The main suppliers of these materials are Toray and Mitsubishi. Increased demand for carbon fiber in the United States for commercial aerospace and military applications has led to carbon fiber shortages in recent years. We have built up relationships with these suppliers through providing them predictable requirements and fixed price annual contracts to encourage the successful procurement of our required quota for high-strength carbon fiber.
Environmental Matters
Our facilities, as with most manufacturing facilities, are subject to a range of environmental laws and regulations, including those relating to air emissions, wastewater discharges, the handling and disposal of solid and hazardous waste and the remediation of contamination associated with the current and historic use of hazardous substances or materials. If a release of hazardous substances or materials occurs on or from our properties, processes or any off-site disposal location we have used, or if contamination from previous activities is discovered at any of our locations, we may be held liable for the costs of remediation, including response costs, natural resource damage costs and associated transaction costs. We devote considerable efforts to complying with, and reducing our risk of liability under, environmental laws, including the maintenance of a detailed environmental management system.
In view of their long history of industrial use, certain of our facilities have areas of soil and groundwater or surface water contamination that require or are anticipated to require investigation or remediation.
Magnesium Elektron, Swinton, U.K. A dedicated landfill has been adjacent to our Swinton, Manchester plant for over sixty years. Following a review, we decided to close the landfill and ship our continuing waste to commercial landfills off-site. A detailed closure plan for the landfill was approved in June 2011 with the EA as the relevant regulator. The remediation process began in the second half of 2012 and we estimate that it will require a further cost of $1.8 million to achieve closure, which amount is covered by a specific reserve in the books. This expenditure is likely to be spread over 2013 to 2014, with closure being undertaken by an independent third party contractor.
Magnesium Elektron CZ, Litvinov, Czech Republic. Dross is a by-product of our production process. As a result of the local Czech environmental agency withdrawing permission for the previous disposal route, we began to stockpile significant quantities of the waste in 2007. The local environment agency also insisted on additional measures regarding the safe disposal of waste dross and a limit to the amount being held on-site. We began to address the issue in 2008 by installing a dross processing plant, at a cost of $0.8 million, to deal with this waste stream in an environmentally acceptable way. The recovery process involves crushing the dross waste and then extracting the magnesium to leave a residual powder. The process has proven successful with better than anticipated metal recovery and yields. The recovered metal is fed back into our main production process, which has resulted in a significant cost reduction benefit to the business. We have obtained approval to sell the powder as a soil supplement or fertilizer and sold over 500 metric tonnes for this purpose in 2012. At the end of 2012 we had accrued $0.5 million for the disposal of the powder, but this may not be required if the feedback from farmers regarding the soil supplement is positive.
MEL Chemicals, Swinton, U.K. In 1998, MEL Chemicals identified radioactive scale (or mineral buildup) contaminating pipes, valves and tanks in a redundant ion exchange plant. The zircon sand used by the operation contains low-level naturally occurring radioactive material, which has become concentrated in the
43
scale. More recently, radioactive hotspots were identified in an unused building on the site that had previously been used for the storage of a radioactive material. We have accrued $0.9 million to cover the estimated cost of removal and subsequent disposal for both of these matters, with a remediation plan being implemented in 2013. The relevant areas are isolated, have been clearly quarantined and are off limits to site personnel.
MEL Chemicals, Flemington, NJ. We have requested permission to collapse the sides of an old settling pond and, as a pre-condition, have been required by the New Jersey Department of Environmental Projection to undertake sampling of the soil that lay under the old pond liner. The total cost is expected to be between $0.2 million to $0.3 million.
MEL Chemicals, Flemington, NJ. We are investigating the presence of dissolved salts in groundwater adjacent to our plant as to whether it has been caused by activity on our site. At this point, we believe that the majority of the salts being detected off-site are naturally occurring. Meanwhile, as a goodwill gesture, we are supplying bottled water to the few adjacent properties that would otherwise use well-drawn drinking water.
Redditch, U.K. In 2000, civil works carried out at the BA Tubes plant in Redditch were undertaken as part of the facility's capital expenditure program. Under the United Kingdom's Integrated Pollution Control regime, and at the request of the EA, soil samples were taken that revealed significant ground water contamination. Further investigations suggest that there were two historic spillages of large quantities of trichloroethylene prior to our ownership of the business. In 2008, the site was designated as a "special site" under the contaminated land regime in England and Wales, which makes the EA responsible for the management and oversight of site assessment and remediation. Various potential treatments have been evaluated and we have presented an action plan for voluntary remediation to the EA, the first elements of which have been implemented. We are working to deliver a long-term improvement plan. Since 2008, there has been no industrial activity on the Redditch site. In 2010, we contracted to demolish the buildings at the site and, as part of this process, incurred environmental remediation costs of $0.3 million. As of December 31, 2012, we had a specific provision of $1.0 million to cover the future costs that would not be of a capital nature. It is expected that remediation will take several years.
General Issues. Under the U.S. Superfund Law or similar laws, we may be subject to liability with regard to on-site contamination and off-site waste disposals. The costs and liabilities associated with the identified matters above are not currently expected to be material. However, because additional contamination could be discovered or more stringent remediation requirements could be imposed in the future, there can be no assurance that the costs and liabilities associated with further environmental investigation and clean-up in respect of these matters will not be material.
We have made and will continue to make expenditures on environmental compliance and related matters. In 2012, we spent $0.9 million on environmental remediation.
We estimate that our expenditures on environmental matters could be approximately $1.8 million in 2013. These expenditures primarily relate to closure of the Swinton landfill and the remediation at the Redditch site. The exact timing of these expenditures is still uncertain and they may get delayed, reducing the expenditures in 2013 and pushing work into 2014 and later years. Since the magnitude of environmental problems often become clearer as remediation is undertaken, the actual cost of such remediation could be higher than our estimate. The nature of the cost is also difficult to fully ascertain, and we may capitalize some costs because the remediation work enhances the value of the land we own.
We have taken the future estimated environmental remediation expenditures into account in our ongoing financial planning, and expect to fund the expenditures from the operating cash we generate. Based on the information currently available to us, we do not believe that there are any other environmental liabilities or issues of non-compliance that will have a material effect on our consolidated financial position or results of
44
operations. Future changes in environmental laws and regulations or other developments could, however, increase environmental expenditures and liabilities, and there can be no assurance that such costs and liabilities in any given year will not be material.
U.S. Greenhouse Regulations. The USEPA has begun regulating the emissions of greenhouse gases. In 2009 and 2010, the USEPA promulgated new greenhouse gas reporting rules, requiring certain facilities that emit more than 25,000 tons of carbon dioxide equivalents ("CO 2 e") to prepare and file annual reports beginning in 2011. In addition, on May 13, 2010, the USEPA issued a new "tailoring" rule, which imposes additional permitting requirements on certain stationary sources emitting over 75,000 tons per year of CO 2 e. The USEPA is also considering additional rulemaking to apply these requirements to broader classes of emission sources, such as facilities with CO 2 e emissions greater than 50,000 tons per year, by 2012. Finally, several states, including states in which we operate such as New Jersey and California, have enacted or are considering enacting regulatory initiatives directed at reducing greenhouse gas emissions, such as "cap and trade" laws. While the ultimate impact of these new greenhouse gas emissions rules on our business is not yet known, it is possible that these new rules could have a material adverse effect on our results of operations and financial condition because of the costs of compliance.
Environmental Management Systems. Following the completion of the Management Buy-In, we retained independent environmental consultants RPS to design and implement an Environmental Management System ("EMS") for the purpose of monitoring and taking remedial action in respect of the issues which were identified in the course of the Management Buy-In due diligence. This work led to the adoption of a corporate environmental policy and the development of an EMS manual used by all the facilities acquired at that time. Subsequent to the original Management Buy-In, all acquired facilities have been the subject of stringent environmental due diligence.
On all sites, we continued during 2012 to take a proactive approach to environmental issues and completed a number of projects to reduce the potential environmental impacts of issues identified in previous base-line reviews. We intend to certify all of our larger sites as ISO 14001-compliant. As of December 31, 2011, twelve sites had achieved this objective.
Seasonality
We have little aggregate exposure to seasonality in respect of demand for our products. However, we have shutdown periods for most of our manufacturing sites during which we carry out key maintenance work on our plants and equipment. The shut-down periods typically last two weeks in the summer and one week around Christmas, and consequently lead to reduced levels of activity in the second half of the year compared to the first half. Third and fourth quarter revenue and operating profit can be affected by the shutdowns at our own plants or by shut downs of production by various industrial customers. In particular, we have found that our fourth quarter results are lower as many customers reduce their production activity from late November through December. However, the lower level of activity in December usually leads to lower levels of working capital and therefore stronger cash flow around the year-end period.
45
C. Organizational Structure
The following is a list of the Luxfer Holdings PLC significant subsidiaries:
Name of company
|
Country of
incorporation |
Proportion of
ownership interest |
|||
---|---|---|---|---|---|
BA Holdings, Inc.* |
United States | 100% | |||
Biggleswick Limited * |
England and Wales | 100% | |||
Luxfer Group Services Limited * |
England and Wales | 100% | |||
LGL 1996 Limited * |
England and Wales | 100% | |||
BAL 1996 Limited * |
England and Wales | 100% | |||
Hart Metals, Inc. * |
United States | 100% | |||
Lumina Trustee Limited (1) |
England and Wales | 100% | |||
Luxfer Australia Pty Limited * |
Australia | 100% | |||
Luxfer Gas Cylinders Limited * |
England and Wales | 100% | |||
Luxfer Gas Cylinders China Holdings Limited * |
England and Wales | 100% | |||
Luxfer Gas Cylinders (Shanghai) Co., Limited * |
Republic of China | 100% | |||
Luxfer Group Limited |
England and Wales | 100% | |||
Luxfer Group 2000 Limited |
England and Wales | 100% | |||
Luxfer, Inc.* |
United States | 100% | |||
Luxfer Overseas Holdings Limited * |
England and Wales | 100% | |||
Magnesium Elektron Limited * |
England and Wales | 100% | |||
MEL Chemicals, Inc.* |
United States | 100% | |||
Magnesium Elektron North America, Inc. * |
United States | 100% | |||
Magnesium Elektron CZ s.r.o. * |
Czech Republic | 100% | |||
MEL Chemicals China Limited * |
England and Wales | 100% | |||
Niagara Metallurgical Products Limited * |
Canada | 100% | |||
Reade Manufacturing, Inc.* |
United States | 100% | |||
Luxfer Gas Cylinders S.A.S. * |
France | 100% | |||
Luxfer Canada Limited * |
Cananda | 100% | |||
Dynetek Europe GmbH * |
Germany | 100% |
Other Investments:
Name of company
|
Country of
incorporation |
Proportion of
voting rights and shares held |
|||
---|---|---|---|---|---|
Nikkei-MEL Co Limited * |
Japan | 50% | |||
Luxfer Uttam India Private Limited |
India | 51% | |||
Dynetek Korea Co Limited * |
South Korea | 49% | |||
Dynetek Cylinders India Private Limited * |
India | 49% | |||
Luxfer Holdings NA, LLC |
United States | 49% |
Subsidiary undertakings are all held by the Company unless indicated.
46
D. Property Plant and Equipment.
We operate from 18 manufacturing plants in the United Kingdom, United States, France, Germany, Czech Republic, Canada and China. We also have joint ventures in Japan, South Korea and India. Our headquarters are located in Salford, England. Our manufacturing plants for our operations, as of December 31, 2012, are shown in the table below:
Division
|
Property/Plant |
Principal products
manufactured |
Ownership |
Approximate
area (square feet) |
|||||
---|---|---|---|---|---|---|---|---|---|
Elektron |
|||||||||
|
Swinton, England (2 plants) | Magnesium alloys/Zirconium chemicals | Split Lease/Own | 561,264 | |||||
|
Madison, IL |
Magnesium sheet |
Lease |
803,795 |
|||||
|
Findlay, OH |
Photo-engraving sheets |
Own |
43,000 |
|||||
|
Tamaqua, PA |
Magnesium powders |
Own |
64,304 |
|||||
|
Lakehurst, NJ |
Magnesium powders |
Own |
78,926 |
|||||
|
Flemington, NJ |
Zirconium chemicals |
Own |
65,000 |
|||||
|
Ontario, Canada |
Magnesium powders |
Lease |
16,335 |
|||||
|
Litvinov, Czech Republic |
Magnesium recycling |
Own |
62,140 |
|||||
Gas Cylinders |
|||||||||
|
Nottingham, England | Aluminum cylinders | Lease | 143,222 | |||||
|
Gerzat, France |
Cylinders |
Own |
327,535 |
|||||
|
Calgary, Canada |
Composite Cylinders |
Lease |
65,500 |
|||||
|
Dusseldorf, Germany |
Composite Cylinders |
Lease |
47,361 |
|||||
|
Worcester, England |
Aluminum panels |
Lease |
66,394 |
|||||
|
Riverside, CA |
Composite cylinders |
Lease/Own |
125,738 |
|||||
|
Graham, NC |
Aluminum cylinders |
Own |
121,509 |
|||||
|
Riverside, CA |
Aluminum panels |
Lease |
49,836 |
|||||
|
Shanghai, China |
Cylinders |
Lease |
15,383 |
We have other locations in Australia and Italy that are involved in sales and distribution but not the manufacture of our products, as well as our headquarters in Salford, England. Our headquarters are approximately 5,500 square feet, and we hold our headquarters under a short-term lease.
Utilization of our main productive pieces of plant and equipment is generally high across our businesses. We can adjust capacity relatively easily by varying shift patterns and/or manning levels, and there are few areas where we are currently constrained such that major capital investment is required to add capacity. Our strategic growth projects may require additional capacity to be installed over the next three years depending on the degree to which such projects are successful. For example, if automotive manufacturers choose the diesel catalysis products that we developed jointly with Rhodia to meet new environmental regulations we may need to build a new production facility to meet this increased demand.
47
Item 4.A. Unresolved Staff Comments
There are no written comments from the staff of the Securities & Exchange Commission which remain unresolved as of the date of filing this annual report with the commission.
Item 5. Operating and Financial Review and Prospects
The following discussion of our financial condition and results of operations should be read in conjunction with Item 3.A "Selected Financial Data", our audited consolidated financial statements and accompanying notes attached and appearing elsewhere in this Annual Report. Our audited consolidated financial statements have been prepared in accordance with IFRS-IASB.
The preparation of our audited consolidated financial statements required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods addressed and are s ubject to certain risks and uncertainties. See "Note 1Accounting policies" to our audited consolidated financial statements included in this Annual Report for additional details on assumptions and estimates. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those identified under "Forward-Looking Statements" and "Risk Factors" and other factors discussed in this Annual Report.
A. Operating Results
Results of Operations for the Years Ended December 31, 2012, 2011 and 2010
The table below summarizes our consolidated results of operations for the years ended December 31, 2012, 2011 and 2010, both in U.S. dollars and as a percentage of total revenue. For more detailed segment information, see "Note 2Revenue and Segmental Analysis" to our audited consolidated financial statements.
|
Year Ended December 31, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | ||||||||||
|
Amount |
Percentage
of Revenue |
Amount |
Percentage
of Revenue |
Amount |
Percentage
of Revenue |
|||||||
|
(in $ millions)
|
(%)
|
(in $ millions)
|
(%)
|
(in $ millions)
|
(%)
|
|||||||
Revenue |
$511.6 | 100.0 | % | $510.8 | 100.0 | % | $402.7 | 100.0 | % | ||||
Cost of sales |
(385.7 | ) | (75.4 | )% | (390.4 | ) | (76.4 | )% | (305.1 | ) | (75.8 | )% | |
Gross profit |
125.9 | 24.6 | % | 120.4 | 23.6 | % | 97.6 | 24.2 | % | ||||
Other income |
| | 2.0 | 0.4 | % | 0.1 | 0.0 | % | |||||
Distribution costs |
(6.9 | ) | (1.4 | )% | (7.3 | ) | (1.4 | )% | (7.4 | ) | (1.8 | )% | |
Administrative expenses |
(50.1 | ) | (9.8 | )% | (48.9 | ) | (9.6 | )% | (44.5 | ) | (11.1 | )% | |
Share of start-up costs of joint venture |
(0.1 | ) | (0.0 | )% | (0.2 | ) | (0.0 | )% | (0.1 | ) | (0.0 | )% | |
Trading profit (1) |
$68.8 | 13.4 | % | $66.0 | 13.0 | % | $45.7 | 11.3 | % | ||||
Restructuring and other expense (2) |
(2.1 | ) | (0.4 | )% | 0.2 | 0.0% | (0.8 | ) | (0.2 | )% | |||
Operating profit |
$66.7 | 13.0 | % | $66.2 | 13.0 | % | $44.9 | 11.1 | % | ||||
Other income (expense): |
|||||||||||||
Acquisition and disposal costs (2) |
(0.8 | ) | (0.1 | )% | (0.2 | ) | (0.0 | )% | (0.4 | ) | (0.1 | )% | |
Finance income: |
|||||||||||||
Interest received |
$0.2 | 0.0 | % | $0.2 | 0.0 | % | $0.2 | 0.1 | % | ||||
Gain on purchase of own debt |
| | | | 0.5 | 0.1 | % | ||||||
Finance costs: |
|||||||||||||
Interest costs |
(6.7 | ) | (1.3 | )% | (9.2 | ) | (1.8 | )% | (9.6 | ) | (2.4 | )% | |
Profit on operations before taxation |
$59.4 | 11.6 | % | $57.0 | 11.2 | % | $35.6 | 8.8 | % | ||||
Tax expense |
(17.0 | ) | (3.3 | )% | (13.6 | ) | (2.7 | )% | (9.9 | ) | (2.5 | )% | |
Net income for the year |
$42.4 | 8.3 | % | $43.4 | 8.5 | % | $25.7 | 6.4 | % | ||||
Adjusted net income for the year (3) |
$45.0 | 8.8 | % | $43.4 | 8.5 | % | $26.1 | 6.5 | % | ||||
48
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Revenue. Our revenue from continuing operations was $511.6 million in 2012, an increase of $0.8 million from $510.8 million in 2011. This increase includes the effect of a $29.3 million reduction in revenue resulting from the rare earth surcharges to zirconium chemical customers that our Elektron division used to recover the increased cost of rare earths, which spiked in price in the third quarter of 2011 and subsequently reduced significantly to more normal market levels. Accordingly, the surcharge levied to recover these previous cost increases reduced in 2012 as the cost of the rare earths decreased. Excluding the rare earth surcharge and impact of exchange rate translation (a $6.2 million loss on revenue attributable to a stronger average U.S. dollar exchange rate used to translate revenues from operations outside the United States), the increase in revenue at constant translation exchange rates was $36.3 million. This increase was a result of increased sales volumes combined with changes in sales mix, the acquisition of Dynetek, pricing and transactional exchange differences on export sales across a range of major market sectors.
Analysis of revenue variances from 2011 to 2012 for continuing operations
|
Elektron |
Gas
Cylinders |
Group | ||||
---|---|---|---|---|---|---|---|
|
(in $ millions)
|
||||||
2011 revenueas reported under IFRS-IASB |
$287.5 | $223.3 | $510.8 | ||||
FX Translation impacton non-U.S. operating results |
(3.3 | ) | (2.9 | ) | (6.2 | ) | |
Trading variances for ongoing operations2012 v 2011 |
10.4 | 25.9 | 36.3 | ||||
Rare earth surcharge variance |
(29.3 | ) | | (29.3 | ) | ||
2012 revenueas reported under IFRS-IASB |
$265.3 | $246.3 | $511.6 | ||||
The above table shows the change in each division's revenue between 2012 and 2011. It separates the impact of changes in average exchange rates on non-U.S. operations when translated into U.S. dollar consolidated results as well as the impact of the rare earth surcharge which we introduced in late 2010 to offset the impact of a substantial increase in the cost of certain rare earths. This surcharge was primarily applied to the sales of auto-catalysis chemicals used in catalytic converters. The Asian Metal Index quoted price for Cerium Carbonate (oxide contained), the principal rare earth used in these products, peaked at approximately $270 per kg in the third quarter of 2011, resulting in a surcharge of $69.8 million being levied on customers to recover the cost increases in 2011. The price of Cerium Carbonate began to reduce in late 2011 and continued to fall during 2012, closing at approximately $28 per kg by December 2012 The total rare earth surcharge levied in 2012 was $40.5 million.
The total revenue profile for the Group and the Elektron division has been distorted by the increase and subsequent decrease in the surcharge levied in 2011 and 2012 and is not indicative of the underlying performance of the Group and the Elektron division. The following discussion provides an explanation of our changes in revenue by division.
49
Elektron
The Elektron division's revenue was $265.3 million in 2012, a reduction of $22.2 million from $287.5 million in 2011.Excluding the $3.3 million adverse translation exchange rate impact on revenue and excluding the decrease in revenue relating to the rare earth surcharge, the underlying increase in revenue at constant translation exchange rates was $10.4 million from 2011. This represents a revenue increase of 4.9%, on revenues in 2011, excluding the rare earth surcharge and adjusted for the translation impact.
Despite a decrease in overall volumes of 3%, a favorable mix of product sales resulted in magnesium revenue increasing, at constant exchange rates, by 5.2% in 2012 when compared to 2011. There was strong demand generally for our high-performance aerospace alloys in the United States, and we also benefited from the extension of a major helicopter gearbox refurbishment program. Following the successful installation of a new extrusion press at our U.K. magnesium operation, we were able to increase sales of extruded products by being able to manufacture and offer magnesium alloys extruded into shaped cross-sectional profiles. Sales of powders to the military for use in counter-measure flares increased in 2012 due to stronger demand from the U.S. military and increased export sales. Sales of our own-manufactured magnesium photo-engraving plate remained similar to those achieved in 2011, while sales of our traded non-magnesium photo-engraving plate, such as zinc and copper, increased over the same period. The downturn in the European automotive market resulted in a reduction in sales volumes of recycled magnesium while sales of commercial alloys were also down in 2012 compared with 2011.
Though overall sales volume of zirconium products reduced in 2012, excluding the effects of the surcharge revenue, revenues increased by 4.4% as a result of higher selling prices and an improved mix of products sold. Rare earths are primarily used in the manufacture of catalysts used in catalytic converters. As the costs of rare earths fell in 2012, customers reduced their inventory levels ahead of an expected future reduction in the surcharge. This, combined with an 8% reduction in demand for new cars within Europe in 2012, resulted in sales volumes of auto-catalyst products being less in 2012 than in 2011. This reduction was more than off-set by increased sales of: our industrial catalysts, as interest rose in our environmentally-friendly zirconium technologies; traditional oxide products used in ceramic and electro-ceramic applications; and ceramic and reactive chemicals that have a number of uses, including, for example, improving the energy efficiency of screens in electronic devices.
Gas Cylinders
The Gas Cylinder division's revenue was $246.3 million in 2012, an increase of $23.0 million from $223.3 million in 2011. Excluding a $2.9 million adverse impact on revenue attributable to exchange rate translation the underlying revenue, at constant translation exchange rates, was $25.9 million, or 11.8%, higher than 2011.
While sales volumes of our aluminum gas cylinders decreased by 8% in 2012, total sales revenue of these products rose by 1.6% due to increased selling prices and a favorable mix of product sales. There were some encouraging growth signs in this sector with increased sales volumes of beverage, large industrial and scuba aluminum cylinders. These increases were offset by lower sales of smaller medical aluminum cylinders and reduced demand for lower-value fire extinguisher cylinders.
Sales volumes of our composite cylinders increased by 20% in 2012 compared to 2011. There was a significant increase in the sales of our patented L7X medical composite cylinders in 2012 when compared to 2011, mainly as a result of the finalization in late 2011 of the U.K. National Health Service tenders to supply the home oxygen therapy market and our subsequent selection as the provider of light-weight cylinders in 2012 to the newly appointed U.K. home oxygen service providers. We also saw significant growth in sales volumes of large composite cylinders used in alternative fuel vehicle systems and gas
50
transportation modules in 2012 compared to the prior year. The increase in underlying alternative fuel cylinders was further augmented by our acquisition of Dynetek at the end of the third quarter of 2012.
Superform sales were slightly down by 2.5% in 2012 compared to 2011. Two major customers suffered weaker than expected demand for premium cars and the U.K. government cut back spending on rail infrastructure projects. U.S aerospace demand remained strong with new projects boosting sales demand.
Cost of Sales. Our cost of sales was $385.7 million in 2012, a decrease of $4.7 million from $390.4 million in 2011. Excluding a translation gain of $5.5 million on cost of sales of non-U.S. operations, our cost of sales at constant translation exchange rates increased $0.8 million, or 0.2%, from 2011. The reduction in rare earth costs was offset by increases in other material costs and higher sales volumes in 2012 when compared to 2011.
Gross Profit. Gross profit was $125.9 million in 2012, an increase of $5.5 million from $120.4 million in 2011. Overall gross profit margin increased to 24.6% in 2012 from 23.6% in 2011, reflecting the more favorable mix of products sold.
Distribution Costs. Distribution costs were $6.9 million in 2012, a decrease of $0.4 million, or 5.5%, from $7.3 million in 2011. There was a translation gain on costs for non-U.S. operations of $0.2 million, and the underlying movement in costs at constant translation exchange rates was a decrease of $0.2 million, or 2.7%, reflecting the improved mix of higher value sales and some reduction in freight costs.
Administrative Expenses. Our administrative expenses were $50.1 million in 2012, an increase of $1.2 million, or 2.5%, from $48.9 million in 2011. The translation to U.S. dollars from our non-U.S. operations decreased costs by $0.4 million. The underlying increase in costs of $1.6 million was due to the incorporation of Dynetek costs following the acquisition of the business, an increase in the net cost of spending on research and development (net of grants), marketing and advertising and general inflationary increases.
Share of start-up costs of joint venture. In late 2009, we entered into a joint venture agreement to establish a manufacturing facility to produce gas cylinders in India. The joint venture has been accounted for using the equity method, as the partners have a contractual agreement that establishes joint control over the economic activities of the entity. The loss attributable to the start-up costs of the joint venture in 2012 was $0.1 million compared to $0.2 million in 2011.
Operating and Trading Profit. Our operating profit was $66.7 million in 2012, an increase of $0.5 million, or 0.8%, from $66.2 million in 2011. Our trading profit was $68.8 million in 2011, an increase of $2.8 million, or 4.2%, from $66.0 million in 2011.
Analysis of trading profit and operating profit variances from 2011 to 2012 for continuing operations
|
Elektron
Trading Profit |
Gas
Cylinders Trading Profit |
Group
Trading Profit |
Restructuring
and other expense |
Group
Operating Profit |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in $ millions)
|
||||||||||
2011as reported under IFRS-IASB |
$54.1 | $11.9 | $66.0 | $0.2 | $66.2 | ||||||
FX Translation impacton non-U.S. operating results |
(0.4 | ) | | (0.4 | ) | | (0.4 | ) | |||
2011adjusted for FX translation |
$53.7 | $11.7 | $65.4 | $0.2 | $65.6 | ||||||
Trading variances for ongoing operations2011 v 2012 |
(0.7 | ) | 3.9 | 3.2 | (2.3 | ) | 0.9 | ||||
2012as reported under IFRS-IASB |
$53.0 | $15.8 | $68.8 | $(2.1 | ) | $66.7 | |||||
51
The above table shows the change in each division's trading profit, group trading profit and operating profit between 2011 and 2012. The table also provides a reconciliation of group trading profit to group operating profit. The table separates the impact of changes in average exchange rates on non-U.S. operations when translated into U.S. dollar consolidated results.
Translating our non-U.S. operations into U.S. dollars has resulted in a decrease in our trading profit and operating profit of $0.4 million and $0.4 million, respectively, in 2012. This decrease represented 0.6% of the change in both trading profit and operating profit from 2012. At constant translation exchange rates, our trading profit increased by $3.2 million or 4.9% and our operating profit increased by $0.9 million or 1.4% in 2012.
Excluding the rare earth surcharge, revenue growth through both favorable pricing and volume changes had a significant benefit in 2012 when compared to 2011. As the cost of rare earths decreased in the year we had to carefully manage the level of surcharge charged to ensure that we were able to maintain profit margins. We also were able to achieve better underlying pricing across a wide range of products through a focus on both price increases and mix of products sold, including through the introduction of new products at price points that helped us to enhance our profitability. These volume and mix changes are further discussed by division below and in the revenue discussion. Together, these factors had a positive impact of $10.0 million on our trading profit and operating profit in 2012.
We had a number of cost changes that together resulted in reducing the increase in trading profit and operating profit by a net $6.8 million in 2012. The main reasons for these changes were as follows:
The segment trading profit results by division are further explained in more detail below:
Elektron
The Elektron division's trading profit of $53.0 million in 2012 was a decrease of $1.1 million from $54.1 million in 2011. Changes in exchange rates used to translate segment trading profit into U.S. dollars led to a $0.4 million decrease in 2012, and therefore profits at constant translation exchange rates decreased by $0.7 million, or 1.3%.
There was a positive benefit of $1.5 million in 2012 when compared with 2011 as a result of obtaining better underlying selling prices, as well as achieving a more favorable mix of sales . The cost of rare earths reduced in 2012 from the peak in the third quarter of 2011 of $270 per kg to approximately $28 per kg by December 2012. Managing this price reduction was as challenging as managing the price increases in the previous year. We believe we negotiated this volatile period in our cost base successfully, as, through the levying of the surcharge and careful control of our cost base and working capital, we were able to maintain our profit margins. We also benefited from a slight reduction in the cost of magnesium in 2012 through
52
careful sourcing of material while the cost of other zirconium raw materials, including zircon sand, increased in cost during the year.
For 2011, the foreign exchange transaction rates on sales and purchases had a negative impact of $0.2 million, net of the benefit of utilizing foreign currency exchange derivative contracts, compared to 2011.
Accounting charges for the Elektron element of the defined benefit plans increased in 2012. The total impact on trading profit was a $1.7 million additional charge when compared to 2011.
The decrease in retirement benefit charges and PPF levy cost allocated to the Elektron division was $0.2 million in 2011. The allocation for the Elektron division was more than the allocation for the Gas Cylinders division because the former had more members in the relevant plans.
Other costs increased by a net $0.5 million in 2012 compared to 2011 and these include increased expenditures on research and development, maintenance and marketing costs.
Gas Cylinders
The Gas Cylinders division's trading profit of $15.8 million in 2012 was an increase of $3.9 million from $11.9 million in of 2011, an increase of 32.8%. The exchange rates used to translate segment profit into U.S. dollars in 2012 were broadly similar to those in the previous year without any impact on profit.
The input costs of raw materials were similar in 2012 compared to 2011. Despite the reduction in overall cylinders sold, there was a favorable mix of products sold as well as an increase in the level of sales prices achieved in 2012 compared to 2012. The net impact of these factors was to increase trading profit by $8.5 million.
In 2012, the foreign exchange transaction rates on sales and purchases had a negative impact of $0.5 million, net of the benefit of utilizing foreign currency exchange derivative contracts, compared to 2011.
Accounting charges for the Gas Cylinders element of the defined benefit plans increased in 2012. The total impact on trading profit was a $1.1 million additional charge when compared to 2011.
Other costs increased by a net $3.0 million, which include increased expenditures on research and development, maintenance, sales and marketing costs and general inflation increases.
Restructuring and other income (expense). In 2012, there was $2.1 million charge to restructuring and other income (expense) compared to a credit of $0.2 million in 2011. There were $1.1 million of costs incurred in relation to rationalization costs in the Gas Cylinders division and $0.2 million of costs have been incurred in relation to minor rationalization costs in the Elektron division. There was also a charge of $0.8 million to the income statement under IFRS 2 in relation to share options granted as part of the initial public offering.
In 2011, there was a credit of $0.2 million to restructuring and other income (expense). A past service credit of $1.6 million was recognized in 2011 in relation to pension plan changes undertaken by the Luxfer Group Pension Plan. In 2011, the Group incurred legal, audit and professional costs of $2.8 million in relation to our initial public offering. Of this, $1.4 million was expensed in the year mainly in relation to historical audit work and $1.4 million in relation to regulatory and legal documentation to support the transaction was deferred to 2012.
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Net acquisition and disposal costs. In 2012, we incurred a non-operating charge of $0.8 million compared to $0.2 million in 2011. In 2012, there was also a net acquisition cost of $0.6 million recognized by the Gas Cylinders division in relation to the acquisition of Dynetek Industries Limited. The cost was comprised of acquisition costs of $0.8 million less a negative goodwill credit of $0.2 million. We also incurred $0.2 million in 2012 and in 2011 relating to a voluntary agreement with the Federal Trade Commission ("FTC") to sell and license a subset of our U.S. photo-engraving business to a third party after the acquisition of Revere Graphics Worldwide ("Revere") in 2007. The sale was achieved in late 2012.
Finance incomeinterest received. Interest received was $0.2 million in 2012 and 2011. Interest received is generated by placing surplus cash on short-term deposit. In 2011, the interest received included $0.1 million of interest received from the loan note due to us from the buyers of our Speciality Aluminium division.
Finance costsinterest costs. The finance costs of $6.7 million that we incurred in 2012 decreased from $9.2 million in 2011. The costs were lower as a result of the reduced level of indebtedness.
The finance costs we incurred in 2012 included $5.7 million of interest payable on our current financing facilities and $1.0 million of amortization relating to finance costs.
The finance costs we incurred in 2011 included $3.3 million of interest payable on our Senior Notes due 2012, $0.5 million of interest payable on our Previous Credit Facility, $3.8 million of interest payable on our current financing facilities and $1.6 million of amortization relating to finance costs.
Taxation. In 2012, our tax expense was $17.0 million on profit before tax of $59.4 million. The effective tax rate was 28.6% on the profit before tax. Of the charge of $17.0 million, $11.1 million (18.7% effective rate) related to current tax payable and $5.9 million (9.9% effective rate) was a deferred taxation charge. In 2011, our tax expense was $13.6 million on profit before tax of $57.0 million. The effective tax rate was 23.9% on the profit before tax. Of the charge of $13.6 million, $11.8 million (effective rate of 20.7%) related to current tax payable and $1.8 million (3.2% effective rate) was a deferred taxation charge.
The effective rate of the current tax, which is the taxes that are payable on current year profits, fell, with more profits being generated in lower tax jurisdictions, such as the U.K, and continued use of tax credits for R&D expenditure. The deferred tax rate is higher, with the utilization of capital allowances and pension deficit payments, which are recognized as a deferred tax asset on the balance sheet and then charged to the income statement when utilized to reduce current tax payable.
Net income for the Financial Year. Net income for the year was $42.4 million compared to $43.4 million in 2011, with the fall due to several one-off costs relating to the acquisition of Dynetek Industries and some IPO related costs, rather than due to lower trading profit. Adjusted net income, which excludes the after tax impact of these exceptional items, was $45.0 million up on the adjusted income for 2011 of $43.4 million.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Revenue. Our revenue from continuing operations was $510.8 million in 2011, an increase of $108.1 million from $402.7 million in 2010. Included in this increase was $66.4 million of additional revenue charged by the Elektron division to zirconium chemical customers in the form of a surcharge in the face of a steep increase in the cost of rare earths as a result of export restrictions imposed by the Chinese government. Excluding the rare earth surcharge and impact of exchange rate translation (a $9.9 million gain on revenue attributable to a weaker average U.S. dollar exchange rate used to translate revenues from operations outside the United States), the increase in revenue at constant translation exchange rates was $31.8 million or 7.7%. This increase was a result of increased sales volumes combined with changes in sales mix, pricing and transactional exchange differences on export sales across a range of major market sectors.
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Analysis of revenue variances from 2010 to 2011 for continuing operations
|
Elektron | Gas Cylinders | Group | ||||
---|---|---|---|---|---|---|---|
|
(in $ millions)
|
||||||
2010 revenueas reported under IFRS-IASB |
$203.5 | $199.2 | $402.7 | ||||
FX Translation impacton non-U.S. operating results |
5.1 | 4.8 | 9.9 | ||||
2010 revenueadjusted for FX translation |
$208.6 | 204.0 | $412.6 | ||||
Trading variances for ongoing operations2011 v 2010 |
78.9 | 19.3 | 98.2 | ||||
2011 revenueas reported under IFRS-IASB |
$287.5 | $223.3 | $510.8 | ||||
The above table shows the change in each division's revenue between 2011 and 2010. It separates the impact of changes in average exchange rates on non-U.S. operations when translated into U.S. dollar consolidated results. The following discussion provides an explanation of our increase in revenue by division.
Elektron
The Elektron division's revenue was $287.5 million in 2011, an increase of $84.0 million from $203.5 million in 2010. Excluding the $5.1 million favorable translation exchange rate impact on revenue and excluding the $66.4 million increase in revenue relating to the rare earth surcharge, the increase in revenue at constant translation exchange rates was $12.5 million, or 6.0%, from 2010.
In late 2010, we applied a rare earth surcharge on various products, primarily impacting the sales of auto-catalysis chemicals used in catalytic converters. We used these rare earth surcharges to protect our business from increased rare earth costs that we incurred during the period. Throughout 2011, management of the rare earth pricing bubble was critical to ensuring we maintained and grew operating profits. Higher sales prices were also needed to fully recover other inflationary costs, including energy, other raw material costs, including magnesium, zirconium compounds and other chemicals, increased labor costs and maintenance expenditure.
Out of the total revenue growth of 6.0% in 2011 when compared to 2010, our magnesium revenue grew by 4.9% and our zirconium revenue grew by 8.0%. Magnesium revenue growth was driven by an increase in recycle volumes with increased demand from the die-casting market servicing the German export-driven premium branded automotive industry. Demand for our high-performance aerospace alloys remained strong in the United States, and we started to benefit from being able to offer extruded parts from our newly commissioned extrusion press. Sales to Japan were impacted by reduced demand from customers as a result of the events following the earthquake and resulting tsunami earlier in the year. Sales of wrought and rolled products increased significantly as we expanded sales for our specialty industrial and aerospace applications.
Sales volumes of our own-manufactured magnesium photo-engraving plate remained similar to those achieved in 2010, while sales volumes of our traded non-magnesium photo-engraving plate, such as zinc and copper, decreased over the same period. Our primary focus continues to be promoting the benefits of our magnesium photo-engraving plate products, and although it is a mature market in western economies, growth in demand is driven by developing economies as they increase both the manufacture and sales of premium consumer products requiring high quality engraved packaging.
Though sales volume of zirconium products reduced in 2011, revenues were helped by higher selling prices. After a strong increase in volumes in 2010 and a further increase in the first half of 2011, zirconium volumes reduced in the second half of 2011, particularly as customers reacted to the high price of product containing rare earths. Further, there was a noticeable destocking by customers later in the year that
55
impacted sales in the fourth quarter of 2011. The environmental auto-catalyst market was the main sector impacted by the rare earth surcharge and inventory destocking in the fourth quarter of 2011. New business development included areas away from auto-catalyst markets, such as industrial scale catalysis, where there is new demand and interest rose in our environmentally friendly zirconium technologies.
Gas Cylinders
The Gas Cylinder division's revenue was $223.3 million in 2011, an increase of $24.1 million from $199.2 million in 2010. Excluding a $4.8 million favorable impact on revenue attributable to exchange rate translation, the increase in revenue at constant translation exchange rates was $19.3 million, or 9.5%, from 2010. This increase was primarily due to an increase in sales volumes.
Sales volumes of our aluminum gas cylinders increased by 5% in 2011. Sales volumes of our patented L7X aluminum cylinders for the medical market increased by 9% and sales volumes in some traditional applications like aluminum fire extinguisher cylinders, beverage cylinders and scuba cylinders also increased. There were some reductions in sales volumes of our aluminum industrial cylinders and our traditional aluminum medical cylinders.
Sales volumes of our composite cylinders increased by 6% in 2011 compared to 2010, the main growth coming from alternative fuel systems, medical oxygen, breathing apparatus and emergency escape sets, which are targeted at our strategic end-markets of Environmental, Healthcare and Protection Technologies, respectively.
Superform sales volumes of formed components (as opposed to tooling) increased by 13% in 2011 compared to 2010. This was mainly due to operational expansions over the past few years, driven by innovation in the size and complexity of superformed shapes that we can now provide and the demand for our specialized lightweight material solutions. New tooling design sales remained strong, giving us opportunities for future growth, and we have a number of new projects providing customers with superformed magnesium solutions using our Elektron division's alloys.
Cost of Sales. Our cost of sales was $390.4 million in 2011, an increase of $85.3 million from $305.1 million in 2010. Excluding a translation loss of $7.8 million on cost of sales of non-U.S. operations, our cost of sales at constant translation exchange rates increased $77.5 million, or 25%, from 2010. The main reason for the increase was higher rare earth and other material costs and higher sales volumes in 2011 when compared to 2010.
Gross Profit. Gross profit was $120.4 million in 2011, an increase of $22.8 million from $97.6 million in 2010. Overall gross profit margin decreased slightly to 23.6% in 2011 from 24.2% in 2010, which was a favorable result given the significant increase in raw material costs.
Distribution Costs. Distribution costs were $7.3 million in 2011, a decrease of $0.1 million, or 1.4%, from $7.4 million in 2010. There was a translation loss on costs for non-U.S. operations of $0.3 million, and the underlying movement in costs at constant translation exchange rates was a decrease of $0.4 million, or 5.2%, despite the increased sales activity and more goods being transported to customers.
Administrative Expenses. Our administrative expenses were $48.9 million in 2011, an increase of $4.4 million, or 9.9%, from $44.5 million in 2010. The translation to U.S. dollars of costs from our non-U.S. operations at weaker exchange rates increased the costs by $1.0 million. The other increase in costs of $3.4 million was due to increased spending on research and development and marketing and advertising and general inflationary increases.
Share of start-up costs of joint venture. In late 2009, we entered into a joint venture agreement to establish a manufacturing facility to produce gas cylinders in India. The joint venture has been accounted for using the equity method, as the partners have a contractual agreement that establishes joint control over
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the economic activities of the entity. The loss attributable to the start-up costs of the joint venture in 2011 was $0.2 million compared to $0.1 million in 2010.
Operating and Trading Profit. Our operating profit was $66.2 million in 2011, an increase of $21.3 million, or 47.4%, from $44.9 million in 2010. Our trading profit was $66.0 million in 2011, an increase of $20.3 million, or 44.4%, from $45.7 million in 2010.
Analysis of trading profit and operating profit variances from 2010 to 2011 for continuing operations
|
Elektron
Trading Profit |
Gas
Cylinders Trading Profit |
Group
Trading Profit |
Restructuring
and other expense |
Group
Operating Profit |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in $ millions)
|
||||||||||
2010as reported under IFRS-IASB |
$33.5 | $12.2 | $45.7 | $(0.8 | ) | $44.9 | |||||
FX Translation impacton non-U.S. operating results |
0.6 | 0.2 | 0.8 | | 0.8 | ||||||
2010adjusted for FX translation |
$34.1 | $12.4 | $46.5 | $(0.8 | ) | $45.7 | |||||
Trading variances for ongoing operations2011 v 2010 |
20.0 | (0.5 | ) | 19.5 | 1.0 | 20.5 | |||||
2011as reported under IFRS-IASB |
$54.1 | $11.9 | $66.0 | $0.2 | $66.2 | ||||||
The above table shows the change in each division's trading profit, group trading profit and operating profit between 2011 and 2010. The table also provides a reconciliation of group trading profit to group operating profit, which were not significantly different given the small level of cost and expense differences. The table separates the impact of changes in average exchange rates on non-U.S. operations when translated into U.S. dollar consolidated results.
Translating our non-U.S. operations into U.S. dollars has resulted in an increase in our trading profit and operating profit of $0.8 million and $0.8 million, respectively, in 2011. This increase represented 4% of the change in both trading profit and operating profit from 2010. At constant translation exchange rates, our trading profit increased by $19.5 million or 41.9% and our operating profit increased by $20.5 million or 44.9% in 2011. The level of operating and trading profit growth experienced was exceptionally high, with an unusually strong third quarter 2011 level of profitability in the Elektron division, and is not indicative of management's on-going organic growth expectations.
Revenue growth through both favorable pricing and volume changes had a significant benefit in 2011 when compared to 2010. The use of a surcharge mechanism ensured we were able to recover the significantly higher rare earth costs and maintain profit margins. We also were able to achieve better underlying pricing across a wide range of products through a focus on both price increases and mix of products sold. Where new products have been introduced, we have tried to position pricing of these to help enhance our profitability. The volume and mix changes are further discussed by division below and in the revenue discussion. Together, these factors had a positive impact of $22.1 million on our trading profit and operating profit in 2011.
We had a number of cost changes that together resulted in reducing the increase in trading profit and operating profit by a net $2.6 million in 2011. The main reasons for these changes were as follows:
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The segment trading profit results by division are further explained in more detail below:
Elektron
The Elektron division's trading profit of $54.1 million in 2011 was an increase of $20.6 million from $33.5 million in 2010. Changes in exchange rates used to translate segment trading profit into U.S. dollars led to a $0.6 million increase in 2011, and therefore profits at constant translation exchange rates increased by $20.0 million, or 59%.
The resulting improvement in trading profit from the positive trading activities in the division was $20.0 million. This resulted from better underlying selling prices, as well as both volume and mix changes. The cost of magnesium in 2011 was higher than 2010, while the cost of zirconium raw materials increased significantly due to restrictions imposed by the Chinese government on the export of rare earths that commenced during late 2010. Price increases, along with operational efficiency measures, were implemented not only to offset higher raw material costs, but also to provide an adequate return in relation to higher levels of capital employed in the business due to a significant knock-on increase in working capital levels. As well as rare earths, we had other cost increases in areas such as zircon sand, energy, magnesium and regulatory costs around sourcing materials, which not only led to additional external costs, but also took up the valuable time of senior technical staff. Price increases and operational improvements became essential. The scale of the rare earth increases required that we levy a surcharge on our customers, reviewed quarterly, to prevent any negative impact on the profit and loss account. We also implemented price increases to cover other inflationary costs, including energy, maintenance and employment costs.
For 2011, the foreign exchange transaction rates on sales and purchases had a positive impact of $0.5 million, net of the benefit of utilizing foreign currency exchange derivative contracts, compared to 2010.
The decrease in retirement benefit charges and PPF levy cost allocated to the Elektron division was $1.7 million in 2011. The allocation for the Elektron division was more than the allocation for the Gas Cylinders division because the former had more members in the relevant plans.
Other costs increased by a net $2.8 million in 2011 compared to 2010 and these include increased expenditures on research and development, maintenance, bonus provisions and marketing costs.
Gas Cylinders
The Gas Cylinders division's trading profit of $11.9 million in 2011 was a reduction of $0.3 million from $12.2 million in of 2010, a decrease of 2.5%. Changes in exchange rates used to translate segment profit into U.S. dollars led to a $0.2 million increase in 2011, and therefore profits at constant translation exchange rates decreased by $0.5 million, or 4.0%.
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As discussed above, increased sales volumes, together with increased average sales prices and an improved sales mix partly offset an increase in raw material prices and utility costs. The net impact of these factors was to increase trading profit by $1.5 million.
In 2011, the foreign exchange transaction rates on sales and purchases had a positive impact of $0.6 million, net of the benefit of utilizing foreign currency exchange derivative contracts, compared to 2010.
The division's allocation of the lower retirement benefit charges and lower PPF levy cost was $0.7 million in 2011. The allocation for the Gas Cylinders division was less than the allocation for the Elektron the former had fewer members in the relevant plans.
Other costs increased by a net $3.3 million, which include increased expenditures on research and development, maintenance, sales and marketing costs.
Restructuring and other income (expense). In 2011 there was a credit of $0.2 million to restructuring and other income (expense), compared to a charge of $0.8 million in 2010. A past service credit of $1.6 million was recognized in 2011 in relation to pension plan changes undertaken by the Luxfer Group Pension Plan. In 2011, the Group incurred legal, audit and professional costs of $2.8 million in relation to the raising of equity funding. Of this, $1.4 million was expensed in the year mainly in relation to historical audit work and $1.4 million was deferred, which related to regulatory and legal documentation to support the transaction.
During 2010 we incurred restructuring and other expense charges of $0.2 million in relation to rationalization activity at our Elektron division. There was also a charge in 2010 of $0.6 million relating to the demolition of a vacant property net of proceeds from a third party lessee of the building owned by the group undertaking Luxfer Group Services Limited.
Disposal costs of intellectual property. In 2011, we incurred a non-operating charge of $0.2 million compared to $0.4 million in 2010, all costs related to agreeing with the Federal Trade Commission ("FTC") to sell and license a subset of our U.S. photo-engraving business to a third party after the acquisition of Revere Graphics Worldwide ("Revere") in 2007. The sale and license mainly involves an intellectual property package and supply agreement for magnesium sheet.
Finance incomeinterest received. Interest received was $0.2 million in 2011 and 2010. Interest received is relatively low because we generally use surplus cash to repay debt and save on interest payment costs rather than placing cash on deposit. The interest received includes $0.1 million of interest received for 2011 and 2010 from the loan note due to us from the buyers of our Speciality Aluminium division.
Finance incomeGain on purchase of own debt. During 2010, we purchased $5.5 million of the then outstanding Senior Notes due 2012 ("Senior Notes due 2012") for $5.0 million through Luxfer Group Limited, a subsidiary of Luxfer Holdings PLC. The gain on the purchase of the Senior Notes due 2012 was $0.5 million and has been included within Finance Income.
Finance costsinterest costs. The finance costs of $9.2 million that we incurred in 2011 decreased slightly from $9.6 million in 2010.
The finance costs we incurred in 2011 included $3.3 million of interest payable on our Senior Notes due 2012, $0.5 million of interest payable on our Previous Credit Facility, $3.8 million of interest payable on our new financing facilities and $1.6 million of amortization relating to finance costs. The finance costs that we incurred in 2010 included $7.5 million of interest payable on our Senior Notes due 2012, $0.8 million of interest payable on our Previous Credit Facility and $1.3 million of amortization related to historic finance costs.
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Taxation. In 2011, our tax expense was $13.6 million on profit before tax of $57.0 million. The effective tax rate was 23.9%. Of the charge of $13.6 million, $11.8 million related to current tax payable and $1.8 million was a deferred taxation charge.
In 2010, our tax expense was $9.9 million on profit before tax of $35.6 million. The effective tax rate was 27.8%. Of the charge of $9.9 million, $9.5 million related to current tax payable and $0.4 million was a deferred taxation charge.
The overall rate is suppressed due to the high proportion of profits being generated by U.K. operations, due to certain expenses that are allowable for U.K. tax purposes, and these include losses arising on translation of loans mainly to our U.S. subsidiaries, "tax deductible" cash contributions to the U.K. retirement benefit plan and utilization of excess capital allowances. Despite these factors reducing our U.K. tax exposure, the increasing profitability of the U.K. businesses resulted in a tax charge of $1.0 million being charged to the income statement in respect of U.K. corporation tax in 2011, and this compared to $nil in 2010.
Net income for the Financial Year. As a result of the above factors, net income for the financial year was $43.4 million in 2011, an increase of $17.7 million, or 68.9%, from $25.7 million in 2010.
B. Liquidity & Capital Resources
Liquidity
Our liquidity requirements arise primarily from obligations under our indebtedness, capital expenditures, the funding of working capital and the funding of hedging facilities to manage foreign exchange and commodity purchase price risks. We meet these requirements primarily through cash flow from operating activities, cash deposits and borrowings under our Revolving Credit Facility and accompanying ancillary hedging facilities. As of December 31, 2012, we had available £70 million ($114.0 million at December 31, 2012 exchange rate of $1.00:£0.6151) under our Revolving Credit Facility. See "FinancingSenior Facilities Agreement." Our principal liquidity needs are:
From time to time, we consider acquisitions or investments in other businesses that we believe would be appropriate additions to our business. For example, we purchased Revere for $14.7 million in 2007, and in 2012 we acquired Dynetek for a consideration of $11.8 million. The Senior Facilities Agreement agreed in June 2011 had certain restrictions stopping its use for acquisitions, unless waived by the Lenders. As part of the renegotiated facility, agreed in November 2012, this restriction was removed to provide committed acquisition funding as required.
We believe that in the long term, cash generated from our operations will be adequate to meet our anticipated requirements for working capital, capital expenditures and interest payments on our indebtedness. In the short term, we believe we have sufficient credit facilities to cover any variation in our cash flow generation. However, any major repayments of indebtedness will be dependent on our ability to raise alternative financing or to realize substantial returns from the sale of operations. Also, our ability to expand operations through sales development and capital expenditures could be constrained by the availability of liquidity, which, in turn, could impact the profitability of our operations.
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On May 13, 2011, we entered into a senior facilities agreement (the "Senior Facilities Agreement"), providing £70 million of funding through a combination of a Term Loan of £30 million ($49 million) and the Revolving Credit Facility of £40 million ($64 million). We refer to this as the "New Bank Facilities." On May 13, 2011, we also issued $65 million principal amount of Loan Notes due 2018 in a private placement to an insurance company. In connection with this new financing, we issued a redemption notice for the Senior Notes due 2012, and they were repaid on June 15, 2011. We also fully repaid and cancelled our Previous Credit Facility on June 15, 2011.
Following the listing of the Company's shares on the New York Stock Exchange we utilized some of the proceeds of the IPO to repay the senior term loan. We subsequently undertook a renegotiation of the terms and conditions of the Senior Facilities Agreement. Under the modified agreement, the value of debt repaid can now be re-drawn against the Revolving Credit Facility available in pounds sterling, U.S. dollars or euros up to a maximum aggregate principal amount of £70 million which was undrawn as at December 31, 2012.
As of December 31, 2012, we were in compliance with the covenants under the Senior Notes due 2012 and the Senior Facilities Agreement.
Our total interest expense was $6.7 million in 2012, compared to $9.2 million in 2011. We expect to invest approximately $30 million in capital expenditures in 2013. We have also been managing the rising costs of retirement benefits, including higher government insurance levies and some historical environmental remediation requirements.
We conduct all of our operations through our subsidiaries. Accordingly, our main cash source is dividends from our subsidiaries. The ability of each subsidiary to make distributions depends on the funds that a subsidiary has from its operations in excess of the funds necessary for its operations, obligations or other business plans. We have not historically experienced any material impediment to these distributions, and we do not expect any local legal or regulatory regimes to have any impact on our ability to meet our liquidity requirements in the future. In addition, since our subsidiaries are wholly-owned by us, our claims will generally rank junior to all other obligations of the subsidiaries. If our operating subsidiaries are unable to make distributions, our growth may slow after the proceeds of this offering are exhausted, unless we are able to obtain additional debt or equity financing. In the event of a subsidiary's liquidation, there may not be assets sufficient for us to recoup our investment in the subsidiary.
Our ability to maintain or increase the generation of cash from our operations in the future will depend significantly on the competitiveness of and demand for our products, including our success in launching new products that we have been developing over many years. Achieving such success is a key objective of our business strategy. Due to commercial, competitive and external economic factors, however, we cannot guarantee that we will generate sufficient cash flow from operations or that future working capital will be available in an amount sufficient to enable us to service our indebtedness or make necessary capital expenditures.
We are still vulnerable to external shocks because of our level of indebtedness and our fixed costs. In recent years, external economic shocks to oil prices, commodity prices and a weakening U.S. dollar have impacted our results. In 2012, our continuing operations incurred over $13 million of energy costs, purchased over $54 million of primary aluminum and over $36 million of primary magnesium. In 2012, $38.7 million, or 58%, of our operating profit was derived from North American businesses. A significant economic shock that has a major impact on one or several of these risks simultaneously could have a severe impact on our financial position. Other factors could also impact our operations. For example, the Chinese government raised export taxes and cut export quotas on rare earth minerals in 2010. These materials are an important input for our zirconium operations, and due to these restrictions, we not only had to ensure that we had adequate supply of these materials but also had to pass on the severe increase in costs resulting from the reduced supply onto our customers by way of a surcharge. In addition, while we have a diverse set of
61
operations, which protect us against individual market sector downturns, we are still vulnerable to a recession in a particular end-market such as aerospace and defense, medical or automotive.
We operate robust cash and trading forecasting systems that impose tight controls on our operating businesses with regard to cash management. We use regularly updated forecasts to plan liquidity requirements, including the payment of interest on our indebtedness, capital expenditures and payments to our suppliers. Although we have generated cash sufficient to cover most of our liability payments, we also rely on the Revolving Credit Facility to provide sufficient liquidity. Our banking facilities are further explained below under "FinancingSenior Facilities Agreement." We are not dependent on this offering to meet our liquidity needs for the next twelve months.
Cash Flow
The following table presents information regarding our cash flows, cash and cash equivalents for the years ended December 31, 2012, 2011 and 2010:
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | ||||
|
(in $ millions)
|
||||||
Net cash flows from operating activities |
$69.0 | $29.1 | $37.8 | ||||
Net cash used in investing activities |
(29.4 | ) | (21.2 | ) | (15.6 | ) | |
Net cash flow before financing activities |
39.6 | 7.9 | 22.2 | ||||
Net cash flows from financing activities |
(23.0 | ) | 5.4 | (14.6 | ) | ||
Net increase in cash and cash equivalents |
$16.6 | $13.3 | $7.6 | ||||
62
Cash flows from operating activities
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | ||||
|
(in $ millions)
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|||||||
Profit for the year |
$42.4 | $43.4 | $25.7 | ||||
Adjustments for: |
|||||||
Income taxes |
11.1 | 11.8 | 9.5 | ||||
Deferred income taxes |
5.9 | 1.8 | 0.4 | ||||
Depreciation and amortization |
14.7 | 14.5 | 13.8 | ||||
Past service credit on retirement benefit obligations |
| (1.6 | ) | | |||
IPO related share based compensation charge |
0.8 | | | ||||
Loss on disposal of property, plant and equipment |
| | 0.1 | ||||
Income and costs relating to demolition of vacant property |
| | 0.6 | ||||
Gain on purchase of own debt |
| | (0.5 | ) | |||
Net finance costs |
6.5 | 9.0 | 9.4 | ||||
Acquisition and disposal costs. |
| 0.2 | 0.4 | ||||
Share of start-up costs of joint venture |
0.1 | 0.2 | 0.1 | ||||
Increase in receivables |
(1.3 | ) | (13.1 | ) | (1.9 | ) | |
Decrease/(increase) in inventories |
24.1 | (24.8 | ) | (20.2 | ) | ||
(Decrease)/increase in payables |
(15.3 | ) | 13.1 | 16.5 | |||
Movement in retirement benefit obligations |
(10.1 | ) | (4.3 | ) | (6.7 | ) | |
Accelerated deficit contributions into retirement benefit obligations |
| (7.2 | ) | | |||
Decrease in provisions |
(0.6 | ) | (0.2 | ) | (0.7 | ) | |
Income tax paid |
(9.3 | ) | (13.7 | ) | (8.7 | ) | |
NET CASH FLOWS FROM OPERATING ACTIVITIES |
$69.0 | $29.1 | $37.8 | ||||
In 2012, net cash flows from operating activities increased by $39.9 million to $69.0 million from $29.1 million of 2011. Profit in 2012 of $42.4 million decreased by $1.0 million from $43.4 million in 2011.There was a net working capital inflow of $7.5 million in 2012 as compared to an outflow of $24.8 million in 2011, an improvement of $32.3 million. Working capital in 2011 had been significantly increased due to the higher costs of rare earths and the need to buy forward material to cover agreed surcharge pricing. The improved availability of rare earths has reduced the need for strategic holding of inventory, and the corresponding fall in prices has benefited the cash flow. The inventory reduction resulted in a $24.1 million cash inflow, a $48.9 million improvement from outflow of $24.8 million in 2011. There was an outflow in receivables of $1.3 million in 2012 compared to an outflow of $13.1 million in 2011, an improvement of $11.8 million. There was also an outflow in payables of $15.3 million in 2012, an increase of $28.4 million from the $13.1 million inflow in 2011. Lower interest rates following the refinancing undertaken in June 2011, the reduction in the need to draw down the Revolving Credit Facility and the repayment of the senior term loan in October 2012 resulted in the net finance costs outflow of $6.5 million in 2012 being $2.5 million less than the outflow of $9.0 million in 2011. In 2012, there were some additional payments made in respect of pension plan deficit remediation funding in the United States, while in 2011, as part of the June 2011 refinancing, we agreed to make advanced payments of $7.2 million into our retirement benefit pension plans covering the period to March 2012. Due to additional pension payments in the U.S. and the effect of temporary timing differences, the income tax outflow in 2012 of $9.3 million was $4.4 million less than the outflow of $13.7 million in 2011.
In 2011, net cash flows from operating activities decreased by $8.7 million to $29.1 million, from $37.8 million in 2010. In 2010, there was an outflow relating to working capital of $5.6 million. The equivalent figure for 2011 was an outflow of $24.8 million, an increase in working capital expenditure of
63
$19.2 million. One of the main factors in the deterioration in cash flows was the significant price increase in the cost of rare earths sourced from China and the subsequent impact on our working capital.
In June 2011, we undertook a refinancing of the business, and as part of this exercise, we agreed to make advanced payments for a total of $7.2 million into our retirement benefit pension plans. As a result of this advanced payment into the U.K. Luxfer Group Pension Plan, we benefited from approximately $6.6 million of pre-paid pension payments spread over the twelve months ended March 31, 2012, after which we resumed monthly pension deficit payments.
Cash used in investing activities
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | ||||
|
(in $ millions)
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|||||||
Purchases of property, plant and equipment |
$(19.3 | ) | $(21.2 | ) | $(15.9 | ) | |
Purchases of intangible fixed assets |
| (0.3 | ) | | |||
Investment in joint venture |
(0.4 | ) | (0.3 | ) | (0.1 | ) | |
Proceeds from sale of business (net of costs) |
1.5 | 0.8 | 0.8 | ||||
Net cash flow on purchase of business |
(11.0 | ) | | | |||
Disposal costs of intellectual property |
(0.2 | ) | (0.2 | ) | (0.4 | ) | |
NET CASH USED IN INVESTING ACTIVITIES |
$(29.4 | ) | $(21.2 | ) | $(15.6 | ) | |
Net cash outflows used in investing activities increased by $8.2 million, or 38.7%, to $(29.4) million in 2012 from $(21.2) million in 2011. The underlying reason for this increase was the net expenditure incurred of $11.0 million relating to the acquisition of Dynetek in September 2012. We also incurred capital expenditures of $19.3 million in 2012, a reduction of $1.9 million from the $21.2 million expenditure in 2011. See "Capital Expenditures." In addition, in the first six months of 2012, we invested an additional $0.4 million into our Gas Cylinders Indian joint venture. We also incurred cost of $0.2 million in 2012 related to the disposal of certain intellectual property. The net cash flows used in investing activities in 2012 were partially offset by $1.5 million in deferred consideration we received from the sale of our Speciality Aluminium division. This receipt represents the final amount due under the terms of the original sales agreement for the sale of the Speciality Aluminium business in 2008.
64
Net cash outflows used in investing activities increased by $5.6 million, or 35.9%, to $(21.2) million in 2011 from $(15.6) million in 2010. We incurred capital expenditures of $21.5 million in 2011 compared to $15.9 million in 2010. See "Capital Expenditures." In addition, in 2011, we incurred costs of $0.2 million related to the disposal of certain intellectual property and injected a further $0.3 million into our Gas Cylinders Indian joint venture. The net cash flows used in investing activities in 2011 were partially offset by $0.8 million in deferred consideration we received from the sale of our Speciality Aluminium division.
Cash flows from financing activities
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | ||||
|
(in $ millions)
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|||||||
Interest paid on banking facilities |
$(1.8 | ) | $(1.9 | ) | $(1.3 | ) | |
Interest paid on Loan Notes due 2018 |
(3.9 | ) | (2.1 | ) | | ||
Interest paid on Senior Notes due 2012 |
| (4.5 | ) | (7.1 | ) | ||
Interest received on Loan Note |
| 0.1 | 0.2 | ||||
Other interest received |
0.2 | 0.1 | | ||||
Dividends paid |
(5.8 | ) | | | |||
Draw down on previous banking facilities |
| 27.7 | | ||||
Repayments of previous banking facilities |
| (38.5 | ) | (1.4 | ) | ||
Draw down on new banking facilities and other loans |
| 139.5 | | ||||
Repayments of banking facilities and other loans |
(72.8 | ) | | | |||
Repayment of Senior Notes due 2012 |
0.0 | (109.8 | ) | | |||
Redemption of preference shares |
0.0 | (0.1 | ) | | |||
Purchase of Senior Notes due 2012 |
| | (5.0 | ) | |||
Renewal of banking facilities and other loansfinancing costs |
| | (0.2 | ) | |||
Payment of banking facilities and other loansfinancing costs |
| (5.1 | ) | | |||
Modification to banking facilities and other loansfinancing costs |
(0.6 | ) | | | |||
Proceeds from issue of shares |
65.1 | | | ||||
Share issue costs |
(3.5 | ) | | | |||
Purchase of shares from ESOP |
0.1 | | 0.2 | ||||
NET CASH FLOWS FROM FINANCING ACTIVITIES |
$(23.0 | ) | $5.4 | $(14.6 | ) | ||
Net cash flows from financing activities decreased by $28.4 million to $(23.0) million in 2012 from $5.4 million in 2011. Net cash flows from financing activities in 2012 were primarily attributable to the proceeds of $65.1 million from the IPO in October 2012 following the successful listing of Luxfer shares on the New York Stock Exchange. The company paid share issuance costs in respect of the IPO process of $3.5 million. A part of the proceeds was used to repay the senior term loan and in addition we also repaid the amount outstanding on the revolving credit facility in the year, for a combined total outflow of $72.8 million. In 2012 we also made two dividend payments to holders of our ordinary shares, resulting in an outflow of $5.8 million.
Net cash flows from financing activities increased by $20.0 million to $5.4 million in 2011 from $(14.6) million in 2010. Net cash flows from financing activities in 2011 were primarily attributable to $139.5 million drawn down under our New Bank Facilities, partially offset by net cash flows used in financing activities of $148.3 million to repay our Senior Notes due 2012 and our Previous Credit Facility. Net cash flows used in financing activities in 2010 were primarily attributable to $7.1 million in interest payments on our Senior Notes due 2012, repayment of $1.4 million on our Previous Credit Facility and purchase of $5.5 million (nominal value) of the Senior Notes due 2012 for $5.0 million.
65
Increase/(decrease) in cash and cash equivalents
Our cash and cash equivalents increased by $18.0 million to $40.2 million for the year ended December 31, 2012 from December 31, 2011. We had cash and cash equivalents of $22.2 million as of December 31, 2011. As of December 31, 2012, we held $16.9 million of cash and cash equivalents denominated in GBP sterling, $14.5 million of denominated in U.S. dollars and $8.8 million of foreign cash and cash equivalents denominated in Australian dollars, Canadian dollars, euro, Chinese renminbi and Czech koruna.
Our cash and cash equivalents increased by $11.9 million to $22.2 million for the year ended December 31, 2011 from December 31, 2010. We had cash and cash equivalents of $10.3 million as of December 31, 2010. As of December 31, 2011, we held $18.2 million of cash and cash equivalents denominated in GBP sterling, a negative position of $2.2 million denominated in U.S. dollars and $6.2 million of foreign cash and cash equivalents denominated in Australian dollars, euro, Chinese renminbi and Czech koruna.
Financing
Indebtedness
Our indebtedness under our Revolving Credit Facility and Loan Notes due 2018 was $63.5 million as of December 31, 2012, while our cash and short term deposits were $40.2 million as of December 31, 2012. Our indebtedness under our Revolving Credit Facility, the previous Term Loan and Loan Notes due 2018 was $132.5 million as of December 31, 2011, while our cash and short term deposits were $22.2 million as of December 31, 2011.
As of December 31, 2012, we also had drawn down $2.0 million of the ancillary facilities available under the Senior Facilities Agreement in connection with certain derivative financial instruments, letters of credit and bank guarantees.
Loan Notes due 2018
On May 13, 2011, our subsidiary, BA Holdings, Inc., entered into a note purchase agreement (the "Note Purchase Agreement"), among us, our subsidiaries and the note purchasers, to issue $65 million aggregate principal amount of Loan Notes due 2018 in a U.S. private placement to an insurance company and related parties. We used the net proceeds from the private placement of the notes, together with borrowings under the Revolving Credit Facility and Term Loan, to redeem the Senior Notes due 2012, repay borrowings under our Previous Credit Facility and for general corporate purposes. The Loan Notes due 2018 bear interest at a rate of 6.19% per annum, payable quarterly on the 15th day of September, December, March and June, commencing on September 15, 2011 and continuing until the principal amount of the notes has become due and payable. The Loan Notes due 2018 mature on June 15, 2018.
Under the May 13, 2011 Note Purchase Agreement, Luxfer Holdings PLC, each subsidiary borrower and each guarantor provided security in favor of the note-holders over its assets in the United Kingdom and the United States. In connection with these security interests, we also pledged to the lenders the shares held by Luxfer Holdings PLC and its subsidiaries in their respective subsidiaries. Following the listing of the Company's shares on the New York Stock Exchange, we successfully renegotiated and agreed amendments to the original Note Purchase Agreement, including the removal of all U.K. and U.S. security debentures together with the cancellation of all share pledges. These amendments were achieved without any changes to the interest rate of 6.19% per annum.
The Note Purchase Agreement contains customary covenants and events of default, in each case with customary and appropriate grace periods and thresholds. In addition, the Note Purchase Agreement requires us to maintain compliance with a debt service coverage ratio, an interest coverage ratio and a leverage ratio.
66
The debt service coverage ratio measures our Adjusted EBITDA (as defined in the Note Purchase Agreement) to Debt Service (as defined in the Note Purchase Agreement). We are required to maintain a debt service coverage ratio of 1.25:1 for Relevant Periods (as defined in the Note Purchase Agreement). The interest coverage ratio measures our EBITDA (as defined in the Note Purchase Agreement) to Net Finance Charges (as defined in the Note Purchase Agreement). We are required to maintain an interest coverage ratio of 4.0:1. The leverage ratio measures our Total Net Debt (as defined in the Note Purchase Agreement) to EBITDA. We are required to maintain a leverage ratio of no more than 3.0:1.
As of September 30, 2011, December 31, 2011, March 31, 2012, June 30, 2012, September 30, 2012 and December 2012 we were in compliance with the covenants under the Note Purchase Agreement.
The Loan Notes due 2018 and the Note Purchase Agreement are governed by the law of the State of New York.
The Loan Notes due 2018 are denominated in U.S. dollars, which creates a natural partial offset between the dollar-denominated net assets and earnings of our U.S. operations and the dollar-denominated debt and related interest expense of the notes. We have included the Note Purchase Agreement and a form of the Loan Notes due 2018 as exhibits to this Annual Report and refer you to the exhibits for more information on the Note Purchase Agreement and the Loan Notes due 2018.
Senior Facilities Agreement
Overview. On May 13, 2011, we entered into the Senior Facilities Agreement with Lloyds TSB Bank plc, Clydesdale Bank PLC and Bank of America, N.A. Lloyds TSB Bank plc and Clydesdale Bank PLC were Mandated Lead Arrangers under the Senior Facilities Agreement. The main purpose of the Senior Facilities Agreement was to enable us to redeem the Senior Notes due 2012 and repay borrowings and accrued interest under the Previous Credit Facility. We issued a redemption notice for the Senior Notes due 2012, and they were repaid on June 15, 2011. We cancelled our Previous Credit Facility on June 15, 2011. The following is a summary of the terms of the Senior Facilities Agreement that we believe are the most important. We have included the Senior Facilities Agreement as an exhibit to this Annual Report and refer you to the exhibit for more information on the Senior Facilities Agreement.
Structure. The May 13, 2011 Senior Facilities Agreement provided for a senior term loan facility available in pound sterling, U.S. dollars or euros, in an aggregate amount of £30 million ($49 million) and a revolving facility available in pound sterling, U.S. dollars or euros up to a maximum aggregate principal amount of £40 million ($64 million). Using part of the funds generated by IPO in October 2012, we repaid fully the amounts outstanding on the senior term loan. Following the listing of the Company's shares on the New York Stock Exchange and the repayment of the senior term loan we undertook a renegotiation of the terms and conditions of the Senior Facilities Agreement, including the removal of all U.K. and U.S. security debentures together with the cancellation of all share pledges. Under the modified agreement, the value of debt repaid can now be re-drawn against the Revolving Credit Facility available in pound sterling, U.S. dollars or euros up to a maximum aggregate principal amount of £70 million which was undrawn as at December 31, 2012,
Availability. The facility is used for short-term loans and overdrafts and of the total facility of £70 million ($114 million), £8 million ($13 million) is allocated to ancillary facilities available under the Senior Facilities Agreement in connection with letters of credit. A further £5.0 million ($8.0 million) and £1.2 million ($2.0 million) has been allocated to overdraft facilities in both the UK and US respectively. Of these committed facilities, $nil (December 31, 2011: $23.7 million) of short-term loans and $nil (December 31, 2011: $0.6 million) of letters of credit were drawn. We may use amounts drawn under the Revolving Credit Facility for our general corporate purposes and certain capital expenditures, as well as for the financing of permitted acquisitions and reorganizations. As of December 31, 2012, $114 million was
67
available under the Revolving Credit Facility. The last day we may draw funds from the Revolving Credit Facility is April 6, 2015.
The Company has a separate bonding facility for bank guarantees denominated in GBP sterling of £3.0 million ($4.6 million), of which £1.2 million ($2.0 million) was drawn at December 31, 2012. The amount drawn on the bonding facility as at December 31, 2011 was £2.7 million ($4.2 million).
Interest Rates and Fees. Borrowings under the facility bears an interest rate equal to an applicable margin plus either EURIBOR, in the case of amounts drawn in euros, or LIBOR, in the case of amounts drawn in pound sterling or U.S. dollars, plus mandatory costs to cover the cost of compliance with the requirements of the Bank of England and Financial Services Authority or the European Central Bank, as applicable. Up to June 15, 2012, the applicable base margin for borrowings under the Term Loan and the Revolving Credit Facility was set at 2.50% per annum 12 months from the original issue date of June 15, 2011.
After June 15, 2012, the applicable base margin for the Term Loan and the Revolving Credit Facility is subject to adjustment each quarter end based on our leverage ratio, which is defined in the Senior Facilities Agreement as the ratio of the total net debt to EBITDA (each as defined in the Senior Facilities Agreement) in respect of the rolling 12 month period ending on the last day of the relevant quarter.
The table below sets out the range of ratios and the related margin percentage currently in effect.
Leverage
|
Margin | ||
---|---|---|---|
|
(% per annum)
|
||
Greater than 2.5:1 |
2.75 | ||
Less than or equal to 2.5:1, but greater than 2.0:1 |
2.50 | ||
Less than or equal to 2.0:1, but greater than 1.5:1 |
2.25 | ||
Less than or equal to 1.5:1, but greater than 1.0:1 |
2.00 | ||
Less than or equal to 1.0:1 |
1.75 |
Prior to the repayment of the Term Loan on October 31, 2012 the effective interest rate for the Term Loan and the Revolving Credit Facility, taking into account the applicable adjusted margins, LIBOR and the relevant mandatory costs, ranged from 1.97% (based on a margin of 1.75) to 3.28% (based on a margin of 2.5%).
We also pay a commitment fee, the charge being levied against any unutilized Revolving Credit Facility, excluding overdraft or ancillary facilities and is calculated at 45% of the applicable margin in force. During 2012 this rate has varied from 1.125% (based on a 2.5% margin) to 0.7875% (based on the margin of 1.75% in force as at December 31, 2012).
Guarantees and security. Our obligations and the obligation of each subsidiary borrower under the facilities entered into under the Senior Facilities Agreement and related senior finance documentation are guaranteed by us and certain of our subsidiaries. Prior to the renegotiation of the agreement on November 29, 2012, each subsidiary which contributed at least 5% of EBITDA (as defined if the previous Senior Facilities Agreement) and had gross assets representing 5% or more of our gross assets, on a consolidated basis, became a guarantor and provided security in favor of the lenders (or the Security Trustee on their behalf) over its assets in the United Kingdom and the United States. In connection with these security interests, we also pledged to the lenders the shares held by Luxfer Holdings PLC and its subsidiaries in their respective subsidiaries.
The renegotiated Senior Facility Agreement, agreed in November 2012, removed all U.K. and U.S. security debentures from the agreement together with the cancellation of all share pledges.
Repayment of principal. Under the terms of the original agreement we were required to repay £1 million of the aggregate outstanding principal amount of the Term Loan on each June 30 and December 31 beginning
68
June 30, 2012. The first payment under this agreement was duly made on June 30, 2012 and the balance of the term loan, £29 million ($46 million), was re-paid in full on October 31, 2012.
Any amounts borrowed under the Revolving Credit Facility must be paid at the end of an interest period agreed between the borrower (or Luxfer Holdings PLC acting on its behalf) and the agent when the loan is made.
Change of control. In the event of a sale of all or substantially all of our business and/or assets or if any person or group of persons acting in concert gains direct or indirect control (as defined in the Senior Facilities Agreement) of Luxfer Holdings PLC, we will be required to immediately prepay all outstanding amounts under the Revolving Credit Facility.
Certain covenants and undertakings. The Senior Facilities Agreement contains a number of additional undertakings and covenants that, among other things, restrict, subject to certain exceptions, us and our subsidiaries' ability to:
We are permitted to dispose of assets up to £8 million in aggregate (subject to a £2 million cap in any financial year) without restriction as to the use of the proceeds under the Senior Facilities Agreement. In addition, we may pay dividends, subject to certain limitations.
In addition, the Senior Facilities Agreement requires us to maintain compliance with a debt service coverage ratio, an interest coverage ratio and a leverage ratio. The debt service coverage ratio measures our Adjusted EBITDA (as defined in the Senior Facilities Agreement) to Debt Service (as defined in the Senior Facilities Agreement). We are required to maintain a debt service coverage ratio of 1.25:1 for Relevant Periods The interest coverage ratio measures our EBITDA (as defined in the Senior Facilities Agreement) to Net Finance Charges (as defined in the Senior Facilities Agreement). We are required to maintain an interest coverage ratio of 4.0:1. The leverage ratio measures our Total Net Debt (as defined in the Senior Facilities Agreement) to the relevant period EBITDA. We are required to maintain a leverage ratio of no more than 3.0:1. The first Relevant Period for which we were required to comply with these financial ratios was the period ended September 30, 2011.
Any breach of a covenant in the Senior Facilities Agreement could result in a default under the Senior Facilities Agreement, in which case lenders could elect to declare all borrowed amounts immediately due and payable if the default is not remedied or waived within any applicable grace periods. Additionally, our and our subsidiaries' ability to make investments, incur liens and make certain restricted payments is also tied to ratios based on EBITDA.
69
As of September 30, 2011, December 31, 2011, March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012 we were in compliance with the covenants under the Senior Facilities Agreement.
Events of default. The Senior Facilities Agreement contains customary events of default, in each case with customary and appropriate grace periods and thresholds, including, but not limited to:
Upon the occurrence of an event of default under the Senior Facilities Agreement, the lenders will be able to terminate the commitments under the senior secured credit facilities, and declare all amounts, including accrued interest to be due and payable and take certain other actions.
The Senior Facilities Agreement is governed by English law.
Capital Expenditures
Investment in upgrading and expanding our production facilities is a key part of our strategy. In 2010 and 2011, we reaffirmed our commitment to capital expenditures by investing $15.9 million and $21.2 million, respectively. In 2012 we spent a further $19.3 million on the purchase of property, plant and equipment. The projects conducted in 2012, 2011 and 2010 included:
70
C. Research and development, patents and licenses, etc
Research and Development
Luxfer has always recognised the importance of research in materials science and the need for innovation in the development of new products designed to meet the future needs of customers and continue to provide growth opportunities for the business. As a result, each year it makes a major investment in the development of new products and processes across the Group. The Group's research and development is directed towards the Healthcare, Protection and Environmental specialist business segments. Total expenditure on research and development (including revenue and capital items and before funding grants received) amounted to $8.9 million in 2012 (2011$11.1 million, 2010$9.8 million).
To provide customers with constantly improving products and services, we continuously invest in new technology and research and employ some of the world's leading specialists in materials science and metallurgy. Our engineers and metallurgists collaborate closely with our customers to design, develop and manufacture our products. We also co-sponsor ongoing research programs at major universities in the United States, Canada and Europe. Thanks to the ingenuity of our own research and development teams, Luxfer has developed a steady stream of new products, including
We believe that this commitment to research and new product development is driving the growth of the Luxfer Group worldwide. Our research and development spending reflects our strategy of increasing our focus on high-performance value-added product lines and markets and leveraging our collaboration with universities. We seek to invest in the development of products that are designed for end markets that we believe have long-term growth potential.
Intellectual Property
We currently rely on a combination of patents, trade secrets, copyrights, trademarks and design rights, together with non-disclosure agreements and technical measures, to establish and protect proprietary rights in our products. Key patents held by our Elektron division include aerospace alloys, magnesium gadolinium alloy (protection applications), water treatment and G4 (environmental applications) and key patents held by our Gas Cylinders division relate to smartflow technology, aluminum alloy for pressurized hollow bodies and superplastic forming techniques.
In certain areas, we rely more heavily upon trade secrets and un-patented proprietary know-how than patent protection in order to establish and maintain our competitive advantage. We generally enter into non-disclosure and invention assignment agreements with our employees and subcontractors.
D. Trend information.
Information required by this item is set forth in Item 5.A of this Annual Report, Risk Factors and below.
The Group has a diversified portfolio of products and end markets and therefore it is not unusual for certain markets to be down or to be showing positive or negative trends. In 2008-09 the automotive sector, other
71
than in certain emerging markets, slumped with the global recession and has still not recovered to pre-2008 levels in various developed economic regions. The North American market appears to be steadily recovering. Europe had recovered somewhat through to 2011, but continuing economic woes in Europe have resulted in automotive demand weakening again in 2012, and this has impacted sales volumes in our Elektron division and had some negative impact on the Elektron division's profit. The weakness in the European automotive industry is expected to continue into 2013 and remains an area of uncertainty. Independent automotive industry forecasts, such as those published by IHS Automotive, project long term growth in all major regions for automotive production, with the recession of 2008-09 and recent economic problems in Europe being projected as shorter-term adjustments to positive long-term growth trends in production and sales. Defense spending in the United States can also have an impact on demand for our Elektron products. Though overall demand for our products into the defense market has continued to be reasonably strong in 2012, we would expect some negative impact from currently-planned U.S. defense spending cuts in the next few years.
Our strategy is focused around introducing new products into markets with expected strong growth trends. For example, we seek to respond to the need for environmentally friendly products required, as a result of stricter government regulations on emissions and the increasing cost of fossil fuels. Currently we are experiencing strong growth for high pressure composite cylinders used to contain compressed natural gas ("CNG"). This growth is due to the increasing use of CNG to power buses and trucks and the need to transport CNG to fuel stations and areas that do not have gas pipelines. The greater use of CNG is partly due to its lower cost and also because it is a cleaner-burning fuel than either gasoline or diesel.
Our revenue on automotive catalyst products has been heavily distorted by rare earth surcharges levied on customers to recover a spike in rare earth costs. For example the impact on 2011 was an additional $69.8 million in revenue, while in 2012 this fell to $40.5 million. While surcharges are expected to be much lower in 2013, it remains possible that there will be a medium- or long-term impact of being forced to re-price these products at several times their historically-perceived value during the last two years.
E. Off Balance Sheet Arrangements
In the ordinary course of business we enter into operating lease commitments and capital commitments. These transactions are recognized in the consolidated financial statements in accordance with IFRS as issued by IASB and are more fully disclosed therein.
As at December 31, 2012, neither Luxfer Holdings PLC nor any of its subsidiaries has any off-balance sheet financing arrangements that currently have or are reasonably likely to have a future effect on the group's financial condition, changes in financial condition, results of operations, liquidity, capital expenditure or capital resources.
F. Contractual Obligations and Commitments
We have various contractual obligations arising from both our continuing and discontinued operations. The following table lists the aggregate maturities of various classes of obligations and expiration amounts of various classes of commitments related to our continuing operations as of December 31, 2012. See "Note 27Commitments and contingencies" and "Note 28Financial risk management objectives and
72
policies" to our audited consolidated financial statements attached to this Annual Report for additional details on these obligations and commitments.
|
Payments Due by Period | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
Total |
Less than
1 year |
13 years | 35 years |
After
5 years |
||||||
|
(in $ millions)
|
||||||||||
Contractual obligations |
|||||||||||
Loan Notes due 2018 (1) |
$65.0 | $ | $ | $ | $65.0 | ||||||
Obligations under operating leases |
32.6 | 4.4 | 6.1 | 6.2 | 15.9 | ||||||
Capital commitments |
0.9 | 0.9 | | | | ||||||
Interest payments (2) |
21.9 | 4.0 | 8.0 | 8.1 | 1.8 | ||||||
Aluminum fixed price purchase commitments |
4.1 | 4.1 | | | | ||||||
Total contractual cash obligations |
$124.5 | $13.4 | $14.1 | $14.3 | $82.7 | ||||||
The Senior Notes. See "FinancingLoan Notes due 2018" above for a detailed explanation of our Loan Notes due 2018.
Obligations under non-cancellable operating leases. We lease certain land and buildings and a limited amount of plant and equipment pursuant to agreements that we cannot terminate prior to the end of their terms without incurring substantial penalties, absent breach by the counterparty. However, under the lease agreements, the risks and rewards of ownership have substantially remained with the lessors. In particular, the fair value of the future payments under these leases is significantly less than the value of the assets to which they relate, and the lease periods are significantly shorter than the estimated lives of the relevant assets. We therefore do not recognize the future lease obligations and the value of the assets leased in our balance sheet. The lease costs payable each year are charged to operating expenses during the year and amounted to $3.7 million in the year ended December 31, 2012.
Foreign currency forward contracts. We use forward contracts to hedge the risk of exchange movements of foreign currencies in relation to sales and purchases and their corresponding trade receivable or trade payable. Under IFRS-IASB, we recognize the value of these contracts at their fair value in our consolidated balance sheet. As of December 31, 2012, we had outstanding contracts with a mark to market fair value gain of $0.7 million, calculated using exchange rates and forward interest rates compared to market rates as of December 31, 2012. See "Item 11. Quantitative and Qualitative Disclosure About Market RiskEffect of Currency Movement on Results of Operations."
Aluminum forward contracts. We may use LME forward purchase contracts to fix a portion of our aluminum purchase costs and thereby hedge against future price movements in the cost of primary aluminum. Since 2008, we have significantly reduced our level of hedging through LME contracts due to liquidity constraints and more recently due to a reduced requirement for this form of hedging instrument because of our ability to reduce this risk through agreeing to fixed price contracts with suppliers. By fixing prices with suppliers, we can reduce or avoid the need to use derivative contracts and the associated risks
73
with holding such financial instruments, such as margin calls on forward losses. Our New Bank Facilities, which commenced in June 2011, have provided us with significantly larger hedging facilities, mitigating the risk of margin calls and making the use of LME derivative contracts more attractive to us in the future. In 2012, we entered into a number of LME contracts to provide hedges against some of our aluminum price risks in 2013. As of December 31, 2012, we had outstanding contracts with a mark to market fair value gain of $0.3 million. See "Item 11. Quantitative and Qualitative Disclosure About Market RiskEffect of Commodity Price Movements On Results of Operations."
We do not recognize the fair value of forward LME contracts in our income statement until we receive delivery of the underlying physical aluminum. The value of such contracts is recognized as an asset or liability in our balance sheet, with the profit or loss deferred in a hedging reserve account in equity until the underlying delivery of the physical aluminum. The fair value of the contracts is based on quoted forward prices from the LME.
Forward interest rate agreements. We have used forward interest rate agreements ("FRAs") to fix specific interest rate payments under our floating rate Senior Notes due 2012. In 2009, we hedged the six-month LIBOR risk on the payment due at the start of November 2010. There were no FRAs in place as of December 31, 2012.
Capital commitments. From time to time, we have capital expenditure commitments when we have new plant and equipment on order. We treat these commitments as contingent liabilities because they will not be recognized on the balance sheet until the capital equipment to which they relate has been delivered. As of December 31, 2012, we had capital commitments of $0.9 million.
G. Safe Harbour
See the section entitled "Information Regarding Forward-Looking Statements" at the beginning of this Annual Report.
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management.
The Board of Directors
The following table presents information regarding the members of the board of directors.
Name
|
Age | Position | ||
---|---|---|---|---|
Peter Joseph Kinder Haslehurst (1)(2)(3) |
72 | Non-Executive Chairman | ||
Brian Gordon Purves |
58 | Director and Chief Executive | ||
Andrew Michael Beaden |
45 | Director and Group Finance Director | ||
Joseph Allison Bonn (1)(2)(3) |
69 | Non-Executive Director | ||
Kevin Sean Flannery (1)(2)(3) |
68 | Non-Executive Director | ||
David Farrington Landless (3)(4) |
53 | Non-Executive Director |
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Biographical information concerning the members of our board of directors is set forth below.
Peter Joseph Kinder Haslehurst
Peter Joseph Kinder Haslehurst was appointed our Non-Executive Chairman on March 31, 2006. Mr. Haslehurst has been a Non-Executive Director of the company and a member of both the Audit Committee and the Remuneration Committee since June 2003. Since his appointment as our Chairman, he has chaired the Audit and Remuneration Committees. Mr. Haslehurst is a Chartered Engineer, a Companion of the Chartered Management Institute, a Fellow of the Institution of Mechanical Engineers, a Fellow of the Institution of Engineering and Technology, a Fellow of the Royal Society of the Arts and also a Fellow of the Institute of Materials, Minerals and Mining, where he was formerly a vice-president. He has been a managing director, chief executive or chairman in the international manufacturing industry for over 40 years, including president emeritus of VAI Industries (U.K.), following chairmanship of VA Tech (U.K.) from 1999 to 2002 and most recently as chairman and chief executive of the Brunner Mond Group from 2000 to 2008. He holds a number of appointments, including chairman of the Chartered Management Institute Manufacturing Review Panel and chairman of the audit committee of the Institute of Materials, Minerals and Mining. He is chairman of the Leonard Cheshire Hill House appeal fund. He was made an Eisenhower Fellow from Britain in 1980, received an honorary Doctor of Science at Loughborough University in 2008 and is a Freeman of the City of London. Mr. Haslehurst holds a BSc degree in production engineering from Loughborough University. He was proud to be made an honourary Chief of the Maasai following his services to their tribe as chairman of Magadi Soda Company in Kenya from 2001 to 2008.
Brian Gordon Purves
Brian Gordon Purves was appointed our Chief Executive on January 2, 2002 and has been an Executive Director of the company or its predecessors since 1996. He also served as Group Finance Director from 1996 to 2001. He was a member of the Management Buy-In team in 1996. Before joining the company, Mr. Purves held several senior positions in Land Rover and Rover Group covering financial, commercial and general management responsibilities. A qualified accountant, Mr. Purves has a degree in physics from the University of Glasgow and a Master's degree in business studies from the University of Edinburgh. He is also a Companion of the Chartered Management Institute.
Andrew Michael Beaden
Andrew Michael Beaden was appointed as an Executive Director and our Group Finance Director on June 1, 2011. Previously, he worked as Director of Planning and Finance from 2008 to 2011. He joined the company in 1997 and was promoted to Group Financial Controller in 2002. He became a member of the executive management board in January 2006. Mr. Beaden is a qualified Chartered Accountant who has worked for KPMG, as well as several U.K. FTSE 100 companies in a variety of financial roles. He has an economics and econometrics honors degree from Nottingham University.
Joseph Allison Bonn
Joseph Allison Bonn was appointed as a Non-Executive Director on March 1, 2007. Mr. Bonn is a member of both the Audit and Remuneration Committees. He has extensive experience in the aluminum and specialty chemical industry, having worked for Kaiser Aluminum and Chemical Corporation for over 35 years in various senior capacities. Among other appointments in the United States, he has served on the Board and Executive Committee of the Aluminum Association, the Board of the National Association of Purchasing Management and the International Primary Aluminum Institute Board. He is currently a consultant with Joseph Bonn RE&C Corp. Mr. Bonn holds a BS degree from Rensselaer Polytechnic Institute and an MBA degree in Finance from Cornell University.
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Kevin Sean Flannery
Kevin Sean Flannery was appointed as a Non-Executive Director on June 1, 2007. Mr. Flannery is a member of both the Audit and Remuneration Committees. Mr. Flannery has over 40 years of experience in both operational and financial management roles in a variety of industries. He is currently the president and chief executive officer of Whelan Financial Corporation, a company he founded in 1993 that specializes in financial management and consulting. He was formerly the chairman and chief executive officer of several companies, including RoweCom, Inc., a provider of service and e-commerce solutions for purchasing and managing print and e-content knowledge resources; Telespectrum Worldwide, a telemarketing and consumer service-company; and Rehrig United Inc., a manufacturing company. He serves as a director of FPM Heat Treating LLC, a leading provider of heat treatment processes; and Energy XXI, a Bermuda based oil and gas-company. From 2005 to 2007, he served as a director of Seitel, Inc., from 2007 to 2009, he served as a director of Daystar Technologies, Inc and from 2009 to 2011 he served as a director of ATS Corporation. Mr. Flannery began his career at Goldman, Sachs & Co. and was a senior managing director of Bear Stearns & Co.
David Landless
David Landless was appointed as a Non-Executive Director on the March 1, 2013. Mr. Landless started his career with Bowater and Carrington Viyella and joined Courtaulds Plc in 1984. He was appointed a Finance Director in the U.K. and U.S. divisions of Courtaulds Plc from 1989 to 1997 and Finance Director of Courtaulds Coatings (Holdings) Limited from 1997 to 1999. He is currently Group Finance Director of Bodycote plc. Mr. Landless is a Chartered Management Accountant, and he graduated from the University of Manchester Institute of Science and Technology.
Executive Management Board
The members of the executive management board of Luxfer are responsible for the day-to-day management of our company.
The following table lists the names and positions of the members of the executive management board.
Name
|
Age | Position | ||
---|---|---|---|---|
Brian Gordon Purves |
58 | Director and Chief Executive | ||
Andrew Michael Beaden |
45 | Director and Group Finance Director | ||
Christopher John Hillary Dagger |
64 | Managing Director of Magnesium Elektron | ||
Edward John Haughey |
57 | Managing Director of MEL Chemicals | ||
John Stephen Rhodes |
63 | President of Luxfer Gas Cylinders | ||
Linda Frances Seddon |
62 | Company Secretary and Legal Adviser |
Biographical information of members of our executive management board who are not members of our board of directors is set forth below.
Christopher John Hillary Dagger
Christopher John Hillary Dagger has been a member of the executive management board since 2001. He joined the business in 1999 and became Managing Director of Magnesium Elektron in 2001. Previously, Mr. Dagger held a number of positions with British Alcan Aluminium over the course of 20 years in a number of fields, including metal stockholders, gas cylinder manufacture, extrusions and smelting. Mr. Dagger holds an HND in Business Studies and a Post Graduate Diploma in Personnel Management, from Middlesex Polytechnic. He is also a member of the Chartered Institute of Personnel and Development.
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Edward John Haughey
Edward John Haughey has been a member of the executive management board since 2003, when he was appointed Managing Director of our MEL Chemicals business. Prior to joining the company, Mr. Haughey was managing director of Croda Colloids Limited for Croda International Plc from 1994 to 2003, and has held a series of senior general management positions in the Croda Group, BASF and Rhone Poulenc. Mr. Haughey holds a chemistry degree from Paisley College of Technology and a Post Graduate Diploma in Industrial Administration from Glasgow College of Technology.
John Stephen Rhodes
John Stephen Rhodes became a member of the executive management board in 1996 upon the Management Buy-In. Since 1998, Mr. Rhodes has been President of our Luxfer Gas Cylinders business. Mr. Rhodes has held numerous positions at the company and its predecessors since 1974, including President of Luxfer Gas Cylinders North America from 1994 to 1998, Managing Director of the Superform business from 1991 to 1994 and Director of Business Development for the Enterprise Division of British Alcan Aluminium from 1989 to 1991. Mr. Rhodes holds a BSc Hons degree in Social Sciences from London University. He is also on the Board of the North American Compressed Gas Association.
Linda Frances Seddon
Linda Frances Seddon has been a member of the executive management board since 2001. Ms Seddon has been Secretary and Legal Adviser of the company and its predecessors since 1997. After qualifying as a solicitor in England and Wales in 1976, Ms. Seddon spent 14 years in private practice as a solicitor, before becoming a legal adviser with Simon Engineering PLC in 1990 and, subsequently, with British Fuels upon its privatization, focusing on general commercial, property, intellectual property, mergers and acquisitions and corporate matters. Ms. Seddon holds a BA Honours degree in Business Law from the City of London Polytechnic and a post graduate diploma in Competition Law from Kings College London.
B. Compensation
Directors' Remuneration Report
This Directors' Remuneration Report has been compiled in accordance with the U.K.'s The Large and Medium Sized Companies and Groups (Accounts and Reports Regulations 2008) (the "Regulations"). As required by the Regulations, the Remuneration Report will be proposed at the Annual General Meeting later this year.
Members
The members of the Remuneration Committee during 2012 did not change and were:
Peter Haslehurst , Non-Executive Director and Chairman (Chair)
Joseph Bonn , Non-Executive Director
Kevin Flannery , Non-Executive Director
Each of the members of the Remuneration Committee is an "independent director" as such term is defined in Rule 10A-3 under the Exchange Act. The Company Secretary acts as secretary to the Remuneration Committee, and Brian Purves and Andrew Beaden attend all the meetings other than when their own remuneration is being discussed.
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Responsibilities
The Remuneration Committee is responsible for determining and agreeing with the board of directors the framework of the Group on executive remuneration and its costs.
Meetings are held at least twice a year to consider the remuneration packages for the year ahead and to consider remuneration reporting requirements as a minimum.
The Remuneration Committee operates to written terms of reference under which its main duties are to:
Advisors to the Remuneration Committee
The Remuneration Committee appointed Mercers Limited to provide comparative data on salaries and the variable elements of remuneration packages paid by a range of comparative US listed and FTSE 250 companies. This data was used by the Remuneration Committee in both 2012 and 2013 to restructure and re-position the remuneration of executives as set out below.
Work Undertaken 2012
During 2012, the Remuneration Committee met on four occasions to consider:
Remuneration Principles and Structure
The objective of the remuneration policy is to articulate the remuneration philosophy and underlying principles which determine remuneration packages. Remuneration packages for Executive Directors and other managers are structured to attract, retain and incentivize high-caliber individuals and reward performance. In setting remuneration, the Remuneration Committee takes into account remuneration levels elsewhere in the Group. On appointment and periodically thereafter the Remuneration Committee benchmarks executive remuneration packages against appropriate comparators both inside and outside the Group. Remuneration packages are considered as a whole by the Remuneration Committee, not just the competitiveness of the individual elements.
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The Remuneration Committee has been working to review and restructure remuneration packages for the executive directors and senior management to reflect that following the IPO it is deemed more appropriate to align them with the type and level of package paid to executives in comparable (by size and industry) companies in a listed environment. The Remuneration Committee determined that to maintain top performance levels in the Company they should be targeting at or above median remuneration packages for key executives. However, the Remuneration Committee recognised that it was unfeasible and undesirable to move to this position immediately. Adjustments to the remuneration packages will be considered over a number of years with the medium-term objective to position them at or above the median for the whole remuneration package.
The work commenced with the establishment by the board of directors of a flexible new Long Term Incentive Plan, the Luxfer Holdings PLC Long Term Umbrella Incentive Plan at the end of 2011 (LTIP) which became effective on the IPO, the purpose of which is to align the long term financial interests of the Executive Directors, senior and other management with those of the shareholders. A share incentive plan was also established for the Non-Executive Directors (further details of which can be found on page 85).
Following a review in January 2012, the following adjustments have been made:
In October 2012, as part of the IPO the Remuneration Committee addressed the issue of long term incentives. The Executive Directors along with other key management in the Group viewed critical to the success of the Group were awarded a one-off grant of market value, time-vesting share option awards. The options awards are further described on page 82.
The IPO also triggered the successful conclusion of the long-term management incentive plan implemented in 2007 resulting in the removal of all remaining restrictions over management-owned shares.
Changes for 2013
Following further advice from Mercers in January 2013, the Remuneration Committee has continued to adjust the remuneration of the executives and other managers to bring it more into line with market practice for comparable listed companies. The additional tool of the LTIP is now also available to align executive remuneration with the experience of shareholders.
79
We describe below in more detail the reward structure for the Executive Directors and other senior executives in the Group comprising the following fixed and variable elements:
Fixed Element
Base salary , which takes into account:
Base salary is reviewed annually in January of each year. In 2012 base salary for the executive directors was repositioned partway towards median target and a substantial increase for 2013 recognises increased responsibility following the IPO. Base salary is still below the market-median target positioning.
Benefits consisting of car allowance, life insurance and eligibility for medical and dental insurance cover.
Pension arrangements for the Executive Directors are reviewed annually to ensure that the benefits are consistent with market practice. The Group's contributory pension arrangements consist of both defined benefit and defined contribution arrangements. The pensions for the Executive Directors who were directors during the year were provided partly by the defined benefit and partly by registered defined contribution arrangements and an allocation to an unfunded unregistered retirement benefit scheme (UURBS) accrued by the Company.
The main features of the defined benefit arrangements are currently:
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Details of the accrued pension entitlements of the Executive Directors under the defined benefit arrangements and payments made to the defined contribution arrangement during 2012 are set out in the table of this remuneration report.
By the end of March 2012 Brian Purves had ceased to be a member of any of the Group's registered pension arrangements. His entitlement to Company retirements benefits has, since that date, along with those of certain other senior management, been provided for by an on-balance sheet accrual in the UURBS.
Variable Elements
Annual cash bonus is based on the achievement against certain financial and non-financial targets, set in January of each year including, for the Executive Directors, trading profit and annual cash flow of the Group measured against the approved annual budget. Divisional and other management are also targeted on trading profit and cash flow, but related to the business they manage. The weighting given to the specific financial targets in any year are aligned, as appropriate, with the needs of the Group and the businesses for that year. The maximum bonus payable is a pre-defined percentage of annual salary and is related to the individual's position in the Group. Payments are earned on a sliding scale with a target-level broadly based on the approved annual budget, and the maximum upon the achievement of stretch targets that considerably exceed the approved budget. Other than for the Executive Directors, the bonus is pensionable, but capped at a defined amount of bonus achievable. For 2013 a Group financial target has been added to the targets for divisional senior management to further align their interests with those of shareholders.
In 2012 and 2013 the annual bonus for the Executive Directors' was structured as shown below:
Annual Bonus
|
|
Maximum
annual bonus |
Group
trading profit |
Annual
cash flow |
Non-financial
objectives |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Directors
|
Years | (% of salary) | % weighting | % achieved | % weighting | % achieved | % weighting | % achieved | |||||||||
Brian Purves (1) |
2012 | 100 | % | 75 | % | 45.4 | % | 25 | % | 25 | % | | | ||||
|
2013 | 100 | % | 66.7 | % | 16.7 | % | 16.6 | % | ||||||||
Andrew Beaden (2)(3) |
2012 | 75 | % | 56.25 | % | 29.35 | % | 18.75 | % | 18.75 | % | | | ||||
|
2013 | 80 | % | 53.3 | % | 13.4 | % | 13.3 | % |
Notes:
No Company pension contributions were paid on the bonus in 2012, instead for 2012 only, an additional sum was paid to the Executive Directors in their bonus payment of £16,282 for Brian Purves and £4,997 for Andrew Beaden, being the amount that would have been paid into their pension under the previous arrangement.
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In addition, the Remuneration Committee has determined to consider each year offering as an incentive to the Executive Directors an additional percentage bonus over and above the predefined maximum annual bonus; this additional bonus will be payable only on achievement of specific additional targets set by the Remuneration Committee and aligned with the requirements of the business. No such additional bonus was set for 2012 or 2013.
Long Term Incentives
As part of the IPO new long term incentives were introduced as follows:
IPO Options Stand-alone option grants were made over our ADSs to the Executive Directors, Non-Executive Directors and certain other key executives seen as critical to our future success on completion of the IPO.
Vesting: 40% vested immediately on grant and a further 20% vest on each of the first three anniversaries from the date of grant, provided the executive is still acting as a director or remains employed by the Company on each of the anniversary dates.
Value of options granted: The options were granted at the IPO price. To determine the number the number of IPO Options to be granted, the IPO Options were valued at one-third of the initial public offering price of the ADSs. The IPO Options granted were valued at (i) 120% of base salary to our Chief Executive, Brian Purves (ii) an average 93% of base salary to members of the executive management board (other than the Chief Executive, but including the Group Finance Director, Andrew Beaden), (iii) an average 93% of annual fee to our Non-Executive Directors and (iv) an average 41% of base salary with respect to the other selected management participants.
Luxfer Holdings Umbrella Incentive Plan (LTIP)
The purpose of the LTIP is to align rewards of employees with returns to shareholders and to reward the achievement of business targets and key strategic objectives.
The equity or equity-related awards under the LTIP can be over ordinary shares or ADS. The LTIP is flexible and provides for the ability to incentivise management through a range of different types of awards that may be considered appropriate including, stock options, stock appreciation rights, restricted stock, restricted stock units and other equity-based or equity-related awards, and cash incentive awards ("Awards"). Awards can be time-based, market value and performance-based.
Value of Awards: Unless otherwise determined by the Committee, the maximum value of the Awards granted under the LTIP in any calendar year shall not exceed in the aggregate, (i) 150% of base salary for our Chief Executive, (ii) 120% of base salary for our Group Finance Director and other members of our executive management board (other than the Chief Executive), and (iii) 100% of base salary for other participants.
Cessation of employment: Subject to the Committee's discretion, after a participant's termination of employment with the Company, for any reason, all unvested time-based awards will be forfeited and all vested unexercised options and stock appreciation rights (" SARs ") will lapse on the first anniversary of the date of termination. If employment of a participant is terminated for any reason, other than for Cause, performance-based awards will vest pro-rata based on the performance results to the date of termination and the elapsed portion of the Performance Period. In case of termination of employment for Cause, all unvested performance-based awards will lapse as of the date of termination.
Upon a Change in Control, all unvested time-based awards will fully vest and become exercisable, as applicable, and all performance-based awards will vest pro-rata based on the performance results to the date of change and the elapsed portion of the Performance Period.
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2013 Awards under the LTIP
The first awards under the LTIP were made in January 2013 to selected management. For the Executive Directors and divisional heads, the committee has determined the Awards will consist of a mixture of performance based nominal cost options, time based nominal cost options and market value options. Fifty percent of performance Awards vest and became exercisable on the achievement of defined earnings per share (EPS) targets and the remaining fifty percent on defined total shareholder return (TSR) targets. Time based nominal cost options and market value options vest and become exercisable on each of the first three anniversaries after the date of grant.
The performance period for the EPS is four years with one-sixth of the performance-related shares awarded vesting on the achievement of each of three adjusted EPS targets for the first time of at least $1.64, $1.93 and $2.12 as measured at 31 December of each year.
The performance period for the TSR target is three years with the ability to extend to four if unvested awards remain available after the third vesting date. One-sixth of the performance-related awards vest on 31 December in each performance year if the Company TSR over a 12-month period is at or above the median of the TSR of a defined comparator group, but using a base ADS price of $10 and a 15-month period for the 31 December 2013 measuring point.
Total awards for 2013 made to Brian Purves are valued at 63% of his base salary and to Andrew Beaden are valued at 50% of his base salary.
The mixture of awards and value as a percentage of salary for other management vary depending on their seniority.
Management Incentive Plan: Implemented in 2007 as part of the re-organisation undertaken at that time. The IPO triggered the termination of the MIP as a result of which the leaver restrictions on the shares were lifted and all restricted management shares became unrestricted. Both Brian Purves and Andrew Beaden owned restricted shares and the portion of the shares owned by them which were restricted became as a result unrestricted.
Luxfer Holdings Executive Share Option Plan: The plan is described in Note 29 on page 94 and Note 40 on page 104 to the financial statements. Andrew Beaden holds options under this scheme that are vested and exercisable at any time. See table below. The plan still holds some shares over which it is still possible to grant options. No awards were made under this plan in 2012.
Employee Share Plans
We are in the process of establishing additional employee share incentive plans, to encourage wider equity participation among our employees and to take advantage of favourable tax treatment, where available.
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Directors' Interests in Share Options in the CompanyAudited
|
Options held | ||||
---|---|---|---|---|---|
Directors
|
Ordinary shares
of £1 each exercise price £4 (1) Expiring: August 3, 2021 No. |
Granted during year
ADSs (2),(3) (4) (2xADSs=£1 ord) exercise price $10 Expiring October 1, 2019 No. |
|||
Peter Haslehurst |
|||||
Held at 31 Dec 2012 |
| 40,400 | |||
Held at 1 Jan 2012 |
| | |||
Brian Purves |
|||||
Held at 31 Dec 2012 |
| 179,200 | |||
Held at 1 Jan 2012 |
| | |||
Andrew Beaden |
|||||
Held at 31 Dec 2012 |
29,510 | 69,000 | |||
Held at 1 Jan 2012 |
29,510 | | |||
Joseph Bonn |
|||||
Held at 31 Dec 2012 |
| 20,000 | |||
Held at 1 Jan 2012 |
| | |||
Kevin Flannery |
|||||
Held at 31 Dec 2012 |
| 20,000 | |||
Held at 1 Jan 2012 |
| |
Notes:
No options were exercised during 2012 by any of the Directors.
Non-Executive Directors' Remuneration
The remuneration of the Chairman and the Non-Executive Directors consists of an annual fee for their services as members of the board of directors and Committees, which is reviewed annually. Non-Executive remuneration, including the Chairman's, is determined by the Board of directors and benchmarked against appropriate comparators. No member of the board of directors is permitted to participate in any discussion or decision on his or her own remuneration.
As part of the IPO, the Non-Executive Directors were awarded a one-off stand-alone option grant valued at 93% of their annual fees. The vesting and termination conditions are the same as for the executive IPO grants described on page 82.
Reflecting US-listed company practice, we also established a non-discretionary equity incentive plan for our Non-Executive Directors which is administered by the board of directors.
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Director Equity Incentive Plan (Director EIP)
The Director EIP provides for the ability to make non-discretionary grants of options, restricted stock awards and restricted stock units to our Non-Executive Directors.
Value of awards: Each of our Non-Executive Directors will receive, upon the appointment or election, a one-time award valued at $30,000 and on a specific date of each calendar year during the term of the Director EIP (to the extent a participant has served as a director for at least six months after the initial appointment), an award valued at 50% of the Non-Executive Director's annual fee. Options, Restricted Stock Awards and Restricted Stock Units will be subject to the same terms and conditions as the respective awards under the LTIP. Annual awards will vest no later than sixteen months from date of grant.
Cessation of directorship: If the grantee ceases to be a Director for any reason, unless otherwise determined by our board of directors, all unvested Restricted Stock Awards will be forfeited and all unvested Options over Shares and Restricted Stock Units will lapse upon cessation of directorship. If the grantee ceases to be a Director for any reason other than because of removal for Cause, any vested but unexercised Options over Shares will lapse as of the first anniversary of the date when the grantee ceases to be a Director. If the grantee's directorship is terminated because of removal or vacation of office for Cause, all Options over Shares (whether or not vested or exercisable) will lapse as of such termination.
Service Contracts
Other than as mentioned below on a change of control, the executive directors are not entitled to any special arrangements on termination, just their contractual rights and, if appropriate, the company's standard redundancy policy for all senior management, which provides for compensation based on length of service.
The Company has entered into service contracts with the Executive Directors that are not for a fixed term. All Executive Directors have service contracts that ordinarily are terminable by twelve-months notice from the Company, which notice can be given at any time. On the IPO, the notice period given to, and required from, the Executive Directors was temporarily extended through to 31 October 2014. The notice period reverts to twelve months from 1 November 2013. The contracts also provide for pay in lieu of notice. In the event that an acquiring company does not assume their employment agreements or offers them a materially different position they will be entitled to severance payments based on our standard severance policy, but calculated using two times their annual salary. Otherwise, the Executive Directors have the same employment rights as any other employee in the case of redundancy or if the termination of their employment was determined by a relevant tribunal to be unfair under English law.
Brian Purves' service contract is dated the 9 April 1999. His service contract expressly states that he has continuity of employment from when he first joined the Group in 1996.
Andrew Beaden's service contract is dated 5th August 2011 and is effective from the date of his appointment as Group Finance Director on 1 June 2011. His service contract expressly states that he has continuity of employment from the date he first joined the Group in 1997.
The Company has entered into letters of appointment with the NonExecutive Directors that are not for a fixed term as it was inappropriate to engage them on a fixed term at the date of their appointment. The appointments are subject to termination with three months' notice to be given at any time by the Company. Joseph Bonn's letter of appointment is dated 28 February 2007 and Kevin Flannery's is dated 11 May 2007. The Chairman's services as Chairman of the board of directors and the Committees he chairs were provided until 1 April 2012 by a letter of appointment via a third-party company. The Chairman is now engaged directly by the Company. The appointment is not for a fixed term. The Company can terminate his appointment on three months written notice. Neither the Non-Executive Directors nor the Chairman have any employment rights.
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Directors' Remuneration (Audited)
Directors' Remuneration and benefits for the year ended 31 December 2012
$
|
Salary/
Fee |
Annual
Bonus (6) |
Benefits |
Total
excluding pension 2012 |
Total
excluding pension 2011 |
Pension
Benefits 2012 (7) |
Pension
Benefits 2011 (7) |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Executive Directors: |
||||||||||||||||||||||
Brian Purves (1) (5) |
501,701 | 379,129 | 28,444 | 909,274 | 823,635 | 141,605 | 152,378 | |||||||||||||||
Andrew Beaden (2) |
258,820 | 132,451 | 21,140 | 412,411 | 362,655 | 36,575 | 33,340 | |||||||||||||||
Total |
760,521 | 511,580 | 49,584 | 1,321,685 | 1,186,290 | 178,180 | 185,718 | |||||||||||||||
Non-Executive Directors: |
||||||||||||||||||||||
Peter Haslehurst (3) |
143,343 | | | 143,343 | 137,689 | | | |||||||||||||||
Joseph Bonn (4) |
72,818 | | | 72,818 | 69,200 | | | |||||||||||||||
Kevin Flannery (4) |
72,818 | | | 72,818 | 69,200 | | | |||||||||||||||
Total |
288,979 | | | 288,979 | 276,089 | | | |||||||||||||||
Grand Total |
1,049,500 | 511,580 | 49,584 | 1,610,664 | 1,462,379 | 178,180 | 185,718 | |||||||||||||||
Notes
86
Pensiondefined benefit for the year ended 31 December 2012
|
Accrued benefit
(1)
at 31 Dec 2012 |
Increase in
accrued benefits exc. inflation over year to 31 Dec 2012 |
Increase in
accrued benefits inc. inflation over year to 31 Dec 2012 |
Transfer value
(2)
of increase exc. inflation less Directors' contributions |
Transfer value
(2)
of accrued benefits at 31 Dec 2011 |
Transfer value
(2)
of accrued benefits at 31 Dec 2012 |
Increase/
(decrease) in transfer value (2) less Directors' contributions |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Executive Directors: |
|||||||||||||||
Brian Purves |
$53,382 pa | $325 pa | $2,780 pa | $2,040 | $724,238 | $793,207 | $31,628 | ||||||||
Andrew Beaden |
$30,890 pa | $1,233 pa | $2,617 pa | $2,520 | $252,063 | $277,249 | $5,281 |
Notes
Approval of Report
Peter Haslehurst, the Chairman of the Remuneration Committee, will attend the forthcoming annual general meeting and will be available to answer any questions shareholders may have concerning the Group's policy on Directors' remuneration. This Directors Remuneration Report will be submitted for approval by the Company at the forthcoming annual general meeting.
The report was approved by the board of directors on the 28 March 2013 and signed on its behalf by:
P J K Haslehurst
Chairman of the Remuneration Committee
C. Board Practices
Board of Directors
The board of directors of Luxfer is currently composed of six directors, including four non-executive directors, of which one is a non-executive chairman. Under the Articles of Association, unless otherwise determined by an ordinary resolution of our shareholders (which is passed by a simple majority of those voting), there may not be less than two and not more than eight directors. A director need not be a shareholder. Under the terms of the Amended Articles, directors may be elected by an ordinary resolution of our shareholders and at least one-third of the directors must stand for re-election at every annual general meeting. Directors may be removed by a special resolution of our shareholders at any time before the expiration of their period of office.
Corporate Governance
The Directors support principles of corporate governance and have over the years adopted many principles from the corporate governance code in the UK in so far as they have considered it appropriate, relevant and practical for a company of Luxfer's status and size. As the Company now has ADSs listed on the NYSE as a result of successfully completing the IPO, we are now subject to the rules of NYSE as well as the US securities rules in so far as and to the extent they apply to a foreign private issuer. We explain below how we practice corporate governance.
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The Board Members
During 2012, the board of directors consisted of five members. This was the maximum number permitted under our pre-IPO Articles of Association. The board of directors comprised a Non-Executive Chairman, two Non-Executive Directors and two Executive Directors. The Chairman and the Executive Directors are shareholders. There were no changes in membership of the board of directors during 2012. Under the Post-IPO Articles of Association, we are now permitted to have up to eight directors. As discussed above, a sixth director, Mr. Landless, was appointed to the board of directors on March 1, 2013.
Brief biographical details of the Directors who served at the end of the 2012 are shown above, together with information on their other commitments. We have also included details of our new Non-Executive director. Under the post-IPO Articles, Mr. Landless is required to retire at the next AGM and seek re-election. Our post-IPO Articles also contain a provision requiring a third of the directors to retire by rotation each year, as a result of which our Chairman will also seek re-election at the next AGM.
Roles
Executive Management Board
The board of directors has responsibility for the overall leadership of the Company, its long-term success and helping to develop and approve its strategic aims. They have determined a schedule of matters reserved to the board of directors. Reserved matters are comprehensive and reviewed as the board of directors considers appropriate.
These reserved matters include:
The executive management board meets ten or eleven times a year. It is chaired by the Chief Executive. The executive management board consists of the Group Finance Director and senior management at Group and divisional level. The members of the executive management board during 2012 are listed in Item 6.A above. The executive management board provides a forum where matters of interest or concern to the Group can be reviewed and discussed, policies agreed and appropriate measures implemented. It also provides an opportunity for senior management to update themselves with progress in other parts of the Group outside their remit.
Division of responsibilities
As the number of directors is small and with only two Non-Executive Directors in 2012 in addition to the Chairman, the board of directors considers it inappropriate to appoint a senior independent director. The recent appointment of a third non-executive director has not changed this view.
88
The division of responsibilities between the Chief Executive and the Chairman is clear and it has not been considered necessary to record it in writing:
The Chairman maintains a dialogue with the Non-Executive Directors in the absence of the Executive Directors, where appropriate canvassing their opinion on issues. The Company does not have a standing Nomination Committee. The Directors have determined that it is more appropriate with a board of directors of five members that appointments are considered and agreed by the board of directors as a whole with any necessary research delegated to an outside body through a designated individual Director. The most recent appointments in the last two years have been dealt with in this way. If the Company were not a foreign private issuer under the NYSE listing rules it would be required to have such a committee under the NYSE listing rules.
The board of directors reviews succession planning for senior appointments in the Group annually.
Meetings
There are six main scheduled meetings of the board of directors each year and normally three or four additional scheduled telephone meetings timed to approve the release of financial information. Additional meetings are called as appropriate. The board of directors will normally meet at least twice a year at one of the Group's operational plants including overseas locations as part of their monitoring role and to ensure a better understanding of the Group's operations. At these meetings the Board has an opportunity to meet local and divisional management on both a formal and informal basis and discuss the progress of their operations with them.
In 2012 the board of directors held six main scheduled meetings and six additional telephone meetings. Of the six meetings, one was held at one of its Riverside California manufacturing plants enabling the board of directors to also visit another of its manufacturing operations close by. A second meeting was held at the Group's manufacturing plant in Gerzat, France.
All meetings were attended by all the Directors with no absentees.
Information and Support
The Company Secretary normally distributes board of directors and committee agendas and materials to the board of directors and committees seven days before a scheduled meeting.
There is a written procedure for decisions to be taken between scheduled board of directors and committee meetings that also deals with information distribution in such cases.
The Board receives both financial and operational information to assist it in discharging its duties. The Chief Executive and the Group Finance Director provide monthly reports to the board of directors which together cover all aspects of the business and which are then elaborated or commented upon at scheduled Board Meetings as appropriate. Additional topics for review and discussion are added in these reports from time to time at the request of the Directors. In addition specific items are scheduled into the board of directors agenda for report and review on a regular basis, such as health and safety and environmental matters and current topical issues.
89
There is a written procedure in place to cover circumstances when the Directors either individually or collectively determine that they require independent professional advice at the Company's expense.
The Company Secretary updates the board of directors on issues and changes of a legal and regulatory nature of which it and the individual Directors should be aware to refresh their skills and knowledge. There is a culture of information exchange on various matters of interest to the Group and its operations between Directors and senior managers to keep Directors abreast of relevant developments. In addition to meetings held at sites as described above, the Non-Executive Directors will independently visit operational sites to enlarge their knowledge of the individual businesses that make up the Group. The Executive Directors have regular business reviews at operational sites throughout the year and any appropriate information gathered on those visits will be reported to the board of directors.
We have put together an induction programme for our new Non-Executive Director David Landless appointed on 1 March 2013. The programme includes presentations on the Group businesses and Group finance, site visits and an opportunity to meet senior management.
During the year the board of directors evaluated its information and support procedures to ensure they were appropriate.
Audit Committee
The members of our Audit Committee during 2012 did not change and were:
Peter Haslehurst , Non-Executive Director and Chairman (Chair)
Joseph Bonn , Non-Executive Director
Kevin Flannery , Non-Executive Director
The Company Secretary acts as secretary to the Audit Committee. The Finance Director and the Chief Executive attend as required.
The responsibility and duties of the Audit Committee are set out in written terms of reference which appear on the Company's website. The terms of reference were reviewed during the year and new terms of reference adopted reflecting the changes in the oversight required as a result of the Company being subject to US securities rules and the rules of the NYSE. The Audit Committee has the responsibility of overseeing our corporate accounting and financial reporting. Its duties include:
The Chairman Peter Haslehurst also chairs the Audit Committee. The board of directors considers that all the members have appropriate financial experience to enable them to contribute to the Audit Committee's work. Each of the members of the Audit Committee is an "independent director" as such term is defined in Rule 10A-3 under the Exchange Act. Currently, our Audit Committee does not include an Audit Committee Financial Expert as defined in Item 407(d) of Regulation S-K. We intend to appoint an Audit Committee Financial Expert after the end of 2012 reporting. The Audit Committee has established a schedule of
90
meetings to coincide with the key events in the Company's financial reporting and audit cycle. Agendas and appropriate papers are issued for each meeting. The Chairman speaks to the external auditors as he considers appropriate and necessary in preparation for meetings at which matters are discussed that have been audited by auditors or are relevant to them.
During the year a specific review of auditor's independence was undertaken by the auditors and the Company's management, which confirmed the independence of the auditors. A pre-approvals policy for audit and non-audit work to be undertaken by the independent auditor was also established.
Relations with Shareholders
Members of the Board seek to develop an understanding of the views of shareholders of the Company in various ways, always taking into account the need to treat shareholders equally. Regular contact is also maintained with analysts, and their views and reports are circulated to the board of directors and discussed where appropriate. The Non-Executive Directors have also, on occasion, taken the opportunity to speak to major investors and make themselves available to do so if requested. The Chief Executive and the Group Finance Director hold quarterly investor conference calls as part of the Company's reporting cycle.
During 2012 as part of the IPO process there was increased engagement with current investors involving liaising with them and seeking their views over the IPO process. The Chief Executive and the Group Finance Director also undertook a road show in the US and Europe to introduce the Company to potential investors.
AGM documentation is normally sent out at least twenty working days before the meeting. Separate resolutions are proposed and proxy votes for the ordinary shares are recorded. Results for, against and withheld are posted to the Company's website. All Directors attend the AGM. ADS holders will be given the opportunity through procedures agreed with the depository, the Bank of New York, to vote the number of ordinary shares that represent their holding of ADSs at the AGM, provided they have submitted valid instructions to the depository by the date set by the depository for receiving such instructions.
D. Employees
The average number of employees by division, function and geography for the years ended December 31, 2012, 2011 and 2010 was as follows:
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
By Division: |
|||||||
Elektron |
558 | 561 | 560 | ||||
Gas Cylinders |
962 | 888 | 865 | ||||
Total |
1,520 | 1,449 | 1,425 | ||||
By Function: |
|||||||
Direct production and distribution |
1,284 | 1,209 | 1,210 | ||||
Indirect: |
|||||||
Sales and administration |
183 | 189 | 170 | ||||
Research and development |
53 | 51 | 45 | ||||
Total |
1,520 | 1,449 | 1,425 | ||||
By Geography: |
|||||||
Europe |
819 | 804 | 795 | ||||
North America |
675 | 619 | 604 | ||||
Rest of the World |
26 | 26 | 26 | ||||
Total |
1,520 | 1,449 | 1,425 | ||||
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Employees at a number of our locations are members of various trade union organizations. We consider our employee relations to be good. In the last three years, we have experienced a few one to three day work stoppages in France and the United Kingdom, but do not consider any of these work stoppages to have been material to our operations. We also employed on average 180, 183 and 136 temporary contract and agency staff in 2012, 2011 and 2010, respectively. Our average total headcount, including employees and temporary contract and agency staff, was 1,700, 1,632 and 1,561 in 2012, 2011 and 2010, respectively.
E. Share Ownership
The following table shows the number of shares owned by our directors and members of our executive management as at March 29, 2013.
Name of Beneficial Owner
|
Ordinary Shares Beneficially Owned (1) | Options over Ordinary Shares | Percent | ||||
---|---|---|---|---|---|---|---|
Peter Joseph Kinder Haslehurst |
65,000 | 20,200 | (8) | (* | ) | ||
Brian Gordon Purves (2) |
324,999 | 120,350 | (9) | 3.3 | % | ||
Andrew Michael Beaden (3) |
45,500 | 76,660 | (10) | (* | ) | ||
Joseph Allison Bonn |
| 10,000 | (8) | (* | ) | ||
Kevin Sean Flannery |
5,000 | 10,000 | (8) | (* | ) | ||
David Farrington Landless |
| 962 | (11) | (* | ) | ||
Christopher John Hillary Dagger (4) |
66,100 | 42,250 | (12) | (* | ) | ||
Edward John Haughey (5) |
78,000 | 49,750 | (13) | (* | ) | ||
John Stephen Rhodes (6) |
117,676 | 51,000 | (14) | (* | ) | ||
Linda Frances Seddon (7) |
32,370 | 34,000 | (15) | (* | ) |
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$12.91 each ADS, 3,950 are nominal cost time based options with an exercise price of £0.50 each ADS and 15,750 are performance based options with an exercise price of £0.50 each ADS.
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A. Major Shareholders.
The following table shows our major shareholders (shareholders that are beneficial owners of 5% or more of the Companies voting shares) as at March 29, 2013, based on notifications made to the company or public filings:
Shareholder
|
Number of Shares
Beneficially Owned |
Percent | |||
---|---|---|---|---|---|
Entities associated with Stonehill Capital Management, LLC (1) |
2,345,525 | 17.4 | % | ||
Entities associated with Marathon Asset Management, LLP (2) |
1,252,421 | 9.3 | % | ||
Wellington Management Co. LLP |
1,197,100 | 8.9 | % | ||
Barclays Bank PLC |
943,472 | 7.0 | % | ||
T Rowe Price Associates Inc. |
928,951 | 6.9 | % | ||
Cetus Capital II, LLC |
874,133 | 6.5 | % |
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From January 1, 2012 to December 31, 2012, the percentage of ordinary shares beneficially owned by (i) Wellington Management Co. LLP increased from 0% to 8.9%, (ii) entities affiliated with T. Rowe Price Associates Inc. increased from 0% to 6.9%, (iii) entities affiliated with Stonehill Capital Management decreased from 23.44% to 17.4%, (iv) entities affiliated with Marathon Asset Management increased from 12.52% to 9.3%, (v) entities affiliated with Avenue Capital Group decreased from 12.00% to 4.5% and (vi) Cetus Capital II, LLC decreased from from 8.74% to 7.0%.
From January 1, 2011 to December 31, 2011: the percentage of ordinary shares beneficially owned by (i) entities affiliated with Stonehill Capital Management increased from 3.55% to 23.44%, (ii) entities affiliated with Marathon Asset Management increased from 10.02% to 12.52%, (iii) entities affiliated with Avenue Capital Group decreased from 25.22% to 12.00% and (iv) Cetus Capital II, LLC increased from 0% to 8.74%.
From January 1, 2010 to December 31, 2010: the percentage of ordinary shares beneficially owned by (i) entities affiliated with Stonehill Capital Management increased from 3.01% to 3.55%, (ii) entities affiliated with Marathon Asset Management increased from 7.70% to 10.02% and (iii) entities affiliated with Pacificor, LLC increased from 3.91% to 7.63%.
Voting Rights
Major shareholders have the same voting rights per share as all other ordinary shareholders.
Lock-Up Agreements
In connection with our initial public offering, we and each of our directors, members of our executive management board, the selling shareholders and certain other shareholders entered into lock-up agreements that restrict the sale of ordinary shares and ADSs for up to 180 days after the initial public offering, subject to an extension in certain circumstances. The lock up period is due to expire on April 1, 2013, after which the ordinary shares or ADSs held by our directors, members of our executive management board, the selling shareholders and certain other shareholders may be sold, subject to the restrictions under Rule 144 under the Securities Act or by means of registered public offerings.
U.S. Resident Shareholders of Record
BNY (Nominees) Limited is the holder of record for the company's ADR program, whereby each ADS represents one-half of an Ordinary Share of £1 each. At 29 March 2013, BNY (Nominees) Limited held 4,600,000 Ordinary Shares representing 34% of the issued share capital held at that date. As at March 29, 2013, we had a further 6,755,071 Ordinary shares held by 39 U.S resident shareholders of record, representing approximately 50% of total voting power. Certain of these ordinary shares and ADS were held by brokers or other nominees. As a result, the number of holders of record or registered holders in the U.S. is not representative of the number of beneficial holders or of the residence of beneficial holders.
B. Related Party Transactions
Since January 1, 2010, there has not been, nor is there currently proposed, any material transaction or series of similar material transactions to which we were or are a party in which any of our directors, members of our executive management board, associates, holders of more than 10% of any class of our voting securities, or any affiliates or member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than the compensation and shareholding arrangements we describe where required in "Management."
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C. Interests of experts and counsel
Not applicable.
Item 8. Financial Information.
A. Consolidated Statements and Other Financial Information.
See "Item 18. Financial Statements."
Dividend Distribution policy
We did not declare or pay any dividends on our ordinary shares in 2009, 2010 or 2011. In July 2012, our board of directors declared an interim dividend of £0.25 per ordinary share (equal to $0.39 per ordinary share at an exchange rate of $1.57:£1), totaling $3.8 million, which was paid on August 10, 2012. Our first quarterly dividend of $0.20 per ordinary share ($0.10 per ADS) was declared and paid in October 2012 to holders of our ordinary shares as of September 30, 2012. The declaration and payment of this dividend and any future dividends will be at the discretion of our board of directors and will depend upon our results of operations, cash requirements, financial condition, contractual restrictions, restrictions imposed by our indebtedness, any future debt agreements or applicable laws and other factors that our board of directors may deem relevant. As with the dividend declared in July 2012 and October 2012, we expect future dividends to be paid out of our earnings. See "Item 5, Operating and Financial Review and Prospects "and "Item 3.D, Risk factorsOur ability to pay regular dividends on our ordinary shares is subject to the discretion of our board of directors and will depend on many factors, including our results of operations, cash requirements, financial condition, contractual restrictions, applicable laws and other factors, and may be limited by our structure and statutory restrictions and restrictions imposed by the Senior Facilities Agreement and Loan Notes due 2018 as well as any future agreements."
Under our Articles of Association, our shareholders must approve any final dividend, although the board of directors may resolve to pay interim dividends without shareholder approval. Any payment of dividends is also subject to the provisions of the Companies Act, according to which dividends may only be paid out of profits available for distribution determined by reference to accounts prepared in accordance with the Companies Act and IFRS-IASB, which differ in some respects from U.S. GAAP. In the event that dividends are paid in the future, holders of the ADSs will be entitled to receive payments in U.S. dollars in respect of dividends on the underlying ordinary shares in accordance with the deposit agreement. Furthermore, because we are a holding company, any dividend payments would depend on cash flow from our subsidiaries.
B. Significant Changes
Except as disclosed elsewhere in this Annual Report, there have been no significant changes since December 31, 2012.
96
Item 9. The Offer and Listing.
A. Offer and Listing Details
Price History of Stock
Following the listing of our ordinary shares, in the form of ADSs evidenced by ADRs, on October 3, 2012 on the New York Stock Exchange, the following table sets forth, for the periods indicated, the reported high and low prices quoted in USD.
|
Price Per ADS | ||||
---|---|---|---|---|---|
|
High | Low | |||
|
(in USD)
|
||||
Quarterly |
|||||
2012 |
12.74 | 10.00 | |||
Fourth Quarter (from October 3) |
|||||
Monthly |
|||||
2012 |
|||||
October (from October 3) |
11.92 | 10.00 | |||
November |
11.62 | 10.80 | |||
December |
12.74 | 10.22 |
B. Plan of Distribution
Not applicable
C. Markets
9,200,000 ADSs of Luxfer Holdings PLC are listed on the New York Stock Exchange. The Depositary for the ADSs holds one £1 ordinary share for every two ADSs. Prior to this listing, no public market existed for our ordinary shares. Our ordinary shares are listed, in the form of ADSs evidenced by ADRs, on the NYSE under the symbol "LXFR".
D. Selling Shareholders
Not applicable
E. Dilution
Not applicable
F. Expenses of the Issue
Not applicable
Item 10. Additional Information
A. Share Capital
The following describes Luxfer Holdings PLC's issued share capital, summarizes the material provisions of the Articles of Association of Luxfer Holdings PLC and highlights certain differences in corporate law in the United Kingdom and the United States.
97
Issued Share Capital
The issued share capital of Luxfer Holdings PLC as at the date of this Annual Report is as follows:
Ordinary shares of £1 (Sterling) each
|
Number Issued | Amount | |||
---|---|---|---|---|---|
As at January 1, 2012 |
10,000,000 | £10,000,000 | |||
Initial Public Offering, October 2012 |
3,500,000 | £3,500,000 | |||
As at December 31, 2012 |
13,500,000 | £13,500,000 | |||
Shares issued March 15, 2013 |
962 | £962 | |||
As at March 29, 2013 |
13,500,962 | £13,500,962 |
Deferred shares of £0.0001 (Sterling) each
|
Number Issued | Amount | |||
---|---|---|---|---|---|
As at January 1, 2012 |
769,413,708,000 | £76,941,370.80 | |||
As at December 31, 2012 |
769,413,708,000 | £76,941,370.80 |
Ordinary Shares
The holders of ordinary shares are entitled to receive, in proportion to the number of ordinary shares held by them and according to the amount paid up on such ordinary shares during any portion or portions of the period in respect of which the dividend is paid, the whole of the profits of Luxfer Holdings PLC paid out as dividends. Subject to the rights of deferred shares, holders of ordinary shares are entitled, in proportion to the number of ordinary shares held by them and to the amounts paid up thereon, to share in the whole of any surplus in the event of the winding up of Luxfer Holdings PLC. The holders of ordinary shares are entitled to receive notice of, attend either in person or by proxy or, being a corporation, by a duly authorized representative, and vote at general meetings of shareholders.
Deferred Shares
The holders of deferred shares are not entitled to receive any dividend or other distribution, or to receive notice of, attend or vote at any general meeting of Luxfer Holdings PLC. On a winding up (but not otherwise), the holders of deferred shares shall be entitled to the repayment of the paid up nominal amount on their deferred shares, but only after any payment to the holders of ordinary shares of an amount equal to 100 times the amount paid up on such ordinary shares.
"B" Preference Shares
Luxfer Holdings PLC previously had 50,000 "B" preference shares of £1 (Sterling) each in issue. The "B" preference shares have been redeemed for £60,456 by Luxfer Holdings PLC, effective August 23, 2011, in accordance with the Articles of Association.
B. Memorandum and articles of association
The information called for by this item has been reported previously in our Registration Statement on form F-1 (File No. 333-178278), filed with the SEC October 4, 2012, as amended, under the heading "Description of Share Capital" and is incorporated by reference into this Annual Report.
C. Material contracts
For the two years immediately preceding the date of this Annual Report, we have not been a party to any material agreements other than in the ordinary course of business.
98
D. Exchange controls
There are no governmental laws, decrees, regulations or other legislation in the United Kingdom that may affect the import or export of capital, including the availability of cash and cash equivalents for use by us, or which may affect the remittance of dividends, interest, or other payments by us to non-resident holders of our ordinary shares or ADSs, other than withholding tax requirements. There is no limitation imposed by U.K. law or Luxfer Holdings PLC's Articles of Association on the right of non-residents to hold or vote shares.
E. Taxation
United States Federal Income Taxation
The following discussion describes certain U.S. federal income tax consequences of the purchase, ownership and disposition of our ADSs by a holder that is a citizen or resident of the United States, a U.S. domestic corporation or a person or entity that otherwise will be subject to U.S. federal income tax on a net income basis in respect of our ADSs (a "U.S. Holder"). This discussion does not purport to be a description of all of the possible tax considerations that may be relevant to a decision to purchase, hold or dispose of ADSs. In particular, this discussion does not address all U.S. federal income tax considerations that may be relevant to a particular investor, nor does it address the special tax rules applicable to certain categories of investors, such as banks, dealers, traders who elect to mark to market, tax-exempt entities, insurance companies, certain short-term holders of ADSs or investors who hold our ADSs as part of a hedge, straddle, conversion or integrated transaction or investors who have a 'functional currency" other than the U.S. dollar. In addition, the discussion does not address tax consequences to an entity treated as a partnership for U.S. federal income tax purposes that holds the ADSs, or a partner in such partnership. This summary deals only with U.S. holders that will hold our ADSs as capital assets and does not address the tax treatment of a U.S. holder that owns or is treated as owning 10% or more of the voting shares (including ADSs) of the company.
This discussion is based on the federal income tax laws of the United States, as well as U.S. Treasury regulations and judicial and administrative interpretations, all as in effect as of the date of this annual report. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below. This summary does not address any tax consequences under the laws of any state or locality of the United States.
YOU ARE URGED TO CONSULT YOUR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL INCOME TAX RULES TO YOUR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE ADSs.
The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with their terms. If you hold ADSs, you should be treated as the holder of the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes.
Taxation of Dividends and Other Distributions on the ADSs
Subject to the exceptions discussed below, the gross amount of distributions made by us to you with respect to the ADSs will generally be includable in your gross income as dividend income. You will be treated as receiving the dividend on the date of receipt by the depositary. If dividends are converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividends. You should consult your tax advisor regarding the treatment of the foreign currency gain or loss, if any, on any non-U.S. currency received that is converted into U.S. dollars on a date subsequent to the date of receipt by the depositary.
99
The gross amount of distributions made by us to you with respect to the ADSs will only be treated as a dividend for U.S. federal income tax purposes to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent, if any, that the amount of the distribution exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of your tax basis in your ADSs, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. A dividend in respect of the ADSs will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.
With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will generally be taxed at the lower rate applicable to qualified dividend income, provided that (1) the ADSs are readily tradable on an established securities market in the United States, or we are eligible for the benefits of a qualifying income tax treaty with the United States that has been approved by the Internal Revenue Service for purposes of the qualified dividend rules, (2) we are not a passive foreign investment company (a "PFIC") for either our taxable year in which the dividend is paid or the preceding taxable year and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, common or ordinary shares, or ADSs representing such shares, are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the New York Stock Exchange. Based on our financial statements and current expectations regarding our income, assets and activities, we believe that we were not a PFIC in 2012 and do not anticipate becoming a PFIC in 2013 or in the foreseeable future. If we were to be a PFIC for any taxable year during which a U.S. holder holds our shares, certain adverse U.S. federal income tax consequences (including, but not limited to, the treatment of dividends received by non-corporate U.S. holders as other than qualified dividends) could apply. You should consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to the ADSs.
Dividends generally will constitute foreign source income for foreign tax credit limitation purposes. However, if 50% or more of our stock is treated as held by U.S. persons, we will be treated as a "United States-owned foreign corporation." In that case, dividends may be treated for foreign tax credit limitation purposes as income from sources outside the United States to the extent attributable to our non-U.S. source earnings and profits, and as income from sources within the United States to the extent attributable to our U.S. source earnings and profits. We cannot assure you that we will not be treated as a United States-owned foreign corporation. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will generally be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to the ADSs will generally constitute "passive category income."
Distributions of additional shares with respect to our ADSs that are made as part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax.
Taxation of Dispositions of ADSs
Subject to the passive foreign investment company rules discussed above, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of an ADS equal to the difference between the amount realized (in U.S. dollars) for the ADS and your tax basis (in U.S. dollars) in the ADS. The gain or loss will generally be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ADS for more than one year, you will be eligible for reduced tax rates. The
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deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as U.S. source income or loss.
Information Reporting and Backup Withholding
Dividend payments with respect to ADSs and proceeds from the sale, exchange or redemption of ADSs may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders that are United States Persons who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. You should consult your tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information.
U.S. Holders who are individuals are required to report information relating to an interest in the ADSs, subject to certain exceptions (including an exception for ADSs held in accounts maintained by certain financial institutions). You should consult your tax advisor regarding the effect, if any, of this requirement on your ownership and disposition of the ADSs.
United Kingdom Tax Considerations
This section discusses the material U.K. tax consequences of an investment in ordinary shares or ADSs by Eligible U.S. Holders. It applies only to Eligible U.S. Holders that beneficially hold ordinary shares or ADSs as capital assets and does not address the tax treatment of investors that are subject to special rules. An "Eligible U.S. Holder" is an investor that, at all material times: (i) qualifies for benefits under the income and capital gains tax convention between the United States and the United Kingdom that was signed on July 24, 2001 (and amended by a Protocol signed on July 19, 2002) (the "Treaty"); (ii) is a resident of the United States for the purposes of the Treaty; and (iii) is not resident or (while it remains relevant to the charge to U.K. capital gains tax) ordinarily resident in the United Kingdom for U.K. tax purposes at any material time. Investors should note that the UK Government has announced that ordinary residence will cease to be relevant to the charge to UK capital gains tax for the tax year 2013-14 and subsequent tax years.
This section does not apply to an investor who holds shares in connection with the conduct of a business or the performance of personal services in the United Kingdom or otherwise in connection with a branch, agency or permanent establishment in the United Kingdom.
This section is based on current U.K. tax law and published HM Revenue & Customs ("HMRC") practice as at the date of this annual report, both of which are subject to change, possibly with retrospective effect.
POTENTIAL INVESTORS IN THE ADSs SHOULD SATISFY THEMSELVES PRIOR TO INVESTING AS TO THE OVERALL TAX CONSEQUENCES, INCLUDING, SPECIFICALLY, THE CONSEQUENCES UNDER U.K. TAX LAW AND HMRC PRACTICE OF THE ACQUISITION, OWNERSHIP AND DISPOSAL OF THE ORDINARY SHARES OR ADSs, IN THEIR OWN PARTICULAR CIRCUMSTANCES BY CONSULTING THEIR OWN TAX ADVISERS.
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Taxation of dividends
Withholding Tax
Dividend payments in respect of the ordinary shares and ADSs may be made without withholding or deduction for or on account of U.K. tax.
Income Tax
Payments of dividends on the ordinary shares and ADSs will constitute U.K. source income for U.K. tax purposes and, as such, remain subject to U.K. income tax by direct assessment even if paid without deduction or withholding for or on account of any U.K. tax. However, dividends with a U.K. source will not generally be chargeable to U.K. tax by direct assessment in the hands of an Eligible US Holder.
Taxation of disposals
As an Eligible U.S. Holder, you will not generally be liable for U.K. taxation on any capital gain realised on the disposal of the ordinary shares or ADSs.
Inheritance Tax
If for the purposes of the Taxes on Estates of Deceased Persons and on Gifts Treaty 1978 between the United States and the United Kingdom an individual holder is domiciled in the United States and is not a national of the United Kingdom, any ordinary shares or ADSs beneficially owned by that holder will not generally be subject to U.K. inheritance tax on that holder's death or on a gift made by that holder during his/her lifetime, provided that any applicable United States federal gift or estate tax liability is paid, except where (i) the ordinary shares or ADSs are part of the business property of a U.K. permanent establishment or pertain to a U.K. fixed base used for the performance of independent personal services; or (ii) the ordinary shares or ADSs are comprised in a settlement unless, at the time of the settlement, the settlor was domiciled in the United States and not a national of the United Kingdom.
Stamp Duty and Stamp Duty Reserve Tax
Issue and transfer of ordinary shares
No U.K. stamp duty or stamp duty reserve tax ("SDRT") is payable on the issue of the ordinary shares.
Transfers of ordinary shares to, or to a nominee or agent for, a person whose business is or includes issuing depositary receipts (which will include a transfer of ordinary shares to the depositary or to the custodian as nominee or agent for the depositary) or to, or to a nominee or agent for, a person whose business is or includes the provision of clearance services, will generally be regarded by HMRC as subject to stamp duty or SDRT at 1.5% of the amount or value of the consideration or, in certain circumstances, the value of the ordinary shares transferred. In practice this liability for stamp duty or SDRT is in general borne by such person depositing the relevant shares in the clearance service or depositary receipt scheme.
The transfer on sale of ordinary shares by a written instrument of transfer will generally be liable to U.K. stamp duty at the rate of 0.5% of the amount or value of the consideration for the transfer. The purchaser normally pays the stamp duty.
An agreement to transfer ordinary shares will generally give rise to a liability on the purchaser to SDRT at the rate of 0.5% of the amount or value of the consideration. Such SDRT is payable on the seventh day of the month following the month in which the charge arises, but where an instrument of transfer is executed and duly stamped before the expiry of a period of six years beginning with the date of that agreement, (i) any SDRT that has not been paid ceases to be payable, and (ii) any SDRT that has been paid may be recovered from HMRC, generally with interest.
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Transfer of ADSs
No U.K. stamp duty will be payable on a written instrument transferring an ADS or on a written agreement to transfer an ADS provided that the instrument of transfer or the agreement to transfer is executed and remains at all times outside the United Kingdom. Where these conditions are not met, the transfer of, or agreement to transfer, an ADS could, depending on the circumstances, attract a charge to U.K. stamp duty at the rate of 0.5% of the value of the consideration.
No SDRT will be payable in respect of an agreement to transfer an ADS.
F. Dividends and paying agents
Not applicable.
G. Statement by experts
Not applicable.
H. Documents on Display
You may read and copy any reports or information that we file at the SEC's Public Reference Room at 100 F Street, N.E.,Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling at the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports and other about issuers, like us, that file electronically with the SEC. The address of that site is "www.sec.gov".
We also make available on our website, free of charge, our annual reports on Form 20-F and the text of our reports on Form 6-K, including any amendments to these reports, as well as cretins other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is "www.Luxfer.com". The information contained on our website is not incorporated by reference in this document.
I. Subsidiary information
Not applicable
Item 11. Quantitative & Qualitative Disclosures About Market Risk
We are exposed to market risk during the normal course of business from changes in currency exchange rates, interest rates and commodity prices such as aluminum prices. We manage exposures through a combination of normal operating and financing activities and through the use of derivative financial instruments such as foreign currency forward purchase contracts and aluminum forward purchase contracts. We do not use market risk-sensitive instruments for trading or speculative purposes.
A hedging committee, chaired by the Group Finance Director, controls and oversees the monitoring of market risks and hedging activities undertaken throughout the company.
Effect of Currency Movement on Results of Operations
We conduct business in the United Kingdom, the United States, continental Europe, Australasia and Asia and in various other countries around the world and, accordingly, our results of operations are subject to currency translation risk and currency transaction risk.
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For the year ended December 31, 2012, our revenue by origin of manufacture and destination of sales, as a percentage of our consolidated revenues for continuing operations, were as follows:
Revenue by Geographic Destination 2012
Geographic Region
|
Percentage
of Revenue |
||
---|---|---|---|
North America |
44.3% | ||
Euro zone |
20.2% | ||
United Kingdom |
11.5% | ||
Asia |
11.4% | ||
Other Europe |
4.5% | ||
South & Central America |
3.8% | ||
Africa |
1.5% | ||
Australasia |
2.8% |
Revenue by Geographic Origin 2012
Geographic Region
|
Percentage
of Revenue |
||
---|---|---|---|
North America |
54.3% | ||
United Kingdom |
32.7% | ||
Euro zone |
8.1% | ||
Other Europe |
3.7% | ||
Asia |
1.2% |
In 2012, 62%, 12% and 19% of our sales revenue from continuing operations was denominated in U.S. dollars, pound sterling and euro respectively.
Currency translation risk
With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant local base currency and then translated each month into U.S. dollars for inclusion in our consolidated financial statements. We translate balance sheet amounts at the exchange rates in effect on the date of the balance sheet, while income and cash flow items are translated at the average rate of exchange in effect for the relevant period.
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The chart below shows the monthly rates used to translate our U.K. and European operations over the last year:
Translation Exchange Rates2012 v 2011
Translation risk on net assets
We hold significant assets in the United States, United Kingdom and Continental Europe, and we have in the past used either forward foreign currency exchange contracts or local currency debt to hedge translation risk on our net assets. Since 2004, we have not engaged in the use of forward foreign currency exchange contracts for the purpose of hedging translation risk, although we may in the future enter into other similar arrangements when we believe it appropriate. We use local denominated debt externally provided by third parties, in various forms and to various levels, to hedge the exchange rate risks. Since 2000, following the sale of British Aluminium, we had a disproportionate amount of external debt in the United Kingdom, leading to an imbalance in the net assets by economic region. In June 2011, however, our new financing facilities enabled us to allocate external debt levels between the United States and United Kingdom in a more appropriate manner, replacing the internal debt structure. Following the IPO in October 2012, we repaid the senior term debt which was held in both the United States and United Kingdom, leaving the Loan Notes due 2018 as our principal external debt instrument, and this debt is denominated in U.S dollars. The net assets employed in North America, Continental Europe and the United Kingdom was $58.9 million, $32.8 million and $52.1 million respectively as of December 31, 2012. Of the $58.9 million net assets in North America, $23.0 million relates to goodwill with a functional currency of pound sterling, the functional currency of the holding company, Luxfer Holdings PLC, following the transition to IFRS. Net assets in other regions only totaled $5.0 million and therefore were not a significant risk. Following the change in presentation currency to U.S. dollars, we are now exposed to translation risk for the UK and all other non-U.S. net assets plus the U.S. goodwill, which in total is $112.9 million. Depreciation of the U.S. dollar compared to the pound sterling positively impacts the value of our assets that are exposed to translation risk as reported in U.S. dollars in our consolidated financial statements and, conversely, the appreciation of the U.S dollar has a negative impact on the value of those assets.
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As at December, 31 2012 the U.S. dollar had weakened by approximately 5% against pound sterling and by approximately 3% against the euro, compared to December, 31, 2011. These movements in conjunction with exchange rate movements of our other overseas investments, which are principally denominated in Czech koruna, Chinese renminbi, Canadian dollars and Australian dollars, increased our consolidated net assets by $2.9 million, which we reported in our SOCI. As of December 31, 2012, we estimate that a 10% appreciation in the U.S. dollar against the other currencies of our operations would have decreased the value of our consolidated net assets by approximately $11.1 million.
Translation risk on revenues and operating profits
The impact of changes in exchange rates on our reported revenue and operating profit is dependent on changes in average exchange rates in one year when compared to another. The chart above plots the pound sterling and euro exchange rates against U.S. dollars. The table below shows the impact of such shifts in average exchange rates had on our financial results. On average, the translation exchange rate was £0.6279 per $1 in 2012 and €0.6210 per $1 in 2011.
|
Q1 2012 | Q2 2012 | Q3 2012 | Q4 2012 | FY 2012 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
(in $ millions)
|
||||||||||
All currenciestranslation impactgain/(loss) |
|||||||||||
Revenue |
$(1.2 | ) | $(3.3 | ) | $(1.9 | ) | $0.2 | $(6.2 | ) | ||
Operating profit |
0.0 | (0.2 | ) | (0.2 | ) | 0.0 | (0.4 | ) |
The table above also indicates the impact of movements in the exchange rate of pound sterling, the euro and other currencies against the U.S. dollar for 2012. We estimate that a 10% appreciation in the U.S. dollar against the other currencies of our operations in 2012 would have decreased our operating profit by approximately $2.5 million.
Hedging of currency translation risk
The gains and losses arising from our exposure to movements in foreign currency exchange rates are recognized in the SOCI.
We cannot easily hedge the impact of translation risk on our operating profits, but we are able to hedge the translation risk on our overseas net assets. The two common methods are through either bank borrowing denominated in the foreign currency or use of forward foreign currency exchange contracts. We have hedged this risk through bank borrowings denominated in the same currencies as the net assets they help to fund. We can draw down amounts under our new Revolving Credit Facility and Term Loan in U.S. dollars, pound sterling and euro. In the past we were also able to draw down our Previous Credit Facility in U.S. dollars, pound sterling and euro, but our Senior Notes due 2012 were all denominated in pound sterling. As of December 31, 2011, and following the refinancing completed on the June 15, 2011, we had $91.1 million of debt denominated in U.S. dollars and $45.5 million denominated in pound sterling. As of December 31, 2012, following the repayment of the senior term loan in October 2012, we had $65.0 million of debt denominated in U.S. dollars. We have on occasion also used forward foreign currency exchange contracts to hedge this exposure. However, this approach is less desirable than the use of bank debt because it requires the cash settlement of the contracts, which exposes us to an additional cash flow risk. As a result, we have not used such hedges in recent years. We also report any gains and losses on hedging instruments in the SOCI, offsetting the exchange movements on overseas net assets.
Currency transaction risk
In addition to currency translation risk, we incur currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or sales transaction in a currency other than its functional currency. Matching sales revenues and costs in the same currency reduces currency transaction risk.
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Our U.S. operations have little currency exposure, as most purchases, costs and revenues are denominated in U.S. dollars. In our U.K. operations, purchases of raw materials and sales are conducted in a large number of countries and in differing currencies, while other operating costs are generally incurred in pound sterling, resulting in exposure to changes in foreign exchange rates. For example, purchases of raw materials are denominated principally in U.S. dollars, and a large portion of our sales by U.K. operations are in euros.
The analysis of our revenues by destination and origin, as shown in the chart above, demonstrates that, although 33% of our product sales revenue originates from manufacturing facilities in the United Kingdom, only 12% of our revenues are derived from sales to customers within the United Kingdom. The remaining percentage of revenues is generated from exports outside the United Kingdom. We sold 20% of our products into the countries that have adopted the euro, but we only manufactured 8% of our goods in the euro-zone. As a result, movement in the exchange rate between the euro and the pound sterling is our largest currency transaction risk. We estimate the net exposure to the euro between sales and purchases equates to a gross profit exposure varying between €50 million and €60 million a year, fluctuating due to changes in sales, which will vary due to market demand factors. The geographic sales analysis shows that the U.S. dollar is another potential source of currency transaction risk for our U.K. operations, with sales of products denominated in U.S. dollars extending beyond North America, as many of our sales to Asia are also priced in U.S. dollars. The U.K. operations are exposed to a translation risk, with export sales being priced in U.S. dollars, and have an estimated $20 million net sales risk per annum. We manage transaction risk on the sales and purchase cash flows separately, using separate sell and buy forward currency contracts, rather than on a net basis.
Hedging of currency transaction risk
To mitigate our exposure to currency transaction risk, we operate a policy of hedging all contracted commitments in foreign currency, and we also hedge a substantial portion of non-contracted forecast currency receipts and payments for up to twelve months forward.
Where no natural hedge exists, all firm contracted commitments and a portion of non-contracted forecast receipts and payments denominated in foreign currencies are hedged by means of forward foreign currency exchange contracts. We base our decision to hedge against non-contracted amounts based on the nature of the transaction being hedged and the volatility of currency movements, among other factors. For example, we cover a lower percentage of our forecast exposure in the case of businesses with relatively few long-term sales contracts.
As of December 31, 2012, we held various foreign currency exchange contracts designated as hedges in respect of forward sales for U.S. dollars, euros, Australian dollars and Japanese yen for the receipt of pound sterling. We also held foreign currency exchange contracts designated as hedges in respect of forward purchases for U.S. dollars and euros by the sale of pound sterling. The contract totals in pound sterling, range of maturity dates and range of exchange rates are disclosed below:
|
2012 Sales hedges | |||||
---|---|---|---|---|---|---|
|
U.S. dollars | Euros |
Canadian
dollars |
|||
Contract totals/£M |
42.8 | 30.3 | 2.5 | |||
Maturity dates |
01/13 to 03/14 | 01/13 to 05/14 | 01/13 to 01/13 | |||
Exchange rates |
$1.5433 to $1.6213 | €1.1880 to €1.2719 | $1.608 to $1.608 |
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|
2012 Purchase hedges | |||||
---|---|---|---|---|---|---|
|
U.S. dollars | Euros |
Canadian
dollars |
|||
Contract totals/£M |
29.4 | 0.6 | N/A | |||
Maturity dates |
01/13 to 03/14 | 01/13 to 01/13 | N/A | |||
Exchange rates |
$1.5450 to $1.6234 | €1.2297 to €1.2297 | N/A |
The fair value of the above hedges was $0.2 million as of December 31, 2012. Under "International Accounting Standard 39Financial Instruments: Recognition and Measurement," a gain of $0.7 million has been deferred from recognition in our consolidated income statement until 2012, because it relates to effective hedges against forecasted sales and purchases in 2012. We disclose the amount deferred separately under hedging reserve in our consolidated balance sheet.
Effect of Commodity Price Movements on Results of Operations
Commodity price risk
We are exposed to commodity price risks in relation to the purchases of our raw materials. The raw materials we use include primary magnesium, rare earth metals and chemical compounds, zircon sand, zirconium oxychloride intermediates and other chemical inputs like soda ash for the Elektron division and aluminum log and sheet and carbon fiber for the Gas Cylinders division. All of these raw materials have increased in price over the last few years, many of them substantially.
In 2010, costs in the first half of the year were favorable compared to the first half of 2009 by $4.9 million. In the second half of 2010, the cost of aluminum, magnesium and other materials raised significantly, an increase of $3.4 million compared to the same period in 2009, resulting in the overall costs for 2010 being only $1.5 million less than 2009. In 2011, total raw material cost increases potentially represented nearly $80.5 million in additional costs, and the impact on our gross margins might have been more substantial, but for operational improvements that produced efficiency gains, which, coupled with some gains from buying raw materials forward, reduced the material cost impact to $69.2 million. Where feasible, we sought to buy materials forward to provide customers with more stable pricing and guarantee supply on a quarterly basis, as well as to stabilize the margin impact. Additional surcharges of $66.4 million were levied on customers for the increased costs of rare earth chemicals and the cost of financing them in our supply chain, including holding strategic inventory levels to guarantee supply as Chinese export-quota restrictions tightened. This required us to work closely with our customers to navigate the challenges created by the rare earth pricing bubble. Cerium carbonate is used by our Elektron division in the manufacture of our zirconium auto-catalysts, along with other rare earth chemicals used in a range of zirconium and magnesium products. Cerium carbonate prices increased dramatically during the year, peaking at a high of $270 per kilogram by the middle of 2011 before falling back later in the year. This peak can be compared to $5 to $10 per kilogram prices less than a year earlier. As well as rare earths, primary aluminum, magnesium and zircon sand costs also increased. The average LME price for aluminum was $2,419 per metric ton in 2011, compared to $2,198 per metric ton in 2010. Magnesium costs rose, with the average price of Chinese magnesium on a free on board basis rising to $3,112 per metric ton, compared to $2,831 per metric ton in 2010. Zircon sand prices also increased, with an increase from $1,250 per metric ton on average in the fourth quarter of 2010 to $2,750 per metric ton in the fourth quarter of 2011, along with various bulk chemicals we use. In aggregate, through a combination of pricing and surcharges, we were able to recover the total impact of the various commodity cost increases we faced in 2011.
In 2012 against the backdrop of global economic uncertainties, raw material prices have generally stabilized or reduced from previous peak prices. The average LME price for aluminum was $2,049 per metric ton in 2012, a reduction of $370 per metric ton, or 15%, from the 2011 equivalent figure.
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Magnesium costs were almost identical in cost in 2012 to the previous year with the average price of Chinese magnesium on a free on board basis being $3,114 per metric ton, a $2 per metric ton difference in 2012 compared to 2011.The largest single impact on our business in previous years was that of cerium carbonate. By the end of 2011 we had seen a softening of the price quoted on the Asian Metal Market to approximately $95 per kg (oxide contained) from the peak of $270 per kg months earlier. 2012 saw an increase in the supply of cerium carbonate and a return to more stable market conditions. As a result of this, the quoted Asian Metal Index price of cerium carbonate reduced progressively during the year, closing at approximately $28 per kg by December 2012.
Despite cost saving initiatives, utility costs slightly increased by $0.3 million in 2012 compared to 2011 with the increase in costs being mainly higher unit costs of electricity, offset by a slight reduction in the in unit cost of gas. We continue to seek further cost savings in this area, especially given the risk of higher water and energy costs in the medium to long-term.
Primary aluminum is a global commodity, with its principal trading market on the LME. In the normal course of business, we are exposed to aluminum price volatility to the extent that the prices of aluminum purchases are more closely related to the LME price than the sales prices of certain of our products. Our Gas Cylinder division will buy various aluminum alloys, in log, sheet, or tube form, and the contractual price will usually include a LME-linked base cost plus a premium for a particular type of alloy and the cost of casting, rolling or extruding. The price of high-grade aluminum, which is actively traded on the LME, has fluctuated significantly in recent years as shown in the LME price graph below. The price remains volatile and difficult to predict. Since aluminum is the Gas Cylinders division's largest single raw material cost, these fluctuations in the cost of aluminum can affect this division's and our financial results. In order to help mitigate this exposure, we have in the past entered into LME-related transactions in the form of commodity contracts with what we believe are creditworthy counter-parties. From January 2009, we began to order a certain amount of our aluminum billet purchases on a forward fixed price, avoiding or reducing the need to use financial instruments to hedge our price exposure.
The three-month LME price for primary aluminum was as follows from January 1, 2008 through December 31, 2012:
LME three month price for primary aluminum
January 2008 to December 2012
Source: London Metal Exchange
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We estimate that changes in the LME price of aluminum will normally take approximately three months to impact our reported costs of sales and operating profits. As a result, for example, the price decrease experienced from the first quarter of 2009 decreased costs charged to our results of operations during second quarter of 2009, and the price increase experienced from the third quarter of 2009 increased costs charged to our results of operations during the last quarter of 2009. This delay is due to contractual arrangements and movements through inventory delaying the impact. At the end of 2008, we held unusually high levels of stock that we purchased in the last half of 2008 when the prices were relatively high. We consumed this stock in the first half of 2009, which, year on year meant that metal prices were lower in the first half of 2010 than in 2010 overall. This pattern was reversed in the second half of the year with the replenishment of metal stock in 2009 being at a much lower unit cost than that purchased and used in the second half of 2010. Overall, we benefitted by a $0.8 million reduction in purchase costs in 2010 over 2009. The increase in aluminum costs in the second half of 2010 continued into 2011 with the average three month LME cost of primary aluminum being 10.0% higher in 2011 compared to 2010. The higher base cost increased our aluminum purchase costs by $2.6 million in 2011 compared to 2010. In the later stages of 2011, the average three month LME cost of primary aluminum began to fall, and this reduction continued in the first nine months of 2012, recovering slightly by December 2012. This overall reduction in 2012 reduced our cost base in 2012 by $1.3 million compared to 2011.
Based on the average LME purchase cost of aluminum, net of any fixed priced agreements and hedging instruments, we estimate the LME base cost was $2,220 per metric ton in 2012, $2,405 per metric ton in 2011 and $2,088 per metric ton in 2010.
There is no similar financial market to hedge magnesium, zirconium raw materials or carbon fiber, and prices for these raw materials have also increased substantially in recent years. To help mitigate these risks, we have a number of fixed-price supply contracts for these raw materials, which limit our exposure to price volatility over a calendar year. However, we remain exposed over time to rising prices in these markets, and therefore rely on the ability to pass on any major price increases to our customers in order to maintain our levels of profitability for zirconium- and magnesium-based products. We have also in the last few years, when we felt it was appropriate, made additional physical purchases of magnesium and some rare earth chemicals to delay the impact of higher prices, but this has had a cash flow impact, leading to greater utilization of our revolving credit bank facilities. Also, the cost of magnesium in the United States is fairly high due to the protection of the U.S. market from Chinese imports through anti-dumping tariffs.
Ultimately we aim to recover all our raw material cost increases through adjustment to our sales prices. However, for aluminum costs, we can utilize the LME financial derivative contracts and fixed price forward purchase orders over a one to two year period to mitigate shorter term fluctuations and protect us in the short term as we renegotiate sales prices with customers.
Hedging of aluminum metal price risk
Based on current sales mix between composite and aluminum cylinders, we expect that our gas cylinders operations will need to purchase approximately 10,000 to 14,000 metric tons of primary aluminum each year, in various sizes of billet and various types of alloy, and that another approximately 1,250 metric tons per year of various forms of fabricated sheet aluminum will be purchased for use in our Superform and composite cylinder production processes. Normally, the division will recover approximately 2,500 to 3,500 metric tons per year of process scrap and would expect to be able to sell this scrap into the market at prices linked to the LME prices. Over time, we have also aimed to recover cost increases via sales price increases, and use any LME hedging or fixed priced supply contracts only to protect margins for the next 12 to 18 months.
In 2012, approximately 60% of our price risk on primary aluminum costs was covered with LME hedges and physical forward fixed priced purchase contracts. At the start of 2013, we estimated we have fixed priced purchase contracts covering approximately 15% of our main primary aluminum requirements and
110
LME derivative contracts covering approximately 50%. Fixed priced supply contracts are a preferred method of reducing the fluctuation in aluminum costs, because it avoids the credit risks associated with LME contracts. We have, however, negotiated adequate hedging facilities with the banks that provided the bank facilities through separate credit lines. We have used a mixture of fixed priced supply contracts and LME derivative contracts to provide protection against price volatility. Together, we estimate we have 65% and 34% of our forecasted price risk of aluminum covered by these arrangements for 2013 and 2014 respectively.
Our hedging policy is designed to enable us to benefit from a more stable cost base. The effect of fixing forward and of the LME-related transactions we enter into is to mitigate the unfavorable impact of price increases on aluminum purchases. Under IFRS-IASB, similar to the treatment of derivative financial instruments used to hedge foreign currency risk, the change in the fair value of the LME contracts that relate to future transactions is deferred and held in an equity hedging reserve account. Gains and losses derived from such commodity contracts are reflected in the cost of goods sold when the underlying physical transaction takes place. The LME contracts we had at the end of 2012 had a mark-to-market loss of $0.3 million, which was deferred and included in the equity hedging reserve account. This compares to a mark-to-market loss of $0.5 million in 2011.
Our hedging policy aims to achieve protection against our calculated exposure to metal price volatility for a full calendar year by the end of the immediately preceding year. We use our hedging policy to minimize risk rather than to engage in speculative positions on the underlying commodity. Although this may result in losses on hedged positions, the downside risk of un-hedged exposure to aluminum prices can be far greater. If we did not hedge our aluminum exposure and were unable to pass additional costs onto customers, we estimate, based on a price exposure on 10,000 metric tons that a $100 annual increase in the price of aluminum on the LME would result in a $1.0 million adverse effect on our full year operating profit.
Effect of Interest Rate Movements
Interest Rate Risk
As at December 31, 2012, we only have fixed rate debt outstanding on our consolidated balance sheet. We are potentially exposed to market risks related to floating interest rates if we draw-down on our Revolving Credit Facility. As a result of this exposure, we sometimes used to hedge interest payable under our floating rate indebtedness based on a combination of forward rate agreements, interest rate caps and swaps. There were no fixed rate interest hedge agreements in place at December 31, 2012 and December 31, 2011.
On May 13, 2011, we entered into the Senior Facilities Agreement and Note Purchase Agreement, providing a variable interest rate Term Loan and Revolving Credit Facility and fixed rated Loan Notes due 2018. This debt was all drawn down on June 15, 2011. The Loan Notes due 2018 have a $65 million principal amount a fixed rate of interest of 6.19%. The Term Loan was fully repaid in October 2012 and under the revised agreement, the value of debt repaid can now be re-drawn against the revolving credit facility available in pound sterling, U.S. dollars or euros up to a maximum aggregate principal amount of £70 million ($114 million), of which $nil was outstanding at December 31, 2012. Should our future need require us to utilize this facility, the variable interest charged will be linked to LIBOR (or, in the case of euro loans, EURIBOR).
111
Item 12. Description of Securities Other Than Equity Securities
A. Debt Securities
Not Applicable
B. Warrant and Rights
Not Applicable
C. Other Securities
Not Applicable
D. American Depositary Shares
Fees payable by ADR Holders
The following table shows the fees and charges that a holder of our ADR may have to pay, either directly or indirectly. The majority of these costs are set by the Depositary and are subject to change:
|
|
|
---|---|---|
Persons depositing or withdrawing ordinary shares or ADS holders must pay: | For: | |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) |
|
Issuance of ADSs, including issuances resulting from a distribution of ordinary shares or rights or other property |
|
|
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates |
$0.02 per ADS per annum |
|
Any cash distribution to ADS holders |
A fee equivalent to the fee that would be payable if securities distributed to you had been ordinary shares and the ordinary shares had been deposited for issuance of ADSs |
|
Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders |
Registration or transfer fees |
|
Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw ordinary shares |
Expenses of the depositary |
|
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) |
|
|
Converting foreign currency to U.S. dollars |
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes |
|
As necessary |
Any charges incurred by the depositary or its agents for servicing the deposited securities |
|
As necessary |
112
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds.
Not applicable
Item 15. Controls & Procedures.
We have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) under the supervision and the participation of the Executive Management Board, which is responsible for the management of the internal controls, and which includes the Principal Executive Officer and the Principal Financial Officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation as of December 31, 2012, the Principal Executive Officer and Principal Financial Officer have concluded that the disclosure controls and procedures (i) were effective at a reasonable level of assurance as of the end of the period covered by this Annual Report in ensuring that information required to be recorded, processed, summarised and reported in the reports that are filed or submitted under the Exchange Act, is recorded, processed, summarised and reported within the time periods specified in the SEC's rules and forms and (ii) were effective at a reasonable level of assurance as of the end of the period covered by this Annual Report in ensuring that information to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to the management of the Company, including the Principal Executive Officer and the Principal Financial Officer, to allow timely decisions regarding required disclosure.
This Annual Report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the Company's registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
During the period covered by this Annual Report, we have not made any changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16a. Audit Committee Financial Expert
The Company does not at the date of signing have an audit committee financial expert serving on its audit committee. The Company announced on March 1, 2013 that it had appointed an additional Non-Executive Director who will serve as the audit committee financial expert after completion of 2012 reporting.
The Company has not yet adopted a formal code of ethics applicable to all employees and directors. The Company, however, intends to adopt a formal code of ethics in the course of 2013.
113
Item 16c. Principal Accountant Fees and Services
Ernst & Young LLP (E&Y) acted as our independent auditor for the fiscal years ended December 31, 2012 and December 31, 2011. The table below sets out the amount billed to us by E&Y for services performed in the year ended December 31, 2012 and 2011 and breaks down these amounts by category:
|
2012 | 2011 | |||
---|---|---|---|---|---|
|
$ Millions
|
||||
Audit Fees |
0.9 | 0.8 | |||
Audit Related Fees |
0.4 | 1.0 | |||
Tax Compliance Fees |
0.5 | 0.5 | |||
Tax Advisory Fees |
0.3 | 0.3 | |||
Total |
2.1 | 2.6 | |||
Audit Fees
Audit fees in 2012 and 2011 were related to the audit of our consolidated financial statements and other audit or interim review services provided in connection with statutory and regulatory filings or engagements.
Audit Related Fees
Audit related fees in 2012 and 2011 were related to professional services rendered in connection with our IPO.
Tax Compliance Fees and Tax Advisory Fees
Tax Compliance and Tax Advisory fees in 2012 and 2011 were related to tax compliance and tax planning services.
Pre-approval policies and procedures
The audit committee has established pre-approval policies and procedures which are followed prior to the engagement of E&Y relating to the carrying out of audit and non-audit services. All services provided by our auditors are approved in advance by the audit committee in accordance with such policies and procedures.
Item 16d. Exemptions From The Listing Standards For Audit Committees
Not Applicable
Item 16e. Purchases of Equity Securities by the Issuer band Affiliated Purchasers
Not Applicable
Item 16f. Change in the Registrants Certifying Accountant
Not Applicable
114
Item 16g. Corporate Governance
Corporate governance practices
Our ADSs are listed on the New York Stock Exchange (NYSE). As a foreign private issuer, we are permitted to follow home-country practice in lieu of certain NYSE corporate governance requirements. As a U.K. company, our corporate governance practices are governed by our bylaws and the Companies Act 2006. The significant differences between our corporate governance practices as a U.K. company and those required by NYSE listing standards for U.S. companies are listed as follows:
Independence
The NYSE listing standards provide that listed companies must have a majority of independent directors and that certain board committees must consist solely of independent directors. Under NYSE rule 303A.02, a director qualifies as independent only if the board affirmatively determines that such director has no material relationship with the company, either directly or indirectly. In addition, the NYSE listing standards enumerate a number of relationships that preclude independence. We have determined that our Non-Executive Directors are independent for the purposes of Rule 10A-3 of the Exchange Act and the U.K. Corporate Governance Code but we have not yet made an affirmative determination that our Non-Executive Directors are independent for the purposes of Rule 303A.02.
Committees
We have board committees that are different than those required by NYSE rules for domestic U.S. companies. For instance, we do not have a nominating/corporate governance committee. Our remuneration committee is broadly similar to the compensation committee the NYSE rules require for domestic U.S. companies. We also have an audit committee, which NYSE rules require for both U.S. companies and foreign private issuers. The audit committee and the remuneration committee are composed solely of Non-Executive Directors whom the board has determined to be independent, in the manner described above.
Equity Compensation Plans
We comply with legal requirements under the Companies Act 2006 and our bylaws regarding shareholder approval to the extent required in respect of equity compensation plans. The Companies Act 2006 does not require shareholder approval of equity compensation plans and certain revisions thereof for which the NYSE listing standards require such shareholder approval.
Code of Ethics
The Companies Act 2006 does not require us to adopt a Code of Ethics. See Item 16b. Code of Ethics.
Item 16h. Mine Safety Disclosure
Not Applicable
115
Not Applicable
The audited consolidated financial statements as required under Item 18 are attached hereto starting on page F-1 of this Annual Report. The audit reports of Ernst & Young LLP, independent registered public accounting firm, is included herein preceding the audited consolidated financial statements.
1.1 | Articles of Association of the Registrant (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form F-1 (file no. 333-178278), as amended, initially filed with the SEC on December 2, 2011) | |
2.1 |
|
Form of specimen certificate evidencing ordinary shares (incorporated by reference to Exhibit 2.1 to our Registration Statement on Form F-1 (file no. 333-178278), as amended, initially filed with the SEC on December 2, 2011) |
2.2 |
|
Form of Deposit Agreement among Luxfer Holdings PLC, The Bank of New York Mellon and holders of American Depositary Receipts (incorporated by reference to Exhibit 2.2 to our Registration Statement on Form F-1 (file no. 333-178278), as amended, initially filed with the SEC on December 2, 2011) |
2.3 |
|
Form of American Depositary Receipt (included in Exhibit 2.2) |
4.1 |
|
Senior Facilities Agreement dated as of November 30, 2012 by and among Luxfer Holdings PLC and the parties named therein |
4.2 |
|
Note Purchase Agreement amended as of November 30, 2012 by and among BA Holdings, Inc. and the parties named therein |
4.3 |
|
Executive Share Option Plan (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form F-1 (file no. 333-178278), as amended, initially filed with the SEC on December 2, 2011) |
4.4 |
|
Long-Term Umbrella Incentive Plan (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form F-1 (file no. 333-178278), as amended, initially filed with the SEC on December 2, 2011) |
4.5 |
|
Amendment No. 1 to Long-Term Umbrella Incentive Plan |
4.6 |
|
Amendment No. 2 to Long-Term Umbrella Incentive Plan |
4.7 |
|
Amended and Restated Non-Executive Director Equity Incentive Plan |
4.8 |
|
Form of Executive Officer IPO Stock Option Grant Agreement (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form F-1 (file no. 333-178278), as amended, initially filed with the SEC on December 2, 2011) |
4.9 |
|
Form of Non-Executive Director IPO Stock Option Grant Agreement (incorporated by reference to Exhibit 10.7.1 to our Registration Statement on Form F-1 (file no. 333-178278), as amended, initially filed with the SEC on December 2, 2011) |
8.1 |
|
List of Subsidiaries (included under Item 4.C "Organizational Structure" in the Annual Report) |
116
12.1 | Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934Brian Gordon Purves | |
12.2 |
|
Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934Andrew Michael Beaden |
13.1 |
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)Brian Gordon Purves |
13.2 |
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)Andrew Michael Beaden |
15.1 |
|
Consent of Ernst & Young LLP |
117
Signature
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
Luxfer Holdings PLC | ||||
March 29, 2013 |
|
By: |
|
/s/ Andrew Michael Beaden Andrew Michael Beaden Group Finance Director |
118
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
LUXFER HOLDINGS PLC
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Luxfer Holdings PLC
We have audited the accompanying consolidated balance sheet of Luxfer Holdings PLC as of December 31, 2012 and 2011, and the related consolidated income statement, consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Luxfer Holdings PLC at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with International Financial Reporting Standards as adopted by the International Accounting Standards Board.
/s/
Ernst & Young LLP
Manchester,
England
28
th
March 2013
F-2
LUXFER HOLDINGS PLC
CONSOLIDATED INCOME STATEMENT
All amounts in millions except share and per share amounts
|
Notes | 2012 | 2011 | 2010 | |||||
---|---|---|---|---|---|---|---|---|---|
|
|
$M
|
$M
|
$M
|
|||||
CONTINUING OPERATIONS |
|||||||||
REVENUE |
2 | 511.6 | 510.8 | 402.7 | |||||
Cost of sales |
(385.7 | ) | (390.4 | ) | (305.1 | ) | |||
Gross profit |
125.9 | 120.4 | 97.6 | ||||||
Other income |
| 2.0 | 0.1 | ||||||
Distribution costs |
(6.9 | ) | (7.3 | ) | (7.4 | ) | |||
Administrative expenses |
(50.1 | ) | (48.9 | ) | (44.5 | ) | |||
Share of start-up costs of joint venture |
15 | (0.1 | ) | (0.2 | ) | (0.1 | ) | ||
TRADING PROFIT |
2 | 68.8 | 66.0 | 45.7 | |||||
Restructuring and other income (expense) |
5 | (2.1 | ) | 0.2 | (0.8 | ) | |||
OPERATING PROFIT |
3 | 66.7 | 66.2 | 44.9 | |||||
Other income (expense): |
|||||||||
Acquisition and disposal costs |
5 | (0.8 | ) | (0.2 | ) | (0.4 | ) | ||
Finance income: |
|||||||||
Interest received |
7 | 0.2 | 0.2 | 0.2 | |||||
Gain on purchase of own debt |
7 | | | 0.5 | |||||
Finance costs |
|||||||||
Interest costs |
8 | (6.7 | ) | (9.2 | ) | (9.6 | ) | ||
PROFIT ON OPERATIONS BEFORE TAXATION |
59.4 | 57.0 | 35.6 | ||||||
Tax expense |
9 | (17.0 | ) | (13.6 | ) | (9.9 | ) | ||
NET INCOME FOR THE YEAR |
42.4 | 43.4 | 25.7 | ||||||
Attributable to: |
|||||||||
Equity shareholders |
42.4 | 43.4 | 25.7 | ||||||
Earnings per share: |
|||||||||
Basic |
|||||||||
Unadjusted |
10 | $3.95 | $4.39 | $2.61 | |||||
Diluted |
|||||||||
Unadjusted |
10 | $3.88 | $4.35 | $2.59 | |||||
F-3
LUXFER HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
All amounts in millions
|
Notes | 2012 | 2011 | 2010 | |||||
---|---|---|---|---|---|---|---|---|---|
|
|
$M
|
$M
|
$M
|
|||||
Net income for the year |
42.4 | 43.4 | 25.7 | ||||||
Other comprehensive income movements: |
|||||||||
Exchange differences on translation of foreign operations |
2.9 | (5.4 | ) | 0.2 | |||||
Fair value movements in cash flow hedges |
(0.1 | ) | 0.9 | (0.2 | ) | ||||
Transfers to income statement on cash flow hedges |
(0.2 | ) | (0.2 | ) | 0.5 | ||||
Exchange differences on translation of hedging reserve |
| (0.1 | ) | | |||||
Deferred tax on cash flow hedges |
| | | ||||||
Hedge accounting income adjustments |
(0.3 | ) | 0.6 | 0.3 | |||||
Actuarial (losses)/gains on defined benefit retirement plan |
30 | (21.3 | ) | (54.0 | ) | 4.4 | |||
Deferred tax on items taken to other comprehensive income |
24 | 3.9 | 15.0 | (1.3 | ) | ||||
Retirement benefit expenses |
(17.4 | ) | (39.0 | ) | 3.1 | ||||
Total other comprehensive income movements for the year |
(14.8 | ) | (43.8 | ) | 3.6 | ||||
Total comprehensive income for the year |
27.6 | (0.4 | ) | 29.3 | |||||
Attributed to: |
|||||||||
Equity shareholders |
27.6 | (0.4 | ) | 29.3 | |||||
F-4
LUXFER HOLDINGS PLC
CONSOLIDATED BALANCE SHEET
All amounts in millions
|
Notes | December 31, 2012 | December 31, 2011 | ||||
---|---|---|---|---|---|---|---|
|
|
$M
|
$M
|
||||
ASSETS |
|||||||
Non-current assets |
|||||||
Property, plant and equipment |
12 | 129.6 | 114.2 | ||||
Intangible assets |
13 | 38.4 | 37.0 | ||||
Investments |
15 | 0.8 | 0.5 | ||||
Deferred tax assets |
24 | 21.6 | 22.7 | ||||
Other non-current assets |
25 | | 0.7 | ||||
|
190.4 | 175.1 | |||||
Current assets |
|||||||
Inventories |
16 | 83.8 | 100.6 | ||||
Trade and other receivables |
17 | 74.4 | 65.2 | ||||
Income tax receivable |
1.7 | 1.2 | |||||
Cash and short term deposits |
18 | 40.2 | 22.2 | ||||
|
200.1 | 189.2 | |||||
TOTAL ASSETS |
390.5 | 364.3 | |||||
EQUITY AND LIABILITIES |
|||||||
Capital and reserves attributable to the Group's equity holders |
|||||||
Ordinary share capital |
19 | 25.3 | 19.6 | ||||
Deferred share capital |
19 | 150.9 | 150.9 | ||||
Share premium account |
21 | 55.6 | | ||||
Retained earnings |
21 | 278.6 | 259.4 | ||||
Own shares held by ESOP |
19 | (0.5 | ) | (0.6 | ) | ||
Other capital reserves |
19 | 0.8 | | ||||
Hedging reserve |
21 | 0.4 | 0.7 | ||||
Translation reserve |
21 | (28.5 | ) | (31.4 | ) | ||
Merger reserve |
21 | (333.8 | ) | (333.8 | ) | ||
Equity attributable to the equity holders of the parent |
148.8 | 64.8 | |||||
Total equity |
148.8 | 64.8 | |||||
Non-current liabilities |
|||||||
Bank and other loans |
22 | 63.5 | 129.4 | ||||
Retirement benefits |
30 | 96.7 | 82.4 | ||||
Provisions |
23 | 2.8 | 3.1 | ||||
|
163.0 | 214.9 | |||||
Current liabilities |
|||||||
Bank and other loans |
22 | | 3.1 | ||||
Trade and other payables |
26 | 73.7 | 79.3 | ||||
Current income tax liabilities |
3.1 | 0.2 | |||||
Provisions |
23 | 1.9 | 2.0 | ||||
|
78.7 | 84.6 | |||||
Total liabilities |
241.7 | 299.5 | |||||
TOTAL EQUITY AND LIABILITIES |
390.5 | 364.3 | |||||
F-5
LUXFER HOLDINGS PLC
CONSOLIDATED CASH FLOW STATEMENT
All amounts in millions
|
Notes | 2012 | 2011 | 2010 | |||||
---|---|---|---|---|---|---|---|---|---|
|
|
$M
|
$M
|
$M
|
|||||
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES |
|||||||||
Net income for the year |
42.4 | 43.4 | 25.7 | ||||||
Adjustments to reconcile net income for the year to net cash from operating activities: |
|||||||||
Income taxes |
9 | 11.1 | 11.8 | 9.5 | |||||
Deferred income taxes |
9 | 5.9 | 1.8 | 0.4 | |||||
Depreciation and amortization |
14.7 | 14.5 | 13.8 | ||||||
Past service credit on retirement benefit obligations |
5 | | (1.6 | ) | | ||||
I.P.O related share based compensation charge |
5 | 0.8 | | | |||||
Loss on disposal of property, plant and equipment |
3 | | | 0.1 | |||||
Income and costs relating to demolition of vacant property |
5 | | | 0.6 | |||||
Gain on purchase of own debt |
7 | | | (0.5 | ) | ||||
Net finance costs |
6.5 | 9.0 | 9.4 | ||||||
Acquisition and disposal costs |
5 | | 0.2 | 0.4 | |||||
Share of start-up costs of joint venture |
15 | 0.1 | 0.2 | 0.1 | |||||
Changes in operating assets and liabilities: |
|||||||||
Increase in receivables |
(1.3 | ) | (13.1 | ) | (1.9 | ) | |||
Decrease/(increase) in inventories |
24.1 | (24.8 | ) | (20.2 | ) | ||||
(Decrease)/increase in payables |
(15.3 | ) | 13.1 | 16.5 | |||||
Movement in retirement benefit obligations |
30 | (10.1 | ) | (4.3 | ) | (6.7 | ) | ||
Accelerated deficit contributions into retirement benefit obligations |
30 | | (7.2 | ) | | ||||
Decrease in provisions |
23 | (0.6 | ) | (0.2 | ) | (0.7 | ) | ||
Income tax paid |
(9.3 | ) | (13.7 | ) | (8.7 | ) | |||
NET CASH FLOWS FROM OPERATING ACTIVITIES |
69.0 | 29.1 | 37.8 | ||||||
Net cash inflow from continuing operating activities |
69.0 | 29.4 | 37.9 | ||||||
Net cash outflow from discontinued operating activities |
| (0.3 | ) | (0.1 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|||||||||
Purchases of property, plant and equipment |
(19.3 | ) | (21.2 | ) | (15.9 | ) | |||
Purchases of intangible assets |
| (0.3 | ) | ||||||
Investment in joint venture |
15 | (0.4 | ) | (0.3 | ) | (0.1 | ) | ||
Proceeds from sale of business |
25 | 1.5 | 0.8 | 0.8 | |||||
Net cashflow on purchase of business |
11 | (11.0 | ) | | | ||||
Disposal of business |
5 | (0.2 | ) | (0.2 | ) | (0.4 | ) | ||
NET CASH USED IN INVESTING ACTIVITIES |
(29.4 | ) | (21.2 | ) | (15.6 | ) | |||
NET CASH FLOW BEFORE FINANCING |
39.6 | 7.9 | 22.2 | ||||||
FINANCING ACTIVITIES |
|||||||||
Interest paid on banking facilities |
(1.8 | ) | (1.9 | ) | (1.3 | ) | |||
Interest paid on Loan Notes due 2018 |
(3.9 | ) | (2.1 | ) | | ||||
Interest paid on Senior Notes due 2012 |
| (4.5 | ) | (7.1 | ) | ||||
Interest received on Loan Note |
| 0.1 | 0.2 | ||||||
Other interest received |
0.2 | 0.1 | | ||||||
Dividends paid |
20 | (5.8 | ) | | | ||||
Draw down on previous banking facilities |
| 27.7 | | ||||||
Repayment of previous banking facilities |
| (38.5 | ) | (1.4 | ) | ||||
Draw down on banking facilities and other loans |
| 139.5 | | ||||||
Repayment of banking facilities and other loans |
(72.8 | ) | | | |||||
Repayment of Senior Notes due 2012 |
| (109.8 | ) | | |||||
Redemption of preference shares |
19 | | (0.1 | ) | | ||||
Purchase of Senior Notes due 2012 |
| | (5.0 | ) | |||||
Renewal of banking facilities and other loansfinancing costs |
22 | | | (0.2 | ) | ||||
Payment of banking facilities and other loansfinancing costs |
22 | | (5.1 | ) | | ||||
Modification to banking facilities and other loansfinancing costs |
22 | (0.6 | ) | | | ||||
Proceeds from issue of shares |
65.1 | | | ||||||
Share issue costs |
(3.5 | ) | | | |||||
Purchase of shares from ESOP |
19 | 0.1 | | 0.2 | |||||
NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES |
(23.0 | ) | 5.4 | (14.6 | ) | ||||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
16.6 | 13.3 | 7.6 | ||||||
Net increase in cash and cash equivalents |
16.6 | 13.3 | 7.6 | ||||||
Net foreign exchange differences |
1.4 | (1.4 | ) | (0.2 | ) | ||||
Cash and cash equivalents at January 1 |
18 | 22.2 | 10.3 | 2.9 | |||||
Cash and cash equivalents at December 31 |
18 | 40.2 | 22.2 | 10.3 | |||||
F-6
LUXFER HOLDINGS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
All amounts in millions
|
|
Equity attributable to the equity holders of the parent | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Notes |
Ordinary
share capital |
Deferred
share capital |
Share
premium account |
Retained
earnings |
Own shares
held by ESOP |
Other
reserves (1) |
Total
equity |
|||||||||
|
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||||
At January 1, 2010 |
19.6 | 150.9 | | 226.2 | (0.8 | ) | (360.2 | ) | 35.7 | ||||||||
Net income for the year |
| | | 25.7 | | | 25.7 | ||||||||||
Currency translation differences |
| | | | | 0.2 | 0.2 | ||||||||||
Decrease in fair value of cash flow hedges |
| | | | | (0.2 | ) | (0.2 | ) | ||||||||
Transfer to income statement on cash flow hedges |
| | | | | 0.5 | 0.5 | ||||||||||
Actuarial gains and losses on pension plans |
| | | 4.4 | | | 4.4 | ||||||||||
Deferred tax on items taken to other comprehensive income |
| | | (1.3 | ) | | | (1.3 | ) | ||||||||
Total comprehensive income for the year |
| | | 28.8 | | 0.5 | 29.3 | ||||||||||
Purchase of shares from ESOP |
19 | | | | | 0.2 | | 0.2 | |||||||||
Other changes in equity in the year |
| | | | 0.2 | | 0.2 | ||||||||||
At December 31, 2010 |
19.6 | 150.9 | | 255.0 | (0.6 | ) | (359.7 | ) | 65.2 | ||||||||
Net income for the year |
| | | 43.4 | | | 43.4 | ||||||||||
Currency translation differences |
| | | | | (5.5 | ) | (5.5 | ) | ||||||||
Increase in fair value of cash flow hedges |
| | | | | 0.9 | 0.9 | ||||||||||
Transfer to income statement on cash flow hedges |
| | | | | (0.2 | ) | (0.2 | ) | ||||||||
Actuarial gains and losses on pension plans |
| | | (54.0 | ) | | | (54.0 | ) | ||||||||
Deferred tax on items taken to other comprehensive income |
| | | 15.0 | | | 15.0 | ||||||||||
Total comprehensive income for the year |
| | | 4.4 | | (4.8 | ) | (0.4 | ) | ||||||||
At December 31, 2011 |
19.6 | 150.9 | | 259.4 | (0.6 | ) | (364.5 | ) | 64.8 | ||||||||
Net income for the year |
| | | 42.4 | | | 42.4 | ||||||||||
Currency translation differences |
| | | | | 2.9 | 2.9 | ||||||||||
Decrease in fair value of cash flow hedges |
| | | | | (0.1 | ) | (0.1 | ) | ||||||||
Transfer to income statement on cash flow hedges |
| | | | | (0.2 | ) | (0.2 | ) | ||||||||
Actuarial gains and losses on pension plans |
| | | (21.3 | ) | | | (21.3 | ) | ||||||||
Deferred tax on items taken to other comprehensive income |
| | | 3.9 | | | 3.9 | ||||||||||
Total comprehensive income for the year |
| | | 25.0 | | 2.6 | 27.6 | ||||||||||
Equity dividends |
21 | | | | (5.8 | ) | | | (5.8 | ) | |||||||
Proceeds from shares issued |
21 | 5.7 | | 59.4 | | | | 65.1 | |||||||||
Share issue costs |
21 | | | (3.8 | ) | | | | (3.8 | ) | |||||||
I.P.O related share based compensation charge |
19 | | | | | | 0.8 | 0.8 | |||||||||
Purchase of shares from ESOP |
19 | | | | | 0.1 | | 0.1 | |||||||||
Other changes in equity in the year |
5.7 | | 55.6 | (5.8 | ) | 0.1 | 0.8 | 56.4 | |||||||||
At December 31, 2012 |
25.3 | 150.9 | 55.6 | 278.6 | (0.5 | ) | (361.1 | ) | 148.8 | ||||||||
F-7
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
1. Accounting policies
Basis of preparation and statement of compliance with IFRS
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the year ended December 31, 2012. The consolidated financial statements have been prepared on a historical cost basis, except where IFRS requires or permits fair value measurement. The consolidated financial statements also comply fully with IFRSs as issued by the International Accounting Standards Board as they apply to the financial statements of the Group for the year ended December 31, 2012.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore the Directors continue to apply the going concern basis for accounting in the preparation of the financial statements.
For the purpose of the accompanying consolidated financial statements, subsequent events have been evaluated through to March 28, 2013, which is the date the financial statements were authorized by the board. The financial statements were issued on March 29, 2013.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Luxfer Holdings PLC and its subsidiaries (the "Group") as at December 31 each year. The financial statements consolidated of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All inter-company balances and transactions, including unrealized profits arising from intra-group transactions, have been eliminated in full.
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.
The accounting policies which follow set out those polices which apply in preparing the financial statements for the years ended December 31, 2010, December 31, 2011 and December 31, 2012.
Presentation currency
The consolidated financial statements are presented in US dollars and all values are rounded to the nearest $0.1 million except when otherwise indicated. The books of the Group's non-US entities are converted to US dollars at each reporting period date in accordance with the accounting policy below.
The functional currency of the holding company Luxfer Holdings PLC and its UK subsidiaries remains pounds sterling, being the most appropriate currency for those particular operations.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree's identifiable net assets is
F-8
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses.
Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognized for the non-controlling interest over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group's cash generating units that are expected to benefit from the combination. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date.
Negative goodwill is measured at cost being the excess of the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination over the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognized for the non-controlling interest. Any amount of negative goodwill is recognised immediately as income.
Patents and trademarks
Patents and trademarks are measured initially at purchase cost and are amortized on a straight-line basis over the lower of their estimated useful lives, or legal life, this being 17 to 20 years. The carrying values are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Reviews are made annually of the estimated remaining lives and residual values of the patents and trademarks.
Revenue
Revenue excludes inter-company sales and value added tax and represents net invoice value less estimated rebates, returns and settlement discounts. Revenue is recognized on the sale of goods and services when the significant risks and rewards of ownership of those goods and services have been transferred to a third party, which would normally be at the point of dispatch.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is initially calculated on a straight-line basis over the estimated useful life of the particular
F-9
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
asset. As a result of the complexity of our manufacturing process, there is a wide range of plant and equipment in operation. The rate of annual charge is summarized as follows:
Freehold buildings |
3% 10% | |
Leasehold land and buildings |
The lesser of life of lease or freehold rate |
|
Plant and equipment |
4% 30% |
|
Including: |
||
Heavy production equipment (including casting, rolling, extrusion and press equipment) |
4% 6% | |
Chemical production plant and robotics |
10% 15% | |
Other production machinery |
10% 20% | |
Furniture, fittings, storage and equipment |
10% 30% |
Freehold land is not depreciated.
Reviews are made annually of the estimated remaining lives and residual values of individual productive assets, taking account of commercial and technological obsolescence as well as normal wear and tear.
For any individual asset the carrying value is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset is written down to its recoverable amount. The recoverable amount of property, plant and equipment is the greater of the net selling price and the value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the income statement as part of the profit or loss before tax.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognized.
Inventories
Inventories are stated at the lower of cost and net realizable value. Raw materials are valued on a first-in, first-out basis. In the Elektron division rare earth chemicals inventories are valued on an average cost basis. Work in progress and finished goods costs comprise direct materials and, where applicable, direct labor costs, an apportionment of production overheads and any other costs that have been incurred in bringing the inventories to their present location and condition. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
F-10
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
Research and development
Research expenditure is written off as incurred. Internal development expenditure is charged to the income statement in the year it is incurred unless it meets the recognition criteria of IAS 38 "Intangible Assets". Regulatory and other uncertainties generally mean that such criteria are not usually met. Where, however, the recognition criteria are met, intangible assets are capitalized and amortized over their useful economic lives from product launch. Intangible assets relating to products in development are subject to impairment testing at each balance sheet date or earlier upon indication of impairment.
Foreign currencies
Transactions in currencies other than an operation's functional currency are initially recorded in the functional currency at the rate of exchange prevailing on the dates of transactions. At each balance sheet date, the foreign currency monetary assets and liabilities are translated into the functional currency at the rates prevailing on the balance sheet date. All differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognized in the consolidated income statement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in equity.
On consolidation, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences that arise, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognized in the income statement in the period in which the operation is disposed.
Income tax
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred income tax is the future corporation tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred income tax liabilities are generally recognized for all taxable temporary differences.
F-11
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
Deferred income tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred income tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, investments in associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of a deferred income tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred income tax is calculated at the tax rate that is expected to apply in the period when the liability is settled or the asset is realized based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred income tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred income tax is also dealt with in equity.
Leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items, are capitalized as a fixed asset at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments.
The capital element of the leasing commitment is shown as obligations under finance leases. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term.
Retirement benefit costs
In respect of defined benefit plans, obligations are measured at discounted present value whilst plan assets are recorded at fair value. The cost of providing benefits is determined using the Projected Unit Method, with actuarial valuations being carried out at each balance sheet date. The charge to the income statement is based on an actuarial calculation of the Group's portion of the annual expected costs of the benefit plans, based on a series of actuarial assumptions which include an estimate of the regular service costs, the liability discount rate and the expected return on assets.
F-12
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
When a settlement or curtailment occurs the obligation and related plan assets are re-measured using current actuarial assumptions and the resultant gain or loss recognized in the income statement in the period in which the settlement or curtailment occurs.
Actuarial gains and losses are recognized immediately in the statement of comprehensive income.
Payments to defined contribution plans are charged as an expense as they fall due.
Government grants
Government grants relating to property, plant and equipment are treated as deferred income and released to the income statement over the expected useful lives of the asset concerned.
Provisions
Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that a transfer of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Share based compensation
The cost of equity-settled transactions is recognized, based upon the fair value at grant date, together with a corresponding increase in other capital reserves in equity, over the period in which the performance or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.
Discontinued operations and assets and liabilities held for sale
Discontinued operations are those operations that represent a separately identifiable major line of business that has either been disposed of, or is classified as held for sale.
For those activities classified as discontinued, the post-tax profit or loss is disclosed separately on the face of the income statement. The cash flows associated with the discontinued operation are also disclosed.
Assets (or disposal groups) held for sale are classified as assets held for sale and stated at the lower of their carrying amount and fair value costs to sell, if their carrying amount is recovered principally through a sale transaction rather than through continuing use. Assets held for sale are no longer amortized or depreciated from the time they are classified as such.
F-13
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
Interest in joint ventures
The Group has interests in joint ventures which are jointly controlled entities, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of the entity. The Group recognizes its interest in its joint ventures using the equity method.
Under the equity method, the investment in a joint venture is carried in the balance sheet at cost plus post acquisition changes in the Group's share of net assets of the joint venture. The income statement reflects the share of the results of the joint venture. The share of the result of joint venture is shown on the face of the income statement. This is the result attributable to equity holders of the joint venture.
The financial statements of the joint ventures are prepared for the same reporting period as the parent company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognize an additional impairment loss on the Group's investment in a joint venture. The Group determines at each reporting date whether there is any objective evidence that the investment in a joint venture is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of a joint venture and its carrying value and recognizes the amount in the income statement.
Upon loss of joint control and provided the former joint control entity does not become a subsidiary or associate, the Group measures and recognizes its remaining investment at its fair value. Any difference between the carrying amount of the former joint controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal is recognized in profit or loss. When the remaining investment constitutes significant influence, it is accounted for as investment in an associate.
Financial assets and liabilities
Trade and other receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
Bank and other loans
Bank and other loans are recorded at the fair value of the proceeds received plus directly attributable transaction costs. Issue costs relating to revolving credit facilities are charged to the income statement over the life of the facility on a periodic basis. Issue costs relating to fixed term loans are charged to the income statement using the effective interest method and are added to the carrying amount of the fixed term loan.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
F-14
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
Derivative financial instruments
The Group uses derivative financial instruments such as foreign currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are stated at fair value.
Hedges are classified as cash flow hedges when they hedge exposure to variability in cash flows either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.
In relation to cash flow hedges to hedge the foreign currency risk of firm commitments which meet the conditions for special hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in equity and the ineffective portion is recognized in the income statement.
In relation to derivative financial instruments used to hedge a forecast transaction, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in equity and the ineffective portion is recognized in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Group are recorded at the proceeds received.
Financial liabilities and equity instruments are all instruments that are issued by the Group as a means of raising finance, including shares, loan notes, debentures, debt instruments and options and warrants that give the holder the right to subscribe for or obtain financial liabilities and equity instruments.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. All equity instruments are included in shareholders' funds. The finance costs incurred in respect of an equity instrument are charged directly to the income statement. Other instruments are classified as financial liabilities if they contain a contractual obligation to transfer economic benefits.
Critical accounting judgments and key sources of estimation of uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. The judgments used by management in the application of the Group's accounting policies in respect of these key areas of estimation are considered to be the most significant.
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill is tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amount may not be recoverable.
F-15
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Details regarding goodwill and assumptions used in carrying out the impairment review are provided in Note 14.
Pensions
Determining the present value of future obligations of pensions requires an estimation of future mortality rates, expected rates of return on assets, future salary increases, future pension increases and discount rates. These assumptions are determined in association with qualified actuaries. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. The pension liability at December 31, 2012 is $96.7 million (December 31, 2011: $82.4 million). Further details are given in Note 30.
Deferred tax
Deferred tax assets are recognized for unabsorbed tax losses and unutilized capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Further details are given in Note 24.
Inventories obsolescence and inventories write down
Inventories are stated at the lower of cost and net realizable value. Inventories are reviewed on a regular basis and the Group will make allowance for excess or obsolete inventories and write down to net realizable value based primarily on committed sales prices and management estimates of expected and future product demand and related pricing. Further details are given in Note 16.
Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year except for the following new and amended standards and interpretations during the year. Adoption of these revised standards and interpretations did not have any effect on the financial statements of the Group.
International Accounting Standards
|
Effective date | |||
---|---|---|---|---|
IAS 12 | Income Taxes (Amendment) | January 1, 2012 | ||
IFRS 7 | Financial Instruments: Disclosures (Amendment) | July 1, 2011 |
F-16
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
New standards and amendments to standards not applied
The IASB has issued the following standards and amendments to standards with an effective date after the date of these financial statements:
International Accounting Standards
|
Effective date | |||
---|---|---|---|---|
IAS 1 | Presentation of Financial Statements (Amendments) | July 1, 2012 | ||
IAS 19 | Employee Benefits (Revised) | January 1, 2013 | ||
IAS 27 | Separate Financial Statements (Revised) | January 1, 2013 | ||
IAS 28 | Investments in Associates and Joint Ventures (Revised) | January 1, 2013 | ||
IAS 32 | Financial Instruments: Presentation (Amendment) | January 1, 2014 | ||
IFRS 7 | Financial Instruments: Disclosures (Amendment) | January 1, 2013 | ||
IFRS 9 | Financial Instruments: Classification and Measurement | January 1, 2015 | ||
IFRS 10 | Consolidated Financial Statements | January 1, 2013 | ||
IFRS 11 | Joint Arrangements | January 1, 2013 | ||
IFRS 12 | Disclosure of Interests in Other Entities | January 1, 2013 | ||
IFRS 13 | Fair Value Measurement | January 1, 2013 |
The Directors do not anticipate that the adoption of these standards and interpretations will have a material effect on the Group's financial statements in the period of initial application, with the exception of the following amendment:
IAS 19 Employee Benefits (Revised)
Under the revised standard, the charge to the income statement in relation to defined benefit costs will change, with only current year service costs and administrative expenses being charged to operating profit and an interest expense calculated on the outstanding accounting deficit being charged to finance costs. Currently a net actuarial charge is made to operating profit based on the aggregation of the service cost, plus an interest cost on the liabilities, net of an expected return (or gain) on assets. Whilst it is difficult to predict the full impact in future periods of the change to IAS 19 (revised) due to changing actuarial assumptions and fund valuations, and whilst the Group defined benefit plans remain in deficit, it is expected there will be increased net finance costs. The revised standard is not expected to lead to changes on the balance sheet or the deficit, so movements in the income statement are expected to have equal and opposite movements in Other Comprehensive Income.
F-17
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
1. Accounting policies (Continued)
The following tables summarize the impact of the revision to the standard to the income statement if it had been applied to the years ending December 31, 2012, 2011 and 2010.
|
Summary income statement under existing IAS 19 | Restated under IAS 19 (Revised) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||
OPERATING PROFIT |
66.7 | 66.2 | 44.9 | 66.4 | 63.9 | 43.9 | |||||||
Other income (expense): |
|||||||||||||
Acquisition and disposal costs |
(0.8 | ) | (0.2 | ) | (0.4 | ) | (0.8 | ) | (0.2 | ) | (0.4 | ) | |
Finance income: |
|||||||||||||
Interest received |
0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | |||||||
Gain on purchase of own debt |
| | 0.5 | | | 0.5 | |||||||
Finance costs |
|||||||||||||
IAS 19 charge |
| | | (3.6 | ) | (1.9 | ) | (2.6 | ) | ||||
Interest costs |
(6.7 | ) | (9.2 | ) | (9.6 | ) | (6.7 | ) | (9.2 | ) | (9.6 | ) | |
PROFIT ON OPERATIONS BEFORE TAXATION |
59.4 | 57.0 | 35.6 | 55.5 | 52.8 | 32.0 | |||||||
Tax expense |
(17.0 | ) | (13.6 | ) | (9.9 | ) | (16.0 | ) | (12.5 | ) | (8.9 | ) | |
NET INCOME FOR THE YEAR |
42.4 | 43.4 | 25.7 | 39.5 | 40.3 | 23.1 | |||||||
Attributable to: |
|||||||||||||
Equity shareholders |
42.4 | 43.4 | 25.7 | 39.5 | 40.3 | 23.1 | |||||||
Based on the above table, the IAS 19 (revised) impact can be summarized as follows:
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Reduction in: |
|||||||
Operating profit |
(0.3 | ) | (2.3 | ) | (1.0 | ) | |
Profit on operations before taxation |
(3.9 | ) | (4.2 | ) | (3.6 | ) | |
Net income |
(2.9 | ) | (3.1 | ) | (2.6 | ) |
2. Revenue and segmental analysis
For management purposes, the Group is organized into two operational divisions, Gas Cylinders and Elektron. The tables below set out information on the results of these two reportable segments.
Management monitors the operating results of its divisions separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on trading profit or loss, defined as operating profit or loss before restructuring and other expense.
All inter-segment sales are made on an arm's length basis.
F-18
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
2. Revenue and segmental analysis (Continued)
REPORTING SEGMENTS:
Year ended December 31, 2012
|
Gas
Cylinders |
Elektron | Unallocated |
Total
Continuing Activities |
|||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Revenue |
|||||||||
Segment Revenue |
246.3 | 265.7 | | 512.0 | |||||
Inter-segment sales |
| (0.4 | ) | | (0.4 | ) | |||
Sales to external customers |
246.3 | 265.3 | | 511.6 | |||||
Result |
|||||||||
Trading profit |
15.8 | 53.0 | | 68.8 | |||||
Restructuring and other income (expense) (Note 5) |
(1.1 | ) | (0.2 | ) | (0.8 | ) | (2.1 | ) | |
Operating profit/(loss) |
14.7 | 52.8 | (0.8 | ) | 66.7 | ||||
Acquisition and disposal costs (Note 5) |
(0.6 | ) | (0.2 | ) | | (0.8 | ) | ||
Net finance costs |
(6.5 | ) | |||||||
Profit before tax |
59.4 | ||||||||
Tax expense |
(17.0 | ) | |||||||
Net income for the year |
42.4 | ||||||||
Other segment information |
|||||||||
Segment assets |
165.7 | 152.1 | 72.7 | 390.5 | |||||
Segment liabilities |
(40.3 | ) | (28.2 | ) | (173.2 | ) | (241.7 | ) | |
Net assets/(liabilities) |
125.4 | 123.9 | (100.5 | ) | 148.8 | ||||
Capital expenditure: Property, plant and equipment |
8.2 | 11.3 | | 19.5 | |||||
Capital expenditure: Intangible assets |
| | | | |||||
Depreciation and amortization |
6.5 | 8.2 | | 14.7 |
F-19
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
2. Revenue and segmental analysis (Continued)
Year ended December 31, 2011
|
Gas
Cylinders |
Elektron | Unallocated |
Total
Continuing Activities |
|||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Revenue |
|||||||||
Segment Revenue |
223.3 | 287.8 | | 511.1 | |||||
Inter-segment sales |
| (0.3 | ) | | (0.3 | ) | |||
Sales to external customers |
223.3 | 287.5 | | 510.8 | |||||
Result |
|||||||||
Trading profit |
11.9 | 54.1 | | 66.0 | |||||
Restructuring and other income (expense) (Note 5) |
| | 0.2 | 0.2 | |||||
Operating profit |
11.9 | 54.1 | 0.2 | 66.2 | |||||
Acquisition and disposal costs (Note 5) |
| (0.2 | ) | | (0.2 | ) | |||
Net finance costs |
(9.0 | ) | |||||||
Profit before tax |
57.0 | ||||||||
Tax expense |
(13.6 | ) | |||||||
Net income for the year |
43.4 | ||||||||
Other segment information |
|||||||||
Segment assets |
136.5 | 172.7 | 55.1 | 364.3 | |||||
Segment liabilities |
(39.8 | ) | (40.0 | ) | (219.7 | ) | (299.5 | ) | |
Net assets/(liabilities) |
96.7 | 132.7 | (164.6 | ) | 64.8 | ||||
Capital expenditure: Property, plant and equipment |
7.0 | 13.8 | | 20.8 | |||||
Capital expenditure: Intangible assets |
0.2 | 0.1 | | 0.3 | |||||
Depreciation and amortization |
6.4 | 8.1 | | 14.5 |
F-20
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
2. Revenue and segmental analysis (Continued)
Year ended December 31, 2010
|
Gas
Cylinders |
Elektron | Unallocated |
Total
Continuing Activities |
|||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Revenue |
|||||||||
Segment Revenue |
199.2 | 204.0 | | 403.2 | |||||
Inter-segment sales |
| (0.5 | ) | | (0.5 | ) | |||
Sales to external customers |
199.2 | 203.5 | | 402.7 | |||||
Result |
|||||||||
Trading profit |
12.2 | 33.5 | | 45.7 | |||||
Restructuring and other expense (Note 5) |
| (0.2 | ) | (0.6 | ) | (0.8 | ) | ||
Operating profit/(loss) |
12.2 | 33.3 | (0.6 | ) | 44.9 | ||||
Acquisition and disposal costs (Note 5) |
| (0.4 | ) | | (0.4 | ) | |||
Net finance costs |
(8.9 | ) | |||||||
Profit before tax |
35.6 | ||||||||
Tax expense |
(9.9 | ) | |||||||
Net income for the year |
25.7 | ||||||||
Other segment information |
|||||||||
Segment assets |
126.3 | 144.3 | 26.0 | 296.6 | |||||
Segment liabilities |
(37.0 | ) | (31.6 | ) | (162.8 | ) | (231.4 | ) | |
Net assets/(liabilities) |
89.3 | 112.7 | (136.8 | ) | 65.2 | ||||
Capital expenditure: Property, plant and equipment |
6.2 | 9.9 | | 16.1 | |||||
Capital expenditure: Intangible assets |
| | | | |||||
Depreciation and amortization |
6.3 | 7.5 | | 13.8 |
F-21
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
2. Revenue and segmental analysis (Continued)
GEOGRAPHIC ORIGIN:
Year ended December 31, 2012
|
United
Kingdom |
Rest of
Europe |
North
America |
Australasia | Asia | Total | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||
Revenue |
|||||||||||||
Segment revenue |
210.1 | 65.2 | 304.2 | 0.1 | 5.9 | 585.5 | |||||||
Inter-segment sales |
(42.9 | ) | (4.5 | ) | (26.5 | ) | | | (73.9 | ) | |||
Sales to external customers |
167.2 | 60.7 | 277.7 | 0.1 | 5.9 | 511.6 | |||||||
Result |
|||||||||||||
Trading profit |
25.0 | 3.2 | 39.6 | 0.1 | 0.9 | 68.8 | |||||||
Restructuring and other expense (Note 5) |
(1.0 | ) | (0.2 | ) | (0.9 | ) | | | (2.1 | ) | |||
Operating profit |
24.0 | 3.0 | 38.7 | 0.1 | 0.9 | 66.7 | |||||||
Other geographical segment information |
|||||||||||||
Non-current assets (1) |
56.7 | 20.9 | 90.8 | | 0.4 | 168.8 | |||||||
Net assets/(liabilities) (2) |
52.1 | 32.8 | 58.9 | 0.4 | 4.6 | 148.8 | |||||||
Capital expenditure: Property, plant and equipment |
6.7 | 2.4 | 10.2 | | 0.2 | 19.5 | |||||||
Capital expenditure: Intangible assets |
| | | | | | |||||||
Depreciation and amortization |
5.5 | 2.7 | 6.5 | | | 14.7 |
F-22
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
2. Revenue and segmental analysis (Continued)
Year ended December 31, 2011
|
United
Kingdom |
Rest of
Europe |
North
America |
Australasia | Asia | Total | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||
Revenue |
|||||||||||||
Segment revenue |
221.8 | 54.9 | 290.3 | 0.1 | 6.5 | 573.6 | |||||||
Inter-segment sales |
(35.4 | ) | (2.5 | ) | (24.9 | ) | | | (62.8 | ) | |||
Sales to external customers |
186.4 | 52.4 | 265.4 | 0.1 | 6.5 | 510.8 | |||||||
Result |
|||||||||||||
Trading profit/(loss) |
26.1 | (0.2 | ) | 39.5 | 0.1 | 0.5 | 66.0 | ||||||
Restructuring and other expense (Note 5) |
0.2 | | | | | 0.2 | |||||||
Operating profit/(loss) |
26.3 | (0.2 | ) | 39.5 | 0.1 | 0.5 | 66.2 | ||||||
Other geographical segment information |
|||||||||||||
Non-current assets (1) |
52.6 | 18.8 | 80.0 | | 0.3 | 151.7 | |||||||
Net assets/(liabilities) (2) |
14.0 | 26.8 | 19.7 | 0.3 | 4.0 | 64.8 | |||||||
Capital expenditure: Property, plant and equipment |
7.8 | 1.7 | 11.3 | | | 20.8 | |||||||
Capital expenditure: Intangible assets |
0.3 | | | | | 0.3 | |||||||
Depreciation and amortization |
5.5 | 2.9 | 6.1 | | | 14.5 |
F-23
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
2. Revenue and segmental analysis (Continued)
Year ended December 31, 2010
|
United
Kingdom |
Rest
of Europe |
North
America |
Australasia | Asia | Total | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||
Revenue |
|||||||||||||
Segment revenue |
170.0 | 48.8 | 234.6 | 0.1 | 5.9 | 459.4 | |||||||
Inter-segment sales |
(29.6 | ) | (1.8 | ) | (25.3 | ) | | | (56.7 | ) | |||
Sales to external customers |
140.4 | 47.0 | 209.3 | 0.1 | 5.9 | 402.7 | |||||||
Result |
|||||||||||||
Trading profit |
15.3 | 1.0 | 28.2 | 0.1 | 1.1 | 45.7 | |||||||
Restructuring and other expense (Note 5) |
(0.6 | ) | | (0.2 | ) | | | (0.8 | ) | ||||
Operating profit |
14.7 | 1.0 | 28.0 | 0.1 | 1.1 | 44.9 | |||||||
Other geographical segment information |
|||||||||||||
Non-current assets (1) |
50.1 | 20.7 | 75.0 | | 0.3 | 146.1 | |||||||
Net assets/(liabilities) (2) |
(55.9 | ) | 27.1 | 90.4 | 0.3 | 3.3 | 65.2 | ||||||
Capital expenditure: Property, plant and equipment |
7.7 | 0.9 | 7.5 | | | 16.1 | |||||||
Capital expenditure: Intangible assets |
| | | | | | |||||||
Depreciation and amortization |
5.4 | 2.9 | 5.4 | | 0.1 | 13.8 |
GEOGRAPHIC DESTINATION:
|
United
Kingdom |
Rest of
Europe |
Africa |
North
America |
South
America |
Asia
Pacific |
Total | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
||||||||
RevenueContinuing activities |
|||||||||||||||
Year ended December 31, 2012 |
58.8 | 126.6 | 7.6 | 226.6 | 19.4 | 72.6 | 511.6 | ||||||||
Year ended December 31, 2011 |
61.5 | 128.3 | 20.3 | 210.3 | 25.1 | 65.3 | 510.8 | ||||||||
Year ended December 31, 2010 |
46.0 | 104.9 | 7.3 | 182.3 | 15.1 | 47.1 | 402.7 |
F-24
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
3. Operating profit
Operating profit for continuing activities is stated after charging/(crediting):
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Research and development expenditure charged to the income statement |
7.1 | 8.5 | 8.9 | ||||
Research and development capital expenditure included within property, plant and equipment |
1.8 | 2.6 | 0.9 | ||||
Total research and development expenditure |
8.9 | 11.1 | 9.8 | ||||
less external funding receivedgrants and recharges to third parties |
(0.7 | ) | (2.9 | ) | (3.1 | ) | |
less research and development expenditure capitalized within property, plant and equipment |
(1.8 | ) | (2.6 | ) | (0.9 | ) | |
Net research and development |
6.4 | 5.6 | 5.8 | ||||
Depreciation of property, plant and equipment (Note 12) |
14.4 | 14.2 | 13.6 | ||||
Amortization of intangible assets (included in cost of sales) (Note 13) |
0.3 | 0.3 | 0.2 | ||||
Loss on disposal of property, plant and equipment |
| | 0.1 | ||||
Income and costs relating to demolition of vacant property (Note 5) |
| | 0.6 | ||||
Net foreign exchange gains |
(0.7 | ) | (0.7 | ) | (1.2 | ) | |
Staff costs (Note 6) |
110.3 | 104.3 | 97.9 | ||||
Cost of inventories recognized as expense |
356.5 | 355.9 | 294.4 |
4. Fees payable to auditors
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Fees payable to auditors for the audit of the financial statements |
0.9 | 0.8 | 0.5 |
The audit fee for the Company financial statements of Luxfer Holdings PLC was $0.1 million (2011 and 2010: $0.1 million).
Fees payable to auditors for non-audit services:
Audit related assurance services |
0.4 | 1.0 | | ||||
Tax compliance services |
0.5 | 0.5 | 0.3 | ||||
Tax advisory services |
0.3 | 0.3 | 0.2 | ||||
|
1.2 | 1.8 | 0.5 | ||||
Total fees payable |
2.1 | 2.6 | 1.0 | ||||
Included in fees payable to auditors for non-audit services was $1.3 million (2011: $1.4 million and 2010: $0.3 million) relating to the Company and its UK subsidiaries.
F-25
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
5. Other income (expense) items
(a) Restructuring and other income (expense)
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
(Charged)/credited to Operating profit: |
|||||||
Rationalization of operations |
(1.3 | ) | | (0.2 | ) | ||
I.P.O related share based compensation charge |
(0.8 | ) | | | |||
I.P.O related legal and professional costs |
| (1.4 | ) | | |||
Past service credit on retirement benefit obligations |
| 1.6 | | ||||
Income and costs relating to demolition of vacant property |
| | (0.6 | ) | |||
|
(2.1 | ) | 0.2 | (0.8 | ) | ||
(b) Acquisition and disposal costs
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Charged to Non-operating profit: |
|||||||
Net acquisition costs |
(0.6 | ) | | | |||
Disposal costs of intellectual property |
(0.2 | ) | (0.2 | ) | (0.4 | ) | |
|
(0.8 | ) | (0.2 | ) | (0.4 | ) | |
Rationalization of operations
In 2012, $1.1 million of costs have been incurred in relation to rationalization costs in the Gas Cylinders division and $0.2 million of costs have been incurred in relation to rationalization costs in the Elektron division.
In 2010, the Elektron division incurred costs of $0.2 million (2009: $1.0 million), relating to a series of rationalization activities conducted at the manufacturing plants to improve operating efficiencies.
I.P.O related share based compensation charge
In 2012, a charge of $0.8 million was recognized in the income statement under IFRS 2 in relation to share options granted as part of the initial public offering. The share options are described in further detail in note 32.
I.P.O related non-trade legal and professional costs
In 2011, the Group incurred legal, audit and professional costs of $2.8 million in relation to the raising of equity funding. Of this, $1.4 million was expensed in the year mainly in relation to historical audit work and $1.4 million was deferred, which related to regulatory and legal documentation to support the transaction.
F-26
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
5. Other income (expense) items (Continued)
Past service credit on retirement benefit obligations
In 2011, retired members of the Luxfer Group Pension Plan, the principal defined benefit plan in the UK, were offered the option of altering the structure of their pension by receiving an uplift immediately in return for giving up rights to a portion of their future pension increases. This reduced the costs and risks of operating the pension plan and resulted in a gain of $1.6 million and a corresponding reduction in the present value of the defined benefit obligations of the pension plan.
Income and costs relating to demolition of vacant property
In 2010, a charge of $0.6 million was made for the demolition of a vacant property net of proceeds from a third party lessee of the building owned by the group undertaking Luxfer Group Services Limited.
Net acquisition costs
In 2012, net acquisition costs of $0.6 million were recognized by the Gas Cylinders division in relation to the acquisition of Dynetek Industries Limited. The cost was comprised of acquisition costs of $0.8 million less a negative goodwill credit of $0.2 million, as further explained in Note 11.
Disposal costs of intellectual property
In 2012, the Elektron division incurred costs of $0.2 million (2011: $0.2 million and 2010: $0.4 million) in relation to the sale process of intellectual property in the USA acquired as part of the 2007 acquisition of Revere Graphics.
6. Staff Costs
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Wages and salaries |
89.6 | 88.0 | 80.0 | ||||
Social security costs |
12.3 | 12.6 | 11.2 | ||||
Retirement benefit costs |
6.4 | 3.7 | 6.6 | ||||
Redundancy costs: |
|||||||
continuing activities (note 5) |
1.2 | | 0.2 | ||||
I.P.O related share based compensation charge |
0.8 | | | ||||
|
110.3 | 104.3 | 98.0 | ||||
F-27
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
6. Staff Costs (Continued)
The average monthly number of employees during the year was made up as follows:
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
No.
|
No.
|
No.
|
||||
Production and distribution |
1,284 | 1,209 | 1,210 | ||||
Sales and administration |
183 | 189 | 170 | ||||
Research and development |
53 | 51 | 45 | ||||
|
1,520 | 1,449 | 1,425 | ||||
In 2012, compensation of key management personnel (including directors) was $2.8 million (2011: $2.7 million and 2010: $2.8 million) for short-term employee benefits and $0.4 million (2011: $0.5 million and 2010: $0.5 million) for post-employment benefits.
Directors' interests and related party transactions
No director had a material interest in, nor were they a party to, any contract or arrangement to which the parent company, Luxfer Holdings PLC (the "Company") or any of its subsidiaries is or was party either during the year or at the end of the year, with the following exceptions: in the case of the executive directors their individual service contract; in the case of the non-executive directors their engagement letters or the contract for services under which their services as a director of the Company are provided; in the case of the executive directors and the chairman, the Management Incentive Plan (terminated October 2012). No share options were exercised by directors of the Company during the year.
7. Finance income
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Bank interest received |
0.2 | 0.1 | 0.1 | ||||
Other interest received (Note 25) |
| 0.1 | 0.1 | ||||
Gain on purchase of own debt |
| | 0.5 | ||||
Total finance income |
0.2 | 0.2 | 0.7 | ||||
8. Finance costs
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Interest paid: |
|||||||
Senior Notes due 2012 |
| 3.3 | 7.5 | ||||
Bank and other loans |
5.7 | 4.3 | 0.8 | ||||
Amortization of issue costs |
1.0 | 1.6 | 1.3 | ||||
Total finance costs |
6.7 | 9.2 | 9.6 | ||||
F-28
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
9. Income tax
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Current tax: |
|||||||
UK Corporation tax |
3.3 | 1.0 | | ||||
Adjustments in respect of previous years |
(0.4 | ) | | | |||
|
2.9 | 1.0 | | ||||
Non-UK tax |
9.9 | 10.8 | 9.4 | ||||
Adjustments in respect of previous years |
(1.7 | ) | | 0.1 | |||
Total current tax charge |
11.1 | 11.8 | 9.5 | ||||
Deferred tax: |
|||||||
Origination and reversal of temporary differences |
4.5 | 2.0 | 0.5 | ||||
Adjustments in respect of previous years |
1.4 | (0.2 | ) | (0.1 | ) | ||
Total deferred tax charge |
5.9 | 1.8 | 0.4 | ||||
Tax on profit on operations |
17.0 | 13.6 | 9.9 | ||||
The income tax charge relates to continuing activities and there is no tax charge in relation to discontinued activities.
The tax assessed for the year differs from the standard rate of 24.5% (2011: 26.5% and 2010: 28%) for corporation tax in the UK.
The differences are explained below:
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Profit on operations before taxation |
59.4 | 57.0 | 35.6 | ||||
Profit on operations at 2012 standard rate of corporation tax in the UK of 24.5% (2011: 26.5% and 2010: 28%) |
14.6 | 15.1 | 10.0 | ||||
Effects of: |
|||||||
Income not taxable |
(0.2 | ) | (0.3 | ) | (0.9 | ) | |
Unprovided deferred tax |
(1.3 | ) | (4.7 | ) | (1.5 | ) | |
Foreign tax rate differences |
4.6 | 3.7 | 2.3 | ||||
Adjustment in respect of previous years |
(0.7 | ) | (0.2 | ) | | ||
Tax expense |
17.0 | 13.6 | 9.9 | ||||
F-29
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
9. Income tax (Continued)
As at December 31, 2012, the Group has carried forward tax losses of $85.4 million (UK: $71.9 million, non-UK: $13.5 million). Carried forward tax losses for 2011 were $74.2 million (UK: $69.2 million, non-UK: $5.0 million) and for 2010 were 73.4 million (UK: $68.4 million, non-UK: $5.0 million). To the extent that these losses are available to offset against future taxable profits, it is expected that the future effective tax rate would be below the standard rate in the country where the profits are offset.
In his annual Budget announcement of March 20, 2013, the Chancellor of the Exchequer announced certain tax changes which will have a significant effect on the Group's future tax position. The proposals include phased reductions in the UK corporation tax rate to 20% from 1 April 2015.
As at December 31, 2012, only the previously announced reduction in the rate to 23% had been 'substantively enacted' and this has been reflected in the Group's financial statements as at December 31, 2012.
The effect of the reduction of the UK corporation tax rate to 20% on the Group's deferred tax asset (recognized and not recognized) would be to reduce the deferred tax asset by $4.5 million. This being a reduction of $2.7 million in the Group's recognized deferred tax asset and $1.8 million in the Group's unrecognized deferred tax asset as at December 31, 2012.
The rate change would also impact the amount of future cash tax payments to be made by the UK Group. The effect on the UK Group of the proposed changes to the UK tax system will be reflected in the financial statements of the UK Group companies in future years, as appropriate, once the proposals have been substantively enacted.
10. Earnings per share
The Group calculates earnings per share in accordance with IAS 33. Basic income per share is calculated based on the weighted average common shares outstanding for the period presented. The weighted average number of shares outstanding is calculated by time-apportioning the shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding during the financial year have been adjusted for the dilutive effects of all potential ordinary shares and share options granted to employees.
American Depositary Shares (ADSs) of Luxfer Holdings PLC are listed on the New York Stock Exchange following an initial public offering on October 3, 2012. The company's £1 ordinary shares are not traded on any recognized stock exchange. The Depository for the ADSs holds 1 £1 ordinary share for every 2 ADSs traded, through American Depositary Receipts.
The weighted average methodology used to calculate the ordinary shareholders for 2012 EPS on the £1 shares does not reflect a full-year economic impact of a 35% increase in the share capital of the Group from the IPO at 3 rd October 2012. ADS and ordinary £1 shareholders should consider this impact when comparing the IFRS EPS to any ADS share price or comparator companies earnings multiples, for valuation purposes.
F-30
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
10. Earnings per share (Continued)
As a comparison, an adjusted EPS, using the IFRS reported net income for 2012, but dividing by the total number of shares outstanding at the end of 2012, is $3.16 per ordinary share (equivalent to an adjusted EP-ADS of $1.58 per ADS), whereas the IAS 33 weighted average basic EPS is $3.95 per share. Although it is a non-GAAP financial measure, management believes an adjusted EP-ADS more closely reflects the underlying earnings per ADS performance based on the post-IPO share structure, which led to a significant change in the capital structure.
It should be noted that all EPS measures for prior years will be restated in 2013 for the introduction of the IAS 19 revised and the impact that accounting standard has on the Group's net income, as further disclosed in note 1 of these financial statements.
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Basic earnings: |
|||||||
Basic earnings attributable to ordinary shareholders |
42.4 | 43.4 | 25.7 | ||||
Adjusted earnings: |
|||||||
Restructuring and other (income) expense (Note 5) |
2.1 | (0.2 | ) | 0.8 | |||
Acquisition and disposal costs (Note 5) |
0.8 | 0.2 | 0.4 | ||||
Finance income (Note 7): |
|||||||
Gain on purchase of own debt |
| | (0.5 | ) | |||
Tax thereon |
(0.3 | ) | | (0.3 | ) | ||
Adjusted earnings |
45.0 | 43.4 | 26.1 | ||||
Weighted average number of £1 ordinary shares: |
|||||||
For basic earnings per share |
10,741,677 | 9,884,145 | 9,851,204 | ||||
Exercise of share options |
185,769 | 95,910 | 67,900 | ||||
For diluted earnings per share |
10,927,446 | 9,980,055 | 9,919,104 | ||||
Earnings per share using weighted average number of ordinary shares outstanding: |
|||||||
Basic |
|||||||
Adjusted |
$4.19 | $4.39 | $2.65 | ||||
Unadjusted |
$3.95 | $4.39 | $2.61 | ||||
Diluted |
|||||||
Adjusted |
$4.12 | $4.35 | $2.63 | ||||
Unadjusted |
$3.88 | $4.35 | $2.59 |
F-31
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
10. Earnings per share (Continued)
|
December 31, 2012 | December 31, 2011 | December 31, 2010 | ||||
---|---|---|---|---|---|---|---|
At the balance sheet date, the number of £1 ordinary shares outstanding were: |
|||||||
For basic earnings per share |
13,406,326 | 9,885,526 | 9,884,026 | ||||
Exercise of share options |
473,710 | 95,910 | 67,900 | ||||
For diluted earnings per share |
13,880,036 | 9,981,436 | 9,951,926 | ||||
Each £1 ordinary share is equal to 2 American Depositary Shares, as listed and quoted on the New York Stock Exchange.
11. Acquisition of business
In September 2012, the Group acquired Dynetek Industries Limited ("Dynetek"), a Canadian business that designs and manufactures high-pressure aluminum and carbon fiber gas cylinders and systems for compressed natural gas and low-emission vehicles. The primary reason for the acquisition was to increase the Group's manufacturing capacity in these areas. The gross consideration for 100% of the equity of the business was $11.7 million, where under the plan of arrangement $6.6 million was paid to the debt holders and $5.1 million was paid to the shareholders. $0.7 million of cash was acquired in the transaction. An additional $0.8 million of acquisition costs were incurred and paid in the fourth quarter of 2012. The initial assessment of the fair value of the net assets of the business acquired amounts to $11.9 million, resulting in a negative goodwill credit on acquisition of $0.2 million and net of the acquisition costs resulted in a charge to the income statement of $0.6 million.
|
Book value prior
to acquisition 2012 |
Revaluation
of fixed assets |
Adjustment to
net realizable value |
Fair value
2012 |
|||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Property, plant and equipment |
2.6 | 5.6 | | 8.2 | |||||
Intangible assets |
0.1 | (0.1 | ) | | | ||||
Cash and short term deposits |
0.7 | | | 0.7 | |||||
Inventories |
6.3 | | (1.3 | ) | 5.0 | ||||
Trade and other receivables |
6.5 | | (0.2 | ) | 6.3 | ||||
Total assets |
16.2 | 5.5 | (1.5 | ) | 20.2 | ||||
Trade and other payables |
8.0 | | 0.3 | 8.3 | |||||
Total liabilities |
8.0 | | 0.3 | 8.3 | |||||
Net assets acquired |
8.2 | 5.5 | (1.8 | ) | 11.9 | ||||
F-32
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
11. Acquisition of business (Continued)
|
2012 | ||
---|---|---|---|
|
$M
|
||
Net acquisition costs: |
|||
Net assets acquired |
11.9 | ||
Consideration paid |
(11.7 | ) | |
Negative goodwill credit |
0.2 | ||
Acquisition costs |
(0.8 | ) | |
Net charge to the income statement |
(0.6 | ) | |
The results of Dynetek, from the date of acquisition to the period ended 31 December 2012, which have been included in the consolidated income statement, are shown below. Following the acquisition, Dynetek was turned into two separate businesses in Germany and Canada.
Revenue of $11.4 million includes $9.1 million relating to the sale of gas cylinders and $2.3 million relating to the sale of other services and accessories.
Due to the distressed financial position of Dynetek Industries, its net assets had been subject to impairment in its own interim report for June 30, 2012, and our own initial fair value exercise re-assessed those asset values, based on the business being a going concern and applying the Group's accounting policies. The Group has not found it practicable to disclose the revenue and profit or loss of the combined entity as though the acquisition date had been at the beginning of the reporting period due to the availability of reliable information.
F-33
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
12. Property, plant and equipment
|
Freehold |
Long
leasehold |
Short
leasehold |
Plant and
equipment |
Total | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
$M
|
||||||
Cost: |
|||||||||||
At January 1, 2011 |
41.5 | 3.9 | 6.6 | 260.1 | 312.1 | ||||||
Additions |
2.9 | | 1.3 | 16.6 | 20.8 | ||||||
Disposals |
| | (0.2 | ) | (1.4 | ) | (1.6 | ) | |||
Transfers |
1.1 | | (1.1 | ) | | | |||||
Exchange adjustments |
(0.4 | ) | | | (2.2 | ) | (2.6 | ) | |||
At December 31, 2011 |
45.1 | 3.9 | 6.6 | 273.1 | 328.7 | ||||||
Additions |
3.0 | 0.1 | 1.1 | 15.3 | 19.5 | ||||||
Business additions |
0.6 | | | 7.6 | 8.2 | ||||||
Disposals |
| | (0.2 | ) | (6.5 | ) | (6.7 | ) | |||
Exchange adjustments |
0.6 | 0.2 | 0.1 | 7.3 | 8.2 | ||||||
At December 31, 2012 |
49.3 | 4.2 | 7.6 | 296.8 | 357.9 | ||||||
Depreciation: |
|||||||||||
At January 1, 2011 |
14.0 | 3.1 | 2.7 | 183.8 | 203.6 | ||||||
Provided during the year |
1.0 | | 0.4 | 12.8 | 14.2 | ||||||
Disposals |
| | (0.2 | ) | (1.4 | ) | (1.6 | ) | |||
Transfers |
0.5 | | (0.5 | ) | | | |||||
Exchange adjustments |
(0.1 | ) | | | (1.6 | ) | (1.7 | ) | |||
At December 31, 2011 |
15.4 | 3.1 | 2.4 | 193.6 | 214.5 | ||||||
Provided during the year |
1.2 | 0.1 | 0.5 | 12.6 | 14.4 | ||||||
Disposals |
| | (0.2 | ) | (6.5 | ) | (6.7 | ) | |||
Exchange adjustments |
0.2 | 0.1 | | 5.8 | 6.1 | ||||||
At December 31, 2012 |
16.8 | 3.3 | 2.7 | 205.5 | 228.3 | ||||||
Net book values: |
|||||||||||
At December 31, 2012 |
32.5 | 0.9 | 4.9 | 91.3 | 129.6 | ||||||
At December 31, 2011 |
29.7 | 0.8 | 4.2 | 79.5 | 114.2 | ||||||
At January 1, 2011 |
27.5 | 0.8 | 3.9 | 76.3 | 108.5 |
Long and short leasehold
The long and short leasehold costs relate to leasehold property improvements.
F-34
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
13. Intangible assets
|
Goodwill | Patents | Other | Total | |||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Cost: |
|||||||||
At January 1, 2011 |
54.5 | 1.7 | 1.2 | 57.4 | |||||
Additions |
| | 0.3 | 0.3 | |||||
Exchange adjustments |
(0.3 | ) | | (0.1 | ) | (0.4 | ) | ||
At December 31, 2011 |
54.2 | 1.7 | 1.4 | 57.3 | |||||
Exchange adjustments |
2.0 | | | 2.0 | |||||
At December 31, 2012 |
56.2 | 1.7 | 1.4 | 59.3 | |||||
Amortization: |
|||||||||
At January 1, 2011 |
18.6 | 0.8 | 0.8 | 20.2 | |||||
Provided during the year |
| 0.1 | 0.2 | 0.3 | |||||
Exchange adjustments |
(0.1 | ) | | (0.1 | ) | (0.2 | ) | ||
At December 31, 2011 |
18.5 | 0.9 | 0.9 | 20.3 | |||||
Provided during the year |
| 0.1 | 0.1 | 0.2 | |||||
Exchange adjustments |
0.4 | | | 0.4 | |||||
At December 31, 2012 |
18.9 | 1.0 | 1.0 | 20.9 | |||||
Net book values: |
|||||||||
At December 31, 2012 |
37.3 | 0.7 | 0.4 | 38.4 | |||||
At December 31, 2011 |
35.7 | 0.8 | 0.5 | 37.0 | |||||
At January 1, 2011 |
35.9 | 0.9 | 0.4 | 37.2 |
The patents acquired are being amortized over the lower of their estimated useful life, or legal life; this being 17 to 20 years.
14. Impairment of goodwill
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from the business combination. The four CGUs represent the lowest level within the Group at which goodwill is monitored for internal reporting management purposes. The four
F-35
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
14. Impairment of goodwill (Continued)
CGUs are aggregated to form the Group's two defined reportable segments: Gas Cylinders division and Elektron division. The table below summarizes the carrying amount of goodwill by division:
|
Gas
Cylinders division |
Elektron
division |
Total | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
At January 1, 2011 |
23.1 | 12.8 | 35.9 | ||||
Exchange adjustments |
(0.1 | ) | (0.1 | ) | (0.2 | ) | |
At December 31, 2011 |
23.0 | 12.7 | 35.7 | ||||
Exchange adjustments |
1.0 | 0.6 | 1.6 | ||||
At December 31, 2012 |
24.0 | 13.3 | 37.3 | ||||
The Gas Cylinders division goodwill of $24.0 million (December 31, 2011: $23.0 million) included goodwill attributable to our Luxfer Gas Cylinders operations of $22.7 million (December 31, 2011: $21.8 million) and goodwill attributable to our Superform operations of $1.3 million (December 31, 2011: $1.2 million). The Elektron division goodwill of $13.3 million (December 31, 2011: $12.7 million) included goodwill attributable to our MEL Chemicals operations of $5.1 million (December 31, 2011: $4.9 million) and goodwill attributable to our Magnesium Elektron operations of $8.2 million (December 31, 2011: $7.8 million).
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amount of each of the cash-generating units has been determined based on a value in use calculation using a discounted cash flow method. The cash flows were derived from a business plan prepared at a detailed level by individual businesses within each CGU. The results of these plans were then extrapolated to give cash flow projections to 2015 and then a terminal value based on a growth rate of 2.5% (2011: 2.5% and 2010: 2.5%). The rate is estimated to be below the average long-term growth rate for the relevant markets. The business plans were driven by detailed sales forecasts by product type and best estimate of future demand by end market. The cash flows included allowance for detailed capital expenditure and maintenance programs, along with working capital requirements based on the projected level of sales. The before tax discount rate used was 10% (2011: 9% and 2010: 10%), which was considered a best estimate for the risk-adjusted cost of capital for the business units. The long term projections assumed product prices and costs were at current levels, but the exchange rates used were: US$: £ exchange rate a range from $1.57 - $1.60 and euro: $ exchange a range from €1.31 - €1.28. Based on the current business plans used in the impairment testing, it is believed no reasonable changes in the discount and growth rates or forecast future cash flows are expected to result in an impairment of the carrying value of the goodwill.
F-36
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
15. Investments
|
Joint
ventures |
Other | Total | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
At January 1, 2011 |
0.2 | 0.2 | 0.4 | ||||
Increase in investments at cost |
0.3 | | 0.3 | ||||
Share of start-up costs of joint ventures |
(0.2 | ) | | (0.2 | ) | ||
At December 31, 2011 |
0.3 | 0.2 | 0.5 | ||||
Increase in investments at cost |
0.4 | | 0.4 | ||||
Share of start-up costs of joint ventures |
(0.1 | ) | | (0.1 | ) | ||
At December 31, 2012 |
0.6 | 0.2 | 0.8 | ||||
Investment in joint ventures
At December 31, 2012, the Group had the following joint ventures undertakings which affect the profit of the Group. Unless otherwise stated, the Group's joint ventures have share capital which consists solely of ordinary shares and are indirectly held, and the country of incorporation or registration is also their principal place of operation.
Name of company
|
Country of
incorporation |
Holding |
Proportion
of voting rights and shares held |
Nature of
business |
||||
---|---|---|---|---|---|---|---|---|
Dynetek Cylinders India Private Limited |
India | Ordinary shares | 49% | Engineering | ||||
Dynetek Korea Co. Limited |
South Korea | Ordinary shares | 49% | Engineering | ||||
Luxfer Holdings NA, LLC |
United States | N/A | 49% | Engineering | ||||
Luxfer Uttam India Private Limited |
India | Ordinary shares | 51% | Engineering | ||||
Nikkei-MEL Co Limited |
Japan | Ordinary shares | 50% | Distribution |
During 2012, the joint venture Luxfer Uttam Private Limited increased its share capital and the cost paid by the Group to maintain the 51% investment in the equity in the joint venture was $0.4 million. The joint venture has been accounted for using the equity method, as the venturers have a contractual agreement that establishes joint control over the economic activities of the entity, and the loss attributable to the joint venture for 2012 was $0.1 million (2011: loss of $0.2 million) as a result of start-up costs being incurred.
During 2012, the Group acquired two Joint Ventures in India and South Korea through its acquisition of Dynetek Industries and at the end of the year established a third in North America. The objective of these joint ventures is to promote and support the use of large composite cylinders for use by end customers in CNG and Hydrogen gas transportation applications. None of these new joint ventures had any significant trading activities whilst being associate members of the Group in 2012. The Group also committed from 1 January 2013, up to $12.5 million of future funding to aid expansion in this area in the coming years, via $2.5 million of equity into Luxfer Holdings NA, LLC and an undrawn $10 million secured credit line for working capital and supplier finance.
F-37
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
15. Investments (Continued)
Related party transactions with joint ventures have been disclosed in Note 33 to the Group's financial statements.
16. Inventories
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Raw materials and consumables |
35.6 | 35.0 | |||
Work in progress |
25.2 | 28.8 | |||
Finished goods and goods for resale |
23.0 | 36.8 | |||
|
83.8 | 100.6 | |||
The provision against obsolete and excess inventories at December 31, 2012 was $6.8 million (December 31, 2011: $14.3 million). The movement represents the utilization of the provision. The cost of inventories recognized as an expense during the year has been disclosed in Note 3.
17. Trade and other receivables
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Trade receivables |
60.3 | 55.1 | |||
Amounts owed by joint ventures and associates |
0.7 | 0.7 | |||
Other receivables |
7.6 | 2.3 | |||
Prepayments and accrued income |
5.3 | 5.5 | |||
Derivative financial instruments |
0.5 | 1.6 | |||
|
74.4 | 65.2 | |||
The Directors consider that the carrying value of trade and other receivables approximates to their fair value.
Trade receivables are non-interest bearing and are generally on 30-90 days terms.
Trade receivables above are disclosed net of any provisions for doubtful receivables.
F-38
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
17. Trade and other receivables (Continued)
As at December 31, 2012, trade receivables at nominal value $2.2 million (December 31, 2011: $1.9 million) were impaired and fully provided for. Movements in the provision for impairment of trade receivables were as follows:
18. Cash and short term deposits
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Cash at bank and in hand |
40.2 | 22.2 |
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The Directors consider that the carrying amount of cash and short-term deposits approximates to their fair value.
19. Share capital
|
December 31,
2012 |
December 31,
2011 |
December 31,
2012 |
December 31,
2011 |
|||||
---|---|---|---|---|---|---|---|---|---|
|
No.
|
No.
|
$M
|
$M
|
|||||
Authorized: |
|||||||||
Ordinary shares of £1 each |
20,000,000 | 10,000,000 | 35.7 | (1) | 19.6 | (1) | |||
Deferred ordinary shares of £0.0001 each |
769,423,688,000 | 769,423,688,000 | 150.9 | (1) | 150.9 | (1) | |||
|
769,443,688,000 | 769,433,688,000 | 186.6 | (1) | 170.5 | (1) | |||
Allotted, called up and fully paid: |
|||||||||
Ordinary shares of £1 each |
13,500,000 | 10,000,000 | 25.3 | (1) | 19.6 | (1) | |||
Deferred ordinary shares of £0.0001 each |
769,413,708,000 | 769,413,708,000 | 150.9 | (1) | 150.9 | (1) | |||
|
769,427,208,000 | 769,423,708,000 | 176.2 | (1) | 170.5 | (1) | |||
F-39
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
19. Share capital (Continued)
The rights of the shares are as follows:
Ordinary shares of £1 each
The ordinary shares carry no entitlement to an automatic dividend but rank pari passu in respect of any dividend declared and paid other than preference dividend (see below).
Deferred ordinary shares of £0.0001 each
The deferred shares have no entitlement to dividends or to vote. On a winding up (but not otherwise) the holders of the deferred shares shall be entitled to the repayment of the paid up nominal amount of the deferred shares, but only after any payment to the holders of ordinary shares of an amount equal to 100 times the amount paid up on such ordinary shares.
9,200,000 American Depositary Shares (ADSs) of Luxfer Holdings PLC are listed on the New York Stock Exchange following an initial public offering on October 3, 2012. The Depository for the ADSs holds 1 £1 ordinary share for every 2 ADSs traded, through American Depositary Receipts.
ADS holders are entitled to instruct their Depositary to vote and to receive a dividend as per the ordinary shareholders, after deducting the fees and expenses of the Depositary.
During the year ended December 31, 2011 the Company called up the remaining unpaid sums on its 50,000 'B' preference shares of £1 each. As fully paid shares, the preference shares were fully redeemed at their nominal value and accrued interest was paid.
As at December 31, 2012, 93,674 ordinary shares (December 31, 2011: 114,474) of £1 each were held by The Luxfer Group Employee Share Ownership Plan. The decrease in the number of ordinary shares held by The Luxfer Group Employee Share Ownership Plan of 20,800 ordinary shares represents the exercise of options to purchase shares from The Luxfer Group Employee Share Ownership Plan by senior management. For further information refer to Note 31.
F-40
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
19. Share capital (Continued)
The share based compensation reserve is used to recognise the fair value of options and performance shares granted under IFRS 2. For further information refer to Note 32. The charge in 2012 related to options over ADSs and not directly in ordinary shares.
20. Dividends paid and proposed
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Dividends declared and paid during the year: |
|||||||
Interim dividend paid August 10, 2012 ($0.39 per ordinary share) |
3.8 | | | ||||
Interim dividend paid October 25, 2012 ($0.20 per ordinary share) |
2.0 | | | ||||
|
5.8 | | | ||||
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Dividends proposed and paid after December 31 (not recognized as a liability as at December 31): |
|||||||
Interim dividend paid February 6, 2013 ($0.20 per ordinary share) |
2.7 | | | ||||
|
2.7 | | | ||||
F-41
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
21. Reserves
|
Share
premium account |
Hedging
reserve |
Translation
reserve |
Merger
reserve |
Retained
earnings |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
$M
|
||||||
At January 1, 2010 |
| (0.2 | ) | (26.2 | ) | (333.8 | ) | 226.2 | |||
Net income for the year |
| | | | 25.7 | ||||||
Currency translation differences |
| | 0.2 | | | ||||||
Decrease in fair value of cash flow hedges |
| (0.2 | ) | | | | |||||
Transfer to income statement on cash flow hedges |
| 0.5 | | | | ||||||
Actuarial gains and losses on pension plans |
| | | | 4.4 | ||||||
Deferred tax on items taken to other comprehensive income |
| | | | (1.3 | ) | |||||
At December 31, 2010 |
| 0.1 | (26.0 | ) | (333.8 | ) | 255.0 | ||||
Net income for the year |
| | | | 43.4 | ||||||
Currency translation differences |
| (0.1 | ) | (5.4 | ) | | | ||||
Increase in fair value of cash flow hedges |
| 0.9 | | | | ||||||
Transfer to income statement on cash flow hedges |
| (0.2 | ) | | | | |||||
Actuarial gains and losses on pension plans |
| | | | (54.0 | ) | |||||
Deferred tax on items taken to other comprehensive income |
| | | | 15.0 | ||||||
At December 31, 2011 |
| 0.7 | (31.4 | ) | (333.8 | ) | 259.4 | ||||
Net income for the year |
| | | | 42.4 | ||||||
Currency translation differences |
| | 2.9 | | | ||||||
Decrease in fair value of cash flow hedges |
| (0.1 | ) | | | | |||||
Transfer to income statement on cash flow hedges |
| (0.2 | ) | | | | |||||
Actuarial gains and losses on pension plans |
| | | | (21.3 | ) | |||||
Deferred tax on items taken to other comprehensive income |
| | | | 3.9 | ||||||
Equity dividends |
| | | | (5.8 | ) | |||||
Arising from issue of share capital |
59.4 | | | | | ||||||
Share issue costs |
(3.8 | ) | | | | | |||||
At December 31, 2012 |
55.6 | 0.4 | (28.5 | ) | (333.8 | ) | 278.6 | ||||
Nature and purpose of reserves
Share premium account
The share premium account is used to record the excess of proceeds over nominal value on the issue of shares. Share issue costs directly related to the issue of shares are deducted from share premium.
F-42
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
21. Reserves (Continued)
Hedging reserve
The hedging reserve contains the effective portion of the cash flow hedge relationships entered into by the Group at the reporting date. The movement in the year to December 31, 2012 of $0.3 million includes a decrease in the fair value of cash flow hedges of $0.1 million and $0.2 million of cash flow hedges being transferred to the income statement. For further information regarding the Group's forward foreign currency contracts, forward aluminum commodity contracts and forward rate interest rate agreements refer to Note 29 section (a)Financial Instruments: Financial Instruments of the Group.
Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of operations who do not have U.S. dollars as their functional currency. It would also be used to record the effect of hedging net investments in such operations.
Merger reserve
The merger reserve relates to the recapitalization of Luxfer Group Limited during the year ended December 31, 1999. Pursuant to the recapitalization of Luxfer Group Limited, Luxfer Holdings PLC acquired the entire share capital of Luxfer Group Limited. The company known as Luxfer Group Limited during the year ended December 31, 1999 was subsequently renamed LGL 1996 Limited and remains dormant. The recapitalization was accounted for using merger accounting principles.
The accounting treatment reflected the fact that ownership and control of Luxfer Group Limited, after the recapitalization, remained with the same institutional and management shareholders as before the recapitalization. Under merger accounting principles the consolidated financial statements of Luxfer Holdings PLC appear as a continuation of those for Luxfer Group Limited and therefore as if it had been the parent of the Group from its incorporation.
22. Bank and other loans
Current
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Revolving credit facility |
| | |||
Term loan |
| 3.1 | |||
|
| 3.1 | |||
F-43
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
22. Bank and other loans (Continued)
Non-current
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Revolving credit facility |
| 23.0 | |||
Term loan |
| 43.0 | |||
Loan Notes due 2018 |
63.5 | 63.4 | |||
|
63.5 | 129.4 | |||
During the year the term loan which was part of the Group's banking facilities was repaid using part of the proceeds from the initial public offering. Following the repayment of the term loan, the facility was modified and the repaid debt now forms part of the revolving credit facility with a total available draw down of £70 million (approximately $114 million).
The group has £110 million facilities (approximately $177 million) comprising a seven year private placement denominated in US dollars of $65 million (approximately £40 million) with a US insurance company and banking facilities that include a revolving credit facility of £70 million ($114 million) with a number of banks.
As at December 31, 2012 the outstanding debt was made up of the private placement of $65 million (December 31, 2011: $65 million), with no draw down on loans under the bank facility (December 31, 2011: $71.6 million).
The $65 million (£40 million) seven year private placement will be repayable in full in 2018 and bears interest at a fixed rate of 6.19%. The Group has arranged the seven year debt to be denominated in US dollars so that there is a natural partial offset between its dollar-denominated net assets and earnings of its US operations and this dollar-denominated debt and related interest expense.
The revolving credit facility can be drawn down until June 2015 and bears interest at a variable rate, at a margin over LIBOR.
The revolving credit facility carries amortization of $1.0 million (£0.6 million) per annum. The private placement notes are secured over the Group's assets, and the revolving credit facility is unsecured. As at December 31, 2012, the total drawn down on the revolving credit facility was $nil. Unamortized finance costs of $2.3 million are included in trade and other receivables. As at December 31, 2012, the total amounts outstanding on the Loan Notes due 2018 were $65.0 million, which are shown in non-current bank and other loans net of unamortized finance costs of $1.5 million. The maturity profile of the Group's undiscounted contractual payments are disclosed in Note 27.
F-44
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
23. Provisions
|
Rationalization &
redundancy |
Employee
benefits |
Environmental
provisions |
Total | |||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
At January 1, 2011 |
0.5 | 0.8 | 4.0 | 5.3 | |||||
Charged to income statement |
| 0.8 | | 0.8 | |||||
Cash payments |
(0.1 | ) | (0.4 | ) | (0.5 | ) | (1.0 | ) | |
At December 31, 2011 |
0.4 | 1.2 | 3.5 | 5.1 | |||||
Charged to income statement |
1.3 | 0.3 | 0.1 | 1.7 | |||||
Cash payments |
(1.3 | ) | (0.2 | ) | (0.8 | ) | (2.3 | ) | |
Exchange adjustments |
| | 0.2 | 0.2 | |||||
At December 31, 2012 |
0.4 | 1.3 | 3.0 | 4.7 | |||||
At December 31, 2012 |
|||||||||
Included in current liabilities |
0.4 | | 1.5 | 1.9 | |||||
Included in non-current liabilities |
| 1.3 | 1.5 | 2.8 | |||||
|
0.4 | 1.3 | 3.0 | 4.7 | |||||
At December 31, 2011 |
|||||||||
Included in current liabilities |
0.4 | | 1.6 | 2.0 | |||||
Included in non-current liabilities |
| 1.2 | 1.9 | 3.1 | |||||
|
0.4 | 1.2 | 3.5 | 5.1 | |||||
Rationalization and redundancy
At December 31, 2012 the Group had $0.4 million of provisions relating to redundancy and the rationalization of its operations (December 31, 2011: $0.4 million). $0.1 million of this provision relates to restructuring of the production facilities at Riverside, California, USA within the Gas Cylinders division. A further $0.2 million of this provision relates to closure of the Gas Cylinders division manufacturing facility based at Aldridge in the UK. In addition $0.1 million of the provision relates to rationalization and redundancy within the Elektron division to improve operating efficiencies. These costs are expected to be spent in 2013.
Employee benefits
At December 31, 2012 the Group had $1.3 million of employee benefit liabilities (in addition to retirement benefits), as calculated on an actuarial basis, relating to a provision for workers' compensation at the Gas Cylinders division in the USA (December 31, 2011: $1.2 million).
Environmental provisions
As at December 31, 2012, the Group had environmental provisions of $3.0 million relating to environmental clean up costs (December 31, 2011: $3.5 million). $1.0 million of the provision is for future remediation costs required at the Speciality Aluminium site, in relation to an incident before Luxfer Group's
F-45
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
23. Provisions (Continued)
ownership. The remediation expenditure is expected to take place over the next two to three years. A further $2.0 million of environmental provisions relate to work required at the UK Elektron division site. This expenditure is expected to take place over the next one to three years.
24. Deferred tax
|
Accelerated
tax depreciation |
Other
temporary differences |
Tax
losses |
Retirement
benefit obligations |
Total | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
$M
|
||||||
At January 1, 2011 |
7.6 | (4.5 | ) | | (12.6 | ) | (9.5 | ) | |||
Charged/(credited) to income statement |
1.2 | (3.4 | ) | | 4.0 | 1.8 | |||||
Credited to other comprehensive income |
| | | (15.0 | ) | (15.0 | ) | ||||
At December 31, 2011 |
8.8 | (7.9 | ) | | (23.6 | ) | (22.7 | ) | |||
Charged/(credited) to income statement |
1.1 | 3.0 | (1.5 | ) | 3.3 | 5.9 | |||||
Credited to other comprehensive income |
| | | (3.9 | ) | (3.9 | ) | ||||
Exchange adjustment |
0.5 | (0.2 | ) | | (1.2 | ) | (0.9 | ) | |||
At December 31, 2012 |
10.4 | (5.1 | ) | (1.5 | ) | (25.4 | ) | (21.6 | ) | ||
The amount of deferred taxation accounted for in the Group balance sheet, after the offset of balances within countries for financial reporting purposes, comprised the following deferred tax assets and liabilities:
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Deferred tax liabilities |
| | |||
Deferred tax assets |
21.6 | 22.7 | |||
Net deferred tax asset |
21.6 | 22.7 | |||
At the balance sheet date, the Group has unrecognized deferred tax assets relating to certain trading and capital losses and other temporary differences of $23.6 million (December 31, 2011: $17.9 million) potentially available for offset against future profits. No deferred tax asset has been recognized in respect of this amount because of the unpredictability of future qualifying profit streams in the relevant entities. Of the total unrecognized deferred tax asset of $23.6 million (December 31, 2011: $17.9 million), $18.5 million (December 31, 2011: $17.4 million) relates to losses that can be carried forward indefinitely under current legislation.
At the balance sheet date there were unremitted earnings of subsidiaries and joint ventures of $56.7 million (December 31, 2011: $48.3 million), for which there are no deferred tax liabilities recognized or unrecognized (December 31, 2011: $nil).
F-46
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
25. Other long term assets and liabilities
Other long term assets
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Loan Notedeferred consideration |
| 0.7 |
The Loan Note receivable relates to the deferred consideration due from the sale of plant and equipment of the Speciality Aluminium division which was completed in January 2008. The total amount of the deferred consideration was $4.8 million (£2.4 million), payable in annual installments over five years, commencing on the first anniversary of the sale date. The final installment was received in November 2012, therefore there was £nil interest accrued as at December 31, 2012 (2011: $0.1 million and 2010: $0.1 million), as disclosed in Note 7.
26. Trade and other payables
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Trade payables |
35.7 | 40.5 | |||
Other taxation and social security |
5.2 | 3.8 | |||
Accruals |
32.6 | 34.3 | |||
Interest payable |
0.2 | 0.2 | |||
Derivative financial instruments |
| 0.5 | |||
|
73.7 | 79.3 | |||
The Directors consider that the carrying amount of trade payables approximates to their fair value.
27. Commitments and contingencies
|
December 31,
2012 |
December 31,
2011 |
January 1,
2011 |
||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Operating lease commitmentsGroup as a lessee |
|||||||
Minimum lease payments under operating leases recognized in the income statement |
3.7 | 4.0 | 3.9 |
F-47
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
27. Commitments and contingencies (Continued)
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
|
December 31,
2012 |
December 31,
2011 |
January 1,
2011 |
||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
Within one year |
4.4 | 3.3 | 3.4 | ||||
In two to five years |
12.3 | 9.4 | 9.5 | ||||
In over five years |
15.9 | 13.9 | 17.7 | ||||
|
32.6 | 26.6 | 30.6 | ||||
Operating lease payments represent rentals payable by the Group for certain of its properties and items of machinery. Leasehold land and buildings have a life between 2 and 65 years. Plant and equipment held under operating leases have an average life between 2 and 5 years. Renewal terms are included in the lease contracts.
Capital commitments
At December 31, 2012, the Group had capital expenditure commitments of $0.9 million (December 31, 2011: $1.3 million and January 1, 2011: $1.0 million) for the acquisition of new plant and equipment.
28. Financial risk management objectives and policies
Financial risk management objectives and policies
The Group's financial instruments comprise bank and other loans, senior loan notes, derivatives and trade payables. Other than derivatives, the main purpose of these financial instruments is to raise finance for the Group's operations. The Group also has various financial assets such as trade receivables and cash and short-term deposits, which arise directly from its operations.
A Hedging Committee, chaired by the Group Finance Director, oversees the implementation of the Group's hedging policies, including the risk management of currency and aluminum risks and the use of derivative financial instruments.
It is not the Group's policy or business activity to trade in derivatives. They are only used to hedge underlying risks occurring as part of the Group's normal operating activities.
The main risks arising from the Group's financial instruments are cash flow interest rate risk, liquidity risk, foreign currency translation and transaction risk, aluminum price risk and credit risk on trade receivables and the Group's £70 million ($114 million) revolving credit facilities, of which $nil was drawn down as at December 31, 2012, see Note 22.
The Group regularly enters into forward currency contracts to manage currency risks and when considered suitable will use other financial derivatives to manage commodity and interest rate risks.
F-48
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
28. Financial risk management objectives and policies (Continued)
Interest rate risk
The Group has exposure to variable interest rates if or when it may drawdown on the revolving credit facilities. As a result of this exposure, the Group may decide to hedge interest payable based on a combination of forward rate agreements, interest rate caps and swaps. It has also used an element of fixed rate debt within its financing structure to mitigate volatility in interest rate movements as disclosed in Note 22.
Total debt, as at December 31, 2012, all related to fixed interest rate debt and so there was no interest rate risk at that date.
Liquidity risk
To understand and monitor cash flows, the Group uses a combination of a short-term rolling six week cash forecast, based on expected daily liquidity requirements and longer term monthly rolling forecasts, covering forecast periods of between six and eighteen months forward. The Group also prepares, at least annually, longer-term strategic cash forecasts. Together this system of control is used to ensure the Group can fund its ongoing operations, including working capital, capital expenditure and interest payments and to ensure that bank covenant targets will be met. Short and medium term changes in liquidity needs are funded from the Group's £70 million ($114 million) revolving bank facility (as disclosed in Note 22), which provides the ability to draw down and repay funds on a daily basis. In monitoring liquidity requirements and planning its working capital and capital expenditure programs, the Group aims to maintain a sufficiently prudent level of headroom against its banking facilities and forecast covenant position as protection against any unexpected or sudden market shocks.
The Group also uses forecasts to manage the compliance with any associated covenant tests in relation to the Group's financing arrangements. The Group is subject to maintaining net debt to EBITDA levels of below three times, EBITDA to net interest above four times, and a number of other debt service tests which include EBITDA, taxation, capital expenditure and pension payments.
F-49
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
28. Financial risk management objectives and policies (Continued)
The maturity of the Group's liabilities are also monitored to ensure sufficient funds remain available to meet liabilities as they fall due. The table below summarizes the maturity profile of the Group's financial liabilities at December 31 based on contractual payments.
|
December 31, 2012 | December 31, 2011 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Within
12 months |
1-5
years |
> 5
years |
Total |
Within
12 months |
1-5
years |
> 5
years |
Total | |||||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||||
Revolving credit facility |
| | | | | 23.7 | | 23.7 | |||||||||
Term loan |
| | | | 3.1 | 44.8 | | 47.9 | |||||||||
Loan Notes due 2018 |
| | 65.0 | 65.0 | | | 65.0 | 65.0 | |||||||||
Trade payables |
35.7 | | | 35.7 | 40.5 | | | 40.5 | |||||||||
Accruals |
32.6 | | | 32.6 | 34.3 | | | 34.3 | |||||||||
Interest payable |
0.2 | | | 0.2 | 0.2 | | | 0.2 | |||||||||
Derivative financial instruments |
| | | | 0.5 | | | 0.5 | |||||||||
|
68.5 | | 65.0 | 133.5 | 78.6 | 68.5 | 65.0 | 212.1 | |||||||||
The table below summarizes the maturity profile of the Group's financial liabilities at December 31 based on contractual undiscounted payments. Interest rates on the Group's debt have been based on a forward curve.
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
Undiscounted contractual maturity of financial liabilities: |
|||||
Amounts payable: |
|||||
Within 12 months |
72.5 | 84.1 | |||
1-5 years |
16.1 | 87.7 | |||
> 5 years |
66.8 | 70.9 | |||
|
155.4 | 242.7 | |||
Less: future finance charges |
(21.9 | ) | (30.6 | ) | |
|
133.5 | 212.1 | |||
Capital risk management
In recent years the Group has sought to reduce its indebtedness and increase the level of equity funding and has organized its capital structure to fund medium and long-term investment programs aimed at the development of new products and production facilities. As at December 31, 2012, the debt drawn by the Group was only its Loan Notes due 2018.
F-50
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
28. Financial risk management objectives and policies (Continued)
The Group monitors its adjusted EBITDA for continuing activities to net debt ratio and has sought to reduce this over time from 6x to below 2x. The table below sets out the calculations for 2012, 2011 and 2010:
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
For continuing operations: |
|||||||
Operating profit |
66.7 | 66.2 | 44.9 | ||||
Add back: Restructuring and other (income) expense (Note 5) |
2.1 | (0.2 | ) | 0.8 | |||
Loss on disposal of property, plant and equipment |
| | 0.1 | ||||
Depreciation and amortization |
14.7 | 14.5 | 13.8 | ||||
Adjusted EBITDA |
83.5 | 80.5 | 59.6 | ||||
Bank and other loans |
63.5 | 132.5 | 9.6 | ||||
Senior Notes due 2012 |
| | 106.3 | ||||
Total debt |
63.5 | 132.5 | 115.9 | ||||
Less: |
|||||||
Cash and short term deposits |
(40.2 | ) | (22.2 | ) | (10.3 | ) | |
Net debt |
23.3 | 110.3 | 105.6 | ||||
Net debt: EBITDA ratio |
0.3x | 1.4x | 1.8x |
Credit risk
The Group only provides trade credit to creditworthy third parties. Credit checks are performed on new and existing customers along with monitoring payment histories of customers. Outstanding receivables from customers are closely monitored to ensure they are paid when due, with both outstanding overdue days and total days of sales outstanding ("DSO days") reported as a business unit key performance measure. Where possible export sales are also protected through the use of credit export insurance. At December 31, 2012, the Group has a provision for bad and doubtful debtors of $2.2 million (December 31, 2011: $1.9 million) and a charge of $0.1 million (2011: charge of $0.5 million) has gone to the Income Statement in relation to bad debts incurred in 2012.
The analysis of trade receivables that were past due but not impaired is as follows:
|
|
|
Past due but not impaired | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total |
Neither past
due nor impaired |
< 31
days |
31-61
days |
61-91
days |
91-121
days |
> 121
days |
||||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
||||||||
At December 31, 2012 |
60.3 | 48.2 | 10.2 | 1.9 | | | | ||||||||
At December 31, 2011 |
55.1 | 48.3 | 6.0 | 0.8 | | | |
The Group also monitors the spread of its customer base with the objective of trying to minimize exposure at a Group and divisional level to any one customer. The top ten customers in 2012 represented 36.0% (2011: 38.9% and 2010: 30.8%) of total revenue. In 2011 the Elektron Division had revenue of
F-51
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
28. Financial risk management objectives and policies (Continued)
$52.8 million from a single customer, which represented 10.3% of total revenue. There were no customers in 2012 or 2010 that represented over 10% of total revenue.
Foreign currency translation risk
With substantial operations in the UK and Rest of Europe, the Group is exposed to translation risk on both its Income Statement, based on average exchange rates, and its Balance Sheet with regards to period end exchange rates.
The Group's results and net assets are reported by geographic region in Note 2. This analysis shows in 2012 the Group had revenue of $167.2 million derived from UK operations, operating profit of $24.0 million and when adding back restructuring and other income (expense) and depreciation and amortization, an adjusted EBITDA of $30.5 million. During 2012, the average exchange rate for GBP sterling was £0.6279 being weaker than the 2011 average of £0.6210. This resulted in an adverse impact of $2.2 million on revenue, $0.5 million on operating profit and $0.5 million on adjusted EBITDA. Based on the 2012 level of sales and profits a £0.05 increase in the GBP sterling to US dollar exchange rate would result in a $15.9 million decrease in revenue, $3.6 million decrease in operating profit and $3.6 million decrease in adjusted EBITDA.
The capital employed as at December 31, 2012 in the UK was $68.4 million translated at an exchange rate of £0.6151. A £0.05 increase in exchange rates would reduce capital employed by approximately $5.1 million.
During 2012, the average exchange rate for the Euro was €0.7747, being weaker than the 2011 average of €0.7148. This resulted in an adverse impact of $4.4 million on revenue, no impact on operating profit and an adverse impact of $0.3 million on adjusted EBITDA. Based on the 2012 level of sales and profits a €0.05 increase in the Euro to US dollar exchange rate would result in a $3.7 million decrease in revenue, a $0.2 million decrease in operating profit and a $0.4 million decrease in adjusted EBITDA.
Foreign currency transaction risk
In addition to currency translation risk, the Group incurs currency transaction risk whenever one of the Group's operating subsidiaries enters into either a purchase or sales transaction in a currency other than its functional currency. Currency transaction risk is reduced by matching sales revenues and costs in the same currency. The Group's US operations have little currency exposure as most purchases, costs and revenues are conducted in US dollars. The Group's UK operations are exposed to exchange transaction risks, mainly because these operations sell goods priced in euros and US dollars, and purchase raw materials priced in US dollars.
The UK operations within the Group have around an estimated $20 million net sales risk after offsetting raw material purchases made in US dollars and a substantial euro sales risk, with approximately €50 million to €60 million of exports priced in euros each year. These risks are being partly hedged through the use of forward foreign currency exchange rate contracts, but we estimate that in 2012 our Elektron division has incurred a transaction loss of $0.2 million, and the transaction impact at our Gas Cylinders division was a loss of $0.5 million.
F-52
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
28. Financial risk management objectives and policies (Continued)
Based on a $20 million net exposure to the US dollar, a $0.10 increase in exchange rates would have a $1.2 million annual decrease in Group operating profit and based on a €60 million euro sales risk a €0.10 increase in exchange rates would have a $4.5 million annual decrease in Group operating profit.
Commodity price risks
The Group is exposed to a number of commodity price risks, including primary aluminum, magnesium, rare earth chemicals, zircon sand and other zirconium basic compounds. All have been subject to substantial increases in recent years. Historically the two largest exposures to the Group have been aluminum and magnesium prices and the Group will spend annually approximately $60 million to $85 million on these two raw materials. Recently the costs of rare earth chemicals have also been subject to significant commodity inflation.
Unlike the other major commodities purchased, aluminum is traded on the London Metal Exchange ("LME") and therefore the Group is able to use LME derivative contracts to hedge a portion of its price exposure. In 2012 the Group purchased approximately 14,000 metric tons of primary aluminum, it scrapped around 3,000 metric tons of processed waste and made finished goods equal to approximately 11,000 metric tons. The processed waste can be sold as scrap aluminum at prices linked to the LME price. The price risk on aluminum is mitigated by agreeing fixed prices with the suppliers, along with the use of LME derivative contracts. As at December 31, 2012, the Group had fixed priced purchase contracts covering up to approximately 15% of our main primary aluminum requirements for 2013, and hedged approximately a further 50%. Before hedging the risk, a $100 increase in the LME price of aluminum would increase our Gas Cylinders division's costs by $1.1 million.
In the long term the Group has sought to recover the cost of increased commodity costs through price increases and surcharges. Any hedging of aluminum risk is performed to protect the Group against short-term fluctuations in aluminum costs.
In 2012 the Group purchased approximately 8,000 metric tons of primary magnesium. Magnesium is not traded on the LME so we are not able to maintain a hedge position of its price exposure.
The Group purchases annually approximately 500 metric tons of various rare earth chemicals which it uses in the production of various materials produced by its Elektron division and when these chemicals became subject to significant price volatility it used surcharges on its products to maintain its product margins. To provide its customers with a stable surcharge price the Group's operations would also buy forward rare earths in bulk.
F-53
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
29. Financial instruments
The following disclosures relating to financial instruments have been prepared on a basis which excludes short-term debtors and creditors which have resulted from the Group's operating activities.
(a) Financial instruments of the Group
The financial instruments of the Group other than short-term debtors and creditors were as follows:
Primary financial instruments:
|
Book value
December 31, 2012 |
Fair value
December 31, 2012 |
Book value
December 31, 2011 |
Fair value
December 31, 2011 |
|||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Financial assets: |
|||||||||
Cash at bank and in hand |
40.2 | 40.2 | 22.2 | 22.2 | |||||
Financial liabilities: |
|||||||||
Bank and other loans |
65.0 | 65.0 | 136.6 | 136.6 | |||||
All financial assets mature within one year. The maturity of the financial liabilities are disclosed in Note 28.
As at December 31, 2012, the amount drawn in bank and other loans was $65.0 million, which was all denominated in US dollars. As at December 31, 2011, the amount drawn in bank and other loans was $136.6 million, of which $45.5 million was denominated in Sterling and $91.1 million denominated in US dollars.
Derivative financial instruments are as follows:
|
Book value
December 31, 2012 |
Fair value
December 31, 2012 |
Book value
December 31, 2011 |
Fair value
December 31, 2011 |
|||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Held to hedge purchases and sales by trading businesses: |
|||||||||
Forward foreign currency contracts |
0.2 | 0.2 | 1.6 | 1.6 | |||||
LME derivative contracts |
0.3 | 0.3 | (0.5 | ) | (0.5 | ) |
The fair value calculations were performed on the following basis:
Cash at bank and in hand
The carrying value approximates to the fair value as a result of the short-term maturity of the instruments.
Bank loans
At December 31, 2012 bank and other loans of $65.0 million (December 31, 2011: $132.5 million) were outstanding. As at December 31, 2012 bank and other loans are shown net of issue costs of $1.5 million and these issue costs are to be amortized to the expected maturity of the facilities. There are $2.3 million of deferred finance costs relating to the revolving credit facility shown in trade and other receivables. The Group at December 31, 2012 was not exposed to variable interest rates on its bank and other loans
F-54
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
29. Financial instruments (Continued)
because all drawn debt was at fixed interest rates. The fair value is calculated to be the same as the book value.
Forward foreign currency contracts
The fair value of these contracts was calculated by determining what the Group would be expected to receive or pay on termination of each individual contract by comparison to present market prices.
LME derivative contracts
The fair value of these contracts has been calculated by valuing the contracts against the equivalent forward rates quoted on the LME.
Fair value hierarchy
At December 31, 2012, for those financial instruments of the Group recorded at fair value, the Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
|
December 31,
2012 |
Level 1 | Level 2 | Level 3 | |||||
---|---|---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
$M
|
|||||
Derivative financial liabilities at fair value through profit or loss: |
|||||||||
Forward foreign currency contracts |
0.2 | | 0.2 | | |||||
LME derivative contracts |
0.3 | | 0.3 | |
During the year ended December 31, 2012, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
F-55
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
29. Financial instruments (Continued)
(b) Interest rate risks
Interest rate risk profile on financial assets
This table shows the Group's financial assets as at December 31, which are cash at bank and in hand. These assets are all subject to floating interest rate risk.
Cash by currency:
|
December 31,
2012 |
December 31,
2011 |
|||
---|---|---|---|---|---|
|
$M
|
$M
|
|||
US Dollar |
14.5 | (2.2 | ) | ||
GBP |
16.9 | 18.2 | |||
Euro |
2.7 | 1.4 | |||
Australian Dollar |
0.6 | 0.5 | |||
Chinese Renminbi |
2.9 | 2.3 | |||
Czech Koruna |
2.0 | 2.0 | |||
Canadian Dollar |
0.6 | | |||
|
40.2 | 22.2 | |||
The Group earns interest on cash balances through either deposit accounts or placing funds on money markets at short-term fixed rates. In all cases, interest earned is at approximately LIBOR rates during the year.
Interest rate risk profile on financial liabilities
The following table sets out the carrying amount, by original maturity, of the Group's financial instruments that were exposed to both fixed and variable interest rate risk:
|
December 31, 2012 | December 31, 2011 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Within
12 months |
1-5
years |
> 5
years |
Total |
Within
12 months |
1-5
years |
> 5
years |
Total | |||||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||||
Fixed interest rate risk: |
|||||||||||||||||
Loan Notes due 2018 |
| | 65.0 | 65.0 | | | 65.0 | 65.0 | |||||||||
|
| | 65.0 | 65.0 | | | 65.0 | 65.0 | |||||||||
Variable interest rate risk: |
|||||||||||||||||
Revolving credit facility |
| | | | | 23.7 | | 23.7 | |||||||||
Term loan |
| | | | 3.1 | 44.8 | | 47.9 | |||||||||
|
| | | | 3.1 | 68.5 | | 71.6 | |||||||||
At December 31, 2012 the Group had no floating rate liabilities outstanding. At December 31, 2011 the Group's floating rate liabilities related to the term loan of $47.9 and the revolving credit facilities of $23.7 million.
F-56
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
29. Financial instruments (Continued)
(c) Hedging activities
Forward foreign exchange contracts
The Group utilizes forward foreign exchange contracts to hedge significant future transactions and cash flows to manage its exchange rate exposures. The contracts purchased are primarily denominated in Sterling, US dollars and Euros. The Group is also exposed to a number of other currencies like Australian dollars with hedges against these on a more ad hoc basis, when exposures are more significant.
At December 31, 2012, the fair value of forward foreign exchange contracts deferred in equity was a gain of $0.7 million (2011: gain of $1.2 million and 2010: gain of $0.1 million). During 2012 a loss of $0.2 million (2011: loss of $0.2 million and 2010: loss of $0.2 million) has been transferred to the income statement in respect of contracts that have matured in the year.
At December 31, 2012 and 2011 the Group held various foreign exchange contracts designated as hedges in respect of forward sales for US dollars, Euros, Canadian dollars and Japanese yen for the receipt of GBP sterling. The Group also held foreign exchange contracts designated as hedges in respect of forward purchases for US dollars and Euros by the sale of GBP sterling. The contract totals in GBP sterling, range of maturity dates and range of exchange rates are disclosed below:
December 31, 2012
Sales hedges |
US dollars | Euros |
Canadian
dollars |
||||
---|---|---|---|---|---|---|---|
Contract totals/£M |
42.8 | 30.3 | 2.5 | ||||
Maturity dates |
01/13 to 03/14 | 01/13 to 05/14 | 01/13 to 01/13 | ||||
Exchange rates |
$1.5433 to $1.6213 | €1.1880 to €1.2719 | $1.608 to $1.608 |
Purchase hedges
|
US dollars | Euros |
Canadian
dollars |
||||
---|---|---|---|---|---|---|---|
Contract totals/£M |
29.4 | 0.6 | N/A | ||||
Maturity dates |
01/13 to 03/14 | 01/13 to 01/13 | N/A | ||||
Exchange rates |
$1.5450 to $1.6234 | €1.2297 to €1.2297 | N/A |
December 31, 2011
Sales hedges |
US dollars | Euros |
Canadian
dollars |
||||
---|---|---|---|---|---|---|---|
Contract totals/£M |
40.6 | 26.8 | N/A | ||||
Maturity dates |
01/12 to 03/13 | 01/12 to 12/12 | N/A | ||||
Exchange rates |
$1.5434 to $1.6450 | €1.1120 to €1.1945 | N/A |
Purchase hedges
|
US dollars | Euros |
Canadian
dollars |
||||
---|---|---|---|---|---|---|---|
Contract totals/£M |
24.6 | N/A | N/A | ||||
Maturity dates |
01/12 to 01/13 | N/A | N/A | ||||
Exchange rates |
$1.5425 to $1.6438 | N/A | N/A |
F-57
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
29. Financial instruments (Continued)
Aluminum commodity contracts
The Group did not hold any forward aluminum commodity contracts at December 31, 2012 or December 31, 2011.
Forward rate interest rate agreements
The Group did not hold any forward rate interest rate agreements at December 31, 2012 or December 31, 2011.
LME derivative contracts
As at 31 December 2012, the Group has hedged 6,000 metric tons of aluminum for supply in 2013 using its new ancillary banking facilities. The fair value of LME derivative contracts deferred in equity was a loss of $0.3 million (2011: loss of $0.5 million and 2010: $nil).
(d) Foreign currency translation risk disclosures
Exchange gains and losses arising on the translation of the Group's non-US assets and liabilities are classified as equity and transferred to the Group's translation reserve. In 2012 a gain of $2.9 million (2011: loss of $5.4 million and 2010: gain of $0.2 million) was recognized in translation reserves.
(e) Un-drawn committed facilities
At December 31, 2012 the Group had committed banking facilities denominated in GBP sterling of £70.0 million ($114 million). At December 31, 2011 these committed banking facilities were £40.0 million ($62.1 million). The facilities were for providing short-term loans and overdrafts, with a sub-limit for letters of credit which at December 31, 2012 was £8.0 million ($13.0 million). At December 31, 2011 the sub-limit was £7.0 million ($10.9 million). Of these committed facilities, $nil (December 31, 2011: $23.7 million) of short-term loans and $nil million (December 31, 2011: $0.6 million) for letters of credit were drawn. The Group has a separate bonding facility for bank guarantees denominated in GBP sterling of £3.0 million ($4.6 million), of which £1.2 million ($2.0 million) was drawn at December 31, 2012. At December 31, 2011 the amount drawn on the bonding facility was £2.7 million ($4.2 million).
30. Retirement benefits
The Group operates defined benefit arrangements in the UK, the US and France. The levels of funding are determined by periodic actuarial valuations. Further, the Group also operates defined contribution plans in the UK, US and Australia. The assets of the plans are generally held in separate trustee administered funds.
Actuarial gains and losses are recognized in full in the period in which they occur. The liability recognized in the balance sheet represents the present value of the defined benefit obligation, as reduced by the fair value of plan assets. The cost of providing benefits is determined using the Projected Unit Credit Method.
F-58
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
30. Retirement benefits (Continued)
The principal defined benefit pension plan in the UK is the Luxfer Group Pension Plan, which closed to new members in 1998, new employees then being eligible for a defined contribution plan. With effect from April 2004 the Luxfer Group Pension Plan changed from a final salary to a career average revalued earnings benefit scale. In August 2005 a plan specific earnings cap of £60,000 per annum subject to inflation increases was introduced, effectively replacing the statutory earnings cap. In October 2007 the rate of the future accrual for pension was reduced and a longevity adjustment was introduced to mitigate against the risk of further increases in life expectancies. The pension cost of the Plan is assessed in accordance with the advice of an independent firm of professionally qualified actuaries, Lane Clark & Peacock LLP.
The Group's other arrangements are less significant than the Luxfer Group Pension Plan, the largest being the BA Holdings Inc Pension Plan in the US. In December 2005 the plan was closed to further benefit accrual with members being offered contributions to the Company's 401(k) plan.
The total charge to the Group's income statement for 2012 for retirement benefits was a cost of $6.5 million (2011: $2.1 million and 2010: $6.6 million).
The movement in the pension liability is shown below:
The financial assumptions used in the calculations are:
|
Projected Unit Valuation | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
United Kingdom | Non United Kingdom | |||||||||||
|
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||
|
%
|
%
|
%
|
%
|
%
|
%
|
|||||||
Discount Rate |
4.40 | 4.90 | 5.50 | 4.20 | 4.70 | 5.50 | |||||||
Salary Inflation |
4.00 | 4.10 | 4.50 | | | | |||||||
Retail Price Inflation |
3.00 | 3.10 | 3.50 | | | | |||||||
Consumer Price Inflation |
2.30 | 2.10 | 2.80 | | | | |||||||
Pension increasespre 6 April 1997 |
2.40 | 2.40 | 2.60 | | | | |||||||
19972005 |
2.90 | 3.00 | 3.40 | | | | |||||||
post 5 April 2005 |
2.10 | 1.90 | 2.20 | | | |
F-59
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
30. Retirement benefits (Continued)
The assets in the plan and expected rate of long-term return were:
|
Long-term rate
of return expected |
||||||||
---|---|---|---|---|---|---|---|---|---|
|
United
Kingdom |
Non United
Kingdom |
|||||||
|
2011 | 2010 | 2011 | 2010 | |||||
|
%
|
%
|
%
|
%
|
|||||
Equities and Growth Funds |
7.40 | 7.60 | 7.80 | 8.10 | |||||
Gilts |
2.80 | 4.20 | | | |||||
Other Bonds |
4.60 | 5.20 | 4.40 | 5.10 | |||||
Cash |
2.80 | 4.20 | | |
Under the new IAS19, which applies for accounting periods beginning on or after January 1, 2013, there is no longer a need to set an assumption for the expected return on assets, hence the 2012 long-term expected rate of return is not disclosed.
Other principal actuarial assumptions:
|
2012
|
2011
|
2010
|
||||
---|---|---|---|---|---|---|---|
|
Years | Years | Years | ||||
Life expectancy of male in the UK aged 65 in 2012 |
20.3 | 20.4 | 20.3 | ||||
Life expectancy of male in the UK aged 65 in 2032 |
22.1 | 21.5 | 21.5 |
The amounts recognized in income in respect of the pension plans are as follows:
|
2012
|
2012
|
2012
|
2011
|
2011
|
2011
|
2010
|
2010
|
2010
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
UK | Non UK | Total | UK | Non UK | Total | UK | Non UK | Total | ||||||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
||||||||||
In respect of defined benefit plans |
|||||||||||||||||||
Current service cost |
1.2 | | 1.2 | 0.8 | | 0.8 | 0.8 | 0.0 | 0.8 | ||||||||||
Interest cost |
14.7 | 3.0 | 17.7 | 15.5 | 3.1 | 18.6 | 14.8 | 3.1 | 17.9 | ||||||||||
Expected return on plan assets |
(13.2 | ) | (2.5 | ) | (15.7 | ) | (15.8 | ) | (2.9 | ) | (18.7 | ) | (12.8 | ) | (2.8 | ) | (15.6 | ) | |
Past service cost/(credit) |
0.1 | | 0.1 | (1.6 | ) | | (1.6 | ) | | | | ||||||||
Total charge/(credit) for defined benefit plans |
2.8 | 0.5 | 3.3 | (1.1 | ) | 0.2 | (0.9 | ) | 2.8 | 0.3 | 3.1 | ||||||||
In respect of defined contribution plans |
|||||||||||||||||||
Total charge for defined contribution plans |
1.3 | 1.9 | 3.2 | 1.3 | 1.7 | 3.0 | 1.8 | 1.7 | 3.5 | ||||||||||
Total charge for pension plans |
4.1 | 2.4 | 6.5 | 0.2 | 1.9 | 2.1 | 4.6 | 2.0 | 6.6 | ||||||||||
Of the charge for the year, charges of $4.4 million and $2.1 million (2011: $2.5 million and $1.2 million; 2010 $4.4 million and $2.2 million) have been included in cost of sales and administrative costs respectively, with a credit of $nil million (2011: $1.6 million and 2010: $nil) being included in restructuring and other income (expense).
F-60
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
30. Retirement benefits (Continued)
For the year, the amount of loss recognized in the Statement of Comprehensive Income is $21.3 million (2011: loss of $54.0 million and 2010: gain of $4.4 million).
The actual return of the plan assets was a gain of $29.0 million (2011: loss of $9.9 million and 2010: gain of $30.1 million). The overall expected rate of return is determined on the basis of the market prices prevailing at the respective balance sheet date, applicable to the period over which the obligation is to be settled.
The value of the plan assets were:
|
2012
|
2012
|
2012
|
2011
|
2011
|
2011
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
UK | Non UK | Total | UK | Non UK | Total | |||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||
Equities and Growth Funds |
187.1 | 29.8 | 216.9 | 170.3 | 23.9 | 194.2 | |||||||
Gilts |
15.8 | | 15.8 | 14.0 | | 14.0 | |||||||
Other Bonds |
63.4 | 23.1 | 86.5 | 52.0 | 18.9 | 70.9 | |||||||
Cash |
0.6 | | 0.6 | 0.3 | | 0.3 | |||||||
Total market value of assets |
266.9 | 52.9 | 319.8 | 236.6 | 42.8 | 279.4 | |||||||
Present value of plan liabilities |
(343.7 | ) | (72.8 | ) | (416.5 | ) | (295.1 | ) | (66.7 | ) | (361.8 | ) | |
Deficit in the plan |
(76.8 | ) | (19.9 | ) | (96.7 | ) | (58.5 | ) | (23.9 | ) | (82.4 | ) | |
Related deferred tax asset |
17.7 | 7.7 | 25.4 | 14.6 | 9.0 | 23.6 | |||||||
Net pension liability |
(59.1 | ) | (12.2 | ) | (71.3 | ) | (43.9 | ) | (14.9 | ) | (58.8 | ) | |
Analysis of movement in the present value of the defined benefit obligations:
|
2012
|
2012
|
2012
|
2011
|
2011
|
2011
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
UK | Non UK | Group | UK | Non UK | Group | |||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||
At January 1 |
295.1 | 66.7 | 361.8 | 274.8 | 57.6 | 332.4 | |||||||
Service cost |
1.2 | | 1.2 | 0.8 | | 0.8 | |||||||
Interest cost |
14.7 | 3.0 | 17.7 | 15.5 | 3.1 | 18.6 | |||||||
Contributions from plan members |
0.8 | | 0.8 | 0.8 | | 0.8 | |||||||
Age related NI rebate |
0.2 | | 0.2 | 0.3 | | 0.3 | |||||||
Actuarial losses and (gains) |
29.1 | 5.5 | 34.6 | 17.1 | 8.3 | 25.4 | |||||||
Exchange difference |
14.6 | | 14.6 | (1.8 | ) | 0.1 | (1.7 | ) | |||||
Benefits paid |
(12.1 | ) | (2.4 | ) | (14.5 | ) | (10.8 | ) | (2.4 | ) | (13.2 | ) | |
Past service cost/(credit) |
0.1 | | 0.1 | (1.6 | ) | | (1.6 | ) | |||||
At December 31 |
343.7 | 72.8 | 416.5 | 295.1 | 66.7 | 361.8 | |||||||
The defined benefit obligation comprises $1.4 million (December 31, 2011: $1.2 million) arising from unfunded plans and $415.1 million (December 31, 2011: $360.6 million) from plans that are funded.
F-61
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
30. Retirement benefits (Continued)
The sensitivities regarding the principal assumptions used to measure the present value of the defined benefit obligations are set out below:
Assumption
|
Change in assumption |
Impact on total
defined benefit obligations |
||
---|---|---|---|---|
Discount rate |
Increase/decrease by 1.0% | Decrease/increase by 17% | ||
Inflation |
Increase/decrease by 1.0% | Increase/decrease by 9% | ||
Post retirement mortality |
Increase by 1 year | Increase by 3% |
Analysis of movement in the present value of the fair value of plan assets:
|
2012
|
2012
|
2012
|
2011
|
2011
|
2011
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
UK | Non UK | Group | UK | Non UK | Group | |||||||
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
|||||||
At January 1 |
236.6 | 42.8 | 279.4 | 246.1 | 45.1 | 291.2 | |||||||
Expected return on plan assets |
13.2 | 2.5 | 15.7 | 15.8 | 2.9 | 18.7 | |||||||
Actuarial gains |
8.7 | 4.6 | 13.3 | (24.1 | ) | (4.5 | ) | (28.6 | ) | ||||
Exchange difference |
11.5 | | 11.5 | (1.9 | ) | (0.1 | ) | (2.0 | ) | ||||
Contributions from employer |
8.0 | 5.4 | 13.4 | 10.4 | 1.8 | 12.2 | |||||||
Contributions from plan members |
0.8 | | 0.8 | 0.8 | | 0.8 | |||||||
Age related NI rebate |
0.2 | | 0.2 | 0.3 | | 0.3 | |||||||
Benefits paid |
(12.1 | ) | (2.4 | ) | (14.5 | ) | (10.8 | ) | (2.4 | ) | (13.2 | ) | |
At December 31 |
266.9 | 52.9 | 319.8 | 236.6 | 42.8 | 279.4 | |||||||
Amounts for the current and previous four years are as follows:
|
2012
|
2012
|
2012
|
||||
---|---|---|---|---|---|---|---|
|
UK | Non UK | Group | ||||
Total market value of plan assets $M |
266.9 | 52.9 | 319.8 | ||||
Present value of plan liabilities $M |
(343.7 | ) | (72.8 | ) | (416.5 | ) | |
Deficit in the plan $M |
(76.8 | ) | (19.9 | ) | (96.7 | ) | |
Difference between the expected and actual return on plan assets: |
|||||||
Amount $M |
8.7 | 4.6 | 13.3 | ||||
Percentage of plan assets |
3 | % | 9 | % | 4 | % | |
Experience gains and losses on plan liabilities: |
|||||||
Amount $M |
0.2 | | 0.2 | ||||
Percentage of present value of plan liabilities |
0 | % | 0 | % | 0 | % | |
Total cumulative amount recognized in Statement of Comprehensive Income: |
|||||||
Amount $M |
78.3 | 24.7 | 103.0 | ||||
Percentage of present value of plan liabilities |
23 | % | 34 | % | 25 | % |
F-62
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
30. Retirement benefits (Continued)
|
2011
|
2011
|
2011
|
2010
|
2010
|
2010
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
UK | Non UK | Group | UK | Non UK | Group | |||||||
Total market value of plan assets $M |
236.6 | 42.8 | 279.4 | 246.1 | 45.1 | 291.2 | |||||||
Present value of plan liabilities $M |
(295.1 | ) | (66.7 | ) | (361.8 | ) | (274.8 | ) | (57.6 | ) | (332.4 | ) | |
Deficit in the plan $M |
(58.5 | ) | (23.9 | ) | (82.4 | ) | (28.7 | ) | (12.5 | ) | (41.2 | ) | |
Difference between the expected and actual return on plan assets: |
|||||||||||||
Amount $M |
(24.1 | ) | (4.5 | ) | (28.6 | ) | 12.3 | 2.1 | 14.5 | ||||
Percentage of plan assets |
(10 | )% | (11 | )% | (10 | )% | 5 | % | 5 | % | 5 | % | |
Experience gains and losses on plan liabilities: |
|||||||||||||
Amount $M |
3.5 | 0.5 | 4.0 | 1.7 | | 1.7 | |||||||
Percentage of present value of plan liabilities |
1 | % | 1 | % | 1 | % | 1 | % | 0 | % | 1 | % | |
Total cumulative amount recognized in Statement of Comprehensive Income: |
|||||||||||||
Amount $M |
58.0 | 23.7 | 81.7 | 14.7 | 10.0 | 24.7 | |||||||
Percentage of present value of plan liabilities |
20 | % | 36 | % | 23 | % | 5 | % | 17 | % | 7 | % |
|
2009
|
2009
|
2009
|
2008
|
2008
|
2008
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
UK | Non UK | Group | UK | Non UK | Group | |||||||
Total market value of plan assets $M |
231.7 | 40.4 | 272.1 | 184.8 | 33.0 | 217.8 | |||||||
Present value of plan liabilities $M |
(272.2 | ) | (53.0 | ) | (325.2 | ) | (207.7 | ) | (52.1 | ) | (259.8 | ) | |
Deficit in the plan $M |
(40.5 | ) | (12.6 | ) | (53.1 | ) | (22.9 | ) | (19.1 | ) | (42.0 | ) | |
Difference between the expected and actual return on plan assets: |
|||||||||||||
Amount $M |
22.6 | 6.8 | 29.3 | (62.1 | ) | (19.0 | ) | (81.1 | ) | ||||
Percentage of plan assets |
10 | % | 17 | % | 11 | % | (34 | )% | (58 | )% | (37 | )% | |
Experience gains and losses on plan liabilities: |
|||||||||||||
Amount $M |
0.9 | (0.2 | ) | 0.7 | | | | ||||||
Percentage of present value of plan liabilities |
0 | % | (0 | )% | 0 | % | | | | ||||
Total cumulative amount recognized in Statement of Comprehensive Income: |
|||||||||||||
Amount $M |
20.3 | 8.3 | 28.6 | 4.8 | 17.9 | 22.7 | |||||||
Percentage of present value of plan liabilities |
7 | % | 16 | % | 9 | % | 2 | % | 34 | % | 9 | % |
The estimated amount of employer contributions expected to be paid to the defined benefit pension plans for the year ending December 31, 2013 is $15.4 million (2012: $13.4 million actual employer contributions).
F-63
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
31. The Luxfer Group Employee Share Ownership Plan
The trust
In 1997, the Group established an employee benefit trust ("the ESOP") with independent trustees, to purchase and hold shares in the Company in trust to be used to satisfy options granted to eligible senior employees under the Company's share plans established from time to time.
The ESOP was established with the benefit of a gift equivalent to the set up and running costs. Purchase monies and costs required by the ESOP trustees to purchase shares for and under the provisions of the trust are provided by way of an interest free loan from a Group subsidiary. The loan is repayable, in normal circumstances, out of monies received from senior employees when they exercise options granted to them over shares. Surplus shares are held by the ESOP trustees to satisfy future option awards. The ESOP trustees have waived their right to receive dividends on shares held in trust. The Remuneration Committee is charged with determining which senior employees are to be granted options and in what number subject to the relevant plan rules.
The current plan
The current share option plan, implemented by the Company in February 2007 is The Luxfer Holdings Executive Share Option Plan ("the Plan"), which consists of two parts. Part A of the Plan is approved by HM Revenue & Customs and Part B is unapproved. Options can be exercised at any time up to the tenth anniversary of their grant subject to the rules of the relevant part of the Plan. As a result of the I.P.O all leaver restrictions over the shares were released. There is no other performance criteria attached to the options.
Movements in the year
The movement in the number of shares held by the trustees of the ESOP and the number of share options held over those shares are shown below:
|
Number of shares held
by ESOP Trustees |
Number of options held
over £1 ordinary shares |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
£0.0001
deferred shares |
£1
ordinary shares |
£0.97
options held |
£1.40
options held |
£3
options held |
£4
options held |
Total
options held |
||||||||
At January 1, 2012 |
15,977,968,688 | 114,474 | 15,200 | 9,600 | 41,600 | 29,510 | 95,910 | ||||||||
Options granted during the year |
| | | | | | | ||||||||
Options exercised during the year |
| (20,800 | ) | | | (20,800 | ) | | (20,800 | ) | |||||
Options lapsed during the year |
| | | (9,600 | ) | | | (9,600 | ) | ||||||
At December 31, 2012 |
15,977,968,688 | 93,674 | 15,200 | | 20,800 | 29,510 | 65,510 | ||||||||
As at December 31, 2012 the loan outstanding from the ESOP was $3.5 million (December 31, 2011: $3.4 million). The share options vested immediately on their grant date and could have been exercised at any time from this grant date. During 2011 the price of the share options granted was estimated to be the fair value of the share options and therefore there was no charge under IFRS 2.
F-64
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
31. The Luxfer Group Employee Share Ownership Plan (Continued)
During the year ended December 31, 2012, 20,800 options were exercised over £1 ordinary shares held by the Trustees of the ESOP and 9,600 options lapsed.
The market value of each £1 ordinary shares held by the ESOP as at December 13, 2012 was $24.54.
32. Share based compensation
Luxfer Holdings PLC Long-Term Umbrella Incentive Plan and Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan
As an important retention tool and to align the long-term financial interests of our management with those of our shareholders, the Group adopted the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan (the "LTIP") for the Group's senior employees, and the Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan (the "Director EIP") for the Non-Executive Directors.
The equity or equity-related awards under the LTIP and the Director EIP will be based on the ordinary shares or ADSs of the Group. The Remuneration Committee will administer the LTIP and will have the power to determine to whom the awards will be granted, the amount, type and other terms. Awards under the EIP are non-discretionary and purely time-based.
In January 2013, 306,200 Restricted Stock Units and Options over ADSs, equivalent to 153,100 ordinary shares, were granted under the LTIP. In March 2013, 1,924 ADS Restricted Stock, equivalent to 962 ordinary shares, was granted under the Director EIP.
I.P.O Option Awards
As a tool to retain key people and align their interests with those of shareholders, a one-off award of market-value options was made to a small number of executives and the non-executive directors immediately prior to the I.P.O.
40% of the options granted vested immediately and 20% of the options will vest upon each of the first, second and third anniversaries of the I.P.O.
|
2012 | 2011 | 2010 | ||||
---|---|---|---|---|---|---|---|
|
$M
|
$M
|
$M
|
||||
I.P.O related share based compensation charge |
0.8 | | |
There were no cancellations or modifications to the awards in 2012.
F-65
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
32. Share based compensation (Continued)
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year, with each option relating to 1 American Depositary Share:
|
2012
|
2012
|
2011
|
2011
|
2010
|
2010
|
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Number | WAEP | Number | WAEP | Number | WAEP | |||||||
At January 1 |
| | | | | | |||||||
Granted during the year |
816,400 | $10.00 | | | | | |||||||
At December 31 |
816,400 | $10.00 | | | | | |||||||
The weighted average remaining contractual life for the share options outstanding as at 31 December 2012 was 7 years.
The weighted average fair value of options granted during the year was $2.45.
The exercise price for options outstanding at the end of the year was $10.00.
The following tables list the inputs to the models used for the plans for the year ended 31 December 2012:
|
2012 | ||
---|---|---|---|
Dividend yield (%) |
3.0 | ||
Expected volatility range (%) |
40.7 42.7 | ||
Risk-free interest rate (%) |
0.16 0.61 | ||
Expected life of share options range (years) |
1 5 | ||
Weighted average exercise price ($) |
$10.00 | ||
Model used |
Black-Scholes |
The expected life of the share options is based on historical data and current expectations and is not necessary indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
33. Related party transactions
Joint venture in which the Group is a venturer
During 2012, the Group maintained its 51% investment in the equity of the joint venture Luxfer Uttam India Private Limited, as disclosed in Note 15. During 2012, the Gas Cylinders division made $0.7 million of sales to the joint venture. At December 31, 2012, the amounts receivable from the joint venture in relation to these sales amounted to $0.7 million and this amount is separately disclosed within Note 17Trade and Other Receivables.
F-66
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in millions)
33. Related party transactions (Continued)
Transactions with other related parties
As at December 31, 2012 the Directors and key management comprising the members of the Executive Management Board, owned 734,645 £1 ordinary shares (2011: 748,175 £1 ordinary shares) and held options over a further 334,810 £1 ordinary shares (2011: 29,510 £1 ordinary shares).
During the years ended December 31, 2012 and December 31, 2011, no share options held by members of the Executive Management board were exercised.
Other than the transactions with the joint venture Luxfer Uttam India Private Limited disclosed above and key management personnel disclosed above, no other related party transactions have been identified.
F-67
EXHIBIT 4.1
Dated 13 May 2011
as amended on 14 June 2011 and as amended and restated on 30 November 2012
LUXFER HOLDINGS PLC
LLOYDS TSB BANK PLC and CLYDESDALE BANK PLC (TRADING AS YORKSHIRE BANK)
as Mandated Lead Arrangers
THE PARTIES LISTED IN PART 1 OF SCHEDULE 1
as Borrowers
THE PARTIES LISTED IN PART 2 OF SCHEDULE 1
as Guarantors
LLOYDS TSB BANK PLC
as Agent
SENIOR FACILITIES AGREEMENT
Contents
|
|
|
Page |
|
Clause |
|
|
|
|
|
|
1 |
Definitions and interpretation |
|
1 |
2 |
The Facility |
|
34 |
3 |
Purpose |
|
36 |
4 |
Conditions of utilisation |
|
37 |
5 |
Utilisation |
|
38 |
6 |
Optional currencies |
|
40 |
7 |
Ancillary Facilities |
|
40 |
8 |
Bilateral Facilities |
|
45 |
9 |
Repayment |
|
45 |
10 |
Illegality, voluntary prepayment and cancellation |
|
46 |
11 |
Mandatory prepayment |
|
48 |
12 |
Restrictions |
|
50 |
13 |
Interest |
|
50 |
14 |
Interest Periods |
|
51 |
15 |
Changes to the calculation of interest |
|
52 |
16 |
Fees |
|
54 |
17 |
Tax gross up and indemnities |
|
55 |
18 |
Increased costs |
|
65 |
19 |
Other indemnities |
|
66 |
20 |
Mitigation by the Lenders |
|
67 |
21 |
Costs and expenses |
|
68 |
22 |
Guarantee and indemnity |
|
68 |
23 |
Representations |
|
72 |
24 |
Information undertakings |
|
82 |
25 |
Financial covenants |
|
87 |
26 |
General undertakings |
|
92 |
27 |
Events of Default |
|
101 |
28 |
Changes to the Lenders |
|
107 |
29 |
Restriction on Debt Purchase Transactions |
|
112 |
30 |
Changes to the Obligors |
|
113 |
31 |
Role of the Agent, the Arrangers and others |
|
115 |
32 |
Conduct of business by the Finance Parties |
|
123 |
33 |
Sharing among the Finance Parties |
|
123 |
34 |
Payment mechanics |
|
125 |
35 |
Set-off |
|
128 |
36 |
Notices |
|
129 |
37 |
Calculations and certificates |
|
131 |
38 |
Partial invalidity |
|
131 |
39 |
Remedies and waivers |
|
131 |
40 |
Amendments and waivers |
|
131 |
41 |
Confidentiality |
|
134 |
42 |
Publicity |
|
138 |
43 |
Counterparts |
|
138 |
44 |
Governing law |
|
138 |
45 |
Enforcement |
|
138 |
|
|
|
|
|
Schedule |
|
|
|
|
|
|
1 |
Part 1 - Original Borrowers |
|
140 |
|
Part 2 - Original Guarantors |
|
140 |
|
Part 3 - The Original Lenders |
|
141 |
|
Commitments as at the Restatement Date |
|
141 |
2 |
Conditions precedent |
|
142 |
|
Part 1 - Conditions precedent to signing this Agreement |
|
142 |
|
Part 2 - Conditions precedent to initial Utilisation |
|
144 |
|
Part 3 - Conditions precedent required to be delivered by an Additional Obligor |
|
148 |
3 |
Requests and Notices |
|
150 |
|
Part 1 Utilisation Request |
|
150 |
|
Part 2 - Not used |
|
152 |
|
Part 3 - Withdrawal Request |
|
153 |
4 |
Mandatory Cost Formula |
|
154 |
5 |
Form of Transfer Certificate |
|
157 |
6 |
Form of Assignment Agreement |
|
160 |
7 |
Form of Accession Deed |
|
164 |
8 |
Form of Resignation Letter |
|
167 |
9 |
Form of Compliance Certificate |
|
168 |
10 |
Timetables |
|
170 |
11 |
Form of Increase Confirmation |
|
171 |
12 |
Forms of Notifiable Debt Purchase Transaction Notice |
|
175 |
|
Part 1 - Form of Notice on Entering into Notifiable Debt Purchase Transaction |
|
175 |
|
Part 2 - Form of Notice on Termination of Notifiable Debt Purchase Transaction / Notifiable Debt Purchase Transaction ceasing to be with Sponsor Affiliate |
|
176 |
This Agreement dated 13 May 2011 as amended on 14 June 2011 and as amended and restated on 30 November 2012
Between
(1) Luxfer Holdings PLC (registered in England and Wales with number 3690830) ( Company );
(2) The parties listed in part 1 schedule 1 ( Original Borrowers );
(3) The parties listed in part 2 of schedule 1 ( Original Guarantors );
(4) Lloyds TSB Bank plc and Clydesdale Bank plc (trading as Yorkshire Bank) as mandated lead arrangers (whether acting individually or together the Arrangers );
(5) The Financial Institutions listed in part 3 (The Original Lenders) of schedule 1 as lenders ( Original Lenders );
(6) Lloyds TSB Bank plc, Clydesdale Bank PLC (trading as Yorkshire Bank) and Bank of America N.A. as ancillary facilities providers ( Original Ancillary Lenders ); and
(7) Lloyds TSB Bank plc as agent of the other Finance Parties ( Agent ).
It is agreed
1 Definitions and interpretation
1.1 Definitions
In this Agreement:
ABL Facility means the facility provided pursuant to the facility agreement dated 26 April 2006 between the Company and Bank of America. N.A (in various capacities)
Acceptable Bank means:
(a) a Lender (provided that such Lender is not a Defaulting Lender)
(b) a bank or financial institution which has a rating for its short-term unsecured and non credit-enhanced debt obligations of A-1 or higher by Standard & Poors Rating Services, F(1) + or higher by Fitch Ratings Ltd or P-1 or higher by Moodys Investors Service Limited or a comparable rating from an internationally recognised credit rating agency or
(c) any other bank or financial institution approved by the Agent, or if the Agent is an Impaired Agent the Majority Lenders
Accession Deed means a document substantially in the form set out in schedule 7 (Form of Accession Deed)
Accounting Principles means the international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements or if required by the applicable law the generally acceptable accounting principles of the US
Accounting Reference Date has the meaning given to it in section 391 of the CA 2006
Additional Borrower means a company which becomes an Additional Borrower in accordance with clause 30.2 (Additional Borrowers)
Additional Cost Rate has the meaning given to it in schedule 4 (Mandatory Cost Formula)
Additional Guarantor means a company which becomes an Additional Guarantor in accordance with clause 30.4 (Additional Guarantors)
Additional Obligor means an Additional Borrower or an Additional Guarantor
Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company
Agents Spot Rate of Exchange means the Agents spot rate of exchange for the purchase of the relevant currency with the Base Currency in the London foreign exchange market at or about 11.00 a.m. on a particular day
Amendment and Restatement Agreement means the amendment and restatement agreement relating to this Agreement made between the Parties and dated on or around the Restatement Date
Ancillary Commencement Date means, in relation to an Ancillary Facility, the date on which that Ancillary Facility is first made available, which date shall be a Business Day within the Availability Period
Ancillary Commitment means, in relation to an Ancillary Lender and an Ancillary Facility, the maximum Base Currency Amount which that Ancillary Lender has agreed to make available from time to time under an Ancillary Facility and which has been authorised as such under clause 7 (Ancillary Facilities), to the extent that amount is not cancelled or reduced under this Agreement or the Ancillary Documents relating to that Ancillary Facility
Ancillary Document means each document relating to or evidencing the terms of an Ancillary Facility
Ancillary Facility means any ancillary facility made available by an Ancillary Lender in accordance with clause 7 (Ancillary Facilities)
Ancillary Lender means any Lender which makes available an Ancillary Facility in accordance with clause 7 (Ancillary Facilities), initially being the Original Ancillary Lenders
Ancillary Outstandings means, at any time, in relation to an Ancillary Lender and an Ancillary Facility then in force the aggregate of the equivalents (as calculated by that Ancillary Lender) in the Base Currency of the following amounts outstanding under that Ancillary Facility:
(a) the principal amount under each overdraft facility (net of any credit balances on any account of any Borrower of an Ancillary Facility with the Ancillary Lender making available that Ancillary Facility to the extent that the credit balances are freely available to be set off by that Ancillary Lender against liabilities owed to it by that Borrower under that Ancillary Facility)
(b) the face amount of each letter of credit under that Ancillary Facility (less any amount prepaid or repaid in respect of such instrument and taking account of any decrease in the liability under such instrument as a consequence of a decrease in the underlying liability in respect of which such instrument was issued) and
(c) the amount fairly representing the aggregate exposure (excluding interest and similar charges) of that Ancillary Lender under each other type of accommodation provided under that Ancillary Facility,
in each case as determined by such Ancillary Lender, acting reasonably in accordance with its normal banking practice and in accordance with the relevant Ancillary Document
Annual Financial Statements means the financial statements for a Financial Year delivered pursuant to clause 24.1(a) (Financial statements)
Anti-Terrorism Law means any US state or federal law relating to terrorism or money laundering, including the Executive Order, the USA Patriot Act and the Money Laundering Control Act of 1986, Public Law 99-570
Articles means the articles of association of the Company
Assignment Agreement means an agreement substantially in the form set out in schedule 6 (Form of Assignment Agreement) or any other form agreed between the relevant assignor and assignee provided that if that other form does not contain the undertaking set out in the form set out in schedule 6 (Form of Assignment Agreement) it shall not be a Creditor/Agent Accession Undertaking as defined in, and for the purposes of, the Intercreditor Deed
Auditors means one of PricewaterhouseCoopers LLP, Ernst & Young LLP, KPMG Audit PLC, Deloitte & Touche LLP, Grant Thornton LLP, Soren McAdam Christenson LLP or any other firm approved in advance by the Majority Lenders (such approval not to be unreasonably withheld or delayed)
Authorisation means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration
Availability Period means the period from and including the date of this Agreement to and including the date falling 1 Month before the Termination Date
Available Commitment means a Lenders Commitment, minus:
(a) the Base Currency Amount of its participation in any outstanding Loans and, the Base Currency Amount of the aggregate of its Ancillary Commitments and
(b) in relation to any duly requested proposed Loan, the Base Currency Amount of its participation in any other Loans that are due to be made on or before the proposed Utilisation Date and, the Base Currency Amount of its Ancillary Commitment in relation to any new Ancillary Facility that is due to be made available on or before the proposed Utilisation Date
For the purposes of calculating a Lenders Available Commitment in relation to any proposed Loan, the following amounts shall not be deducted from a Lenders Commitment:
(i) that Lenders participation in any Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date and
(ii) that Lenders Ancillary Commitments to the extent that they are due to be reduced or cancelled on or before the proposed Utilisation Date
Available Facility means the aggregate for the time being of each Lenders Available Commitment in respect of the Facility
Base Case Model means the financial model dated 4 April 2011 in agreed form prepared by the Company including profit and loss account, balance sheet and cashflow projections relating to the Group
Base Currency means sterling
Base Currency Amount means:
(a) in relation to a Loan, the amount specified in the Utilisation Request delivered by a Borrower (or the Company on its behalf) for that Loan (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the Agents Spot Rate of Exchange on the date which is 3 Business Days before the Utilisation Date or, if later, on the date the Agent receives the Utilisation Request in accordance with the terms of this Agreement)
(b) in relation to an Ancillary Commitment, the amount specified as such in the notice delivered to the Agent by the Company pursuant to clause 7.2 (Availability) or
(c) if the amount specified is not denominated in the Base Currency, that amount converted into the Base Currency at the Agents Spot Rate of Exchange on the date which is 3 Business Days before the Ancillary Commencement Date for that Ancillary Facility or, if later, the date the Agent receives the notice of the Ancillary Commitment in accordance with the terms of this Agreement
as adjusted to reflect any repayment, prepayment or consolidation of a Loan, or (as the case may be) cancellation or reduction of an Ancillary Facility
Base Reference Bank Rate means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request by the Base Reference Banks:
(a) in relation to LIBOR, as the rate at which the relevant Base Reference Bank could borrow funds in the London interbank market or
(b) in relation to EURIBOR, as the rate at which the relevant Base Reference Bank could borrow funds in the European interbank market
in the relevant currency and for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period
Base Reference Banks means, in relation to LIBOR, the principal London offices of Lloyds TSB Bank plc, Clydesdale Bank plc and Bank of America and, in relation to EURIBOR, the principal office of Lloyds TSB Bank plc, Clydesdale Bank plc and Bank of America or such other banks as may be appointed by the Agent in consultation with the Company
Bilateral Document means each document relating to or evidencing the terms of a Bilateral Facility
Bilateral Facility means a bilateral facility made available to an Obligor by a Bilateral Lender in accordance with clause 8 (Bilateral Facilities)
Bilateral Lender means each Lender
Bilateral Limit means in respect of each Bilateral Lender the amount set opposite its name under the heading Bilateral Limit in part 3 (The Original Lenders) of schedule 1 (or its
equivalent in any currency) each Bilateral Lenders exposure and limit being calculated in accordance with the relevant Bilateral Lenders usual policy
Borrower means an Original Borrower or an Additional Borrower unless it has ceased to be a Borrower in accordance with clause 30 (Changes to the Obligors)
Break Costs means the amount (if any) by which:
(a) the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the amount of the Loan or Unpaid Sum received been paid on the last day of that Interest Period
exceeds:
(b) the amount which that Lender would be able to obtain by placing an amount equal to the amount of the Loan or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period
Budget means:
(a) in relation to the period beginning on 1 January 2011 and ending on 31 December 2011, the Base Case Model to be delivered by the Company to the Agent pursuant to clause 4.1 (Initial conditions precedent) and
(b) in relation to any other period, the budget delivered by the Company to the Agent in respect of that period pursuant to, and in accordance with, clause 24.4 (Budget)
Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London, and:
(a) in relation to any date for payment or purchase of a currency other than euro, the principal financial centre of the country of that currency or
(b) in relation to any date for payment or purchase of euro, any TARGET Day
CA2006 means the Companies Act 2006
Cash Equivalent Investments means at any time:
(a) certificates of deposit maturing within 6 Months after the relevant date of calculation and issued by an Acceptable Bank
(b) any investment in marketable debt obligations issued or guaranteed by the government of the United States of America or any member state of the European Economic Area, or by an instrumentality or agency of any of them having an equivalent credit rating, maturing within 3 Months after the relevant date of calculation and not convertible or exchangeable to any other security
(c) commercial paper not convertible or exchangeable to any other security:
(i) for which a recognised trading market exists
(ii) issued by an issuer incorporated in the United States of America or any member State of the European Economic Area
(iii) which matures within 3 Months after the relevant date of calculation and
(iv) which has a credit rating of either A-1 or higher by Standard & Poors Rating Services, F-1 or higher by Fitch Ratings Ltd or P-1 or higher by Moodys Investors Service Limited, or, if no rating is available in respect of the commercial paper, the issuer of which has, in respect of its long-term unsecured and non-credit enhanced debt obligations, an equivalent rating
(d) any investment in money market funds which
(i) have a credit rating of either A-1 or higher by Standard & Poors Rating Services, F-1 or higher by Fitch Ratings Ltd or P-1 or higher by Moodys Investors Service Limited
(ii) invest substantially all their assets in securities of the types described in paragraphs (a) to (c) and
(iii) can be turned into cash on not more than 30 days notice or
(e) any other debt security approved by the Majority Lenders
in each case, denominated in sterling or an Optional Currency and to which an Obligor is alone or together with other Obligors beneficially entitled at that time and which is not issued or guaranteed by any member of the Group or subject to any Security
Change of Control means any person or group of persons acting in concert gains direct or indirect control of the Company. For the purposes of this definition:
(a) control of the Company means:
(i) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:
(A) cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the Company or
(B) appoint or remove all, or the majority, of the directors or other equivalent officers of the Company or
(C) give directions with respect to the operating and financial policies of the Company with which the directors or other equivalent officers of the Company are obliged to comply
(ii) (the holding beneficially of more than 50% of the issued share capital of the Company (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital)
(b) acting in concert means, a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the
acquisition, directly or indirectly, of shares in the Company by any of them, either directly or indirectly, to obtain or consolidate control of the Company
Closing Date means the date the Agent gives the notice to the Company pursuant to clause 4.1(c)
Commitment means:
(a) in relation to an Original Lender, the amount in the Base Currency set opposite its name in part 3 (Original Lenders) of schedule 1 and the amount of any other commitment transferred to it under this Agreement or assumed by it in accordance with clause 2.2 (Increase) and
(b) in relation to any other Lender, the amount in the Base Currency of any Commitment transferred to it under this Agreement or assumed by it in accordance with clause 2.2 (Increase)
to the extent not cancelled, reduced or transferred by it under this Agreement
Compliance Certificate means a certificate substantially in the form set out in schedule 9 (Form of Compliance Certificate)
Confidential Information means all information relating to the Company, any Obligor, the Group, the Finance Documents or the Facility in respect of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:
(a) any member of the Group, or any of its advisers or
(b) another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:
(i) is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of clause 41 (Confidentiality) or
(ii) is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers or
(iii) is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality
Confidentiality Undertaking means a confidentiality undertaking substantially in the recommended form of the LMA for the time being or in any other form agreed between the Company and the Agent
Contribution Notice means a contribution notice issued by the Pensions Regulator under section 38 or section 47 of the Pensions Act 2004
CTA means the Corporation Tax Act 2009
Czech Subsidiary means Magnesium Elektron Recycling CZ S.R.O.
Debenture means the debenture entered into by the Original Obligors pursuant to clause 4.1
Debt Purchase Transaction means, in relation to a person, a transaction where such person:
(a) purchases by way of assignment or transfer
(b) enters into any sub-participation in respect of or
(c) enters into any other agreement or arrangement having an economic effect substantially similar to a sub-participation in respect of
any Commitment or amount outstanding under this Agreement
Default means an Event of Default or any event or circumstance specified in clause 27 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default
Defaulting Lender means any Lender (other than Lender which is a Sponsor Affiliate):
(a) which has failed to make its participation in a Loan available or has notified the Agent that it will not make its participation in a Loan available, in each case, by the Utilisation Date of that Loan in accordance with clause 5.4 (Lenders participation) or
(b) which has otherwise rescinded or repudiated a Finance Document
unless, in the case of paragraph (a) above
(i) its failure to pay is caused by
(A) administrative or technical error or
(B) a Disruption Event and
and payment is made within 5 Business Days of its due date or
(ii) the Lender is disputing in good faith whether it is contractually obliged to make the payment in question
Defined Benefit Scheme means each of the following:
(a) Luxfer Group Pension Plan
(b) Luxfer Group Supplementary Pension Plan
(c) BA Holdings inc. Defined Benefit Pension Plan
(d) Pension Plan for Hourly Employees of Luxfer Inc
(e) BA Holdings Inc. Executive Supplemental Retirement Plan
(f) IPC Supplementary Pension scheme and
(g) IDR Termination Indemnities
Designated Gross Amount has the meaning given to that term in clause 7.2 (Availability)
Designated Net Amount has the meaning given to that term in clause 7.2 (Availability)
Designated Person means a person:
(a) listed on the annex to the Executive Order
(b) owned or controlled by, or acting for or on behalf of, any person listed on the annex to the Executive Order
(c) listed on the Specially Designated Nationals and Blocked Persons list maintained by OFAC of the United States Department of the Treasury, as updated or amended from time to time
(d) whose property has been blocked, or is subject to seizure, forfeiture or confiscation, under any applicable Anti-Terrorism Law or
(e) that commits, threatens or conspires to commit or support terrorism as defined in the Executive Order
Disruption Event means either or both of:
(a) a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties or
(b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:
(i) from performing its payment obligations under the Finance Documents or
(ii) from communicating with other Parties in accordance with the terms of the Finance Documents
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted
Dormant Subsidiary means a member of the Group which does not trade (for itself or as agent for any person) and does not own, legally or beneficially, assets (including indebtedness owed to it) which in aggregate have a value of £20,000 or more or its equivalent in other currencies
Employee Plan means, at any time, an employee pension benefit plan as defined in section 3(2) of ERISA and subject to Title IV of ERISA (other than a Multiemployer Plan) then
or at any time during the previous six years maintained for, or contributed to (or to which there is or was an obligation to contribute) on behalf of, employees of any Obligor or ERISA Affiliate
Environment means humans, animals, plants and all other living organisms including the ecological systems of which they form part and the following media:
(a) air (including, without limitation, air within natural or man made structures, whether above or below ground)
(b) water (including, without limitation, territorial, coastal and inland waters, water under or within land and water in drains and sewers) and
(c) land (including, without limitation, land under water)
Environmental Claim means any claim, proceeding, formal notice or investigation by any person in respect of any Environmental Law
Environmental Law means any applicable law or regulation which relates to:
(a) the pollution or protection of the Environment
(b) the conditions of the workplace or
(c) the generation, handling, storage, use, release or spillage of any substance which alone, or in combination with any other, is capable of causing harm to the Environment, including without limitation, any waste
Environmental Permits means any permit and other Authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any member of the Group conducted on or from any Real Property owned or used by any member of the Group
ERISA means the US Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder
ERISA Affiliate means each person (as defined in section 3(9) of ERISA) that is a member of a controlled group of, or under common control with, any Obligor, within the meaning of section 414 of the Internal Revenue Code
ERISA Event means any of the following events:
(a) any reportable event, as defined in section 4043(c) of ERISA, with respect to an Employee Plan as to which the PBGC has not by regulation waived the requirement of section 4043(a) of ERISA that it be notified within thirty days of the occurrence of that event. However, a failure to meet the minimum funding standard of section 412 of the Internal Revenue Code or section 302 of ERISA shall be a reportable event for the purposes of this paragraph (a) regardless of the issuance of any waiver under said sections
(b) the requirements of subsection (1) of section 4043(b) of ERISA (without regard to subsection (2) of that section) are met with respect to a contributing sponsor, as defined in section 4001(a)(13) of ERISA, of an Employee Plan and an event described in paragraph (9), (10), (11), (12) or (13) of section 4043(c) of ERISA is reasonably expected to occur with respect to that Employee Plan within the following 30 days
(c) the filing under section 4041(c) of ERISA of a notice of intent to terminate any Employee Plan
(d) the termination of any Employee Plan under section 4041(c) of ERISA
(e) the institution of proceedings under section 4042 of ERISA by the PBGC for the termination of, or the appointment of a trustee to administer, any Employee Plan
(f) the failure to make a required contribution to any Employee Plan that would result in the imposition of an encumbrance pursuant to section 412 of the Internal Revenue Code or section 302 of ERISA or
(g) engagement with an Employee Plan in a non-exempt prohibited transaction within the meaning of section 4975 of the Internal Revenue Code or section 406 of ERISA other than as a result of entering into this Agreement
ESOP means the Luxfer Group Employee Share Ownership Plan established by a deed of trust dated 3 November 1997
EURIBOR means, in relation to any Loan in euro:
(a) the applicable Screen Rate or
(b) if no Screen Rate is available for the Interest Period of that Loan, the Base Reference Bank Rate
as of the Specified Time on the Quotation Day in euro and a period comparable to the Interest Period of that Loan
Event of Default means any event or circumstance specified as such in clause 27 (Events of Default)
Excluded Deposit Account means each of the following deposit accounts:
(a) any deposit account specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of the Company or any of its Subsidiarys salaried employees
(b) any deposit account credited at any time with an amount not exceeding $100,000 (or its equivalent in any currency) individually and, when aggregated with the amounts in all other such accounts, $500,000 (or its equivalent in any currency)
(c) any deposit account, the balance of which consists solely of funds set aside in connection with tax, trust or similar accounts that are or are or will be promptly applied in the ordinary course of business toward valid applicable obligations of such Obligor
(d) any lock-box deposit account the balance of which is swept on a daily basis into other deposit accounts of the Company or any of its Subsidiaries that are deposit accounts as set forth under the preceding limbs (a) - (c) (inclusive)
Executive Order means Executive Order No. 13224 of September 23, 2001- Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism
Existing Notes means £71,850,977 floating rate notes due 2012 issued by the Company
Existing Note Documents means:
(a) the indenture dated 6 February 2007 made between the Company and The Bank of New York; and
(b) each note issued pursuant to the indenture referred to in limb (a) above
Facility means the revolving credit facility made available under this Agreement as described in clause 2.1(a) (The Facility)
Facility Office means:
(a) in respect of a Lender, the office or offices notified by that Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than 7 days written notice) as the office or offices through which it will perform its obligations under this Agreement or
(b) in respect of any other Finance Party, the office in the jurisdiction in which it is resident for tax purposes
FATCA has the meaning given to that term in clause 17.1 (Tax gross up and indemnities)
FATCA Application Date means:
(a) in relation to a withholdable payment described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 January 2014
(b) in relation to a withholdable payment described in section 1473(1)(A)(ii) of the Code (which relates to gross proceeds from the disposition of property of a type that can produce interest from sources within the US), 1 January 2015 or
(c) in relation to a passthru payment described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2017
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement
FATCA Deduction means a deduction or withholding from a payment under a Finance Document required by FATCA
FATCA Exempt Party means a Party that is entitled to receive payments free from any FATCA Deduction
Fee Letter means:
(a) any letter or letters dated on or about the date of this Agreement between:
(i) the Original Lenders and the Company or
(ii) the Agent and the Company
setting out any of the fees referred to in clause 2.2(e) (Increase) or clause 16 (Fees) and
(b) the Amendment Fee Letter (as defined in the Amendment and Restatement Agreement)
Finance Document means this Agreement, any Accession Deed, the Amendment and Restatement Agreement, any Ancillary Document, any Bilateral Document, any Compliance Certificate, any Fee Letter, any Hedging Agreement, the Intercreditor Deed, any Resignation Letter, any Utilisation Request and any other document designated as a Finance Document by the Agent and the Company
provided that where the term Finance Document is used in, and construed for the purposes of, this Agreement or the Intercreditor Deed, a Hedging Agreement shall be a Finance Document only for the purposes of:
(a) the definition of Material Adverse Effect
(b) paragraph (a) of the definition of Permitted Transaction
(c) the definition of Transaction Document
(d) clause 1.2(a)(iv) ( Interpretation )
(e) clause 22 (Guarantee and indemnity) and
(f) clause 27 (Events of Default) (other than clause 27.15 (Repudiation and rescission of agreements) and clause 27.20 (Acceleration))
provided that where the term Finance Document is used in, and construed for the purposes of, this Agreement or the Intercreditor Deed, a Bilateral Document shall be a Finance Document only for the purposes of clause 22 (Guarantee and indemnity)
Finance Lease means any lease or hire purchase contract which would, in accordance with the Accounting Principles, be treated as a finance or capital lease
Finance Party means the Agent, the Arrangers, a Lender, a Hedge Counterparty, any Ancillary Lender or any Bilateral Lender
provided that where the term Finance Party is used in, and construed for the purposes of, this Agreement or the Intercreditor Deed, a Hedge Counterparty shall be a Finance Party only for the purposes of:
(a) clause 1.2(a)(i) (Interpretation)
(b) paragraph (c) of the definition of Material Adverse Effect
(c) clause 22 (Guarantee and indemnity) and
(d) clause 32 (Conduct of business by the Finance Parties)
provided that where the term Finance Party is used in, and construed for the purposes of, this Agreement or the Intercreditor Deed, a Bilateral Lender shall be a Finance Party only for the purposes of clause 22 (Guarantee and indemnity)
Financial Indebtedness means, without double counting, any indebtedness for or in respect of:
(a) monies borrowed and debit balances at banks or other financial institutions
(b) acceptance under any acceptance credit or bill discounting facility (or dematerialised equivalent)
(c) any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument
(d) any Finance Leases
(e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis)
(f) any Treasury Transaction (and, when calculating the value of that Treasury Transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that Treasury Transaction, that amount) shall be taken into account)
(g) any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution in respect of (i) an underlying liability of an entity which is not a member of the Group which liability would fall within one of the other paragraphs of this definition
(h) any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to raise finance or to finance the acquisition or construction of the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than 180 days after the date of supply
(i) any amount raised under any other transaction (including any forward sale or purchase sale and sale back or sale and leaseback agreement) having the commercial or economic effect of a borrowing or otherwise classified as borrowings under the Accounting Principles
(j) any amount raised by the issue of redeemable shares which are redeemable (other than at the option of the issuer) before the Termination Date or are otherwise classified as borrowings under the Accounting Principles
(k) the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs (a) to (j)
Financial Quarter has the meaning given to that term in clause 25 (Financial covenants)
Financial Support Direction means a financial support direction issued by the Pensions Regulator under section 43 of the Pensions Act 2004
Financial Year has the meaning given to that term in clause 25 (Financial covenants)
Fraudulent Transfer Law means any applicable US Bankruptcy Law (including, without limitation, section 548 of Title 11 of the US Bankruptcy Law) or any US state fraudulent transfer or conveyance statute or any relevant case law
French Subsidiary means Luxfer Gas Cylinders S.A.S
Funds Flow Statement means a funds flow statement in agreed form
Group means the Company and each of its Subsidiaries for the time being
Group Structure Chart means the group structure chart to be delivered by the Company to the Agent pursuant to clause 4.1 (Initial conditions precedent)
Guarantor means an Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with clause 30 (Changes to the Obligors)
Hedge Counterparty means any person which has become a Party as a Hedge Counterparty in accordance with clause 28.8 (Accession of Hedge Counterparties) which has become, a party to the Intercreditor Deed as a Hedge Counterparty in accordance with the provisions of the Intercreditor Deed
Hedging Agreement means any master agreement, confirmation, schedule or other agreement in agreed form entered into or to be entered into by the relevant Borrower and a Hedge Counterparty for the purpose of hedging the types of liabilities and/or risks which, at the time that the master agreement, confirmation, schedule or other agreement (as the case may be) is entered into, the Hedging Letter requires to be hedged
Hedging Letter means the letter dated on or before the date of this Agreement and made between the Agent and the Company describing the hedging arrangements to be entered into in respect of the interest rate liabilities of the Borrowers
Holding Company means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary
Impaired Agent means the Agent at any time when:
(a) it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment
(b) the Agent otherwise rescinds or repudiates as Finance Document
(c) (if the Agent is also a Lender) it is a Defaulting Lender under paragraph (a) or (b) of the definition of Defaulting Lender and, in the case of the events or circumstances referred to in paragraph (a), none of the exceptions apply to that paragraph or
(d) an Insolvency Event has occurred and is continuing with respect to the Agent
unless, in the case of paragraph (a) above:
(i) its failure to pay is caused by:
(A) administrative or technical error, or
(B) a Disruption Event and
(ii) payment is made within 5 Business Days of its due date or
(iii) the Agent is disputing in good faith whether it is contractually obliged to make the payment in question
Increase Confirmation means a confirmation substantially in the form set out in schedule 11 (Form of Increase Confirmation)
Increase Lender has the meaning given to that term in clause 2.2 (Increase)
Internal Revenue Code means the US Internal Revenue Code of 1986, as amended from time to time, and any and all regulations and rulings issued thereunder
Information Memorandum means the document dated 7 January 2011 in the form approved by the Company concerning the Group which, at the request of the Company and on its behalf in relation to this transaction prior to the date of this Agreement in connection with the Facility
Information Package means the Base Case Model and the Information Memorandum
Insolvency Event means, in relation to a Finance Party:
(a) any receiver, administrative receiver, administrator, liquidator, compulsory manager or other similar officer is appointed in respect of that Finance Party or all or substantially all of its assets
(b) that Finance Party is subject to any event which has an analogous effect to any of the events specified in paragraph (a) under the applicable laws of any jurisdiction or
(c) that Finance Party suspends making payments on all or substantially all of its debts or publicly announces an intention to do so
Intellectual Property means:
(a) any patents, trade marks, service marks, designs, business names, copyrights, database rights, design rights, domain names, moral rights, inventions, confidential information, know-how and other intellectual property rights and interests (which may now or in the future subsist), whether registered or unregistered and
(b) the benefit of all applications and rights to use such assets of each member of the Group (which may now or in the future subsist)
Intercreditor Deed means the intercreditor deed dated the same date as this Deed and as amended and restated on or around the Restatement Date and made between, among others, the Company, the Debtors (as defined in the Intercreditor Agreement), Lloyds TSB Bank plc as senior agent, the Lenders (as Senior Lenders), the Arrangers (as Senior Arrangers), the Ancillary Lenders (as Senior Lenders), the Hedge Counterparties (each as defined in the Intercreditor Deed), each Bilateral Lender, the Noteholders and the Intra-Group Lenders (as defined in the Intercreditor Deed)
Interest Period means, in relation to a Loan, each period determined in accordance with clause 14 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with clause 13.3 (Default interest)
ITA means the Income Tax Act 2007
Joint Venture means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership or any other entity
Legal Reservations means:
(a) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors
(b) the time barring of claims under the Limitation Acts, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim
(c) the possibility that the courts may recharacterise any security purporting to be a fixed charge as a floating charge (or vice versa) and
(d) similar principles, rights and defences under the laws of any Relevant Jurisdiction
Lender means:
(a) any Original Lender and
(b) any bank, financial institution, trust, fund or other entity which has become a Party as a Lender in accordance with clause 2.2 (Increase) or clause 28 (Changes to the Lenders)
which in each case has not ceased to be a Lender in accordance with the terms of this Agreement
LIBOR means, in relation to any Loan:
(a) the applicable Screen Rate or
(b) (if no Screen Rate is available for the currency or Interest Period of that Loan) the Base Reference Bank Rate
as of the Specified Time on the Quotation Day for the currency of that Loan and a period comparable to the Interest Period of that Loan and if any such rate is below zero, LIBOR will be deemed to be zero
Limitation Acts means the Limitation Act 1980 and the Foreign Limitation Periods Act 1984
LMA means the Loan Market Association
Loan means a loan made or to be made under the Facility or the principal amount outstanding for the time being of that loan
Major Breach means any breach of:
(a) clause 26.7 (Change of business)
(b) clause 26.8 (Acquisitions)
(c) clause 26.11 ( Pari passu ranking )
(d) clause 26.12 (Negative pledge)
(e) clause 26.13 (Disposals)
(f) clause 26.15 (Loans or credit)
(g) clause 26.16 (No Guarantees or indemnities)
(h) clause 26.17 (Dividends and share redemption)
(i) clause 26.18 (Notes)
(j) clause 26.19 (Financial Indebtedness) and
(k) clause 26.21 (Insurance)
Major Default means any of the following Events of Default:
(a) clause 27.1 (Non-payment)
(b) clause 27.2 (Financial covenants and other obligations)
(c) clause 27.3 (Other obligations) but only insofar as it relates to a Major Breach
(d) clause 27.4 (Misrepresentation) but only insofar as it relates to a Major Representation
(e) clause 27.6 (Insolvency) and clause 27.7 (Insolvency proceedings) and
(f) clause 27.9 (Unlawfulness and invalidity) and clause 27.15 (Repudiation and rescission of agreements) and
(g) clause 27.19 (ERISA)
Majority Lenders means a Lender or Lenders whose Commitments aggregate more than 66 2 / 3 per cent of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 2 / 3 per cent of the Total Commitments immediately prior to that reduction)
Major Representation means each of the representations set out in clause 23.2 (Status) to clause 23.6(a) (Validity and admissibility in evidence) inclusive, clause 23.25 (Obligors), clause 23.31 (US Regulations) and clause 23.32 (Sanctions)
Mandatory Cost means the percentage rate per annum calculated by the Agent in accordance with schedule 4 (Mandatory Cost Formula)
Margin means:
(a) subject to clause 15.1 (Margin adjustment), in relation to each Loan, 2.5% per annum
(b) in relation to any Unpaid Sum relating or referable to the Facility, the rate per annum specified for the Facility and
(c) in relation to any other Unpaid Sum, the highest rate specified above
Margin Stock shall have the meaning ascribed to such term under Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System
Material Adverse Effect means in the reasonable opinion of the Majority Lenders a material adverse effect on:
(a) the business, operations, property, condition (financial or otherwise) or prospects of the Group taken as a whole
(b) the ability of an Obligor to perform its payment obligations under the Finance Documents (taking into account the financial resources available to that Obligor from other members of the Group) or
(c) the rights or remedies of any Finance Party under any of the Finance Documents
Material Company means, at any time:
(a) an Obligor
(b) a wholly-owned member of the Group that holds shares in an Obligor or
(c) a Subsidiary of the Company which has earnings before interest, tax and amortisation calculated on the same basis as EBITA representing 5% or more of EBITA, or has gross assets, (excluding intra-group items) representing 5%, or more of the gross assets of the Group, calculated on a consolidated basis
Compliance with the conditions set out in paragraph (c) shall be determined by reference to the most recent Compliance Certificate supplied by the Company and/or the latest audited financial statements of that Subsidiary (consolidated in the case of a Subsidiary which itself has Subsidiaries) and the latest audited consolidated financial statements of the Group. However, if a Subsidiary has been acquired since the date as at which the latest audited consolidated financial statements of the Group were prepared, the financial statements shall be deemed to be adjusted in order to take into account the acquisition of that Subsidiary (that adjustment being certified by the Groups Auditors as representing an accurate reflection of the revised EBITA and gross assets of the Group)
A report by the Auditors of the Company that a Subsidiary is or is not a Material Company shall, in the absence of manifest error, be conclusive and binding on all Parties
Material Provision means each of clause 24.1 (Financial statements) to 24.3 (Requirements as to financial statements), clause 26.6 (Merger) to 26.8 (Acquisitions) (inclusive), clause 26.11 (Pari passu ranking), clause 26.12 (Negative pledge), clause 26.13 (Disposals), clauses 26.15 (Loans or credit) to 26.19 (Financial Indebtedness) (inclusive), clause 26.21 (Insurance) and clause 26.35 (ERISA)
Month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a) (subject to paragraph (c)) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day
(b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month and
(c) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end
The above rules will only apply to the last Month of any period
Monthly Financial Statements means the financial statements delivered pursuant to clause 24.1(b) (Financial statements)
Multiemployer Plan means, at any time, a multiemployer plan (as defined in section 4001(a)(3) of ERISA) then or at any time during the previous five years maintained for, or contributed to (or to which there is or was an obligation to contribute) on behalf of, employees of any Obligor or an ERISA Affiliate
New Lender has the meaning given to it in clause 28.1 (Assignments and transfers by the Lenders)
Notes means the notes issued pursuant to the Note Documents
Note Documents means:
(a) the note purchase agreement for up to US $65,000,000 entered into by BA Holdings Inc on or around the date of this Agreement
(b) the guarantee entered into by each Obligor on or around the Closing Date in the form set out in the note purchase agreement referred to in limb (a) above and
(c) each note issued pursuant to the note purchase agreement referred to in limb (a) above
(d) the hedging letter issued pursuant to the note purchase agreement referred to in limb (a) above
(e) a letter dated 21 March 2011 between the Company and Pricoa Capital Group and
(f) any other Note Document as defined in the note purchase agreement referred to in limb (a) above
Notifiable Debt Purchase Transaction has the meaning given to that term in clause 29.2 (Disenfranchisement on Debt Purchase Transactions entered into by Sponsor Affiliates)
Obligor means a Borrower or a Guarantor
OFAC means the Office of Foreign Asset Control of the US Department of the Treasury
Optional Currency means a currency (other than the Base Currency) which complies with the conditions set out in clause 4.3 (Conditions relating to Optional Currencies)
Original Financial Statements means:
(a) in relation to the Company (i) in respect of any representation to be given on the date of this Agreement, its consolidated audited financial statements for its financial year ended 31 December 2009 and its consolidated unaudited financial statements for its financial year ended 31 December 2010 and (ii) in any other respect its consolidated audited financial statements for its financial year ended 31 December 2010
(b) in relation to the Company the consolidated unaudited monthly management accounts for the period from 1 January 2011 to 31 March 2011
(c) in relation to each other member of the Group (other than BA Holdings Inc, Luxfer Australia Pty Limited, Hart Metals Inc, MEL Chemicals Inc, Magnesium Elektron North America Inc, Niagra Metallurgical Products Limited and Reade Manufacturing Company), its audited financial statements for the financial year ended 31 December 2009 and
(d) in relation to any other Obligor, its audited financial statements delivered to the Agent as required by clause 30 (Changes to the Obligors)
Original Obligor means an Original Borrower or an Original Guarantor
Participating Member State means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union
Party means a party for the time being to this Agreement
PBGC means the Pension Benefit Guaranty Corporation of the US established pursuant to section 4002 of ERISA or any entity succeeding to all or any of its functions under ERISA
Pensions Regulator means the body corporate called the Pensions Regulator established under Part I of the Pensions Act 2004
Permitted Acquisition means:
(a) an acquisition pursuant to a Permitted Share Issue
(b) the incorporation of a company which on incorporation becomes a member of the Group, but only if that company is incorporated in England and Wales or the US with limited liability
(c) an acquisition by a member of the Group of an asset sold, leased, transferred or otherwise disposed of by another member of the Group in circumstances constituting a Permitted Disposal
(d) an acquisition (not being an acquisition by the Company), of (A) all of the issued share capital of a limited liability company or (B) (if the acquisition is made by a limited liability company) a business or undertaking carried on as a going concern, but only if:
(i) no Default is continuing on the closing date for the acquisition or would occur as a result of the acquisition;
(ii) the acquired company, business or undertaking:
(A) is engaged in a business substantially the same as that carried on by the Group and
(B) is incorporated or established, and carries on its principal business in a jurisdiction in which an existing member of the Group operates and not in any jurisdiction that is on a restricted list for a Finance Party
(iii) Leverage (as shown in the latest Compliance Certificate) does not exceed 2.5:1
(iv) the Company has delivered to the Lender not later than 5 Business Days prior to it (or the relevant member of the Group) legally committing to make such acquisition, a certificate signed by two directors of the Company:
(A) giving notice to the Agent of the proposed acquisition and
(B) to which is attached forecasts (which have been prepared on the basis of recent historical information and reasonable assumptions, and which assume that the acquisition has occurred), demonstrating that the Company will remain in compliance with its obligations under clause 25 (Financial covenants) for a period of not less than 12 Months from the closing date for the acquisition and
(v) the consideration (including associated costs and expenses) for the acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in the acquired company (or any such business) at the date of acquisition (when aggregated with the consideration (including associated costs and expenses) for any other Permitted Acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in any such acquired companies or businesses at the time of acquisition (the Total Purchase Price )) does not exceed in aggregate £15,000,000 (or its equivalent) or
(e) an acquisition permitted by the Agent (acting on the instructions of the Majority Lenders (such consent not to be unreasonably withheld or delayed)) in writing
Permitted Cash Balance means £10,000,000 (or its equivalent in any currency)
Permitted Disposal means any sale, lease, licence, transfer or other disposal which, except in the case of paragraph (b), is on arms length terms:
(a) of trading stock or cash made by any member of the Group in the ordinary course of trading of the disposing entity
(b) of any asset by a member of the Group (Disposing Company) to another member of the Group (Acquiring Company), but if:
(i) the Disposing Company is an Obligor, the Acquiring Company must also be an Obligor and
(ii) the Disposing Company is a Guarantor, the Acquiring Company must be a Guarantor guaranteeing at all times an amount no less than that guaranteed by the Disposing Company
(c) of assets in exchange for other assets comparable or superior as to type, value or quality
(d) of assets to a Permitted Joint Venture
(e) of obsolete or redundant vehicles, plant and equipment for cash
(f) of Cash Equivalent Investments for cash or in immediate exchange for other Cash Equivalent Investments
(g) constituted by a licence of intellectual property rights permitted by clause 26.24 (Intellectual Property)
(h) arising as a result of any Permitted Security
(i) of cash by way of a Permitted Loan
(j) of cash in order to complete a Permitted Acquisition
(k) of assets for cash where the higher of the market value or the net consideration receivable in respect of such asset when aggregated with the higher of the market value or the net consideration receivable for any other sale, lease, licence, transfer or other disposal of an asset not allowed under the preceding paragraphs) does not exceed £8,000,000 (or its equivalent) in aggregate and does not exceed £2,000,000 (or its equivalent) in any Financial Year or
(l) that is a Permitted Transaction
Permitted Distribution means:
(a) the payment of a dividend to any member of the Group by any of that member of the Groups Subsidiaries
(b) the payment of a dividend by the Company provided:
(i) no Default has occurred and is continuing or would result from such payment
(ii) Leverage (as shown in latest Compliance Certificate) does not exceed 2.5:1 and
(iii) at the time the proposed dividend is made the forecasted Leverage for the next 12 month (assuming payment of any proposed dividends during that period) does not exceed 2.5:1
(c) the redemption of up to £50,000 B preference shares at par value (plus any accrued dividend) issued by the Company to Brian Purves and Ian Mckinnon or
(d) the payment of any other dividend agreed between the Company and the Agent (acting on the instructions of the Majority Lenders)
Permitted Financial Indebtedness means Financial Indebtedness:
(a) arising under any of the Finance Documents, the Note Documents, in each case as in force on the date of this Agreement and amended from time to time in compliance with this Agreement and the Intercreditor Deed
(b) arising under a Permitted Loan, a Permitted Guarantee or as permitted by clause 26.28 (Treasury transactions)
(c) arising under a foreign exchange transaction for spot or forward delivery entered into in connection with protection against fluctuation in currency rates where that foreign exchange exposure arises in the ordinary course of trade or in respect of Loans made in Optional Currencies, but not a foreign exchange transaction for investment or speculative purposes
(d) under finance or capital leases of vehicles, plant, equipment or computers, provided that the aggregate capital value of all such items so leased under outstanding leases by members of the Group does not exceed £10,000,000 (or its equivalent in other currencies) at any time
(e) of a company that becomes a member of the Group as a result of a Permitted Acquisition provided that the Financial Indebtedness is repaid in full within 45 days of that company becoming a member of the Group
(f) arising under any Bilateral Facility
(g) not permitted by the preceding paragraphs and the outstanding amount does not exceed £400,000 (or its equivalent) in aggregate for the Group at any time
(h) performance bonds issued in the ordinary course of trading in respect of non-financial obligations
(i) any Financial Indebtedness (existing as at the date of this Agreement) pursuant to the ABL Facility and/or the Existing Note Documents so long as the Financial Indebtedness is irrevocably discharged no later than the Closing Date
(j) permitted by the Agent (acting on the instructions of the Majority Lenders) in writing and
(k) such other Financial Indebtedness not permitted by the preceding paragraphs, provided that the outstanding principal amount of all Financial Indebtedness of the Group (including the Financial Indebtedness permitted pursuant to paragraphs (a) to (j) above) does not exceed £145,000,000 (or its equivalent) in aggregate for the Group at any time
Permitted Guarantee means:
(a) the endorsement of negotiable instruments in the ordinary course of trade
(b) any guarantee to a property landlord of which a member of the Group is a tenant
(c) any performance or similar bond guaranteeing performance by a member of the Group under any contract entered into in the ordinary course of trade
(d) any guarantee or indemnity arising under any Transaction Document
(e) any indemnity given by a member of the Group for its liabilities in the ordinary course of trade
(f) a guarantee in respect of Financial Indebtedness permitted under limb (h) of the definition of Permitted Financial Indebtedness
(g) a guarantee of Financial Indebtedness as part of a Permitted Joint Venture
(h) a guarantee in respect of obligations of an Obligor or a guarantee by a non-Obligor in respect of the obligations of another member of the Group made in the ordinary course of business
(i) any guarantee given in respect of the netting or set-off arrangements permitted pursuant to paragraph (c) of the definition of Permitted Security
(j) any guarantee or indemnity given by a member of the Group in respect of any obligations of an employee or officer of a member of the Group, which obligations shall not exceed £100,000 (or its equivalent) in aggregate for all such obligations supported by such guarantee or indemnity pursuant to this clause (j) outstanding at any time or
(k) any guarantee (existing as at the date of this Agreement) given in respect of the Financial Indebtedness in relation to the ABL Facility or the Existing Note Documents so long as such guarantees are irrevocably released, removed or discharged no later than the Closing Date
Permitted Joint Venture means any investment by any member of the Group:
(a) where the joint venture interest is held through an entity incorporated or formed with limited liability and
(i) the joint venture entity is incorporated or established, and carries on its principal business in a jurisdiction in which an existing member of the Group operates and not in any jurisdiction that is on a restricted list for a Finance Party
(ii) as at the date of the joint venture investment by the relevant member of the Group:
(A) Leverage (as shown in the latest Compliance Certificate) does not exceed 2.5:1 and
(B) the Company has delivered to the Lender not later than 5 Business Days prior to the relevant member of the Group legally committing to make such joint venture investment, a certificate signed by two directors of the Company:
1) giving notice to the Agent of the proposed joint venture investment and
2) to which is attached forecasts (which have been prepared on the basis of recent historical information and reasonable assumptions, and which assume that the joint venture investment has occurred), demonstrating that the Company will remain in compliance with its obligations under clause 25 (Financial covenants) for a period of not less than 12 Months from the date of the joint venture investment
(iii) the joint venture investment is made on arms length terms
(iv) that entity carries on or owns the same, a similar, complementary or related business to that carried on by the Group and
(v) the aggregate (without double counting) of:
(A) all outstanding amounts lent, advances, contributed to or for equity in, or otherwise invested in, all such entities by members of the Group and
(B) the market value (at the date of transfer or contribution) of all assets transferred or contributed to all such entities by members of the Group to the extent exceeding the value of the consideration for such transfers or contributions and
(C) all outstanding Financial Indebtedness incurred (whether by way of guarantee or otherwise) in relation to all such entities by members of the Group
shall not after the date of this Agreement, when taken together with any contingent liability of the Permitted Joint Venture, exceed £15,000,000 (or its equivalent) or
(b) permitted by the Agent acting on the instruction of the Majority Lenders (such consent not to be unreasonably withheld or delayed) in writing
Permitted Loan means:
(a) any trade credit extended by any member of the Group to its customers on normal commercial terms and in the ordinary course of its trading activities
(b) Financial Indebtedness which is referred to in the definition of, or otherwise constitutes, Permitted Financial Indebtedness
(c) any loan made to a Permitted Joint Venture
(d) any loan or advance made to employees of any member of the Group which loans and advances shall not exceed £100,000 in aggregate for all loans to employees (or its equivalent) outstanding at any time
(e) any loan, advance or other financial facility in an aggregate amount not to exceed £500,000 in any calendar year made available to the trustee of the ESOP, the trustee of any other employee share ownership plan or similar trust or to an employee whether for the purpose of acquiring ordinary, preference or deferred shares in the Company or any member of the Group, provided that such loan, advance or other financial facility may not exceed £5,000,000 at any one time outstanding
(f) a loan made by an Obligor to another Obligor or made by a member of the Group which is not an Obligor to another member of the Group
(g) any loan made by an Obligor to a member of the Group which is not an Obligor so long as:
(i) the aggregate amount of the Financial Indebtedness under any such loans does not exceed £10,000,000 (or its equivalent) at any time or
(ii) such loan is funded by the issue of shares pursuant to limb (a) of the definition of Permitted Share Issue or
(h) any loan (other than a loan that would fall within one of the limbs set out above) so long as the aggregate amount of Financial Indebtedness under any such loan does not exceed £500,000 (or its equivalent) at any time
Permitted Security means:
(a) any lien arising by operation of law and in the ordinary course of trading and not as a result of any default or omission by any member of the Group
(b) any netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances of members of the Group but only so long as (i) such arrangement does not permit credit balances of Obligors to be netted or set off against debit balances of members of the Group which are not Obligors and (ii) such arrangement does not give rise to other Security over the assets of Obligors in support of liabilities of members of the Group which are not Obligors
(c) any payment or close out netting or set-off arrangement pursuant to any Treasury Transaction or foreign exchange transaction entered into by a member of the Group which constitutes Permitted Financial Indebtedness, excluding any Security or Quasi-Security under a credit support arrangement
(d) any Security or Quasi-Security arising under any retention of title, hire purchase or conditional sale arrangement or arrangements having similar effect in respect of goods supplied to a member of the Group in the ordinary course of trading and on the suppliers standard or usual terms and not arising as a result of any default or omission by any member of the Group
(e) any Quasi-Security arising as a result of a disposal which is a Permitted Disposal
(f) any Security or Quasi-Security arising as a consequence of any finance or capital lease permitted pursuant to paragraph (d) of the definition of Permitted Financial Indebtedness
(g) not used or
(h) any Security or Quasi-Security (existing as at the date of this Agreement) over the assets of the Group pursuant to the ABL Facility so long as the Security or Quasi-Security is irrevocably released, removed or discharged no later than the Closing Date
Permitted Share Issue means an issue of:
(a) ordinary shares by the Company, paid for in full in cash upon issue and which by their terms are not redeemable and where such issue does not lead to a Change of Control of the Company
(b) any shares issued in connection with the ESOP where such issue does not lead to a Change of Control and
(c) shares by a member of the Group (other than the Company) which is a Subsidiary to any Holding Company
Permitted Transaction means:
(a) any disposal required, Financial Indebtedness incurred, guarantee, indemnity or Security or Quasi-Security given, or other transaction arising, under the Finance Documents
(b) the solvent liquidation or reorganisation of any member of the Group which is not an Obligor so long as any payments or assets distributed as a result of such liquidation or reorganisation are distributed to other members of the Group or
(c) transactions (other than (i) any sale, lease, license, transfer or other disposal and (ii) the granting or creation of Security or the incurring or permitting to subsist of Financial Indebtedness) conducted in the ordinary course of trading on arms length terms
Qualifying Lender has the meaning given to that term in clause 17 (Tax gross up and indemnities)
Quarter Date means the last day of a Financial Quarter
Quarterly Financial Statements means the financial statements for each Financial Quarter delivered pursuant to clause 24.1 (Financial statements)
Quasi-Security has the meaning given to that term in clause 26.12 (Negative pledge)
Quotation Day means, in relation to any period for which an interest rate is to be determined:
(a) if the currency is sterling, the first day of that period
(b) if the currency is euro, 2 TARGET Days before the first day of that period or
(c) for any other currency, 2 Business Days before the first day of that period
unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than 1 day, the Quotation Day will be the last of those days)
Real Property means:
(a) any freehold, leasehold, commonhold or immovable property and
(b) any buildings, fixtures, fittings, fixed plant or machinery from time to time situated on or forming part of that freehold, leasehold, commonhold or immovable property
Receiving Agent means The Bank of New York
Regulation T , Regulation U or Regulation X means Regulation T, U or, as the case may be, X of the Board of Governors of the Federal Reserve System of the US (or any successor) as from time to time in effect and all official rulings and interpretations thereunder or thereof
Related Fund in relation to a fund ( first fund ), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or adviser is an Affiliate of the investment manager or investment adviser of the first fund
Relevant Interbank Market means:
(a) in relation to euro, the European interbank market and
(b) in relation to any other currency, the London interbank market
Relevant Jurisdiction means, in relation to an Obligor:
(a) its jurisdiction of incorporation and
(b) any jurisdiction where it conducts its business
Relevant Period has the meaning given to that term in clause 25 (Financial covenants)
Repeating Representations means each of the representations set out in clause 23.2 (Status) to clause 23.7 (Governing law and enforcement) (inclusive), clause 23.11 (No default), clause 23.12(g) (No misleading information), clause 23.13 (f), (g) and (h) (Original Financial Statements), clause 23.20 (Good title to assets) to clause 23.21 (Legal and beneficial ownership) (inclusive), clause 23.27 (Centre of main interests and establishments) and clause 23.32 (Sanctions)
Representative means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian
Resignation Letter means a letter substantially in the form set out in schedule 8 (Form of Resignation Letter)
Restatement Date means 2012
Rollover Loan means one or more Loans:
(a) made or to be made on the same day that a maturing Loan is due to be repaid
(b) the aggregate amount of which is equal to or less than the amount of the maturing Loan
(c) in the same currency as the maturing Loan (unless it arose as a result of the operation of clause 6.2 (Unavailability of a currency)) and
(d) made or to be made to the same Borrower for the purpose of refinancing that maturing Loan
Screen Rate means:
(a) in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period and
(b) in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the Relevant Period
displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Company and the Lenders
Security means a mortgage, charge, pledge, lien, assignment or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect
Share Option Documents means each deed of agreement granting options pursuant to parts A and B of the ESOP
Specified Time means a time determined in accordance with schedule 10 (Timetables)
Sponsor Affiliate means Sponsor Management Company ( Xco ), each of its Affiliates, any trust of which XCo or any of its Affiliates is a trustee, any partnership of which XCo or any of its Affiliates is a partner and any trust, fund or other entity which is managed by, or is under the control of, XCo or any of its Affiliates provided that any such trust, fund or other entity which has been established for at least 6 months solely for the purpose of making, purchasing or investing in loans or debt securities and which is managed or controlled independently from all other trusts, funds or other entities managed or controlled by XCo or any of its Affiliates which have been established for the primary or main purpose of investing in the share capital of companies shall not constitute a Sponsor Affiliate
Subsidiary means a subsidiary undertaking within the meaning of section 1162 of the CA2006
TARGET2 means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007
TARGET Day means any day on which TARGET2 is open for the settlement of payments in euro
Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same)
Termination Date means 6 May 2015
Third Parties Act means the Contracts (Rights of Third Parties) Act 1999
Third Party Disposal means the disposal of an Obligor to a person which is not a member of the Group where that disposal is permitted under clause 26.13 (Disposals) or made with the approval of the Majority Lenders (and the Company has confirmed this is the case)
Total Commitments means the aggregate of the Commitments being £70,000,000 at the Restatement Date
Trade Instruments means any performance bonds, advance payment bonds or documentary letters of credit issued in respect of the obligations of any member of the Group arising in the ordinary course of trading of that member of the Group
Transaction Costs means all fees, costs and expenses incurred by the Obligors in connection with the Transaction Documents as set out in the Funds Flow Statement
Transaction Documents means the Finance Documents, the Note Documents, the Articles and any other document designated as a Transaction Document by the Agent and the Company
Transfer Certificate means a certificate substantially in the form set out in schedule 5 (Form of Transfer Certificate) or any other form agreed between the Agent and the Company
Transfer Date means, in relation to an assignment or a transfer, the later of:
(a) the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate and
(b) the date on which the Agent executes the relevant Assignment Agreement or Transfer Certificate
Treasury Transaction means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price
Unpaid Sum means any sum due and payable but unpaid by an Obligor under the Finance Documents
USA Patriot Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 of the United States
US or United States means the United States of America
US Bankruptcy Law means the United States Bankruptcy Code of 1978 or any other United States federal or state bankruptcy, insolvency or similar law
US Guarantor means a Guarantor incorporated or formed under the laws of, or of any state (including the District of Columbia) of, the US
US Obligor means an Obligor incorporated or formed under the laws of, or of any state (including the District of Columbia) of, the US
Utilisation means a Loan
Utilisation Date means the date of a Utilisation being the date on which the relevant Loan is to be made
Utilisation Request means a notice substantially in the relevant form set out in part 1 (Utilisation Request) of schedule 3
VAT means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature
Withdrawal Request means a notice in substantially the form set out in part 3 (Withdrawal Request) of schedule 3
1.2 Interpretation
(a) Unless a contrary indication appears, a reference in this Agreement to:
(i) the Agent, the Arrangers, any Finance Party, any Lender, any Obligor, any Party, any Ancillary Lender, any Hedge Counterparty, any Bilateral Lender or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees and, in the case of the Agent any person for the time being appointed as Agent (as the case may be) in accordance with the Finance Documents;
(ii) a document in agreed form is a document which is previously agreed in writing by or on behalf of the Agent and the Company or, if not so agreed, is in the form specified by the Agent;
(iii) assets includes present and future properties, revenues and rights of every description (including any right to receive such revenues);
(iv) a Finance Document or a Transaction Document or any other agreement or instrument is a reference to that Finance Document or Transaction Document or other agreement or instrument as amended, novated, supplemented or restated (however fundamentally) or (in the case of an Ancillary Document or a Bilateral Document) replaced;
(v) guarantee means (other than in clause 22 (Guarantee and indemnity)) any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person or to make an investment in or loan to any person or to purchase assets of any person where, in each case, such obligation is assumed in order to maintain or assist the ability of such person to meet its indebtedness;
(vi) indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
(vii) a person includes any individual person, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium or partnership (whether or not having separate legal personality) or any other entity or body of any description;
(viii) a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but if not having the force of law, then being a type with which persons to which it applies customarily comply) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation;
(ix) a provision of law is a reference to a provision, of any treaty, legislation, regulation, decree, order or by-law and any secondary legislation enacted under a power given by that provision, as amended, applied or re-enacted or replaced (whether with or without modification) whether before or after the date of this Agreement;
(x) a time of day is a reference to London time;
(xi) sterling and £ shall be construed as a reference to the lawful currency of the United Kingdom;
(xii) euro and shall be construed as a reference to the single currency of Participating Member States;
(xiii) US Dollar shall be construed as a reference to the lawful currency of the United States; and
(b) Clause and schedule headings are for ease of reference only.
(c) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(d) Any word importing the singular shall include the plural and vice versa.
(e) A Borrower providing cash cover for an Ancillary Facility means a Borrower paying an amount in the currency of the Ancillary Facility into an interest-bearing account in the name of such Borrower and the following conditions being met:
(i) the account is with the Ancillary Lender; and
(ii) until no amount is or may be outstanding under Ancillary Facility, withdrawals from the account may only be made to pay a Finance Party amounts due and payable to it under this Agreement in respect of the Ancillary Facility.
(f) A Default (other than an Event of Default) is continuing if it has not been remedied or waived and an Event of Default is continuing if it has not been waived, in both cases, to the satisfaction of the Agent acting on the instructions of the Majority Lenders.
(g) A Borrower repaying or prepaying the Ancillary Outstandings means:
(i) that Borrower providing cash cover for the Ancillary Outstandings;
(ii) the maximum amount payable under Ancillary Facility being reduced or cancelled in accordance with its terms; or
(iii) the Ancillary Lender being satisfied that it has no further liability under the Ancillary Facility,
and the amount by which the Ancillary Outstandings are, repaid or prepaid under clauses 1.2(g)(i) and 1.2(g)(ii) is the amount of the relevant cash cover or reduction.
(h) An amount borrowed includes any amount utilised under an Ancillary Facility.
(i) Any certificate provided by a director of an Obligor pursuant to the terms of a Finance Document shall be given without incurring any personal liability.
(j) A reference to the date of this Agreement is a reference to 13 May 2011.
(k) A reference to an amount in a currency other than the Base Currency shall be converted to the Base Currency at the Agents Spot Rate of Exchange unless another conversation rate is expressly stated.
1.3 Third party rights
(a) Unless expressly provided to the contrary in this Agreement a person (other than a Bilateral Lender or a Hedge Counterparty) who is not a Party has no right under the Third Parties Act to enforce or enjoy the benefit of any term of this Agreement.
(b) Unless expressly provided to the contrary in any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement or any other Finance Document entered into under or in connection with it.
2 The Facility
2.1 The Facility
(a) Subject to the terms of this Agreement, the Lenders make available a multicurrency revolving credit facility the Base Currency Amount of which is equal to the Total Commitments.
(b) Not used.
(c) The Facility will be available to all the Borrowers.
(d) Subject to the terms of this Agreement and the Ancillary Documents, an Ancillary Lender may make available an Ancillary Facility to any of the Borrowers in place of all or part of its Commitment.
(e) Subject to the terms of this Agreement and the Bilateral Documents, a Bilateral Lender may make available a Bilateral Facility to any of the Borrowers.
2.2 Increase
(a) The Company may by giving prior notice to the Agent after the effective date of a cancellation of:
(i) the Available Commitments of a Defaulting Lender in accordance with clause 10.7 (Right of cancellation in relation to a Defaulting Lender); or
(ii) the Commitments of a Lender in accordance with clause 10.1 (Illegality),
request that the Total Commitments be increased (and the Total Commitments shall be so increased) in an aggregate amount in the Base Currency of up to the amount of the Available Commitments or Commitments so cancelled as follows:
(iii) the increased Commitments will be assumed by one or more Lenders or other banks, financial institutions, trusts, funds or other entities (each an Increase Lender ) selected by the Company (each of which shall not be a Sponsor Affiliate or a member of the Group and which is further acceptable to the Agent (acting reasonably)) and each of which confirms its willingness to assume and does assume all the obligations of a Lender corresponding to that part of the increased Commitments which it is to assume, as if it had been an Original Lender;
(iv) each of the Obligors and any Increase Lender shall assume obligations towards one another and/or acquire rights against one another as the Obligors and the Increase Lender would have assumed and/or acquired had the Increase Lender been an Original Lender;
(v) each Increase Lender shall become a Party as a Lender and any Increase Lender and each of the other Finance Parties shall assume obligations towards one another and acquire rights against one another as that Increase Lender and those Finance Parties would have assumed and/or acquired had the Increase Lender been an Original Lender;
(vi) the Commitments of the other Lenders shall continue in full force and effect; and
(vii) any increase in the Total Commitments shall take effect on the date specified by the Company in the notice referred to above or any later date on which the conditions set out in clause 2.2(b) below are satisfied.
(b) An increase in the Total Commitments will only be effective on:
(i) the execution by the Agent of an Increase Confirmation from the relevant Increase Lender;
(ii) in relation to an Increase Lender which is not a Lender immediately prior to the relevant increase:
(A) the Increase Lender entering into the documentation required for it to accede as a party to the Intercreditor Deed; and
(B) the performance by the Agent of all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the assumption of the increased Commitments by that Increase Lender, the completion of which the Agent shall promptly notify to the Company and the Increase Lender.
(c) Each Increase Lender, by executing the Increase Confirmation, confirms (for the avoidance of doubt) that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the increase becomes effective.
(d) The Company shall, on the date upon which the increase takes effect, promptly on demand pay the Agent the amount of all costs and expenses (including legal fees subject to any cap agreed in advance between the Company and the Agent) reasonably incurred.
(e) The Company may pay to the Increase Lender a fee in the amount and at the times agreed between the Company and the Increase Lender in a Fee Letter.
(f) Clause 28.4 (Limitation of responsibility of Existing Lenders) shall apply mutatis mutandis in this clause 2.2 in relation to an Increase Lender as if references in that clause to:
(i) an Existing Lender were references to all the Lenders immediately prior to the relevant increase;
(ii) the New Lender were references to that Increase Lender; and
(iii) a re-transfer and re-assignment were references to respectively a transfer and assignment.
2.3 Finance Parties rights and obligations
(a) The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b) The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.
(c) A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.
2.4 Obligors agent
(a) Each Obligor (other than the Company) by its execution of this Agreement or an Accession Deed irrevocably appoints the Company to act on its behalf as its agent in relation to the Finance Documents and irrevocably authorises:
(i) the Company on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions (including Utilisation Requests), to execute on its behalf any Accession Deed to make such agreements and to effect the relevant amendments, supplements and variations capable of being given, made or effected by any Obligor notwithstanding that they may affect the Obligor, without further reference to or the consent of that Obligor; and
(ii) each Finance Party to give any notice, demand or other communication to that Obligor pursuant to the Finance Documents to the Company,
and in each case the Obligor shall be bound as though the Obligor itself had given the notices and instructions (including, without limitation, any Utilisation Requests) or executed or made the agreements or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication.
(b) Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Obligors agent or given to the Obligors agent under any Finance Document on behalf of another Obligor or in connection with any Finance Document (whether or not known to any other Obligor and whether occurring before or after such other Obligor became an Obligor under any Finance Document) shall be binding for all purposes on that Obligor as if that Obligor had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Obligors agent and any other Obligor, those of the Obligors agent shall prevail.
3 Purpose
3.1 Purpose
(a) Not used.
(b) Each Borrower shall apply all amounts borrowed by it under the Facility and any utilisation of any Ancillary Facility towards the general corporate and working capital purposes of the Obligors and refinancing any utilisations under the Obligors existing asset based lending facilities (but not towards in the case of any utilisation of any Ancillary Facility, towards repayment or prepayment of any Loan).
3.2 Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4 Conditions of utilisation
4.1 Initial conditions precedent
(a) The Company shall provide the Agent all the documents and other evidence in part 1 (Conditions precedent to signing the Agreement) of schedule 2 in form and substance satisfactory to the Agent on or before the date of this Agreement.
(b) The Lenders will only be obliged to comply with clause 5.4 (Lenders participation) in relation to any Loan if on or before the Utilisation Date for that Utilisation, the Agent has received all of the documents and other evidence listed in part 2 (Conditions precedent to be satisfied before initial Utilisation) of schedule 2 in form and substance satisfactory to the Agent.
(c) The Agent shall, in each case, notify the Company and the Lenders promptly upon being so satisfied.
4.2 Further conditions precedent
Subject to clause 4.1 the Lenders will only be obliged to comply with clause 5.4 (Lenders participation) if on the date of the Utilisation Request and on the proposed Utilisation Date:
(a) in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan and, in the case of any other Loan, no Default is continuing or would result from the proposed Loan; and
(b) in relation to any Loan on the Closing Date, all the representations and warranties in clause 23 (Representations) or, in relation to any other Loan, the Repeating Representations, to be made by each Obligor are true.
4.3 Conditions relating to Optional Currencies
(a) A currency will constitute an Optional Currency in relation to a Loan if:
(i) it is readily available in the amount and for the period required and freely convertible into the Base Currency in the Relevant Interbank Market on the Quotation Day and the Utilisation Date for that Loan; and
(ii) it is Euro or US Dollar or has been approved by the Agent (acting on the instructions of all the Lenders) on or prior to receipt by the Agent of the relevant Utilisation Request for that Loan.
(b) If the Agent has received a written request from the Company for a currency to be approved under clause 4.3(a)(ii), the Agent will confirm to the Company by the Specified Time:
(i) whether or not the Lenders have granted their approval; and
(ii) if approval has been granted, the minimum amount for any subsequent Loan in that currency.
4.4 Maximum number of Loans
(a) A Borrower (or the Company on its behalf) may not deliver a Utilisation Request if as a result of the proposed Loan more than 10 Loans would be outstanding.
(b) Not used.
(c) Any Loan made by a single Lender under clause 6.2 (Unavailability of a currency) shall not be taken into account in this clause 4.4.
4.5 Not used.
5 Utilisation
5.1 Delivery of a Utilisation Request
A Borrower (or the Company on its behalf) may request a Loan by delivery to the Agent of a duly completed Utilisation Request not later than the Specified Time.
5.2 Completion of a Utilisation Request
(a) Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:
(i) it identifies the Borrower and the Facility to be utilised;
(ii) the proposed Utilisation Date is a Business Day within the Availability Period;
(iii) the currency and amount of the Loan comply with clause 5.3; and
(iv) the proposed Interest Period complies with clause 14 (Interest Periods).
(b) Multiple Loans may be requested in a Utilisation Request where the proposed Utilisation Date is the Closing Date. Only 1 Loan may be requested in each subsequent Utilisation Request.
5.3 Currency and amount
(a) The currency specified in a Utilisation Request must be the Base Currency or an Optional Currency.
(b) The amount of the proposed Loan must be:
(i) not used;
(ii) in respect of the Facility:
(A) if the currency selected is the Base Currency, a minimum of £1,500,000 (and a multiple of £500,000) or, if less, the Available Facility; or
(B) if the currency selected is Euro, a minimum of Euro 2,000,000 (and a multiple of Euro 500,000) or, if less, the Available Facility; or
(C) if the currency selected is US Dollar, a minimum of $2,000,000 (and a multiple of $500,000) or, if less, the Available Facility; or
(D) if the currency selected is an Optional Currency other than Euro or US Dollar, the minimum amount specified by the Agent pursuant to clause 4.3(b)(ii) (Conditions relating to Optional Currencies) or, if less, the Available Facility.
5.4 Lenders participation
(a) If the conditions set out in this Agreement have been met and subject to clause 9.2 (Repayment of Loans), each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office.
(b) The amount of each Lenders participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making that Loan.
(c) The Agent shall determine the Base Currency Amount of each Loan which is to be made in an Optional Currency and notify each Lender of the amount, currency and the Base Currency Amount of each Loan and the amount of its participation in that Loan and, if different, the amount of that participation to be made available in cash, by the Specified Time.
5.5 Limitations on Loans
(a) Not used.
(b) The maximum aggregate amount of the Ancillary Commitments of all the Lenders shall not at any time exceed:
(i) in the period from the Closing Date to (but excluding) the date falling two Months after the Closing Date £18,000,000 (or its equivalent in any currency); and
(ii) at any time on or after the date falling two Months after the Closing Date £17,000,000 (or its equivalent in any currency).
(c) The maximum aggregate amount of the Ancillary Commitments of all the Lenders in respect of overdraft facilities and bilateral loan facilities shall not at any time exceed £10,000,000 (or its equivalent in any currency).
(d) The maximum aggregate amount of the Ancillary Commitments of all the Lenders in respect of letters of credit facility shall not at any time exceed:
(i) in the period from the Closing Date to (but excluding) the date falling two Months after the Closing Date £8,000,000 (or its equivalent in any currency); and
(ii) at any time on or after the date falling two Months after the Closing Date £7,000,000 (or its equivalent in any currency).
5.6 Cancellation of Commitment
(a) Not used.
(b) The Commitments which, at that time, are unutilised shall be immediately cancelled at the end of the Availability Period.
6 Optional currencies
6.1 Selection of currency
A Borrower (or the Company on its behalf) shall select the currency of a Loan in a Utilisation Request.
6.2 Unavailability of a currency
If before the Specified Time on any Quotation Day a Lender notifies the Agent that:
(a) the Optional Currency requested is not readily available to it in the amount and for the period required; or
(b) compliance with its obligation to participate in a Loan in the proposed Optional Currency would contravene a law or regulation applicable to it,
the Agent will give notice to the Company to that effect by the Specified Time on that day. In this event, any Lender that gives notice pursuant to this clause 6.2 will be required to participate in the Loan in the Base Currency (in an amount equal to that Lenders proportion of the Base Currency Amount, or in respect of a Rollover Loan in an amount equal to that Lenders proportion of the Base Currency Amount of the Rollover Loan that is due to be made) and its participation will be treated as a separate Loan denominated in the Base Currency during that Interest Period.
6.3 Agents calculations
Each Lenders participation in a Loan will be determined in accordance with clause 5.4 (Limitations on Loans).
7 Ancillary Facilities
7.1 Type of Facility
An Ancillary Facility may be by way of:
(a) an overdraft facility;
(b) a letter of credit facility; or
(c) a bilateral loan facility.
7.2 Availability
(a) If the Company and a Lender agree and except as otherwise provided in this Agreement, that Lender may provide an Ancillary Facility on a bilateral basis in place of all or part of that Lenders unutilised Commitment (which shall (except for the purposes of determining the Majority Lenders and of clause 40.4 (Deemed consent)) be reduced by the amount of the Ancillary Commitment under that Ancillary Facility).
(b) An Ancillary Facility shall not be made available unless, not later than 14 days prior to the Ancillary Commencement Date for an Ancillary Facility, the Agent has received from the Company:
(i) a notice in writing of the establishment of an Ancillary Facility and specifying:
(A) the proposed Borrower(s) which may use the Ancillary Facility;
(B) the proposed Ancillary Commencement Date and expiry date of the Ancillary Facility;
(C) the proposed type of Ancillary Facility to be provided;
(D) the proposed Ancillary Lender;
(E) the proposed Ancillary Commitment, the maximum amount of the Ancillary Facility and, if the Ancillary Facility is an overdraft facility comprising more than one account, its maximum gross amount (that amount being Designated Gross Amount ) and its maximum net amount (that amount being Designated Net Amount ); and
(F) the proposed currency of the Ancillary Facility (if not denominated in the Base Currency); and
(ii) any other information which the Agent may reasonably request in connection with the Ancillary Facility.
(c) The Agent shall promptly notify the Ancillary Lender and the other Lenders of the establishment of an Ancillary Facility.
(d)
(i) No amendment or waiver of a term of any Ancillary Facility shall require the consent of any Finance Party other than the relevant Ancillary Lender unless such amendment or waiver itself relates to or gives rise to a matter which would require an amendment of or under this Agreement (including, for the avoidance of doubt, under this clause). In such a case, the provisions of this Agreement with regard to amendments and waivers will apply.
(ii) The Company shall notify the Agent and provide details of any material amendment or waiver of a term of any Ancillary Facility which does not require the consent of any other Finance Party, no later than 14 days prior to the date of such amendment or waiver.
(e) Subject to compliance with clause 7.2(b):
(i) the Lender concerned will become an Ancillary Lender; and
(ii) the Ancillary Facility will be available,
with effect from the date agreed by the Company and the Ancillary Lender.
7.3 Terms of Ancillary Facilities
(a) Except as provided below, the terms of any Ancillary Facility will be those agreed by the Ancillary Lender and the Company.
(b) However, those terms:
(i) must be based upon normal commercial rates and terms at that time (except as varied by this Agreement);
(ii) may allow only Borrowers to use the Ancillary Facility;
(iii) may not allow the Ancillary Outstandings to exceed the Ancillary Commitment;
(iv) may not allow the Ancillary Commitment of a Lender to exceed the Available Commitment of that Lender; and
(v) must require that the Ancillary Commitment is reduced to nil, and that all Ancillary Outstandings are repaid not later than the Termination Date (or such earlier date as the Commitment of the relevant Ancillary Lender is reduced to zero).
(c) If there is any inconsistency between any term of an Ancillary Facility and any term of this Agreement, this Agreement shall prevail except for (i) clause 37.3 (Day count convention) which shall not prevail for the purposes of calculating fees, interest or commission relating to an Ancillary Facility and (ii) an Ancillary Facility comprising more than one account where the terms of the Ancillary Documents shall prevail to the extent required to permit the netting of balances on those accounts and (iii) where the relevant term of this Agreement would be contrary to, or inconsistent with, the law governing the relevant Ancillary Document, in which case that term of this Agreement shall not prevail.
7.4 Repayment of Ancillary Facility
(a) An Ancillary Facility shall cease to be available on the Termination Date or such earlier date on which its expiry date occurs or on which it is cancelled in accordance with the terms of this Agreement.
(b) If an Ancillary Facility expires in accordance with its terms the Ancillary Commitment of the Ancillary Lender shall be reduced to zero (and its Commitment shall be increased accordingly).
(c) No Ancillary Lender may demand repayment or prepayment of any amounts under its Ancillary Facility (except where the Ancillary Facility is provided on a net limit basis to the extent required to bring any gross outstandings down to the net limit) unless:
(i) the Total Commitments have been cancelled in full, or all outstanding Loans under the Facility have become due and payable in accordance with the terms of this Agreement, or the Agent has declared all outstanding Loans immediately due and payable in accordance with the terms of this Agreement, or the expiry date of the Ancillary Facility occurs;
(ii) it becomes unlawful in any applicable jurisdiction for the Ancillary Lender to perform any of its obligations as contemplated by this Agreement or to fund, issue or maintain its participation in its Ancillary Facility; or
(iii) the Ancillary Outstandings (if any) under that Ancillary Facility can be refinanced by a Loan and the Ancillary Lender gives sufficient notice to enable a Loan of the Facility to be made to refinance those Ancillary Outstandings in accordance with the terms of this Agreement.
Other than demanding repayment or prepayment, as the case may be, no Ancillary Lender may exercise any other right, remedy and/or power in connection with any amount or liability owed to it by any Borrower under any Ancillary Facility.
(d) For the purposes of determining whether or not the Ancillary Outstandings under an Ancillary Facility mentioned in clause 7.4(c)(iii) can be refinanced by a Loan:
(i) the Commitment of that Lender will be increased by the amount of its Ancillary Commitment; and
(ii) the Loan may (so long as clause 7.4(c)(i) does not apply) be made irrespective of whether a Default is outstanding or any other applicable condition precedent is not satisfied (but only to the extent that the proceeds are applied in refinancing those Ancillary Outstandings) and irrespective of whether clause 4.4 (Maximum number of Loans) or clause 5.2(b) (Completion of a Utilisation Request) applies.
(e) On the making of a Loan to refinance Ancillary Outstandings:
(i) each Lender will participate in that Loan in an amount (as determined by the Agent) which will result as nearly as possible in the aggregate amount of its participation in the Loans then outstanding bearing the same proportion to the aggregate amount of the Loans then outstanding as its Commitment bears to the Total Commitments; and
(ii) the relevant Ancillary Facility shall be cancelled.
(f) In relation to an Ancillary Facility which comprises an overdraft facility where a Designated Net Amount has been established, the Ancillary Lender providing that Ancillary Facility shall only be obliged to take into account for the purposes of calculating compliance with the Designated Net Amount those credit balances which it is permitted to take into account by the then current law and regulations in relation to its reporting of exposures to the Financial Services Authority as netted for capital adequacy purposes.
7.5 Ancillary Outstandings
Each Borrower and each Ancillary Lender agrees with and for the benefit of each Lender that:
(a) the Ancillary Outstandings under any Ancillary Facility provided by that Ancillary Lender shall not exceed the Ancillary Commitment applicable to that Ancillary Facility and where the Ancillary Facility is an overdraft facility comprising more than one account, Ancillary Outstandings under that Ancillary Facility shall not exceed the Designated Net Amount in respect of that Ancillary Facility; and
(b) where all or part of the Ancillary Facility is an overdraft facility comprising more than one account, the Ancillary Outstandings (calculated on the basis that the words in brackets in paragraph (a) of the definition of that term were deleted) shall not exceed the Designated Gross Amount applicable to that Ancillary Facility.
7.6 Adjustment for Ancillary Facilities upon acceleration
In this clause 7.6:
Outstandings means, in relation to a Lender, the aggregate of the equivalent in the Base Currency of (i) its participation in each Utilisation then outstanding (together with the aggregate amount of all accrued interest, fees and commission owed to it as a Lender under the Facility) and (ii) if the Lender is also an Ancillary Lender, the Ancillary Outstandings in respect of Ancillary Facilities provided by that Ancillary Lender (together with the aggregate amount of all accrued interest, fees and commission owed to it as an Ancillary Lender in respect of the Ancillary Facility).
Total Outstandings means the aggregate of all Outstandings.
(a) If a notice is served under clause 27.20 (Acceleration) (other than a notice declaring Utilisations to be due on demand), each Lender and each Ancillary Lender shall promptly adjust by corresponding transfers (to the extent necessary) their claims in respect of amounts outstanding to them under the Facility and each Ancillary Facility to ensure that after such transfers the Outstandings of each Lender bear the same proportion to the Total Outstandings as such Lenders Commitment bears to the Total Commitments, each as at the date the notice is served under clause 27.20 (Acceleration).
(b) If an amount outstanding under an Ancillary Facility is a contingent liability and that contingent liability becomes an actual liability or is reduced to zero after the original adjustment is made under paragraph (a) above, then each Lender and Ancillary Lender will make a further adjustment by corresponding transfers (to the extent necessary), to put themselves in the position they would have been in had the original adjustment been determined by reference to the actual liability or, as the case may be, zero liability and not the contingent liability.
(c) Prior to the application of the provisions of paragraph (a) of this clause 7.6, an Ancillary Lender that has provided an overdraft comprising more than one account under an Ancillary Facility shall set-off any liabilities owing to it under such overdraft facility against credit balances on any account comprised in such overdraft facility.
(d) All calculations to be made pursuant to this clause 7.6 shall be made by the Agent based upon information provided to it by the Lenders and Ancillary Lenders.
7.7 Information
Each Borrower and each Ancillary Lender shall, promptly upon request by the Agent, supply the Agent with any information relating to the operation of an Ancillary Facility (including the Ancillary Outstandings) as the Agent may reasonably request from time to time. Each Borrower consents to all such information being released to the Agent and the other Finance Parties.
7.8 Commitment amounts
Notwithstanding any other term of this Agreement, each Lender shall ensure that at all times its Commitment is not less than its Ancillary Commitment.
8 Bilateral Facilities
8.1 Type of Facility
A Bilateral Facility may be by way of:
(a) a foreign exchange facility; or
(b) any other facility or accommodation required in connection with the business of the Group (other than any facility or accommodation for the purpose of or having the effect of a term loan or a revolving credit facility) and which is agreed by the Company with a Bilateral Lender.
8.2 Availability
(a) If a Borrower and a Bilateral Lender agree and except as otherwise provided in this Agreement, that Bilateral Lender may provide a Bilateral Facility to that Borrower.
(b) The aggregate amount of all Bilateral Facilities shall at no time exceed the relevant Bilateral Limit.
(c) The Company shall promptly notify the Agent of the establishment of a Bilateral Facility.
(d) No amendment or waiver of a term of a Bilateral Facility shall require the consent of any Finance Party other than the relevant Bilateral Lender unless such amendment or waiver itself relates to or gives rise to a matter which would require an amendment of or under this Agreement (including, for the avoidance of doubt, under this clause). In such a case, the provisions of this Agreement with regard to amendments and waivers will apply.
(e) The Company shall notify the Agent and provide details of any material amendment or waiver of a term of any Bilateral Facility which does not require the consent of any Finance Party, no later than 14 days prior to the date of such amendment or waiver.
8.3 Information
Each Borrower shall, promptly upon request by the Agent, supply the Agent with any information relating to the terms or operation of a Bilateral Facility as the Agent may reasonably request from time to time. Each Borrower consents to all such information being released to the Agent and the other Finance Parties.
9 Repayment
9.1 Not used.
9.2 Repayment of Loans
(a) Each Borrower which has drawn a Loan shall repay that Loan on the last day of its Interest Period.
(b) Without prejudice to each Borrowers obligation under clause 9.2(a) above, if one or more Loans are to be made available to a Borrower:
(i) on the same day that a maturing Loan is due to be repaid by that Borrower;
(ii) in the same currency as the maturing Loan (unless it arose as a result of the operation of clause 6.2 (Unavailability of a currency)); and
(iii) in whole or in part for the purpose of refinancing the maturing Loan;
the aggregate amount of the new Loans shall be treated as if applied in or towards repayment of the maturing Loan so that:
(A) if the amount of the maturing Loan exceeds the aggregate amount of the new Loans:
1) the relevant Borrower will only be required to pay an amount in cash in the relevant currency equal to that excess; and
2) each Lenders participation (if any) in the new Loans shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lenders participation (if any) in the maturing Loan and that Lender will not be required to make its participation in the new Loans available in cash; and
(B) if the amount of the maturing Loan is equal to or less than the aggregate amount of the new Loans:
1) the relevant Borrower will not be required to make any payment in cash; and
2) each Lender will be required to make its participation in the new Loans available in cash only to the extent that its participation (if any) in the new Loans exceeds that Lenders participation (if any) in the maturing Loan and the remainder of that Lenders participation in the new Loans shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lenders participation in the maturing Loan.
9.3 Not used.
10 Illegality, voluntary prepayment and cancellation
10.1 Illegality
If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund, issue or maintain its participation in any Loan:
(a) that Lender, shall promptly notify the Agent upon becoming aware of that event;
(b) upon the Agent notifying the Company, the Commitment of that Lender will be immediately cancelled; and
(c) each Borrower shall repay that Lenders participation in the Loans made to that Borrower on the last day of the then current Interest Period for each Loan occurring after the Agent has notified the Company or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).
10.2 Mandatory cancellation
All Available Commitments under the Facility shall automatically be cancelled at the end of the Availability Period in respect of the Facility.
10.3 Voluntary cancellation
(a) The Company may, if it gives the Agent not less than 3 Business Days (or such shorter period as the Majority Lenders may agree) prior written notice, cancel the whole or any part (being a minimum amount of $2,000,000, £1,500,000 or 2,000,000 (or its equivalent in any currency) and a multiple of £250,000 (or its equivalent in any currency)) of an Available Facility. Any cancellation under this clause 10.3 shall reduce the Commitments of the Lenders rateably under the Facility.
(b) Not used.
10.4 Not used.
10.5 Voluntary prepayment of Loans
A Borrower to which a Loan has been made may, if it or the Company gives the Agent not less than 3 Business Days (or such shorter period as the Majority Lenders may agree) prior written notice, prepay the whole or any part of a Loan (but if in part, being a minimum amount of £2,000,000 (or its equivalent in any currency) and a multiple of £250,000 (or its equivalent in any currency)).
10.6 Right of cancellation and repayment in relation to a single Lender
(a) If:
(i) any sum payable to any Lender by an Obligor is required to be increased under clause 17.2(c) (Tax gross-up); or
(ii) any Lender claims indemnification from an Obligor under clause 17.3 (Tax indemnity) or clause 18.1 (Increased costs),
the Company may, whilst the circumstance giving rise to the requirement for that increase or indemnification continues give the Agent notice of cancellation of the Commitment of that Lender and its intention to procure the repayment of that Lenders participation in the Loans.
(b) On receipt of a notice referred to in clause 10.6(a) in relation to a Lender, the Commitment of that Lender shall immediately be reduced to zero.
(c) On the last day of each Interest Period which ends after the Company has given notice under clause 10.6(a) in relation to a Lender (or, if earlier, the date specified by the Company in that notice), each Borrower to which a Loan is outstanding shall repay that Lenders participation in that Loan together with all interest and other amounts accrued under the Finance Documents.
10.7 Right of cancellation in relation to a Defaulting Lender
(a) If any Lender becomes a Defaulting Lender, the Company may, at any time whilst the Lender continues to be a Defaulting Lender, give the Agent 10 Business Days notice of cancellation of each Available Commitment of that Lender.
(b) On the notice referred to in clause 10.7(a) above becoming effective, each Available Commitment of the Defaulting Lender shall immediately be reduced to zero.
(c) The Agent shall as soon as practicable after receipt of a notice referred to in clause 10.7(a) above, notify all the Lenders.
10.8 Cash cover
To the extent that, under the terms of this Agreement, an Obligor is obliged to provide cash cover in respect of the Ancillary Facilities, it shall only be entitled to withdraw that cash cover if:
(a) the Company delivers to the Agent a duly completed Withdrawal Request not later than 11am 14 days before the proposed date of withdrawal;
(b) no Default is continuing; and
(c) the amount so withdrawn is applied in immediate prepayment of the Ancillary Facilities.
11 Mandatory prepayment
11.1 Exit :
Upon the occurrence of:
(a) a Change of Control; or
(b) the sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions,
the Facility will be cancelled and all outstanding Loans and Ancillary Outstandings, together with accrued interest, and all other amounts accrued under the Finance Documents, shall become immediately due and payable.
11.2 Disposal and Insurance
(a) For the purposes of this clause 11.2
Disposal means a sale, lease or licence (other than an occupational rack rent lease or licence), transfer, loan or other disposal by a person of any asset, undertaking or business (whether by a voluntary or involuntary single transaction or series of transactions)
Disposal Proceeds means the consideration receivable by any member of the Group (including any amount receivable in repayment of intercompany debt) for any Disposal made by any member of the Group except for Excluded Disposal Proceeds
Excluded Disposal Proceeds means the proceeds of a Disposal from a Permitted Disposal
Excluded Insurance Proceeds means any proceeds of an insurance claim which the Company notifies the Agent are, or are to be, applied:
(i) to meet a third party claim
(ii) to cover operating losses in respect of which the relevant insurance claim was made
(iii) to the replacement, reinstatement and/or repair of the assets or otherwise in amelioration of the loss in respect of which the relevant insurance claim was made
(iv) by an Obligor to purchase assets useful to the business of the Obligors,
in each case as soon as reasonably practicable after receipt or
(iv) which do not exceed £10,000,000 (or its equivalent) when aggregated together with the proceeds of all other insurance claims (excluding those referred to in (i), (ii) and (iii) of this definition) during the term of this Agreement
Insurance Proceeds means the proceeds of any insurance claim under any insurance maintained by any member of the Group except for Excluded Insurance Proceeds and after deducting any reasonable expenses in relation to that claim which are incurred by any member of the Group to persons who are not members of the Group
(b) Subject to the terms of the Intercreditor Deed, the Company shall ensure (unless the Agent agrees in writing otherwise) that the Borrowers cancel Commitments and prepay Loans in the following amounts at the times and in the order of application contemplated by clause 11.3:
(i) the amount of Disposal Proceeds; and
(ii) the amount of Insurance Proceeds.
11.3 Application
(a) A prepayment and/or cancellation made under clause 11.2 shall be applied in the following order:
(i) first in cancellation of Available Commitments under the Facility (and the Available Commitment of the Lenders under the Facility will be cancelled rateably);
(ii) second, in prepayment of Loans and cancellation of Commitments; and
(iii) third, in repayment and cancellation of the Ancillary Outstandings and cancellation of Ancillary Commitments.
(b) A prepayment relating to the amounts of Disposal Proceeds or Insurance Proceeds made under clause 11.2 shall be made promptly upon receipt of those proceeds.
12 Restrictions
12.1 Notices of Cancellation or Prepayment
Any notice of cancellation, prepayment, authorisation or other election given by any Party under clause 10 (Illegality, voluntary prepayment and cancellation) or clause 11 (Mandatory prepayment) shall (subject to the terms of those clauses) be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.
12.2 Interest and other amounts
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.
12.3 Not used.
12.4 Reborrowing of the Facility
Unless a contrary indication appears in this Agreement, any part of the Facility which is prepaid or repaid may be reborrowed in accordance with the terms of this Agreement.
12.5 Prepayment in accordance with Agreement
Subject to clause 2.2 (Increase), no Borrower shall repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.
12.6 No reinstatement of Commitments
Subject to clause 2.2 (Increase), no amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.
12.7 Agents receipt of Notices
If the Agent receives a notice or election under clause 10 (Illegality, voluntary prepayment and cancellation) or clause 11 (Mandatory prepayment) it shall promptly forward a copy of that notice or election to either the Company or the affected Lender, as appropriate.
12.8 Effect of Repayment and Prepayment on Commitments
If all or part of a Utilisation under the Facility is repaid or prepaid and is not available for redrawing (other than by operation of clause 4.2 (Further conditions precedent), an amount of the Commitments (equal to the Base Currency Amount of the amount of the Utilisation which is repaid or prepaid) in respect of the Facility will be deemed to be cancelled on the date of repayment or prepayment. Any cancellation under this clause 12.8 shall reduce the Commitments of the Lenders rateably under the Facility.
13 Interest
13.1 Calculation of interest
The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:
(a) Margin;
(b) LIBOR or, in relation to any Loan in euro, EURIBOR; and
(c) Mandatory Cost, if any.
13.2 Payment of interest
The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the Interest Period is longer than 6 Months, on the dates falling at 6 Monthly intervals after the first day of the Interest Period).
13.3 Default interest
(a) If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to clause 13.3(b), is 2% higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this clause 13.3 shall be immediately payable by the Obligor on demand by the Agent.
(b) If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:
(i) the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and
(ii) the rate of interest applying to the overdue amount during that first Interest Period shall be 2% higher than the rate which would have applied if the overdue amount had not become due.
(c) Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.
13.4 Notification of rates of interest
The Agent shall promptly notify the Lenders and the relevant Borrower (or the Company on its behalf) of the determination of a rate of interest under this Agreement.
14 Interest Periods
14.1 Selection of Interest Periods and terms
(a) A Borrower (or the Company on its behalf) may select an Interest Period for a Loan in the Utilisation Request for that Loan.
(b) Not used.
(c) Not used.
(d) Subject to this clause 14, the Borrower (or the Company on its behalf) may select an Interest Period of 1, 2, 3 or 6 Months or any other period agreed between the Agent
(acting on the instructions of all the Lenders in relation to the relevant Loan) and the Company.
(e) No Interest Period for a Loan shall extend beyond the Termination Date.
(f) Not used.
(g) A Loan has 1 Interest Period only.
14.2 Not used.
14.3 Non-Business Days
If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
14.4 Not used.
15 Changes to the calculation of interest
15.1 Margin adjustment
(a) If:
(i) no Default is continuing;
(ii) a period of at least 12 Months has expired since the Closing Date; and
(iii) Leverage in respect of the most recently completed Relevant Period (as evidenced by the last Compliance Certificate) is within the range set out below,
then the Margin for each Loan will be the percentage per annum set out below in the column for the Facility opposite that range:
Leverage |
|
Margin % p.a. |
|
Greater than 2.5:1 |
|
2.75 |
|
Less than or equal to 2.5:1, but greater than 2.0:1 |
|
2.50 |
|
Less than or equal to 2.0:1, but greater than 1.5:1 |
|
2.25 |
|
Less than or equal to 1.5:1 but greater than 1.0:1 |
|
2.00 |
|
Less than or equal to 1.0:1 |
|
1.75 |
|
(b)
(i) Any increase or decrease in the Margin shall take effect on the date which is the first day of the Interest Period for each Loan.
(ii) If, following receipt by the Agent of the Annual Financial Statements of the Group and related Compliance Certificate, those statements and Compliance
Certificate do not confirm the basis for a reduced Margin, then the provisions of clause 13.2 (Payment of interest) shall apply and the Margin for each Loan shall be the percentage per annum determined in accordance with clause 15.1(a) and the revised ratio of Leverage calculated using the figures in the Compliance Certificate and the Company shall (or shall ensure the relevant Borrower shall) promptly pay to the Agent any amounts necessary to put the Lenders in the position they would have been in had the reduced Margin not have been applied during such period.
(iii) While a Default is continuing unremedied and unwaived, the Margin for each Loan shall be the highest percentage per annum set out in clause 15.1(a) for a Loan.
15.2 Absence of quotations
Subject to clause 15.3, if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Base Reference Banks but a Base Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR or EURIBOR shall be determined on the basis of the quotations of the remaining Base Reference Banks.
15.3 Market disruption
(a) If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lenders share of that Loan for the Interest Period shall be the percentage rate per annum which is the sum of:
(i) the Margin;
(ii) the rate notified to the Agent by that Lender as soon as practicable and in any event by close of business on the date falling 2 Business Days after the Quotation Day (or, if earlier, on the date falling 2 Business Days prior to the date on which interest is due to be paid in respect of that Interest Period), to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in that Loan from whatever source it may reasonably select; and
(iii) the Mandatory Cost, if any, applicable to that Lenders participation in the Loan.
(b) If:
(i) the percentage rate per annum notified by a Lender pursuant to clause 15.3(a)(ii) above is less than LIBOR or, in relation to any Loan in euro, EURIBOR; or
(ii) a Lender has not notified the Agent of a percentage rate per annum pursuant to clause 15.3(a)(ii) above,
the cost to that Lender of funding its participation in that Loan for that Interest Period shall be deemed, for the purposes of clause 15.3(a) above, to be LIBOR in relation to a loan in euro, EURIBOR.
(c) In this Agreement:
Market Disruption Event means:
(i) at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Base Reference Banks supplies a rate to the Agent to determine LIBOR or, if applicable, EURIBOR for the relevant currency and Interest Period or
(i) before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 14 per cent. of that Loan) that the cost to it of funding its participation in that Loan from whatever source it may reasonably select would be in excess of LIBOR or, if applicable, EURIBOR
15.4 Alternative basis of interest or funding
(a) If a Market Disruption Event occurs and the Agent or the Company so requires, the Agent and the Company shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.
(b) Any alternative basis agreed pursuant to clause 15.4(a) above shall, with the prior consent of all the Lenders and the Company, be binding on all Parties.
15.5 Break Costs
(a) Each Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.
(b) Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.
16 Fees
16.1 Commitment fee
(a) The Company shall pay to the Agent (for the account of each Lender) a fee in the Base Currency computed at the rate of 45% of the applicable Margin on that Lenders Available Commitment for the Availability Period.
(b) The accrued commitment fee is payable on the last day of each successive period of 3 Months which ends during the Availability Period, on the Closing Date, on the last day of the Availability Period and on the cancelled amount of the relevant Lenders Available Commitment at the time the cancellation is effective.
16.2 Participation fee
The Company shall pay to the Original Lenders a participation fee in the amount and at the times agreed in a Fee Letter.
16.3 Agency fee
The Company shall pay to the Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter.
16.4 Interest, commission and fees on Ancillary Facilities
The rate and time of payment of interest, commission, fees and any other remuneration in respect of each Ancillary Facility shall be determined by agreement between the relevant Ancillary Lender and the Borrower of that Ancillary Facility based upon normal market rates and terms.
16.5 Interest, commission and fees on Bilateral Facilities
The rate and time of payment of interest, commission, fees and any other remuneration in respect of each Bilateral Facility shall be determined by agreement between the relevant Bilateral Lender and the Borrower of that Bilateral Facility based upon normal market rates and terms.
17 Tax gross up and indemnities
17.1 Definitions
In this Agreement:
FATCA means Sections 1471 through 1474 of the Internal Revenue Code, and any regulations thereunder and official interpretations thereof
Non-US Finance Party means a Finance Party that is not a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code
Protected Party means a Finance Party which is or will be subject to any liability or required to make any payment for or on account of Tax in relation to a sum received or receivable or accruing (or any sum deemed for the purposes of Tax to be received or receivable or accruing) under a Finance Document
Qualifying Lender means:
(i) a Lender (other than a Lender within (ii) below) which is beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document and is:
(A) a Lender:
(1) which is a bank (as defined for the purpose of section 879 of ITA) making an advance under a Finance Document or
(2) in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 879 of ITA) at the time that that advance was made
and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance
(B) a Lender which is:
(1) a company resident in the United Kingdom for United Kingdom tax purposes
(2) a partnership each member of which is:
(a) a company so resident in the United Kingdom or
(b) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA
(3) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company or
(C) a Treaty Lender or
(ii) a building society (as defined for the purposes of section 880 of the ITA) making an advance under a Finance Document
Tax Confirmation means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
(a) a company resident in the United Kingdom for United Kingdom tax purposes
(b) a partnership each member of which is:
(i) a company so resident in the United Kingdom or
(ii) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA or
(c) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company
Tax Credit means a credit against, relief or remission for, or repayment of, any Tax
Tax Deduction means a deduction or withholding for or on account of Tax from a payment under a Finance Document
Tax Payment means either the increase in a payment made by an Obligor to a Finance Party under clause 17.2 or a payment under clause 17.3
Treaty Lender means a Lender which:
(a) is treated as a resident of a Treaty State for the purposes of the Treaty;
(b) does not carry on a business in the United Kingdom through a permanent establishment with which that Lenders participation in the Loan is effectively connected; and
(c) fulfils any other conditions that must be fulfilled under the relevant Treaty by residents of that Treaty State for such residents to obtain exemption from taxation of interest imposed by the United Kingdom, assuming for these purposes that all relevant procedural steps and formalities have been duly completed.
Treaty State means a jurisdiction having a double taxation agreement (Treaty) with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest
UK Non-Bank Lender means a Lender which gives a Tax Confirmation in the Assignment Agreement or Transfer Certificate which it executes on becoming a Party
Unless a contrary indication appears, in this clause 17 a reference to determines or determined means a determination made in the absolute discretion of the person making the determination, acting in good faith.
17.2 Tax gross-up
(a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.
(b) The Company shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Company and that Obligor.
(c) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.
(d) A payment shall not be increased under clause 17.2(c) by reason of a Tax Deduction on account of Tax imposed by the United Kingdom from a payment of interest on a Loan, or an amount treated as interest on a loan for Tax purposes, if on the date on which the payment falls due:
(i) the payment could have been made to the relevant Lender without a Tax Deduction if the Lender had been a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or published concession of any relevant taxing authority;
(ii) the relevant Lender is a Qualifying Lender solely by virtue of paragraph (i)(B) of the definition of Qualifying Lender and:
(A) an officer of HM Revenue & Customs has given (and not revoked) a direction (Direction) under section 931 of ITA which relates to that
payment and that Lender has received from the Obligor making the payment or from the Company a certified copy of that Direction; and
(B) the payment could have been made to the Lender without any Tax Deduction if that Direction had not been made;
(iii) the relevant Lender is a Qualifying Lender solely by virtue of paragraph (i)(B) of the definition of Qualifying Lender and:
(A) the relevant Lender has not given a Tax Confirmation to the Company; and
(B) the payment could have been made to the Lender without any Tax Deduction if the Lender had given a Tax Confirmation to the Company, on the basis that the Tax Confirmation would have enabled the Company to have formed a reasonable belief that the payment was an excepted payment for the purpose of section 930 of the ITA;
(iv) the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under clause 17.2(g); or
(v) the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender not granted a sub-participation to a person who, if that person had been a Lender, would not be a Qualifying Lender with regard to that payment but on that date that subparticipant is, if that person had been a Lender, not a Qualifying Lender (or, has ceased to be a Qualifying Lender) other than as a result of any change after the date it became a sub-participant in (or in the official interpretation, administration or application of) any law or treaty, or any published practice or published concession of any relevant taxing authority. For the avoidance of doubt there shall be no obligation on a Finance Party to disclose any sub-participation to any Obligor.
(e) If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.
(f) Within 28 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment a statement under section 975 of the ITA or other evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
(g)
(i) Subject to clause 17.2(g)(ii) below, a Treaty Lender and each Obligor which makes a payment to which that Treaty Lender is entitled shall co-operate in completing any procedural formalities necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction
(ii) Nothing in clause 17.2(g)(i) above shall require a Treaty Lender to:
(A) register under the HMRC DT Treaty Passport scheme;
(B) apply the HMRC DT Treaty Passport scheme to any Loan if it has so registered; or
(C) file Treaty forms if it has included an indication to the effect that it wishes the HMRC DT Treaty Passport scheme to apply to this Agreement in accordance with clause 17.2(i) below or clause 17.7(a), and the Obligor making that payment has not complied with its obligations under clause 17.2(j) or clause 17.7(b).
(h) A UK Non-Bank Lender shall promptly notify the Company and the Agent if there is any change in the position from that set out in the Tax Confirmation.
(i) A Treaty Lender which becomes a Party on the day on which this Agreement is entered into that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall include an indication to that effect (for the benefit of the Agent and without liability to any Obligor) by including its scheme reference number and its jurisdiction of tax residence opposite its name in part 3 (The Original Lenders) of schedule 1.
(j) Where a Lender includes the indication described in clause 17.2(i) above in part 3 (The Original Lenders) of schedule 1:
(i) each Original Borrower shall, to the extent that that Lender is a Lender under the Facility made available to that Original Borrower pursuant to clause 2.1 (The Facility), file a duly completed form DTTP2 in respect of such Lender with HM Revenue & Customs within 30 days of the date of this Agreement and shall promptly provide the Lender with a copy of that filing; and
(ii) each Additional Borrower shall, to the extent that that Lender is a Lender under the Facility made available to that Additional Borrower pursuant to clause 2.1 (The Facility), file a duly completed form DTTP2 in respect of such Lender with HM Revenue & Customs within 30 days of becoming an Additional Borrower and shall promptly provide the Lender with a copy of that filing.
(k) If a Lender has not included an indication to the effect that it wishes the HMRC DT Treaty Passport scheme to apply to this Agreement in accordance with clause 17.2(i) above or clause 17.7(a), no Obligor shall file any form relating to the HMRC DT Treaty Passport scheme in respect of that Lenders Commitments or its participation in any Loan.
(l) A payment shall not be increased under clause 17.2(c) by reason of a Tax Deduction on account of Tax imposed by the United States from a payment of a Loan (i) pursuant to FATCA or (ii) attributable to the failure by a Finance Party to deliver the applicable US tax forms in accordance with clause 17.9.
17.3 Tax indemnity
(a) Each Obligor shall, within 3 Business Days of demand by the Agent, pay to a Protected Party an amount equal to the loss, liability or cost which that Protected
Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.
(b) Clause 17.3(a) shall not apply:
(i) with respect to any Tax assessed on a Finance Party:
(A) under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or
(B) under the law of the jurisdiction in which that Finance Partys Facility Office is located in respect of amounts received or receivable in that jurisdiction,
if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or
(ii) to the extent a loss, liability or cost:
(A) is compensated for by an increased payment under clause 17.2; or
(B) would have been compensated for by an increased payment under clause 17.2 but was not so compensated solely because one of the exclusions in clause 17.2(d) or clause 17.2(l) applied.
(c) A Protected Party making, or intending to make a claim under clause 17.3(a) shall promptly notify the Agent of the event which will give, or has given, rise to the claim, and will give details of the amount claimed following which the Agent shall notify the Company.
(d) A Protected Party shall, on receiving a payment from an Obligor under this clause 17.3, notify the Agent.
17.4 Tax Credit
If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
(a) a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part or to that Tax Payment; and
(b) that Finance Party has obtained, utilised and retained that Tax Credit,
the Finance Party shall (provided that no Default is continuing) pay an amount to the Obligor as soon as reasonably practicable from the date on which it has acting reasonably determined that it has obtained, utilised and retained such Tax Credit which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.
17.5 Refund of Tax Deduction
If a Borrower incorporated in the United Kingdom makes a Tax Deduction in respect of tax imposed by the United Kingdom on interest from a payment of interest to a Treaty Lender, and clause 17.2 (Tax Gross-up) applies to increase the amount of the payment due to that
Treaty Lender from that Borrower, such Borrower shall promptly provide the Treaty Lender with an executed original certificate, in the form required by HM Revenue & Customs, evidencing the Tax Deduction. The Treaty Lender shall, within a reasonable period following receipt of such certificate, apply to HM Revenue & Customs for a refund of the amount of the Tax and following receipt of this refund shall inform the Borrower of such receipt within a reasonable period of such receipt. This clause 17.5 shall not require a Treaty Lender to apply for a refund of the amount of the Tax Deduction if the procedural formalities required in relation to making such an application are materially more onerous or require the disclosure of materially more information than the procedural formalities required by HM Revenue & Customs as at the date of this Agreement in relation to such an application.
17.6 Lender Status Confirmation
Each Lender which becomes a Party to this Agreement after the date of this Agreement shall indicate, in the Transfer Certificate or Assignment Agreement or an Increase Confirmation which it executes on becoming a Party, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it falls in:
(a) not a Qualifying Lender;
(b) a Qualifying Lender (other than a Treaty Lender); or
(c) a Treaty Lender.
If a New Lender fails to indicate its status in accordance with this clause 17.6 then such New Lender shall be treated for the purposes of this Agreement (including each Obligor) as if it is not a Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Company). For the avoidance of doubt, a Transfer Certificate or Assignment Agreement or Increase Confirmation shall not be invalidated by any failure of a Lender to comply with this clause 17.6.
17.7 HMRC DT Treaty Passport scheme confirmation
(a) A New Lender or an Increase Lender that is a Treaty Lender that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall include an indication to that effect (for the benefit of the Agent and without liability to any Obligor) in the Transfer Certificate, Assignment Agreement or Increase Confirmation which it executes by including its scheme reference number and its jurisdiction of tax residence in that Transfer Certificate, Assignment Agreement or Increase Confirmation.
(b) Where a New Lender or an Increase Lender includes the indication described in clause 17.7(a) above in the relevant Transfer Certificate, Assignment Agreement or Increase Confirmation:
(i) each Borrower which is a Party as a Borrower as at the relevant Transfer Date or the date on which the increase in Total Commitments described in the relevant Increase Confirmation takes effect shall, to the extent that that New Lender or Increase Lender becomes a Lender under the Facility which is made available to that Borrower pursuant to clause 2.1 (The Facility), file a duly completed form DTTP2 in respect of such Lender with HM Revenue & Customs within 30 days of that Transfer Date or that date on which the increase in Total Commitments takes effect and shall promptly provide the Lender with a copy of that filing; and
(ii) each Additional Borrower which becomes an Additional Borrower after the relevant Transfer Date or the date on which the increase in Total Commitments described in the relevant Increase Confirmation takes effect shall, to the extent that that New Lender or Increase Lender is a Lender under the Facility which is made available to that Additional Borrower pursuant to clause 2.1 (The Facility), file a duly completed form DTTP2 in respect of such Lender with HM Revenue & Customs within 30 days of becoming an Additional Borrower and shall promptly provide the Lender with a copy of that filing.
17.8 Co-operation
In the event that it is necessary for any procedural formalities to be completed to allow an Obligor to make a payment of interest on a Loan to a Treaty Lender without a Tax Deduction, the Obligor and the Treaty Lender shall co-operate to procure the filing of any relevant tax forms including (to the extent applicable and available under the prevailing law, and only where the HMRC DT Treaty Passport scheme does not apply to a Loan), an application form for an Obligor to obtain authorisation to pay interest to a Treaty Lender without a Tax Deduction in respect of tax imposed by the United Kingdom on interest, and where reasonably practicable such filing shall be made before the end of the relevant Interest Period. Nothing in this clause shall require a Treaty Lender to:
(a) register under the HMRC DT Treaty Passport scheme; or
(b) apply the HMRC DT Treaty Passport scheme to any Loan if it has so registered; or
(c) file Treaty forms if it has included an indication to the effect that it wishes the HMRC DT Treaty Passport scheme to apply to this Agreement in accordance with clause 17.2(i) or clause 17.7(a), and the Obligor making that payment has not complied with its obligations under clause 17.2(j) or clause 17.7(b).
17.9 US tax forms
(a) Each Finance Party that is a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code shall deliver to each applicable Obligor and the Agent executed originals of US Internal Revenue Service Form W-9 or such other documentation or information prescribed by applicable law or reasonably requested by the applicable Obligor or the Agent as will enable such Obligor or the Agent, as the case may be, certifying to such Finance Partys exemption from US backup withholding and/or information reporting requirements.
(b) Each Non-US Finance Party shall deliver to each applicable Obligor and the Agent (in such number of copies as shall be requested by the recipient) as soon as reasonably practicable following the date on which such Non-US Finance Party becomes a Finance Party under this Agreement, but no later than three Business Days prior to the date the first payment is due under the Finance Documents to that Non-US Finance Party (and from time to time thereafter upon the request of such Obligor or the Agent), whichever of the following is applicable:
(i) properly completed and duly executed originals of US Internal Revenue Service Form W-8BEN (claiming a complete exemption from United States withholding tax on payments made to such Non-US Finance Party pursuant to the Finance Documents under the benefits of an applicable income tax treaty);
(ii) properly completed and duly executed originals of US Internal Revenue Service Form W-ECI (claiming a complete exemption from United States withholding tax because payments made to such Non-US Finance Party pursuant to the Finance Documents are effectively connected with a US trade or business);
(iii) properly completed and duly executed originals of US Internal Revenue Service Form W-8IMY and all required supporting documentation (claiming a complete exemption from United States withholding tax because payments made to such Non-US Finance Party pursuant to the Finance Documents); or
(iv) in the case of a Non-US Finance Party claiming the benefits of the exemption for portfolio interest under Sections 871(h) or 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Non-US Finance Party is not (A) a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (B) a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Internal Revenue Code, or (C) a controlled foreign corporation described in Section 881(c)(3)(C) of the Internal Revenue Code and (y) properly completed and duly executed originals of US Internal Revenue Service Form W-8BEN.
(c) If a payment made by any Obligor hereunder or under any other Finance Document would be subject to United States withholding tax imposed pursuant to FATCA (including those contained in Sections 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Finance Party shall use commercially reasonable efforts to deliver to such Obligor and the Agent, as reasonably requested by such Obligor, (A) two properly completed and duly executed original certifications prescribed by applicable law and/or reasonably satisfactory to such Obligor and the Agent that establish that such payment is exempt from United States withholding tax imposed pursuant to FATCA and (B) any other documentation reasonably requested by such Obligor sufficient for such Obligor and the Agent to comply with their obligations under FATCA and to determine that such Finance Party has complied with such applicable reporting and other requirements of FATCA.
17.10 Stamp taxes
The Obligors shall pay and, within 3 Business Days of demand, indemnify each Secured Party and Arrangers against any cost, loss or liability that Secured Party or Arrangers incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document provided that this clause 17.10 shall not apply in respect of any stamp duty, registration and other similar Taxes which are payable in respect of an assignment transfer or other alienation of any kind by a Lender of any of its rights and/or obligations under a Finance Document.
17.11 Value added tax
(a) All amounts set out or expressed in a Finance Document to be payable by any Party to a Finance Party which (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable on such supply or supplies, and accordingly, subject to clause 17.11(b), if VAT is or becomes chargeable on any supply made by any Finance Party to any Party under a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying any other consideration for such supply)
an amount equal to the amount of such VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).
(b) If VAT is or becomes chargeable on any supply made by any Finance Party (Supplier) to any other Finance Party (Recipient) under a Finance Document, and any Party other than the Recipient (Subject Party) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse the Recipient in respect of that consideration), such Party shall also pay to the Supplier (in addition to and at the same time as paying such amount) an amount equal to the amount of such VAT. The Recipient will promptly pay to the Subject Party an amount equal to any credit or repayment obtained by the Recipient from the relevant tax authority which the Recipient reasonably determines is in respect of such VAT.
(c) Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.
(d) Any reference in this clause 17.11 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term representative member to have the same meaning as in the Value Added Tax Act 1994).
17.12 FATCA Information
(a) Subject to clause 17.12(c), each Party shall, within 10 Business Days of a reasonable request by another Party:
(i) confirm to that other Party whether it is:
(A) a FATCA Exempt Party; or
(B) not a FATCA Exempt Party; and
(ii) supply to that other Party such forms, documentation and other information relating to its status under FATCA (including its applicable passthru percentage or other information required under the Treasury Regulations or other official guidance including intergovernmental agreements) as that other Party reasonably requests for the purposes of that other Partys compliance with FATCA.
(b) If a Party confirms to another Party pursuant to clause 17.12(a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
(c) Clause 17.12(a) above shall not oblige any Finance Party to do anything which would or might in its reasonable opinion constitute a breach of:
(i) any law or regulation;
(ii) any policy of that Finance Party;
(iii) any fiduciary duty; or
(iv) any duty of confidentiality.
(d) If a Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with clause 17.12(a) (including, for the avoidance of doubt, where clause 17.12(c) applies), then:
(i) if that Party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such Party shall be treated for the purposes of the Finance Documents as if it is not a FATCA Exempt Party; and
(ii) if that Party failed to confirm its applicable passthru percentage then such Party shall be treated for the purposes of the Finance Documents (and payments made thereunder) as if its applicable passthru percentage is 100%,
until (in each case) such time as the Party in question provides the requested confirmation, forms, documentation or other information.
18 Increased costs
18.1 Increased costs
(a) Subject to clause 18.3 the Obligors shall, within 3 Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of:
(i) the introduction or implementation, suspension or revocation of or any change in (or in the interpretation, administration or application of) any law or regulation; or
(ii) compliance with any law or regulation,
occurring or made, as applicable, after the date of this Agreement.
(b) In this Agreement Increased Costs means:
(i) a reduction in the rate of return from the Facility or on a Finance Partys (or its Affiliates) overall capital; or
(ii) an additional or increased cost,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or an Ancillary Commitment or funding or performing its obligations under any Finance Document.
18.2 Increased cost claims
(a) A Finance Party intending to make a claim pursuant to clause 18.1 shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Company.
(b) Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.
18.3 Exceptions
(a) Clause 18.1 does not apply to the extent any Increased Cost is:
(i) attributable to a Tax Deduction required by law to be made by an Obligor;
(ii) compensated for by clause 17.3 (Tax indemnity) (or would have been compensated for under clause 17.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in clause 17.3(b) (Tax indemnity) applied);
(iii) compensated for by the payment of the Mandatory Cost; or
(iv) attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.
(b) In this clause 18.3 reference to a Tax Deduction has the same meaning given to the term in clause 17.1 (Definitions).
19 Other indemnities
19.1 Currency indemnity
(a) If any sum due from an Obligor under the Finance Documents ( Sum ), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency ( First Currency ) in which that Sum is payable into another currency ( Second Currency ) for the purpose of:
(i) making or filing a claim or proof against that Obligor; or
(ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall as an independent obligation, within 3 Business Days of demand by the Agent, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
(b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable (or in which it is otherwise determined to be payable pursuant to clause 34.10 (Change of currency).
19.2 Other indemnities
(a) The Company shall (or shall ensure that an Obligor will), within 3 Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by it as a result of:
(i) the occurrence of any Event of Default;
(ii) a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of clause 33 (Sharing among the Finance Parties);
(iii) funding, or making arrangements to fund, its participation in a Loan requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of gross negligence or wilful default by that Finance Party alone); or
(iv) a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by a Borrower (or the Company on its behalf).
19.3 Indemnity to the Agent
Each Obligor will, within 3 Business Days of demand, indemnify the Agent against any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:
(a) investigating any event which it reasonably believes is a Default; or
(b) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.
20 Mitigation by the Lenders
20.1 Mitigation
(a) Each Finance Party shall, in consultation with the Company, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of clause 10.1 (Illegality), clause 17 (Tax gross up and indemnities), clause 18 (Increased costs) or paragraph 2 of schedule 4 (Mandatory Cost Formula), including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.
(b) Clause 20.1(a) does not in any way limit the obligations of any Obligor under the Finance Documents.
20.2 Limitation of liability
(a) The Company shall (or shall ensure that an Obligor will), within 3 Business Days of demand indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under clause 20.1.
(b) A Finance Party is not obliged to take any steps under clause 20.1. if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
21 Costs and expenses
21.1 Transaction expenses
The Company shall promptly on demand pay the Agent and the Arrangers the amount of all costs and expenses (including legal fees subject to any cap previously agreed between the Company and the Agent) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution, syndication and perfection of:
(a) this Agreement and any other documents referred to in this Agreement; and
(b) any other Finance Documents executed after the date of this Agreement.
21.2 Amendment costs
If:
(a) an Obligor requests an amendment, waiver or consent; or
(b) an amendment is required pursuant to:
(i) clause 34.10 (Change of currency); or
(ii) schedule 4 (Mandatory Cost Formula),
the Company shall, within 3 Business Days of demand, reimburse the Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent in responding to, evaluating, negotiating or complying with that request or requirement.
21.3 Enforcement and preservation costs
The Company shall, within 3 Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of, or the preservation of, any rights under any Finance Document.
22 Guarantee and indemnity
22.1 Guarantee and indemnity
Each Guarantor irrevocably and unconditionally jointly and severally:
(a) guarantees to each Finance Party punctual performance by each other Obligor of all that Obligors obligations under the Finance Documents;
(b) undertakes with each Finance Party that whenever another Obligor does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and
(c) agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of an Obligor not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount payable by a Guarantor under this indemnity will not exceed the amount it would have had to pay
under this clause 22 if the amount claimed had been recoverable on the basis of a guarantee.
22.2 Continuing Guarantee
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
22.3 Reinstatement
If any discharge, release or arrangement (whether in respect of the obligations of any Obligor or any Security for those obligations or otherwise) is made by a Finance Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of each Guarantor under this clause 22 will continue or be reinstated as if the discharge, release or arrangement had not occurred.
22.4 Waiver of defences
The obligations of each Guarantor under this clause 22 will not be affected by an act, omission, matter or thing which, but for this clause 22, would reduce, release or prejudice any of its obligations under this clause 22 (without limitation and whether or not known to it or any Finance Party) including:
(a) any time, waiver or consent granted to, or composition with, any Obligor or other person;
(b) the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or Security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any Security;
(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;
(e) any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or Security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or Security ;
(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or Security; or
(g) any insolvency or similar proceedings.
22.5 Guarantor Intent
Without prejudice to the generality of clause 22.4, each Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental)
variation, increase, extension or addition of or to any of the Finance Documents and/or any facility or amount made available under any of the Finance Documents for the purposes of or in connection with any of the following:
(a) business acquisitions of any nature;
(b) increasing working capital;
(c) enabling investor distributions to be made;
(d) carrying out restructurings;
(e) refinancing existing facilities;
(f) refinancing any other indebtedness;
(g) making facilities available to new borrowers;
(h) any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and
(i) any fees, costs and/or expenses associated with any of the foregoing.
22.6 Immediate recourse
Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or Security or claim payment from any person before claiming from that Guarantor under this clause 22. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
22.7 Appropriations
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:
(a) refrain from applying or enforcing any other moneys, Security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and
(b) hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantors liability under this clause 22.
22.8 Deferral of Guarantors rights
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this clause 22 :
(a) to be indemnified by an Obligor;
(b) to claim any contribution from any other guarantor of any Obligors obligations under the Finance Documents;
(c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or Security taken pursuant to, or in connection with, the Finance Documents by any Finance Party;
(d) to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which any Guarantor has given a guarantee, undertaking or indemnity under clause 22.1 (Guarantee and indemnity);
(e) to exercise any right of set-off against any Obligor; and/or
(f) to claim or prove as a creditor of any Obligor in competition with any Finance Party.
If a Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Finance Parties by the Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Finance Parties and shall promptly pay or transfer the same to the Agent or as the Agent may direct for application in accordance with clause 34 (Payment mechanics).
22.9 Release of Guarantors right of contribution
If any Guarantor ( Retiring Guarantor ) ceases to be a Guarantor in accordance with the terms of the Finance Documents for the purpose of any sale or other disposal of that Retiring Guarantor then on the date such Retiring Guarantor ceases to be a Guarantor:
(a) that Retiring Guarantor is released by each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a contribution to any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Finance Documents; and
(b) each other Guarantor waives any rights it may have by reason of the performance of its obligations under the Finance Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under any Finance Document or of any other Security taken pursuant to, or in connection with, any Finance Document where such rights or Security are granted by or in relation to the assets of the Retiring Guarantor.
22.10 US Guarantors
(a) Each US Guarantor acknowledges that:
(i) it will receive valuable direct or indirect benefits as a result of the transactions financed by the Finance Documents;
(ii) those benefits will constitute reasonably equivalent value and fair consideration for the purpose of any Fraudulent Transfer Law;
(iii) each Lender has acted in good faith in connection with the guarantee given by that US Guarantor and the transactions contemplated by the Finance Documents; and
(iv) it has not incurred and does not intend to incur debts beyond its ability to pay as they mature.
(b) Each Lender agrees that each US Guarantors liability under this clause is limited to the extent (if any) necessary so that no obligation of, or payment by, any US Guarantor under this clause is subject to avoidance or turnover under any Fraudulent Transfer Law.
(c) Each US Guarantor represents and warrants to each Lender that:
(i) the aggregate amount of its debts (including its obligations under the Finance Documents (other than obligations that are, at the relevant time, wholly contingent or prospective)) is less than the aggregate value (being the lesser of fair valuation and present fair saleable value) of its assets;
(ii) its capital is not unreasonably small to carry on its business as it is being conducted;
(iii) it has not incurred and does not intend to incur debts beyond its ability to pay as they become due; and
(iv) it has not made a transfer or incurred any obligation under any Finance Document with the intent to hinder, delay or defraud any of its present or future creditors.
22.11 Additional security
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or Security now or subsequently held by any Finance Party.
22.12 Guarantee Limitations
This guarantee does not apply to any liability to the extent that it would result in this guarantee constituting unlawful financial assistance within the meaning of sections 678 or 679 of the CA2006 or any equivalent and applicable provisions under the laws of the jurisdiction of incorporation of the relevant Guarantor and, with respect to any Additional Guarantor, is subject to any limitations set out in the Accession Deed applicable to such Additional Guarantor.
23 Representations
23.1 General
Each Obligor makes the representations and warranties set out in this clause 23 to each Finance Party.
23.2 Status
(a) It and each of its Subsidiaries is a limited liability corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.
(b) It and each of its Subsidiaries has the power to own its assets and carry on its business as it is being conducted.
23.3 Binding obligations
Subject to the Legal Reservations the obligations expressed to be assumed by it in each Transaction Document to which it is a party are legal, valid, binding and enforceable obligations.
23.4 Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, the Transaction Documents do not and will not conflict with:
(a) any law or regulation applicable to it;
(b) the constitutional documents of any member of the Group; or
(c) any agreement or instrument binding upon it or any member of the Group or any of its or any member of the Groups assets or constitute a default or termination event (however described) under any such agreement or instrument unless such conflict, default or termination event would not have or is not reasonably likely to have a Material Adverse Effect.
23.5 Power and authority
(a) It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Transaction Documents to which it is or will be a party and the transactions contemplated by those Transaction Documents.
(b) No limit on its powers will be exceeded as a result of the borrowing, grant of Security or giving of guarantees or indemnities contemplated by the Transaction Documents to which it is a party.
23.6 Validity and admissibility in evidence
(a) All Authorisations required:
(i) to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which it is a party; and
(ii) to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions,
have been obtained or effected and are in full force and effect except any Authorisation referred to in clause 23.9 (No filing or stamp taxes).
(b) All Authorisations necessary for the conduct of the business, trade and ordinary activities of the members of the Group have been obtained or effected and are in full force and effect if failure to obtain or effect those Authorisations has or is reasonably likely to have a Material Adverse Effect.
23.7 Governing law and enforcement
(a) The choice of governing law of the Finance Documents will be recognised and enforced in its Relevant Jurisdictions.
(b) Any judgment obtained in relation to a Finance Document in the jurisdiction of the governing law of that Finance Document will be recognised and enforced in its Relevant Jurisdictions.
23.8 Insolvency
(a) No:
(i) corporate action, legal proceeding or other procedure or step described in clause 27.7(a) (Insolvency proceedings); or
(ii) creditors process described in clause 27.8 (Creditors process),
has been taken or, so far as it is aware, threatened in relation to a member of the Group.
(b) No corporate action, legal proceeding or other procedure or step described in clause 27.7(b) (Insolvency proceedings) has been taken or, so far as it is aware, threatened in relation to any member of the Group incorporated in the US.
(c) None of the circumstances described in clause 27.6 (Insolvency) applies to a member of the Group.
23.9 No filing or stamp taxes
Under the laws of its Relevant Jurisdiction it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents except for those registrations specifically set out in any legal opinion delivered to the Agent pursuant to clause 4.1 (Initial conditions precedent).
23.10 Deduction of Tax
It is not required to make any deduction for or on account of Tax from any payment it may make under any Finance Document to a Lender which is:
(a) a Qualifying Lender:
(i) falling within paragraph (i)(A) of the definition of Qualifying Lender;
(ii) except where a Direction has been given under section 931 of the ITA in relation to the payment concerned, falling within paragraph (i)(B) of the definition of Qualifying Lender; or
(iii) falling within paragraph (ii) of the definition of Qualifying Lender or;
(b) a Treaty Lender and the payment is one specified in a direction given by the Commissioners of Revenue & Customs under Regulation 2 of the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 (SI 1970/488).
23.11 No default
(a) No Event of Default and, on the date of this Agreement and the Closing Date, no Default is continuing or is reasonably likely to result from the making of any Loan or
the entry into, the performance of, or any transaction contemplated by, any Transaction Document.
(b) No other event or circumstance is outstanding which constitutes (or, with the expiry of a grace period, the giving of notice, the making of any determination or any combination of any of the foregoing, would constitute) a default or termination event (however described) under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries) assets are subject which has or is reasonably likely to have a Material Adverse Effect.
23.12 No misleading information
(a) All factual information contained in the Information Package was true and accurate in all material respects as at the date of the relevant report or document containing the information or (as the case may be) as at the date the information is expressed to be given.
(b) The Base Case Model has been prepared in accordance with the Accounting Principles as applied to the Original Financial Statements of the Company, and the financial projections contained in the Base Case Model have been prepared on the basis of recent historical information, are fair and based on reasonable assumptions and have been approved by the board of directors of the Company.
(c) Any financial projection or forecast contained in the Information Package has been prepared on the basis of recent historical information and on the basis of reasonable assumptions and was fair (as at the date of the relevant report or document containing the projection or forecast) and arrived at after careful consideration (it being acknowledged by the Finance Parties that financial projections or forecasts are subject to uncertainties and contingencies and no representation or warranty is given that such financial projections or forecasts will be realised).
(d) The expressions of opinion or intention provided by or on behalf of an Obligor for the purposes of the Information Package were made after careful consideration and (as at the date of the relevant report or document containing the expression of opinion or intention) were fair and based on reasonable grounds.
(e) No event or circumstance has occurred or arisen and no information has been omitted from the Information Package and no information has been given or withheld that results in the information, opinions, intentions, forecasts or projections contained in the Information Package being untrue or misleading in any material respect.
(f) All material information provided to a Finance Party by or on behalf of the Group on or before the date of this Agreement and not superseded before that date (whether or not contained in the Information Package) is accurate and not misleading in any material respect and all projections provided to any Finance Party on or before the date of this Agreement have been prepared in good faith on the basis of assumptions which were reasonable at the time at which they were prepared and supplied.
(g) All other written information provided by the Company to a Finance Party was true, complete and accurate in all material respects as at the date it was provided and is not misleading in any material respect.
23.13 Original Financial Statements
(a) Its Original Financial Statements were prepared in accordance with the Accounting Principles consistently applied.
(b) Its unaudited Original Financial Statements fairly represent its financial condition and results of operations for the relevant period in accordance with basis of preparation and Accounting Principles unless expressly disclosed to the Agent in writing to the contrary prior to the date of this Agreement.
(c) Its audited Original Financial Statements give a true and fair view of its financial condition and results of operations during the relevant Financial Year.
(d) There has been no material adverse change in its assets, business or financial condition (or the assets, business or consolidated financial condition of the Group, in the case of the Company) since 31 December 2010.
(e) The Original Financial Statements of the Company do not consolidate the results, assets or liabilities of any person or business which does not form part of the Group (other than in respect of any joint venture) as at the Closing Date.
(f) Its most recent financial statements delivered pursuant to clause 24.1 (Financial statements):
(i) have been prepared in accordance with the Accounting Principles as applied to the Original Financial Statements and the Base Case Model (or if there has been a change to the Accounting Principles the requirements of clause 24.3(c) have been complied with); and
(i) give a true and fair view of (if audited) or fairly present (if unaudited) its consolidated financial condition as at the end of, and consolidated results of operations for, the period to which they relate.
(g) The budgets and forecasts supplied under this Agreement were arrived at after careful consideration and have been prepared in good faith on the basis of recent historical information and on the basis of assumptions which were reasonable as at the date they were prepared and supplied (it being acknowledged by the Finance Parties that financial projections or forecasts are subject to uncertainties and contingencies and no representation or warranty is given that such financial projections or forecasts warranties will be realised).
(h) Since the date of the most recent financial statements delivered pursuant to clause 24.1 (Financial statements) there has been no material adverse change in the business, assets or financial condition of the Group.
23.14 No proceedings pending or threatened
(a) No litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency which, if adversely determined, are reasonably likely to result in liabilities to it or any of its Subsidiaries (whether actual or contingent) which has or is reasonably likely to have a Material Adverse Effect have (so far as it is aware) been started or threatened against it or any of its Subsidiaries.
(b) No labour disputes are current or, so far as it is aware, threatened against any member of the Group which have or are reasonably likely to result in liabilities to it or
any of its Subsidiaries which has or is reasonably likely to have a Material Adverse Effect.
23.15 No breach of laws
It has not (and none of its Subsidiaries has) breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.
23.16 Environmental laws
(a) It and each of its Subsidiaries is in compliance with clause 26.3 (Environmental compliance) and, so far as it is aware, no circumstances have occurred which would prevent such compliance in a manner or to an extent which has or is reasonably likely to result in a Material Adverse Effect.
(b) No Environmental Claim has been commenced or, so far as it is aware, is threatened against any member of the Group where that claim has or is reasonably likely, if determined against that member of the Group, to result in a Material Adverse Effect.
(c) The cost to the Group of compliance with Environmental Laws (including Environmental Permits) is, so far as it is aware, adequately provided for in the Base Case Model.
23.17 Taxation
(a) It is not (and none of its Subsidiaries is) materially overdue in the filing of any Tax returns and it is not (and none of its Subsidiaries is) overdue in the payment of any amount in respect of Tax.
(b) No claims or investigations are being, or are reasonably likely to be, made or conducted against it (or any of its Subsidiaries) with respect to Taxes such that a liability of, or claim against, any member of the Group which would have or is reasonably likely to have a Material Adverse Effect.
(c) It is resident for Tax purposes only in the jurisdiction of its incorporation.
23.18 Security and Financial Indebtedness
(a) No Security or Quasi-Security exists over all or any of the present or future assets of any member of the Group other than as permitted by this Agreement.
(b) No member of the Group has any Financial Indebtedness outstanding other than as permitted by this Agreement.
23.19 Not Used
23.20 Good title to assets
It and each of its Subsidiaries has a good, valid and marketable title to, or valid leases or licences of, and all appropriate Authorisations to use, the assets necessary to carry on its business as presently conducted.
23.21 Legal and beneficial ownership
It and each of its Subsidiaries is the sole legal and beneficial owner of the respective assets over which it purports to grant Security.
23.22 Shares
There are no agreements in force which provide for the issue, allotment or transfer of, or grant any person the right to call for the issue, allotment or transfer of, any share or loan capital of any member of the Group (including any option or right of pre-emption or conversion) other than pursuant to the Share Option Documents.
23.23 Intellectual Property
It and each of its Subsidiaries:
(a) is the sole legal and beneficial owner of or has licensed to it on normal commercial terms all the Intellectual Property which is material in the context of its business and which is required by it in order to carry on its business as it is being conducted and as contemplated in the Base Case Model and where the Intellectual Property is licensed to it, that licence has not been breached in any material respect or terminated by any party;
(b) does not, in carrying on its businesses, infringe any Intellectual Property of any third party in any respect which has or is reasonably likely to have a Material Adverse Effect; and
(c) has taken all formal or procedural actions (including payment of fees) required to maintain any Intellectual Property owned by it which is required by it in order to carry on its business as it is being conducted and as contemplated in the Base Case Model.
23.24 Group Structure Chart
The Group Structure Chart delivered to the Agent pursuant to part 1 (Conditions precedent to signing this Agreement) of schedule 2 is true, complete and accurate in all material respects.
23.25 Obligors
(a) Each Subsidiary of the Company incorporated in the United Kingdom (other than a Dormant Subsidiary, LGL 1996 Limited and Biggleswick Limited) and each Material Company (other than the French Subsidiary and the Czech Subsidiary) incorporated in any other jurisdiction is an Obligor on or prior to the first Utilisation Date.
(b) The aggregate:
(i) earnings before interest, tax and amortisation (calculated on the same basis as EBITA) of the Guarantors on the Closing Date (calculated on an unconsolidated basis and excluding all unrealised intra-Group profits of any member of the Group) exceeds 75% of EBITA of the Group; and
(ii) gross assets of the Guarantors on the Closing Date (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 75% of the consolidated gross assets of the Group.
23.26 Accounting reference date
The Accounting Reference Date of each member of the Group is 31 December.
23.27 Centre of main interests and establishments
For the purposes of The Council of the European Union Regulation No. 1346/2000 on Insolvency Proceedings ( Regulation ), its centre of main interest (as that term is used in Article 3(1) of the Regulation) is situated in its jurisdiction of incorporation and it has no establishment (as that term is used in Article 2(h) of the Regulation) in any other jurisdiction.
23.28 Dormant Companies
There are no Dormant Subsidiaries other than:
(a) BAL 1996 Limited; and
(b) Mel Chemicals China Limited.
23.29 Pensions
Except for the Defined Benefit Schemes:
(a) neither it nor any of its Subsidiaries is or has at any time been an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pensions Schemes Act 1993); and
(b) neither it nor any of its Subsidiaries is or has at any time been connected with or an associate of (as those terms are used in sections 38 and 43 of the Pensions Act 2004) such an employer.
23.30 No adverse consequences
(a) It is not necessary under the laws of its Relevant Jurisdictions:
(i) in order to enable any Finance Party to enforce its rights under any Finance Document; or
(ii) by reason of the execution of any Finance Document or the performance by it of its obligations under any Finance Document,
that any Finance Party should be licensed, qualified or otherwise entitled to carry on business in any of its Relevant Jurisdictions.
(b) No Finance Party is or will be deemed to be resident, domiciled or carrying on business in its Relevant Jurisdictions by reason only of the execution, performance and/or enforcement of any Finance Document.
23.31 US Regulations
(a) Employee Benefit Plans
(i) No Obligor or ERISA Affiliate has incurred during any time within the last six years or could be reasonably expected to incur any liability to, or on account
of, a Multiemployer Plan as a result of a violation of section 515 of ERISA or pursuant to section 4201, 4204 or 4212(c) of ERISA.
(ii) Each Employee Plan complies in form and operation in all material respects with ERISA, the Internal Revenue Code and all other applicable laws and regulations.
(iii) The present value of the aggregate benefit liabilities under each of the Employee Plans (other than any Multiemployer Plan), determined as of the end of such plans most recently ended plan year on the basis of the actuarial methods and assumptions specified for funding purposes in such plans most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such plan allocable to such benefit liabilities by more than US$9,000,000 (or its equivalent) in the case of any single Employee Plan and by more than US$10,500,000 (or its equivalent) in the aggregate for all Employee Plans. The term benefit liabilities has the meaning specified in section 4001 of ERISA and the terms current value and present value have the meaning specified in section 3 of ERISA.
(iv) There is (to the best of each Obligors and ERISA Affiliates knowledge and belief) no litigation, arbitration, administrative proceeding or claim pending or threatened against or with respect to any Employee Plan (other than routine claims for benefits) which has or, if adversely determined, could reasonably be expected have a Material Adverse Effect.
(v) Within the last 6 years, each Obligor and each ERISA Affiliate has made all material contributions to each Employee Plan and Multiemployer Plan required by law within the applicable time limits prescribed by law, the terms of that Plan and any contract or agreement requiring contributions to that Plan.
(vi) No Obligor or ERISA Affiliate has ceased operations at a facility so as to be subject to the provisions of section 4062(e) of ERISA, withdrawn as a substantial employer so as to be subject to the provisions of section 4063 of ERISA, or ceased making contributions to any Employee Plan subject to section 4064(a) of ERISA to which it made contributions.
(vii) No Obligor or ERISA Affiliate has incurred any material liability to the PBGC, which remains outstanding or could reasonably be expected to incur any material liability to the PBGC.
(viii) No ERISA Event has occurred or, as at the date of this Agreement, is reasonably likely to occur that could reasonably be expected to have a Material Adverse Effect.
(b) Margin Regulations
(i) The proceeds of any Utilisation will not be used, directly or indirectly, in whole or in part, for purchasing or carrying Margin Stock or for any purpose which might (whether immediately, incidentally or ultimately) cause all or any part of the Facility to be a purpose credit within the meaning of Regulation T, U or X.
(ii) Following the application of the proceeds of any Utilisation, not more than 25 per cent of the value of the assets of the Obligors, as a group (on a consolidated basis), will be invested in Margin Stock.
(iii) Neither any Obligor nor any agent acting on its behalf has taken or will take any action which might cause any document delivered under or in connection with the Facility to violate any regulation of the Board of Governors of the Federal Reserve System (including Regulation T, U or X) or violate the United States Securities Exchange Act of 1934 or any applicable US federal or state securities law.
(c) Other US Regulation
(i) No Obligor or any Affiliate of an Obligor is:
(A) a public utility within the meaning of, or subject to regulation under, the United States Federal Power Act of 1920
(B) an investment company or a company controlled by an investment company within the meaning of the United States Investment Company Act of 1940 or
(C) subject to regulation under any United States federal or state law or regulation that limits its ability to incur or guarantee indebtedness.
(d) Anti-Terrorism Law
No Obligor or any of its Subsidiaries or any of its Affiliates or Holding Companies, or to its knowledge any of their respective brokers or other agents acting or benefiting in any capacity in connection with the Facility:
(i) is in violation of any Anti-Terrorism Law or
(ii) is a Designated Person.
23.32 Sanctions
The Company represents that neither the Company nor any member of the Group (collectively for the purpose of this clause only, the Company ) or, to the knowledge of the Company, any director, officer, employee, agent, affiliate or representative of the Company is an individual or entity ( Person ) currently the subject of any sanctions administered or enforced by OFAC, the United Nations Security Council ( UNSC ), the European Union, Her Majestys Treasury ( HMT ), or other relevant sanctions authority (collectively, Sanctions ), nor is the Company located, organised or resident in a country or territory that is the subject of Sanctions. The Company represents and covenants that it will not, directly or indirectly, use the proceeds of the transaction, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, to fund any activities of or business with any Person, or in Burma/Myanmar, Cuba, Iran, Libya, North Korea, Sudan or in any other country or territory, that, at the time of such funding would result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
23.33 Times when representations made
(a) All the representations and warranties in this clause 23 are made by each Obligor on the date of this Agreement except for the representations and warranties set out in clause 23.12 which are deemed to be made by each Obligor (i) with respect to the Information Memorandum, on the date the Information Memorandum is approved by the Company, (ii) with respect to the Information Package, on the date of this Agreement and on the Closing Date and (iii) with respect to the Information Package (other than the Base Case Model), on the date of this Agreement and on any later date on which the Information Package (or part of it) is released to the Arrangers.
(b) All the representations and warranties in this clause 23 are deemed to be made by each Obligor on the Closing Date.
(c) The Repeating Representations are deemed to be made by each Obligor on the date of each Utilisation Request, on each Utilisation Date and on the first day of each Interest Period (except that those contained in clause 23.13(a) to 23.13(e) will cease to be so made once subsequent financial statements have been delivered under this Agreement).
(d) All the representations and warranties in this clause 23 except clause 23.12, clause 23.24 and clause 23.28 are deemed to be made by each Additional Obligor on the day on which it becomes (or it is proposed that it becomes) an Additional Obligor.
(e) Each representation or warranty deemed to be made after the date of this Agreement shall be deemed to be made by reference to the facts and circumstances existing at the date the representation or warranty is deemed to be made.
24 Information undertakings
The undertakings in this clause 24 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
24.1 Financial statements
The Company shall supply to the Agent in sufficient copies for all the Lenders:
(a) as soon as they are available, but in any event within 180 days after the end of each of its Financial Years:
(i) its audited consolidated financial statements for that Financial Year; and
(ii) the financial statements (consolidated if appropriate) of each Obligor (audited where required under the Relevant Jurisdiction) for that Financial Year;
(b) as soon as they are available, but in any event within 45 days after the end of each calendar month its management financial statements on a consolidated basis for that calendar month and for the Financial Year to date.
24.2 Provision and contents of Compliance Certificate
(a) The Company shall supply a Compliance Certificate to the Agent with each set of its Annual Financial Statements and each set of its Quarterly Financial Statements.
(b) The Compliance Certificate shall, amongst other things, set out (in reasonable detail) computations as to compliance with clause 25 (Financial covenants).
(c) Each Compliance Certificate shall be signed by two directors of the Company.
24.3 Requirements as to financial statements
(a) The Company shall procure that:
(i) each set of Annual Financial Statements shall be audited by the auditors and shall include the audited profit and loss accounts, balance sheets and cashflow statements of each Obligor (prepared in the case of the Company on a consolidated basis); and
(ii) each set of Monthly Financial Statements shall be in the form of the monthly management accounts supplied by the Company to the Agent pursuant to clause 4.1 (Initial conditions precedent).
(b) Each set of financial statements delivered pursuant to clause 24.1:
(i) in the case of the Annual Financial Statements, shall be accompanied by any letter addressed to the management of the relevant company (to the extent the Company receives such a letter) by the auditors accompanying those Annual Financial Statements;
(ii) in the case of the Monthly Financial Statements of the Company, shall be accompanied by a commentary by the finance director of the Company comparing actual performance for the period to which the financial statements relate to:
(A) the projected performance for that period set out in the Budget; and
(B) the actual performance for the corresponding period in the preceding Financial Year; and
(iii) shall be prepared in accordance with Accounting Principles.
(c) If after the date of this Agreement a change in the Accounting Principles (as at the date of this Agreement) or the accounting practices is such as to affect:
(A) the determination of the financial covenants contained in clause 25 (Financial covenants); and/or
(B) the determination of compliance with clause 26.33 (Guarantors) and/or clause 30.4(a) (Additional Guarantors); and/or
(C) the Margin,
the Company and the Agent shall, at the Agents request, negotiate in good faith with a view to agreeing such amendments as may be necessary to grant to the Lenders
protection comparable to that granted on the date of this Agreement, and any amendments so agreed will take effect on the date agreed between the Company and the Agent; and if no such agreement is reached within 30 days of the Agents request, the Agent and the Company shall instruct independent accountants (and if the Agent and the Company cannot agree the identity of the independent accountant such independent accountant as the chair of the law society directs) to determine any amendments to those clauses or definitions which those accountants (acting as experts and not as arbitrators) consider appropriate to grant to the Lenders protection comparable to that granted on the date of this Agreement, which amendments shall take effect when so determined and notified to the Company. Any amendments determined by such accountants shall be binding on all the Parties.
(d) If at any time a Default is continuing the Agent wishes to discuss the financial position of any member of the Group with the auditors, the Agent may notify the Company, stating the questions or issues which the Agent wishes to discuss with the auditors. In this event, the Company must ensure that the auditors are authorised (at the expense of the Company):
(i) to discuss the financial position of each member of the Group with the Agent on request from the Agent; and
(ii) to disclose to the Agent for the Finance Parties any information which the Agent may reasonably request.
24.4 Budget
(a) The Company shall supply to the Agent in sufficient copies for all the Lenders, as soon as the same become available but in any event before the start of each of its Financial Years, an annual Budget for that Financial Year.
(b) The Company shall ensure that each Budget:
(i) is in a form acceptable to the Agent and includes:
(A) a projected consolidated profit and loss, balance sheet and cashflow statement for each principal division of the Group; and
(B) projected financial covenant calculations for that Financial Year;
(ii) is prepared in accordance with the Accounting Principles and the accounting practices and financial reference periods applied to financial statements under clause 24.1; and
(iii) has been approved by the board of directors of the Company.
24.5 Year-end
The Company shall procure that each Financial Year-end of each member of the Group falls on 31 December save where otherwise required by law in any Relevant Jurisdiction.
24.6 Information: miscellaneous
The Company shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):
(a) at the same time as they are dispatched, copies of all documents dispatched by the Company to its shareholders generally (or any class of them) or dispatched by the Company or any Obligor to its creditors generally (or any class of them);
(b) promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which, if adversely determined, would involve a liability, or a potential or alleged liability, exceeding £1,000,000 (or its equivalent in other currencies);
(c) not used;
(d) promptly on the reasonable request of the Agent, such further information regarding the financial condition, assets and operations of the Group and/or any member of the Group (including any requested amplification or explanation of any item in the financial statements, Budget or other material provided by any Obligor under this Agreement; and
(e) any changes to the main board or the executive board of the Company and an up to date copy of its register of members (or equivalent in its jurisdiction of incorporation)) as any Finance Party through the Agent may reasonably request (provided that the Agent shall not request a copy of its register of members more frequently than twice in any Financial Year unless the Agent requires the register of members for know your customer requirements and/or if the Agent suspects that there has been a Change of Control).
24.7 Notification of default
(a) Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless such a notification has already been provided by another Obligor).
(b) If the Agent reasonably suspects that a Default is continuing promptly upon a request by the Agent, the Company shall supply to the Agent a certificate signed by two of its directors certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).
24.8 Know your customer checks
(a) If:
(i) the implementation or introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
(ii) any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date of this Agreement; or
(iii) a proposed assignment or transfer by a Lender of any of its rights and/or obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of clause 24.8(a)(iii), any prospective new Lender) to comply with know your customer or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective new Lender) in order for the Agent, such Lender or any prospective new Lender to carry out and be satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
(b) Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied with the results of all necessary know your customer or other checks on Lenders or prospective new Lenders pursuant to the transactions contemplated in the Finance Documents.
(c) The Company shall, by not less than ten Business Days prior written notice to the Agent, notify the Agent (who shall promptly notify the Lenders) of its intention to request that one of its Subsidiaries becomes an Additional Obligor pursuant to clause 30 (Changes to the Obligors).
(d) Following the giving of any notice pursuant to clause 24.8(c), if the accession of such Additional Obligor obliges the Agent or any Lender to comply with know your customer or similar identification procedures in circumstances where the necessary information is not already available to it, the Company shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective new Lender) in order for the Agent or such Lender or any prospective new Lender to carry out and be satisfied it has complied with all necessary know your customer or other checks in relation to any relevant person pursuant to such Subsidiary becoming an Additional Obligor.
24.9 ERISA
(a) Each Obligor will:
(i) promptly upon a request by the Lender, deliver to the Lender copies of the Annual Report (IRS form 5500 Series) together with all schedules and documentation reasonably requested by the Agent with respect to each Employee Plan; and
(ii) within 21 Business Days after it or any ERISA Affiliate becomes aware that any ERISA Event has occurred or, in the case of any ERISA Event which requires advance notice under section 4043(b) of ERISA, will occur, deliver to the Lender a statement signed by a director, member or officer of the Obligor or ERISA Affiliate describing that ERISA Event and the action, if any, taken or proposed to be taken with respect to that ERISA Event.
25 Financial covenants
25.1 Financial definitions
In this Agreement:
Adjusted EBITDA means in respect of any Relevant Period, EBITDA for that Relevant Period after:
(a) adding the amount of any cash receipts (and deducting the amount of any cash payments) during that Relevant Period in respect of any Exceptional Items not already taken account of in calculating EBITDA for any Relevant Period but excluding:
(i) Exceptional Items relating to cash receipts or cash paid for finance costs or discontinued operations
(ii) cash payments for Permitted Acquisitions and cash received for Permitted Disposals
(b) adding the amount of any increase in provisions, which are not Current Assets or Current Liabilities and deducting the amount of any non-cash credits which are not Current Assets or Current Liabilities) in each case to the extent taken into account in establishing EBITDA
(c) deducting the cash amount of maintenance capital expenditure actually paid (which shall be not more than £8,000,000 (or its equivalent in any currency)) during that Relevant Period by any member of the Group except (in each case) to the extent funded from the proceeds of Permitted Disposals, third party grants, third party contributions or Insurance Proceeds) and
(d) deducting the amount of any cash dividends or distributions paid or made by the Company in respect of that Relevant Period
and so that no amount shall be added (or deducted) more than once
Average Exchange Rate means the 12 month average of the month end exchange rates as referenced to Reuters
Current Assets means the aggregate (on a consolidated basis) of all inventory, work in progress, trade and other receivables of each member of the Group including prepayments in relation to operating items and sundry debtors (but excluding cash and Cash Equivalent Investments) maturing within 12 Months from the date of computation but excluding amounts in respect of:
(a) receivables in relation to corporation and deferred Tax
(b) Exceptional Items and other non-operating items
(c) insurance claims and
(d) any interest owing to any member of the Group
Current Liabilities means the aggregate (on a consolidated basis) of all liabilities (including trade creditors, accruals and provisions) of each member of the Group falling due within 12 Months from the date of computation but excluding amounts in respect of:
(a) liabilities for Financial Indebtedness and Finance Charges
(b) liabilities for corporation and deferred Tax
(c) Exceptional Items and other non-operating items
(d) insurance claims and
(e) liabilities in relation to dividends declared but not paid by the Company or by a member of the Group in favour of a person which is not a member of the Group
Debt Service means in respect of any Relevant Period the aggregate of:
(a) Net Finance Charges for that Relevant Period
(b) the net amount of any cash receipts during that Relevant Period in respect of any corporation tax rebates or credits and the amount actually paid or due and payable in respect of corporation taxes during that Relevant Period by any member of the Group
(c) the aggregate of all scheduled repayments of Financial Indebtedness falling due during that Relevant Period but excluding
(i) any amounts repaid or falling due under any overdraft or revolving facility (including, without limitation, the Facility and any Ancillary Facility) and which were available for simultaneous redrawing according to the terms of that facility
(ii) any such obligations owed to any member of the Group
(iii) any prepayment of Financial Indebtedness existing on the Closing Date which is required to be repaid under the terms of this Agreement and
(d) the amount of the capital element of any payments in respect of that Relevant Period payable under any Finance Lease entered into by any member of the Group
and so that no amount shall be included more than once
Debt Service Cover means the ratio of Adjusted EBITDA to Debt Service in respect of any Relevant Period
EBIT means in respect of any Relevant Period the consolidated operating profit of the Company before taxation (excluding the results from discontinued operations):
(a) before deducting any interest, commission, fees, discounts, prepayment fees, premiums or charges, gains or losses on Financial Indebtedness and other finance payments whether paid, payable or capitalised by any member of the Group (calculated on a consolidated basis) in respect of that Relevant Period
(b) not including any accrued interest owing or paid to any member of the Group
(c) before taking into account any Exceptional Items
(d) before deducting any Transaction Costs
(e) before taking into account any gain or loss arising from an upward or downward revaluation of any other asset except for the impairment of working capital items
(f) after deducting the amount of any profit (or adding back the amount of any loss) of any member of the Group which is attributable to minority interests;
(g) before taking into account any unrealised gains or losses on any derivative instrument (other than any derivative instrument which is accounted for on a hedge accounting basis)
(h) before taking into account any Pension Payment to the extent made after the date of this Agreement but before the first anniversary of the date of this Agreement and
(i) excluding any profit or loss arising from the disposal of fixed assets
in each case to the extent added, deducted or taken into account, as the case may be, for the purposes of determining operating profits of the Group before taxation
EBITA means in respect of any Relevant Period, EBIT for that Relevant Period after adding back any amount attributable to the impairment or amortisation of assets or impairment of members of the Group and non-cash based charges and amortisation costs associated with equity stock-based compensation schemes for that Relevant Period
EBITDA means in respect of any Relevant Period, EBITA for that Relevant Period after adding back any amount attributable to the depreciation of assets of members of the Group for that Relevant Period
Exceptional Items means any exceptional, one-off or non-recurring items which represent gains or losses including (without limitation) those arising on:
(a) the restructuring of the activities of an entity, including the associated redundancy programme costs and reversals of any provisions for the cost of restructuring
(b) disposals, revaluations or impairment of non-current assets
(c) disposals of assets associated with discontinued operations and acquisition costs in relation to the acquisition of new operations
(d) Environmental remediation costs and provisions not in the ordinary course of business
(e) one-off gains and losses recognised on the early termination, curtailment or change in employee retirement defined benefits
(f) disposal of a business operation whereby this is not classified as a discontinued operation for accounting purposes
Finance Charges means for any Relevant Period the aggregate amount of the accrued interest, commission, fees, discounts, prepayment fees, premiums or charges and other finance payments in respect of Financial Indebtedness whether paid payable or capitalised by any member of the Group (calculated on a consolidated basis) in respect of that Relevant Period:
(a) excluding any upfront fees or costs
(b) including the interest (but not the capital) element of payments in respect of Finance Leases;
(c) including any commission, fees, discounts and other finance payments payable by (and deducting any such amounts payable to) any member of the Group under any interest rate hedging arrangement
(d) taking no account of any unrealised gains or losses on any financial instruments other than any derivative investments which are accounted for on a hedge accounting basis
(e) excluding any Transaction Costs and
(f) excluding any interest cost or expected return on plan assets in relation to any post employment benefit schemes
so that no amount shall be added (or deducted) more than once
Financial Quarter means a 3 calendar months period ending on 31 March, 30 June, 30 September or 31 December in any Financial Year
Financial Year means a financial year of the Company
Interest Cover means the ratio of EBITDA to Net Finance Charges in respect of any Relevant Period
Leverage means in respect of any Relevant Period the ratio of Total Net Debt on the last day of that Relevant Period to EBITDA in respect of that Relevant Period
Net Finance Charges means, for any Relevant Period, the Finance Charges for that Relevant Period after deducting any interest payable in that Relevant Period to any member of the Group on any cash or Cash Equivalent investment
Non-Group Entity means any investment or entity (which is not itself a member of the Group (including associates) in which any member of the Group has an ownership interest
Pension Items means any income or charge attributable to an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pensions Schemes Act 1993) other than the current service costs and any past service costs and curtailments and settlements attributable to the scheme
Pension Payment means a payment of up to £5,000,000 as set out in the Base Case Model
Relevant Period means:
(a) in respect of Leverage and Interest Cover each 12 Month period ending on the most recent Quarter Date ending on or after 30 September 2011 and
(b) in respect of Debt Service Cover, prior to 30 June 2012, the period commencing on the Closing Date and ending on the most recent Quarter Date ending on or after 30 September 2011 and after such period each 12 Month period ending on the most recent Quarter Date
Relevant Proceeds means Disposal Proceeds or Insurance Proceeds (each as defined in clause 11 (Mandatory prepayment)
Total Debt means at any time the aggregate amount of all obligations of members of the Group for or in respect of Financial Indebtedness at that time but:
(a) excluding any such obligations to any other member of the Group
(b) including in the case of Finance Leases only their capitalised value
(c) excluding unrealised gains and losses on Treasury Transactions (including currency exchange gains and losses)
(d) excluding any obligations in respect of performance bonds issued in the ordinary course of trading in respect of non-financial obligations to the extent such performance bonds are not called or enforced
and so that no amount shall be included or excluded more than once
Total Net Debt means Total Debt less the aggregate amount of cash and Cash Equivalent Investments held by an Obligor at that time and so that no amount shall be included or excluded more than once
Working Capital means on any date Current Assets less Current Liabilities
25.2 Financial Condition
The Company shall ensure that:
(a) Debt Service Cover: Debt Service Cover in respect of any Relevant Period specified in column 1 below shall not be less than the ratio set out in column 2 below opposite that Relevant Period:
Column 1
|
|
Column 2
|
|
|
|
Relevant Period ending 30 September 2011 |
|
1.25:1 |
|
|
|
Relevant Period ending 31 December 2011 |
|
1.25:1 |
|
|
|
Thereafter each Relevant Period ending on a Quarter Date |
|
1.25:1 |
(b) Interest Cover: Interest Cover in respect of any Relevant Period shall not be less than 4.0:1.
(c) Leverage: Leverage in respect of any Relevant Period shall not exceed 3.0:1.
(d) Capital expenditure: The aggregate capital expenditure of the Group in respect of any Financial Year shall not exceed 110% of budgeted capital expenditure for that Financial Year as set out in the Budget for that Financial Year.
25.3 Financial testing
(a) The financial covenants set out in clause 25.2 shall be calculated in accordance with the Accounting Principles and tested by reference to:
(i) the Annual Financial Statements; and
(ii) the Quarterly Financial Statements for the Relevant Period.
(b) If in respect of any period there is a discrepancy between the information set out in the Quarterly Financial Statements for such period and that set out in the Annual Financial Statements for such period, the information in the Annual Financial Statements shall prevail.
(c) In respect of any Relevant Period, the exchange rate used to calculate Total Net Debt shall be the Average Exchange Rate for that Relevant Period.
26 General undertakings
The undertakings in this clause 26 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
26.1 Authorisations
Each Obligor shall promptly:
(a) obtain, comply with and do all that is necessary to maintain in full force and effect; and
(b) supply certified copies to the Agent of,
any Authorisation required under any law or regulation of a Relevant Jurisdiction to:
(i) enable it to perform its obligations under the Finance Documents;
(ii) ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document; and
(iii) carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.
26.2 Compliance with laws
Each Obligor shall (and the Company shall ensure that each member of the Group will) comply in all respects with all laws to which it may be subject, if failure so to comply has or is reasonably likely to have a Material Adverse Effect.
26.3 Environmental compliance
Each Obligor shall (and the Company shall ensure that each member of the Group will):
(a) comply with all Environmental Law;
(b) obtain, maintain and ensure compliance with all requisite Environmental Permits; and
(c) implement procedures to monitor compliance with and to prevent liability under any Environmental Law,
where failure to do so has or is reasonably likely to have a Material Adverse Effect.
26.4 Environmental claims
Each Obligor shall (and the Company shall ensure that each member of the Group will) promptly upon becoming aware of the same, inform the Agent in writing of:
(a) any Environmental Claim against any member of the Group which is current, pending or threatened; and
(b) any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the Group,
where the claim, if determined against that member of the Group, has or is reasonably likely to have a Material Adverse Effect.
26.5 Taxation
(a) Each Obligor shall pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:
(i) such payment is being contested in good faith;
(ii) adequate reserves are being maintained for those Taxes and the costs required to contest them which have been disclosed in its latest financial statements delivered to the Agent under clause 24.1 (Financial statements); and
(iii) such payment can be lawfully withheld and failure to pay those Taxes does not have or is not reasonably likely to have a Material Adverse Effect.
(b) No Obligor may change its residence for Tax purposes.
26.6 Merger
No Obligor shall enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction without the prior written consent of the Agent (acting on the instructions of the Majority Lenders (such consent not to be unreasonably withheld or delayed)).
26.7 Change of business
The Company shall procure that no substantial change is made to the general nature of the business of the Company, the Obligors or the Group taken as a whole from that carried on by the Group at the date of this Agreement.
26.8 Acquisitions
(a) No Obligor shall (and the Company shall ensure that no other member of the Group will):
(i) acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them); or
(ii) incorporate a company.
(b) Clause 26.8(a) does not apply to an acquisition of a company, of shares, securities or a business or undertaking (or, in each case, any interest in any of them) or the incorporation of a company which is a Permitted Acquisition.
26.9 Joint ventures
No Obligor shall (and the Company shall ensure that no member of the Group will):
(a) enter into, invest in or acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or
(b) transfer any assets or lend to or guarantee or give an indemnity for or give Security for the obligations of a Joint Venture or maintain the solvency of or provide working capital to any Joint Venture (or agree to do any of the foregoing).
Clause 26.9(a) and (b) above does not apply to any Joint Venture with is a Permitted Joint Venture.
26.10 Preservation of Assets
Each Obligor shall maintain in good working order and condition (ordinary wear and tear excepted) all of its assets necessary in the conduct of its business.
26.11 Pari passu ranking
Each Obligor shall (and the Company shall ensure that each member of the Group will) ensure that at all times any unsecured and unsubordinated claims of a Finance Party or Hedge Counterparty against it under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.
26.12 Negative pledge
In this Agreement, Quasi-Security means an arrangement or transaction described in clause 26.12(b).
(a) No Obligor shall (and the Company shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.
(b) No Obligor shall (and the Company shall ensure that no other member of the Group will):
(i) sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor or any other member of the Group;
(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms;
(iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or
(iv) enter into any other preferential arrangement having a similar effect,
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
(c) Clauses 26.12(a) and 26.12(b) do not apply to any Security or (as the case may be) Quasi-Security, which is Permitted Security.
26.13 Disposals
(a) No Obligor shall (and the Company shall ensure that no member of the Group will) enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset.
(b) Clause 26.13(a) above does not apply to any sale, lease, transfer or other disposal which is:
(i) a Permitted Disposal; or
(ii) a Permitted Transaction.
26.14 Arms length basis
(a) No Obligor shall (and the Company shall ensure no member of the Group will) enter into any transaction with any person except on arms length terms and for full market value.
(b) Clause 26.14(a) does not apply to:
(i) intra-Group loans permitted under clause 26.15;
(ii) fees, costs and expenses payable under the Transaction Documents in the amounts set out in the Transaction Documents delivered to the Agent under clause 4.1 (Initial conditions precedent) or agreed by the Agent;
(iii) any Permitted Transaction; or
(iv) the sale and/or licensing by Revere Graphics Worldwide of certain Intellectual Property for a nominal amount to a third party as approved by the Federal Trade Commission in the US as set out in the Information Memorandum.
26.15 Loans or credit
(a) No Obligor shall (and the Company shall ensure that no member of the Group will) be a creditor in respect of any Financial Indebtedness.
(b) Clause 26.15(a) does not apply to a Permitted Loan.
26.16 No Guarantees or indemnities
(a) No Obligor shall (and the Company shall ensure that no member of the Group will) incur or allow to remain outstanding any guarantee in respect of any obligation of any person.
(b) Clause 26.16(a) does not apply to a Permitted Guarantee.
26.17 Dividends and share redemption
(a) Except as permitted under the Intercreditor Deed, the Company shall not (and the Company shall ensure that no member of the Group will):
(i) declare, make or pay any dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other distribution) (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital);
(ii) repay or distribute any dividend or share premium reserve;
(iii) pay or allow any member of the Group to pay any management, advisory or other fee to or to the order of any of the shareholders of the Company; or
(iv) redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so.
(b) Clause 26.17(a) does not apply to a Permitted Distribution.
26.18 Notes
Except as permitted under the Intercreditor Deed, the Company shall not (and will ensure that no other member of the Group will):
(a) repay or prepay any principal amount (or capitalised interest) outstanding under the Notes;
(b) pay any interest, fee or charge accrued or due under the Note Documents; or
(c) purchase, redeem, defease or discharge any of the loan notes outstanding under the Notes.
26.19 Financial Indebtedness
(a) No Obligor shall (and the Company shall ensure that no member of the Group will) incur or allow to remain outstanding any Financial Indebtedness.
(b) Clause 26.19(a) does not apply to Permitted Financial Indebtedness.
26.20 Share capital
(a) No Obligor shall (and the Company shall ensure no member of the Group will) issue any shares.
(b) Clause 26.20(a) does not apply to a Permitted Share Issue.
26.21 Insurance
(a) Each Obligor shall effect and maintain, in a form and amount such insurance on and in respect of its business and its assets as a prudent company carrying on the same or substantially similar business as such Obligor would effect.
(b) The Company shall within 10 Business Days of each anniversary of the date of this Agreement provide to the Agent either:
(i) copies of each insurance policy in which that Obligor has an interest; or
(ii) a letter from an insurance broker confirming the requirements of clause 26.21(a) are being compiled with.
26.22 Pensions
(a) The Company shall ensure that all pension schemes operated by or maintained for the benefit of members of the Group and/or any of its employees are funded in accordance with the statutory funding objective under sections 221 and 222 of the Pensions Act 2004 and that no action or omission is taken by any member of the Group in relation to such a pension scheme which has or is reasonably likely to have a Material Adverse Effect (including, without limitation, the termination or commencement of winding-up proceedings of any such pension scheme or any member of the Group ceasing to employ any member of such a pension scheme).
(b) Except for the Defined Benefit Schemes, the Company shall ensure that no member of the Group is or has been at any time an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pension Schemes Act 1993) or connected with or an associate of (as those terms are used in sections 38 or 43 of the Pensions Act 2004) such an employer.
(c) If requested, the Company shall deliver to the Agent at such times as those reports are prepared in order to comply with the then current statutory or auditing requirements (as applicable either to the trustees of any relevant schemes or to the Company), the actuarial reports in relation to all pension schemes mentioned in clause 26.22(a).
(d) The Company shall promptly notify the Agent of any material change in the rate of contributions to any pension schemes mentioned in clause 26.22(a) above paid or recommended to be paid (whether by the scheme actuary or otherwise) or required (by law or otherwise).
(e) Each Obligor shall as soon as it becomes aware of it immediately notify the Agent of any investigation or proposed investigation by the Pensions Regulator which may lead to the issue of a Financial Support Direction or a Contribution Notice to any member of the Group.
(f) Each Obligor shall immediately notify the Agent if it receives a Financial Support Direction or a Contribution Notice from the Pensions Regulator.
26.23 Access
If a Default is continuing each Obligor shall (and the Company shall ensure that each member of the Group will) (not more than once in every Financial Year unless the Agent reasonably suspects a Default is continuing or may occur) permit the Agent and/or accountants or other professional advisers and contractors of the Agent free access at all reasonable times and on reasonable notice at the risk and cost of the Obligor or the Company to:
(a) the premises, assets, books, accounts and records of each member of the Group; and
(b) meet and discuss matters with the directors.
26.24 Intellectual Property
Each Obligor shall:
(a) preserve and maintain the subsistence and validity of the Intellectual Property necessary for the business of the relevant Obligor;
(b) use reasonable endeavours to prevent any infringement in any material respect of the Intellectual Property;
(c) make registrations and pay all registration fees and Taxes necessary to maintain the Intellectual Property that the relevant Obligor is required to maintain under clause 26.24(a) above in full force and effect and record its interest in that Intellectual Property;
(d) not use or permit the Intellectual Property to be used in a way or take any step or omit to take any step in respect of that Intellectual Property which may materially and adversely affect the existence or value of the Intellectual Property or imperil the right of any Obligor to use such property; and
(e) not discontinue the use of the Intellectual Property,
where failure to do so, in the case of clause 26.24(a) and clause 26.24(b) or, in the case of clause 26.24(d) and clause 26.24(e), such use, permission to use, omission or discontinuation is reasonably likely to have a Material Adverse Effect.
26.25 Transaction Documents
(a) No Obligor shall amend, vary, novate, supplement, supersede, waive or terminate any term of a Transaction Document or any other document delivered to the Agent pursuant to clause 4.1 (Initial conditions precedent) or clause 30 (Changes to the Obligors) or enter into any agreement with any shareholders of the Company or any of their Affiliates which is not a member of the Group except in writing:
(i) in accordance with the provisions of clause 40 (Amendments and waivers);
(ii) to the extent that that amendment, variation, novation, supplement, superseding, waiver or termination is permitted by the Intercreditor Deed;
(iii) prior to or on the Closing Date, with the prior written consent of the Original Lenders; or
(iv) after the Closing Date, in a way which:
(A) could not be reasonably expected materially and adversely to affect the interests of the Lenders; and
(B) would not change the date, amount or method of payment of interest or principal on the Notes.
(b) The Company shall promptly supply to the Agent a copy of any document relating to any of the matters referred to in clause 26.25(a)(i) to 26.25(a)(iv) above.
(c) Each Obligor shall (and the Company shall ensure that each member of the Group will) comply with the material terms of all Transaction Documents to which it is party.
26.26 Financial assistance
Any Obligor which is incorporated in any jurisdiction other than England and Wales shall comply with any law or regulation on financial assistance or its equivalent in that jurisdiction.
26.27 Group bank accounts
Each Obligor shall, where in the reasonable opinion of the Company it is commercially reasonable to do so, ensure that within 3 months of the Closing Date all its bank accounts in the United Kingdom or the US (other than Excluded Deposit Accounts) shall be opened and maintained with banks or financial institutions that are Acceptable Banks from time to time.
26.28 Treasury transactions
No Obligor shall (and the Company will ensure that no member of the Group will) enter into any Treasury Transaction, other than:
(a) the hedging transactions contemplated by the Hedging Letter and documented by the Hedging Agreements;
(b) spot and forward delivery foreign exchange contracts entered into in the ordinary course of business and not for speculative purposes; and
(c) any Treasury Transaction entered into for the hedging of actual or projected real exposures arising in the ordinary course of trading activities of a member of the Group and not for speculative purposes.
26.29 Compliance with Hedging Letter
The Company shall ensure that all exchange rate and interest rate hedging arrangements required by the Hedging Letter are implemented in accordance with the terms of the Hedging Letter and that such arrangements are not terminated, varied or cancelled without the prior written consent of the Agent save as permitted by the terms of the Intercreditor Deed.
26.30 Repatriation of Cash
The Company shall procure that on the last day of each Interest Period all cash within the Group (other than the Permitted Cash Balance) shall be in bank accounts of the Obligors
26.31 Auditors
The Company shall ensure that the auditors of each member of the Group are Auditors.
26.32 Further assurance
The Obligors shall, promptly upon the request of the Agent, file or record, as applicable, all termination statements and lien releases and take such other actions as may be necessary to discharge all mortgages, deeds of trust and security interests granted by members of the Group in respect of (a) the ABL Facility (following repayment of the ABL Facility as contemplated hereunder) and (b) any other security over assets of any Obligor other than Permitted Security.
26.33 Guarantors
(a) The Company shall ensure that at all times after the date of this Agreement the aggregate:
(i) earnings before interest, tax and amortisation (calculated on the same basis as EBITA) of the Guarantors (calculated on an unconsolidated basis and excluding all unrealised intra-Group profits of any member of the Group) exceeds 75% of EBITA of the Group; and
(ii) gross assets of the Guarantors (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 75% of the consolidated gross assets of the Group.
(b) The Company need only perform its obligations under clause 26.33(a) if it is not unlawful for the relevant person to become a Guarantor and that person becoming a Guarantor would not result in personal liability for that persons directors or other management. Each Obligor must use, and must procure that the relevant person uses, all reasonable endeavours lawfully available to avoid any such unlawfulness or personal liability. This includes agreeing to a limit on the amount guaranteed. The Agent may (but shall not be obliged to) agree to such a limit if, in its opinion, to do so would avoid the relevant unlawfulness or personal liability.
(c) Not used.
26.34 Anti-Terrorism Laws
Each Obligor agrees to the extent applicable to each Obligor:
(a) to comply with all Anti-Terrorism Laws;
(b) immediately to notify the Agent if it obtains knowledge that it or any of its Affiliates has become or been listed as a Designated Person or has been charged with or has engaged in any violation of any Anti-Terrorism Law;
(c) to exclude any funds derived from any Designated Person or from any person or entity involved in the violation of any Anti-Terrorism Law from being used to pay debt service or any other amounts owing under the Finance Documents;
(d) except for transfers of stock of any publicly traded Obligor or Affiliate effected on a stock exchange, not to transfer or permit the transfer of any legal or beneficial ownership interest of any kind in such Obligor or any Affiliate of such Obligor to a Designated Person or any person or entity that such Obligor has to its best knowledge (based upon reasonable inquiry by such Obligor) been involved in the violation of any Anti-Terrorism Law;
(e) not to acquire, directly or indirectly, ownership interest of any kind in any Designated Person or any person or entity that such Obligor has, to its best knowledge (based upon reasonable inquiry by such Obligor) been involved in the violation of any Anti-Terrorism Law, not to form any partnership or joint venture with any such person and not to act, directly or indirectly, as the agent or representative of any such person; and
(f) to indemnify the Lenders for any costs incurred by any of them as a result of any violation of an Anti-Terrorism Law by any Obligor or any Affiliate of any Obligor.
26.35 ERISA
Each Obligor shall:
(a) ensure that neither it nor any ERISA Affiliate engages in a complete or partial withdrawal, within the meaning of sections 4203 and 4205 of ERISA, from any Multiemployer Plan without the prior consent of the Agent;
(b) ensure that any material liability imposed on it or any ERISA Affiliate pursuant to Title IV of ERISA is paid and discharged when due;
(c) ensure that neither it nor any ERISA Affiliate adopts an amendment to an Employee Plan requiring the provision of Security under ERISA or the Internal Revenue Code without the prior consent of the Lender; and
(d) ensure that no Employee Plan is terminated under section 4041 of ERISA
26.36 Margin Regulation
(a) Each Obligor shall (and the Company shall ensure that each Obligor shall) use the proceeds of the Loans without violating Regulation T, U or X or any other applicable US federal or state laws or regulations.
(b) If requested by the Agent, each Obligor shall furnish to the Agent a statement in conformity with the requirements of FR Form U-1 referred to in Regulation U.
26.37 US Regulation
Each Obligor shall ensure that it will not, by act or omission, become subject to any of the categories, laws or regulations described in clause 23.31(c) (Other US Regulation).
26.38 Conditions Subsequent
(a) Each US Obligor shall submit the required notification and documentation to close all its bank accounts in England and Wales on or prior to the date falling 3 Business Days after the Closing Date.
(b) On or before the date 60 days after the Closing Date, the Company shall provide to the Agent evidence that the Security in respect of the ABL Facility has been released and all necessary forms MG02 have been filed at Companies House.
(c) The Company shall procure that each of LGL 1996 Limited and Biggleswick Limited are liquidated in accordance with limb (b) of the definition of Permitted Transaction before the first anniversary of this Agreement.
27 Events of Default
Each of the events or circumstances set out in this clause 27 (other than clause 27.20) is an Event of Default.
27.1 Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place and in the currency in which it is expressed to be payable unless:
(a) its failure to pay is caused by:
(i) an administrative or technical error; or
(ii) a Disruption Event; and
(b) payment is made within 3 Business Days of its due date.
27.2 Financial covenants and other obligations
(a) Any requirement of clause 25 (Financial covenants) is not satisfied.
(b) An Obligor does not comply with any Material Provision.
(c) Not used.
27.3 Other obligations
(a) An Obligor does not comply with any provision of the Finance Documents (other than those referred to in clause 27.1 and clause 27.2.
(b) No Event of Default under clause 27.3(a) will occur if the failure to comply is capable of remedy and is remedied within 15 Business Days of the earlier of:
(i) the Agent giving notice to the Company or relevant Obligor; and
(ii) the Company or the relevant Obligor becoming aware of the failure to comply.
27.4 Misrepresentation
(a) Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.
(b) No Event of Default under clause 27.4(a) will occur if:
(i) the event or circumstance causing the representation or statement to be incorrect or misleading is capable of remedy; and
(ii) such Obligor shall have remedied such event or circumstance within 15 Business Days after the earlier of:
(A) the relevant Obligor becoming aware of such incorrect or misleading representation or statement; and
(B) receipt by the relevant Obligor of written notice from the Agent to such Obligor requiring the event or circumstance to be remedied.
27.5 Cross default
(a) Any Financial Indebtedness of any member of the Group is not paid when due nor within any originally applicable grace period.
(b) Any Financial Indebtedness of any member of the Group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
(c) Any commitment for any Financial Indebtedness of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).
(d) Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).
(e) No Event of Default will occur under this clause 27.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within clause 27.5(a) to 27.5(d) (inclusive) is less than £2,500,000 (or its equivalent in any other currency or currencies).
27.6 Insolvency
(a) A member of the Group is unable or admits inability to pay its debts as they fall due, suspends or threatens to suspend making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
(b) A moratorium is declared in respect of any indebtedness of any member of the Group. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.
27.7 Insolvency proceedings
(a) Any corporate action, legal proceedings or other procedure or step is taken in relation to:
(i) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any member of the Group;
(ii) a composition, compromise, assignment or arrangement with any creditor of any member of the Group other than as permitted under paragraph (b) of the definition of Permitted Transaction;
(iii) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any member of the Group or any of its assets; or
(iv) enforcement of any Security over any assets of any member of the Group,
or any analogous procedure or step is taken in any jurisdiction.
(b) Any of the following occurs in respect of a US Obligor:
(i) it makes a general assignment for the benefit of creditors;
(ii) it commences a voluntary case or proceeding under any US Bankruptcy Law;
(iii) an involuntary proceeding under any US Bankruptcy Law is commenced against it and is not challenged by appropriate means within thirty (30) days and is not dismissed or stayed within ninety (90) days after commencement of such case; or
(iv) a custodian, conservator, receiver, liquidator, assignee, trustee, sequestrator or other similar official is appointed under any US Bankruptcy Law for, or takes charge of, all or a substantial part of the property of a US Obligor
(c) Clause 27.7 shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement.
27.8 Creditors process
Any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affects any asset or assets of a member of the Group having an aggregate value of £1,500,000 (or its equivalent in any currency) and is not discharged within 21 days of the commencement of such process.
27.9 Unlawfulness and invalidity
(a) It is or becomes unlawful for an Obligor, or any other member of the Group that is a party to the Intercreditor Deed, to perform any of its obligations under the Finance Documents or any subordination created under the Intercreditor Deed is or becomes unlawful.
(b) Any obligation or obligations of any Obligor under any Finance Documents or any other member of the Group under the Intercreditor Deed are not (subject to the Legal Reservations) or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Lenders under the Finance Documents.
(c) Any Finance Document ceases to be in full force and effect or any subordination created under the Intercreditor Deed, ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to it (other than a Finance Party) to be ineffective.
27.10 Intercreditor Deed
(a) Any party to the Intercreditor Deed (other than a Finance Party or an Obligor) fails to comply with the provisions of, or does not perform its obligations under, the Intercreditor Deed; or
(b) a representation or warranty given by that party in the Intercreditor Deed is incorrect in any material respect,
and, if the non-compliance or circumstances giving rise to the misrepresentation or breach of warranty are capable of remedy, it is not remedied within 10 Business Days of the earlier of the Agent giving notice to that party or that party becoming aware of the non-compliance, misrepresentation or breach of warranty.
27.11 Cessation of business
Any member of the Group suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business where such suspension or cessation is reasonably likely to have a Material Adverse Effect.
27.12 Change of ownership
After the Closing Date, an Obligor (other than the Company) ceases to be a wholly-owned Subsidiary of the Company.
27.13 Audit qualification
The Auditors of the Group qualify the Annual Financial Statements of the Company in an adverse manner which the Agent (acting reasonably) considers material.
27.14 Expropriation
The authority or ability of any Obligor to conduct its business is materially limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other person in relation to any Obligor or any of its assets.
27.15 Repudiation and rescission of agreements
(a) An Obligor (or any other relevant party) rescinds or purports to rescind or repudiates or purports to repudiate a Finance Document or evidences an intention to rescind or repudiate a Finance Document.
(b) Any party to the Intercreditor Deed rescinds or purports to rescind or repudiates or purports to repudiate any of those agreements or instruments in whole or in part where to do so has or is, in the reasonable opinion of the Majority Lenders, likely to have a material adverse effect on the interests of the Lenders under the Finance Documents.
27.16 Litigation
Any litigation, arbitration, administrative, governmental, regulatory or other investigations, proceedings or disputes are commenced or threatened in relation to the Transaction Documents or the transactions contemplated in the Transaction Documents or against any member of the Group or its assets which results in a liability to such member of the Group (whether actual or contingent) in an aggregate amount in excess of £5,000,000 (excluding any proceedings in respect of which (a) the insurers of the Group have confirmed in writing to the Agent that the liability is fully covered by insurance and (b) such insurers are not disputing liability) (or its equivalent in any currency) and where a grace period is provided for that liability is not discharged in full within any required period set out in the relevant judgment, settlement or agreement.
27.17 Pensions
The Pensions Regulator issues a Financial Support Direction or a Contribution Notice to any member of the Group unless the aggregate liability of the Obligors in each Financial Year under all Financial Support Directions and Contributions Notices is less than the greater of:
(a) £5,000,000 (or its equivalent in any currency); and
(b) 10% of the Groups EBITDA (by reference to the latest audited Annual Financial Statements delivered to the Agent pursuant to clause 24.1(a) (Financial statements)).
27.18 Material adverse change
Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.
27.19 ERISA
Any ERISA Event or event set forth in (a), (b) or (c) below occurs that has or could reasonably be expected to have a Material Adverse Effect:
(a) any Obligor or ERISA Affiliate incurs a liability to or on account of a Multiemployer Plan as a result of a violation of section 515 of ERISA or under section 4201, 4204 or 4212(c) of ERISA;
(b) with respect to each Employee Plan subject to Title IV of ERISA, such plans funded ratio (defined for this purpose as the actuarial value of the assets of such plan divided by the present value of all benefits accrued or earned with respect to such plan) is less than (i) 76 per cent as of 1 January 2011, and (ii) 80 per cent on the first day of any calendar year thereafter. The calculation of such ratio shall be computed using the actuarial value, assumptions and methods used by the actuary to the Employee Plan in its most recent valuation of such plan; or
(c) any Obligor or ERISA Affiliate incurs or is likely to incur a liability to or on account of an Employee Plan under section 409, 502(i) or 502(I) of ERISA or section 4971 or 4975 of the Internal Revenue Code other than as a result of entering into this Agreement.
27.20 Acceleration
On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Lenders, by notice to the Company:
(a) cancel the Total Commitments and/or Ancillary Commitments at which time they shall immediately be cancelled;
(b) declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, at which time they shall become immediately due and payable;
(c) declare that all or part of the Loans be payable on demand, at which time they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders; and/or
(d) declare all or any part of the amounts (or cash cover in relation to those amounts) outstanding under the Ancillary Facilities to be immediately due and payable, at which time they shall become immediately due and payable.
27.21 Automatic Acceleration in Relation to a US Obligor
If an Event of Default occurs under clause 27.7(b) in relation to a US Obligor:
(a) the Total Commitment shall immediately be cancelled automatically, without any direction, notice, declaration or other act;
(b) all of the Utilisations, together with accrued interest, and all other amounts accrued and outstanding under the Finance Documents shall be immediately due and payable, automatically and without any direction, notice, declaration or other act; and
(c) each amount expressed hereunder to be payable by any US Obligor on demand shall, after that Event of Default has occurred, be immediately due and payable without the need for any demand or other claim on any US Obligor.
28 Changes to the Lenders
28.1 Assignments and transfers by the Lenders
Subject to this clause 28 and to clause 29, a Lender ( Existing Lender ) may:
(a) assign any of its rights; or
(b) transfer by novation any of its rights and obligations,
under any Finance Document to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in, or established for the purpose of making, purchasing or investing in loans, securities or other financial assets ( New Lender ).
28.2 Conditions of assignment or transfer
(a) An Existing Lender must consult with the Company for not less than 5 Business Days before it may make an assignment or transfer in accordance with clause 28.1 unless the assignment or transfer is:
(i) to another Lender or an Affiliate of a Lender;
(ii) if the Existing Lender is a fund, to a fund which is a Related Fund of the Existing Lender; or
(iii) made at a time when an Event of Default is continuing.
(b) An assignment will only be effective on:
(i) receipt by the Agent (whether in the Assignment Agreement or otherwise) of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender at that time;
(ii) the New Lender entering into the documentation required for it to accede as a party to the Intercreditor Deed; and
(iii) the performance by the Agent of all necessary know your customer or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.
(c) A transfer will only be effective if the New Lender enters into the documentation required for it to accede as a party to the Intercreditor Deed and if the procedure set out in clause 28.5 is complied with.
(d) If:
(i) a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and
(ii) as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under clause 18 (Increased costs),
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.
(e) Each New Lender, by executing the relevant Transfer Certificate or Assignment Agreement, confirms, for the avoidance of doubt, that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lenders would have been had it remained a Lender.
28.3 Assignment or transfer fee
Unless the Agent otherwise agrees and excluding an assignment or transfer:
(a) to an Affiliate of a Lender; or
(b) to a Related Fund
the New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of £1,500.
28.4 Limitation of responsibility of Existing Lenders
(a) Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:
(i) the legality, validity, effectiveness, adequacy or enforceability of the Transaction Documents or any other documents;
(ii) the financial condition of any Obligor;
(iii) the performance and observance by any Obligor or any other member of the Group of its obligations under the Transaction Documents or any other documents; or
(iv) the accuracy of any statements (whether written or oral) made in or in connection with any Transaction Document or any other document,
and any representations or warranties implied by law are excluded.
(b) Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
(i) has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender or any other Finance Party in connection with any Transaction Document; and
(ii) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities and of the risks arising under or in connection with the Finance Documents on the terms set out in clause 31.15 (Credit appraisal by the Lenders and Ancillary Lenders) whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
(c) Nothing in any Finance Document obliges an Existing Lender to:
(i) accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this clause 28; or
(ii) guarantee, indemnify or otherwise hold harmless a New Lender in respect of any cost, loss or liability directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Transaction Documents or otherwise.
28.5 Procedure for transfer
(a) Subject to the conditions set out in clause 28.2 a transfer is effected in accordance with clause 28.5(c) when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to clause 28.5(b), as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate. Each Obligor and each Finance Party (other than the Existing Lender and the Agent) irrevocably authorises the Agent to execute on its behalf each duly completed Transfer Certificate delivered to the Agent and acknowledges that it will be bound by such transfer.
(b) The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary know your customer or similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.
(c) Subject to clause 28.10, on the Transfer Date:
(i) to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their
respective rights against one another under the Finance Documents shall be cancelled ( Discharged Rights and Obligations );
(ii) each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor or other member of the Group and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;
(iii) the Agent, the Arrangers, the New Lender, the other Lenders and any relevant Ancillary Lender shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights, and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Arrangers and any relevant Ancillary Lender and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and
(iv) the New Lender shall become a Party as a Lender.
28.6 Procedure for assignment
(a) Subject to the conditions set out in clause 28.2 an assignment may be effected in accordance with clause 28.6(c) below when the Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to clause 28.6(b) below, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.
(b) The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.
(c) Subject to clause 28.10, on the Transfer Date:
(i) the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents expressed to be the subject of the assignment in the Assignment Agreement;
(ii) the Existing Lender will be released from the obligations ( Relevant Obligations ) expressed to be the subject of the release in the Assignment Agreement; and
(iii) the New Lender shall become a Party as a Lender and will be bound by obligations equivalent to the Relevant Obligations.
(d) Lenders may utilise procedures other than those set out in this clause 28.6 to assign their rights under the Finance Documents (but not, without the consent of the relevant Obligor or unless in accordance with clause 28.5, to obtain a release by that Obligor from the obligations owed to that Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender) provided that they comply with the conditions set out in clause 28.2.
28.7 Copy of Transfer Certificate, Assignment Agreement or Increase Confirmation to Company
The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, an Assignment Agreement or an Increase Confirmation, send to the Company a copy of that Transfer Certificate, Assignment Agreement or Increase Confirmation.
28.8 Accession of Hedge Counterparties
Any person which becomes a party to the Intercreditor Deed as a Hedge Counterparty shall, at the same time, become a Party to this Agreement as a Hedge Counterparty in accordance with clause 16.7 (Creditor/Agent Accession Undertaking) of the Intercreditor Deed.
28.9 Security over Lenders rights
In addition to the other rights provided to Lenders under this clause 28, each Lender may without consulting with or obtaining consent from any Obligor, at any time charge, assign or otherwise create a Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:
(a) any Security to secure obligations to a federal reserve or central bank or to a government authority, department or agency (including HM Treasury); and
(b) in the case of any Lender which is a fund any Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,
except that no such Security shall:
(i) release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant Security for the Lender as a party to any of the Finance Documents; or
(ii) require any payments to be made by an Obligor or grant to any person any more extensive rights than those required to be made or granted to the relevant Lender under the Finance Documents.
28.10 Pro rata interest settlement
If the Agent has notified the Lenders that it is able to distribute interest payments on a pro rata basis to Existing Lenders and New Lenders then (in respect of any transfer pursuant to clause 28.6 or any assignment pursuant to clause 28.6 the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):
(a) any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date ( Accrued Amounts ) and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six Months, on the next of the dates which falls at six Monthly intervals after the first day of that Interest Period); and
(b) the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts so that, for the avoidance of doubt:
(i) when the Accrued Amounts become payable, those Accrued Amounts will be payable for the account of the Existing Lender; and
(ii) the amount payable to the New Lender on that date will be the amount which would, but for the application of this clause 28.10, have been payable to it on that date, but after deduction of the Accrued Amounts.
29 Restriction on Debt Purchase Transactions
29.1 Prohibition on Debt Purchase Transactions by the Group
The Company shall not, and shall procure that each other member of the Group shall not, enter into any Debt Purchase Transaction or beneficially own all or any part of the share capital of a company that is a Lender or a party to a Debt Purchase Transaction of the type referred to in paragraphs (b) or (c) of the definition of Debt Purchase Transaction.
29.2 Disenfranchisement on Debt Purchase Transactions entered into by Sponsor Affiliates
(a) For so long as a Sponsor Affiliate (i) beneficially owns a Commitment or (ii) has entered into a sub-participation agreement relating to a Commitment or other agreement or arrangement having a substantially similar economic effect and such agreement or arrangement has not been terminated:
(i) in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents such Commitment shall be deemed to be zero; and
(ii) such Sponsor Affiliate or the person with whom it has entered into such sub-participation, other agreement or arrangement shall be deemed not to be a Lender (unless in the case of a person not being a Sponsor Affiliate it is a Lender by virtue otherwise than by beneficially owning the relevant Commitment).
(b) Each Lender shall, unless such Debt Purchase Transaction is an assignment or transfer, promptly notify the Agent in writing if it knowingly enters into a Debt Purchase Transaction with a Sponsor Affiliate ( Notifiable Debt Purchase Transaction ), such notification to be substantially in the form set out in part 1 (Form of Notice on Entering into Notifiable Debt Purchase Transaction) of schedule 12.
(c) A Lender shall promptly notify the Agent if a Notifiable Debt Purchase Transaction to which it is a party:
(i) is terminated; or
(ii) ceases to be with a Sponsor Affiliate,
such notification to be substantially in the form set out in part 2 (Form of Notice on Termination of Notifiable Debt Purchase Transaction / Notifiable Debt Purchase Transaction ceasing to be with Sponsor Affiliate) of schedule 12.
(d) Each Sponsor Affiliate that is a Lender agrees that:
(i) in relation to any meeting or conference call to which all the Lenders are invited to attend or participate, it shall not attend or participate in the same if so requested by the Agent or, unless the Agent otherwise agrees, be entitled to receive the agenda or any minutes of the same; and
(ii) in its capacity as Lender, unless the Agent otherwise agrees, it shall not be entitled to receive any report or other document prepared at the behest of, or on the instructions of, the Agent or one or more of the Lenders.
30 Changes to the Obligors
30.1 Assignment and transfers by Obligors
No Obligor or any other member of the Group may assign any of its rights or transfer (or enter into any transaction or purported transaction the effect of which is to give rise to a trust in respect of) any of its rights or obligations under the Finance Documents.
30.2 Additional Borrowers
(a) Subject to compliance with the provisions of clause 24.8(c) (Know your customer checks) and 24.8(d) (Know your customer checks), the Company may request, at any time after the first Utilisation Date, in connection with any of its wholly owned Subsidiaries, which is not a Dormant Subsidiary, becomes a Borrower under the Revolving Facility. That Subsidiary shall become a Borrower upon satisfaction of each of the following conditions:
(A) it is incorporated in the same jurisdiction as an existing Borrower and the Majority Lenders approve the addition of that Subsidiary or otherwise if all the Lenders approve the addition of that Subsidiary;
(B) the Company and that Subsidiary deliver to the Agent a duly completed and executed Accession Deed;
(C) the Subsidiary is (or becomes) a Guarantor prior to becoming a Borrower;
(D) the Company confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Borrower and the Company confirms this; and
(E) the Agent has received all of the documents and other evidence listed in part 3 (Conditions precedent to be delivered by an Additional Obligor) of schedule 2 in relation to that Additional Borrower, each in form and substance satisfactory to the Agent.
(b) The Agent shall notify the Company and the Lenders promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in part 3 (Conditions precedent to be delivered by an Additional Obligor) of schedule 2.
(c) Upon becoming an Additional Borrower that Subsidiary shall make any filings (and provide copies of such filings) as required by clause 17.2(j) (Tax gross-up) and clause 17.7(b) (HMRC DT Treaty Passport scheme confirmation) in accordance with those clauses.
30.3 Resignation of a Borrower
(a) With the prior consent of all the Lenders (such consent to be provided if the Borrower is the subject of a disposal that is permitted under clause 26.13), the Company may request that such Borrower ceases to be a Borrower by delivering to the Agent a Resignation Letter.
(b) The Agent shall accept a Resignation Letter and notify the Company and the other Finance Parties of its acceptance if:
(i) the Company has confirmed that no Default is continuing or would result from the acceptance of the Resignation Letter;
(ii) the Borrower is under no actual or contingent obligations as a Borrower under any Finance Documents;
(iii) where the Borrower is also a Guarantor (unless its resignation has been accepted in accordance with clause 30.5), its obligations in its capacity as Guarantor continue to be legal, valid, binding and enforceable and in full force and effect (subject to the Legal Reservations) and the amount guaranteed by it as a Guarantor is not decreased (and the Company has confirmed this is the case); and
(iv) the Company has confirmed that it shall ensure that any relevant Disposal Proceeds will be applied in accordance with clause 11.2 (Disposal and Insurance).
(c) Upon notification by the Agent to the Company of its acceptance of the resignation of a Borrower, that Party shall cease to be a Borrower and shall have no further rights or obligations under the Finance Documents as a Borrower.
(d) The Agent may, at the cost and expense of the Company, require a legal opinion from counsel to the Agent confirming the matters set out in clause 30.3(b)(ii) and the Agent shall be under no obligation to accept a Resignation Letter until it has obtained such opinion in form and substance satisfactory to it.
30.4 Additional Guarantors
(a) Subject to compliance with the provisions of clause 24.8 (Know your customer checks), the Company shall ensure that any other member of the Group which is a Material Company (other than the French Subsidiary and the Czech Subsidiary) shall within ten Business Days after becoming a Material Company, shall become an Additional Guarantor.
(b) A member of the Group shall become an Additional Guarantor if the Agent has received all of the documents and other evidence listed in part 3 (Conditions precedent required to be delivered by an Additional Obligor) of schedule 2 in relation to that Additional Guarantor, each in form and substance satisfactory to the Agent.
(c) The Agent shall notify the Company and the other Finance Parties promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in part 3 (Conditions precedent required to be delivered by an Additional Obligor) of schedule 2.
30.5 Resignation of a Guarantor
(a) The Company may request that a Guarantor (other than the Company) ceases to be a Guarantor by delivering to the Agent a Resignation Letter if:
(i) that Guarantor is being disposed of by way of a Third Party Disposal (as defined in clause 30.3) and the Company has confirmed this is the case; or
(ii) subject to clause 3.3(c)(ii) (Amendments and waivers: Senior Lenders) of the Intercreditor Deed, all the Lenders have consented to the resignation of that Guarantor.
(b) Subject to clause 16.10 (Resignation of a Debtor) of the Intercreditor Deed, the Agent shall accept a Resignation Letter and notify the Company and the Lenders of its acceptance upon satisfaction of each of the following conditions:
(i) the Company has confirmed that no Default is continuing or would result from the acceptance of the Resignation Letter;
(ii) no payment is due from the Guarantor under clause 22.1 (Guarantee and indemnity);
(iii) where the Guarantor is also a Borrower, it is under no actual or contingent obligations as a Borrower and has resigned and ceased to be a Borrower under clause 30.3; and
(iv) the Company has confirmed that it shall ensure that the relevant Disposal Proceeds will be applied, in accordance with clause 11.2 (Disposal and Insurance).
(c) The resignation of that Guarantor shall not be effective until the date of the relevant Third Party Disposal at which time that company shall cease to be a Guarantor and shall have no further rights or obligations under the Finance Documents as a Guarantor.
30.6 Repetition of Representations
Delivery of an Accession Deed constitutes confirmation by the relevant Subsidiary that the representations and warranties referred to in clause 23.33(d) are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.
30.7 Not used.
31 Role of the Agent, the Arrangers and others
31.1 Appointment of the Agent
(a) Each of the Arrangers and the Lenders appoints the Agent to act as its agent under and in connection with the Finance Documents.
(b) Each of the Arrangers and the Lenders authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.
31.2 Duties of the Agent
(a) Subject to clause 31.2(b), the Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.
(b) Without prejudice to clause 28.7 (Copy of Transfer Certificate, Assignment Agreement or Increase Confirmation to Company), clause 31.2(a) above shall not apply to any Transfer Certificate, any Assignment Agreement or any Increase Confirmation.
(c) Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(d) If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
(e) If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Arrangers) under this Agreement it shall promptly notify the other Finance Parties.
(f) The Agent shall maintain a register for recordation of the names, addresses (including the department or officer) if any, to whom communications are to be made or documents are to be delivered), fax numbers, electronic mail address and/or any other information required to enable the sending and receipt of information by electronic mail or other electronic means and the Commitments of each Lender, and agrees to provide to the Company within 5 Business Days of a request by the Company (but no more frequently than once per calendar month) or as soon as reasonably practicable upon the Agent becoming an Impaired Agent a copy of such register as at the date of that request. The entries in the register shall be conclusive absent manifest error, and the Obligors and the Lenders may treat each Person whose name is recorded in the register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement,
(g) The Agents duties under the Finance Documents are solely mechanical and administrative in nature.
31.3 Role of the Arrangers
Except as specifically provided in the Finance Documents, the Arrangers have no obligations of any kind to any other Party under or in connection with any Finance Document.
31.4 No fiduciary duties
(a) Nothing in this Agreement constitutes the Agent and/or the Arrangers as a trustee or fiduciary of any other person.
(b) None of the Agent, the Arrangers or any Ancillary Lender shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.
31.5 Business with the Group
The Agent, the Arrangers and each Ancillary Lender may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
31.6 Rights and discretions
(a) The Agent may rely on:
(i) any representation, notice or document (including, without limitation, any notice given by a Lender pursuant to clause 29.2(b) or 29.2(c) (Disenfranchisement on Debt Purchase Transactions entered into by Sponsor Affiliates)) believed by it to be genuine, correct and appropriately authorised; and
(ii) any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.
(b) The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:
(i) no Default has occurred (unless it has actual knowledge of a Default arising under clause 27.1 (Non-payment));
(ii) any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised;
(iii) any notice or request made by the Company (other than a Utilisation Request) is made on behalf of and with the consent and knowledge of all the Obligors; and
(iv) no Notifiable Debt Purchase Transaction:
(A) has been entered into;
(B) has been terminated; or
(C) has ceased to be with a Sponsor Affiliate.
(c) The Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.
(d) The Agent may act in relation to the Finance Documents through its personnel and agents.
(e) The Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.
(f) Without prejudice to the generality of clause 31.6(e) above, the Agent may disclose the identity of a Defaulting Lender to the other Finance Parties and the Company shall disclose the same upon the written request of the Majority Lenders.
(g) Notwithstanding any other provision of any Finance Document to the contrary, none of the Agent or the Arrangers is obliged to do or omit to do anything if it would or
might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
(h) The Agent may not disclose to any Finance Party any details of the rate notified to the Agent by any Lender for the purpose of clause 15.3(a)(ii) (Market disruption).
31.7 Majority Lenders instructions
(a) Unless a contrary indication appears in a Finance Document, the Agent shall:
(i) exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent); and
(ii) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the Majority Lenders.
(b) Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.
(c) The Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.
(d) In the absence of instructions from the Majority Lenders, (or, if appropriate, the Lenders) the Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders.
(e) The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lenders consent) in any legal or arbitration proceedings relating to any Finance Document.
31.8 Responsibility for documentation
None of the Agent or any Arranger or any Ancillary Lender:
(a) is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, any Arranger, an Ancillary Lender, an Obligor or any other person given in or in connection with any Finance Document, the Information Memorandum or the transactions contemplated in the Finance Documents;
(b) is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document; or
(c) is responsible for any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.
31.9 Exclusion of liability
(a) Without limiting clause 31.9(b) (and without prejudice to the provisions of clause 34.11(e) (Disruption to Payment Systems etc), none of the Agent or any Ancillary Lender will be liable (including, without limitation, for negligence or any other category of liability whatsoever) for any action taken by it (or any omission by it to act) under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
(b) No Party (other than the Agent or an Ancillary Lender (as applicable)) may take any proceedings against any officer, employee or agent of the Agent or any Ancillary Lender, in respect of any claim it might have against the Agent or an Ancillary Lender or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document or any Transaction Document and any officer, employee or agent of the Agent or any Ancillary Lender may rely on this clause subject to clause 1.3 (Third party rights) and the provisions of the Third Parties Act.
(c) The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.
(d) Nothing in this Agreement shall oblige the Agent or the Arrangers to carry out any know your customer or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent and the Arrangers that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Arrangers.
31.10 Lenders indemnity to the Agent
Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within 3 Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the Agents gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to clause 34.11 (Disruption to Payment Systems etc) notwithstanding the Agents negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance Document).
31.11 Resignation of the Agent
(a) The Agent may resign and appoint one of its Affiliates acting through an office in the United Kingdom as successor by giving notice to the Lenders and the Company.
(b) Alternatively the Agent may resign by giving notice to the Lenders and the Company, in which case the Majority Lenders (after consultation with the Company) may appoint a successor Agent.
(c) If the Majority Lenders have not appointed a successor Agent in accordance with clause 31.11(b) within 30 days after notice of resignation was given, the Agent (after consultation with the Company) may appoint a successor Agent (acting through an office in the United Kingdom).
(d) If the Agent wishes to resign because (acting reasonably) it has concluded that it is no longer appropriate for it to remain as agent and the Agent is entitled to appoint a successor Agent under clause 31.11(c), the Agent may (if it concludes (acting reasonably) that it is necessary to do so in order to persuade the proposed successor Agent to become a party to this Agreement as Agent) agree with the proposed successor Agent amendments to this clause 31 and any other term of this Agreement dealing with the rights or obligations of the Agent consistent with then current market practice for the appointment and protection of corporate trustees together with any reasonable amendments to the agency fee payable under this Agreement which are consistent with the successor Agents normal fee rates and those amendments will bind the Parties.
(e) The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.
(f) The Agents resignation notice shall only take effect upon the appointment of a successor.
(g) Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this clause 31. Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
(h) After consultation with the Company, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with clause 31.11(b). In this event, the Agent shall resign in accordance with clause 31.11(b).
(i) The Agent shall resign in accordance with clause 31.11(b) (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to clause 31.11(c)) if on or after the date which is 3 months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:
(i) the Agent fails to respond to a request under clause 17.12 (FATCA Information) and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(ii) the information supplied by the Agent pursuant to clause 17.12 (FATCA Information) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(iii) the Agent notifies the Company and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) a Lender believes that a Party may be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.
31.12 Replacement of the Agent
(a) After consultation with the Company, the Majority Lenders may, by giving 30 days notice to the Agent (or at any time the Agent is an Impaired Agent, by giving any shorter notice determined by the Majority Lenders) replace the Agent by appointing a successor Agent (acting through an office in the United Kingdom).
(b) The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.
(c) The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this clause 31.12 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date).
(d) Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
31.13 Confidentiality
(a) In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
(b) If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.
(c) Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Arrangers are obliged to disclose to any other person:
(i) any confidential information; or
(ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any law or a breach of a fiduciary duty.
31.14 Relationship with the Lenders
(a) Subject to clause 28.10 (Pro rata interest settlement), the Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agents principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:
(i) entitled to or liable for any payment due under any Finance Document on that day; and
(ii) entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,
unless it has received not less than 5 Business Days prior notice from that Lender to the contrary in accordance with the terms of this Agreement.
(b) Each Lender shall supply the Agent with any information required by the Agent in order to calculate the Mandatory Cost in accordance with schedule 4 (Mandatory Cost Formula).
(c) Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted by clause 36.5 (Communication when Agent is Impaired Agent) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, tax number, electronic mail address, department and officer by that Lender for the purposes of clause 36.2 (Addresses) and clause 36.6(a)(iii) (Electronic Communication) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.
31.15 Credit appraisal by the Lenders and Ancillary Lenders
Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender and Ancillary Lender confirms to the Agent, the Arrangers and each Ancillary Lender that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:
(a) the financial condition, status and nature of each member of the Group;
(b) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;
(c) whether that Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and
(d) the adequacy, accuracy and/or completeness of the Information Memorandum and any other information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.
31.16 Base Reference Banks
If a Base Reference Bank (or, if a Base Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with the Company) appoint another Lender or an Affiliate of a Lender to replace that Base Reference Bank.
31.17 Agents management time
(a) Any amount payable to the Agent under clause 19.3 (Indemnity to the Agent), clause 21 (Costs and expenses) and clause 31.10 following an Event of Default shall include the cost of utilising the Agents management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Agent may notify to the Company and the Lenders, and is in addition to any fee paid or payable to the Agent under clause 16 (Fees).
(b) Any cost of utilising the Agents management time or other resources shall include, without limitation, any such costs in connection with clause 29.2 (Disenfranchisement on Debt Purchase Transactions entered into by Sponsor Affiliates).
31.18 Deduction from amounts payable by the Agent
If any Party owes an amount to the Agent (in its capacity as such) under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.
31.19 Reliance and engagement letters
Each Finance Party confirms that each of the Arrangers and the Agent has authority to accept on its behalf (and ratifies the acceptance on its behalf of any letters or reports already accepted by the Arrangers or the Agent) the terms of any reliance letter or engagement letters relating to any reports or letters provided in connection with the Finance Documents or the transactions contemplated in the Finance Documents and to bind it in respect of those reports or letters and to sign such letters on its behalf and further confirms that it accepts the terms and qualifications set out in such letters.
32 Conduct of business by the Finance Parties
No provision of this Agreement will:
(a) interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
(b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or
(c) oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.
33 Sharing among the Finance Parties
33.1 Payments to Finance Parties
If a Finance Party ( Recovering Finance Party ) receives or recovers any amount from an Obligor other than in accordance with clauses 16.2 (participation fee), 16.3 (Agency fee) and 34 (Payment mechanics) (a Recovered Amount ) and applies that amount (or exercises any other right (including any right of set-off or combination) which it may have, in each case) to or towards the discharge of a payment due under the Finance Documents then:
(a) the Recovering Finance Party shall, within 3 Business Days, notify details of the receipt recovery, or discharge, to the Agent;
(b) the Agent shall determine whether the receipt recovery or discharge is in excess of the amount the Recovering Finance Party would have been paid had the receipt recovery or discharge been received or made by the Agent and distributed in accordance with clause 34 (Payment mechanics), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and
(c) the Recovering Finance Party shall, within 3 Business Days of demand by the Agent, pay to the Agent an amount ( Sharing Payment ) equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with clause 34.6 (partial payments).
33.2 Redistribution of payments
The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the Sharing Finance Parties ) in accordance with clause 34.6 (partial payments) towards the obligations of that Obligor to the Sharing Finance Parties.
33.3 Recovering Finance Partys rights
On a distribution by the Agent under clause 33.2 of a payment received by a Recovering Finance Party from an Obligor, as between the relevant Obligor and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Obligor.
33.4 Reversal of redistribution
If any part of the Sharing Payment received or recovered (or which is deemed to have been received or recovered) by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
(a) each Sharing Finance Party shall, upon request of the Agent, pay to the Agent for that account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the Redistributed Amount ); and
(b) as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Obligor.
33.5 Exceptions
(a) This clause 33 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this clause, have a valid and enforceable claim against the relevant Obligor.
(b) A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:
(i) it notified the other Finance Party of the legal or arbitration proceedings; and
(ii) the other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
33.6 Ancillary Lenders
(a) This clause 33 shall not apply to any receipt or recovery by a Lender in its capacity as an Ancillary Lender at any time prior to service of notice under clause 27.20 (Acceleration).
(b) Following service of notice under clause 27.20 (Acceleration), this clause 33 shall apply to all receipts or recoveries by Ancillary Lenders except to the extent that the receipt or recovery represents a reduction from the Designated Gross Amount for an Ancillary Facility to its Designated Net Amount.
34 Payment mechanics
34.1 Payments to the Agent
(a) On each date on which an Obligor or a Lender is required to make a payment under a Finance Document (excluding a payment under the terms of an Ancillary Document) or, in the case of an Obligor, a scheduled payment under a Hedging Agreement, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.
(b) Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in a Participating Member State or London) with such bank as the Agent specifies.
34.2 Distributions by the Agent
Each payment received by the Agent under the Finance Documents for another Party shall, subject to clause 34.3 and clause 34.4 be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than 5 Business Days notice with a bank in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London).
34.3 Distributions to an Obligor
The Agent may (with the consent of the Obligor or in accordance with clause 35 (Set-off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
34.4 Clawback
(a) Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.
(b) If the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.
34.5 Impaired Agent
If, at any time, the Agent becomes an Impaired Agent, an Obligor or a Lender which is required to make a payment under the Finance Documents to the Agent in accordance with clause 34.1 (Payments to the Agent) may instead pay that amount direct to the required recipient or if the relevant Obligor and the Majority Lenders agree at that time pay that amount to an interest-bearing account (which account shall bear interest at a market rate taking into account the currency and term of the deposit) held with an Acceptable Bank which is a regular acceptor of deposits within the meaning of paragraph (a) of the definition of Acceptable Bank and in relation to which no Insolvency Event has occurred and is continuing, in the name of the Obligor or the Lender making the Payment and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents. In each case such payments must be made on the due date for payment under the Finance Documents. The trust account must be held in London or in a principal financial centre of another jurisdiction whose law recognises the concept of a trust arrangement and in which the Majority Lenders consider that the rights of the Partiers in respect of that account (and the rights to receive monies due to them standing to its credit) will not be prejudiced (including in the event of an insolvency or other similar proceedings affecting the Acceptable Bank or the relevant recipient party). In each case such payments must be made on the due date for payment under the Finance Documents.
34.6 Partial payments
(a) If the Agent receives a payment for application against amounts due in respect of any Finance Documents that is insufficient to discharge all the amounts then due and payable by an Obligor under those Finance Documents to the Agent, the Arrangers and the Lenders, the Agent shall apply that payment towards the obligations of that Obligor under those Finance Documents to such parties in the following order:
(i) first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent and the Arrangers under those Finance Documents;
(ii) secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under those Finance Documents to such parties;
(iii) thirdly, in or towards payment pro rata of any principal due but unpaid under those Finance Documents to such parties; and
(iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents to such parties.
(b) The Agent shall, if so directed by the Majority Lenders, vary the order set out in clause 34.6(a)(ii) to 34.6(a)(iv).
(c) Clause 34.6(a) and 34.6(b) will override any appropriation made by an Obligor.
34.7 No set-off by Obligors
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.
34.8 Business Days
(a) Subject to clause 34.8(b), any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b) If a payment under the Finance Documents is due to be paid on a relevant Termination Date but that day is not a Business Day, that payment shall be made on the preceding Business Day.
(c) During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the date on which, but for this clause 34.8, such principal or Unpaid Sum would otherwise have been due.
34.9 Currency of account
(a) Subject to clause 34.9(b) to 34.9(e), the Base Currency is the currency of account and payment for any sum due from an Obligor under any Finance Document.
(b) A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum shall be made in the currency in which that Loan or Unpaid Sum is denominated on its due date.
(c) Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.
(d) Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(e) Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.
34.10 Change of currency
(a) Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
(i) any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Company); and
(ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).
(b) If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Company) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.
34.11 Disruption to Payment Systems etc
If either the Agent determines (in its discretion) that a Disruption Event has occurred or the Agent is notified by the Company that a Disruption Event has occurred:
(a) the Agent may, and shall if requested to do so by the Company, consult with the Company with a view to agreeing with the Company such changes to the operation or administration of the Facility as the Agent may deem necessary in the circumstances;
(b) the Agent shall not be obliged to consult with the Company in relation to any changes mentioned in clause 34.11(a) if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;
(c) the Agent may consult with the other Finance Parties in relation to any changes mentioned in clause 34.11(a) but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;
(d) any such changes agreed upon by the Agent and the Company shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of clause 40 (Amendments and waivers);
(e) the Agent shall not be liable for any damages, costs or losses whatsoever (including, without limitation for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this clause 34.11; and
(f) the Agent shall notify the other Finance Parties of all changes agreed pursuant to clause 34.11(d) above.
35 Set-off
(a) A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
(b) Any credit balances taken into account by an Ancillary Lender when operating a net limit in respect of any overdraft under an Ancillary Facility shall on enforcement of the Finance Documents be applied first in reduction of the overdraft provided under that Ancillary Facility in accordance with its terms.
36 Notices
36.1 Communications in writing
Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.
36.2 Addresses
The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:
(a) in the case of the Company, that identified with its name below;
(b) in the case of the Agent, the Arrangers, each Original Lender and the Original Ancillary Lender, that identified with its name below; and
(c) in the case of each other Lender, each other Ancillary Lender or any other Obligor, that notified in writing to the Agent on or prior to the date on which it becomes a Party,
or any substitute address, fax number or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than 5 Business Days notice.
36.3 Delivery
(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:
(i) if by way of fax, when received in legible form; or
(ii) if by way of letter, when it has been left at the relevant address or 3 Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,
and, if a particular department or officer is specified as part of its address details provided under clause 36.2, if addressed to that department or officer.
(b) Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is expressly marked for the attention of the department or officer identified with the Agents signature below (or any substitute department or officer as the Agent shall specify for this purpose).
(c) All notices from or to an Obligor shall be sent through the Agent.
(d) Any communication or document made or delivered to the Company in accordance with this clause 36.3 will be deemed to have been made or delivered to each of the Obligors.
36.4 Notification of address and fax number
Promptly upon receipt of notification of an address and fax number or change of address or fax number pursuant to clause 36.2 or changing its own address or fax number, the Agent shall notify the other Parties.
36.5 Communication when Agent is an Impaired Agent
Upon the Agent becoming aware that it is an Impaired Agent, the Agent will as soon as reasonably practicable notify, in writing, each Party to a Finance Document that it is an Impaired Agent (the Impaired Agent Notice ). The Impaired Agent Notice will specify the date on which the Agent became an Impaired Agent and will include the details required to be delivered by the Agent under clause 31.2 (Duties of the Agent). From the date of the Impaired Agent Notice, the Parties may, instead of communicating with each other through the Agent, communicate with each other directly and (while the Agent is an Impaired Agent) all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the Agent shall be varied so that communications may be made and notices given to or by the relevant Parties directly. This provision shall not operate after a replacement Agent has been appointed. For the avoidance of doubt, the failure of the Agent to deliver the Impaired Agent Notice will not prevent the Parties from communicating directly with each other if the Agent is an Impaired Agent.
36.6 Electronic communication
(a) Any communication to be made between the Agent and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Lender:
(i) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;
(ii) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and
(iii) notify each other of any change to their address or any other such information supplied by them.
(b) Any electronic communication made between the Agent and a Lender will be effective only when actually received in intelligible form and in the case of any electronic communication made by a Lender to the Agent only if it is addressed in such a manner as the Agent shall specify for this purpose.
36.7 English language
(a) Any notice given under or in connection with any Finance Document must be in English.
(b) All other documents provided under or in connection with any Finance Document must be:
(i) in English; or
(ii) if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
37 Calculations and certificates
37.1 Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
37.2 Certificates and determinations
Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
37.3 Day count convention
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.
38 Partial invalidity
If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
39 Remedies and waivers
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement and the other Finance Documents are cumulative and not exclusive of any rights or remedies provided by law.
40 Amendments and waivers
40.1 Intercreditor Deed
This clause 40 is subject to the terms of the Intercreditor Deed.
40.2 Required consents
(a) Subject to clause 40.3 any term of the Finance Documents may be amended or waived only with the prior written consent of the Majority Lenders and the Company and any such amendment or waiver will be binding on all Parties.
(b) The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this clause 40.
(c) Each Obligor agrees to any such amendment or waiver permitted by this clause 40 which is agreed to by the Company. This includes any amendment or waiver which would, but for this clause 40.2(c), require the consent of all of the Guarantors.
40.3 Exceptions
(a) An amendment or waiver that has the effect of changing or which relates to:
(i) the definition of Majority Lenders in clause 1 (Definitions and interpretation);
(ii) an extension to the date of payment of any amount under the Finance Documents;
(iii) a reduction in the Margin (other than by means of the operation of the Margin ratchet) or a reduction in the amount of any payment of principal, interest, fees or other amount payable to a Lender under the Finance Documents (other than in relation to clause 11 (Mandatory prepayment));
(iv) a change in currency of payment of any amount under the Finance Documents;
(v) an increase in or an extension of any Commitment or the Total Commitments;
(vi) a change to the Borrowers or Guarantors other than in accordance with clause 30 (Changes to the Obligors);
(vii) any provision which expressly requires the consent of all the Lenders;
(viii) clause 1.3 (Third party rights), clause 2.3 (Finance Parties rights and obligations), clause 11 (Mandatory prepayment), 15.1 (Margin adjustment), clause 28 (Changes to the Lenders), clause 33 (Sharing among the Finance Parties) or this clause 40;
(ix) (other than as expressly permitted by the provisions of any Finance Document) the nature or scope of the guarantee and indemnity granted under clause 22 (Guarantee and indemnity);
(x) the release of any guarantee and indemnity granted under clause 22 (Guarantee and indemnity) unless permitted under this Agreement or any other Finance Document or relating to a sale or disposal of an asset which is expressly permitted under this Agreement; or
(xi) any amendment to the order of priority or subordination under the Intercreditor Deed,
shall not be made without the prior consent of all the Lenders.
(b) An amendment or waiver which relates to the rights or obligations of the Agent, the Arrangers, any Ancillary Lender or any Hedge Counterparty (each in their capacity as such) may not be effected without the prior written consent of the Agent, the Arrangers, that Ancillary Lender or, as the case may be, that Hedge Counterparty.
40.4 Deemed consent
If at any time the Lenders agree to amend or waive any term of this Agreement in accordance with this clause 40 then the Ancillary Lenders will be deemed to make a corresponding amendment or waiver in equivalent terms to the Ancillary Documents and to take any steps that the Agent may reasonably require on behalf of the Lenders to give effect to this clause 40.4.
40.5 Disenfranchisement of Defaulting Lenders
(a) For so long as a Defaulting Lender has any Available Commitment, in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents, that Defaulting Lenders Commitments will be reduced by the amount of its Available Commitments.
(b) For the purposes of this clause 40.5 the Agent may assume that the following Lenders are Defaulting Lenders:
(i) any Lender which has notified the Agent that it has become a Defaulting Lender;
(ii) any Lender in relation to which it is aware that any of the events of circumstances referred to in paragraphs (a), (b) or (c) of the definition of Defaulting Lender has occurred and, in the case of the events or circumstances referred to in paragraph (a), none of the exceptions to that paragraph apply,
unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.
40.6 Replacement of a Defaulting Lender
(a) The Company may, at any time a Lender has become and continues to be a Defaulting Lender, by giving 10 Business Days prior written notice to the Agent and such Lender:
(i) replace such Lender by requiring such Lender to (and such Lender shall) transfer pursuant to clause 28 (Changes to the Lenders) all (and not part only) of its rights and obligations under this Agreement;
(ii) require such Lender to (and such Lender shall) transfer pursuant to clause 28 (Changes to the Lenders) all (and not part only) of the undrawn Commitment of the Lender; or
(iii) require such Lender to (and such Lender shall) transfer pursuant to clause 28 (Changes to the Lenders) all (and not part only) of its rights and obligations in respect of the Facility,
to a Lender or other bank, financial institution, trust, fund or other entity ( Replacement Lender ) selected by the Company, and which (unless the Agent is an Impaired Agent) is acceptable to the Agent (acting reasonably), which confirms its willingness to assume and does assume all the obligations or all the relevant
obligations of the transferring Lender (including the assumption of the transferring Lenders participations or unfunded participations (as the case may be) on the same basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal amount of such Lenders participation in the outstanding Utilisations and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents.
(b) Any transfer of rights and obligations of a Defaulting Lender pursuant to this clause shall be subject to the following conditions:
(i) the Company shall have no right to replace the Agent;
(ii) neither the Agent nor the Defaulting Lender shall have any obligation to the Company to find a Replacement Lender;
(iii) the transfer must take place no later than 20 Business Days after the notice referred to in clause 40.6(a) above; and
(iv) in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents.
41 Confidentiality
41.1 Confidential Information
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by clause 41.2 (Disclosure of Confidential Information) and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
41.2 Disclosure of Confidential Information
Any Finance Party may disclose:
(a) to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this clause 41.2(a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information:
(b) to any person:
(i) to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that persons Affiliates, Related Funds, Representatives and professional advisers;
(ii) with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by
reference to, one or more Finance Documents and/or one or more Obligors and to any of that persons Affiliates, Related Funds, Representatives and professional advisers;
(iii) appointed by any Finance Party or by a person to whom clause 41.2(b)(i) or (ii) applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under clause 31.14(c) (Relationship with the Lenders));
(iv) who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in clause 41.2(b)(i) or 41.2(b)(ii);
(v) to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;
(vi) to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to clause 28.9 (Security over Lenders rights));
(vii) to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;
(viii) who is a Party; or
(ix) with the consent of the Company;
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
(A) in relation to clause 41.2(b)(i), 41.2(b)(ii) and 41.2(b)(iii), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;
(B) in relation to clause 41.2(b)(iv), the person to whom the Confidential Information is to be given has entered into a Confidential Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;
(C) in relation to clauses 41.2(b)(v) and 41.2(b)(vii), the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;
(c) to any person appointed by that Finance Party or by a person to whom clause 41.2(b)(i) or 41.2(b)(ii) applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this clause 41.2(c) if the party to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information;
(d) to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.
41.3 Disclosure to a numbering service provider
(a) Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facility and/or one or more Obligors the following information:
(i) names of Obligors;
(ii) country of domicile of Obligors;
(iii) place of incorporation of Obligors;
(iv) date of this Agreement;
(v) the names of the Agent and the Arranger;
(vi) date of each amendment and restatement of this Agreement;
(vii) amount of Total Commitments;
(viii) currencies of the Facility;
(ix) type of Facility;
(x) ranking of the Facility;
(xi) changes to any of the information previously supplied pursuant to clauses 41.3(a)(i) to 41.3(a)(xi) above; and
(xii) such other information agreed between such Finance Party and the Company.
to enable such number service provider to provide its usual syndicated loan numbering identification services.
(b) The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facility and/or one or more Obligors by a number service provider
and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that number service provider.
(c) Each Obligor represents that none of the information set out in clauses paragraphs 41.3(a)(i) to 41.3(a)(xii) above is, nor will at any time be, unpublished price-sensitive information.
(d) The Agent shall notify the Parent and the other Finance Parties of:
(i) the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facility and/or one or more Obligors; and
(ii) the number or, as the case may be, numbers assigned to this Agreement, the Facility and/or one or more Obligors by such numbering service provider.
41.4 Entire agreement
This clause 41 constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.
41.5 Inside information
Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.
41.6 Notification of disclosure
Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Company:
(a) of the circumstances of any disclosure of Confidential Information made pursuant to clause 41.2(b)(v) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and
(b) upon becoming aware that Confidential Information has been disclosed in breach of this clause 41.
41.7 Continuing obligations
The obligations in this clause 41 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of 12 months from the earlier of:
(a) the date on which all amounts payable by the Obligors under or in connection with the Finance Documents have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and
(b) the date on which such Finance Party otherwise ceases to be a Finance Party.
42 Publicity
The Company and each Obligor confirm it will not delay or unreasonably withhold its consent to any Finance Party publicising (by such means as that Finance Party may determine) its role in the funding of the Facility.
43 Counterparts
Each Finance Document may be executed in any number of counterparts, and by each party on separate counterparts. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of a Finance Document by e-mail attachment or telecopy shall be an effective mode of delivery.
44 Governing law
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
45 Enforcement
45.1 Jurisdiction of English courts
(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a Dispute ).
(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
(c) This clause 45 is for the benefit of the Finance Parties. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.
45.2 Service of process
(a) Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):
(i) irrevocably appoints Luxfer Holdings PLC as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document (and Luxfer Holdings PLC by its execution of this Agreement, accepts that appointment); and
(ii) agrees that failure by an agent for service of process to notify the relevant Obligor of the process will not invalidate the proceedings concerned.
(b) If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, Luxfer Holdings PLC (on behalf of all the Obligors) must immediately (and in any event within 5 days of such event taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose.
(c) Luxfer Holdings PLC expressly agrees and consents to the provisions of this clause 45 and clause 44 (Governing law).
This Agreement has been entered into on the date stated at the beginning of this Agreement.
Schedule 1
Part 1 - Original Borrowers
Company Name |
|
Company Number |
|
Relevant Jurisdiction |
Luxfer Holdings PLC |
|
3690830 |
|
England & Wales |
BA Holdings, Inc. |
|
|
|
Delaware |
Luxfer Group Limited |
|
3944037 |
|
England & Wales |
Luxfer Group 2000 Limited |
|
4027006 |
|
England & Wales |
MEL Chemicals Inc. |
|
|
|
New Jersey |
Magnesium Elektron North America Inc. |
|
|
|
Delaware |
Part 2 - Original Guarantors
Company Name |
|
Company Number |
|
Relevant Jurisdiction |
Luxfer Holdings PLC |
|
3690830 |
|
England & Wales |
BA Holdings, Inc. |
|
|
|
Delaware |
Luxfer Group Limited |
|
3944037 |
|
England & Wales |
Luxfer Group 2000 Limited |
|
4027006 |
|
England & Wales |
MEL Chemicals Inc. |
|
|
|
New Jersey |
Magnesium Elektron North America, Inc. |
|
|
|
Delaware |
Luxfer Gas Cylinders Limited |
|
3376625 |
|
England & Wales |
Luxfer Group Services Limited |
|
3981395 |
|
England & Wales |
Magnesium Elektron Limited |
|
3141950 |
|
England & Wales |
Luxfer Overseas Holdings Limited |
|
3081726 |
|
England & Wales |
Luxfer Gas Cylinders China Holdings Limited |
|
5165622 |
|
England & Wales |
Luxfer Inc. |
|
|
|
Delaware |
Hart Metals, Inc. |
|
|
|
Delaware |
Reade Manufacturing Company |
|
|
|
Delaware |
Part 3 - The Original Lenders
Commitments as at the Restatement Date
|
|
Total Commitment as
|
|
Bilateral Limit as at
|
|
|||
Lloyds TSB Bank plc |
|
£ |
31,600,000 |
|
£ |
17,000,000 |
|
|
Clydesdale Bank PLC (trading as Yorkshire Bank) |
|
£ |
23,400,000 |
|
£ |
9,800,000 |
|
|
Bank of America N.A. |
|
£ |
15,000,000 |
|
US$ |
27,250,000 |
|
|
Schedule 2
Conditions precedent
Part 1 - Conditions precedent to signing this Agreement
1 Obligors
(a) A copy of the constitutional documents of each Original Obligor.
(b) A copy of a resolution of the board or, if applicable, a committee of the board of directors of each Original Obligor:
(i) approving the terms of, and the transactions contemplated by, the Transaction Documents to which it is a party and resolving that it execute, deliver and perform the Transaction Documents to which it is a party;
(ii) authorising a specified person or persons to execute the Transaction Documents to which it is a party on its behalf;
(iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party; and
(iv) in the case of an Obligor other than the Company, authorising the Company to act as its agent in connection with the Finance Documents.
(c) If applicable, a copy of a resolution of the board of directors of the relevant Original Obligor, establishing the committee referred to in paragraph 1(b).
(d) A specimen of the signature of each person authorised by the resolution referred to in paragraph 1(b) in relation to the Finance Documents and related documents.
(e) A copy of a resolution signed by all the holders of the issued shares in each Original Guarantor (other than the Company), approving the terms of, and the transactions contemplated by, the Finance Documents to which the Original Guarantor is a party.
(f) A copy of a resolution of the board of directors of each corporate shareholder of each Original Guarantor approving the terms of the resolution referred to in paragraph 1(e).
(g) A certificate from a director of the Company confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guarantee, Security or similar limit binding on any Original Obligor to be exceeded.
(h) A certificate from a director of the Company or other relevant Original Obligor certifying that each copy document relating to it specified in this part 1 of schedule 2 is correct, complete and in full force and effect and has not been amended, novated, supplemented, superseded or terminated as at a date no earlier than the date of this Agreement.
(i) If an Original Obligor is not incorporated in England and Wales, such documentary evidence that such Original Obligor has complied with any law in its jurisdiction relating to financial assistance or analogous process.
(j) If an Original Obligor is incorporated outside the United Kingdom, a certificate of that Obligor (signed by a director) certifying either that (i) it has not registered one or more establishments (as that term is defined in Part 1 of the Overseas Companies Regulations 2009) with the Registrar of Companies or (ii) it has such an establishment and specifying the name and registered number under which it is registered with the Registrar of Companies.
(k) A search at the Companies Court at the Royal Courts of Justice in London and at Companies House as at the date of this Agreement revealing no adverse entries against any of the Original Obligors.
(l) A Uniform Commercial Code search of the Secretary of State (or equivalent recording office) of the state of incorporation of each US Obligor in a form acceptable to the Agents counsel and releases in a form acceptable to the Agents counsel of any existing liens appearing on such searches that do not constitute Permitted Security.
2 Finance Documents
(a) This Agreement executed by each member of the Group who is a party to this Agreement.
(b) The Fee Letters executed by the Company.
(c) The Hedging Letter.
3 Other documents and evidence
(a) The Group Structure Chart which shows the Group assuming the Closing Date has occurred.
(b) The Base Case Model.
(c) The Information Memorandum.
(d) A copy, certified by a director of the Company to be a true copy, of the Original Financial Statements of each other Obligor.
(e) The Funds Flow Statement detailing the proposed movement of funds on or before the Closing Date.
(f) The Note Documents in the agreed form.
(g) An irrevocable prepayment notice in the agreed form in respect of the Existing Notes signed by the Company together with a certificate from a director of the Company confirming that such prepayment notices will be served on or prior to the date falling 5 Business Days after the date of this Agreement.
(h) The Agent being satisfied with the results of its know your customer and money laundering checks on the Original Obligors, and their officers and shareholders.
Part 2 - Conditions precedent to initial Utilisation
1 Obligors
(a) A copy of the constitutional documents of each Original Obligor (and in respect of MEL Chemicals Inc as certified by applicable regulatory authority in a form acceptable to the Agent (acting reasonably)).
(b) A copy of a resolution of the board or, if applicable, a committee of the board of directors of each Original Obligor:
(i) approving the terms of, and the transactions contemplated by, the Transaction Documents to which it is a party and resolving that it execute, deliver and perform the Transaction Documents to which it is a party;
(ii) authorising a specified person or persons to execute the Transaction Documents to which it is a party on its behalf;
(iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party; and
(iv) in the case of an Obligor other than the Company, authorising the Company to act as its agent in connection with the Finance Documents.
(c) If applicable, a copy of a resolution of the board of directors of the relevant Original Obligor, establishing the committee referred to in paragraph 1(b).
(d) A specimen of the signature of each person authorised by the resolution referred to in paragraph 1(b) in relation to the Finance Documents and related documents.
(e) A copy of a resolution signed by all the holders of the issued shares in each Original Guarantor (other than the Company), approving the terms of, and the transactions contemplated by, the Finance Documents to which the Original Guarantor is a party.
(f) A copy of a resolution of the board of directors of each corporate shareholder of each Original Guarantor approving the terms of the resolution referred to in paragraph 1(e).
(g) A certificate from a director of the Company confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guarantee, Security or similar limit binding on any Original Obligor to be exceeded.
(h) A certificate from a director of the Company or other relevant Original Obligor certifying that each copy document relating to it specified in this part 2 of schedule 2 is correct, complete and in full force and effect and has not been amended, novated, supplemented, superseded or terminated as at a date no earlier than the first Utilisation Date.
(i) If an Original Obligor is not incorporated in England and Wales, such documentary that such Original Obligor has complied with any law in its jurisdiction relating to financial assistance or analogous process.
(j) If an Original Obligor is incorporated outside the United Kingdom, a certificate of that Obligor (signed by a director) certifying either that (i) it has not registered one or more establishments (as that term is defined in Part 1 of the Overseas Companies Regulations 2009) with the Registrar of Companies or (ii) it has such an establishment and specifying the name and registered number under which it is registered with the Registrar of Companies.
(k) A search at the Companies Court at the Royal Courts of Justice in London and at Companies House as at the first Utilisation Date revealing no adverse entries against any of the Original Obligors.
(l) A Uniform Commercial Code search of the Secretary of State (or equivalent recording office) of the state of incorporation of each US Obligor in a form acceptable to the Agents counsel and releases in a form acceptable to the Agents counsel of any existing liens appearing on such searches that do not constitute Permitted Security.
2 Transaction Documents
A copy of each of the Transaction Documents (other than the Finance Documents) executed by the parties to those documents.
3 Finance Documents
(a) The Intercreditor Deed executed by all the parties to that deed.
(b) An ancillary facility letter between Lloyds TSB Bank plc and the Company.
(c) An ancillary facility letter between Bank of America, N.A. and the Company.
(d) An ISDA Master Agreement and ISDA Schedule between the Company and each Bilateral Lender.
(e) At least 2 originals of the following transaction security documents executed by the Original Obligors specified below opposite the relevant transaction security document:
Name of Original Obligor |
|
Transaction Security Document |
Each Obligor incorporated in England and Wales |
|
Debenture |
Each Obligor incorporated in US |
|
Security agreement |
Luxfer Overseas Holdings Limited, BA Holdings, Inc and MEL Chemicals Inc. |
|
Share pledge agreement |
(f) All duly executed notices required to be sent under the transaction security documents.
(g) All share certificates, transfers and stock transfer forms or equivalent duly executed by the relevant Obligor in blank in relation to the assets subject to or expressed to be subject to the transaction security and other documents of title to be provided under the transaction security documents.
(h) A perfection certificate for each US Obligor delivered to the security trustee, which shall be executed by such US Obligor and shall be in a form and substance previously provided to the security trustee or in a form and substance satisfactory to the security trustee (acting reasonably).
4 Insurance
A letter from Marsh insurance broker dated no earlier than the Closing Date listing the insurance policies of the Group and confirming that they are on risk and that the insurance for the Group at the first Utilisation Date covering appropriate risks for the business carried out by the Group and that such insurance complies with the terms of the Finance Documents.
5 Legal opinions
The following legal opinions, each addressed to, and capable of being relied on by, the Agent, the security trustee and the Original Lenders:
(a) a legal opinion of Addleshaw Goddard LLP, legal advisers to the Agent, the Arrangers and the security trustee as to English law substantially in the form provided to the Agent, the Arrangers and the security trustee and/or distributed to the Original Lenders prior to execution and delivery of this Agreement;
(b) a legal opinion of Husch Blackwell, legal advisers to the Agent, Arrangers and the security trustee as to New York law substantially in the form provided to the Agent, the Arrangers and the security trustee and/or distributed to the Original Lenders prior to execution and delivery of this Agreement; and
(c) a legal opinion of Brown Mokowitz & Kallen, PLC., legal advisers to the Agent, Arrangers and the security trustee as to New Jersey law substantially in the form provided to the Agent, the Arrangers and the security trustee and/or distributed to the Original Lenders prior to execution and delivery of this Agreement.
6 Other documents and evidence
(a) Evidence that any process agent referred to in clause 45.2 (Service of process), if not an Original Obligor, has accepted its appointment.
(b) Evidence that the fees, costs and expenses then due from the Company pursuant to clause 7.4 (Repayment of Ancillary Facility), clause 16 (Fees) and clause 21 (Costs and expenses) payable before the Closing Date have been paid and fees payable on the Closing Date have or will be paid on the Closing Date.
(c) A certificate from a director of the Company specifying each member of the Group (assuming the Closing Date has occurred) which is a Dormant Subsidiary as at the Closing Date together with certified copies (certified by such director to be a true copy) of the last audited accounts of each such Dormant Subsidiary.
(d) A certificate from a director of the Company certifying that:
(i) the Note Documents are in full force and effect;
(ii) a utilisation request requesting the utilisation of the full amount of the Notes on or before the Closing Date has been issued by the Company and each of the conditions precedent to such utilisation specified in clause 4 of the note
purchase agreement set out in limb (a) of the definition of Note Documents have been satisfied (other than utilisation of the Facility);
(iii) as a result of the Notes referred at paragraph 6(d)(ii) above the Company has the sum of £[ figure to be set out in officers certificate to be sufficient to repay Existing Notes and ABL Facility in full ] available to it:
Notes [ figure to be set out in officers certificate ]
[ ] [ figure to be set out in officers certificate ]
(iv) the sum of £[ figure to be set out in officers certificate to be sufficient to repay Existing Notes and ABL Facility in full ] has been applied or will, simultaneously with the first Loan under this Agreement be applied to repay the Existing Notes and the ABL Facility in full.
(e) A certificate from a director of the Company detailing the estimated Transaction Costs.
(f) Utilisation Requests relating to any Utilisations to be made on the Closing Date.
(g)
(i) Such release documents as are necessary to discharge and release all existing Security granted by each member of the Group other than Security falling within limbs (a)-(g) of the definition of Permitted Security.
(ii) Releases in agreed form of any existing liens appearing on the results of the Uniform Commercial Code searches referred to in paragraph 1(l) above that do not constitute Permitted Security.
(h) A certificate of the Company addressed to the Finance Parties confirming which companies within the Group are Material Companies.
(i) The Note Documents duly executed by each party to each Note Document in the form previously agreed by the Agent.
(j) The Agent being satisfied with the results of its know your customer and money laundering checks on the Original Obligors, and their officers and shareholders.
(k) A certified copy of the cancellation notice served under the ABL Facility.
Part 3 - Conditions precedent required to be delivered by an Additional Obligor
1 An Accession Deed executed by the Additional Obligor and the Company.
2 A copy of the constitutional documents of the Additional Obligor.
3 A copy of a resolution of the board or, if applicable, a committee of the board of directors of the Additional Obligor:
(a) approving the terms of, and the transactions contemplated by, the Accession Deed and the Finance Documents and resolving that it execute, deliver and perform the Accession Deed and any other Finance Document to which it is party;
(b) authorising a specified person or persons to execute the Accession Deed and other Finance Documents on its behalf;
(c) authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices (including, in relation to an Additional Borrower, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party; and
(d) authorising the Company to act as its agent in connection with the Finance Documents.
4 If applicable, a copy of a resolution of the board of directors of the Additional Obligor, establishing the committee referred to in paragraph 3.
5 A specimen of the signature of each person authorised by the resolution referred to in paragraph 3.
6 A copy of a resolution signed by all the holders of the issued shares of the Additional Guarantor, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Additional Guarantor is a party.
7 A copy of a resolution of the board of directors of each corporate shareholder of each Additional Guarantor approving the terms of the resolution referred to in paragraph 6.
8 A certificate from a director of the Additional Obligor confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guarantee, Security or similar limit binding on it to be exceeded.
9 A certificate from a director of the Additional Obligor certifying that each copy document listed in this part 3 of schedule 2 is correct, complete and in full force and effect and has not been amended or superseded as at a date no earlier than the date of the Accession Deed.
10 A copy of any other authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Accession Deed or for the validity and enforceability of any Finance Document.
11 The latest Annual Financial Statement of the Additional Obligor.
12 The following legal opinions each addressed to the Agent and the Lenders:
(a) A legal opinion of Addleshaw Goddard, the legal advisers to the Agent and the Arrangers as to English law in the form provided to the Agent and the Arrangers and/or distributed to the Lenders prior to signing the Accession Deed.
(b) If the Additional Obligor is incorporated in or has its centre of main interest or establishment (as referred to in clause 23.27 (Centre of main interests and establishments)) in a jurisdiction other than England and Wales or is executing a Finance Document which is governed by a law other than English law, a legal opinion of the legal advisers to the Agent and the Arrangers in the jurisdiction of its incorporation, centre of main interest or establishment (as applicable) or, as the case may be, the jurisdiction of the governing law of that Finance Document ( Applicable Jurisdiction ) as to the law of the Applicable Jurisdiction and in the form provided to the Agent and the Arrangers and/or distributed to the Lenders prior to signing the Accession Deed.
13 If the proposed Additional Obligor is incorporated in a jurisdiction other than England and Wales, evidence that the process agent specified in clause 45.2 (Service of process) if not an Obligor, has accepted its appointment in relation to the proposed Additional Obligor.
14 Any notices duly executed or documents required to be given or executed under the terms of those security documents.
15 An accession memorandum to the Company Intra-Group Loan Agreement or similar loan agreement with the Company.
Schedule 3
Requests and Notices
Part 1 Utilisation Request
From: [Borrower] [Company](i)
To: [Agent]
Dated:
Dear Sirs
Luxfer Holdings PLC Senior facilities agreement dated · (Facilities Agreement)
1 We refer to the Facilities Agreement. This is a Utilisation Request. Terms defined in the Facilities Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.
2 We wish to borrow a Loan on the following terms:
(a) |
Borrower: |
· |
|
|
|
(b) |
Proposed Utilisation Date: |
· (or, if that is not a Business Day, the next Business Day) |
|
|
|
(c) |
Currency of Loan: |
· |
|
|
|
(d) |
Amount: |
· or, if less, the Available Facility |
|
|
|
(e) |
Interest Period: |
· |
3 We confirm that each condition specified in clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.
4 [We irrevocably instruct you to deduct from the amount of the Loan the legal fees, VAT and disbursements of Addleshaw Goddard in the amount of £ · and to pay such amount to Addleshaw Goddard on the Utilisation Date.]
5 The proceeds of this Loan should be credited to [account(iv)].
6 This Utilisation Request is irrevocable.
(i) Amend as appropriate. Utilisation Requests can be given by the Borrower or by the Company.
The account for the utilisations to repay Existing Notes and ABL Facility should specify the account of the Receiving Agent and the account in the redemption statement (as applicable)
Yours faithfully
|
|
authorised signatory for |
|
[the Company on behalf of [insert name of relevant Borrower]] [insert name of Borrower](v)
(v) Amend as appropriate. Utilisation Requests can be given by the Borrower or by the Company.
Part 3 - Withdrawal Request
From: [Borrower] [Company](vi)
To: [Agent]
Dated:
Dear Sirs
Luxfer Holdings PLC Senior facilities agreement dated · ( Facilities Agreement )
1 We refer to the Facilities Agreement. This is a Withdrawal Request. Terms defined in the Facilities Agreement have the same meaning in this Withdrawal Request unless given a different meaning in this Withdrawal Request.
2 We wish to withdraw cash cover as follows:
(a) |
Proposed withdrawal date: |
· (or, if that is not a Business Day, the next Business Day) |
|
|
|
(b) |
Amount: |
· |
3 We confirm that each condition specified in clause 10.8 (Cash cover) is satisfied.
4 We confirm that each condition in clause 10.7 (Right of cancellation in relation to a Defaulting Lender) is satisfied.
5 [The proceeds of the withdrawal should be credited to the following accounts:
·
6 We confirm that the amount withdrawn will be applied in [redeeming the Vendor Loan Notes and we attach copies of the relevant notices of redemption] [prepaying the Ancillary Facility].
7 This Withdrawal Notice is irrevocable.
Yours faithfully
|
|
authorised signatory for |
|
[[the Company] on behalf of [insert name of relevant Borrower]] [insert name of Borrower]
(vi) Amend as appropriate. The Withdrawal Notice can be given by the Borrower or the Company.
Schedule 4
Mandatory Cost Formula
1 The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.
2 On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate ( Additional Cost Rate ) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.
3 The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lenders participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.
4 The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Agent as follows:
(a) in relation to a sterling Loan:
(b) in relation to a Loan in any currency other than sterling:
Where:
A is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.
B is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in clause 13.3(a) (Default interest)) payable for the relevant Interest Period on the Loan.
C is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.
D is the percentage rate per annum payable by the Bank of England to the Agent on interest bearing Special Deposits.
E is designed to compensate the Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Base Reference Banks to the Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.
5 For the purposes of this schedule:
Eligible Liabilities and Special Deposits have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England
Fees Rules means the rules on periodic fees contained in the Financial Services Authority Fees Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits
Fee Tariffs means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate) and
Tariff Base has the meaning given to it in, and will be calculated in accordance with, the Fees Rules
6 In application of the above formulae in paragraph 4, A, B, C and D will be included in the formulae as percentages (i.e. 5% will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to 4 decimal places.
7 If requested by the Agent, each Base Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Base Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Base Reference Bank as being the average of the Fee Tariffs applicable to that Base Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Base Reference Bank.
8 Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:
(a) the jurisdiction of its Facility Office; and
(b) any other information that the Agent may reasonably require for such purpose.
Each Lender shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.
9 The percentages of each Lender for the purpose of A and C above and the rates of charge of each Base Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lenders obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.
10 The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Base Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.
11 The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Base Reference Bank pursuant to paragraphs 3, 7 and 8 above.
12 Any determination by the Agent pursuant to this schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.
13 The Agent may from time to time, after consultation with the Company and the Lenders, determine and notify to all Parties any amendments which are required to be made to this schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.
Schedule 5
Form of Transfer Certificate
To: · as Agent
From: [ The Existing Lender ] ( Existing Lender ) and [ The New Lender ] ( New Lender )
Dated:
Luxfer Holdings PLC Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to the Facilities Agreement and to the Intercreditor Deed (as defined in the Facilities Agreement). This agreement ( Agreement ) shall take effect as a Transfer Certificate for the purpose of the Facilities Agreement and as a Creditor/Agent Accession Undertaking for the purposes of the Intercreditor Deed (and as defined in the Intercreditor Deed). Terms defined in the Facilities Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.
2 We refer to clause 28.5 (Procedure for transfer) of the Facilities Agreement:
(a) The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all or part of the Existing Lenders Commitment, rights and obligations referred to in the schedule in accordance with clause 28.5 (Procedure for transfer).
(b) The proposed Transfer Date is · .
(c) The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of clause 36.2 (Addresses) are set out in the schedule.
3 The New Lender expressly acknowledges the limitations on the Existing Lenders obligations set out in clause 28.4(c) (Limitation of responsibility of Existing Lenders).
4 The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:
(a) [a Qualifying Lender falling within paragraph (i)(A) [or paragraph (ii)] of the definition of Qualifying Lender);]
(b) [a Treaty Lender;]
(c) [not a Qualifying Lender].
5 [The New Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
(a) a company resident in the United Kingdom for United Kingdom tax purposes;
(b) a partnership each member of which is:
(i) a company so resident in the United Kingdom; or
(ii) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings
into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or
(c) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.]
6 [The New Lender confirms (for the benefit of the Agent and without liability to any Obligor) that it is a Treaty Lender that holds a passport under the HMRC DT Treaty Passport scheme (reference number · ) and is tax resident in · (vii), so that interest payable to it by borrowers is generally subject to full exemption from UK withholding tax and notifies the Company that:
(a) each Borrower which is a Party as a Borrower as at the Transfer Date must, to the extent that the New Lender becomes a Lender under the Facility which is made available to that Borrower pursuant to clause 2.1 (The Facility) of the Facilities Agreement, make an application to HM Revenue & Customs under form DTTP2 within 30 days of the Transfer Date; and
(b) each Additional Borrower which becomes an Additional Borrower after the Transfer Date must, to the extent that the New Lender is a Lender under the Facility which is made available to that Additional Borrower pursuant to clause 2.1 (The Facility) of the Facilities Agreement, make an application to HM Revenue & Customs under form DTTP2 within 30 days of becoming an Additional Borrower(viii).]
7 The New Lender confirms that it [is]/[is not] a Sponsor Affiliate.
8 We refer to clause · (Change of Senior Lender) of the Intercreditor Deed.
In consideration of the New Lender being accepted as a Senior Lender for the purposes of the Intercreditor Deed (and as defined therein), the New Lender confirms that, as from the Transfer Date, it intends to be party to the Intercreditor Deed as a Senior Lender, and undertakes to perform all the obligations expressed in the Intercreditor Deed to be assumed by a Senior Lender and agrees that it shall be bound by all the provisions of the Intercreditor Deed, as if it had been an original party to the Intercreditor Deed.
9 This Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.
10 This Agreement and any non-contractual obligations arising out of or in connection with governed by English law.
11 This Agreement has been entered into on the date stated at the beginning of this Agreement.
(vii) Insert jurisdiction of tax residence
(viii) This confirmation must be included if the New Lender holds a passport under the HMRC DT Treaty Passport scheme and wishes that scheme to apply to the Facilities Agreement.
The Schedule
Commitment/rights and obligations to be transferred
[ insert relevant details ]
[ Facility Office address, fax number and attention details for notices and account details for payments ,]
[Existing Lender] |
|
[New Lender] |
|
|
|
By: |
|
By: |
This Agreement is accepted as a Transfer Certificate for the purposes of the Facilities Agreement and as a Creditor/Agent Accession Undertaking for the purposes of the Intercreditor Deed and the Transfer Date is confirmed as · .
[Agent]
By:
Schedule 6
Form of Assignment Agreement
To: · as Agent and · , · as [Company], for and on behalf of each Obligor
From: [the Existing Lender ] ( Existing Lender ) and [the New Lender ] ( New Lender )
Dated:
Luxfer Holdings PLC - Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to the Facilities Agreement and to the Intercreditor Deed (as defined in the Facilities Agreement). This is an Assignment Agreement. This agreement ( Agreement ) shall take effect as an Assignment Agreement for the purpose of the Facilities Agreement and as a Creditor/Agent Accession Undertaking for the purposes of the Intercreditor Deed (and as defined in the Intercreditor Deed). Terms defined in the Facilities Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.
2 We refer to clause 28.5 (Procedure for transfer) of the Facilities Agreement:
(a) The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Facilities Agreement, the other Finance Documents which correspond to that portion of the Existing Lenders Commitments under the Facilities Agreement as specified in the schedule.
(b) The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lenders Commitments under the Facilities Agreement specified in the schedule.
(c) The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph 2(b) above.
3 The proposed Transfer Date is · .
4 On the Transfer Date the New Lender becomes:
(a) Party to the relevant Finance Documents (other than the Intercreditor Deed) as a Lender; and
(b) Party to the Intercreditor Deed as a Senior Lender.
5 The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of clause 36.2 (Addresses) are set out in the schedule.
6 The New Lender expressly acknowledges the limitations on the Existing Lenders obligations set out in clause 28.4(c) (Limitation of responsibility of Existing Lenders).
7 The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:
(a) [a Qualifying Lender falling within paragraph (i)(A) [or paragraph (ii)] of the definition of Qualifying Lender;]
(b) [a Treaty Lender;]
(c) [not a Qualifying Lender].
8 [The New Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
(a) a company resident in the United Kingdom for United Kingdom tax purposes; or
(b) a partnership each member of which is:
(i) a company so resident in the United Kingdom; or
(ii) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or
(c) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.]
9 [The New Lender confirms (for the benefit of the Agent and without liability to any Obligor) that it is a Treaty Lender that holds a passport under the HMRC DT Treaty Passport scheme (reference number · ) and is tax resident in · (ix), so that interest payable to it by borrowers is generally subject to full exemption from UK withholding tax and notifies the Company that:
(a) each Borrower which is a Party as a Borrower as at the Transfer Date must, to the extent that the New Lender becomes a Lender under the Facility which is made available to that Borrower pursuant to clause 2.1 (The Facility) of the Facilities Agreement, make an application to HM Revenue & Customs under form DTTP2 within 30 days of the Transfer Date; and
(b) each Additional Borrower which becomes an Additional Borrower after the Transfer Date must, to the extent that the New Lender is a Lender under the Facility which is made available to that Additional Borrower pursuant to clause 2.1 (The Facility) of the Facilities Agreement, make an application to HM Revenue & Customs under form DTTP2 within 30 days of becoming an Additional Borrower(x).]
10 The New Lender confirms that it [is]/[is not](xi) a Sponsor Affiliate.
11 We refer to clause · (Change of Senior Lender) of the Intercreditor Agreement:
In consideration of the New Lender being accepted as a Senior Lender for the purposes of the Intercreditor Deed (and as defined in the Intercreditor Deed), the New Lender confirms that, as from the Transfer Date, it intends to be party to the Intercreditor Deed as a Senior
(ix) Insert jurisdiction of tax residence
(x) This confirmation must be included if the New Lender holds a passport under the HRMC DT Treaty Passport scheme and wishes that scheme to apply to the Facilities.
(xi) Delete as applicable.
Lender, and undertakes to perform all the obligations expressed in the Intercreditor Deed to be assumed by a Senior Lender and agrees that it shall be bound by all the provisions of the Intercreditor Deed, as if it had been an original party to the Intercreditor Deed.
12 This Agreement acts as notice to the Agent (on behalf of each Finance Party) and, upon delivery in accordance with clause 28.7 (Copy of Transfer Certificate, Assignment Agreement or Increase Confirmation to Company), to the [Company] (on behalf of each Obligor) of the assignment referred to in this Agreement.
13 This Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.
14 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
15 This Agreement has been entered into on the date stated at the beginning of this Agreement.
The Schedule
Commitment/rights and obligations to be transferred by assignment, release and accession
[ insert relevant details ]
[ Facility office address, fax number and attention details for notices and account details for payments ]
[Existing Lender] |
|
[New Lender] |
|
|
|
By: |
|
By: |
This Agreement is accepted as an Assignment Agreement for the purposes of the Facilities Agreement and as a Creditor/Agent Accession Undertaking for the purposes of the Intercreditor Deed and the Transfer Date is confirmed as · .
Signature of this Agreement by the Agent constitutes confirmation by the Agent of receipt of notice of the assignment referred to in this Agreement, which notice the Agent receives on behalf of each Finance Party.
[Agent]
By:
Schedule 7
Form of Accession Deed
To: · as Agent for itself and each of the other parties to the Intercreditor Deed referred to below
From: [ Subsidiary ] and [[ Company ]]
Dated:
Dear Sirs
Luxfer Holdings PLC Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to the Facilities Agreement and to the Intercreditor Deed. This deed ( Accession Deed ) shall take effect as an Accession Deed for the purposes of the Facilities Agreement and as a Debtor Accession Deed for the purposes of the Intercreditor Deed (and as defined in the Intercreditor Deed). Terms defined in the Facilities Agreement have the same meaning in paragraphs 1 to 3 of this Accession Deed unless given a different meaning in this Accession Deed.
2 [ Subsidiary ] agrees to become an Additional [Borrower]/[Guarantor] and to be bound by the terms of the Facilities Agreement and the other Finance Documents (other than the Intercreditor Deed) as an Additional [Borrower]/[Guarantor] pursuant to clause 30.2 (Additional Borrowers)/[clause 30.4 (Additional Guarantors) of the Facilities Agreement. [ Subsidiary ] is a company duly incorporated under the laws of [ name of relevant jurisdiction ] and is a limited liability company and registered number · .
3 [ Subsidiarys ] administrative details for the purposes of the Facilities Agreement and the Intercreditor Deed are as follows:
Address:
Fax No.:
Attention:
4 [ Subsidiary ] (for the purposes of this paragraph 4, the Acceding Debtor ) intends to [incur Liabilities under the following documents]/[give a guarantee, indemnity or other assurance against loss in respect of Liabilities under the following documents]:
[ Insert details (date, parties and description) of relevant documents ]
the Relevant Documents.
It is agreed as follows:
(a) Terms defined in the Intercreditor Deed shall, unless otherwise defined in this Accession Deed, bear the same meaning when used in this paragraph 4.
(b) The Acceding Debtor confirms that it intends to be party to the Intercreditor Deed as a Debtor, undertakes to perform all the obligations expressed to be assumed by a Debtor under the Intercreditor Deed and agrees that it shall be bound by all the provisions of the Intercreditor Deed as if it had been an original party to the Intercreditor Deed.
(c) [In consideration of the Acceding Debtor being accepted as an Intra-Group Lender for the purposes of the Intercreditor Deed, the Acceding Debtor also confirms that it intends to be party to the Intercreditor Deed as an Intra-Group Lender, and undertakes to perform all the obligations expressed in the Intercreditor Deed to be assumed by an Intra-Group Lender and agrees that it shall be bound by all the provisions of the Intercreditor Deed, as if it had been an original party to the Intercreditor Deed]
5 This Accession Deed [and any non-contractual obligations arising out of or in connection with it] [is/are] governed by English law.
This Accession Deed has been signed on behalf of the Agent (for the purposes of paragraph 4 above only), signed on behalf of the [Company] and executed as a deed by [ Subsidiary ] and is delivered on the date stated above.
[ Subsidiary ]
[EXECUTED AS A DEED
By: [ Subsidiary ]
|
Director |
|
Director/Secretary |
OR
[EXECUTED AS A DEED By: [ Subsidiary ] |
|
|
Signature of Director |
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Name of Director |
in the presence of |
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Signature of witness |
|
Name of witness |
|
Address of witness |
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|
Occupation of witness] |
The Company
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[ Company ] |
By:
The Agent
[ Full Name of Current Agent ]
By:
Date:
Schedule 8
Form of Resignation Letter
To: · as Agent
From: [ resigning Obligor ] and [ Company ]
Dated:
Dear Sirs
Luxfer Holdings PLC - Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to the Facilities Agreement. This is a Resignation Letter. Terms defined in the Facilities Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.
2 Pursuant to [clause 30.3 (Resignation of a Borrower)] [clause 30.5 (Resignation of a Guarantor)], we request that [ resigning Obligor ] be released from its obligations as a [Borrower] [Guarantor] under the Facilities Agreement and the Finance Documents (other than the Intercreditor Deed).
3 We confirm that:
(a) no Default is continuing or would result from the acceptance of this request;
(b) [this request is given in relation to a Third Party Disposal of [ resigning Obligor ];
(c) [the Disposal Proceeds have been or will be applied in accordance with clause 11.3; and
(d) [];
4 This Resignation Letter (and any non-contractual obligations arising out of or in connection with it [is/are]) is governed by English law.
[Company] |
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[ resigning Obligor ] |
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By: |
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By: |
Schedule 9
Form of Compliance Certificate
To: · as Agent
From: Luxfer Holdings PLC
Dated:
Dear Sirs
Luxfer Holdings PLC - Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to the Facilities Agreement. This is a Compliance Certificate. Terms defined in the Facilities Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2 With reference to the [Annual Financial Statements] [Quarterly Financial Statements] for the [Financial Year ended · ] [Financial Quarter ended · ], we confirm that:
Covenant |
|
Relevant Period |
|
Target |
|
Actual |
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Compliant/Non
|
Debt Service Cash Cover |
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· to · |
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Not less than · : · |
|
· : · |
|
] |
Interest Cover |
|
· to · |
|
At least · : · |
|
· : · |
|
] |
Leverage |
|
· to · |
|
Not exceeding · : · |
|
· : · |
|
] |
3 We confirm that Leverage is · :1 and that, therefore, the Margin should be · %.]
4 [We confirm that no Default is continuing.](xii)
5 [We confirm that the following companies constitute Material Companies for the purposes of the Facilities Agreement:
· .]
[We confirm that the aggregate of the earnings before interest, tax, depreciation and amortisation (calculated on the same basis as [EBITA)] [aggregate gross assets] of the Guarantors (calculated on an unconsolidated basis and excluding all intra-group items and investments in Subsidiaries of any member of the Group) exceeds 75% of the [EBITA] [consolidated gross assets].]
(xii) If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.
Signed |
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Finance Director |
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Director |
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of |
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of |
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[Company] |
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[Company] |
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[insert applicable certification language] |
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for and on behalf of |
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name of Auditors of the Company(xiii) |
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(xiii) Only applicable if the Compliance Certificate accompanies the Audited Financial Statements and is to be signed by the Auditors. To be agreed with the Companys Auditors prior to signing of the Agreement.
Schedule 10
Timetables
|
|
Loans in euro
|
|
Loans in sterling |
|
Loans in other
|
Agent notifies the Company if a currency is approved as an Optional Currency in accordance with clause 4.3 (Conditions relating to Optional Currencies)) |
|
- |
|
- |
|
U-4 |
|
|
|
|
|
|
|
Delivery of a duly completed Utilisation Request (clause 5.1 (Delivery of a Utilisation Request)) |
|
U-3
1.00pm |
|
U-1
9.30am |
|
U-3
9.30am |
|
|
|
|
|
|
|
Agent determines (in relation to a Loan) the Base Currency Amount of the Loan, if required under clause 5.4 (Lenders participation) and notifies the Lenders of the Loan in accordance with clause 5.4 (Lenders participation) |
|
U-3
4.00pm |
|
U-1
Noon |
|
U-3
Noon |
|
|
|
|
|
|
|
Agent receives a notification from a Lender under clause 6.2 (Unavailability of a currency) |
|
Quotation Day
9.30am |
|
-
|
|
Quotation Day
9.30am |
|
|
|
|
|
|
|
Agent gives notice in accordance with clause 6.2 (Unavailability of a currency) |
|
Quotation Day
5.30pm |
|
U
9.30am |
|
Quotation Day
5.30pm |
|
|
|
|
|
|
|
LIBOR or EURIBOR is fixed |
|
Quotation Day as of 11:00 a.m. in respect of LIBOR and as of 11.00 a.m. (Brussels time) in respect of EURIBOR |
|
Quotation Day as of 11:00 a.m. |
|
Quotation Day as of 11:00 a.m. |
U = date of utilisation
U - X = X Business Days prior to date of utilisation
Schedule 11
Form of Increase Confirmation
To: · as Agent, and · as [Company], for and on behalf of each Obligor
From: [ the Increase Lender ] ( Increase Lender )
Dated:
Luxfer Holdings PLC - Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to the Facilities Agreement and to the Intercreditor Deed (as defined in the Facilities Agreement). This agreement ( Agreement ) shall take effect as an Increase Confirmation for the purpose of the Facilities Agreement and as a Creditor/Agent Accession Undertaking for the purposes of the Intercreditor Deed (and as defined in the Intercreditor Deed). Terms defined in the Facilities Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.
2 We refer to clause 2.2 (Increase) of the Facilities Agreement.
3 The Increase Lender agrees to assume and will assume all of the obligations corresponding to the Commitment specified in the schedule ( Relevant Commitment ) as if it was an Original Lender under the Facilities Agreement.
4 The proposed date on which the increase in relation to the Increase Lender and the Relevant Commitment is to take effect ( Increase Date ) is · .
5 On the Increase Date, the Increase Lender becomes:
(a) party to the relevant Finance Documents (other than the Intercreditor Deed) as a Lender; and
(b) party to the Intercreditor Deed as a Senior Lender.
6 The Facility Office and address, fax number and attention details for notices to the Increase Lender for the purposes of clause 36.2 (Addresses) are set out in the schedule.
7 The Increase Lender expressly acknowledges the limitations on the Lenders obligations referred to in clause 2.2(f) (Increase).
8 The Increase Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:
(a) [a Qualifying Lender (other than a Treaty Lender);]
(b) [a Treaty Lender;]
(c) [not a Qualifying Lender]
9 [The Increase Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
(a) a company resident in the United Kingdom for United Kingdom tax purposes; or
(b) a partnership each member of which is:
(i) a company so resident in the United Kingdom; or
(ii) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or
(c) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.]
10 [The Increase Lender confirms (for the benefit of the Agent and without liability to any Obligor) that it is a Treaty Lender that holds a passport under the HMRC DT Treaty Passport scheme (reference number · ) and is tax resident in · (xiv), so that interest payable to it by borrowers is generally subject to full exemption from UK withholding tax and notifies the Company that:
(a) each Borrower which is a Party as a Borrower as at the Transfer Date must, to the extent that the New Lender becomes a Lender under the Facility which is made available to that Borrower pursuant to clause 2.1 (The Facility) of the Facilities Agreement, make an application to HM Revenue & Customs under form DTTP2 within 30 days of the Transfer Date; and
(b) each Additional Borrower which becomes an Additional Borrower after the Transfer Date must, to the extent that the New Lender is a Lender under the Facility which is made available to that Additional Borrower pursuant to clause 2.1 (The Facility) of the Facilities Agreement, make an application to HM Revenue & Customs under form DTTP2 within 30 days of becoming an Additional Borrower(xv).]
11 The Increase Lender confirms that it is not a Sponsor Affiliate.
12 We refer to clause · (Creditor/Agent Accession Undertaking) of the Intercreditor Deed:
In consideration of the Increase Lender being accepted as a Senior Lender for the purposes of the Intercreditor Deed (and as defined in the Intercreditor Deed), the Increase Lender confirms that, as from the Increase Date, it intends to be party to the Intercreditor Deed as a Senior Lender, and undertakes to perform all the obligations expressed in the Intercreditor Deed to be assumed by a Senior Lender and agrees that it shall be bound by all the provisions of the Intercreditor Deed, as if it had been an original party to the Intercreditor Deed.
13 This Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.
14 This Agreement [and any non-contractual obligations arising out of or in connection with it] [is/are] governed by English law.
(xiv) Insert jurisdiction of tax residence
(xv) This confirmation must be included if the Increase Lender holds a passport under the HRMC DT Treaty Passport scheme and wishes that scheme to apply to the Facilities Agreement.
The Schedule
Relevant Commitment/rights and obligations to be assumed by the Increase Lender
[ insert relevant details ]
[ Facility office address, fax number and attention details for notices and account details for payments ]
[Increase Lender] |
|
|
|
By: |
|
This Agreement is accepted as an Increase Confirmation for the purposes of the Facilities Agreement and as a Creditor/Agent Accession Undertaking for the purposes of the Intercreditor Deed by the Agent and the Increase Date is confirmed as · .
Agent |
|
|
|
By: |
|
Schedule 12
Forms of Notifiable Debt Purchase Transaction Notice
Part 1 - Form of Notice on Entering into Notifiable Debt Purchase Transaction
To: · as Agent
From: [ The Lender ]
Dated:
Luxfer Holdings PLC Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to clause 29.2(b) (Disenfranchisement on Debt Purchase Transactions entered into by Sponsor Affiliates) of the Facilities Agreement. Terms defined in the Facilities Agreement have the same meaning in this notice unless given a different meaning in this notice.
2 We have entered into a Notifiable Debt Purchase Transaction.
3 The Notifiable Debt Purchase Transaction referred to in paragraph 2 above relates to the amount of our Commitment(s) as set out below.
Commitment |
|
Amount of our Commitment to which Notifiable Debt Purchase Transaction relates (Base Currency) |
|
|
|
Commitment |
|
[ insert amount (of that Commitment) to which the relevant Debt Purchase Transaction applies ](xvi) |
[Lender]
By:
(xvi) Delete as applicable.
Part 2 - Form of Notice on Termination of Notifiable Debt Purchase Transaction /
Notifiable Debt Purchase Transaction ceasing to be with Sponsor Affiliate
To: · as Agent
From: [ The Lender ]
Dated:
[Company] Senior Facilities Agreement dated · (Facilities Agreement)
1 We refer to clause 29.2(c) (Disenfranchisement on Debt Purchase Transactions entered into by Sponsor Affiliates) of the Facilities Agreement. Terms defined in the Facilities Agreement have the same meaning in this notice unless given a different meaning in this notice.
2 A Notifiable Debt Purchase Transaction which we entered into and which we notified you of in a notice dated · has [terminated]/[ceased to be with a Sponsor Affiliate]. (xvii)
3 The Notifiable Debt Purchase Transaction referred to in paragraph 2 above relates to the amount of our Commitment(s) as set out below.
Commitment |
Amount of our Commitment to which Notifiable Debt Purchase Transaction relates (Base Currency) |
|
|
Commitment |
[ insert amount (of that Commitment) to which the relevant Debt Purchase Transaction applies ] (xviii) |
[Lender]
By:
(xvii) Delete as applicable.
(xviii) Delete as applicable.
NOTICE DETAILS
THE COMPANY
LUXFER HOLDINGS PLC
Address: |
Anchorage Gateway, 5 Anchorage Quay, Salford, M50 3XE |
|
|
Fax: |
0870 1911 492 |
|
|
Attention: |
Company Secretary |
MAGNESIUM ELEKTRON NORTH AMERICA, INC. |
|
|
|
Address: |
Anchorage Gateway, 5 Anchorage Quay, Salford, M50 3XE |
|
|
Fax: |
0870 1911 492 |
|
|
Attention: |
Company Secretary of Luxfer Holdings PLC |
Exhibit 4.2
Conformed Copy
EXECUTION VERSION
BA HOLDINGS, INC.
US$65,000,000
SENIOR NOTES DUE JUNE 15, 2018
NOTE PURCHASE AGREEMENT
Dated May 13, 2011
TABLE OF CONTENTS
|
|
|
Page |
|
|
|
|
|
|
1. |
AUTHORIZATION OF NOTES; GUARANTEES |
|
1 |
|
|
|
|
|
|
2. |
SALE AND PURCHASE OF NOTES |
|
2 |
|
|
|
|
|
|
3. |
CLOSING |
|
2 |
|
|
|
|
|
|
4. |
CONDITIONS TO CLOSING |
|
2 |
|
|
|
|
|
|
|
4.1. |
Representations and Warranties |
|
2 |
|
4.2. |
Performance; No Default |
|
3 |
|
4.3. |
Compliance Certificates |
|
3 |
|
4.4. |
Opinions of Counsel |
|
4 |
|
4.5. |
Purchase Permitted by Applicable Law, etc. |
|
4 |
|
4.6. |
Sale of Other Notes |
|
5 |
|
4.7. |
Payment of Special Counsel Fees |
|
5 |
|
4.8. |
Private Placement Number |
|
5 |
|
4.9. |
Repayment of Existing Notes and ABL Facility |
|
5 |
|
4.10. |
English Guarantee Agreements |
|
6 |
|
4.11. |
Intercreditor Deed |
|
6 |
|
4.12. |
[Reserved.] |
|
6 |
|
4.13. |
Insurance |
|
6 |
|
4.14. |
Security Searches and Releases |
|
7 |
|
4.15. |
Base Case Model |
|
7 |
|
4.16. |
[Reserved] |
|
7 |
|
4.17. |
Funding Instructions |
|
7 |
|
4.18. |
Payment of Structuring Fee; Delayed Delivery Fee |
|
7 |
|
4.19. |
Funds Flow Statement |
|
8 |
|
4.20. |
Hedging Letter |
|
8 |
|
4.21. |
[Reserved.] |
|
8 |
|
4.22. |
Cross Receipt |
|
8 |
|
4.23. |
Foreign Corrupt Practices Act Letter |
|
8 |
|
4.24. |
Bank Facilities Agreement |
|
8 |
|
|
|
|
|
5. |
REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS |
|
8 |
|
|
|
|
|
|
|
5.1. |
Status |
|
9 |
|
5.2. |
Binding Obligations |
|
9 |
|
5.3. |
Non-conflict with Other Obligations |
|
9 |
|
5.4. |
Power and Authority |
|
9 |
|
5.5. |
Validity and Admissibility in Evidence |
|
9 |
|
5.6. |
Governing Law and Enforcement |
|
10 |
|
5.7. |
Insolvency |
|
10 |
|
5.8. |
No Filing or Stamp Taxes |
|
11 |
|
5.9. |
Deduction of Tax |
|
11 |
|
5.10. |
No Default |
|
11 |
|
5.11. |
No Misleading Information |
|
11 |
TABLE OF CONTENTS
(continued)
|
|
|
Page |
|
|
|
|
|
|
|
5.12. |
Original Financial Statements |
|
12 |
|
5.13. |
No Proceedings Pending or Threatened |
|
13 |
|
5.14. |
No Breach of Laws |
|
13 |
|
5.15. |
Environmental Laws |
|
13 |
|
5.16. |
Taxation |
|
13 |
|
5.17. |
Security and Financial Indebtedness |
|
14 |
|
5.18. |
Ranking |
|
14 |
|
5.19. |
Good Title to Assets |
|
14 |
|
5.20. |
Legal and Beneficial Ownership |
|
14 |
|
5.21. |
Shares |
|
14 |
|
5.22. |
Intellectual Property |
|
14 |
|
5.23. |
Group Structure Chart |
|
15 |
|
5.24. |
Obligors |
|
15 |
|
5.25. |
Accounting Reference Date |
|
16 |
|
5.26. |
Centre of Main Interests and Establishments |
|
16 |
|
5.27. |
Dormant Companies |
|
16 |
|
5.28. |
Pensions |
|
16 |
|
5.29. |
No Adverse Consequences |
|
16 |
|
5.30. |
U.S. Regulations |
|
17 |
|
5.31. |
Sanctions |
|
19 |
|
5.32. |
Private Offering |
|
20 |
|
|
|
|
|
6. |
REPRESENTATIONS OF THE PURCHASERS |
|
20 |
|
|
|
|
|
|
|
6.1. |
Purchase for Investment |
|
20 |
|
6.2. |
Source of Funds |
|
20 |
|
|
|
|
|
7. |
INFORMATION AS TO THE OBLIGORS |
|
22 |
|
|
|
|
|
|
|
7.1. |
Financial and Business Information |
|
22 |
|
7.2. |
Other Requirements as to Financial Statements; Officers Certificate |
|
24 |
|
7.3. |
Access |
|
25 |
|
7.4. |
Limitation on Disclosure Obligation |
|
25 |
|
|
|
|
|
8. |
PAYMENT AND PREPAYMENT OF THE NOTES |
|
26 |
|
|
|
|
|
|
|
8.1. |
Maturity |
|
26 |
|
8.2. |
Optional Prepayments with Make-Whole Amount |
|
26 |
|
8.3. |
Allocation of Partial Prepayments |
|
26 |
|
8.4. |
Maturity; Surrender, etc. |
|
26 |
|
8.5. |
Purchase of Notes |
|
27 |
|
8.6. |
Make-Whole Amount |
|
27 |
|
8.7. |
Change of Control Prepayment |
|
28 |
|
8.8. |
Disposal and Insurance Prepayments |
|
29 |
|
|
|
|
|
9. |
COVENANTS |
|
31 |
|
|
|
|
|
|
|
9.1. |
Financial Covenants |
|
31 |
TABLE OF CONTENTS
(continued)
|
|
|
Page |
|
|
|
|
|
|
|
9.2. |
Authorizations |
|
32 |
|
9.3. |
Compliance with Laws |
|
32 |
|
9.4. |
Environmental Compliance |
|
32 |
|
9.5. |
Environmental Claims |
|
33 |
|
9.6. |
Taxation |
|
33 |
|
9.7. |
Merger |
|
33 |
|
9.8. |
Change of Business |
|
33 |
|
9.9. |
Acquisitions |
|
33 |
|
9.10. |
Joint Ventures |
|
34 |
|
9.11. |
Preservation of Assets |
|
34 |
|
9.12. |
Pari Passu Ranking |
|
34 |
|
9.13. |
Negative Pledge |
|
34 |
|
9.14. |
Disposals |
|
35 |
|
9.15. |
Arms Length Basis |
|
35 |
|
9.16. |
Loans or Credit |
|
36 |
|
9.17. |
No Guarantees or Indemnities |
|
36 |
|
9.18. |
Dividends and Share Redemption |
|
36 |
|
9.19. |
Bank Facilities Agreement |
|
37 |
|
9.20. |
Financial Indebtedness |
|
37 |
|
9.21. |
Share Capital |
|
37 |
|
9.22. |
Insurance |
|
37 |
|
9.23. |
Pensions |
|
37 |
|
9.24. |
Intellectual Property |
|
38 |
|
9.25. |
Transaction Documents |
|
39 |
|
9.26. |
Financial Assistance |
|
40 |
|
9.27. |
Group Bank Accounts |
|
40 |
|
9.28. |
Treasury Transactions |
|
40 |
|
9.29. |
Auditors |
|
40 |
|
9.30. |
Further Assurance |
|
40 |
|
9.31. |
Guarantors |
|
40 |
|
9.32. |
Anti-Terrorism Laws |
|
43 |
|
9.33. |
ERISA |
|
44 |
|
9.34. |
Margin Regulation |
|
44 |
|
9.35. |
U.S. Regulation |
|
44 |
|
9.36. |
Favored Lender Status |
|
44 |
|
9.37. |
Year-end |
|
45 |
|
9.38. |
Compliance with Hedging Letter |
|
45 |
|
9.39. |
Replacement Agent for Service of Process |
|
45 |
|
9.40. |
Conditions Subsequent |
|
46 |
|
|
|
|
|
10. |
EVENTS OF DEFAULT |
|
46 |
|
|
|
|
|
|
11. |
REMEDIES ON DEFAULT, ETC. |
|
51 |
|
|
|
|
|
|
|
11.1. |
Acceleration |
|
51 |
TABLE OF CONTENTS
(continued)
|
|
|
Page |
|
|
|
|
|
|
|
11.2. |
Other Remedies |
|
52 |
|
11.3. |
Rescission |
|
52 |
|
11.4. |
No Waivers or Election of Remedies, Expenses, etc. |
|
53 |
|
|
|
|
|
12. |
TAX INDEMNIFICATION |
|
53 |
|
|
|
|
|
|
13. |
GUARANTEE AND OTHER RIGHTS AND UNDERTAKINGS |
|
56 |
|
|
|
|
|
|
|
13.1. |
Guarantee |
|
56 |
|
13.2. |
Obligations Absolute |
|
58 |
|
13.3. |
Waiver |
|
58 |
|
13.4. |
Obligations Unimpaired |
|
59 |
|
13.5. |
Subrogation and Subordination |
|
59 |
|
13.6. |
Reinstatement of Guarantee |
|
61 |
|
13.7. |
Term of Guarantee |
|
61 |
|
13.8. |
Information Regarding the Issuer |
|
61 |
|
13.9. |
Further Assurances |
|
61 |
|
|
|
|
|
14. |
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES |
|
61 |
|
|
|
|
|
|
|
14.1. |
Registration of Notes |
|
61 |
|
14.2. |
Transfer and Exchange of Notes |
|
62 |
|
14.3. |
Replacement of Notes |
|
62 |
|
|
|
|
|
15. |
PAYMENTS ON NOTES |
|
63 |
|
|
|
|
|
|
|
15.1. |
Place of Payment |
|
63 |
|
15.2. |
Home Office Payment |
|
63 |
|
|
|
|
|
16. |
EXPENSES, ETC. |
|
63 |
|
|
|
|
|
|
|
16.1. |
Transaction Expenses |
|
63 |
|
16.2. |
Certain Taxes |
|
64 |
|
16.3. |
Survival |
|
64 |
|
|
|
|
|
17. |
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT |
|
64 |
|
|
|
|
|
|
18. |
AMENDMENT AND WAIVER |
|
65 |
|
|
|
|
|
|
|
18.1. |
Requirements |
|
65 |
|
18.2. |
Solicitation of Holders of Notes |
|
65 |
|
18.3. |
Binding Effect, etc. |
|
66 |
|
18.4. |
Notes Held by Obligors, etc. |
|
66 |
|
|
|
|
|
19. |
NOTICES; ENGLISH LANGUAGE |
|
66 |
|
|
|
|
|
|
20. |
REPRODUCTION OF DOCUMENTS |
|
67 |
|
|
|
|
|
|
21. |
CONFIDENTIAL INFORMATION |
|
67 |
|
|
|
|
|
|
22. |
SUBSTITUTION OF PURCHASER |
|
68 |
TABLE OF CONTENTS
(continued)
|
|
|
Page |
|
|
|
|
|
|
23. |
MISCELLANEOUS |
|
69 |
|
|
|
|
|
|
|
23.1. |
Successors and Assigns |
|
69 |
|
23.2. |
Payments Due on Non-Business Days |
|
69 |
|
23.3. |
Accounting Terms; IAS 39 |
|
69 |
|
23.4. |
Severability |
|
70 |
|
23.5. |
Construction, etc. |
|
70 |
|
23.6. |
Counterparts |
|
70 |
|
23.7. |
Governing Law |
|
70 |
|
23.8. |
Jurisdiction and Process; Waiver of Jury Trial |
|
71 |
|
23.9. |
Obligation to Make Payment in U.S. Dollars |
|
72 |
|
23.10. |
Tax Forms |
|
72 |
Schedule A |
|
Information Relating to Purchasers |
|
|
|
Schedule B |
|
Defined Terms |
|
|
|
Schedule C |
|
Original Subsidiary Guarantors |
|
|
|
Exhibit 1(a) |
|
Form of Senior Note due June 15, 2018 |
|
|
|
Exhibit 1(b)(i) |
|
Form of English Guarantee Agreement |
|
|
|
Exhibit 1(b)(ii) |
|
Form of Joinder Agreement |
|
|
|
Exhibit 4.4(a)(i) |
|
Form of Opinion of U.S. Special Counsel for the Obligors |
|
|
|
Exhibit 4.4(a)(ii) |
|
Form of Opinion of English Special Counsel for the Obligors |
|
|
|
Exhibit 4.4(a)(iii) |
|
Form of Opinion of New Jersey Special Counsel for the Obligors |
|
|
|
Exhibit 4.4(b)(i) |
|
Form of Opinion of U.S. Special Counsel for the Purchasers |
|
|
|
Exhibit 4.4(b)(ii) |
|
Form of Opinion of English Special Counsel for the Purchasers |
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Exhibit 4.11 |
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Form of Intercreditor Deed |
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Exhibit 4.18 |
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Commitment Letter |
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Exhibit 4.20 |
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Form of Hedging Letter |
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Exhibit 7.2 |
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Form of Compliance Certificate |
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Schedule 5.11 |
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Disclosure Documents |
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Schedule 5.23 |
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Group Structure Chart |
BA HOLDINGS, INC.
Anchorage Gateway
5 Anchorage Quay
Salford, M50 3XE
United Kingdom
Senior Notes due June 15, 2018
May 13, 2011
To Each of the Purchasers Listed in
Schedule A Hereto:
Ladies and Gentlemen:
Each of BA Holdings, Inc., a Delaware corporation (the Issuer or any successor that becomes such in the manner prescribed in Section 9.7), Luxfer Holdings PLC (Registered No. 3690830), a public limited company organized under the laws of England and Wales (the Parent Guarantor ), and each of the parties listed in Schedule C (each an Original Subsidiary Guarantor and collectively the Original Subsidiary Guarantors ), agrees with each of the purchasers whose names appear at the end hereof (each a Purchaser and collectively the Purchasers ) as follows:
1. AUTHORIZATION OF NOTES; GUARANTEES.
(a) The Issuer will authorize the issue and sale of US$65,000,000 aggregate principal amount of its Senior Notes due June 15, 2018 (the Notes , such term to include any such notes issued in substitution therefor pursuant to Section 15). The Notes shall be substantially in the form set out in Exhibit 1(a) . Certain capitalized and other terms used in this Agreement are defined in Schedule B ; and references to a Schedule or an Exhibit are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.
(b) The payment by the Issuer of all amounts due with respect to the Notes shall be absolutely and unconditionally guaranteed by (i) each of the Original Subsidiary Guarantors that is a U.S. Guarantor pursuant to the Unconditional Guarantee contained in Section 13, (ii) the Parent Guarantor, which owns all of the outstanding equity interests of the Issuer, and each of the Original Subsidiary Guarantors that is an English Guarantor pursuant to a Guarantee Agreement in substantially the form of Exhibit 1(b)(i) (each an English Guarantee Agreement ), and (iii) each Subsidiary (each an Additional Subsidiary Guarantor ) which, after the date of this Agreement, becomes a party hereto pursuant to a Joinder Agreement in substantially the form of Exhibit 1(b)(ii) (each a Joinder Agreement ) and guarantees the Notes pursuant to such Joinder Agreement, an English Guarantee Agreement or a guarantee agreement in form and substance satisfactory to the Required Holders, but shall exclude at such time any Subsidiary
theretofore released from its obligations as a Subsidiary Guarantor pursuant to Section 9.31.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Issuer will issue and sell to each Purchaser and each Purchaser will purchase from the Issuer, at the Closing provided for in Section 3, Notes in the principal amount specified opposite such Purchasers name in Schedule A at the purchase price of 100% of the principal amount thereof. The Purchasers obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of Bingham McCutchen (London) LLP, 41 Lothbury, London, England, at 10:00 A.M., local time, at a closing (the Closing ) on June 15, 2011 or on such other Business Day thereafter on or prior to June 30, 2011 as may be agreed upon by the Obligors and the Purchasers. At the Closing the Issuer will deliver to each Purchaser the Notes to be purchased by such Purchaser in the form of a single Note (or such greater number of Notes in denominations of at least US$100,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchasers name (or in the name of its nominee), against delivery by such Purchaser to the Issuer or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Issuer to the account identified by the Issuer in the Funding Instructions (unless agreed by the Purchasers at least 5 Business Days prior to Closing, such account must be a bank account in a bank located in the United States and it being understood by the parties hereto that irrespective of the time of Closing no such wire can be initiated by a Purchaser until the opening of business in the United States for both such Purchaser and its bank). If at the Closing the Issuer shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchasers satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Each Purchasers obligation to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchasers satisfaction, prior to or at the Closing, of the following conditions:
4.1. Representations and Warranties .
The Major Representations shall be correct at the time of the Closing.
4.2. Performance; No Default .
Each Obligor shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.30(b)) no Major Default shall have occurred and be continuing. Nothing in this Section 4.2 operates as a waiver of any Event of Default or will affect the rights of the holders of Notes in respect of any outstanding Event of Default upon purchase of the Notes, irrespective of whether that Event of Default occurred prior to the purchase of Notes or not, and the holders of Notes may exercise all or any of their rights and remedies set out in this Agreement in respect of any continuing Event of Default upon purchase of the Notes (including without limitation their rights under Section 11.1).
4.3. Compliance Certificates .
(a) Officers Certificates . Each Obligor shall have delivered to such Purchaser an Officers Certificate, dated the date of the Closing, in Agreed Form, certifying that the conditions specified in Sections 4.1 and 4.2 have been fulfilled.
(b) Secretarys or Directors Certificates .
(i) Each Obligor shall have delivered to such Purchaser a certificate of its Secretary or an Assistant Secretary or a director or other appropriate person, dated the date of the Closing, certifying (A) as to the resolutions of the board of directors and shareholders of such Obligor attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Note Documents to which it is a party, (B) constitutive documents of such Obligor (and in respect of each U.S. Obligor as certified by the applicable regulatory authority), and (C) to the incumbency and specimen signature of each person authorized by the resolutions referred to in clause (A) above to execute the Note Documents, all in Agreed Form.
(ii) The Parent Guarantor shall have delivered to such Purchaser a certificate of a director, dated the date of the Closing:
(A) confirming that issuing or guaranteeing or securing, as appropriate, the Notes would not cause any borrowing, guarantee, Security or similar limit binding on the Parent Guarantor, the Issuer or any Original Subsidiary Guarantor to be exceeded;
(B) attaching thereto a copy of the Bank Facilities Agreement and each other Finance Document (as defined in the Bank Facilities Agreement), all in Agreed Form, and certifying that (1) each such document copy is correct, complete and in full force and effect and has not been amended, novated, supplemented, superseded or terminated as at the date of the Closing and (2) the commitments under the Bank Facilities Agreement are available to be drawn as at the date of the Closing;
(C) attaching thereto a copy of the Original Financial Statements of each Obligor and certifying that each such document copy is true;
(D) specifying each member of the Group which is a Dormant Subsidiary as at the date of Closing together with certified copies (certified by such director to be a true copy) of the last audited accounts of each such Dormant Subsidiary;
(E) specifying each member of the Group which is a Material Company as at the date of Closing;
(F) confirming that such irrevocable prepayment notice in respect of the Existing Notes was served on or prior to the date falling five Business Days after the date of this Agreement; and
(G) confirming that, as a result of the sale of the Notes and the utilization of the facilities available under the Bank Facilities Agreement on the date of the Closing (or, in the case of the Bank Facilities Agreement, on the day immediately following the day of Closing), the Obligors have available to them a sum which is sufficient to repay the Existing Notes and the ABL Facility in full, and that such sum has been applied or will, simultaneously with the receipt of the proceeds of the Bank Facilities Agreement, be applied to repay the Existing Notes and the ABL Facility in full;
in Agreed Form.
4.4. Opinions of Counsel .
Such Purchaser shall have received opinions, dated the date of the Closing (a) from Fried, Frank, Harris, Shriver & Jacobson LLP, U.S. counsel for the Obligors, Dickson Minto W.S., English counsel for the Obligors, and Montalbano, Condon & Frank, P.C., New Jersey counsel for the Obligors, in the respective forms set forth in Exhibits 4.4(a)(i) , 4.4(a)(ii) and 4.4(a)(iii) , in each case without any changes from such forms attached hereto unless such changes have been approved by the Purchasers (and the Obligors hereby instruct their counsel to deliver such opinions to the Purchasers) and (b) from Bingham McCutchen LLP and Bingham McCutchen (London) LLP, the Purchasers U.S. and English special counsel, respectively, in connection with such transactions, substantially in the respective forms set forth in Exhibits 4.4(b)(i) and 4.4(b)(ii) , or with such changes approved by the Purchasers.
4.5. Purchase Permitted by Applicable Law, etc .
On the date of the Closing such Purchasers purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by such Purchaser, such Purchaser shall have received an Officers Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.
4.6. Sale of Other Notes .
Contemporaneously with the Closing the Issuer shall sell to each other Purchaser and each other Purchaser shall purchase the Notes to be purchased by it at the Closing as specified in Schedule A .
4.7. Payment of Special Counsel Fees .
Without limiting the provisions of Section 17.1, the Issuer shall have paid on or before the Closing the reasonable fees, charges and disbursements of the Purchasers special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Issuer at least one Business Day prior to the Closing.
4.8. Private Placement Number .
A Private Placement Number issued by Standard & Poors CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained for the Notes.
4.9. Repayment of Existing Notes and ABL Facility .
Such Purchaser shall have received, in each case in Agreed Form:
(a) Existing Notes
(i) On or before the date hereof, a copy of the irrevocable prepayment notices and related certificate in Agreed Form in respect of the Existing Notes signed by the Parent Guarantor, and
(ii) evidence that the rating issued by Moodys Investors Service Ltd. with respect to the Existing Notes shall have been extinguished; and
(b) ABL Facility
(i) an executed copy of a lien termination agreement by and among the U.S. Obligors, Luxfer Group Limited and Bank of America, N.A., as security trustee, in respect of the ABL Facility, in Agreed Form and certified by a director of the Parent Guarantor as correct, complete and in full force and effect, and as not having been amended, novated, supplemented, superseded or terminated as at the date of the Closing,
(ii) an executed copy of a Deed of Release between Bank of America N.A., as security trustee, and certain of the Obligors in respect of the ABL Facility, in Agreed Form and certified by a director of the Parent Guarantor as correct, complete and in full force and effect, and as not having been amended, novated, supplemented, superseded or terminated as at the date of the Closing, and
(iii) a copy of the cancellation notice served under the ABL Facility, certified by a director of the Parent Guarantor as correct, complete and in full force and effect.
4.10. English Guarantee Agreements .
The Parent Guarantor and each of the Original Subsidiary Guarantors that is an English Guarantor shall have entered into an English Guarantee Agreement and such Purchaser shall have received an original copy of such agreement and it shall be in full force and effect.
4.11. Intercreditor Deed .
Each of (a) the Parent Guarantor, the Issuer and the Original Subsidiary Guarantors, (b) the Bank Agent, (c) the security trustee, (d) Lloyds TSB Bank plc and Clydesdale Bank PLC (trading as Yorkshire Bank), as Arrangers, (e) the Bank Lenders, (f) Lloyds TSB Bank plc, Clydesdale Bank PLC (trading as Yorkshire Bank) and Bank of America, N.A., as Bilateral Lenders, and (g) the Purchasers shall have entered into the Intercreditor Deed, which shall be in the form set forth in Exhibit 4.11 , and such Purchaser shall have received an original copy of the Intercreditor Deed and it shall be in full force and effect.
4.12. [Reserved .]
4.13. Insurance .
Such Purchaser shall have received a letter from Marsh Ltd, as insurance broker for the Group, dated no earlier than the date of the Closing, listing the insurance policies of the Group and confirming that they are on risk and that the insurance for the Group at the date of the Closing covers appropriate risks for the business carried out by the Group and that such insurance complies with the terms of the Note Documents.
4.14. Security Searches and Releases .
(a) Security Searches . Such Purchaser shall have received copies of the results of the following searches dated within one week of the Closing:
(i) a search at the Companies Court at the Royal Courts of Justice in London and at Companies House as at the date of Closing revealing no adverse entries against the Parent Guarantor, the Issuer or any Original Subsidiary Guarantor, and
(ii) a Uniform Commercial Code search of the Secretary of State (or equivalent recording office) of the state of incorporation of each U.S. Obligor revealing no existing liens that do not constitute Permitted Security.
(b) Security Releases . Such Purchaser shall have received copies of:
(i) releases in Agreed Form of any existing liens appearing on the results of the Uniform Commercial Code searches referred to in paragraph (a)(ii) above that do not constitute Permitted Security (other than Permitted Security identified in paragraph (h) of the definition of such term), and
(ii) such release documents as are necessary to discharge and release all existing Security granted by each member of the Group other than Security falling within paragraphs (a) through (g), inclusive, of the definition of Permitted Security, and such release documents shall be in form and substance satisfactory to such Purchaser.
4.15. Base Case Model .
Such Purchaser shall have received a copy of the Base Case Model.
4.16. [Reserved] .
4.17. Funding Instructions .
At least three Business Days prior to the date of the Closing, each Purchaser shall have received written instructions (the Funding Instructions ) signed by a Responsible Officer on letterhead of the Issuer designating the bank account for payment of the purchase price of the Notes in accordance with Section 3 including (a) the name and address of the transferee bank, (b) such transferee banks ABA number and (c) the account name and number into which the purchase price for the Notes is to be deposited.
4.18. Payment of Structuring Fee; Delayed Delivery Fee .
(a) Structuring Fee . Without limiting the provisions of Section 16.1, the Issuer shall have paid to such Purchaser on or before the Closing, in immediately available funds, such Purchasers pro rata share of a fee in the aggregate amount of
US$812,500 in consideration for the time, effort and expense involved in the preparation, negotiation and execution of this Agreement and the other Note Documents.
(b) Delayed Delivery Fee . In the event that the Closing does not occur on or before June 15, 2011, the Issuer shall pay on the date of the Closing the Delayed Delivery Fee (as defined in the Commitment Letter) in accordance with the terms of the Commitment Letter.
4.19. Funds Flow Statement .
Such Purchaser shall have received prior to the date of the Closing the Funds Flow Statement.
4.20. Hedging Letter .
Such Purchaser shall have received a hedging strategy letter (the Hedging Letter ) in favor of the Purchasers in the form set forth in Exhibit 4.20 .
4.21. [Reserved .]
4.22. Cross Receipt .
Such Purchaser shall have received a cross receipt with respect to the Purchasers receipt of the Notes and the Issuers receipt of payment in full for the Notes, which shall be executed by the Issuer and shall be in Agreed Form.
4.23. Foreign Corrupt Practices Act Letter .
Such Purchaser shall have received a copy of a letter from the Purchasers to the Bank Agent with respect to U.S. and non-U.S. anti-bribery and anti-corruption laws, including, but not limited to, the U.S. Foreign Corrupt Practices Act of 1977, which shall be executed by the Bank Agent and in Agreed Form.
4.24. Bank Facilities Agreement .
Each Purchaser shall have received an acknowledgement of the Bank Agent that (a) it has received an irrevocable Utilization Request (as defined in the Bank Facilities Agreement) requesting funds under the Facilities (as defined in the Bank Facilities Agreement) in an amount equal to or greater than the amount required from such Facilities pursuant to the Funds Flow Statement and (b) all conditions precedent to such Utilization Request have been satisfied.
5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.
Each Obligor jointly and severally represents and warrants to each Purchaser that, as of the date of this Agreement and as of the date of the Closing:
5.1. Status .
(a) It and each of its Subsidiaries is a limited liability corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation and, where legally applicable, is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) It and each of its Subsidiaries has the power to own its assets and carry on its business as it is being conducted.
5.2. Binding Obligations .
Subject to the Legal Reservations, the obligations expressed to be assumed by it in each Note Document to which it is a party are legal, valid, binding and enforceable obligations.
5.3. Non-conflict with Other Obligations .
The entry into and performance by it of, and the transactions contemplated by, the Note Documents do not and will not conflict with:
(a) any law or regulation applicable to it;
(b) the constitutional documents of any member of the Group; or
(c) any agreement or instrument binding upon it or any member of the Group or any of its or any member of the Groups assets or constitute a default or termination event (however described) under any such agreement or instrument unless such conflict, default or termination event would not have or is not reasonably likely to have a Material Adverse Effect.
5.4. Power and Authority .
(a) It has the power to enter into, perform and deliver, and has taken all necessary action to authorize its entry into, performance and delivery of, the Note Documents to which it is or will be a party and the transactions contemplated by such Note Documents.
(b) No limit on its powers will be exceeded as a result of the borrowing, grant of Security or giving of guarantees or indemnities contemplated by the Note Documents to which it is a party.
5.5. Validity and Admissibility in Evidence .
(a) All Authorizations required:
(i) to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Note Documents to which it is a party including, without limitation, any Authorizations required in connection with the obtaining of U.S. Dollars to make payments under this Agreement or the Notes and the payment of such U.S. Dollars to Persons resident in the United States of America; and
(ii) to make the Note Documents to which it is a party admissible in evidence in its Relevant Jurisdictions,
have been obtained or effected and are in full force and effect except any Authorization referred to in Section 5.8.
(b) All Authorizations necessary for the conduct of the business, trade and ordinary activities of the members of the Group have been obtained or effected and are in full force and effect if failure to obtain or effect those Authorizations has or is reasonably likely to have a Material Adverse Effect.
5.6. Governing Law and Enforcement .
(a) The choice of governing law of the Note Documents will be recognized and enforced in its Relevant Jurisdictions.
(b) Any judgment obtained in relation to a Note Document in the jurisdiction of the governing law of that Note Document will be recognized and enforced in its Relevant Jurisdictions.
5.7. Insolvency .
(a) No:
(i) corporate action, legal proceeding or other procedure or step described in Section 10(g)(i); or
(ii) creditors process described in Section 10(h),
has been taken or, so far as it is aware, threatened in relation to a member of the Group.
(b) No corporate action, legal proceeding or other procedure or step described in Section 10(g)(ii) has been taken or, so far as it is aware, threatened in relation to the Issuer or any other member of the Group incorporated in the United States of America.
(c) None of the circumstances described in Section 10(f) applies to a member of the Group.
5.8. No Filing or Stamp Taxes .
Under the laws of its Relevant Jurisdiction it is not necessary that the Note Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Note Documents or the transactions contemplated by the Note Documents except for those registrations specifically set out in any legal opinion delivered to the Purchasers pursuant to Section 4.4.
5.9. Deduction of Tax .
No liability for any Tax, directly or indirectly, imposed, assessed, levied or collected by or for the account of any Governmental Authority of the United Kingdom or any political subdivision thereof will be incurred by any Obligor or any holder of a Note as a result of the execution or delivery of any Note Document and no deduction or withholding in respect of Taxes imposed by or for the account of the United Kingdom or, to the knowledge of the Obligors, any other Taxing Jurisdiction, is required to be made from any payment by any Obligor under any Note Document except for any such liability, withholding or deduction imposed, assessed, levied or collected by or for the account of any such Governmental Authority of the United Kingdom arising out of circumstances described in clause (a), (b) or (c) of Section 12.
5.10. No Default .
(a) No Default or Event of Default is continuing or is reasonably likely to result from the issuance of the Notes or the entry into, the performance of, or any transaction contemplated by, any Note Document.
(b) No other event or circumstance is outstanding which constitutes (or, with the expiry of a grace period, the giving of notice, the making of any determination or any combination of any of the foregoing, would constitute) a default or termination event (however described) under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries) assets are subject which has or is reasonably likely to have a Material Adverse Effect.
5.11. No Misleading Information .
(a) All factual information contained in the Note Documents and the documents, certificates or other writings delivered to the Purchasers by or on behalf of the Obligors in connection with the transactions contemplated hereby and identified in Schedule 5.11 , the Original Financial Statements and the Information Memorandum (the Note Documents, such documents, certificates or other writings, the Original Financial Statements and the Information Memorandum delivered to each Purchaser prior to the date of this Agreement being referred to, collectively, as the Disclosure Documents ) was true and accurate in all material respects as at the date of the relevant report or document containing the information or (as the case may be) as at the date the information is expressed to be given.
(b) The Base Case Model has been prepared in accordance with the Accounting Principles as applied to the Original Financial Statements of the Parent Guarantor, and the financial projections contained in the Base Case Model have been prepared on the basis of recent historical information, are fair and based on reasonable assumptions and have been approved by the board of directors of the Parent Guarantor.
(c) Any financial projection or forecast contained in the Disclosure Documents has been prepared on the basis of recent historical information and on the basis of reasonable assumptions and was fair (as at the date of the relevant report or document containing the projection or forecast) and arrived at after careful consideration (it being acknowledged by the Purchasers that financial projections or forecasts are subject to uncertainties and contingencies and no representation or warranty is given that such financial projections or forecasts will be realized).
(d) The expressions of opinion or intention provided by or on behalf of an Obligor for the purposes of the Disclosure Documents were made after careful consideration and (as at the date of the relevant report or document containing the expression of opinion or intention) were fair and based on reasonable grounds.
(e) No event or circumstance has occurred or arisen and no information has been omitted from the Disclosure Documents and no information has been given or withheld that results in the information, opinions, intentions, forecasts or projections contained in the Disclosure Documents being untrue or misleading in any material respect.
(f) All material information provided to a Purchaser by or on behalf of the Group on or before the date of the Closing and not superseded before that date (whether or not contained in the Disclosure Documents) is accurate and not misleading in any material respect and all projections provided to any Purchaser on or before the date of the Closing have been prepared in good faith on the basis of assumptions which were reasonable at the time at which they were prepared and supplied.
(g) All other written information provided by any Obligor to a Purchaser was true, complete and accurate in all material respects as at the date it was provided and is not misleading in any material respect.
5.12. Original Financial Statements .
(a) Its Original Financial Statements were prepared in accordance with the Accounting Principles consistently applied.
(b) Its unaudited Original Financial Statements fairly represent its financial condition and results of operations for the relevant period in accordance with the basis of preparation and Accounting Principles unless expressly disclosed to the Purchasers in writing to the contrary prior to the date of this Agreement.
(c) Its audited Original Financial Statements give a true and fair view of its financial condition and results of operations during the relevant Financial Year.
(d) There has been no material adverse change in its assets, business or financial condition (or the assets, business or consolidated financial condition of the Group, in the case of the Parent Guarantor) since December 31, 2010.
(e) The Original Financial Statements of the Parent Guarantor do not consolidate the results, assets or liabilities of any Person or business which does not form part of the Group (other than in respect of any joint venture) as at the date of the Closing.
5.13. No Proceedings Pending or Threatened .
(a) No litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency which, if adversely determined, are reasonably likely to result in liabilities to it or any of its Subsidiaries (whether actual or contingent) which has or is reasonably likely to have a Material Adverse Effect have (so far as it is aware) been started or threatened against it or any of its Subsidiaries.
(b) No labor disputes are current or, so far as it is aware, threatened against any member of the Group which have or are reasonably likely to result in liabilities to it or any of its Subsidiaries which has or is reasonably likely to have a Material Adverse Effect.
5.14. No Breach of Laws .
It has not (and none of its Subsidiaries has) breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.
5.15. Environmental Laws .
(a) It and each of its Subsidiaries is in compliance with Section 9.4 and, so far as it is aware, no circumstances have occurred which would prevent such compliance in a manner or to an extent which has or is reasonably likely to result in a Material Adverse Effect.
(b) No Environmental Claim has been commenced or, so far as it is aware, is threatened against any member of the Group where that claim has or is reasonably likely, if determined against that member of the Group, to result in a Material Adverse Effect.
(c) The cost to the Group of compliance with Environmental Laws (including Environmental Permits) is, so far as it is aware, adequately provided for in the Base Case Model.
5.16. Taxation .
(a) It is not (and none of its Subsidiaries is) materially overdue in the filing of any Tax returns and it is not (and none of its Subsidiaries is) overdue in the payment of any amount in respect of Tax.
(b) No claims or investigations are being, or are reasonably likely to be, made or conducted against it (or any of its Subsidiaries) with respect to Taxes such that a liability of, or claim against, any member of the Group which would have or is reasonably likely to have a Material Adverse Effect.
(c) It is resident for Tax purposes only in the jurisdiction of its incorporation.
5.17. Security and Financial Indebtedness .
(a) No Security or Quasi-Security exists over all or any of the present or future assets of any member of the Group other than as permitted by this Agreement.
(b) No member of the Group has any Financial Indebtedness outstanding other than as permitted by this Agreement.
5.18. Ranking .
(a) The Obligors payment obligations under the Note Documents will rank at least pari passu, without preference or priority, with the Obligors payment obligations under the Bank Facilities Agreement and the other Finance Documents (as defined in the Bank Facilities Agreement).
(b) Any unsecured and unsubordinated claims of a holder against any Obligor under the Note Documents will rank at least pari passu with the claims of all of such Obligors other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.
5.19. Good Title to Assets .
It and each of its Subsidiaries has a good, valid and marketable title to, or valid leases or licenses of, and all appropriate Authorizations to use, the assets necessary to carry on its business as presently conducted.
5.20. Legal and Beneficial Ownership .
It and each of its Subsidiaries is the sole legal and beneficial owner of the respective assets over which it purports to grant Security.
5.21. Shares .
There are no agreements in force which provide for the issue, allotment or transfer of, or grant any Person the right to call for the issue, allotment or transfer of, any share or loan capital of any member of the Group (including any option or right of pre-emption or conversion) other than pursuant to the Share Option Documents.
5.22. Intellectual Property .
It and each of its Subsidiaries:
(a) is the sole legal and beneficial owner of or has licensed to it on normal commercial terms all the Intellectual Property which is material in the context of its business and which is required by it in order to carry on its business as it is being conducted and as contemplated in the Base Case Model and where the Intellectual Property is licensed to it, that license has not been breached in any material respect or terminated by any party;
(b) does not, in carrying on its businesses, infringe any Intellectual Property of any third party in any respect which has or is reasonably likely to have a Material Adverse Effect; and
(c) has taken all formal or procedural actions (including payment of fees) required to maintain any Intellectual Property owned by it which is required by it in order to carry on its business as it is being conducted and as contemplated in the Base Case Model.
5.23. Group Structure Chart .
(a) The group structure chart contained in Schedule 5.23 (the Group Structure Chart ) is true, complete and accurate in all material respects and shows, as of the date of this Agreement and the date of the Closing, each member of the Group, including current name and company registration number, and its jurisdiction of incorporation and/or establishment.
(b) No Subsidiary is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than this Agreement, the Bank Facilities Agreement, the Existing Notes, the ABL Facility and customary limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Parent Guarantor, the Issuer or any of their respective Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.
5.24. Obligors .
(a) Each Subsidiary of the Parent Guarantor incorporated in the United Kingdom (other than a Dormant Subsidiary, LGL 1996 Limited and Biggleswick Limited) and each Material Company (other than the French Subsidiary and the Czech Subsidiary) incorporated in any other jurisdiction is an Obligor on the date of the Closing.
(b) The aggregate:
(i) earnings before interest, tax and amortization (calculated on the same basis as EBITA) of the Obligors on the date of the Closing (calculated on an unconsolidated basis and excluding all unrealized intra-Group profits of any member of the Group) exceeds 75% of EBITA of the Group; and
(ii) gross assets of the Obligors on the date of the Closing (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 75% of the consolidated gross assets of the Group.
5.25. Accounting Reference Date .
The Accounting Reference Date of each member of the Group is December 31.
5.26. Centre of Main Interests and Establishments .
For the purposes of The Council of the European Union Regulation No. 1346/2000 on Insolvency Proceedings (Regulation), its centre of main interest (as that term is used in Article 3(1) of the Regulation) is situated in its jurisdiction of incorporation and it has no establishment (as that term is used in Article 2(h) of the Regulation) in any other jurisdiction.
5.27. Dormant Companies .
There are no Dormant Subsidiaries other than:
(a) BAL 1996 Limited; and
(b) Mel Chemicals China Limited.
5.28. Pensions .
(a) Except for the Defined Benefit Schemes:
(i) neither it nor any of its Subsidiaries is or has at any time been an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pensions Schemes Act 1993); and
(ii) neither it nor any of its Subsidiaries is or has at any time been connected with or an associate of (as those terms are used in sections 38 and 43 of the Pensions Act 2004) such an employer.
(b) The present value of the accrued benefit liabilities (whether or not vested) under each Non-U.S. Plan that is funded, determined as of the end of each Obligors most recently ended Financial Year on the basis of reasonable actuarial assumptions, did not exceed the current value of the assets of such Non-U.S. Plan allocable to such benefit liabilities determined as of such date by more than £20,000,000 (or its equivalent).
5.29. No Adverse Consequences .
(a) It is not necessary under the laws of its Relevant Jurisdictions:
(i) in order to enable any holder to enforce its rights under any Note Document; or
(ii) by reason of the execution of any Note Document or the performance by it of its obligations under any Note Document,
that any Purchaser or other holder should be licensed, qualified or otherwise entitled to carry on business in any of its Relevant Jurisdictions.
(b) No Purchaser or other holder is or will be deemed to be resident, domiciled or carrying on business in its Relevant Jurisdictions by reason only of the execution, performance and/or enforcement of any Note Document.
5.30. U.S. Regulations .
(a) Employee Benefit Plans
(i) No Obligor or ERISA Affiliate has incurred at any time within the last six years or could be reasonably expected to incur any liability to, or on account of, a Multiemployer Plan as a result of a violation of section 515 of ERISA or pursuant to section 4201, 4204 or 4212(c) of ERISA.
(ii) Each Employee Plan complies in form and operation in all material respects with ERISA, the Internal Revenue Code and all other applicable laws and regulations.
(iii) The present value of the aggregate benefit liabilities under each of the Employee Plans (other than any Multiemployer Plan), determined as of the end of such plans most recently ended plan year on the basis of the actuarial methods and assumptions specified for funding purposes in such plans most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such plan allocable to such benefit liabilities by more than US$9,000,000 (or its equivalent) in the case of any single Employee Plan and by more than US$10,500,000 (or its equivalent) in the aggregate for all Employee Plans. The term benefit liabilities has the meaning specified in section 4001 of ERISA and the terms current value and present value have the meaning specified in section 3 of ERISA.
(iv) There is (to the best of each Obligors and ERISA Affiliates knowledge and belief) no litigation, arbitration, administrative proceeding or claim pending or threatened against or with respect to any Employee Plan (other than routine claims for benefits) which has or, if adversely determined, could reasonably be expected have a Material Adverse Effect.
(v) Within the last six years each Obligor and each ERISA Affiliate has made all material contributions to each Employee Plan and Multiemployer Plan required by law within the applicable time limits prescribed by law, the terms of that Plan and any contract or agreement requiring contributions to that Plan.
(vi) No Obligor or ERISA Affiliate has ceased operations at a facility so as to be subject to the provisions of section 4062(e) of ERISA, withdrawn as a substantial employer so as to be subject to the provisions of section 4063 of ERISA, or ceased making contributions to any Employee Plan subject to section 4064(a) of ERISA to which it made contributions.
(vii) No Obligor or ERISA Affiliate has incurred any material liability to the PBGC, which remains outstanding or could reasonably be expected to incur any material liability to the PBGC.
(viii) No ERISA Event has occurred or, as at the date of this Agreement, is reasonably likely to occur that could reasonably be expected to have a Material Adverse Effect.
(ix) The execution and delivery of this Agreement and the other Note Documents and the issuance and sale of the Notes will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Internal Revenue Code. The representation by the Obligors to each Purchaser in the first sentence of this Section 5.30(a)(x) is made in reliance upon and subject to the accuracy of such Purchasers representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser.
(b) Margin Regulations
The Issuer will apply the proceeds of the sale of the Notes to repay the Existing Notes on the day immediately following the day of Closing in accordance with the Funds Flow Statement and, to the extent any proceeds are not necessary for the repayment of the Existing Notes, for general corporate purposes. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Issuer in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 25% of the value of the consolidated assets of the Group and none of the Obligors has any present intention that margin stock will constitute more than 25% of the value of such assets. As used in this Section, the terms margin stock and purpose of buying or carrying shall have the meanings assigned to them in said Regulation U.
(c) Other U.S. Regulation
No Obligor or any Affiliate of an Obligor is:
(i) a public utility within the meaning of, or subject to regulation under, the United States Federal Power Act of 1920,
(ii) an investment company or a company controlled by an investment company within the meaning of the United States Investment Company Act of 1940,
(iii) subject to regulation under the ICC Termination Act of 1995, as amended, or
(iv) subject to regulation under any United States federal or state law or regulation that limits its ability to incur or guarantee indebtedness.
(d) Foreign Assets Control Regulations, etc.
No Obligor or any of its Subsidiaries or any of its Affiliates or Holding Companies, or to its knowledge any of their respective brokers or other agents acting or benefiting in any capacity in connection with the Notes or any other Note Document:
(i) is in violation of any Anti-Terrorism Law,
(ii) is in violation of the OFAC Sanctions Regulations,
(iii) is a Designated Person, or
(iv) is a department, agency or instrumentality of, or is otherwise controlled by or acting on behalf of, directly or indirectly, any Designated Person, any Person that is otherwise a sanctions target of the U.S. government, or any government of a country subject to the OFAC Sanctions Regulations (each Designated Person and each other Person described in this clause (v) is a Blocked Person ).
5.31. Sanctions .
The Parent Guarantor represents that neither the Parent Guarantor nor any member of the Group (collectively for the purpose of this clause only, the Company ) or, to the knowledge of the Company, any director, officer, employee, agent, affiliate or representative of the Company is a Person currently the subject of any sanctions administered or enforced by OFAC, the United Nations Security Council ( UNSC ), the European Union, Her Majestys Treasury ( HMT ), or other relevant sanctions authority (collectively, Sanctions ), nor is the Company located, organized or resident in a country or territory that is the subject of Sanctions. The Company represents and covenants that it will not, directly or indirectly, use the proceeds of the transaction, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, to fund any activities of or business with any Person, or in Burma/Myanmar, Cuba, Iran, Libya, North Korea, Sudan or in any other country or territory, that, at the time of such funding, would result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
5.32. Private Offering .
None of the Obligors nor anyone acting on their behalf has offered the Notes, the Unconditional Guarantee or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than the Purchasers, each of which has been offered the Notes and the Unconditional Guarantee at a private sale for investment. Subject to the Purchasers representations and warranties in Section 6, none of the Obligors nor anyone acting on their behalf has taken, or will take, any action that would subject the issuance or sale of the Notes or the Unconditional Guarantee to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws of any applicable jurisdiction.
6. REPRESENTATIONS OF THE PURCHASERS.
6.1. Purchase for Investment .
Each Purchaser severally represents that it is purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution or resale thereof, provided that the disposition of such Purchasers or their property shall at all times be within such Purchasers or their control. Each Purchaser understands that the Notes have not been registered under the Securities Act or any state or other securities law, that the Notes are being issued by the Issuer in transactions exempt from the registration requirements of the Securities Act and that the Notes may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration under the Securities Act is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Issuer is not required to register the Notes. Each Purchaser is an accredited investor as defined in Regulation D promulgated by the Securities Act. Each Purchaser represents that (a) it is a sophisticated institutional investor and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Notes, (b) it has been furnished with or has had access to the information it has requested from the Issuer and its Affiliates and has had an opportunity to discuss with the management of the Issuer and its Affiliates the business and financial affairs of the Issuer and its Subsidiaries and (c) it must bear the economic risk of its investment in the Notes for an indefinite period of time because the Notes will not be registered under the Securities Act or any applicable state securities laws.
6.2. Source of Funds.
Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of funds (a Source ) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by it hereunder:
(a) the Source is an insurance company general account (as the term is defined in the United States Department of Labors Prohibited Transaction Exemption ( PTE ) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of
Insurance Commissioners (the NAIC Annual Statement )) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchasers state of domicile; or
(b) the Source is a separate account that is maintained solely in connection with such Purchasers fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Issuer in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or
(d) the Source constitutes assets of an investment fund (within the meaning of Part V of PTE 84-14 (the QPAM Exemption )) managed by a qualified professional asset manager or QPAM (within the meaning of Part V of the QPAM Exemption), no employee benefit plans assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of control in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Issuer and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Issuer in writing pursuant to this clause (d); or
(e) the Source constitutes assets of a plan(s) (within the meaning of Part IV(h) of PTE 96-23 (the INHAM Exemption )) managed by an in-house asset manager or INHAM (within the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of control in Part IV(d) of the INHAM Exemption) owns a 10% or more interest in the Issuer (as determined under Part IV(d) of the INHAM Exemption, as amended effective April 1, 2011) and (i) the identity of such INHAM and (ii) the name(s) of the employee
benefit plan(s) whose assets constitute the Source have been disclosed to the Issuer in writing pursuant to this clause (e); or
(f) the Source is a governmental plan; or
(g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Issuer in writing pursuant to this clause (g); or
(h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms employee benefit plan, governmental plan, and separate account shall have the respective meanings assigned to such terms in section 3 of ERISA.
7. INFORMATION AS TO THE OBLIGORS.
7.1. Financial and Business Information .
The Parent Guarantor shall deliver to each holder of Notes that is an Institutional Investor (and for purposes of this Agreement the information required by this Section 7.1 shall be deemed delivered on the date of delivery of such information in the English language or the date of delivery of an English translation thereof):
(a) Monthly Statements promptly after the same are available and in any event within 45 days after the end of each calendar month, a duplicate copy of the Parent Guarantors management financial statements on a consolidated basis for that calendar month and for the Financial Year to date, which statements shall be substantially in the form of the monthly management accounts supplied by the Parent Guarantor to the Purchasers pursuant to Section 4.3(b);
(b) Annual Statements promptly after the same are available and in any event within 180 days after the end of each Financial Year, a duplicate copy of
(i) its audited consolidated profit and loss accounts, balance sheets and cashflow statements for that Financial Year, and
(ii) the consolidated profit and loss accounts, balance sheets and cashflow statements (consolidated if appropriate) of each other Obligor (audited where required under the Relevant Jurisdiction) for that Financial Year,
setting forth in each case in comparative form the figures for the previous Financial Year, all in reasonable detail, prepared by the Groups Auditors in accordance with Accounting Principles, and accompanied by an opinion thereon of the Groups Auditors, which opinion shall state that such financial statements give a true and fair view of the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with Accounting Principles, and that the
examination of the Groups Auditors in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances;
(c) SEC and Other Reports promptly upon their becoming available, one copy of (i) each financial statement, report, circular, notice or proxy statement or similar document sent by the Parent Guarantor or any Subsidiary to its principal lending banks as a whole (excluding information sent to such banks in the ordinary course of administration of a bank facility, such as information relating to pricing and borrowing availability) or to its public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Parent Guarantor or any Subsidiary with the Securities and Exchange Commission or any similar Governmental Authority or securities exchange and of all press releases and other statements made available generally by the Parent Guarantor or any Subsidiary to the public concerning developments that are Material;
(d) Notice of Default or Event of Default promptly after a Responsible Officer becoming aware of the existence of any Default or Event of Default, a written notice specifying the nature and period of existence thereof and what action the Obligors are taking or propose to take with respect thereto;
(e) ERISA
(i) promptly upon a request by any holder, deliver to such holder copies of the Annual Report (IRS form 5500 Series) together with all schedules and documentation reasonably requested by such holder with respect to each Employee Plan; and
(ii) within twenty-one Business Days after it or any ERISA Affiliate becomes aware that any ERISA Event has occurred or, in the case of any ERISA Event which requires advance notice under section 4043(b) of ERISA, will occur, deliver to the holders a statement signed by a director, member or officer of the Parent Guarantor or ERISA Affiliate describing that ERISA Event and the action, if any, taken or proposed to be taken with respect to that ERISA Event;
(f) Budget as soon as it becomes available but in any event before the start of each Financial Year, an annual Budget for that Financial Year, which Budget shall be in a form acceptable to the Required Holders and shall:
(i) include a projected consolidated profit and loss, balance sheet and cashflow statement for each principal division of the Group; and
(ii) include projected financial covenant calculations for such Financial Year;
(iii) be prepared in accordance with the Accounting Principles and the accounting practices and financial reference periods applied to financial statements under Sections 7.1(a) and 7.1(b); and
(iv) have been approved by the board of directors of the Parent Guarantor;
(g) Litigation promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which, if adversely determined, would involve a liability, or a potential or alleged liability, exceeding £1,000,000 (or its equivalent in other currencies);
(h) Parent Guarantor promptly upon the reasonable request of any holder, information regarding any changes to the main board or the executive board of the Parent Guarantor and an up to date copy of its register of members (or equivalent in its jurisdiction of incorporation) (provided that the Parent Guarantor shall not be required to provide a copy of its register of members to any one holder more frequently than twice in any Financial Year unless such holder requires the register of members for know your customer requirements and/or if such holder suspects that there has been a Change of Control); and
(i) Requested Information with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Parent Guarantor or any of its Subsidiaries or relating to the ability of the Obligors to perform their obligations under any Note Document or the ability of the Issuer to perform its obligations under the Notes as from time to time may be reasonably requested by any such holder of Notes, including information readily available to the Obligors explaining the Parent Guarantors financial statements if such information has been requested by the SVO in order to assign or maintain a designation of the Notes.
7.2. Other Requirements as to Financial Statements; Officers Certificate .
(a) Each set of Annual Financial Statements delivered to a holder of Notes pursuant to Section 7.1(b) shall be accompanied by any letter addressed to the management of the relevant company (to the extent the Parent Guarantor receives such a letter) by the auditors accompanying those Annual Financial Statements.
(b) Each set of Monthly Financial Statements delivered to a holder of Notes pursuant to Section 7.1(a) shall be accompanied by a commentary from a Senior Financial Officer of the Parent Guarantor comparing actual performance for the period to which such Monthly Financial Statements relate to (i) the projected performance for that period set out in the Budget and (ii) the actual performance for the corresponding period in the preceding Financial Year.
(c) Each set of Quarterly Financial Statements and each set of Annual Financial Statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a Compliance Certificate.
7.3. Access .
Each Obligor shall (and the Parent Guarantor shall ensure that each member of the Group shall) permit the representatives of each holder of Notes that is an Institutional Investor:
(a) No Default if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of any member of the Group, to discuss the affairs, finances and accounts of the Group with such Group members officers, and (with the consent of such member, which consent will not be unreasonably withheld) to visit the other offices and properties of the Group, all at such reasonable times and as often as may be reasonably requested in writing; and
(b) Default if a Default or Event of Default then exists, at the expense of the Issuer to visit and inspect any of the offices or properties of the Group, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss the Group members respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Obligors authorize said accountants to discuss the affairs, finances and accounts of the Group), all at such times and as often as may be requested.
7.4. Limitation on Disclosure Obligation .
The Obligors shall not be required to disclose the following information pursuant to Section 7.1(d), 7.1(i) or 7.3:
(a) information that the applicable Obligor determines after consultation with counsel qualified to advise on such matters that, notwithstanding the confidentiality requirements of Section 21, it would be prohibited from disclosing by applicable law or regulations without making public disclosure thereof; or
(b) information that, notwithstanding the confidentiality requirements of Section 21, the applicable Obligor is prohibited from disclosing by the terms of an obligation of confidentiality contained in any agreement with any non-Affiliate binding upon such Obligor and not entered into in contemplation of this clause (b), provided that such Obligor shall use commercially reasonable efforts to obtain consent from the party in whose favor the obligation of confidentiality was made to permit the disclosure of the relevant information and provided further that the applicable Obligor has received a written opinion of counsel confirming that disclosure of such information without consent from such other contractual party would constitute a breach of such agreement.
Promptly after a request therefor from any holder of Notes that is an Institutional Investor, the Obligors will provide such holder with a written opinion of counsel (which may be addressed to the applicable Obligor) relied upon as to any requested information that the applicable Obligor is prohibited from disclosing to such holder under circumstances described in this Section 7.4.
8. PAYMENT AND PREPAYMENT OF THE NOTES.
8.1. Maturity .
As provided therein, the entire unpaid principal balance of the Notes shall be due and payable on the stated maturity date thereof.
8.2. Optional Prepayments with Make-Whole Amount .
The Issuer may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than US$1,000,000 (and in integrals of US$500,000) in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Issuer will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 10 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date (which shall be a Business Day), the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer of the Issuer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Issuer shall deliver to each holder of Notes a certificate of a Senior Financial Officer of the Issuer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. Prior to the date that is three Business Days before the prepayment date specified in a prepayment notice delivered pursuant to this Section 8.2, by written notice to each holder of Notes, the Issuer may revoke such notice of prepayment or postpone the prepayment date specified therein to a later date specified in such written notice; provided , however, the Issuer may revoke a notice of prepayment or postpone the prepayment date specified therein only in the event that the Issuer has notified the holders of Notes that it intends to make such prepayment using the proceeds of the incurrence of Financial Indebtedness under a financing facility that is not currently in effect and such refinancing fails to close or, in the case of a postponement of the prepayment date only, the closing of such refinancing is postponed to a date falling after the prepayment date specified in such notice.
8.3. Allocation of Partial Prepayments .
In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.
8.4. Maturity; Surrender, etc .
In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day), together with interest on such principal amount
accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Issuer shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Issuer and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.
8.5. Purchase of Notes .
The Obligors will not and will not permit any of their respective Affiliates to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Issuer will promptly cancel all Notes acquired by any Obligor or any Affiliate of an Obligor pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.
8.6. Make-Whole Amount .
The term Make-Whole Amount means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:
Applicable Percentage in the case of a computation of the Make-Whole Amount for any purpose means 0.50% (50 basis points).
Called Principal means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 11.1, as the context requires.
Discounted Value means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.
Reinvestment Yield means, with respect to the Called Principal of any Note, the sum of the (x) Applicable Percentage plus (y) the yield to maturity implied by (i) the yields reported as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as Page PX1 (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on the run U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. In the case of each determination under clause (i) or clause (ii), as the case may be, of the preceding paragraph, such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the applicable U.S. Treasury security with the maturity closest to and greater than such Remaining Average Life and (2) the applicable U.S. Treasury security with the maturity closest to and less than such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.
Remaining Average Life means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.
Remaining Scheduled Payments means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1.
Settlement Date means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 11.1, as the context requires.
8.7. Change of Control Prepayment .
(a) Within 15 days following the date upon which a Responsible Officer of any Obligor first has actual knowledge of a Change of Control, the Issuer shall give written notice of such Change of Control (a Change of Control Notice ) to each holder of a Note, which Change of Control Notice shall (i) describe the facts and circumstances of such Change of Control in reasonable detail, (ii) refer to this Section 8.7 and the rights of the holders of Notes hereunder, (iii) contain an offer to prepay on a date, which shall be no more than 60 days and not less than 30 days after the date of such Change of Control Notice, the entire unpaid principal amount of the Notes held by such holder, together with interest thereon to the prepayment date, if any, with respect to each Note prepaid (showing in such offer the amount of interest which would be paid on such prepayment date together with specific information as to how such estimated amount was
calculated), and (iv) request such holder to notify the Issuer in writing by a stated date (a Response Date ), which date is not less than 10 days prior to the prepayment date and not less than 20 days after such holders receipt of the Change of Control Notice, of its acceptance or rejection of such prepayment offer. If a holder does not notify the Issuer on or before the Response Date specified in the Change of Control Notice of such holders acceptance of the prepayment offer contained therein, then the holder shall be deemed to have rejected such offer.
(b) On the prepayment date specified in the Change of Control Notice, the entire unpaid principal amount of the Notes held by each holder of a Note who has accepted such prepayment offer, together with accrued and unpaid interest thereon to the prepayment date shall become due and payable.
(c) To the extent they may legally do so (including without breaching any confidentiality undertaking) the Obligors will promptly provide any holder of a Note with all information in their possession which such holder may reasonably request in order to enable such holder to evaluate the effect of a Change of Control on such holders investment in the Notes.
8.8. Disposal and Insurance Prepayments .
(a) Notice and Offer . In the event that any member of the Group receives any Disposal Proceeds or any Insurance Proceeds, the Issuer shall give written notice thereof to each holder of Notes. Such written notice shall contain, and such written notice shall constitute, an irrevocable offer (a Disposal Prepayment Offer or Insurance Prepayment Offer , respectively) to prepay, at the election of each holder, a portion of the Notes held by such holder equal to such holders Ratable Portion of such Disposal Proceeds or Insurance Proceeds on a date specified in such notice (the Disposal Prepayment Date or Insurance Prepayment Date , respectively) that is not less than 30 days and not more than 60 days after the date of such notice. If such prepayment date shall not be specified in such notice, the Disposal Prepayment Date or Insurance Prepayment Date, as applicable, shall be the 45th day after the date of such notice.
(b) Acceptance; Rejection .
(i) Disposal Prepayment Offer . The failure of a holder of a Note to respond to a Disposal Prepayment Offer in writing within 20 days after the date of such written notice thereof from the Issuer shall be deemed to constitute an acceptance of the Disposal Prepayment Offer with respect to such Note. A holder may reject a Disposal Prepayment Offer with respect to any or all of such holders Notes by causing a notice of its rejection to be delivered to the Issuer not later than 20 days after the date of such written notice from the Issuer.
(ii) Insurance Prepayment Offer . The failure of a holder of a Note to respond to an Insurance Prepayment Offer in writing within 20 days after the date of such written notice thereof from the Issuer shall be deemed to constitute a rejection of the Insurance Prepayment Offer with respect to such Note. To accept
an Insurance Prepayment Offer, a holder shall cause a notice of its acceptance to be delivered to the Issuer not later than 20 days after the date of such written notice from the Issuer.
(c) Prepayment .
(i) Disposal Prepayment Offer . Once accepted by a holder of a Note, a prepayment in respect of a Disposal Prepayment Offer (equal to such holders Ratable Portion of the relevant Disposal Proceeds) shall be due and payable on the Disposal Prepayment Date. Such offered prepayment shall be made at 100% of the principal amount of such Notes being so prepaid, plus the Make-Whole Amount determined for the Disposal Prepayment Date with respect to such principal amount, together with interest on such principal amount then being prepaid accrued to the Disposal Prepayment Date. On the Business Day preceding the Disposal Prepayment Date, the Issuer shall deliver to each holder of Notes being prepaid a statement showing the Make-Whole Amount due in connection with such prepayment and setting forth the details of the computation of such amount. The prepayment shall be made on the Disposal Prepayment Date.
(ii) Insurance Prepayment Offer . Once accepted by a holder of a Note, a prepayment in respect of an Insurance Prepayment Offer (equal to such holders Ratable Portion of the relevant Insurance Proceeds) shall be due and payable on the Insurance Prepayment Date. Such offered prepayment shall be made at 100% of the principal amount of such Notes being so prepaid, together with interest on such principal amount then being prepaid accrued to the Insurance Prepayment Date. The prepayment shall be made on the Insurance Prepayment Date.
(d) Other Terms . Each offer to prepay the Notes pursuant to this Section 8.8 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Parent Guarantor and dated the date of such offer, specifying (i) the Disposal Prepayment Date or Insurance Prepayment Date, as applicable, (ii) the amount of the relevant Disposal Proceeds or Insurance Proceeds, (iii) that such offer is being made pursuant to this Section 8.8, (iv) the principal amount of each Note offered to be prepaid, (v) with respect to a prepayment pursuant to a Disposal Prepayment Offer, the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such certificate were the Disposal Prepayment Date), setting forth the details of such computation, (vi) the interest that would be due on each Note offered to be prepaid, accrued to the Disposal Prepayment Date or Insurance Prepayment Date, as applicable, and (vii) in reasonable detail, the nature of such Disposal or relevant insurance claim and certifying that no Default or Event of Default exists or would exist after giving effect to the prepayment contemplated by such offer. For the avoidance of doubt, any Disposal giving rise to an Event of Default under any provision of this Agreement shall not be deemed to be permitted, and such Event of Default shall not be deemed to be waived by any holder, by reason of any holders acceptance or rejection of a Disposal Prepayment Offer in respect of such Disposal or any payment in connection therewith.
(e) Intercreditor Deed . Any payments under this Section 8.8 shall be made subject to and in accordance with the provisions of the Intercreditor Deed.
9. COVENANTS.
Each Obligor covenants that, at all times on and after the date of this Agreement until no Notes are outstanding:
9.1. Financial Covenants .
(a) Financial Condition .
(i) Debt Service Cover . The Parent Guarantor shall ensure that Debt Service Cover in respect of any Relevant Period specified in column 1 below shall not be less than the ratio set out in column 2 below opposite that Relevant Period:
Column 1
|
|
Column 2
|
|
|
|
Relevant Period ending September 30, 2011 |
|
1.25:1 |
|
|
|
Relevant Period ending December 31, 2011 |
|
1.25:1 |
|
|
|
Thereafter each Relevant Period ending on a Quarter Date |
|
1.25:1 |
(ii) Interest Cover . The Parent Guarantor shall ensure that Interest Cover in respect of any Relevant Period shall not be less than 4.0:1.
(iii) Leverage . The Parent Guarantor shall ensure that Leverage in respect of any Relevant Period shall not exceed 3.0:1
(iv) Capital Expenditure . The Parent Guarantor shall ensure that the aggregate capital expenditure of the Group in respect of any Financial Year shall not exceed 110% of budgeted capital expenditure for that Financial Year as set out in the Budget for that Financial Year.
(b) Financial testing .
(i) The financial covenants set out in Section 9.1(a) shall be calculated in accordance with the Accounting Principles and tested by reference to:
(A) the Annual Financial Statements; and
(B) the Quarterly Financial Statements for the Relevant Period.
(ii) If in respect of any period there is a discrepancy between the information set out in the Quarterly Financial Statements for such period and that
set out in the Annual Financial Statements for such period, the information in the Annual Financial Statements shall prevail.
(iii) In respect of any Relevant Period, the exchange rate used to calculate Total Net Debt shall be the Average Exchange Rate for that Relevant Period.
9.2. Authorizations .
Each Obligor shall promptly:
(a) obtain, comply with and do all that is necessary to maintain in full force and effect; and
(b) supply certified copies to the holders of,
any Authorization required under any law or regulation of a Relevant Jurisdiction to:
(i) enable it to perform its obligations under the Note Documents;
(ii) ensure the legality, validity, enforceability or admissibility in evidence of any Note Document; and
(iii) carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.
9.3. Compliance with Laws .
Each Obligor shall (and the Parent Guarantor shall ensure that each member of the Group will) comply in all respects with all laws to which it may be subject, if failure so to comply has or is reasonably likely to have a Material Adverse Effect.
9.4. Environmental Compliance .
Each Obligor shall (and the Parent Guarantor shall ensure that each member of the Group will):
(a) comply with all Environmental Law;
(b) obtain, maintain and ensure compliance with all requisite Environmental Permits; and
(c) implement procedures to monitor compliance with and to prevent liability under any Environmental Law,
where failure to do so has or is reasonably likely to have a Material Adverse Effect.
9.5. Environmental Claims .
Each Obligor shall (and the Parent Guarantor shall ensure that each member of the Group will) promptly upon becoming aware of the same, inform the holders in writing of:
(a) any Environmental Claim against any member of the Group which is current, pending or threatened; and
(b) any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the Group,
where the claim, if determined against that member of the Group, has or is reasonably likely to have a Material Adverse Effect.
9.6. Taxation .
(a) Each Obligor shall pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:
(i) such payment is being contested in good faith;
(ii) adequate reserves are being maintained for those Taxes and the costs required to contest them which have been disclosed in its latest financial statements delivered to the holders under Section 7.1(a) or 7.1(b); and
(iii) such payment can be lawfully withheld and failure to pay those Taxes does not have or is not reasonably likely to have a Material Adverse Effect.
(b) No Obligor may change its residence for Tax purposes.
9.7. Merger .
No Obligor shall enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction without the prior written consent of the Required Holders (such consent not to be unreasonably withheld or delayed).
9.8. Change of Business .
The Parent Guarantor shall procure that no substantial change is made to the general nature of the business of the Parent Guarantor, the Obligors or the Group taken as a whole from that carried on by the Group at the date of this Agreement.
9.9. Acquisitions .
(a) No Obligor shall (and the Parent Guarantor shall ensure that no other member of the Group will):
(i) acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them); or
(ii) incorporate a company.
(b) Section 9.9(a) does not apply to an acquisition of a company, of shares, securities or a business or undertaking (or, in each case, any interest in any of them) or the incorporation of a company which is a Permitted Acquisition.
9.10. Joint Ventures .
No Obligor shall (and the Parent Guarantor shall ensure that no member of the Group will):
(a) enter into, invest in or acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or
(b) transfer any assets or lend to or guarantee or give an indemnity for or give Security for the obligations of a Joint Venture or maintain the solvency of or provide working capital to any Joint Venture (or agree to do any of the foregoing).
Sections 9.10(a) and 9.10(b) above do not apply to any Joint Venture with is a Permitted Joint Venture.
9.11. Preservation of Assets .
Each Obligor shall maintain in good working order and condition (ordinary wear and tear excepted) all of its assets necessary in the conduct of its business.
9.12. Pari Passu Ranking .
(a) Each Obligor shall ensure that at all times its payment obligations under the Note Documents will rank at least pari passu, without preference or priority, with its payment obligations under the Bank Facilities Agreement and the other Bank Documents and any Permitted Refinancing Agreement and any other Permitted Refinancing Documents.
(b) Each Obligor shall (and the Parent Guarantor shall ensure that each member of the Group will) ensure that at all times any unsecured and unsubordinated claims of a holder against it under the Note Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.
9.13. Negative Pledge .
In this Agreement, Quasi-Security means an arrangement or transaction described in Section 9.13(b).
(a) No Obligor shall (and the Parent Guarantor shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.
(b) No Obligor shall (and the Parent Guarantor shall ensure that no other member of the Group will):
(i) sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor or any other member of the Group;
(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms;
(iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or
(iv) enter into any other preferential arrangement having a similar effect,
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
(c) Section 9.13(a) and 9.13(b) do not apply to any Security or (as the case may be) Quasi-Security, which is Permitted Security.
9.14. Disposals .
(a) No Obligor shall (and the Parent Guarantor shall ensure that no member of the Group will) enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset.
(b) Section 9.14(a) above does not apply to any sale, lease, transfer or other disposal which is:
(i) a Permitted Disposal; or
(ii) a Permitted Transaction.
9.15. Arms Length Basis .
(a) No Obligor shall (and the Parent Guarantor shall ensure no member of the Group will) enter into any transaction with any Person except on arms length terms and for full market value.
(b) Section 9.15(a) does not apply to:
(i) intra-Group loans permitted under Section 9.16;
(ii) fees, costs and expenses payable under the Note Documents or under the Bank Documents in the amounts set out in the Bank Documents delivered to the Purchasers under Section 4 or agreed by the Required Holders;
(iii) any Permitted Transaction; or
(iv) the sale and/or licensing by Revere Graphics Worldwide of certain Intellectual Property for a nominal amount to a third party as approved by the U.S. Federal Trade Commission as set out in the Disclosure Documents.
9.16. Loans or Credit .
(a) No Obligor shall (and the Parent Guarantor shall ensure that no member of the Group will) be a creditor in respect of any Financial Indebtedness.
(b) Section 9.16(a) does not apply to a Permitted Loan.
9.17. No Guarantees or Indemnities .
(a) No Obligor shall (and the Parent Guarantor shall ensure no member of the Group will) incur or allow to remain outstanding any guarantee in respect of any obligation of any Person.
(b) Section 9.17(a) does not apply to a Permitted Guarantee.
9.18. Dividends and Share Redemption .
(a) Except as permitted under the Intercreditor Deed, the Parent Guarantor shall not (and the Parent Guarantor shall ensure that no member of the Group will):
(i) declare, make or pay any dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other distribution) (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital);
(ii) repay or distribute any dividend or share premium reserve;
(iii) pay or allow any member of the Group to pay any management, advisory or other fee to or to the order of any of the shareholders of the Parent Guarantor; or
(iv) redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so.
(b) Section 9.18(a) does not apply to a Permitted Distribution.
9.19. Bank Facilities Agreement .
Except as permitted under the Intercreditor Deed, the Parent Guarantor shall not (and will ensure that no other member of the Group will):
(a) repay or prepay any principal amount (or capitalized interest) outstanding under the Bank Facilities Agreement or any Permitted Refinancing Agreement; or
(b) pay any interest, fee or charge accrued or due under the Bank Documents or any Permitted Refinancing Documents.
9.20. Financial Indebtedness .
(a) No Obligor shall (and the Parent Guarantor shall ensure that no member of the Group will) incur or allow to remain outstanding any Financial Indebtedness.
(b) Clause 9.20(a) does not apply to Permitted Financial Indebtedness.
9.21. Share Capital .
(a) No Obligor shall (and the Parent Guarantor shall ensure no member of the Group will) issue any shares.
(b) Section 9.21(a) does not apply to a Permitted Share Issue.
9.22. Insurance .
(a) Each Obligor shall effect and maintain, in a form and amount such insurance on and in respect of its business and its assets as a prudent company carrying on the same or substantially similar business as such Obligor would effect.
(b) The Parent Guarantor shall within 10 Business Days of each anniversary of the date of this Agreement provide to the holders of Notes either:
(i) copies of each insurance policy in which that Obligor has an interest; or
(ii) a letter from an insurance broker confirming the requirements of Section 9.22(a) are being compiled with.
9.23. Pensions .
(a) The Parent Guarantor shall ensure that all pension schemes operated by or maintained for the benefit of members of the Group and/or any of its employees are funded in accordance with the statutory funding objective under sections 221 and 222 of the Pensions Act 2004 and that no action or omission is taken by any member of the Group in relation to such a pension scheme which has or is reasonably likely to have a Material Adverse Effect (including, without limitation, the termination or commencement
of winding-up proceedings of any such pension scheme or any member of the Group ceasing to employ any member of such a pension scheme).
(b) Except for the Defined Benefit Schemes, the Parent Guarantor shall ensure that no member of the Group is or has been at any time an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pension Schemes Act 1993) or connected with or an associate of (as those terms are used in sections 38 or 43 of the Pensions Act 2004) such an employer.
(c) If requested by any holder, the Parent Guarantor shall deliver to such holder at such times as those reports are prepared in order to comply with the then current statutory or auditing requirements (as applicable either to the trustees of any relevant schemes or to the Parent Guarantor), the actuarial reports in relation to all pension schemes mentioned in Section 9.23(a).
(d) The Parent Guarantor shall promptly notify the holders of any material change in the rate of contributions to any pension schemes mentioned in Section 9.23(a) above paid or recommended to be paid (whether by the scheme actuary or otherwise) or required (by law or otherwise).
(e) Each Obligor shall as soon as it becomes aware of it immediately notify the holders of any investigation or proposed investigation by the Pensions Regulator which may lead to the issue of a Financial Support Direction or a Contribution Notice to any member of the Group.
(f) Each Obligor shall immediately notify the holders if it receives a Financial Support Direction or a Contribution Notice from the Pensions Regulator.
9.24. Intellectual Property .
Each Obligor shall:
(a) preserve and maintain the subsistence and validity of the Intellectual Property necessary for the business of the relevant Obligor;
(b) use reasonable endeavors to prevent any infringement in any material respect of the Intellectual Property;
(c) make registrations and pay all registration fees and Taxes necessary to maintain the Intellectual Property that the relevant Obligor is required to maintain under Section 9.24(a) above in full force and effect and record its interest in that Intellectual Property;
(d) not use or permit the Intellectual Property to be used in a way or take any step or omit to take any step in respect of that Intellectual Property which may materially and adversely affect the existence or value of the Intellectual Property or imperil the right of any Obligor to use such property; and
(e) not discontinue the use of the Intellectual Property,
where failure to do so, in the case of Sections 9.24(a) and 9.24(b) or, in the case of Sections 9.24(d) and 9.24(e), such use, permission to use, omission or discontinuation is reasonably likely to have a Material Adverse Effect.
9.25. Transaction Documents .
(a) No Obligor shall amend, vary, novate, supplement, supersede, waive or terminate any term of a Transaction Document or any other document delivered to the Purchasers pursuant to Section 4 or enter into any agreement with any shareholders of the Parent Guarantor or any of their Affiliates which is not a member of the Group except in writing:
(i) in accordance with the provisions of Section 18.1;
(ii) to the extent that that amendment, variation, novation, supplement, superseding, waiver or termination is permitted by the Intercreditor Deed;
(iii) prior to or on the date of Closing, with the prior written consent of the Purchasers;
(iv) after the date of Closing in respect of the Bank Documents, in a way which:
(A) could not be reasonably expected materially and adversely to affect the interests of the holders; and
(B) would not change the date, amount or method of payment of interest or principal payable under the Bank Facilities Agreement; or
(v) in respect of any Permitted Refinancing Documents, in a way which:
(A) could not be reasonably expected materially and adversely to affect the interests of the holders; and
(B) would not change the date, amount or method of payment of interest or principal payable under any Permitted Refinancing Agreement.
(b) The Issuer shall promptly supply to the holders a copy of any document relating to any of the matters referred to in Sections 9.25(a)(i) to 9.25(a)(v), inclusive, above.
(c) Each Obligor shall (and the Parent Guarantor shall ensure that each member of the Group will) comply with the material terms of all Transaction Documents to which it is party.
9.26. Financial Assistance .
Any Obligor which is incorporated in any jurisdiction other than England and Wales shall comply with any law or regulation on financial assistance or its equivalent in that jurisdiction.
9.27. Group Bank Accounts .
Each Obligor shall ensure that, within three months of the date of Closing all its bank accounts in the United Kingdom or the United States of America (other than Excluded Deposit Accounts) shall be opened and maintained with banks or financial institutions that are Acceptable Banks from time to time.
9.28. Treasury Transactions .
No Obligor shall (and the Parent Guarantor will ensure that no member of the Group will) enter into any Treasury Transaction, other than:
(a) the hedging transactions contemplated by the Hedging Letter (as defined in the Bank Facilities Agreement as in effect on the date hereof) and documented by the Hedging Agreement (as defined in the Bank Facilities Agreement as in effect on the date hereof);
(b) spot and forward delivery foreign exchange contracts entered into in the ordinary course of business and not for speculative purposes; and
(c) any Treasury Transaction entered into for the hedging of actual or projected real exposures arising in the ordinary course of trading activities of a member of the Group and not for speculative purposes.
9.29. Auditors .
The Parent Guarantor shall ensure that the auditors of each member of the Group are Auditors.
9.30. Further Assurance .
The Obligors shall, promptly upon the request of the Required Holders, file or record, as applicable, all termination statements and lien releases and take such other actions as may be necessary to discharge all mortgages, deeds of trust and security interests granted by members of the Group in respect of (i) the ABL Facility (following repayment of the ABL Facility as contemplated hereunder) and (ii) any other security over assets of any Obligor other than Permitted Security (excluding Permitted Security identified in paragraph (h) of the definition of such term).
9.31. Guarantors .
(a) The Parent Guarantor and the Issuer shall ensure that at all times after the date of this Agreement the aggregate:
(i) earnings before interest, tax and amortization (calculated on the same basis as EBITA) of the Obligors (calculated on an unconsolidated basis and excluding all unrealized intra-Group profits of any member of the Group) exceeds 75% of EBITA of the Group; and
(ii) gross assets of the Obligors (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 75% of the consolidated gross assets of the Group.
Notwithstanding the foregoing, the Parent Guarantor and the Issuer need only perform their obligations under this Section 9.31(a) if it is not unlawful for the relevant Person to become a Subsidiary Guarantor and that Person becoming a Subsidiary Guarantor would not result in personal liability for that Persons directors or other management. Each Obligor must use, and must procure that the relevant Person uses, all reasonable endeavors lawfully available to avoid any such unlawfulness or personal liability. This includes agreeing to a limit on the amount guaranteed. The holders may (but shall not be obliged to) agree to such a limit if, in their opinion, to do so would avoid the relevant unlawfulness or personal liability.
(b) The Parent Guarantor and the Issuer shall ensure that each Material Company (other than the Issuer, the French Subsidiary and the Czech Subsidiary) is a Subsidiary Guarantor.
(c) The Parent Guarantor and the Issuer shall ensure that each Subsidiary (other than the Issuer) that at any time becomes obligated as a borrower or a guarantor under or with respect to any Principal Lending Facility is a Subsidiary Guarantor.
(d) The Parent Guarantor and the Issuer shall, at their sole cost and expense, cause each Subsidiary that, after the date of this Agreement, becomes a Subsidiary Guarantor to concurrently therewith deliver to each of the holders of the Notes the following items:
(i) an executed Joinder Agreement;
(ii) (A) in the case of any Subsidiary that is incorporated or formed under the laws of England and Wales, an executed English Guarantee Agreement and (B) in the case of any Subsidiary that is incorporated or formed under the laws of any jurisdiction outside the United States of America and England and Wales, an executed guarantee agreement in form and substance reasonably satisfactory to the Required Holders;
(iii) evidence in form and substance reasonably satisfactory to the Required Holders that such Subsidiary has become party to the Intercreditor Deed as a Debtor in accordance with the terms thereof;
(iv) such documents and evidence with respect to such Subsidiary as the Required Holders may reasonably request in order to establish the existence
and good standing of such Subsidiary and the authorization of the transactions contemplated by the Note Documents being executed by such Subsidiary;
(v) an opinion of counsel to such Subsidiary in form and substance reasonably satisfactory to the Required Holders to the effect that (w) the Note Documents being executed by such Subsidiary have been duly authorized, executed and delivered by such Subsidiary, (x) the Note Documents being executed by such Subsidiary constitute the legal, valid and binding contracts and agreements of such Subsidiary, enforceable in accordance with their terms (except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws affecting the enforcement of creditors rights generally and by general equitable principles), and (y) the execution, delivery and performance by such Subsidiary of the Note Documents being executed by such Subsidiary do not (A) violate any law, rule or regulation applicable to such Subsidiary, or (B) (1) conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Security not permitted by this Agreement or (2) conflict with or result in any breach of any of the provisions of or constitute a default under the provisions of the constitutive documents of such Subsidiary; and
(vi) such Subsidiarys most recent annual financial statements in the form specified in Section 7.1(b).
(e) If at any time, any Subsidiary Guarantor:
(i) is not required to be a Guarantor pursuant to Sections 9.31(a) or 9.31(b),
(ii) is not a borrower under any Principal Lending Facility and, pursuant to the terms and conditions of each Principal Lending Facility, is discharged and released from any guarantee it shall have granted with respect to each such Principal Lending Facility, and
(iii) the Parent Guarantor shall have delivered to each holder of Notes an Officers Certificate of the Parent Guarantor certifying that (x) the conditions specified in clauses (i) and (ii) above have been satisfied and (y) immediately preceding the release of such Subsidiary Guarantor from its guarantee with respect to the Notes and after giving effect thereto, no Default or Event of Default will have existed or would exist,
then, upon receipt by the holders of Notes of such Officers Certificate, such Subsidiary Guarantor will be discharged and released, automatically and without the need for any further action, from its obligations under its Joinder Agreement, English Guarantee Agreement or other guarantee agreement (if applicable) with respect to the Notes; provided that, if in connection with any release of a Subsidiary Guarantor from its guarantee with respect to any Principal Lending Facility any fee or other consideration is paid or given to any Person in connection with such release, each holder of a Note shall
receive equivalent consideration on a pro rata basis. Without limiting the foregoing, for purposes of further assurance, each of the holders agrees to provide to the Obligors, if reasonably requested by the Obligors and at the Issuers expense, written evidence of such discharge and release signed by such holder.
9.32. Anti-Terrorism Laws .
Each Obligor agrees to the extent applicable to each Obligor:
(a) to comply and require its Affiliates to comply with all Anti-Terrorism Laws;
(b) to comply and require its Affiliates to comply with the OFAC Sanctions Regulations;
(c) not to take actions that would render it or any of its Affiliates to become subject to sanctions under CISADA;
(d) not to be listed and not to permit any of its Affiliates to be listed as a Designated Person or a Blocked Person, and not to violate any Anti-Terrorism Law or OFAC Sanctions Regulation;
(e) notwithstanding its obligations under Section 9.32(d), immediately to notify the holders if it obtains knowledge that it or any of its Affiliates has become or been listed as a Designated Person or a Blocked Person or has been charged with or has engaged in any violation of any Anti-Terrorism Law or the OFAC Sanctions Regulations;
(f) to exclude any funds derived from any Designated Person or Blocked Person or from any Person involved in the violation of any Anti-Terrorism Law or OFAC Sanctions Regulation from being used to pay debt service or any other amounts owing under the Note Documents;
(g) except for transfers of stock of any publicly traded Obligor or Affiliate effected on a stock exchange, not to transfer or permit the transfer of any legal or beneficial ownership interest of any kind in such Obligor or any Affiliate of such Obligor to a Designated Person, Blocked Person or any Person or entity that such Obligor has to its best knowledge (based upon reasonable inquiry by such Obligor) been involved in the violation of any Anti-Terrorism Law or OFAC Sanctions Regulation;
(h) not to acquire, directly or indirectly, ownership interest of any kind in any Designated Person, Blocked Person or any Person or entity that such Obligor has, to its best knowledge (based upon reasonable inquiry by such Obligor) been involved in the violation of any Anti-Terrorism Law or OFAC Sanctions Regulation, not to form any partnership or joint venture with any such Person and not to act, directly or indirectly, as the agent or representative of any such Person or engage in any other dealings or transactions with any such Person; and
(i) to indemnify the holders for any costs incurred by any of them as a result of any violation of an Anti-Terrorism Law or OFAC Sanctions Regulation by any Obligor or any Affiliate of any Obligor.
9.33. ERISA .
Each Obligor shall:
(a) ensure that neither it nor any ERISA Affiliate engages in a complete or partial withdrawal, within the meaning of sections 4203 and 4205 of ERISA, from any Multiemployer Plan without the prior consent of the Required Holders;
(b) ensure that any material liability imposed on it or any ERISA Affiliate pursuant to Title IV of ERISA is paid and discharged when due;
(c) ensure that neither it nor any ERISA Affiliate adopts an amendment to an Employee Plan requiring the provision of Security under ERISA or the Internal Revenue Code without the prior consent of the Required Holders; and
(d) ensure that no Employee Plan is terminated under section 4041 of ERISA.
9.34. Margin Regulation .
(a) Each Obligor shall (and the Parent Guarantor shall ensure that each Obligor shall) use the proceeds of the Notes without violating Regulation T, U or X of the Board of Governors of the Federal Reserve System (12 CFR 220, 12 CFR 221 and 12 CFR 224, respectively) or any other applicable U.S. federal or state laws or regulations.
(b) If requested by any holder, each Obligor shall furnish to such holder a statement in conformity with the requirements of FR Form U-1 referred to in Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221).
9.35. U.S. Regulation .
Each Obligor shall ensure that it will not, by act or omission, become subject to any of the categories, laws or regulations described in Section 5.30(c).
9.36. Favored Lender Status .
(a) No Obligor shall, or shall permit any of its Subsidiaries to, at any time after the date of this Agreement enter into or amend or otherwise modify any Principal Lending Facility (including any amendment to the Bank Facilities Agreement) which would result in such Principal Lending Facility including any covenant or event of default (whether set forth as a covenant, undertaking, event of default, restriction or other such provision but, for the avoidance of doubt, excluding any term thereof relating to interest rates, applicable margins, fees or other pricing terms) that would be more beneficial to the holders of Notes than the provisions of this Agreement (any such covenant, a More Favorable Provision ) unless the Obligors shall have delivered a
Favored Lender Notice to each holder of a Note and the Required Holders have accepted (or have been deemed to accept) or rejected the offer contained in such Favored Lender Notice in accordance with this Section 9.36(a). If holders of Notes constituting the Required Holders do not notify the Issuer on or before the date that is fifteen days after each holders receipt of such Favored Lender Notice of their rejection of the offer contained therein, then the Required Holders shall be deemed to have accepted such offer and such More Favorable Provision shall be deemed automatically incorporated by reference into this Agreement, mutatis mutandis , as if set forth fully herein, effective as of the date when such More Favorable Provision shall become effective under such Principal Lending Facility (any More Favorable Provision incorporated into this Agreement pursuant to this Section 9.36, an Incorporated Provision ). Thereafter, upon the request of the Required Holders, the Obligors shall enter into any additional agreement or amendment to this Agreement reasonably requested by the Required Holders evidencing any of the foregoing.
(b) For the avoidance of doubt, each of the existing covenants and events of default in Section 9 and Section 10 as of the date of this Agreement shall remain in this Agreement regardless of whether any Incorporated Provisions are incorporated into this Agreement.
(c) For purposes of this Section 9.36, a Favored Lender Notice means, in respect of any More Favorable Provision, a written notice to each of the holders of Notes by a Senior Financial Officer of the Issuer or the Parent Guarantor which: (i) refers to this Section 9.36 and the rights of the holders of Notes hereunder, (ii) sets forth a reasonably detailed description of such More Favorable Covenant (including any defined terms used therein) and related explanatory calculations, as applicable, (iii) contains an offer to incorporate such More Favorable Provision into this Agreement, and (iv) requests such holder to notify the Issuer or the Parent Guarantor within fifteen days of such holders receipt of such Favored Lender Notice of its acceptance or rejection of such offer.
9.37. Year-end .
The Parent Guarantor shall procure that its Financial Year-end falls on December 31 and that each Financial Year-end of each other member of the Group falls on December 31 save where otherwise required by law in any Relevant Jurisdiction.
9.38. Compliance with Hedging Letter .
The Parent Guarantor shall ensure that all exchange rate and interest rate hedging arrangements required by the Hedging Letter are implemented in accordance with the terms of the Hedging Letter and that such arrangements are not terminated, varied or cancelled without the prior written consent of the Required Holders save as permitted by the terms of the Intercreditor Deed.
9.39. Replacement Agent for Service of Process .
In the event that the Issuer ceases to be a Group member or otherwise ceases to serve as the U.S. Obligors agent for the purpose of accepting service of process in the United States for
and on their behalf, each Non-U.S. Obligor shall, within thirty (30) days, appoint a replacement agent for such purpose from the date of such appointment to the date that is one calendar year after the latest maturity date of any Note as stated therein, which replacement agent shall be reasonably satisfactory to the holders of Notes.
9.40. Conditions Subsequent .
(a) Each U.S. Obligor shall submit the required notification and documentation to close all its bank accounts in England and Wales on or prior to the date falling three (3) Business Days after the date of the Closing.
(b) On or before the date 60 days after the date of the Closing, the Obligors shall provide evidence to the holders of Notes that the Security in respect of the ABL Facility has been released and all necessary forms MG02 have been filed at Companies House.
(c) The Parent Guarantor shall procure that each of LGL 1996 Limited and Biggleswick Limited are liquidated in accordance with clause (b) of the definition of Permitted Transaction before the first anniversary of the date hereof.
10. EVENTS OF DEFAULT.
An Event of Default shall exist if any of the following conditions or events shall occur and be continuing:
(a) Non-payment . An Obligor does not pay on the due date any amount payable pursuant to a Note Document at the place and in the currency in which it is expressed to be payable unless:
(i) its failure to pay is caused by:
(A) an administrative or technical error; or
(B) a Disruption Event; and
(ii) payment is made within 3 Business Days of its due date.
(b) Financial Covenants and Other Obligations .
(i) Any requirement of Section 9.1 is not satisfied.
(ii) An Obligor does not comply with any Material Provision.
(c) Other Obligations .
(i) An Obligor does not comply with any provision of the Note Documents (other than those referred to in Sections 10(a) and 10(b)).
(ii) No Event of Default under Sections 10(c)(i) will occur if the failure to comply is capable of remedy and is remedied within 15 Business Days of the earlier of:
(A) any holder giving notice to the Issuer or relevant Obligor; and
(B) the Issuer or the relevant Obligor becoming aware of the failure to comply.
(d) Misrepresentation .
(i) Any representation or statement made or deemed to be made by an Obligor in the Note Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Note Document is or proves to have been incorrect or misleading when made or deemed to be made.
(ii) No Event of Default under Section 10(d)(i) will occur if:
(A) the event or circumstance causing the representation or statement to be incorrect or misleading is capable of remedy; and
(B) such Obligor shall have remedied such event or circumstance within ten Business Days after the earlier of:
(1) the relevant Obligor becoming aware of such incorrect or misleading representation or statement; and
(2) receipt by the relevant Obligor of written notice from any holder to such Obligor requiring the event or circumstance to be remedied.
(e) Cross Default .
(i) Any Financial Indebtedness of any member of the Group is not paid when due nor within any originally applicable grace period.
(ii) Any Financial Indebtedness of any member of the Group (A) is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described), or (B) is otherwise required to be repurchased prior to its specified maturity as a result of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Financial Indebtedness to convert such Financial Indebtedness into equity interests), provided , that this clause (B) shall not apply with respect to any event constituting a Change of Control which is covered by Section 8.7 or any offer of repayment of the type set forth in Section 8.8.
(iii) Any commitment for any Financial Indebtedness of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).
(iv) Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).
(v) No Event of Default will occur under this Section 10(e) if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within Section 10(e)(i) to 10(e)(iv) (inclusive) is less than £2,500,000 (or its equivalent in any other currency or currencies).
(f) Insolvency .
(i) A member of the Group is unable or admits inability to pay its debts as they fall due, suspends or threatens to suspend making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
(ii) A moratorium is declared in respect of any indebtedness of any member of the Group. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.
(g) Insolvency Proceedings .
(i) Any corporate action, legal proceedings or other procedure or step is taken in relation to:
(A) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) of any member of the Group;
(B) a composition, compromise, assignment or arrangement with any creditor of any member of the Group other than as permitted under paragraph (b) of the definition of Permitted Transaction;
(C) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any member of the Group or any of its assets; or
(D) enforcement of any Security over any assets of any member of the Group,
or any analogous procedure or step is taken in any jurisdiction.
(ii) Any of the following occurs in respect of a U.S. Obligor:
(A) it makes a general assignment for the benefit of creditors;
(B) it commences a voluntary case or proceeding under any U.S. Bankruptcy Law;
(C) an involuntary proceeding under any U.S. Bankruptcy Law is commenced against it and is not challenged by appropriate means within thirty (30) days and is not dismissed or stayed within ninety (90) days after commencement of such case; or
(D) a custodian, conservator, receiver, liquidator, assignee, trustee, sequestrator or other similar official is appointed under any U.S. Bankruptcy Law for, or takes charge of, all or a substantial part of the property of a U.S. Obligor.
(iii) Section 10(g) shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement.
(h) Creditors Process . Any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affects any asset or assets of a member of the Group having an aggregate value of £1,500,000 (or its equivalent in any currency) and is not discharged within 21 days of the commencement of such process.
(i) Unlawfulness and Invalidity .
(i) It is or becomes unlawful for an Obligor, or any other member of the Group that is a party to the Intercreditor Deed, to perform any of its obligations under the Note Documents or any subordination created under the Intercreditor Deed is or becomes unlawful.
(ii) Any obligation or obligations of any Obligor under any Note Document or any obligation or obligations of any other member of the Group under the Intercreditor Deed are not (subject to the Legal Reservations) or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the holders of Notes under the Note Documents.
(iii) Any Note Document ceases to be in full force and effect or any subordination created under the Intercreditor Deed, ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to it (other than a holder) to be ineffective.
(j) Intercreditor Deed .
(i) Any party to the Intercreditor Deed (other than a holder or an Obligor) fails to comply with the provisions of, or does not perform its obligations under, the Intercreditor Deed; or
(ii) a representation or warranty given by that party in the Intercreditor Deed is incorrect in any material respect,
and, if the non-compliance or circumstances giving rise to the misrepresentation or breach of warranty are capable of remedy, it is not remedied within 10 Business Days of the earlier of any holder giving notice to that party or that party becoming aware of the non-compliance, misrepresentation or breach of warranty.
(k) Cessation of Business . Any member of the Group suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business where such suspension or cessation is reasonably likely to have a Material Adverse Effect.
(l) Change of Ownership . After the date of the Closing, an Obligor (other than the Parent Guarantor) ceases to be a wholly-owned Subsidiary of the Parent Guarantor.
(m) Audit Qualification . The Auditors of the Group qualify the Annual Financial Statements of the Parent Guarantor in an adverse manner which the Required Holders (acting reasonably) consider material.
(n) Expropriation . The authority or ability of any Obligor to conduct its business is materially limited or wholly or substantially curtailed by any seizure, expropriation, nationalization, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other Person in relation to any Obligor or any of its assets.
(o) Repudiation and Rescission of Agreements .
(i) An Obligor (or any other relevant party) rescinds or purports to rescind or repudiates or purports to repudiate a Note Document or evidences an intention to rescind or repudiate a Note Document.
(ii) Any party to the Intercreditor Deed rescinds or purports to rescind or repudiates or purports to repudiate any of those agreements or instruments in whole or in part where to do so has or is, in the reasonable opinion of the Required Holders, likely to have a material adverse effect on the interests of the holders under the Note Documents.
(p) Litigation . Any litigation, arbitration, administrative, governmental, regulatory or other investigations, proceedings or disputes are commenced or threatened in relation to the Transaction Documents or the transactions contemplated in the
Transaction Documents or against any member of the Group or its assets which results in a liability to such member of the Group (whether actual or contingent) in an aggregate amount in excess of £5,000,000 (excluding any proceedings in respect of which (a) the insurers of the Group have confirmed in writing to the holders that the liability is fully covered by insurance and (b) such insurers are not disputing liability) (or its equivalent in any currency) and where a grace period is provided for that liability is not discharged in full within any required period set out in the relevant judgment, settlement or agreement.
(q) Pensions . The Pensions Regulator issues a Financial Support Direction or a Contribution Notice to any member of the Group unless the aggregate liability of the Obligors in each Financial Year under all Financial Support Directions and Contributions Notices is less than the greater of:
(i) £5,000,000 (or its equivalent in any currency); and
(ii) 10% of the Groups EBITDA (by reference to the latest audited Annual Financial Statements delivered to the holders pursuant to Section 7.1(b)).
(r) Material Adverse Change . Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.
(s) ERISA . Any ERISA Event or event set forth in (i) through (iii), inclusive, below occurs that has or could reasonably be expected to have, a Material Adverse Effect:
(i) any Obligor or ERISA Affiliate incurs or is likely to incur a liability to or on account of a Multiemployer Plan as a result of a violation of section 515 of ERISA or under section 4201, 4204 or 4212(c) of ERISA;
(ii) with respect to each Employee Plan subject to Title IV of ERISA, such plans funded ratio (defined for this purpose as the actuarial value of the assets of such plan divided by the present value of all benefits accrued or earned with respect to such plan) is less than (A) 76 per cent as of January 1, 2011 and (B) 80 per cent on the first day of any year thereafter. The calculation of such ratio shall be computed using the actuarial value, assumptions and methods used by the actuary to the Employee Plan in its most recent valuation of such plan;
(iii) any Obligor or ERISA Affiliate incurs or is likely to incur a liability to or on account of an Employee Plan under section 409, 502(i) or 502(l) of ERISA or section 401 or 4971 of the Internal Revenue Code.
11. REMEDIES ON DEFAULT, ETC.
11.1. Acceleration .
(a) If an Event of Default with respect to any Obligor described in Section 10 (f), (g) or (h) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at their option, by notice or notices to the Issuer, declare all the Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in Section 10(a) has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Issuer, declare all the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 11.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon (including, without limitation, interest accrued thereon at the Default Rate) and (y) with respect to an acceleration under Section 11.1(a) or (b), the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. Each Obligor acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Issuer (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Issuer in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.
11.2. Other Remedies .
If any Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 11.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.
11.3. Rescission .
At any time after any Notes have been declared due and payable pursuant to Section 11.1(b) or (c), the Required Holders, by written notice to the Issuer, may rescind and annul any such declaration and its consequences if (a) the Issuer has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) neither the Issuer nor any other Person shall have paid any amounts that have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 18, and (d) no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section 11.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.
11.4. No Waivers or Election of Remedies, Expenses, etc .
No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holders rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Issuer under Section 16, the Issuer will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 11, including, without limitation, reasonable attorneys fees, expenses and disbursements and any Registration Duty.
12. TAX INDEMNIFICATION.
All payments whatsoever under the Note Documents will be made by the relevant Obligor in lawful currency of the United States of America free and clear of, and without liability for withholding or deduction for or on account of, any present or future Taxes of whatever nature imposed or levied by or on behalf of any jurisdiction other than the United States (or any political subdivision or taxing authority of or in such jurisdiction) (hereinafter a Taxing Jurisdiction ), unless the withholding or deduction of such Tax is compelled by law.
If any deduction or withholding for any Tax of a Taxing Jurisdiction shall at any time be required in respect of any amounts to be paid by an Obligor under a Note Document, the relevant Obligor will pay to the relevant Taxing Jurisdiction the full amount required to be withheld, deducted or otherwise paid before penalties attach thereto or interest accrues thereon and pay to each holder of a Note such additional amounts as may be necessary in order that the net amounts paid to such holder pursuant to the terms of such Note Document after such deduction, withholding or payment (including, without limitation, any required deduction or withholding of Tax on or with respect to such additional amount), shall be not less than the amounts then due and payable to such holder under the terms of such Note Document before the assessment of such Tax, provided that no payment of any additional amounts shall be required to be made for or on account of:
(a) any Tax that would not have been imposed but for the existence of any present or former connection between such holder (or a fiduciary, settlor, beneficiary, member of, shareholder of, or possessor of a power over, such holder, if such holder is an estate, trust, partnership or corporation or any Person other than the holder to whom the Notes or any amount payable thereon or in connection therewith is attributable for the purposes of such Tax) and the Taxing Jurisdiction, other than the mere holding of the relevant Note or the receipt of payments thereunder or in respect thereof, including, without limitation, such holder (or such other Person described in the above parenthetical) being or having been a citizen or resident thereof, or being or having been present or engaged in trade or business therein or having or having had an establishment, office, fixed base or branch therein, provided that this exclusion shall not apply with
respect to a Tax that would not have been imposed but for the relevant Obligor, after the date of this Agreement, opening an office in, moving an office to, reincorporating in, or changing the Taxing Jurisdiction from or through which payments on account of any Note Document are made to, the Taxing Jurisdiction imposing the relevant Tax;
(b) any Tax that would not have been imposed but for the delay or failure by such holder (following a written request by the relevant Obligor) in the filing with the relevant Taxing Jurisdiction of Forms (as defined below) that are required to be filed by such holder to avoid or reduce such Taxes (including for such purpose any refilings or renewals of filings that may from time to time be required by the relevant Taxing Jurisdiction), provided that the filing of such Forms would not (in such holders reasonable judgment) impose any unreasonable burden (in time, resources or otherwise) on such holder or result in any confidential or proprietary income tax return information being revealed, either directly or indirectly, to any Person and such delay or failure could have been lawfully avoided by such holder, and provided further that such holder shall be deemed to have satisfied the requirements of this clause (b) upon the good faith completion and submission of such Forms (including refilings or renewals of filings) as may be specified in a written request of the relevant Obligor no later than 60 days after receipt by such holder of such written request (accompanied by copies of such Forms and related instructions, if any, all in the English language or with an English translation thereof); or
(c) any combination of clauses (a) and (b) above;
and provided further that in no event shall an Obligor be obligated to pay such additional amounts to any holder of a Note (i) not resident in the United States of America or any other jurisdiction in which an original Purchaser is resident for tax purposes on the date of the Closing in excess of the amounts that such Obligor would be obligated to pay if such holder had been a resident of the United States of America or such other jurisdiction, as applicable, for purposes of, and eligible for the benefits of, any double taxation treaty from time to time in effect between the United States of America or such other jurisdiction and the relevant Taxing Jurisdiction or (ii) to any holder of a Note registered in the name of a nominee if under the law of the relevant Taxing Jurisdiction (or the current regulatory interpretation of such law) securities held in the name of a nominee do not qualify for an exemption from the relevant Tax and such Obligor shall have given timely notice of such law or interpretation to such holder.
By acceptance of any Note, the holder of such Note agrees, subject to the limitations of clause (b) above, that it will from time to time with reasonable promptness (x) duly complete and deliver to or as reasonably directed by an Obligor all such forms, certificates, documents and returns provided to such holder by such Obligor (collectively, together with instructions for completing the same, Forms ) required to be filed by or on behalf of such holder in order to avoid or reduce any such Tax pursuant to the provisions of an applicable statute, regulation or administrative practice of the relevant Taxing Jurisdiction or of a tax treaty between the United States and such Taxing Jurisdiction and (y) provide such Obligor with such information with respect to such holder as such Obligor may reasonably request in order to complete any such Forms, provided that nothing in this Section 12 shall require any holder to provide information with respect to any such Form or otherwise if in the opinion of such holder such Form or
disclosure of information would involve the disclosure of tax return or other information that is confidential or proprietary to such holder, and provided further that each such holder shall be deemed to have complied with its obligation under this paragraph with respect to any Form if such Form shall have been duly completed and delivered by such holder to such Obligor or mailed to the appropriate taxing authority (which in the case of a United Kingdom HMRC Form US/Company 2002 or any similar Form shall be deemed to occur when such Form is submitted to the United States Internal Revenue Service in accordance with instructions contained in such Form), whichever is applicable, within 60 days following a written request of such Obligor (which request shall be accompanied by copies of such Form and English translations of any such Form not in the English language) and, in the case of a transfer of any Note, at least 90 days prior to the relevant interest payment date.
Any Purchaser or other holder of a Note who is a UK Treaty Holder and who holds a UK Treaty Passport, and who wishes to apply its UK Treaty Passport to this Agreement, shall irrevocably include an indication to that effect by including its scheme reference number and its jurisdiction of tax residence in Schedule A (or, in the case of any transferee of a Note, in the information provided to the Issuer pursuant to Section 14.2). Where a Purchaser of a Note has included such an indication in Schedule A or in the information provided to the Issuer pursuant to Section 14.2, the Issuer shall file a duly completed form DTTP2 in respect of such Purchaser or holder with HMRC within 30 days of the date of the Closing (or, in the case of any transferee of a Note, within 30 days of completion of the transfer thereof). The Issuer shall provide such Purchaser or holder with a copy of that filing and shall notify such Purchaser or holder if the filing has not been made within the aforementioned period or if the Issuer becomes aware that HMRC has decided not to apply the UK Treaty Passport Scheme to this Agreement or any Note in respect of that Purchaser or holder. For the avoidance of doubt, any Purchaser or other holder of a Note who is a UK Treaty Holder holding a UK Treaty Passport which can be used by such UK Treaty Holder in respect of this Agreement, and who has given the Issuer an indication or notification in accordance with the foregoing, shall not be required to file any other Form seeking relief in respect of UK Tax pursuant to the applicable double taxation agreement unless and until it has received any notification by the Issuer in accordance with this paragraph (and then only in accordance with this Section 12).
If any payment is made by an Obligor to or for the account of the holder of any Note after deduction for or on account of any Taxes, and increased payments are made by such Obligor pursuant to this Section 12, then, if such holder at its sole discretion determines that it has received or been granted a refund of such Taxes, such holder shall, to the extent that it can do so without prejudice to the retention of the amount of such refund, reimburse to such Obligor such amount as such holder shall, in its sole discretion, determine to be attributable to the relevant Taxes or deduction or withholding. Nothing herein contained shall interfere with the right of the holder of any Note to arrange its tax affairs in whatever manner it thinks fit and, in particular, no holder of any Note shall be under any obligation to claim relief from its corporate profits or similar tax liability in respect of such Tax in priority to any other claims, reliefs, credits or deductions available to it or (other than as set forth in clause (b) above) oblige any holder of any Note to disclose any information relating to its tax affairs or any computations in respect thereof.
Each Obligor will furnish the holders of Notes, promptly and in any event within 60 days after the date of any payment by such Obligor of any Tax in respect of any amounts paid under
any Note Document, the original tax receipt issued by the relevant taxation or other authorities involved for all amounts paid as aforesaid (or if such original tax receipt is not available or must legally be kept in the possession of such Obligor, a duly certified copy of the original tax receipt or any other reasonably satisfactory evidence of payment), together with such other documentary evidence with respect to such payments as may be reasonably requested from time to time by any holder of a Note.
If any Obligor is required by any applicable law, as modified by the practice of the taxation or other authority of any relevant Taxing Jurisdiction, to make any deduction or withholding of any Tax in respect of which such Obligor would be required to pay any additional amount under this Section 12, but for any reason does not make such deduction or withholding with the result that a liability in respect of such Tax is assessed directly against the holder of any Note, and such holder pays such liability, then such Obligor will promptly reimburse such holder for such payment (including any related interest or penalties to the extent such interest or penalties arise by virtue of a default or delay by such Obligor) upon demand by such holder accompanied by an official receipt (or a duly certified copy thereof) issued by the taxation or other authority of the relevant Taxing Jurisdiction.
If any Obligor makes payment to or for the account of any holder of a Note and such holder is entitled to a refund of the Tax to which such payment is attributable upon the making of a filing (other than a Form described above), then such holder shall, as soon as practicable after receiving written request from such Obligor (which shall specify in reasonable detail and supply the refund forms to be filed) use reasonable efforts to complete and deliver such refund forms to or as directed by such Obligor, subject, however, to the same limitations with respect to Forms as are set forth above.
The obligations of the Obligors under this Section 12 shall survive the payment or transfer of any Note and the provisions of this Section 12 shall also apply to successive transferees of the Notes.
13. GUARANTEE AND OTHER RIGHTS AND UNDERTAKINGS.
13.1. Guarantee .
Each U.S. Guarantor, in consideration of the execution and delivery of this Agreement, the purchase of the Notes by the Purchasers and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby irrevocably, unconditionally and jointly and severally with the other Guarantors guarantees to each holder, the due and punctual payment in full by the Issuer of (a) the principal of, Make-Whole Amount, if any, and interest on (including, without limitation, interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), and any other amounts due under, the Notes when and as the same shall become due and payable (whether at stated maturity or by required or optional prepayment or by acceleration or otherwise) and (b) any other sums which may become owing by the Issuer to the holders under the terms and provisions of the Notes, this Agreement, any other Note Document or any other instrument referred to therein (all such obligations described in clauses (a) and (b) above are
herein called the Guaranteed Obligations ). The guarantee in the preceding sentence (the Unconditional Guarantee ) is an absolute, present and continuing guarantee of payment and not of collectibility and is in no way conditional or contingent upon any attempt to collect from any other Obligor or guarantor of the Notes (including, without limitation, any other U.S. Guarantor hereunder and any other Guarantor that executes an English Guarantee Agreement) or upon any other action, occurrence or circumstance whatsoever. In the event that the Issuer shall fail so to pay any of such Guaranteed Obligations, each U.S. Guarantor agrees to pay the same when due to the holders entitled thereto, without demand, presentment, protest or notice of any kind, in lawful money of the United States of America, pursuant to the requirements for payment specified in the Notes and this Agreement. Each default in payment of any of the Guaranteed Obligations shall give rise to a separate cause of action hereunder and separate suits may be brought hereunder as each cause of action arises. Each U.S. Guarantor agrees that the Notes may (but need not) make reference to the Unconditional Guarantee.
Each U.S. Guarantor agrees to pay and to indemnify and save each holder harmless from and against any damage, loss, cost or expense (including attorneys fees) which such holder may incur or be subject to as a consequence, direct or indirect, of (x) any breach by such U.S. Guarantor, by any other Guarantor or by the Issuer of any warranty, covenant, term or condition in, or the occurrence of any default under, this Agreement (including, without limitation, the Unconditional Guarantee), the Notes, any other Note Document or any other instrument referred to therein, together with all expenses resulting from the compromise or defense of any claims or liabilities arising as a result of any such breach or default, (y) any legal action commenced to challenge the validity or enforceability of this Agreement (including, without limitation, the Unconditional Guarantee), the Notes, any other Note Document or any other instrument referred to therein and (z) enforcing or defending (or determining whether or how to enforce or defend) the provisions of this Section 13, provided , that no U.S. Guarantor shall be liable for any damage, loss, cost or expense arising out of the gross negligence or willful misconduct of any holder.
Each U.S. Guarantor hereby acknowledges and agrees that such U.S. Guarantors liability hereunder is joint and several with the other Guarantors and any other Person(s) who may guarantee the obligations and indebtedness under and in respect of the Notes and the other Note Documents.
Notwithstanding the foregoing provisions or any other provision of this Agreement, the Purchasers (on behalf of themselves and their successors and assigns) and each U.S. Guarantor hereby agree that if at any time the Guaranteed Obligations exceed the Maximum Guaranteed Amount determined as of such time with regard to such U.S. Guarantor, then this Section 13 shall be automatically amended to reduce the Guaranteed Obligations to the Maximum Guaranteed Amount. Such amendment shall not require the written consent of any U.S. Guarantor or any holder and shall be deemed to have been automatically consented to by each U.S. Guarantor and each holder. Each U.S. Guarantor agrees that the Guaranteed Obligations may at any time exceed the Maximum Guaranteed Amount without affecting or impairing the obligation of such U.S. Guarantor. Maximum Guaranteed Amount means as of the date of determination with respect to a U.S. Guarantor, the lesser of (a) the amount of the Guaranteed Obligations outstanding on such date and (b) the maximum amount that would not render such U.S. Guarantors liability under this Section 13 subject to avoidance under Section 548 of the
United States Bankruptcy Code (or any successor provision) or any comparable provision of applicable law of any jurisdiction.
13.2. Obligations Absolute .
The obligations of each U.S. Guarantor under this Section 13 shall be primary, absolute, irrevocable and unconditional, irrespective of the validity or enforceability of the Notes, any other Note Document or any other instrument referred to therein, shall not be subject to any counterclaim, setoff, deduction or defense based upon any claim such U.S. Guarantor may have against the Issuer or any holder or otherwise, and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not such U.S. Guarantor shall have any knowledge or notice thereof), including, without limitation: (a) any amendment to, modification of, supplement to or restatement of the Notes, any other Note Document or any other instrument referred to therein (it being agreed that the obligations of each U.S. Guarantor under this Section 13 shall apply to the Notes, the other Note Documents and any such other instrument as so amended, modified, supplemented or restated) or any assignment or transfer of any thereof or of any interest therein, or any furnishing, acceptance or release of any security for the Notes or the addition, substitution or release of any other Guarantor or any other entity or other Person primarily or secondarily liable in respect of the Guaranteed Obligations; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of the Notes, any other Note Document or any other instrument referred to therein; (c) any bankruptcy, insolvency, arrangement, reorganization, readjustment, composition, liquidation or similar proceeding with respect to the Issuer or its property; (d) any merger, amalgamation or consolidation of any Guarantor or of the Issuer into or with any other Person or any sale, lease or transfer of any or all of the assets of any Guarantor or of the Issuer to any Person; (e) any failure on the part of the Issuer for any reason to comply with or perform any of the terms of any other agreement with any Guarantor; (f) any failure on the part of any holder to obtain, maintain, register or otherwise perfect any security; or (g) any other event or circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor (whether or not similar to the foregoing), and in any event however material or prejudicial it may be to any Guarantor or to any subrogation, contribution or reimbursement rights any Guarantor may otherwise have. Each U.S. Guarantor covenants that its obligations hereunder will not be discharged except by indefeasible payment in full in cash of all of the Guaranteed Obligations and all other obligations hereunder.
13.3. Waiver .
Each U.S. Guarantor unconditionally waives to the fullest extent permitted by law, (a) notice of acceptance hereof, of any action taken or omitted in reliance hereon and of any default by the Issuer in the payment of any amounts due under the Notes, any other Note Document or any other instrument referred to therein, and of any of the matters referred to in Section 13.2, (b) all notices which may be required by statute, rule of law or otherwise to preserve any of the rights of any holder against such U.S. Guarantor, including, without limitation, presentment to or demand for payment from the Issuer or any Guarantor with respect to any Note, notice to the Issuer or to any Guarantor of default or protest for nonpayment or dishonor and the filing of claims with a court in the event of the bankruptcy of the Issuer, (c) any right to require any holder to enforce, assert or exercise any right, power or remedy including, without limitation,
any right, power or remedy conferred in this Agreement, the Notes or any other Note Document, (d) any requirement for diligence on the part of any holder and (e) any other act or omission or thing or delay in doing any other act or thing which might in any manner or to any extent vary the risk of such U.S. Guarantor or otherwise operate as a discharge of such U.S. Guarantor or in any manner lessen the obligations of such U.S. Guarantor hereunder.
13.4. Obligations Unimpaired .
Each U.S. Guarantor authorizes the holders, without notice or demand to such U.S. Guarantor or any other Guarantor and without affecting its obligations hereunder, from time to time, in accordance with the provisions of the relevant Note Document or other instrument: (a) to renew, compromise, extend, accelerate or otherwise change the time for payment of, all or any part of the Notes, any other Note Document or any other instrument referred to therein; (b) to change any of the representations, covenants, events of default or any other terms or conditions of or pertaining to the Notes, this Agreement, any other Note Document or any other instrument referred to therein, including, without limitation, decreases or increases in amounts of principal, rates of interest, the Make-Whole Amount or any other obligation; (c) to take and hold security for the payment of the Notes, any other Note Document or any other instrument referred to therein, for the performance of this Section 13 or otherwise for the Guaranteed Obligations and to exchange, enforce, waive, subordinate and release any such security; (d) to apply any such security and to direct the order or manner of sale thereof as the holders in their sole discretion may determine; (e) to obtain additional or substitute endorsers or guarantors or release any other Guarantor or any other Person or entity primarily or secondarily liable in respect of the Guaranteed Obligations; (f) to exercise or refrain from exercising any rights against the Issuer, any Guarantor or any other Person; and (g) to apply any sums, by whomsoever paid or however realized, to the payment of the Guaranteed Obligations and all other obligations owed hereunder. The holders shall have no obligation to proceed against any additional or substitute endorsers or guarantors or to pursue or exhaust any security provided by the Issuer, such U.S. Guarantor or any other Guarantor or any other Person or to pursue any other remedy available to the holders.
If an event permitting the acceleration of the maturity of the principal amount of any Notes shall exist and such acceleration shall at such time be prevented or the right of any holder to receive any payment on account of the Guaranteed Obligations shall at such time be delayed or otherwise affected by reason of the pendency against the Issuer, any Guarantor or any other guarantors of a case or proceeding under a bankruptcy or insolvency law, such U.S. Guarantor agrees that, for purposes of this Section 13 and its obligations hereunder, the maturity of such principal amount shall be deemed to have been accelerated with the same effect as if the holder thereof had accelerated the same in accordance with the terms of this Agreement, and such U.S. Guarantor shall forthwith pay such accelerated Guaranteed Obligations.
13.5. Subrogation and Subordination .
(a) Each U.S. Guarantor will not be entitled to and will not exercise any rights which it may have acquired by way of subrogation under this Section 13, by any payment made hereunder or otherwise, or accept any payment on account of such subrogation rights, nor will any U.S. Guarantor seek or be entitled to seek any reimbursement, contribution or indemnity from any other Obligor or any other Person, nor seek or be
entitled to seek any rights or recourse to any security for the Notes or this Agreement, in each case unless and until all of the Guaranteed Obligations shall have been indefeasibly paid in full in cash.
(b) Each U.S. Guarantor hereby subordinates the payment of all Financial Indebtedness and other obligations of the Issuer, any other Obligor or any other guarantor of the Guaranteed Obligations owing to such U.S. Guarantor, whether now existing or hereafter arising, including, without limitation, all rights and claims described in Section 13.5(a), to the indefeasible payment in full in cash of all of the Guaranteed Obligations. If the Required Holders so request, any such Financial Indebtedness or other obligations shall be enforced and performance received by such U.S. Guarantor as trustee for the holders and the proceeds thereof shall be paid over to the holders promptly, in the form received (together with any necessary endorsements) to be applied to the Guaranteed Obligations, whether matured or unmatured, as may be directed by the Required Holders, but without reducing or affecting in any manner the liability of any U.S. Guarantor under this Section 13.
(c) If any amount or other payment is made to or accepted by any U.S. Guarantor in violation of Section 13.5(a) and (b), such amount shall be deemed to have been paid to such U.S. Guarantor for the benefit of, and held in trust for the benefit of, the holders and shall be paid over to the holders promptly, in the form received (together with any necessary endorsements) to be applied to the Guaranteed Obligations, whether matured or unmatured, as may be directed by the Required Holders, but without reducing or affecting in any manner the liability of such U.S. Guarantor under this Section 13.
(d) Each U.S. Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that its agreements set forth in this Section 13 (including this Section 13.5) are knowingly made in contemplation of such benefits.
(e) Each U.S. Guarantor hereby agrees that, to the extent that a Guarantor shall have paid an amount hereunder to any holder that is greater than the net value of the benefits received, directly or indirectly, by such paying Guarantor as a result of the issuance and sale of the Notes (such net value, its Proportionate Share ), such paying Guarantor shall, subject to Section 13.5(a) and (b), be entitled to contribution from any Guarantor that has not paid its Proportionate Share of the Guaranteed Obligations. Any amount payable as a contribution under this Section 13.5(e) shall be determined as of the date on which the related payment is made by such Guarantor seeking contribution and each U.S. Guarantor acknowledges that the right to contribution hereunder shall constitute an asset of such U.S. Guarantor to which such contribution is owed. Notwithstanding the foregoing, the provisions of this Section 13.5(e) shall in no respect limit the obligations and liabilities of any Guarantor to the holders of the Notes hereunder or under the Notes, any other Note Document or any other document, instrument or agreement executed in connection therewith, and each U.S. Guarantor shall remain jointly and severally liable for the full payment and performance of the Guaranteed Obligations.
13.6. Reinstatement of Guarantee .
The Unconditional Guarantee shall continue to be effective, or be reinstated, as the case may be, if and to the extent at any time payment, in whole or in part, of any of the sums due to any holder on account of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by a holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Issuer or any other guarantors, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Issuer or any other guarantors or any part of its or their property, or otherwise, all as though such payments had not been made.
13.7. Term of Guarantee .
The Unconditional Guarantee and all guarantees, covenants and agreements of the U.S. Guarantors contained in this Agreement shall continue in full force and effect and shall not be discharged until such time as all of the Guaranteed Obligations and all other obligations hereunder shall be indefeasibly paid in full in cash and shall be subject to reinstatement pursuant to Section 13.6.
13.8. Information Regarding the Issuer .
Each U.S. Guarantor now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Issuer. No holder shall have any duty or responsibility to provide any U.S. Guarantor with any credit or other information concerning the affairs, financial condition or business of the Issuer which may come into possession of the holders. Each U.S. Guarantor is executing and delivering this Agreement and each other Note Document to which it is a party without reliance upon any representation by the holders including, without limitation, with respect to (a) the due execution, validity, effectiveness or enforceability of any instrument, document or agreement evidencing or relating to any of the Guaranteed Obligations or any loan or other financial accommodation made or granted to the Issuer, (b) the validity, genuineness, enforceability, existence, value or sufficiency of any property securing any of the Guaranteed Obligations or the creation, perfection or priority of any lien or security interest in such property or (c) the existence, number, financial condition or creditworthiness of other guarantors or sureties, if any, with respect to any of the Guaranteed Obligations.
13.9. Further Assurances .
Each U.S. Guarantor agrees to execute and deliver all such instruments and take all such action as the Required Holders may from time to time reasonably request in order to effectuate fully the purposes of the Unconditional Guarantee.
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1. Registration of Notes .
The Issuer shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Issuer shall not be affected by any notice or knowledge to the contrary. The Issuer shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.
14.2. Transfer and Exchange of Notes .
Upon surrender of any Note to the Issuer at the address and to the attention of the designated officer (all as specified in Section 19) for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holders attorney duly authorized in writing and accompanied by the relevant name, address and other details for notices of each transferee of such Note or part thereof) within ten Business Days thereafter the Issuer shall execute and deliver, at the Issuers expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1(a) . Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Issuer may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than US$100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than US$100,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2.
14.3. Replacement of Notes .
Upon receipt by the Issuer at the address and to the attention of the designated officer (all as specified in Section 19(iii)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least US$50,000,000 (or its equivalent in other currencies) or a Qualified Institutional Buyer, such Persons own unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
within ten Business Days thereafter the Issuer at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
15. PAYMENTS ON NOTES.
15.1. Place of Payment .
Subject to Section 15.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made at the principal office of JPMorgan Chase Bank, N.A. in New York, New York. The Issuer may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Issuer in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.
15.2. Home Office Payment .
So long as any Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 15.1 or in such Note to the contrary, the Issuer or the Guarantors, as applicable, will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below such Purchasers name in Schedule A , or by such other method or at such other address as such Purchaser shall have from time to time specified to the Issuer in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Issuer made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Issuer at its principal executive office or at the place of payment most recently designated by the Issuer pursuant to Section 15.1. Prior to any sale or other disposition of any Note held by a Purchaser or its nominee, such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Issuer in exchange for a new Note or Notes pursuant to Section 14.2. The Issuer will afford the benefits of this Section 15.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by a Purchaser under this Agreement and that has made the same agreement relating to such Note as the Purchasers have made in this Section 15.2.
16. EXPENSES, ETC.
16.1. Transaction Expenses .
Whether or not the transactions contemplated hereby are consummated, the Issuer will pay all costs and expenses (including reasonable attorneys fees of a special counsel and, if reasonably required by the Required Holders, local or other counsel) incurred by the Purchasers and each other holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement (including, without limitation, the Unconditional Guarantee), the Notes or the other Note Documents (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the
costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement (including, without limitation, the Unconditional Guarantee), the Notes or the other Note Documents, or in responding to any subpoena or other legal process or informal investigative demand issued in connection with any Note Document, or by reason of being a holder of any Note, (b) the costs and expenses, including financial advisors fees, incurred in connection with the insolvency or bankruptcy of any member of the Group or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes and (c) the costs and expenses incurred in connection with the initial filing of this Agreement and all related documents and financial information with the SVO, provided that such costs and expenses under this clause (c) shall not exceed US$3,500 (or its equivalent in other currencies). The Issuer will pay, and will save each Purchaser and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those, if any, retained by a Purchaser or other holder in connection with its purchase of the Notes). In the event that the Notes are not issued on or before June 30, 2011 or, if prior to that date, the Company elects not to issue and sell the Notes, the Issuer agrees to pay to the Purchasers on June 30, 2011 or such earlier date, via wire transfer of immediately available funds, (i) the Cancellation Fee (as defined in the Commitment Letter) in accordance with the terms of the Commitment Letter and (ii) the Delayed Delivery Fee (as defined in the Commitment Letter).
16.2. Certain Taxes .
The Issuer agrees to pay all stamp, documentary or similar taxes or fees which may be payable in respect of the execution and delivery (but not the transfer) or the enforcement of any of the Notes or the execution and delivery or the enforcement of this Agreement or any other Note Document in the United States or the United Kingdom or of any amendment of, or waiver or consent under or with respect to, any Note Document, and to pay any value added tax due and payable in respect of reimbursement of costs and expenses by the Issuer pursuant to this Section 16 (provided that, where the Issuer has made a payment of such value added tax and the relevant holder reasonably determines that it has received or been granted a credit or repayment in respect of such value added tax from the relevant tax authority, such holder shall reimburse such amount to the Issuer), and will save each holder of a Note to the extent permitted by applicable law harmless against any loss or liability resulting from nonpayment or delay in payment of any such tax or fee required to be paid by the Issuer hereunder.
16.3. Survival .
The obligations of the Issuer under this Section 16 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of any Note Document, and the termination of any Note Document.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the execution and delivery of this Agreement, the Notes and the other Note Documents, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and
may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of any Obligor pursuant to this Agreement shall be deemed representations and warranties of such Obligor under this Agreement. Subject to the preceding sentence, this Agreement (including, without limitation, the Unconditional Guarantee), the Notes, the other Note Documents and the Commitment Letter embody the entire agreement and understanding among each Purchaser and the Obligors and supersede all prior agreements and understandings relating to the subject matter hereof.
18. AMENDMENT AND WAIVER.
18.1. Requirements .
This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of each Obligor and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 22, or any defined term (as it is used therein), will be effective as to any Purchaser unless consented to by such Purchaser in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 11 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, (iii) amend Section 8, 10(a), 11, 12, 18, 21 or 23.9, or (iv) release all or substantially all of the Unconditional Guarantee.
18.2. Solicitation of Holders of Notes .
(a) Solicitation . The Issuer will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Issuer will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 18 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.
(b) Payment . No Obligor will directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment.
(c) Consent in Contemplation of Transfer . Any consent made pursuant to this Section 18.2 by the holder of any Note that has transferred or has agreed to transfer such Note to an Obligor or any Affiliate of an Obligor and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force or effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force or effect except solely as to such transferring holder.
18.3. Binding Effect, etc .
Any amendment or waiver consented to as provided in this Section 18 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon each Obligor without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between any Obligor, on one hand, and the holder of any Note, on the other hand, nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term this Agreement and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.
18.4. Notes Held by Obligors, etc .
Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by any Obligor or any Affiliates of any Obligor shall be deemed not to be outstanding.
19. NOTICES; ENGLISH LANGUAGE.
All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized international commercial delivery service (charges prepaid), or (b) by a recognized international commercial delivery service (with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or its nominee, to such Purchaser or nominee at the address specified for such communications in Schedule A , or at such other address as such Purchaser or nominee shall have specified to the Issuer in writing,
(ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Issuer in writing,
(iii) if to the Issuer, to the Issuer at its address set forth at the beginning hereof to the attention of the Secretary, or at such other address as the Issuer shall have specified to the holder of each Note in writing, or
(iv) if to any Guarantor, to such Guarantor at Anchorage Gateway, 5 Anchorage Quay, Salford, M50 3XE, United Kingdom, Attention: the Company Secretary, or at such other address as such Guarantor shall have specified to the holder of each Note in writing.
Notices under this Section 19 will be deemed given only when actually received.
Each document, instrument, financial statement, report, notice or other communication delivered in connection with this Agreement shall be in English or accompanied by an English translation thereof.
This Agreement and the Notes have been prepared and signed in English and the parties hereto agree that the English version hereof and thereof (to the maximum extent permitted by applicable law) shall be the only version valid for the purpose of the interpretation and construction hereof and thereof notwithstanding the preparation of any translation into another language hereof or thereof, whether official or otherwise or whether prepared in relation to any proceedings which may be brought in any jurisdiction in respect hereof or thereof.
20. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to any Purchaser, may be reproduced by such Purchaser by any photographic, photostatic, electronic, digital or other similar process and such Purchaser may destroy any original document so reproduced. Each Obligor agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 20 shall not prohibit any Obligor or any holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.
21. CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, Confidential Information means information delivered to any Purchaser by or on behalf of any member of the Group in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of such Group member, provided that such term does not include information that (a) was publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by such Purchaser or any Person acting on such Purchasers behalf, (c) otherwise becomes known to such Purchaser other than through disclosure by any Group member or (d) constitutes financial statements delivered to such Purchaser under Section 7.1 that are otherwise publicly available. Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to (i) its directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by its Notes), (ii) its financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 21, (iii) any other holder of any Note, (iv) any Institutional Investor to which it sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 21), (v) any Person from which it offers to purchase any security of the Issuer (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 21), (vi) any federal or state regulatory authority having jurisdiction over such Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such Purchasers investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser is a party or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchasers Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 21 as though it were a party to this Agreement. On reasonable request by any Obligor in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Obligors embodying the provisions of this Section 21.
22. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser of the Notes that it has agreed to purchase hereunder, by written notice to the Issuer, which notice shall be signed by both such Purchaser and such Affiliate, shall contain such Affiliates agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, any reference to such Purchaser in this Agreement (other than in this Section 22), shall be deemed to refer to such Affiliate in lieu of such original Purchaser. In the event that such Affiliate is so substituted as a Purchaser hereunder and such Affiliate thereafter transfers to such original Purchaser all of the Notes then held by such Affiliate, upon receipt by the Issuer of notice of such transfer, any reference to such Affiliate as a Purchaser in this Agreement (other than in this Section 22), shall no longer be deemed to refer to such Affiliate, but shall refer to
such original Purchaser, and such original Purchaser shall again have all the rights of an original holder of the Notes under this Agreement.
23. MISCELLANEOUS.
23.1. Successors and Assigns .
All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not.
23.2. Payments Due on Non-Business Days .
Anything in this Agreement or the Notes to the contrary notwithstanding (but without limiting the requirement in Section 8.4 that notice of any optional prepayment specify a Business Day as the date fixed for such prepayment), any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; provided that if the maturity date of any Note is a date other than a Business Day, the payment otherwise due on such maturity date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.
23.3. Accounting Terms; IAS 39 .
Except as otherwise specifically provided herein, all accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with the Accounting Principles, all computations made pursuant to this Agreement shall be made in accordance with the Accounting Principles, and all financial statements shall be prepared in accordance with the Accounting Principles. Notwithstanding the foregoing or any other provision of this Agreement:
(a) for purposes of determining Financial Indebtedness, indebtedness or debt (or any similar term) under any covenant or other term or provision contained in this Agreement (including any Incorporated Provision), any election by any Group member to measure any portion of a non-derivative financial liability at fair value (as permitted by International Accounting Standard 39 or any similar accounting standard), other than to reflect a hedge of such non-derivative financial liability (including interest rate, foreign currency and commodity hedges), shall be disregarded and such determination shall be made as if such election had not been made; and
(b) if after the date of this Agreement a change in the Accounting Principles (as at the date of this Agreement) or the accounting practices is such as to affect:
(i) the determination of the financial covenants contained in Section 9.1; and/or
(ii) the determination of whether a Subsidiary is a Material Company,
the Obligors and the Required Holders shall, at the Required Holders request, negotiate in good faith with a view to agreeing such amendments as may be necessary to grant to the holders protection comparable to that granted on the date of this Agreement, and any amendments so agreed will take effect on the date agreed between the Obligors and the holders; and if no such agreement is reached within 30 days of the Required Holders request, the Required Holders may instruct independent accountants to determine any amendments to those clauses or definitions which those accountants (acting as experts and not as arbitrators) consider appropriate to grant to the holders protection comparable to that granted on the date of this Agreement, which amendments shall take effect when so determined and notified to the Issuer. Any amendments determined by such accountants shall be binding on all the parties hereto.
23.4. Severability .
Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.
23.5. Construction, etc .
Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.
For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall be deemed to be a part hereof.
23.6. Counterparts .
This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Delivery of an executed signature page hereto by facsimile or e-mail transmission shall be effective as delivery of a manually signed counterpart of this Agreement.
23.7. Governing Law .
This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
23.8. Jurisdiction and Process; Waiver of Jury Trial .
(a) Each Obligor irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. To the fullest extent permitted by applicable law, each Obligor irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(b) Each Obligor agrees, to the fullest extent permitted by applicable law, that a final judgment in any suit, action or proceeding of the nature referred to in Section 23.8(a) brought in any such court shall be conclusive and binding upon it subject to rights of appeal, as the case may be, and may be enforced in the courts of the United States of America or the State of New York (or any other courts to the jurisdiction of which it or any of its assets is or may be subject) by a suit upon such judgment.
(c) Each Non-U.S. Obligor consents to process being served by or on behalf of any holder of a Note in any suit, action or proceeding of the nature referred to in Section 23.8(a) by mailing a copy thereof by registered or certified or priority mail, postage prepaid, return receipt requested, or delivering a copy thereof in the manner for delivery of notices specified in Section 19, to the Issuer, as its agent for the purpose of accepting service of any process in the United States. Each Non-U.S. Obligor agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to it. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.
(d) Nothing in this Section 23.8 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against any Obligor in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
(e) Each Non-U.S. Obligor hereby irrevocably appoints the Issuer to receive for it, and on its behalf, service of process in the United States. The Issuer hereby accepts such appointment and designation for the period from the date of the Closing to the date that is one calendar year after the latest maturity date of any Note as stated therein.
(f) THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE UNCONDITIONAL GUARANTEE),
THE NOTES, ANY OTHER FINANCE DOCUMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.
23.9. Obligation to Make Payment in U.S. Dollars .
Any payment on account of an amount that is payable hereunder or under the Notes in U.S. Dollars which is made to or for the account of any holder of Notes in any other currency, whether as a result of any judgment or order or the enforcement thereof or the realization of any security or the liquidation of any Obligor, shall constitute a discharge of the obligation of such Obligor, as applicable, under this Agreement or the Notes only to the extent of the amount of U.S. Dollars which such holder could purchase in the foreign exchange markets in London, England, with the amount of such other currency in accordance with normal banking procedures at the rate of exchange prevailing on the London Banking Day following receipt of the payment first referred to above. If the amount of U.S. Dollars that could be so purchased is less than the amount of U.S. Dollars originally due to such holder, the Obligors agree to the fullest extent permitted by law, to indemnify and save harmless such holder from and against all loss or damage arising out of or as a result of such deficiency. This indemnity shall, to the fullest extent permitted by law, constitute an obligation separate and independent from the other obligations contained in this Agreement and the Notes, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by such holder from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under the Notes or under any judgment or order. As used herein the term London Banking Day shall mean any day other than Saturday or Sunday or a day on which commercial banks are required or authorized by law to be closed in London, England.
23.10. Tax Forms .
(a) Each Purchaser and each holder that is a United States person within the meaning of Section 7701(a)(30)of the Internal Revenue Code shall deliver to the Issuer executed originals of U.S. Internal Revenue Service Form W-9 or such other documentation or information prescribed by applicable law or reasonably requested by the Issuer as will enable the Issuer to certify to such Purchaser or holders exemption from U.S. backup withholding and/or information reporting requirements.
(b) Each Purchaser and each holder that is not a United States person within the meaning of Section 7701(a)(30)of the Internal Revenue Code (a Non-U.S. Holder ) shall deliver to the Issuer on or prior to the date on which such Non-U.S. Holder becomes a party to this Agreement (and from time to time thereafter upon the request of the Issuer), whichever of the following is applicable:
(i) properly completed and duly executed originals of U.S. Internal Revenue Service Form W-8BEN (claiming a complete exemption from United States withholding tax on payments made under the benefits of an applicable income tax treaty);
(ii) properly completed and duly executed originals of U.S. Internal Revenue Service Form W-8ECI (claiming a complete exemption from United States withholding tax because payments made are effectively connected with a U.S. trade or business);
(iii) properly completed and duly executed originals of U.S. Internal Revenue Service Form W-8IMY and all required supporting documentation (claiming a complete exemption from United States withholding tax on payments made); or
(iv) in the case of a Purchaser or holder claiming the benefits of the exemption for portfolio interest under Sections 871(h) or 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Non-U.S. Holder is not (A) a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (B) a 10 percent shareholder of the Issuer within the meaning of Section 881(c)(3)(B) of the Internal Revenue Code, or (C) a controlled foreign corporation described in Section 881(c)(3)(C) of the Internal Revenue Code and (y) properly completed and duly executed originals of U.S. Internal Revenue Service Form W-8BEN.
(c) Each Purchaser or holder that is a Non-U.S. Holder shall deliver to the Issuer such other tax forms or other documents as shall be prescribed by applicable law to demonstrate, where applicable, that payments under this Agreement to such Purchaser or holder are exempt from United States withholding tax imposed pursuant to FATCA.
[Remainder of page left intentionally blank. Next page is signature page.]
If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of this Agreement and return it to the Obligors, whereupon this Agreement shall become a binding agreement among you and the Obligors.
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BA HOLDINGS, INC. |
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LUXFER HOLDINGS PLC |
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[Signature Blocks for Original Subsidiary Guarantors to be inserted] |
This Agreement is hereby
accepted and agreed to as
of the date thereof.
PURCHASERS
[ADD PURCHASER SIGNATURE BLOCKS]
Schedule A
INFORMATION RELATING TO PURCHASERS
Purchaser Name |
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
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Name in which Notes are to be registered |
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
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Registration number(s); principal amount(s) |
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R-1; $45,820,000 |
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Payment on account of Note |
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Method |
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Federal Funds Wire Transfer |
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Account information |
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JPMorgan Chase Bank New York, NY ABA No.: 021-000-021 Account Name: Prudential Managed Portfolio Account No.: P86188 (do not include spaces) Ref: Accompanying Information below |
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Accompanying information |
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Name of Issuer: |
BA HOLDINGS INC. |
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Description of Security: |
6.19% Senior Secured Guaranteed Notes due June 15, 2018 |
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PPN: |
05523* AA5 |
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Security No.: |
INV11372 |
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Due date and application (as among principal, interest and Yield-Maintenance Amount) of the payment being made. |
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Address / Fax # for notices related to payments |
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The Prudential Insurance Company of America c/o Investment Operations Group Gateway Center Two, 10th Floor 100 Mulberry Street Newark, NJ 07102-4077 Attn: Manager, Billings and Collections |
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with telephonic prepayment notices to : |
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Manager, Trade Management Group |
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Tel: |
973-367-3141 |
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Fax: |
888-889-3832 |
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Address for all other notices |
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The Prudential Insurance Company of America c/o Prudential Capital Group Two Prudential Plaza, Suite 5600 180 N. Stetson Avenue Chicago, IL 60601 Attn: Managing Director, PRICOA |
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Instructions re Delivery of Notes and closing sets |
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Prudential Capital Group 2200 Ross Avenue, Suite 4200E Dallas, TX 75201 Attn: William H. Bulmer, Esq. |
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Purchaser Name |
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
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By: |
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Name: |
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Title: |
Vice President |
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Tax identification number |
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22-1211670 |
Purchaser Name |
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
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Signature Block |
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
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Vice President |
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Tax identification number |
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22-1211670 |
Purchaser Name |
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RGA REINSURANCE COMPANY |
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Name in which to register Note(s) |
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HARE & CO. |
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Note Registration Number(s); Principal Amount(s) |
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R-3; $7,500,000 |
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Payment on account of Note |
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Method |
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Account Information |
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The Bank of New York Mellon ABA #021-000-018 BNF Account No.: IOC 566 For credit to: RGA Reinsurance Company Ref: Accompanying Information below. |
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Accompanying Information |
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Name of Issuer: |
BA HOLDINGS INC. |
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Description of Security: |
6.19% Senior Secured Guaranteed Notes due June 15, 2018 |
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PPN: |
05523* AA5 |
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Due date and application (as among principal, interest and Yield-Maintenance Amount) of the payment being made. |
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Address for notices related to payments |
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RGA Reinsurance Company Attn: Banking Dept. 1370 Timberlake Manor Parkway Chesterfield, MO 63017-6039 |
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Address for all other notices |
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Prudential Private Placement Investors, L.P. c/o Prudential Capital Group Two Prudential Plaza, Suite 5600 180 N. Stetson Avenue Chicago, IL 60601 Attn: Managing Director, PRICOA |
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Instructions re: delivery of Notes |
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The Bank of New York Mellon One Wall Street - 3rd Floor Window A New York, NY 10256 Attn: Anthony V. Saviano (212-635-6742) Ref: RGA Private Placement Prudential Financial Account No. 0000128863 Cc: Prudential Capital Group |
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Form signature block |
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RGA REINSURANCE COMPANY |
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By: |
Prudential Private Placement Investors, |
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L.P. (as Investment Advisor) |
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By: |
Prudential Private Placement Investors, Inc. |
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(as its General Partner) |
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By: |
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Name: |
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Title: |
Vice President |
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Tax Identification Number |
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43-1235868 |
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Schedule B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:
ABL Facility means the facility provided pursuant to the Facility Agreement dated April 26, 2006 (as amended and restated pursuant to an amendment and restatement deed dated March 5, 2009) by and among Luxfer Group 2000 Limited, Luxfer Group Limited and others as borrowers and guarantors thereunder and Bank of America, N.A., as original lender, original issuer, original hedging party, facility agent and security trustee.
Acceptable Bank means:
(a) a bank or financial institution which has a rating for its short-term unsecured and non credit-enhanced debt obligations of A-1 or higher by Standard & Poors Rating Services, F(1) + or higher by Fitch Ratings Ltd or Aaa or higher by Moodys Investors Service Limited or a comparable rating from an internationally recognised credit rating agency or
(b) any other bank or financial institution approved by the Required Holders.
Accounting Principles means the international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements or if required by the applicable law the generally acceptable accounting principles of the United States.
Accounting Reference Date has the meaning given to it in section 391 of the Companies Act 2006.
Additional Subsidiary Guarantor is defined in Section 1(b).
Adjusted EBITDA means, in respect of any Relevant Period, EBITDA for that Relevant Period after:
(a) adding the amount of any cash receipts (and deducting the amount of any cash payments) during such Relevant Period in respect of any Exceptional Items not already taken account of in calculating EBITDA for any Relevant Period but excluding:
(i) Exceptional Items relating to cash receipts or cash paid for finance costs or discontinued operations and
(ii) cash payments for Permitted Acquisitions and cash received for Permitted Disposals;
(b) adding the amount of any increase in provisions, which are not Current Assets or Current Liabilities and deducting the amount of any non-cash credits which are
not Current Assets or Current Liabilities) in each case to the extent taken into account in establishing EBITDA;
(c) deducting the cash amount of maintenance capital expenditure actually paid (which shall be not more than £8,000,000 (or its equivalent in any currency)) during that Relevant Period by any member of the Group except (in each case) to the extent funded from the proceeds of Permitted Disposals, third party grants, third party contributions or Insurance Proceeds) and
(d) deducting the amount of any cash dividends or distributions paid or made by the Parent Guarantor in respect of that Relevant Period;
and so that no amount shall be added (or deducted) more than once.
Affiliate means, in relation to any Person, a Subsidiary of that Person or a Holding Company of that person or any other Subsidiary of that Holding Company. Unless the context otherwise clearly requires, any reference to an Affiliate is a reference to an Affiliate of the Issuer or the Parent Guarantor.
Agreed Form means, in relation to any document, the form of such document which is previously agreed in writing by or on behalf of the Purchasers and the Obligors or, if not so agreed, is in the form specified by the Purchasers.
Annual Financial Statements means the financial statements for a Financial Year delivered pursuant to Section 7.1(b).
Anti-Terrorism Law means any U.S. state or federal law relating to terrorism or money laundering, including the Executive Order, the USA Patriot Act and the Money Laundering Control Act of 1986, Public Law 99-570.
Articles means the articles of association of the Parent Guarantor and the articles of association of the Issuer.
assets includes present and future properties, revenues and rights of every description (including any right to receive such revenues).
Auditors means one of PricewaterhouseCoopers LLP, Ernst & Young LLP, KPMG Audit PLC, Deloitte & Touche LLP, Grant Thornton LLP, Soren McAdam Christenson LLP or any other firm of independent public accountants of recognized international standing.
Authorization means an authorization, consent, approval, resolution, license, exemption, filing, notarization or registration.
Average Exchange Rate means the 12 month average of the month end exchange rates as referenced to Reuters.
Bank Agent means Lloyds TSB Bank plc, as agent of the Finance Parties (as defined in the Bank Facilities Agreement).
Bank Document means the Finance Documents (as defined in the Bank Facilities Agreement as in effect on the date hereof) and each other document executed in connection with the Bank Facilities Agreement or otherwise relating thereto).
Bank Lender means a Lender (as defined in the Bank Facilities Agreement).
Bank Facilities Agreement means the Senior Facilities Agreement, dated as of May 13, 2011, among (a) the Parent Guarantor, (b) Lloyds TSB Bank plc and Clydesdale Bank plc (trading as Yorkshire Bank), as mandated lead arrangers, (c) the parties listed in part 1 schedule 1 thereto as original borrowers, (d) the parties listed in part 2 of schedule 1 thereto as original guarantors, (e) the financial institutions listed in part 3 of schedule 1 thereto as lenders, (f) Lloyds TSB Bank plc, Clydesdale Bank plc (trading as Yorkshire Bank) and Bank of America, N.A., as ancillary facilities providers, and (g) the Bank Agent, as the same may from time to time be amended, restated, supplemented, modified or extended; provided that any such amendment, restatement, supplement, modification or extension shall be made in accordance with the terms of this Agreement and the Intercreditor Deed.
Base Case Model means the financial model dated April 4, 2011 in Agreed Form prepared by the Parent Guarantor including profit and loss account, balance sheet and cashflow projections relating to the Group.
Bilateral Facility has the meaning given to such term in the Bank Facilities Agreement (as in effect on the date hereof).
Blocked Person is defined in Section 5.30(d).
Budget means:
(a) in relation to the period beginning on January 1, 2011 and ending on December 31, 2011, the Base Case Model to be delivered by the Obligors to the holders pursuant to Section 4.15 and
(b) in relation to any other period, the budget delivered by the Parent Guarantor to the holders in respect of that period pursuant to, and in accordance with, Section 7.1(f).
Business Day means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York or London, England are required or authorized to be closed.
Cash Equivalent Investments means at any time:
(a) certificates of deposit maturing within 6 Months after the relevant date of calculation and issued by an Acceptable Bank,
(b) any investment in marketable debt obligations issued or guaranteed by the government of the United States of America or any member state of the European Economic Area, or by an instrumentality or agency of any of them having an equivalent credit rating, maturing within 3 Months after the relevant date of calculation and not convertible or exchangeable to any other security,
(c) commercial paper not convertible or exchangeable to any other security:
(i) for which a recognized trading market exists,
(ii) issued by an issuer incorporated in the United States of America or any member state of the European Economic Area,
(iii) which matures within 3 Months after the relevant date of calculation, and
(iv) which has a credit rating of either A-1 or higher by Standard & Poors Rating Services, F-1 or higher by Fitch Ratings Ltd or P-1 or higher by Moodys Investors Service Limited, or, if no rating is available in respect of the commercial paper, the issuer of which has, in respect of its long-term unsecured and non-credit enhanced debt obligations, an equivalent rating,
(d) any investment in money market funds which:
(i) have a credit rating of either A-1 or higher by Standard & Poors Rating Services, F-1 or higher by Fitch Ratings Ltd or P-1 or higher by Moodys Investors Service Limited,
(ii) invest substantially all their assets in securities of the types described in paragraphs (a) to (c), and
(iii) can be turned into cash on not more than 30 days notice or
(e) any other debt security approved by the Required Holders,
in each case, denominated in U.S. Dollars, Euros, Sterling or an Optional Currency (as defined in the Bank Facilities Agreement as in effect on the date hereof) and to which an Obligor is alone or together with other Obligors beneficially entitled at that time and which is not issued or guaranteed by any member of the Group or subject to any Security.
Change of Control means any Person or group of Persons acting in concert gains direct or indirect control of the Parent Guarantor. For the purposes of this definition:
(a) control of the Parent Guarantor means:
(i) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:
(A) cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the Parent Guarantor or
(B) appoint or remove all, or the majority, of the directors or other equivalent officers of the Parent Guarantor or
(C) give directions with respect to the operating and financial policies of the Parent Guarantor with which the directors or other equivalent officers of the Parent Guarantor are obliged to comply; or
(ii) (the holding beneficially of more than 50% of the issued share capital of the Parent Guarantor (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); and
(b) acting in concert means, a group of Persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition, directly or indirectly, of shares in the Parent Guarantor by any of them, either directly or indirectly, to obtain or consolidate control of the Parent Guarantor.
Change of Control Notice is defined in Section 8.7
CISADA is the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (Pub. L. 111195).
Closing is defined in Section 3.
Commitment Letter means that certain letter agreement dated as of 21 March 2011 between the Parent Guarantor and Pricoa Capital Group, a copy of which is attached hereto as Exhibit 4.18 .
Compliance Certificate means a certificate substantially in the form set out in Exhibit 7.2 .
Confidential Information is defined in Section 21.
Contribution Notice means a contribution notice issued by the Pensions Regulator under section 38 or section 47 of the Pensions Act 2004.
Current Assets means the aggregate (on a consolidated basis) of all inventory, work in progress, trade and other receivables of each member of the Group including prepayments in relation to operating items and sundry debtors (but excluding cash and Cash Equivalent Investments) maturing within 12 Months from the date of computation but excluding amounts in respect of:
(a) receivables in relation to corporation and deferred Tax,
(b) Exceptional Items and other non-operating items,
(c) insurance claims, and
(d) any interest owing to any member of the Group.
Current Liabilities means the aggregate (on a consolidated basis) of all liabilities (including trade creditors, accruals and provisions) of each member of the Group falling due within 12 Months from the date of computation but excluding amounts in respect of:
(a) liabilities for Financial Indebtedness and Finance Charges,
(b) liabilities for corporation and deferred Tax,
(c) Exceptional Items and other non-operating items,
(d) insurance claims, and
(e) liabilities in relation to dividends declared but not paid by the Parent Guarantor or by a member of the Group in favor of a Person which is not a member of the Group.
Czech Subsidiary means Magnesium Elektron Recycling CZ S.R.O., a limited liability company organized under the laws of the Czech Republic.
Debt Service means in respect of any Relevant Period the aggregate of:
(a) Net Finance Charges for such Relevant Period,
(b) the net amount of any cash receipts during that Relevant Period in respect of any corporation tax rebates or credits and the amount actually paid or due and payable in respect of corporation taxes during that Relevant Period by any member of the Group,
(c) the aggregate of all scheduled repayments of Financial Indebtedness falling due during such Relevant Period but excluding:
(i) any amounts repaid or falling due under any overdraft or revolving facility (including, without limitation, the facility available pursuant to the Bank Facilities Agreement or any Permitted Refinancing Agreement) and which were available for simultaneous redrawing according to the terms of such facility,
(ii) any such obligations owed to any member of the Group and
(iii) any prepayment of Financial Indebtedness existing on the date of the Closing which is required to be repaid under the terms of this Agreement, and
(d) the amount of the capital element of any payments in respect of such Relevant Period payable under any Finance Lease entered into by any member of the Group,
and so that no amount shall be included more than once.
Debt Service Cover means the ratio of Adjusted EBITDA to Debt Service in respect of any Relevant Period.
Default means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.
Default Rate means that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes and (ii) 2% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A. in New York, New York as its base or prime rate.
Defined Benefit Scheme means each of the following:
(a) Luxfer Group Pension Plan,
(b) Luxfer Group Supplementary Pension Plan,
(c) BA Holdings, Inc. Defined Benefit Pension Plan,
(d) Pension Plan for Hourly Employees of Luxfer Inc.,
(e) BA Holdings, Inc. Executive Supplemental Retirement Plan,
(f) IPC Supplementary Pension scheme, and
(g) IDR Termination Indemnities.
Designated Person means a Person:
(a) listed on the annex to the Executive Order;
(b) owned or controlled by, or acting for or on behalf of, any Person listed on the annex to the Executive Order;
(c) listed on the Specially Designated Nationals and Blocked Persons list maintained by the Office of Foreign Asset Control of the United States Department of the Treasury, as updated or amended from time to time;
(d) whose property has been blocked, or is subject to seizure, forfeiture or confiscation, under any applicable Anti-Terrorism Law; or
(e) that commits, threatens or conspires to commit or support terrorism as defined in the Executive Order.
Disclosure Documents is defined in Section 5.11.
Disposal means a sale, lease or license (other than an occupational rack rent lease or license), transfer, loan or other disposal by a Person of any asset, undertaking or business (whether by a voluntary or involuntary single transaction or series of transactions).
Disposal Proceeds means the consideration receivable by any member of the Group (including any amount receivable in repayment of intercompany debt) for any Disposal made by any member of the Group except for Excluded Disposal Proceeds.
Disposal Prepayment Date is defined in Section 8.8.
Disposal Prepayment Offer is defined in Section 8.8.
Disruption Event means either or both of:
(a) a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Note Documents (or otherwise in order for the transactions contemplated by the Note Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the parties hereto, or
(b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a party hereto preventing that, or any other party hereto:
(i) from performing its payment obligations under the Note Documents, or
(ii) from communicating with other parties hereto in accordance with the terms of the Note Documents,
and which (in either such case) is not caused by, and is beyond the control of, the party whose operations are disrupted.
Dormant Subsidiary means a member of the Group which does not trade (for itself or as agent for any Person) and does not own, legally or beneficially, assets (including indebtedness owed to it) which in aggregate have a value of £20,000 or more or its equivalent in other currencies.
EBIT means in respect of any Relevant Period the consolidated operating profit of the Parent Guarantor before taxation for such Relevant Period (excluding the results from discontinued operations):
(a) before deducting any interest, commission, fees, discounts, prepayment fees, premiums or charges, gains or losses on Financial Indebtedness and other finance payments whether paid, payable or capitalized by any member of the Group (calculated on a consolidated basis) in respect of such Relevant Period,
(b) not including any accrued interest owing or paid to any member of the Group,
(c) before taking into account any Exceptional Items,
(d) before deducting any Transaction Costs,
(e) before taking into account any gain or loss arising from an upward or downward revaluation of any other asset except for the impairment of working capital items,
(f) after deducting the amount of any profit (or adding back the amount of any loss) of any member of the Group which is attributable to minority interests,
(g) before taking into account any unrealized gains or losses on any derivative instrument (other than any derivative instrument which is accounted for on a hedge accounting basis),
(h) before taking into account any Pension Payment to the extent made after the date of this Agreement but before the first anniversary of the date of this Agreement, and
(i) excluding any profit or loss arising from the disposal of fixed assets,
in each case to the extent added, deducted or taken into account, as the case may be, for the purposes of determining operating profits of the Group before taxation for such Relevant Period.
EBITA means in respect of any Relevant Period, EBIT for that Relevant Period after adding back any amount attributable to the impairment or amortization of assets or impairment of members of the Group and non-cash based charges and amortization costs associated with equity stock-based compensation schemes for such Relevant Period.
EBITDA means in respect of any Relevant Period, EBITA for such Relevant Period after adding back any amount attributable to the depreciation of assets of members of the Group for such Relevant Period.
Employee Plan means, at any time, an employee pension benefit plan as defined in section 3(32) of ERISA and subject to Title IV of ERISA (other than a Multiemployer Plan) then or at any time during the previous six years maintained for, or contributed to (or to which there is or was an obligation to contribute) on behalf of, employees of any Obligor or ERISA Affiliate.
English Guarantee Agreement is defined in Section 1(b).
English Guarantor means the Parent Guarantor and each other Guarantor incorporated or formed under the laws of England and Wales.
Environment means humans, animals, plants and all other living organisms including the ecological systems of which they form part and the following media:
(a) air (including, without limitation, air within natural or man made structures, whether above or below ground),
(b) water (including, without limitation, territorial, coastal and inland waters, water under or within land and water in drains and sewers), and
(c) land (including, without limitation, land under water).
Environmental Claim means any claim, proceeding, formal notice or investigation by any Person in respect of any Environmental Law.
Environmental Law means any applicable law or regulation which relates to:
(a) the pollution or protection of the Environment,
(b) the conditions of the workplace, or
(c) the generation, handling, storage, use, release or spillage of any substance which alone, or in combination with any other, is capable of causing harm to the Environment, including without limitation, any waste.
Environmental Permits means any permit and other Authorization and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any member of the Group conducted on or from any Real Property owned or used by any member of the Group.
ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
ERISA Affiliate means each person (as defined in section 3(9) of ERISA) that is a member of a controlled group of, or under common control with, any Obligor, within the meaning of section 414 of the Internal Revenue Code.
ERISA Event means any of the following events:
(a) any reportable event, as defined in section 4043(c) of ERISA, with respect to an Employee Plan as to which the PBGC has not by regulation waived the requirement of section 4043(a) of ERISA that it be notified within thirty days of the occurrence of that event. However, a failure to meet the minimum funding standard of section 412 of the Internal Revenue Code or section 302 of ERISA shall be a reportable event for the purposes of this paragraph (a) regardless of the issuance of any waiver under said sections;
(b) the requirements of subsection (1) of section 4043(b) of ERISA (without regard to subsection (2) of that section) are met with respect to a contributing sponsor, as defined in section 4001(a)(13) of ERISA, of an Employee Plan and an event described in paragraph (9), (10), (11), (12) or (13) of section 4043(c) of ERISA is reasonably expected to occur with respect to that Employee Plan within the following 30 days;
(c) the filing under section 4041(c) of ERISA of a notice of intent to terminate any Employee Plan;
(d) the termination of any Employee Plan under section 4041(c) of ERISA;
(e) the institution of proceedings under section 4042 of ERISA by the PBGC for the termination of, or the appointment of a trustee to administer, any Employee Plan;
(f) the failure to make a required contribution to any Employee Plan that would result in the imposition of an encumbrance pursuant to section 412 of the Internal Revenue Code or section 302 of ERISA; or
(g) engagement with an Employee Plan in a non-exempt prohibited transaction within the meaning of section 4795 of the Internal Revenue Code or section 406 of ERISA (other than as a result of an incorrect representation of a Purchaser pursuant to Section 6.2).
ESOP means the Luxfer Group Employee Share Ownership Plan established by a deed of trust dated 3 November 1997.
euro or means the unit of single currency of the Participating Member States.
Event of Default is defined in Section 10.
Exceptional Items means any exceptional, one-off or non-recurring items which represent gains or losses including (without limitation) those arising on:
(a) the restructuring of the activities of an entity, including the associated redundancy program costs and reversals of any provisions for the cost of restructuring,
(b) disposals, revaluations or impairment of non-current assets,
(c) disposals of assets associated with discontinued operations and acquisition costs in relation to the acquisition of new operations,
(d) Environmental remediation costs and provisions not in the ordinary course of business,
(e) one-off gains and losses recognized on the early termination or curtailment of or change in employee retirement defined benefits, or
(f) disposal of a business operation which is not classified as a discontinued operation for accounting purposes.
Excluded Deposit Accounts means each of the following deposit accounts:
(a) any deposit account specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of the Parent Guarantors or any of its Subsidiaries salaried employees,
(b) any deposit account credited at any time with an amount not exceeding US$100,000 (or its equivalent in any currency) individually and, when aggregated with the amounts in all other such accounts, US$500,000 (or its equivalent in any currency), and
(c) any lock-box deposit account the balance of which is swept on a daily basis into other deposit accounts of the Parent Guarantor or any of its Subsidiaries that are deposit accounts as set forth in the preceding clauses (a) or (b) or deposit accounts held with a lender under the Bank Facilities Agreement or any Permitted Refinancing Agreement.
Excluded Disposal Proceeds means the proceeds of a Disposal from a Permitted Disposal or Permitted Transaction unless such proceeds are to be used to repay or prepay Financial Indebtedness under the Bank Facilities Agreement or a Permitted Refinancing Agreement at any time when a Default or Event of Default exists.
Excluded Insurance Proceeds means any proceeds of an insurance claim which the Issuer notifies the holders are, or are to be, applied:
(a) to meet a third party claim,
(b) to cover operating losses in respect of which the relevant insurance claim was made,
(c) to the replacement, reinstatement and/or repair of the assets or otherwise in amelioration of the loss in respect of which the relevant insurance claim was made,
(d) by an Obligor to purchase assets useful to the business of the Obligors,
in each case as soon as possible after receipt, or
(e) which do not exceed £10,000,000 (or its equivalent) when aggregated together with the proceeds of all other insurance claims (excluding those referred to in paragraphs (a), (b) and (c) of this definition) during the term of this Agreement.
Executive Order means Executive Order No. 13224 of September 23, 2001- Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism, 66 U.S. Fed. Reg. 49079 (2001), as amended.
Existing Note Documents means:
(a) the indenture dated February 6, 2007 made between the Parent Guarantor and The Bank of New York; and
(b) each note issued pursuant to the indenture referred to in paragraph (a) above.
Existing Notes means £71,850,977 floating rate notes due 2012 issued by the Parent Guarantor.
FATCA means Sections 1471, 1472, 1473 and 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable) and any current or future regulations or official interpretations thereof.
Favored Lender Notice is defined in Section 9.36.
Finance Charges means for any Relevant Period the aggregate amount of the accrued interest, commission, fees, discounts, prepayment fees, premiums or charges and other finance payments in respect of Financial Indebtedness whether paid payable or capitalized by any member of the Group (calculated on a consolidated basis) in respect of such Relevant Period:
(a) excluding any upfront fees or costs,
(b) including the interest (but not the capital) element of payments in respect of Finance Leases,
(c) including any commission, fees, discounts and other finance payments payable by (and deducting any such amounts payable to) any member of the Group under any interest rate hedging arrangement, and
(d) taking no account of any unrealized gains or losses on any financial instruments other than any derivative investments which are accounted for on a hedge accounting basis,
(e) excluding any Transaction Costs, and
(f) excluding any interest cost or expected return on plan assets in relation to any post employment benefit schemes,
so that no amount shall be added (or deducted) more than once.
Finance Lease means any lease or hire purchase contract which would, in accordance with the Accounting Principles, be treated as a finance or capital lease.
Financial Indebtedness means, without double counting, any indebtedness for or in respect of:
(a) monies borrowed and debit balances at banks or other financial institutions,
(b) acceptance under any acceptance credit or bill discounting facility (or dematerialized equivalent),
(c) any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument,
(d) any Finance Leases,
(e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis),
(f) any Treasury Transaction (and, when calculating the value of that Treasury Transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that Treasury Transaction, that amount) shall be taken into account),
(g) any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution in respect of an underlying liability of an entity which is not a member of the Group which liability would fall within one of the other paragraphs of this definition,
(h) any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to raise finance or to finance the acquisition or construction of the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than 180 days after the date of supply,
(i) any amount raised under any other transaction (including any forward sale or purchase sale and sale back or sale and leaseback agreement) having the commercial or economic effect of a borrowing or otherwise classified as borrowings under the Accounting Principles,
(j) any amount raised by the issue of redeemable shares which are redeemable (other than at the option of the issuer thereof) before the latest maturity date of any Note as stated therein or are otherwise classified as borrowings under the Accounting Principles, and
(k) the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs (a) to (j).
Financial Quarter means a 3 calendar months period ending on March 31, June 30, September 30 or December 31 in any Financial Year.
Financial Support Direction means a financial support direction issued by the Pensions Regulator under section 43 of the Pensions Act 2004.
Financial Year means a financial year of the Parent Guarantor.
First Amendment Effective Date means November 30, 2012.
French Subsidiary means Luxfer Gas Cylinders S.A.S., a société par actions simplifiées organized under the laws of France.
Funding Instructions is defined in Section 4.17.
Funds Flow Statement means a funds flow statement detailing the proposed movement of the funds received pursuant to the Notes and the Bank Facilities Agreement in payment of the relevant redemption amounts in respect of the ABL Facility and the Existing Notes.
Governmental Authority means
(a) the government of
(i) the United States of America or England or any State or other political subdivision of either thereof, or
(ii) any other jurisdiction in which the Parent Guarantor or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Parent Guarantor or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.
Group means the Parent Guarantor and each of its Subsidiaries for the time being.
Group Structure Chart is defined in Section 5.23.
guarantee means (other than in Section 13) any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any Person or to make an investment in or loan to any Person or to purchase assets of any Person where, in each case, such obligation is assumed in order to maintain or assist the ability of such Person to meet its indebtedness.
Guaranteed Obligations is defined in Section 13.1.
Guarantor means the Parent Guarantor and each Subsidiary Guarantor.
Hedging Agreement has the meaning given to such term in the Bank Facilities Agreement (as in effect on the date hereof).
Hedging Letter is defined in Section 4.20.
HMRC means the United Kingdom HM Revenue and Customs.
holder means, with respect to any Note the Person in whose name such Note is registered in the register maintained by the Issuer pursuant to Section 14.1.
Holding Company means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
Incorporated Provision is defined in Section 9.36.
indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent.
Information Memorandum means the document dated 7 January 2011 in the form approved by the Parent Guarantor concerning the Group which, at the request of the Parent Guarantor and on its behalf, was provided to the Purchasers in relation to this transaction prior to the date of this Agreement.
Institutional Investor means (a) any Purchaser of a Note, (b) any holder of a Note holding (together with one or more of its affiliates) more than 5% of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.
Insurance Prepayment Date is defined in Section 8.8.
Insurance Prepayment Offer is defined in Section 8.8.
Insurance Proceeds means the proceeds of any insurance claim under any insurance maintained by any member of the Group except for Excluded Insurance Proceeds and after deducting any reasonable expenses in relation to that claim which are incurred by any member of the Group to Persons who are not members of the Group.
Intellectual Property means:
(a) any patents, trademarks, service marks, designs, business names, copyrights, database rights, design rights, domain names, moral rights, inventions, confidential information, know-how and other intellectual property rights and interests (which may now or in the future subsist), whether registered or unregistered and
(b) the benefit of all applications and rights to use such assets of each member of the Group (which may now or in the future subsist).
Intercreditor Deed means the Intercreditor Deed dated as of the date hereof and as amended and restated on or around the First Amendment Effective Date and made between, among others, the Obligors, the Bank Agent, the Bank Lenders (as senior lenders), Lloyds TSB Bank plc and Clydesdale Bank PLC (trading as Yorkshire Bank) (as senior arrangers), the Ancillary Lenders (as defined in the Intercreditor Deed (as senior lenders), each Bilateral Lender (as defined in the Intercreditor Deed), the Purchasers and the Intra-Group Lenders (as defined in the Intercreditor Deed), as the same may from time to time be amended, amended and restated, modified or supplemented.
Interest Cover means the ratio of EBITDA to Net Finance Charges in respect of any Relevant Period.
Internal Revenue Code means the U.S. Internal Revenue Code of 1986, as amended from time to time, and any and all regulations and rulings issued thereunder.
Issuer is defined in the first paragraph of this Agreement.
Joinder Agreement is defined in Section 1(b).
Joint Venture means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership or any other entity.
Legal Reservations means:
(a) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganization and other laws generally affecting the rights of creditors,
(b) the time barring of claims under the Limitation Act 1980 and the Foreign Limitation Periods Act 1984, the possibility that an undertaking to assume liability for or indemnify a Person against non-payment of UK stamp duty may be void and defenses of set-off or counterclaim,
(c) the possibility that the courts may recharacterize any security purporting to be a fixed charge as a floating charge (or vice versa), and
(d) similar principles, rights and defenses under the laws of any Relevant Jurisdiction.
Leverage means in respect of any Relevant Period the ratio of Total Net Debt on the last day of such Relevant Period to EBITDA in respect of such Relevant Period.
Major Breach means any breach of:
(a) Section 9.8 (Change of Business),
(b) Section 9.9 (Acquisitions),
(c) Section 9.12 (Pari Passu Ranking),
(d) Section 9.13 (Negative Pledge),
(e) Section 9.14 (Disposals),
(f) Section 9.16 (Loans or Credit),
(g) Section 9.17 (No Guarantees or Indemnities),
(h) Section 9.18 (Dividends and Share Redemption),
(i) Section 9.19 (Bank Facilities Agreement),
(j) Section 9.20 (Financial Indebtedness), and
(k) Section 9.22 (Insurance).
Major Default means any of the following Events of Default:
(a) Section 10(a) (Non-payment),
(b) Section 10(b) (Financial Covenants and Other Obligations),
(c) Section 10(c) (Other Obligations) but only insofar as it relates to a Major Breach,
(d) Section 10(d) (Misrepresentation) but only insofar as it relates to a Major Representation,
(e) Section 10(f) (Insolvency) and Section 10(g) (Insolvency Proceedings),
(f) Section 10(i) (Unlawfulness and Invalidity) and Section 10(o) (Repudiation and Rescission of Agreements), and
(g) Section 10(s) (ERISA).
Major Representation means each of the representations set out in Section 5.1 (Status) to Section 5.5(a) (Validity and Admissibility in Evidence) inclusive, Section 5.24 (Obligors), Section 5.30 (U.S. Regulations) and Section 5.31 (Sanctions).
Make-Whole Amount is defined in Section 8.6.
Material means material in relation to the business, operations, affairs, financial condition, assets, properties or prospects of the Group taken as a whole.
Material Adverse Effect means in the reasonable opinion of the Required Holders a material adverse effect on:
(a) the business, operations, property, condition (financial or otherwise) or prospects of the Group taken as a whole, or
(b) the ability of an Obligor to perform its payment obligations under the Note Documents (taking into account the financial resources available to that Obligor from other members of the Group), or
(c) the rights or remedies of any holder under any of the Note Documents.
Material Company means, at any time:
(a) an Obligor,
(b) a wholly-owned member of the Group that holds shares in an Obligor, or
(c) a Material Subsidiary.
Material Provision means each of Sections 7, 9.7, 9.8, 9.9, 9.12, 9.13, 9,14, 9.16, 9.17, 9.18, 9.19, 9.20, 9.22, 9.31, 9.32 and 9.33 and each Incorporated Provision.
Material Subsidiary means a Subsidiary of the Parent Guarantor which has earnings before interest, tax and amortization (calculated on the same basis as EBITA) representing 5% or more of EBITA, or has gross assets, (excluding intra-Group items) representing 5% or more of the gross assets of the Group, calculated on a consolidated basis. The foregoing shall be determined by reference to the most recent Compliance Certificate and/or the latest audited financial statements of that Subsidiary (consolidated in the case of a Subsidiary which itself has Subsidiaries) and the latest audited consolidated financial statements of the Group. However, if a Subsidiary has been acquired since the date as at which the latest audited consolidated financial statements of the Group were prepared, the financial statements shall be deemed to be adjusted in order to take into account the acquisition of that Subsidiary (that adjustment being certified by the Groups Auditors as representing an accurate reflection of the revised EBITA and gross assets of the Group). A report by the Auditors of the Parent Guarantor that a Subsidiary is or is not a Material Subsidiary shall, in the absence of manifest error, be conclusive and binding on all parties to this Agreement.
Month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day and
(b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month.
The above rules will only apply to the last Month of any period.
Monthly Financial Statements means the financial statements for a month delivered pursuant to Section 7.1(a).
More Favorable Provision is defined in Section 9.36.
Multiemployer Plan means, at any time, a multiemployer plan (as defined in section 4001(a)(3) of ERISA) then or at any time during the previous five years maintained for, or contributed to (or to which there is or was an obligation to contribute) on behalf of, employees of any Obligor or an ERISA Affiliate.
NAIC means the National Association of Insurance Commissioners or any successor thereto.
Net Finance Charges means, for any Relevant Period, the Finance Charges for such Relevant Period after deducting any interest payable in such Relevant Period to any member of the Group on any cash or Cash Equivalent Investment.
Non-U.S. Obligor means an Obligor that is not a U.S. Obligor.
Non-U.S. Plan means any plan, fund or other similar program that (a) is established or maintained outside the United States of America by a member of the Group primarily for the benefit of employees of members of the Group residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and (b) is not subject to ERISA or the Internal Revenue Code.
Note Document means this Agreement, each Note, the Intercreditor Deed, each Joinder Agreement, each English Guarantee Agreement and each other guarantee agreement executed by any Additional Subsidiary Guarantor in accordance with Sections 1(b) and 9.31, and the Hedging Letter, in each case as amended, novated, supplemented or restated (however fundamentally).
Notes is defined in Section 1.
Obligor means the Issuer and each Guarantor.
OFAC Sanctions Regulations means the U.S. sanctions administered by the Office of Foreign Asset Control of the U.S. Department of the Treasury as amended from time to time, and codified in 31 C.F.R. 500 et. seq.
Officers Certificate means a certificate of a Senior Financial Officer or of any other officer of an Obligor whose responsibilities extend to the subject matter of such certificate.
Original Financial Statements means:
(a) in relation to the Parent Guarantor, (i) in respect of any representation set forth in Section 5 made as of the date of this Agreement and as of the date of the Closing, its consolidated audited financial statements for its financial year ended 31 December 31, 2009 and its consolidated unaudited financial statements for its financial year ended December 31, 2010 and (ii) in any other respect its consolidated audited financial statements for its financial year ended December 31, 2010;
(b) in relation to the Parent Guarantor, the consolidated unaudited monthly management accounts for the period from January 1, 2011 to March 31, 2011;
(c) in relation to each other member of the Group (other than the Issuer, Luxfer Australia Pty Limited, Hart Metals, Inc., MEL Chemicals Inc., Magnesium Elektron North America Inc., Niagara Metallurgical Products Limited and Reade Manufacturing Company), its audited financial statements for the financial year ended December 31, 2009; and
(d) in relation to any other Obligor, its audited financial statements delivered to the holders of Notes as required by Section 9.31.
Original Subsidiary Guarantor is defined in the first paragraph of this Agreement.
Parent Guarantor is defined in the first paragraph of this Agreement.
Participating Member State means any member state of the European Community that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic Monetary Union.
PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto.
Pension Items means any income or charge attributable to an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pensions Schemes Act 1993) other than the current service costs and any past service costs and curtailments and settlements attributable to the scheme.
Pension Payment means a payment of up to £5,000,000 (or its equivalent) as set out in the Base Case Model.
Pensions Regulator means the body corporate called the Pensions Regulator established under Part I of the Pensions Act 2004.
Permitted Acquisition means:
(a) an acquisition pursuant to a Permitted Share Issue;
(b) the incorporation of a company which on incorporation becomes a member of the Group, but only if that company is incorporated in England and Wales or the United States of America with limited liability;
(c) an acquisition by a member of the Group of an asset sold, leased, transferred or otherwise disposed of by another member of the Group in circumstances constituting a Permitted Disposal;
(d) an acquisition (not being an acquisition by the Parent Guarantor or the Issuer), of (1) all of the issued share capital of a limited liability company or (2) (if the acquisition is made by a limited liability company) a business or undertaking carried on as a going concern, but only if:
(i) no Default or Event of Default is continuing on the closing date for the acquisition or would occur as a result of the acquisition;
(ii) the acquired company, business or undertaking:
(A) is engaged in a business the substantially the same as that carried on by the Group and
(B) is incorporated or established, and carries on its principal business in a jurisdiction in which an existing member of the Group operates and not in any jurisdiction that is on a restricted list for a holder;
(iii) Leverage (as shown in the latest Compliance Certificate) does not exceed 2.5:1;
(iv) the Parent Guarantor has delivered to the holders of Notes not later than 5 Business Days prior to it (or the relevant member of the Group) legally committing to make such acquisition, a certificate signed by two directors of the Parent Guarantor:
(A) giving notice to the holders of the proposed acquisition and
(B) to which is attached forecasts (which have been prepared on the basis of recent historical information and reasonable assumptions, and which assume that the acquisition has occurred), demonstrating that the Parent Guarantor will remain in compliance with its obligations under Section 9.1 for a period of not less than 12 Months from the closing date for the acquisition and
(v) the consideration (including associated costs and expenses) for the acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in the acquired company (or any such business) at the date of acquisition (when aggregated with the consideration (including associated costs and expenses) for any other Permitted Acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in any such acquired companies or businesses at the time of acquisition (the Total Purchase Price )) does not exceed in aggregate £15,000,000 (or its equivalent); or
(e) an acquisition permitted by the Required Holders (such consent not to be unreasonably withheld or delayed) in writing.
Permitted Disposal means any sale, lease, license, transfer or other disposal which, except in the case of paragraph (b), is on arms length terms:
(a) of trading stock or cash made by any member of the Group in the ordinary course of trading of the disposing entity;
(b) of any asset by a member of the Group ( Disposing Company ) to another member of the Group ( Acquiring Company ), but:
(i) if the Disposing Company is an Obligor, the Acquiring Company must also be an Obligor and
(ii) if the Disposing Company is a Guarantor, the Acquiring Company must be a Guarantor guaranteeing at all times an amount no less than that guaranteed by the Disposing Company;
(c) of assets in exchange for other assets comparable or superior as to type, value or quality;
(d) of assets to a Permitted Joint Venture;
(e) of obsolete or redundant vehicles, plant and equipment for cash;
(f) of Cash Equivalent Investments for cash or in immediate exchange for other Cash Equivalent Investments;
(g) constituted by a license of intellectual property rights permitted by Section 9.24;
(h) arising as a result of any Permitted Security;
(i) of cash by way of a Permitted Loan;
(j) of cash in order to complete a Permitted Acquisition; or
(k) of assets for cash where the higher of the market value or the net consideration receivable in respect of such asset when aggregated with the higher of the market value or the net consideration receivable for any other sale, lease, license, transfer or other disposal of an asset not allowed under the preceding paragraphs) does not exceed £8,000,000 (or its equivalent) in aggregate and does not exceed £2,000,000 (or its equivalent) in any Financial Year.
Permitted Distribution means:
(a) the payment of a dividend to any member of the Group by any of such Group members Subsidiaries;
(b) the payment of a dividend by the Parent Guarantor provided:
(i) no Default or Event of Default has occurred and is continuing or would result from such payment,
(ii) Leverage (as shown in latest Compliance Certificate) does not exceed 2.5:1, and
(iii) at the time the proposed dividend is made the forecasted Leverage for the next 12 Months (assuming payment of any proposed dividends during that period) does not exceed 2.5:1;
(c) the redemption of up to £50,000 B preference shares at par value (plus any accrued dividend) issued by the Parent Guarantor to Brian Purves and Ian Mckinnon; and
(d) the payment of any other dividend agreed between the Obligors and the Required Holders.
Permitted Financial Indebtedness means Financial Indebtedness:
(a) arising under
(i) any of the Note Documents or
(ii) (x) the Bank Facilities Agreement (other than any Bilateral Facility), as amended from time to time in compliance with this Agreement and the Intercreditor Deed, (y) any Bilateral Facility made available to an Obligor by a Bank Lender in accordance with clause 8.1(a) (Bilateral Facilities) of the Bank Facilities Agreement (as in effect on the date hereof) or(z) a Permitted Refinancing Agreement, as amended from time to time in compliance with this Agreement and the Intercreditor Deed; provided that the aggregate amount committed or outstanding under this clause (ii) shall not at any time exceed the aggregate commitments under the Bank Facilities Agreement (including the Bilateral Facilities) on the date hereof plus the Senior Headroom;
(b) arising under a Permitted Loan or a Permitted Guarantee or as permitted by Section 9.28;
(c) arising under (i) a foreign exchange transaction for spot or forward delivery entered into in connection with protection against fluctuation in currency rates where that foreign exchange exposure arises in the ordinary course of trade or in respect of loans made under the Bank Facilities Agreement, but not a foreign exchange transaction for investment or speculative purposes and (ii) the Hedging Agreement;
(d) under finance or capital leases of vehicles, plant equipment or computers, provided that the aggregate capital value of all such items so leased under outstanding leases by members of the Group does not exceed £10,000,000 (or its equivalent in other currencies) at any time;
(e) of a company that becomes a member of the Group as a result of a Permitted Acquisition provided that the Financial Indebtedness is repaid in full within 45 days of that company becoming a member of the Group;
(f) [Reserved];
(g) not permitted by the preceding paragraphs so long as the outstanding amount does not exceed £400,000 (or its equivalent) in aggregate for the Group at any time;
(h) performance bonds issued in the ordinary course of trading in respect of non-financial obligations;
(i) existing as at the date of this Agreement pursuant to the ABL Facility and/or the Existing Note Documents so long as such Financial Indebtedness is irrevocably discharged no later than the date of the Closing;
(j) permitted by the Required Holders in writing; and
(k) such other Financial Indebtedness not permitted by the preceding paragraphs, provided that the outstanding principal amount of all Financial Indebtedness of the Group (including the Financial Indebtedness permitted pursuant to paragraphs (a)
to (j) above) does not exceed £145,000,000 (or its equivalent) in aggregate for the Group at any time.
Permitted Guarantee means:
(a) the endorsement of negotiable instruments in the ordinary course of trade;
(b) any guarantee to a property landlord of which a member of the Group is a tenant;
(c) any performance or similar bond guaranteeing performance by a member of the Group under any contract entered into in the ordinary course of trade;
(d) any guarantee or indemnity arising under the articles of association of the Parent Guarantor;
(e) any indemnity given by a member of the Group for its liabilities in the ordinary course of trade;
(f) a guarantee in respect of Specified Financial Indebtedness under paragraph (g) of the definition of Permitted Financial Indebtedness;
(g) a guarantee of Financial Indebtedness as part of a Permitted Joint Venture;
(h) a guarantee in respect of obligations of an Obligor or a guarantee by a non-Obligor in respect of the obligations of another member of the Group made in the ordinary course of business;
(i) any guarantee given in respect of the netting or set-off arrangements permitted pursuant to paragraph (c) of the definition of Permitted Security;
(j) any guarantee or indemnity given by a member of the Group in respect of any obligations of an employee or officer of a member of the Group, which obligations shall not exceed £100,000 (or its equivalent) in aggregate for all such obligations supported by such guarantees or indemnities pursuant to this paragraph (j) outstanding at any time; or
(k) any guarantee (existing as at the date of this Agreement) given in respect of the Financial Indebtedness in relation to the ABL Facility or the Existing Note Documents so long as such guarantees are irrevocably released, removed or discharged no later than the date of the Closing.
so long as the aggregate outstanding amount of the obligations supported by such guarantees and indemnities does not exceed £100,000 (or its equivalent) at any time.
Permitted Joint Venture means any investment by any member of the Group:
(a) where the joint venture interest is held through an entity incorporated or formed with limited liability and
(i) the joint venture entity is incorporated or established, and carries on its principal business in a jurisdiction in which an existing member of the Group operates and not in any jurisdiction that is on a restricted list for any holder,
(ii) as at the date of the joint venture investment by the relevant member of the Group:
(A) Leverage (as shown in the latest Compliance Certificate) does not exceed 2.5:1 and
(B) the Parent Guarantor has delivered to the holders of Notes not later than 5 Business Days prior to the relevant member of the Group legally committing to make such joint venture investment, a certificate signed by two directors of the Parent Guarantor:
(1) giving notice to the holders of the proposed joint venture investment and
(2) to which is attached forecasts (which have been prepared on the basis of recent historical information and reasonable assumptions, and which assume that the joint venture investment has occurred), demonstrating that the Parent Guarantor will remain in compliance with its obligations under Section 9.1 for a period of not less than 12 Months from the date of the joint venture investment,
(iii) the joint venture investment is made on arms length terms,
(iv) such entity carries on or owns the same, a similar, complementary or related business to that carried on by the Group, and
(v) the aggregate (without double counting) of:
(A) all outstanding amounts lent, advances, contributed to or for equity in, or otherwise invested in, all such entities by members of the Group and
(B) the market value (at the date of transfer or contribution) of all assets transferred or contributed to all such entities by members of the Group to the extent exceeding the value of the consideration for such transfers or contributions and
(C) all outstanding Financial Indebtedness incurred (whether by way of guarantee or otherwise) in relation to all such entities by members of the Group
shall not after the date of this Agreement, when taken together with any contingent liability of such Permitted Joint Venture, exceed £15,000,000 (or its equivalent); or
(b) permitted by the Required Holders (such consent not to be unreasonably withheld or delayed) in writing.
Permitted Loan means:
(a) any trade credit extended by any member of the Group to its customers on normal commercial terms and in the ordinary course of its trading activities;
(b) Financial Indebtedness which is referred to in the definition of, or otherwise constitutes, Specified Financial Indebtedness;
(c) any loan to a Permitted Joint Venture;
(d) any loan or advance made to employees of any member of the Group which loans and advances shall not exceed £100,000 (or its equivalent) in aggregate for all loans to employees outstanding at any time;
(e) any loan, advance or other financial facility in an aggregate amount not to exceed £500,000 in any calendar year made available to the trustee of the ESOP, the trustee of any other employee share ownership plan or similar trust or to an employee whether for the purpose of acquiring ordinary, preference or deferred shares in the Parent Guarantor or any member of the Group, provided that such loan, advance or other financial facility may not exceed £5,000,000 (or its equivalent) at any one time outstanding;
(f) a loan made by an Obligor to another Obligor or made by a member of the Group which is not an Obligor to another member of the Group;
(g) any loan made by an Obligor to a member of the Group which is not an Obligor so long as:
(i) the aggregate amount of the Financial Indebtedness under any such loans does not exceed £10,000,000 (or its equivalent) at any time, or
(ii) such loan is funded by the issue of shares pursuant to paragraph (a) of the definition of Permitted Share Issue; or
(h) any loan (other than a loan that would fall within one of the paragraphs set out above) so long as the aggregate amount of Financial Indebtedness under any such loans does not exceed £500,000 (or its equivalent) at any time.
Permitted Refinancing Agreement means any facility agreement, credit agreement or similar agreement which refinances or replaces all or any portion the Bank Facilities Agreement so long as (a) such agreement and any other Permitted Refinancing Documents do not contain, either initially or by amendment or other modification, any material terms, conditions, covenants or defaults other than those which (x) then exist in the Bank Facilities Agreement or those that would not be materially more restrictive on the Obligors than the terms, conditions, covenants and defaults in the then existing Bank Facilities Agreement or (y) could be included in the Bank Facilities Agreement by an amendment or other modification that would not be prohibited by the terms of the Intercreditor Deed, (b) the principal amount and commitments under such agreement shall not exceed the principal amount permitted pursuant to clause 3.3 of the Intercreditor Deed, and (c) each agent and lender a party to such agreement has acceded to the Intercreditor Deed (or entered into an intercreditor agreement on substantively the same terms as the Intercreditor Deed) pursuant to documentation reasonably acceptable to the Required Holders.
Permitted Refinancing Documents means a Permitted Refinancing Agreement and each other document executed in connection therewith that is a financing document (or such other similar term).
Permitted Security means:
(a) any lien arising by operation of law and in the ordinary course of trading and not as a result of any default or omission by any member of the Group;
(b) any netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances of members of the Group but only so long as (i) such arrangement does not permit credit balances of Obligors to be netted or set off against debit balances of members of the Group which are not Obligors and (ii) such arrangement does not give rise to other Security over the assets of Obligors in support of liabilities of members of the Group which are not Obligors;
(c) any payment or close out netting or set-off arrangement pursuant to any Treasury Transaction or foreign exchange transaction entered into by a member of the Group which constitutes Specified Financial Indebtedness, excluding any Security or Quasi-Security under a credit support arrangement;
(d) any Security or Quasi-Security arising under any retention of title, hire purchase or conditional sale arrangement or arrangements having similar effect in respect of goods supplied to a member of the Group in the ordinary course of trading and on the suppliers standard or usual terms and not arising as a result of any default or omission by any member of the Group;
(e) any Quasi-Security arising as a result of a disposal which is a Permitted Disposal;
(f) any Security or Quasi-Security arising as a consequence of any finance or capital lease permitted pursuant to paragraph (i) of the definition of Specified Financial Indebtedness; or
(g) any Security or Quasi-Security (existing as at the date of this Agreement) over the assets of the Group pursuant to the ABL Facility so long as such Security or Quasi Security is irrevocably released, removed or discharged no later than the date of the Closing or as otherwise required pursuant to Section 9.40(b).
Permitted Share Issue means an issue of:
(a) ordinary shares by the Parent Guarantor, paid for in full in cash upon issue and which by their terms are not redeemable and where such issue does not lead to a Change of Control of the Parent Guarantor,
(b) any shares issued in connection with the ESOP where such issue does not lead to a Change of Control, and
(c) shares by a member of the Group (other than the Parent Guarantor) which is a Subsidiary to any Holding Company.
Permitted Transaction means:
(a) any disposal required, Financial Indebtedness incurred, guarantee, indemnity or Security or Quasi-Security given, or other transaction arising, under the Note Documents;
(b) the solvent liquidation or reorganization of any member of the Group which is not an Obligor so long as any payments or assets distributed as a result of such liquidation or reorganization are distributed to other members of the Group; or
(c) transactions (other than (i) any sale, lease, license, transfer or other disposal and (ii) the granting or creation of Security or the incurring or permitting to subsist of Financial Indebtedness) conducted in the ordinary course of trading on arms length terms.
Person means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, business entity or Governmental Authority.
Plan means an employee benefit plan (as defined in section 3(3) of ERISA) subject to Title I of ERISA that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Parent Guarantor or any ERISA Affiliate or with respect to which the Parent Guarantor or any ERISA Affiliate may have any liability.
Preferred Stock means any class of capital stock of a Person that is preferred over any other class of capital stock (or similar equity interests) of such Person as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such Person.
Principal Lending Facility means (a) the Bank Facilities Agreement, (b) any Permitted Refinancing Agreement and (c) any other credit agreement, note purchase agreement, indenture or any other term loan or working capital facility of any Obligor or any Subsidiary of
an Obligor providing, in each case, for the incurrence of Financial Indebtedness, or commitments therefor, in a principal amount equal to or greater than £10,000,000 (or its equivalent in other currencies), in each case under clauses (a), (b) and (c) as amended, restated, supplemented or otherwise modified and together with increases, refinancings and replacements thereof.
property or properties means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate.
provision of law is a reference to a provision, of any treaty, legislation, regulation, decree, order or by-law and any secondary legislation enacted under a power given by that provision, as amended, applied or re-enacted or replaced (whether with or without modification) whether before or after the date of this Agreement.
PTE is defined in Section 6.2.
Purchaser is defined in the first paragraph of this Agreement.
Qualified Institutional Buyer means any Person who is a qualified institutional buyer within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.
Quarter Date means the last day of a Financial Quarter.
Quarterly Financial Statements means the financial statements for the three-month periods ending on March 31, June 30, September 30 and December 31 in each Financial Year delivered pursuant to Section 7.1(a).
Quasi-Security is defined in Section 9.13.
Ratable Portion means, in respect of any holder of any Note and any Disposal Proceeds or Insurance Proceeds, an amount equal to the product of:
(a) the amount of such Disposal Proceeds or Insurance Proceeds, multiplied by
(b) a fraction, the numerator of which is the outstanding principal amount of such Note, and the denominator of which is the sum of (i) the aggregate outstanding principal amount of all the Notes plus (ii) the aggregate Commitments (as defined in the Bank Facilities Agreement as in effect on the date hereof) at such time under the Bank Facilities Agreement or the aggregate commitments at such time under a Permitted Refinancing Agreement, as applicable.
Real Property means:
(a) any freehold, leasehold, commonhold or immovable property and
(b) any buildings, fixtures, fittings, fixed plant or machinery from time to time situated on or forming part of that freehold, leasehold, commonhold or immovable property.
Registration Duty means any registration duty or similar amount payable pursuant to the laws of any jurisdiction in which an Obligor is organized in connection with the use in a judicial proceeding in such jurisdiction of this Agreement or any other Note Document or any other agreement or document related hereto or thereto or the transactions contemplated herein or therein.
regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but if not having the force of law, then being a type with which Persons to which it applies customarily comply) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organization.
Related Fund means, with respect to any holder of any Note, any fund or entity that (a) invests in securities or bank loans, and (b) is advised or managed by such holder, the same investment advisor as such holder or by an affiliate of such holder or such investment advisor.
Relevant Jurisdiction means, in relation to an Obligor:
(a) its jurisdiction of incorporation and
(b) any jurisdiction where it conducts its business.
Relevant Period means:
(a) in respect of Leverage and Interest Cover, each 12 Month period ending on the most recent Quarter Date ending on or after September 30, 2011 and
(b) in respect of Debt Service Cover, prior to June 30, 2012, the period commencing on the date of the Closing and ending on the most recent Quarter Date ending on or after September 30, 2011, and after such period, each 12 Month period ending on the most recent Quarter Date.
Required Holders means, at any time, the holders of at least 51% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Obligors or any of their Affiliates).
Responsible Officer means any Senior Financial Officer and any other officer of the Issuer or a Guarantor, as applicable, with responsibility for the administration of the relevant portion of this Agreement.
Response Date is defined in Section 8.7.
Securities Act means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.
Security means a mortgage, charge, pledge, lien, assignment or other security interest securing any obligation of any Person or any other agreement or arrangement having a similar effect.
Senior Financial Officer means the chief financial officer, principal accounting officer, treasurer or comptroller of the Issuer or a Guarantor, as applicable.
Share Option Documents means each deed of agreement granting options pursuant to parts A and B of the ESOP.
Sterling or £ means lawful money of the United Kingdom.
Subsidiary means a subsidiary undertaking within the meaning of section 1162 of the Companies Act 2006. Unless the context otherwise clearly requires, any reference to a Subsidiary is a reference to a Subsidiary of the Parent Guarantor.
Subsidiary Guarantor means each Original Subsidiary Guarantor and each Additional Subsidiary Guarantor, but shall exclude at such time any Subsidiary theretofore released from its obligations as a Subsidiary Guarantor pursuant to Section 9.31.
SVO means the Securities Valuation Office of the NAIC or any successor to such Office.
Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
Taxing Jurisdiction is defined in Section 12.
Total Debt means at any time the aggregate amount of all obligations of members of the Group for or in respect of Financial Indebtedness at that time but:
(a) excluding any such obligations to any other member of the Group,
(b) including in the case of Finance Leases only their capitalized value,
(c) excluding unrealized gains and losses on Treasury Transactions (including currency exchange gains and losses), and
(d) excluding any obligations in respect of performance bonds issued in the ordinary course of trading in respect of non-financial obligations to the extent such performance bonds are not called or enforced,
and so that no amount shall be included or excluded more than once
Total Net Debt means Total Debt less the aggregate amount of cash and Cash Equivalent Investments held by an Obligor at that time and so that no amount shall be included or excluded more than once.
Transaction Costs means all fees, costs and expenses incurred by the Obligors in connection with the Transaction Documents as set out in the Funds Flow Statement.
Transaction Documents means the Note Documents, the Bank Documents, the Articles and any other document designated as a Transaction Document by the Required Holders and the Issuer.
Treasury Transaction means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.
UK Treaty Holder means a holder of Notes which: (a) is resident (as defined in the appropriate double taxation agreement) in a country with which the United Kingdom has a double taxation agreement giving residents of that country a full exemption from United Kingdom taxation on interest; (b) is entitled to the benefit of the exemption in such a double taxation agreement (subject to the completion of any necessary procedural formalities); and (c) does not carry on a business in the United Kingdom through a permanent establishment with which the payment is effectively connected.
UK Treaty Passport means a passport under the UK Treaty Passport Scheme.
UK Treaty Passport Scheme means the Double Taxation Treaty Passport Scheme for overseas corporate lenders introduced by HMRC on September 1, 2010.
Unconditional Guarantee is defined in Section 13.1.
U.S. Bankruptcy Law means the United States Bankruptcy Code of 1978 or any other United States federal or state bankruptcy, insolvency or similar law.
U.S. Dollars or US$ means lawful money of the United States of America.
U.S. Guarantor means a Guarantor incorporated or formed under the laws of, or of any state (including the District of Columbia) of, the United States of America.
U.S. Obligor means an Obligor incorporated or formed under the laws of, or of any state (including the District of Columbia) of, the United States of America.
USA Patriot Act means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.
Working Capital means on any date Current Assets less Current Liabilities.
Schedule C
ORIGINAL SUBSIDIARY GUARANTORS
Name |
|
Jurisdiction of Organization |
|
|
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Luxfer Group Limited (Registered No. 3944037) |
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England and Wales |
|
|
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Luxfer Group 2000 Limited (Registered No. 4027006) |
|
England and Wales |
|
|
|
MEL Chemicals Inc. |
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New Jersey |
|
|
|
Magnesium Elektron North America Inc. |
|
Delaware |
|
|
|
Luxfer Gas Cylinders Limited (Registered No. 3376625) |
|
England and Wales |
|
|
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Luxfer Group Services Limited (Registered No. 3981395) |
|
England and Wales |
|
|
|
Magnesium Elektron Limited (Registered No. 3141950) |
|
England and Wales |
|
|
|
Luxfer Overseas Holdings Limited (Registered No. 3081726) |
|
England and Wales |
|
|
|
Luxfer Gas Cylinders China Holdings Limited (Registered No. 5165622) |
|
England and Wales |
|
|
|
Luxfer Inc. |
|
Delaware |
|
|
|
Hart Metals, Inc. |
|
Delaware |
|
|
|
Reade Manufacturing Company |
|
Delaware |
Exhibit 1(a)
[Form of Note]
BA Holdings, Inc.
Senior Note Due June 15, 2018
No. R-[ ] |
[Date] |
US$[ ] |
PPN: [ ] |
FOR VALUE RECEIVED, the undersigned, BA HOLDINGS, INC. (herein called the Issuer ), a corporation organized and existing under the laws of Delaware, hereby promises to pay to [ ] , or registered assigns, the principal sum of [ ] U.S. DOLLARS (or so much thereof as shall not have been prepaid) on June 15, 2018, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.19% per annum from the date hereof, payable quarterly, on the 15th day of September, December, March and June in each year (each such date an Interest Payment Date ), commencing with the September, December, March or June next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the greater of (i) 8.19% and (ii) 2% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A. from time to time in New York, New York as its base or prime rate, payable quarterly as aforesaid (or, at the option of the registered holder hereof, on demand).
In addition to the interest payable pursuant to the above paragraph, in the event that Leverage on the last day of any Relevant Period (a Testing Date ) is greater than 2.50 to 1.0, there shall accrue on the unpaid principal balance of this Note additional interest ( Additional Interest ) at the rate of 0.75% per annum for each period (each such period an Additional Interest Period ) commencing on the Interest Payment Date immediately prior to such Testing Date through the Interest Payment Date immediately after the first subsequent Testing Date on which Leverage equals or is less than 2.50 to 1.0. The Issuer shall pay, on each Interest Payment Date during each Additional Interest Period, all accrued and unpaid Additional Interest as of such Interest Payment Date.
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of JPMorgan Chase Bank, N.A. in New York, New York or at such other place as the Issuer shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the Notes ) issued pursuant to the Note Purchase Agreement, dated as of May 13, 2011 (as from time to time amended, the Note Purchase Agreement ), among the Issuer, Luxfer Holdings PLC, the respective Original
Subsidiary Guarantors named therein and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 21 of the Note Purchase Agreement and (ii) made the representation set forth in Section 6.2 of the Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, accompanied by a written instrument of transfer duly executed by the registered holder hereof or such holders attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Issuer may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Issuer will not be affected by any notice to the contrary.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.
This Note shall be construed and enforced in accordance with, and the rights of the Issuer and the holder of this Note shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
|
BA HOLDINGS, INC. |
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By: |
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Name: |
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Title: |
|
Exhibit 1(b)(i)
Form of English Guarantee Agreement
GUARANTEE AGREEMENT
This Guarantee Agreement, dated as of [ , 20 ] (this Guarantee Agreement ), is made by [ ], a [ ] (the Guarantor ) in favor of the Purchasers (as defined below) and the other holders from time to time of the Notes (as defined below). The Purchasers and such other holders are herein collectively called the holders and individually a holder .
Preliminary Statements:
I. BA Holdings, Inc., a Delaware corporation (the Issuer ), [Luxfer Holdings PLC (Registered No. 3690830), a public limited company organized under the laws of England and Wales / the Guarantor], [the Guarantor] and each of the [other] parties listed in Schedule C attached thereto [is entering][has entered] into a Note Purchase Agreement dated as of May 13, 2011 (as amended, modified, supplemented or restated from time to time, the Note Agreement ) with the Persons listed in Schedule A attached thereto (collectively, the Purchasers ) [simultaneously with the delivery of this Guarantee Agreement]. Capitalized terms used herein have the meanings specified in the Note Agreement unless otherwise defined herein.
II. Pursuant to the Note Agreement, the Issuer [proposes to issue and sell][has issued and sold] US$65,000,000 aggregate principal amount of Senior Notes due June 15, 2018 (collectively, the Initial Notes ). The Initial Notes and any other Notes that may from time to time be issued pursuant to the Note Agreement (including any notes issued in substitution for any of the Notes) are herein collectively called the Notes and individually a Note .
III. [It is a condition to the agreement of the Purchasers to purchase the Notes that this Guarantee Agreement shall have been executed and delivered by the Guarantor and shall be in full force and effect.][Pursuant to the Note Agreement, the Obligors are required to cause the Guarantor to deliver this Guarantee Agreement to the holders and to enter into a certain Joinder Agreement, dated the date hereof, pursuant to which the Guarantor shall become a party to the Note Agreement (the Joinder Agreement ).]
IV. The Guarantor and the Issuer are operated as part of one consolidated business entity and are directly dependent upon each other for and in connection with their respective business activities and their respective financial resources. The Guarantor will receive[, and has received,] direct and indirect economic and financial benefits from the indebtedness incurred under the Note Agreement and the Notes by the Issuer, and the incurrence of such indebtedness is or was in the best interests of the Guarantor. By agreeing to enter into this Guarantee
Agreement and the Joinder Agreement, the Guarantor will gain substantial financial and other benefits, both direct and indirect.
NOW THEREFORE, in [order to induce][compliance with the Note Agreement], and in consideration of, the execution and delivery of the Note Agreement and the purchase of the Notes by each of the Purchasers, the Guarantor hereby covenants and agrees with, and represents and warrants to each of the holders as follows:
Section 1. GUARANTEE.
The Guarantor hereby irrevocably and unconditionally, and jointly and severally with the other Guarantors, guarantees to each holder, the due and punctual payment in full of (a) the principal of, Make-Whole Amount, if any, and interest on (including, without limitation, interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), and any other amounts due under, the Notes when and as the same shall become due and payable (whether at stated maturity or by required or optional prepayment or by acceleration or otherwise) and (b) any other sums which may become owing by the Issuer to the holders under the terms and provisions of the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein (all such obligations described in clauses (a) and (b) above are herein called the Guaranteed Obligations ). The guarantee in the preceding sentence is an absolute, present and continuing guarantee of payment and not of collectibility and is in no way conditional or contingent upon any attempt to collect from the Issuer or any other Obligor or guarantor of the Notes or upon any other action, occurrence or circumstance whatsoever. In the event that the Issuer shall fail so to pay any of such Guaranteed Obligations, the Guarantor agrees to pay the same when due to the holders entitled thereto, without demand, presentment, protest or notice of any kind, in lawful money of the United States of America, pursuant to the requirements for payment specified in the Notes and the Note Agreement. Each default in payment of any of the Guaranteed Obligations shall give rise to a separate cause of action hereunder and separate suits may be brought hereunder as each cause of action arises. The Guarantor agrees that the Notes issued in connection with the Note Agreement may (but need not) make reference to this Guarantee Agreement.
The Guarantor agrees to pay and to indemnify and save each holder harmless from and against any damage, loss, cost or expense (including attorneys fees) which such holder may incur or be subject to as a consequence, direct or indirect, of (x) any breach by the Guarantor or by the Issuer of any warranty, covenant, term or condition in, or the occurrence of any default under, this Guarantee Agreement, the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein, together with all expenses resulting from the compromise or defense of any claims or liabilities arising as a result of any such breach or default, (y) any legal action commenced to challenge the validity or enforceability of this Guarantee Agreement, the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein and (z) enforcing or defending (or determining whether or how to enforce or defend) the provisions of this Guarantee Agreement, provided , that the Guarantor
shall not be liable for any damage, loss, cost or expense arising out of the gross negligence or willful misconduct of any holder.
The Guarantor further irrevocably and unconditionally indemnifies each holder immediately on demand against any cost, loss or liability suffered by such holder if any payment obligation guaranteed by it is or becomes unenforceable, invalid or illegal; the amount of the loss or liability under this indemnity will be equal to the amount such holder would otherwise have been entitled to recover.
The Guarantor hereby acknowledges and agrees that the Guarantors liability hereunder is joint and several with any other Person(s) who may guarantee the Guaranteed Obligations, including [the Parent Guarantor] and any [other] Subsidiary Guarantor.
Anything herein or in the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein to the contrary notwithstanding, the maximum liability of the Guarantor hereunder and under the Notes and the Note Agreement shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable laws relating to the insolvency of debtors.
The Guarantor agrees that the obligations under and in respect of the Notes, the Note Agreement and the other Note Documents may at any time and from time to time exceed the amount of the liability of the Guarantor hereunder without impairing this Guarantee Agreement or affecting the rights and remedies of any holder hereunder.
Section 2. OBLIGATIONS ABSOLUTE.
The obligations of the Guarantor hereunder shall be primary, absolute, irrevocable and unconditional, irrespective of the validity or enforceability of the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein, shall not be subject to any counterclaim, setoff, deduction or defense based upon any claim the Guarantor may have against the Issuer or any holder or otherwise, and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not the Guarantor shall have any knowledge or notice thereof), including, without limitation: (a) any amendment to, modification of, supplement to or restatement of the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein (it being agreed that the obligations of the Guarantor hereunder shall apply to the Notes, the Note Agreement, the other Note Documents and any such other instrument as so amended, modified, supplemented or restated) or any assignment or transfer of any thereof or of any interest therein, or any furnishing, acceptance or release of any security for the Notes or the addition, substitution or release of any other Guarantor or any other entity or other Person primarily or secondarily liable in respect of the Guaranteed Obligations; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein; (c) any bankruptcy, insolvency, arrangement, reorganization, readjustment, composition, liquidation or
similar proceeding with respect to the Issuer or its property; (d) any merger, amalgamation or consolidation of the Guarantor or of the Issuer into or with any other Person or any sale, lease or transfer of any or all of the assets of the Guarantor or of the Issuer to any Person; (e) any failure on the part of the Issuer for any reason to comply with or perform any of the terms of any other agreement with the Guarantor; (f) any failure on the part of any holder to obtain, maintain, register or otherwise perfect any security; or (g) any other event or circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor (whether or not similar to the foregoing), and in any event however material or prejudicial it may be to the Guarantor or to any subrogation, contribution or reimbursement rights the Guarantor may otherwise have. The Guarantor covenants that its obligations hereunder will not be discharged except by indefeasible payment in full in cash of all of the Guaranteed Obligations and all other obligations hereunder.
Section 3. WAIVER.
The Guarantor unconditionally waives to the fullest extent permitted by law, (a) notice of acceptance hereof, of any action taken or omitted in reliance hereon and of any default by the Issuer in the payment of any amounts due under the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein, and of any of the matters referred to in Section 2 hereof, (b) all notices which may be required by statute, rule of law or otherwise to preserve any of the rights of any holder against the Guarantor, including, without limitation, presentment to or demand for payment from the Issuer or the Guarantor with respect to any Note, notice to the Issuer or to the Guarantor of default or protest for nonpayment or dishonor and the filing of claims with a court in the event of the bankruptcy of the Issuer, (c) any right to require any holder to enforce, assert or exercise any right, power or remedy including, without limitation, any right, power or remedy conferred in the Note Agreement, the Notes or any other Note Document, (d) any requirement for diligence on the part of any holder and (e) any other act or omission or thing or delay in doing any other act or thing which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a discharge of the Guarantor or in any manner lessen the obligations of the Guarantor hereunder.
Section 4. OBLIGATIONS UNIMPAIRED.
The Guarantor authorizes the holders, without notice or demand to the Guarantor and without affecting its obligations hereunder, from time to time, in accordance with the provisions of the relevant Note Document or other instrument: (a) to renew, compromise, extend, accelerate or otherwise change the time for payment of, all or any part of the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein; (b) to change any of the representations, covenants, events of default or any other terms or conditions of or pertaining to the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein, including, without limitation, decreases or increases in amounts of principal, rates of interest, the Make-Whole Amount or any other obligation; (c) to take and hold security for the payment of the Notes, the Note Agreement, any other Note Document or any other instrument referred to therein, for the performance of this Guarantee Agreement or otherwise for the Guaranteed Obligations and to exchange, enforce, waive, subordinate and release any such
security; (d) to apply any such security and to direct the order or manner of sale thereof as the holders in their sole discretion may determine; (e) to obtain additional or substitute endorsers or guarantors or release any other Guarantor or any other Person or entity primarily or secondarily liable in respect of the Guaranteed Obligations; (f) to exercise or refrain from exercising any rights against the Issuer and others, including [the Parent Guarantor and] any [other] Subsidiary Guarantor; and (g) to apply any sums, by whomsoever paid or however realized, to the payment of the Guaranteed Obligations and all other obligations owed hereunder. The holders shall have no obligation to proceed against [the Parent Guarantor or] any [other] Subsidiary Guarantor or any additional or substitute endorsers or guarantors or to pursue or exhaust any security provided by the Issuer, the Guarantor, [the Parent Guarantor or] any [other] Subsidiary Guarantor or any other Person or to pursue any other remedy available to the holders.
If an event permitting the acceleration of the maturity of the principal amount of any Notes shall exist and such acceleration shall at such time be prevented or the right of any holder to receive any payment on account of the Guaranteed Obligations shall at such time be delayed or otherwise affected by reason of the pendency against the Issuer, the Guarantor or any other guarantors of a case or proceeding under a bankruptcy or insolvency law, the Guarantor agrees that, for purposes of this Guarantee Agreement and its obligations hereunder, the maturity of such principal amount shall be deemed to have been accelerated with the same effect as if the holder thereof had accelerated the same in accordance with the terms of the Note Agreement, and the Guarantor shall forthwith pay such accelerated Guaranteed Obligations.
Section 5. SUBROGATION AND SUBORDINATION.
(a) The Guarantor will not be entitled to and will not exercise any rights which it may have acquired by way of subrogation under this Guarantee Agreement, by any payment made hereunder or otherwise, or accept any payment on account of such subrogation rights, nor will the Guarantor seek or be entitled to seek any reimbursement, contribution or indemnity from the Issuer, [the Parent Guarantor,] any [other] Subsidiary Guarantor or any other Person, nor seek or be entitled to seek any rights or recourse to any security for the Notes or this Guarantee Agreement, in each case unless and until all of the Guaranteed Obligations shall have been indefeasibly paid in full in cash.
(b) The Guarantor hereby subordinates the payment of all Financial Indebtedness and other obligations of the Issuer, [the Parent Guarantor,] any [other] Subsidiary Guarantor or any other guarantor of the Guaranteed Obligations owing to the Guarantor, whether now existing or hereafter arising, including, without limitation, all rights and claims described in clause (a) of this Section 5, to the indefeasible payment in full in cash of all of the Guaranteed Obligations. If the Required Holders so request, any such Financial Indebtedness or other obligations shall be enforced and performance received by the Guarantor as trustee for the holders and the proceeds thereof shall be paid over to the holders promptly, in the form received (together with any necessary endorsements) to be applied to the Guaranteed Obligations, whether matured or unmatured, as may be directed by the Required Holders, but without reducing or affecting in any manner the liability of the Guarantor under this Guarantee Agreement.
(c) If any amount or other payment is made to or accepted by the Guarantor in violation of any of the preceding clauses (a) and (b) of this Section 5, such amount shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for the benefit of, the holders and shall be paid over to the holders promptly, in the form received (together with any necessary endorsements) to be applied to the Guaranteed Obligations, whether matured or unmatured, as may be directed by the Required Holders, but without reducing or affecting in any manner the liability of the Guarantor under this Guarantee Agreement.
(d) The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Note Agreement and that its agreements set forth in this Guarantee Agreement (including this Section 5) are knowingly made in contemplation of such benefits.
Section 6. REINSTATEMENT OF GUARANTEE.
This Guarantee Agreement shall continue to be effective, or be reinstated, as the case may be, if and to the extent at any time payment, in whole or in part, of any of the sums due to any holder on account of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by a holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Issuer or any other guarantors, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Issuer or any other guarantors or any part of its or their property, or otherwise, all as though such payments had not been made.
Section 7. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
The Guarantor now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Issuer. No holder shall have any duty or responsibility to provide the Guarantor with any credit or other information concerning the affairs, financial condition or business of the Issuer which may come into possession of the holders. The Guarantor is executing and delivering this Guarantee Agreement and each other Note Document to which it is a party without reliance upon any representation by the holders including, without limitation, with respect to (a) the due execution, validity, effectiveness or enforceability of any instrument, document or agreement evidencing or relating to any of the Guaranteed Obligations or any loan or other financial accommodation made or granted to the Issuer, (b) the validity, genuineness, enforceability, existence, value or sufficiency of any property securing any of the Guaranteed Obligations or the creation, perfection or priority of any lien or security interest in such property or (c) the existence, number, financial condition or creditworthiness of other guarantors or sureties, if any, with respect to any of the Guaranteed Obligations.
Section 8. TERM OF GUARANTEE AGREEMENT.
This Guarantee Agreement and all guarantees, covenants and agreements of the Guarantor contained herein shall continue in full force and effect and shall not be discharged until such time as all of the Guaranteed Obligations and all other obligations hereunder shall be indefeasibly paid in full in cash and shall be subject to reinstatement pursuant to Section 6.
Section 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the execution and delivery of this Guarantee Agreement and may be relied upon by any subsequent holder, regardless of any investigation made at any time by or on behalf of any Purchaser or any other holder. All statements contained in any certificate or other instrument delivered by or on behalf of the Guarantor pursuant to this Guarantee Agreement shall be deemed representations and warranties of the Guarantor under this Guarantee Agreement. Subject to the preceding sentence, this Guarantee Agreement embodies the entire agreement and understanding between each holder and the Guarantor and supersedes all prior agreements and understandings relating to the subject matter hereof.
Section 10. AMENDMENT AND WAIVER.
10.1 Requirements . This Guarantee Agreement may be amended, and the observance of any term hereof may be waived (either retroactively or prospectively), with (and only with) the written consent of the Guarantor and the Required Holders, except that no amendment or waiver (a) of any of the provisions of Section 1, 2, 3, 4, 5, 6, 8, 10 or 12.7 hereof, or any defined term (as it is used therein), or (b) which results in the limitation of the liability of the Guarantor hereunder will be effective as to any holder unless consented to by such holder in writing.
10.2 Solicitation of Holders of Notes .
(a) Solicitation . The Guarantor will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof. The Guarantor will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 10.2 to each holder promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.
(b) Payment . The Guarantor will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any holder as
consideration for or as an inducement to the entering into by any holder of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder even if such holder did not consent to such waiver or amendment.
(c) Consent in Contemplation of Transfer . Any consent made pursuant to this Section 10.2 by the holder of any Note that has transferred or has agreed to transfer such Note to an Obligor (including the Guarantor) or any Affiliate of an Obligor and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force or effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force or effect except solely as to such transferring holder.
10.3 Binding Effect . Any amendment or waiver consented to as provided in this Section 10 applies equally to all holders and is binding upon them and upon each future holder and upon the Guarantor without regard to whether any Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant or agreement not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Guarantor and the holder nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder. As used herein, the term this Guarantee Agreement and references thereto shall mean this Guarantee Agreement as it may be amended, modified, supplemented or restated from time to time.
10.4 Notes Held by Issuer, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Guarantee Agreement, or have directed the taking of any action provided herein to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by any Obligor (including the Guarantor) or any Affiliate of an Obligor shall be deemed not to be outstanding.
Section 11. NOTICES; ENGLISH LANGUAGE .
All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent:
(a) if to the Guarantor, to [ ], or such other address as the Guarantor shall have specified to the holders in writing, or
(b) if to any holder, to such holder at the addresses specified for such communications set forth in Schedule A to the Note Agreement, or such other address as such holder shall have specified to the Guarantor in writing.
Each document, instrument, financial statement, report, notice or other communication delivered in connection with this Guarantee Agreement shall be in English or accompanied by an English translation thereof.
This Guarantee Agreement has been prepared and signed in English and the Guarantor agrees that the English version hereof (to the maximum extent permitted by applicable law) shall be the only version valid for the purpose of the interpretation and construction hereof and thereof notwithstanding the preparation of any translation into another language hereof or thereof, whether official or otherwise or whether prepared in relation to any proceedings which may be brought in [ ] or any other jurisdiction in respect hereof or thereof.
Section 12. MISCELLANEOUS.
12.1 Successors and Assigns . All covenants and other agreements contained in this Guarantee Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns whether so expressed or not.
12.2 Severability . Any provision of this Guarantee Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law), not invalidate or render unenforceable such provision in any other jurisdiction.
12.3 Construction . Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such express contrary provision) be deemed to excuse compliance with any other covenant. Whether any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.
The section and subsection headings in this Guarantee Agreement are for convenience of reference only and shall neither be deemed to be a part of this Guarantee Agreement nor modify, define, expand or limit any of the terms or provisions hereof. All references herein to numbered sections, unless otherwise indicated, are to sections of this Guarantee Agreement. Words and definitions in the singular shall be read and construed as though in the plural and vice versa, and words in the masculine, neuter or feminine gender shall be read and construed as though in either of the other genders where the context so requires.
12.4 Further Assurances . The Guarantor agrees to execute and deliver all such instruments and take all such action as the Required Holders may from time to time reasonably request in order to effectuate fully the purposes of this Guarantee Agreement.
12.5 Governing Law . This Guarantee Agreement and any non-contractual obligations arising out of or in connection with it shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of England and Wales.
12.6 Jurisdiction .
(a) The English courts have exclusive jurisdiction to settle any dispute in connection with this Guarantee Agreement, including a dispute relating to any non-contractual obligation arising out of or in connection with this Guarantee Agreement.
(b) The English courts are the most appropriate and convenient courts to settle any such dispute and the Guarantor waives objection to those courts on the grounds of inconvenient forum or otherwise in relation to proceedings in connection with this Guarantee Agreement.
(c) This Section 12.6 is for the benefit of the holders of Notes only. To the extent allowed by law, the Required Holders may take:
(1) proceedings in any other court; and
(2) concurrent proceedings in any number of jurisdictions.
12.7 Obligation to Make Payment in U.S. Dollars . Any payment on account of an amount that is payable hereunder in U.S. Dollars which is made to or for the account of any holder in any other currency, whether as a result of any judgment or order or the enforcement thereof or the realization of any security or the liquidation of the Guarantor, shall constitute a discharge of the obligation of the Guarantor under this Guarantee Agreement only to the extent of the amount of U.S. Dollars which such holder could purchase in the foreign exchange markets in London, England, with the amount of such other currency in accordance with normal banking procedures at the rate of exchange prevailing on the London Banking Day following receipt of the payment first referred to above. If the amount of U.S. Dollars that could be so purchased is less than the amount of U.S. Dollars originally due to such holder, the Guarantor agrees to the fullest extent permitted by law, to indemnify and save harmless such holder from and against all loss or damage arising out of or as a result of such deficiency. This indemnity shall, to the fullest extent permitted by law, constitute an obligation separate and independent from the other obligations contained in this Guarantee Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by such holder from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order. As used herein the term London Banking Day shall mean any day other than Saturday or Sunday or a
day on which commercial banks are required or authorized by law to be closed in London, England.
12.8 Reproduction of Documents; Execution . This Guarantee Agreement may be reproduced by any holder by any photographic, photostatic, electronic, digital, or other similar process and such holder may destroy any original document so reproduced. The Guarantor agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such holder in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 12.8 shall not prohibit the Guarantor or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. A facsimile or electronic transmission of the signature page of the Guarantor shall be as effective as delivery of a manually executed counterpart hereof and shall be admissible into evidence for all purposes.
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IN WITNESS WHEREOF, the Guarantor has caused this Guarantee Agreement to be duly executed and delivered as of the date and year first above written.
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Exhibit 1(b)(ii)
Form of Joinder Agreement
JOINDER AGREEMENT
This Joinder Agreement (this Joinder Agreement ), dated as of [ ], is executed by [ ], a [ ] (the Guarantor ), in favor of each of the holders from time to time of the Notes (as defined below) (collectively, the Noteholders ) issued by BA Holdings, Inc. (the Issuer ) pursuant to the Note Agreement (as defined below).
RECITALS
A. The Issuer, Luxfer Holdings PLC (the Parent Guarantor ), and each of the parties listed in Schedule C thereto (the Original Subsidiary Guarantors and together with the Issuer and the Parent Guarantor, collectively, the Obligors ), on the one hand, and each of the purchasers listed in Schedule A thereto (the Purchasers ), on the other hand, entered into a Note Purchase Agreement, dated as of May 13, 2011 (as it may be amended, restated or otherwise modified from time to time, the Note Agreement ), pursuant to which the Issuer issued Senior Notes due June 15, 2018 in the aggregate principal amount of US$65,000,000 (the Notes ) to the Purchasers.
B. The Guarantor and the Issuer are operated as part of one consolidated business entity and are directly dependent upon each other for and in connection with their respective business activities and their respective financial resources. The Guarantor will receive[, and has received,] direct and indirect economic and financial benefits from the indebtedness incurred under the Note Agreement and the Notes by the Issuer, and the incurrence of such indebtedness is or was in the best interests of the Guarantor. By agreeing to enter into this Joinder Agreement [and the Guarantee Agreement (as defined below)](1), the Guarantor will gain substantial financial and other benefits, both direct and indirect.
C. The Obligors have covenanted in the Note Agreement that joinder agreements shall be duly executed by certain Subsidiaries of the Parent Guarantor. Annex 1 hereto sets forth a list of the joinder agreements with respect to the Notes executed prior to the date of this Joinder Agreement.
[D. Concurrently herewith, the Guarantor is entering into a certain [Guarantee Agreement], dated the date hereof, pursuant to which the Guarantor is guaranteeing the obligations of the Issuer under the Notes, the Note Agreement and the other Note Documents (the Guarantee Agreement ).](2)
(1) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
(2) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Guarantor hereby agrees with the Noteholders as follows:
1. Unless otherwise defined herein, all capitalized terms used herein and defined in the Note Agreement shall have the respective meanings given to those terms in the Note Agreement.
2. The Guarantor has received a copy of, and has reviewed, the Note Agreement as in existence on the date of this Joinder Agreement and is executing and delivering this Joinder Agreement to the Noteholders pursuant to Section 9.31 of the Note Agreement.
3. In accordance with the terms of Section 9.31 of the Note Agreement, the Guarantor, by the execution and delivery of this Joinder Agreement, does hereby agree to become, and does hereby become, (a) a party to the Note Agreement as a Subsidiary Guarantor and (b) bound by the terms and conditions, covenants and other agreements in the Note Agreement to be performed or observed by, or otherwise applicable to, Subsidiary Guarantors [except for the provisions of Section 13 of the Note Agreement](3) [including, without limitation, becoming jointly and severally liable with the other Guarantors for the Guaranteed Obligations as set forth in Section 13 of the Note Agreement](4). The Note Agreement is hereby, without any further action, amended to add the Guarantor as a Subsidiary Guarantor and signatory to the Note Agreement.
4. The Guarantor hereby makes, as of the date hereof and only as to itself in its capacity as a Subsidiary Guarantor under the Note Agreement and/or as a Subsidiary, each of the representations and warranties set forth in Section 5 of the Note Agreement that are applicable to a Subsidiary Guarantor and a Subsidiary (except that any representation and warranty made as of or with respect to a specific earlier date is made only as of such date)[, and the representations and warranties set forth in Section 13.8 of the Note Agreement](5).
5. The Guarantor hereby delivers to each of the Noteholders, contemporaneously with the delivery of this Joinder Agreement, each of the documents set forth on Annex 2 hereto.
6. Except as expressly supplemented hereby, the Note Agreement shall remain in full force and effect.
7. All communications and notices hereunder shall be in writing and given as provided in Section 19 of the Note Agreement. All communications and notices hereunder to the Guarantor shall be given to it at the address set forth under its signature hereto.
8. Any provision of this Joinder Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition
(3) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
(4) To be included if the Guarantor is organized in the U.S.
(5) To be included if the Guarantor is organized in the U.S.
or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
9. This Joinder Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice of law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
10. This Joinder Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Guarantor.
11. This Joinder Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. Delivery of an executed signature page hereto by facsimile or e-mail transmission shall be effective as delivery of a manually signed counterpart of this Joinder Agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Joinder Agreement to be executed on its behalf by its duly authorized officer or agent as of the date first above written.
Guarantor :
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Address for notices and other communications:
Annex 1
Joinder Agreements
Executed Prior to the Date of this Joinder Agreement
Existing Joinder Agreements:
[To be Completed]
Annex 2
Additional Documents
(a) A certified copy of the resolution of the board of directors or other governing body of the Guarantor approving the execution and delivery of this Joinder Agreement [and the Guarantee Agreement](6), the joinder of the Guarantor to the Note Agreement and the execution and delivery of any security document referred to in clause (d) below, and the performance of its obligations thereunder and authorizing the person or persons signing this Joinder Agreement [[and /,] the Guarantee Agreement](7) and any other documents to be delivered pursuant hereto to sign the same on behalf of the Guarantor.
(b) Authenticated signatures of the person or persons specified in the resolutions referred to in clause (a) above.
(c) The articles of incorporation or other constitutive documents of the Guarantor, certified as being in effect by the Guarantors Secretary or an Assistant Secretary or a director or other appropriate person (including, if relevant, copies of all amending resolutions or other amendments).
(d) Such security documents as the Required Holders may require, each in form and substance satisfactory to the Required Holders.
(e) An opinion or opinions of counsel in form and substance satisfactory to the Required Holders, confirming that (i) [this Joinder Agreement[, the Guarantee Agreement](8) and any security document referred to in clause (d) above has been duly authorized, executed and delivered by the Guarantor, (ii) this Joinder Agreement[, the Guarantee Agreement](9) and any such security document constitutes the legal, valid and binding contract and agreement of the Guarantor, enforceable in accordance with its terms (except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws affecting the enforcement of creditors rights generally and by general equitable principles), (iii) the execution, delivery and performance by the Guarantor of this Joinder Agreement[, the Guarantee Agreement](10) and any such security document do not (A) violate any law, rule or regulation applicable to the Guarantor, or (B) (1) conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Security not permitted by the Note Agreement or (2) conflict with or result in any breach of any of the provisions of or constitute a default under (I) the provisions of the constitutive documents of the Guarantor, or (II) any agreement or other instrument to which the Guarantor is a party or by which it may be bound, and (iv) any Security granted under any such security document constitutes a valid, attached and perfected Security in favor of the Noteholders.
(6) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
(7) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
(8) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
(9) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
(10) To be included if the Guarantor is organized in a jurisdiction outside the U.S.
(f) Such other documents and evidence with respect to the Guarantor as the Required Holders may reasonably request in order to establish the existence and good standing of the Guarantor and the authorization of the transactions contemplated by this Joinder Agreement and any such security document.
Exhibit 4.4(a)(i)
Form of Opinion of U.S. Special Counsel for the Obligors
See attached
Exhibit 4.4(a)(ii)
Form of Opinion of English Special Counsel for the Obligors
See attached
Exhibit 4.4(a)(iii)
Form of Opinion of New Jersey Special Counsel for the Obligors
See attached
Exhibit 4.4(b)(i)
Form of Opinion of English Special Counsel for the Purchasers
See attached
Exhibit 4.4(b)(ii)
Form of Opinion of U.S. Special Counsel for the Purchasers
See attached
Exhibit 4.11
Form of Intercreditor Deed
See attached
Exhibit 4.18
Commitment Letter
See attached
Exhibit 4.20
Form of Hedging Letter
To: The Prudential Insurance Company of America
RGA Reinsurance Company
2011
Dear Sirs
Note Purchase Agreement dated on or about the date of this letter and made by and among BA Holdings, Inc. (the Issuer), Luxfer Holdings PLC, each of the parties listed in Schedule C thereto and each of the purchasers listed in Schedule A thereto (the Note Purchase Agreement).
We refer to the Note Purchase Agreement. Terms defined in the Note Purchase Agreement shall have the same meaning when used in this letter unless otherwise defined in this letter. This letter is the Hedging Letter.
We confirm that in consideration of your entering into the Note Purchase Agreement, Luxfer Holdings PLC shall enter into or shall procure that the Issuer will enter into, within 60 days of the date of the Note Purchase Agreement, such Hedging Agreements (as defined in the Intercreditor Deed) with a Bank Lender to ensure that from the date 60 days after the date of the Note Purchase Agreement until the Termination Date (as defined in the Intercreditor Deed) not less than 50% in aggregate of all outstanding (i) Facility A Loans (as defined in the Bank Facilities Agreement) and (ii) Notes are either interest rate hedged or provided on a fixed rate basis.
This letter is a Note Document.
This letter shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Please sign and return to us the enclosed copy of this letter to confirm your agreement to its terms.
Yours faithfully
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[On duplicate]
We hereby acknowledge and confirm our agreement to the terms of the letter of which this is a duplicate.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
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Vice President |
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RGA REINSURANCE COMPANY |
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Prudential Private Placement Investors, |
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L.P. (as Investment Advisor) |
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Prudential Private Placement Investors, Inc. |
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(as its General Partner) |
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Vice President |
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Exhibit 7.2
Form of Compliance Certificate
To: [Holders of Notes]
From: Luxfer Holdings PLC
Dated:
Dear Sirs
Note Purchase Agreement, dated as of May 13, 2011, by and among BA Holdings, Inc., Luxfer Holdings PLC, each of the parties listed in Schedule C thereto and each of the purchasers listed in Schedule A thereto (the Note Purchase Agreement)
1 We refer to the Note Purchase Agreement. This is a Compliance Certificate. Terms defined in the Note Purchase Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2 With reference to the [Annual Financial Statements] [Quarterly Financial Statements] for the [Financial Year ended [ ]] [Financial Quarter ended [ ]], we confirm that:
Covenant |
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Relevant
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Target |
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Actual |
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Compliant/Non
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Debt Service Cover (Section 9.1(a)(i)) |
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[ ] to [ ] |
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Not less than [ ]:1 |
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[ ]:1 |
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Interest Cover (Section 9.1(a)(ii)) |
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[ ] to [ ] |
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Not less than 4.0:1 |
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Leverage (Section 9.1(a)(iii)) |
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[ ] to [ ] |
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Not exceeding 3.0:1 |
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Capital Expenditure (Section 9.1(a)(iv)) |
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[ ] to [ ] |
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Not exceeding $[ ] (110% of budgeted capital expenditure) |
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Set forth in Exhibit A attached hereto are detailed calculations of each of the ratios set forth above.
3 We confirm that we have reviewed the relevant terms hereof and have made, or caused to be made, under our supervision, a review of the transactions and conditions of the Group from the beginning of the interim or annual period covered by the statements being furnished herewith to the date hereof and that such review has not disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default.(11)
4 We confirm that the following companies constitute Material Companies for the purposes of the Note Purchase Agreement (Section 9.31(b)) :
[ ]
5 We confirm that the following companies are obligated as a borrower or a guarantor under or with respect to a Principal Lending Facility (Section 9.31(c)) :
[ ]
6 We confirm that the aggregate earnings before interest, tax and amortization (calculated on the same basis as EBITA) of the Obligors (calculated on an unconsolidated basis and excluding all unrealized intra-Group profits of any member of the Group) exceeds 75% of EBITA of the Group (Section 9.31(a)(i)) .
7 We confirm that the aggregate gross assets of the Obligors (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 75% of the consolidated gross assets of the Group (Section 9.31(a)(ii)) .
Signed |
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Finance Director of |
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Director of |
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Luxfer Holdings PLC |
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Luxfer Holdings PLC |
[insert applicable certification language]
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for and on behalf of |
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(11) If any condition or event that constitutes a Default or an Event of Default existed or exists, the certificate should specify the nature and period of existence thereof and what action the Obligors have taken or propose to take with respect thereto.
[name of Auditors of Luxfer Holdings PLC](12) |
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(12) Only applicable if the Compliance Certificate accompanies the Audited Financial Statements and is to be signed by the Auditors. To be agreed with the Parent Guarantors Auditors prior to signing of the Agreement.
Exhibit 4.5
AMENDMENT NO. 1 TO LUXFER HOLDINGS PLC LONG-TERM UMBRELLA INCENTIVE PLAN
The Luxfer Holdings PLC Long-Term Umbrella Incentive Plan (the Plan ) and the UK Schedule thereto are hereby amended effective as of January 23, 2013 as follows:
1. By deleting Section 3(c) of the Plan in its entirety and replacing it by the following:
(c) Unless otherwise determined by the Committee, the maximum value of the Awards granted under the Plan in any calendar year shall not exceed in the aggregate : (i) 150% of base salary for the Chief Executive Officer, (ii) 120% of base salary for the Chief Financial Officer and other members of the Executive Management Board of Luxfer (other than the Chief Executive Officer), and (iii) 100% of base salary for other Participants. For purposes of these individual limits, the Awards shall be valued as follows: (i) Time-Based Restricted Stock and Time-Based Restricted Stock Units shall be valued at the Fair Market Value of Shares subject to the Award on the date of grant; (ii) Options and Stock Appreciation Rights shall be valued at one-third of the Fair Market Value of Shares subject to the Award on the date of grant; (iii) Performance-Based Restricted Stock and Performance-Based Restricted Stock Units shall be valued at 50% of the Fair Market Value on the date of grant of the Target Award; (iv) Cash Incentive Awards shall be valued at the maximum cash value payable under the Award, and (v) Other Stock Based Awards shall be valued, as determined by the Committee in good faith at the time of grant , by reference to the Fair Market Value of Shares subject to the Award at the time of grant.
2. By deleting Section 7(c) of the Plan in its entirety and replacing it by the following:
(c) T he Committee may provide that any dividends declared on the Restricted Stock before they are vested shall either (i) be reinvested in the form of additional Shares, which shall be subject to the same vesting provisions that apply to the Shares of Restricted Stock to which they relate , or (ii) be credited by the Company to an account for the Participant and accumulated with or without interest until the date upon which the Shares of Restricted Stock to which they relate become vested, and any dividends accrued with respect to forfeited Restricted Stock will be reconveyed to the Company without further consideration or any act or action by the Participant . In cased dividends are reinvested, the number of additional Shares shall be determined by first (i) multiplying the number of Shares of Restricted Stock subject to an Award on the dividend payment date by the per-Share dollar amount of the dividend so paid, and then (ii) dividing the resulting amount by the Fair Market Value of Shares on the dividend payment date, with the number of Shares rounded down to the nearest whole number and the cash balance remaining being carried forward and added to the dividend amounts (if any) paid on the next occasion. If Shares of Restricted Stock subject to an Award are forfeited, the additional Shares that relate to such Restricted Stock shall also be forfeited.
3. By deleting Section 5(c) of the Plan in its entirety and replacing it by the following:
(c) Each Award granted under the Plan shall be evidenced by an Award Agreement, in form and substance approved by the Committee. Except as otherwise determined by the Committee, an Award may not be Transferred.
4. By deleting Section 5 of the UK Schedule to the Plan in its entirety and replacing it by the following:
5. Non-Transferability
Section 5(c) of the Plan shall be amended to read:
Each Award granted under the Plan shall be evidenced by an Award Agreement in form and substance approved by the Committee. An Award may not be Transferred (other than to a Participants Beneficiary in the event of his death) .
5. This amendment shall not affect any other provisions of the Plan and the UK Schedule thereto and the Plan and the UK Schedule shall remain in full force and effect.
Exhibit 4.6
AMENDMENT NO. 2 TO LUXFER HOLDINGS PLC LONG-TERM UMBRELLA INCENTIVE PLAN
The Luxfer Holdings PLC Long-Term Umbrella Incentive Plan (the Plan ) is hereby amended effective as of March 28, 2013 as follows:
1. By deleting Section 2(r) of the Plan in its entirety and replacing it by the following:
(r) Fair Market Value means, with respect to a Share, as of the applicable date of determination (i) (x) for purposes of Sections 3(c) and 6(a) hereof, the closing price per Share on the trading day immediately preceding such date as reported on the New York Stock Exchange and (y) for all other purposes, the closing price per Share on that date as reported on the New York Stock Exchange (or if not reported, the closing price per Share on the trading day immediately preceding such date as reported on the New York Stock Exchange) or (ii) if not so reported, as determined by the Committee in its sole discretion using a reasonable valuation method taking into account, to the extent applicable, the requirements of Section 409A of the Code.
2. This amendment shall not affect any other provisions of the Plan and the Plan shall remain in full force and effect.
Exhibit 4.7
LUXFER HOLDINGS PLC
AMENDED AND RESTATED
NON-EXECUTIVE DIRECTORS EQUITY INCENTIVE PLAN
1. Purpose of the Plan
The purpose of the Plan is to promote the interests of the Company and its shareholders, by allowing the Company to attract and retain highly qualified Non-Executive Directors by permitting them to obtain or increase their proprietary interest in the Company.
2. Definitions
As used in the Plan or in any instrument governing the terms of any Award, unless stated otherwise, the following definitions apply to the terms indicated below:
(a) American Depositary Shares means American Depositary Shares, each representing one-half of an Ordinary Share . The American Depositary Shares are evidenced by American Depositary Receipts issued pursuant to the Deposit Agreement as in effect from time to time between Luxfer and The Bank of New York Mellon.
(b) Award means any Option, Restricted Stock, Restricted Stock Unit or Nil/Nominal Cost Right granted to a P articipant pursuant to the Plan.
(c) Award Agreement means any written agreement, contract or other instrument or document evidencing an Award.
(d) Beneficiary means a person designated in writing by the Participant to receive any amounts due to the Participant hereunder in the event of the Participants death or, absent any such designation, the Participants estate. Such designation, if any, must be on file with the Company prior to the Participants death.
(e) Board means the Board of Directors of Luxfer.
(f) Cause means (i) absence without the permission of the Board from meetings of the Board for three consecutive full meetings, (ii) any prohibition by law from being a director, (iii) becoming bankrupt or making any formal arrangement or composition with the Participants creditors generally, (iv) commission of any serious or repeated breach or non-observance of the Participants obligations to the Company (which include an obligation not to breach directors statutory, fiduciary or common-law duties), or (v) any conduct involving fraud or dishonesty or acting in any manner which, in the opinion of the Company, brings or is likely to bring the Company into disrepute or is materially adverse to the interests of the Company.
(g) Change in Control means, u nless otherwise defined in the Award Agreement, the occurrence of any of the following after the Effective Date: (i) any Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30 % or more of the combined voting power of the
Companys outstanding securities (other than any Person who was a beneficial owner of securities of the Company representing 30 % or more of the combined voting power of the Companys outstanding securities prior to the Effective Date); or (ii) dissolution or liquidation of the Company; or (iii) material reconstruction or significant demerger; or (iv) individuals who constitute the Board on the Effective Date (the Incumbent Board ) cease for any reason to constitute at least a majority of the members of the Board, provided that any person becoming a director subsequent to the Effective Date whose appointment to fill a vacancy or to fill a new Board position was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Companys shareholders was approved by the same nominating committee serving under an Incumbent Board, shall be, for purposes of this clause (iv), considered as though he were a member of the Incumbent Board; or (v) the occurrence of any of the following of which the Incumbent Board does not approve: (A) merger or consolidation in which the Company is not the surviving corporation or (B) sale of all or substantially all of the assets of the Company; or (vi) consummation of a plan of reorganization, merger or consolidation of the Company with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan of reorganization are exchanged or converted into cash or property or securities not issued by the Company, which was approved by shareholders pursuant to a proxy statement soliciting proxies from shareholders of the Company, by someone other than the then current management of the Company.
(h) Code means the United States Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder.
(i) Committee means the Board or such other committee as the Board may designate from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan.
(j) Company means Luxfer and all of its Subsidiaries, collectively.
(k) Effective Date means October 2, 2012 .
(l) Exchange Act means the United States Securities Exchange Act of 1934, as amended from time to time.
(m) Exercise Price means the price per Share at which a holder of an Option may purchase Shares.
(n) Fair Market Value means, with respect to a Share, as of the applicable date of determination (i) (x) for purposes of Sections 6 and 7(a) hereof, the closing price per Share on the trading day immediately preceding such date as reported on the New York Stock Exchange and (y) for all other purposes, the closing price per Share on that date as reported on the New York Stock Exchange (or if not reported, the closing price per Share on the trading day immediately preceding such date as reported on the New York Stock Exchange) or (ii) if not so reported, as determined by the Committee in its sole discretion using a reasonable valuation
method taking into account, to the extent applicable, the requirements of Section 409A of the Code.
(o) Luxfer means Luxfer Holdings PLC, incorporated in England and Wales, and any successor thereto.
(p) Nil/Nominal Cost Right means an equity-based award granted to a UK Participant pursuant to the UK Schedule to the Plan.
(q) Non-Executive Director shall mean a member of the Board who is not an employee of the Company.
(r) Option means a right granted to a Participant pursuant to Section 7 to purchase a specified amount of Shares at an Exercise Price.
(s) Ordinary Shares means Luxfers ordinary shares, nominal value £1 per share , or any other security into which the ordinary shares shall be changed pursuant to the adjustment provisions of Section 10 of the Plan .
(t) Participant means a Non-Executive Director to whom one or more Awards have been granted pursuant to the Plan.
(u) Person means a person as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any group within the meaning of Section 13(d)(3) under the Exchange Act.
(v) Personal Data means the name, home address, email address and telephone number, date of birth, social security number or equivalent of a Participant, details of all rights to acquire Shares or other securities or cash granted to the Participant and of Shares or other securities issued or transferred or cash paid to the Participant pursuant to the Plan and any other personal information which could identify the Participant and is necessary for the administration of the Plan.
(w) Plan means this Luxfer Non-Executive Directors Equity Incentive Plan, as it may be amended from time to time.
(x) Restricted Stock means Shares awarded to a Participant pursuant to Section 8 subject to a substantial risk of forfeiture
(y) Restricted Stock Unit means a right to receive a number of Shares subject to the Award or the value thereof as of the specified date granted to a Participant pursuant to Section 9.
(z) Securities Act means the United States Securities Act of 1933, as amended.
(aa) Share means an Ordinary Share or an American Depositary Share.
(bb) Subsidiary shall mean any entity of which a majority of the outstanding voting shares or voting power is beneficially owned directly or indirectly by Luxfer.
(cc) Transfer means, with respect to any Award, a transfer, sale, exchange, assignment, pledge, hypothecation or other encumbrance or disposition of such Award , whether for or without consideration . Transferee , Transferred and T ransferability shall have correlative meanings.
(dd) UIP means the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan, as it may be amended from time to time.
(ee) U.S. shall mean the United States of America.
3. Term; Stock Subject to the Plan
(a) Term of the Plan
Unless the Plan shall have been earlier terminated by the Company, Awards may be granted under the Plan at any time in the period commencing on the Effective Date and ending immediately prior to the tenth anniversary of the Effective Date. Awards granted pursuant to the Plan within that period shall not expire solely by reason of the termination of the Plan.
(b) Stock Subject to the Plan
The maximum number of Shares that initially may be available for Awards under the Plan and awards under the UIP, in the aggregate, shall be a number equal to 680,410, which represents 5% of the outstanding share capital of Luxfer as of the Effective Date. The maximum referred to in the preceding sentences of this paragraph shall be subject to adjustment as provided in Section 10. The Board may, subject to any applicable law, from time to time increase the maximum number of Shares that may be available for Awards under the Plan. The Company may satisfy its obligation to deliver Shares under the Plan in any manner permitted by law, including without limitation, by issuing new Shares that are authorized for issuance, using treasury shares or causing any trust to deliver Shares.
For purposes of the preceding paragraph, Shares covered by Awards shall only be counted as used to the extent they are actually transferred or delivered to a Participant (or such Participants permitted t ransferees as described in the Plan) pursuant to the Plan. For purposes of clarification, in accordance with the preceding sentence, if Shares are withheld to pay the Exercise Price of an Option or to satisfy any tax withholding requirement in connection with an Award, only the shares transferred or delivered (if any), net of the shares withheld or paid, will be deemed transferred or delivered for purposes of determining the number of Shares that are available for transfer and delivery under the Plan or the UIP. In addition, if Shares are transferred or delivered subject to conditions which may result in the forfeiture, cancellation or return of such Shares to the Company, any portion of the Shares forfeited, cancelled or returned shall thereafter be treated as not transferred or delivered pursuant to the Plan. In addition, if Shares owned by a Participant (or such Participants permitted transferees as described in the Plan) are tendered (either actually or through attestation) to the Company in payment of any obligation in connection with an Award, the number of Shares tendered shall be added to the number of Shares that are available for delivery under the Plan or the UIP. Shares covered by Awards granted pursuant to the Plan in connection with the assumption, replacement, conversion
or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual) shall not count as used under the Plan for purposes of this Section 3(b).
4. Administration of the Plan
The Plan shall be administered by the Committee. The Committee shall, consistent with the terms of the Plan, designate the type and other terms and conditions of Awards under the Plan.
The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and the terms of any Award (and any Award Agreement) granted thereunder and to adopt and amend from time to time such rules and regulations for the administration of the Plan as the Committee may deem necessary or appropriate.
On or after the date of grant of an Award under the Plan, the Committee may (i) accelerate the date on which any such Award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such Award, including, without limitation, extending the period following a termination of a Participants directorship during which any such Award may remain outstanding, (iii) provide for the payments of dividends or dividend equivalents with respect to any such Award, or (iv) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Award; provided that the Committee shall not have any such authority to the extent that the grant or exercise of such authority would cause any tax to become due under Section 409A of the Code or any other applicable law .
Without limiting the generality of the foregoing, in order to assure the viability of Awards granted to Participants acting as a director of Luxfer in various jurisdictions, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom applicable in the jurisdiction in which the Participant resides or acts as a director of Luxfer. Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative version of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan for any other purpose.
Decisions of the Committee shall be final, binding and conclusive on all parties.
To the extent permitted by applicable law, (i) no member of the Committee shall be liable for any action, omission, or determination relating to the Plan, and (ii) the Company shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan.
5. Eligibility; Award Agreements; Non-Transferability
(a) Non-Executive Directors of the Company shall be eligible to receive Awards pursuant to the Plan.
(b) Each Award granted under the Plan shall be evidenced by an Award Agreement (which in the case of Options may be a simplified certificate of entitlement), in form and substance approved by the Committee. Except as otherwise determined by the Committee, an Award may not be Transferred .
6. Non-Discretionary Grants .
Upon the appointment or election of a person as a Non-Executive Director for the first time while this Plan is in effect, such Non-Executive Director shall receive a one-time Award valued at $30,000. Each calendar year during the term of the Plan, on a date determined by the Committee (the Award Grant Date ), each Non-Executive Director who is acting as a director of Luxfer on the Award Grant Date and who has at the Award Grant Date been acting as a director of Luxfer for at least six months after his or her initial appointment or election shall receive 50% of such directors annual fee in Awards. In the event a Non-Executive Director has not been acting as a director of Luxfer for at least six months on the Award Grant Date , the annual fee earned in that year and payable in Awards shall be included in the Awards in respect of the following calendar year.
Subject to the Committees discretion, for purposes of the Plan, the Awards shall be valued as follows: (i) Options shall be valued at one-third of the Fair Market Value of Shares subject to the Award on the date of grant: (ii) Restricted Stock and Restricted Stock Units shall be valued at the Fair Market Value of Shares subject to the Award on the date of grant; and (iii) Nil/Nominal Cost Rights shall be valued at the Fair Market Value of Shares subject to the Award on the date of grant.
7. Options
Unless otherwise provided in the applicable Award Agreement, each Award of an Option granted under the Plan shall have the following terms and conditions:
(a) Evidence of Grant
The Award Agreement evidencing the grants of Options shall include the amount of Shares subject to an Award, the Exercise Price, vesting conditions (as set forth below) and such additional provisions as may be specified by the Committee . The Exercise Price per Share covered by any Option shall be not less than 100% of the Fair Market Value of a Share on the date of grant.
(b) Vesting
Each Option shall become vested and exercisable on the date determined by the Committee but no later than 16 months from the Award Grant Date provided the Participant is continuously acting as a director of Luxfer through the vesting date.
(c) Exercise Period
No Option shall be exercisable after the expiration of ten years from the date it is granted.
(d) Exercise of Options
Each Option may, to the extent vested and exercisable, be exercised in whole or in part. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof. An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise. The E xercise P rice of an Option must be paid in full when the Option is exercised. For the avoidance of doubt, the preceding sentence will not prevent the Exercise Price being paid from the proceeds pursuant to the prompt sale of Shares acquired upon exercise or the Participant entering into other permissible arrangements, agreed by the Committee, for procuring payment of the aggregate Exercise Price .
(e) Cessation of Directorship
Subject to the discretion of the Committee, if the Participant ceases to be a director of Luxfer for any reason other than for Cause, (i) the portion of the Option that has not become vested or exercisable as of the date when the Participant ceases to be a director shall immediately lapse and (ii) except as otherwise provided in the Plan or in the applicable Award Agreement, the portion of the Option that is vested or exercisable as of the date when the Participant ceases to be a director will lapse on the first anniversary of such date to the extent not theretofore exercised . If the Participant ceases to be a director of Luxfer because of removal or vacation of office for Cause, the Option, whether then vested or exercisable or not, shall immediately lapse on such cessation of directorship.
8. Restricted Stock
Unless otherwise provided in the applicable Award Agreement, each Award of Restricted Stock granted under the Plan shall have the following terms and conditions:
(a) Grant of Restricted Stock
At the time of grant, the Committee shall determine, in its discretion, the terms and conditions that will apply to Restricted Stock granted pursuant to this Section 8. Restricted Stock shall vest on the date determined by the Committee but no later than 16 months from the Award Grant Date provided the Participant is continuously acting as a director of Luxfer through the vesting date.
(b) Issuance of Restricted Stock; Rights of Participants
As soon as practicable after Restricted Stock has been granted, Restricted Stock shall be transferred to the Participant. Shares of Restricted Stock may be evidenced in such manner as the Committee shall determine. Except as otherwise determined by the Committee, the Participant will have all rights of a shareholder with respect to the Shares of Restricted Stock, including the right to vote and to receive dividends or other distributions, except that the Shares may be subject to a vesting schedule and forfeiture and may not be Transferred until the restrictions are satisfied or lapse. The Committee may enforce any restrictions that the
Committee may impose on Restricted Stock in such manner as the Committee shall determine, including legends, custody accounts or any other restrictions on transfer.
(c) Dividends
T he Committee may provide that any dividends declared on the Restricted Stock before they are vested shall either (i) be reinvested in the form of additional Shares, which shall be subject to the same vesting provisions that apply to the Shares of Restricted Stock to which they relate , or (ii) be credited by the Company to an account for the Participant and accumulated with or without interest until the date upon which the Shares of Restricted Stock to which they relate become vested, and any dividends accrued with respect to forfeited Restricted Stock will be reconveyed to the Company without further consideration or any act or action by the Participant . In cased dividends are reinvested, the number of additional Shares shall be determined by first (i) multiplying the number of Shares of Restricted Stock subject to an Award on the dividend payment date by the per-Share dollar amount of the dividend so paid, and then (ii) dividing the resulting amount by the Fair Market Value of Shares on the dividend payment date, with the number of Shares rounded down to the nearest whole number and the cash balance remaining being carried forward and added to the dividend amounts (if any) paid on the next occasion. If Shares of Restricted Stock subject to an Award are forfeited, the additional Shares that relate to such Restricted Stock shall also be forfeited.
(d) Cessation of Directorship
Subject to the discretion of the Committee, if the Participant ceases to be a director of Luxfer for any reason, all Shares underlying Restricted Stock that have not yet become vested as of the date the Participant ceases to be a director shall be immediately forfeited by the Participant and the Participant shall have no further rights with respect thereto.
9. Restricted Stock Units
Unless otherwise provided in the applicable Award Agreement, each Award of Restricted Stock Units granted under the Plan shall have the following terms and conditions:
(a) Grant of Restricted Stock Units
At the time of grant, the Committee shall determine, in its discretion, the terms and conditions that will apply to Restricted Stock Units granted pursuant to this Section 9. Restricted Stock Units shall vest on the date determined by the Committee but no later than 16 months from the Award Grant Date provided the Participant is continuously acting as a director of Luxfer through the vesting date .
(b) Dividend Equivalents
The Committee shall provide for the payment of dividend equivalents with respect to Restricted Stock Units. The Company shall credit the Participant with additional Restricted Stock Unit s as of each date on which the Company pays a cash dividend on Shares, the number of which shall be determined by first (i) multiplying the number of Restricted Stock Units subject to an Award on the dividend payment date by the per-Share dollar amount of the dividend so paid, and then (ii) dividing the resulting amount by the Fair Market Value of Shares
on the dividend payment date. Additional Restricted Stock Units shall be subject to the same restrictions, including but not limited to vesting, T ransferability and payment restrictions, that apply to the Restricted Stock Units to which they relate. If the Restricted Stock Units subject to an Award are forfeited, the additional Restricted Stock Units that relate to such Restricted Stock Units shall also be forfeited.
(c) Form and Timing of Settlement
Payment of earned Restricted Stock Units shall be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement, provided that with respect to any Restricted Stock Units subject to Section 409A of the Code such payment will occur in a manner that would not cause any tax to become due under Section 409A of the Code. Restricted Stock Units may be settled for cash, Shares, or a combination of both, as determined by the Committee and set forth in the Award Agreement. The Committee may permit Participants to request the deferral of payment of vested Restricted Stock Units (including the value of related dividend equivalents, if any) to a date later than the payment date specified in the Award Agreement, provided that with respect to any Restricted Stock Units subject to Section 409A of the Code such deferral will be made in a manner that would not cause any tax to become due under Section 409A of the Code.
(d) Cessation of Directorship .
Subject to the discretion of the Committee, if the Participant ceases to be a director of Luxfer for any reason, all Shares underlying Restricted Stock Units that have not yet become vested as of the date the Participant ceases to be a director shall be immediately forfeited by the Participant and the Participant shall have no further rights with respect thereto.
10. Adjustment upon Certain Changes
(a) Adjustment of Shares
If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of Luxfer, without the fair market value consideration, then (i) the number of Shares available for Awards under the Plan and awards under the UIP set forth in Section 3, (ii) the Exercise Prices of and number of Shares subject to outstanding Options, (iii) the nominal value per Share, if applicable, and the number of Shares subject to other outstanding Awards, may be proportionately adjusted, subject to any required action by the Board or the shareholders of the Company and in compliance with applicable securities laws and, to the extent applicable, Section 409A of the Code. In addition, except insofar as the Board (on behalf of Luxfer) agrees to capitalize Luxfers reserves and apply the same in paying up any difference between the Exercise Price (or any amount payable per Share in relation to an Award) and the nominal value of the Shares, the Exercise Price (or other amount payable per Share in relation to an Award) of any Award over Shares that are to be newly issued by Luxfer in satisfaction of the Award shall not be reduced below a Shares nominal value.
(b) Certain Mergers
Subject to any required action by the shareholders of Luxfer, in the event that the Company shall be the surviving corporation in any merger, consolidation or similar transaction as a result of which the holders of Shares receive consideration consisting exclusively of securities of such surviving corporation, the Committee may, to the extent deemed appropriate by the Committee, adjust each Award outstanding on the date of such merger or consolidation so that it pertains and applies to the securities which a holder of the number of Shares subject to such Award would have received in such merger or consolidation.
(c) Certain Other Transactions
In the event of (i) a dissolution or liquidation of Luxfer, (ii) a sale of all or substantially all of the Luxfers assets (on a consolidated basis), (iii) a merger, consolidation or similar transaction involving Luxfer in which Luxfer is not the surviving corporation or (iv) a merger, consolidation or similar transaction involving Luxfer in which Luxfer is the surviving corporation but the holders of Shares receive securities of another corporation and/or other property, including cash, the Committee shall, in its sole discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of such event, each Award (whether or not then exercisable), and, in full consideration of such cancellation, pay to the Participant to whom such Award was granted an amount in cash, for each Share subject to such Award equal to the value, as determined by the Committee in its reasonable discretion, of such Award, provided that with respect to any outstanding Option, such value shall be equal to the excess of (A) the value, as determined by the Committee in its reasonable discretion, of the property (including cash) received by the holder of a Share as a result of such event over (B) the E xercise P rice of such Option; or
(ii) provide for the exchange of each Award (whether or not then exercisable or vested) for an a ward with respect to, as appropriate, some or all of the property which a holder of the number of Shares subject to such Award would have received in such transaction and, incident thereto, make an equitable adjustment as determined by the Committee in its reasonable discretion in the E xercise P rice of the Award, or the number of shares or amount of property subject to the Award or, if appropriate, provide for a cash payment to the Participant to whom such Award was granted in partial consideration for the exchange of the Award.
(d) Notice
The Company shall give each Participant notice of an adjustment, substitution, cancellation or other action hereunder and, upon notice, such adjustment, substitution, cancellation or other action shall be conclusive and binding for all purposes . Notwithstanding the foregoing, the Committee may, in its discretion, decline to take action under this Section 10 with respect to any Award if the Committee determines that such action would violate (or cause the Award to violate) applicable law or result in adverse tax consequences to the Participant or to the Company.
(e) No Repricing
Notwithstanding any provision of the Plan to the contrary, in no event shall (i) any repricing (within the meaning of U.S. generally accepted accounting principles or any applicable stock exchange rule) of Awards granted under the Plan be permitted at any time under any circumstances or (ii) any new Awards be granted in substitution for outstanding Awards previously granted to Participants if such action would be considered a repricing (within the meaning of U.S. generally accepted accounting principles or any applicable stock exchange rule).
(b) No Other Rights
Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of Luxfer or any other corporation. Except as expressly provided in the Plan, no issuance by Luxfer of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares or amount of other property subject to, or the terms related to, any Award.
(c) Savings Clause
No provision of this Section 10 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.
11. Rights under the Plan
No person shall have any rights as a shareholder with respect to any Shares covered by or relating to any Award granted pursuant to the Plan until the date of the transfer or delivery of Shares. Except as otherwise expressly provided in Section 10, no adjustment of any Award shall be made for dividends or other rights for which the record date occurs prior to the date such Shares are transferred or delivered . Nothing in this Section 11 is intended, or should be construed, to limit authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any Share if it were transferred or delivered or outstanding, or from granting rights related to such dividends.
The Company may, but shall not have any obligation to, establish any separate fund or trust or other segregation of assets to provide for the satisfaction of Awards under the Plan.
12. No Special Rights to Continue as a Director; No Right to Awards
Neither the Plan, nor any Award Agreement nor action taken under the Plan, shall be construed as conferring upon a Participant any right to continue as a director of Luxfer, to be renominated by the Board or re-elected by the shareholders of Luxfer or shall interfere in any way with the right of Luxfer at any time to remove such Participant from his position as director or to increase or decrease the annual fees of any Non-Executive Director or change the portion thereof paid in cash or Awards.
13. Securities Matters
The Company shall be under no obligation to effect the registration pursuant to the Securities Act or any federal, state or non-U.S. securities laws of any Shares to be transferred or delivered hereunder or to effect similar compliance under any state laws. Notwithstanding anything in the Plan to the contrary, the Company shall not be obligated to cause to be transferred or delivered any Shares pursuant to the Plan unless and until the Company is advised by its counsel that the transfer and delivery of Shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which Shares are traded. The Committee may require, as a condition to the transfer and delivery of Shares pursuant to the terms hereof, that the recipient of such Shares make such covenants, agreements and representations, and that certificates, if any, evidencing such Shares, bear such legends, as the Committee deems necessary or desirable.
The exercise of any Option granted hereunder shall only be effective at such time as counsel to the Company shall have determined that the transfer or delivery of Shares pursuant to such exercise is in compliance with all applicable laws and regulations and the requirements of any securities exchange on which Shares are traded. The Company may, in its sole discretion, defer the effectiveness of an exercise of an Award hereunder or the delivery or transfer of Shares pursuant to any Award pending or to ensure compliance under federal, state, non-U.S. securities laws and the requirements of any securities exchange on which Shares are traded. The Company shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Award or the delivery or transfer of Shares pursuant to any Award. During the period that the effectiveness of the exercise of an Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.
The issue or transfer of any Shares under the Plan shall be subject to Luxfers Articles of the Association and to any necessary consents of any governmental or other authorities (in any jurisdiction) under any enactments or regulations from time to time in force. The Participant shall comply with any requirements to be fulfilled in order to obtain or obviate the necessity of any such consent.
14. Withholding Taxes
(a) Payment of Taxes
Participants shall be solely responsible for any applicable taxes imposed on the Participant by applicable law (including without limitation income, social security and excise taxes but excluding any taxes imposed in connection with the issuance of American Depositary Shares) and penalties, and any interest that accrues thereon, which they incur in connection with the receipt, vesting, settlement or exercise of any Award. Notwithstanding any provision of the Plan to the contrary, in no event shall the Company or the Committee be liable to a Participant on account of an Awards failure to (i) qualify for favorable U.S. or non-U.S. tax treatment or (ii) avoid adverse tax treatment under U.S. or non-U.S. law, including, without limitation, under Section 409A of the Code.
(b) Cash Remittance
Whenever Shares are to be transferred or delivered upon the exercise, grant or vesting of an Award, and whenever any cash amount shall become payable in respect of any Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, grant, vesting or payment prior to the delivery of Shares or recordation by the Company of the Participant or his or her nominee as the owner of such Shares or the effectiveness of the lapse of such restrictions or making of such payment. In addition, upon any payment (including in Shares) with respect to any Award, the Company shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, settlement or payment.
(c) Share Remittance
At the election of the Participant, subject to the approval of the Committee, when Shares are to be transferred or delivered upon the exercise, grant or vesting of an Award, the Participant may tender to the Company a number of Shares that have been owned by the Participant for at least six months (or such other period as the Committee may determine) having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the minimum federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, grant or vesting, but not greater than the minimum withholding obligations. Such election shall satisfy the Participants obligations under Section 14(a) hereof, if any.
(d) Share Withholding
At the election of the Participant, subject to the approval of the Committee, when Shares are to be transferred or delivered upon the exercise, grant or vesting of an Award, the Company shall withhold a number of such S hares determined by the Committee to be sufficient to satisfy the minimum federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, grant or vesting, but not greater than the minimum withholding obligations. Such election shall satisfy the Participants obligations under Section 14(a) hereof, if any.
15. Amendment or Termination of the Plan
(a) The Board may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided , however , that to the extent that any applicable law, regulation or rule of a stock exchange requires shareholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence shall not restrict the Committees ability to exercise its discretionary authority hereunder pursuant to Section 4 hereof, which discretion may be exercised without amendment to the Plan. No provision of this Section 15 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the Plan, no action hereunder may, without the consent of a Participant, reduce the Participants rights under any previously granted and outstanding Award. Nothing in the Plan shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.
(b) The Committee may amend or modify the terms and conditions of an Award to the extent that the Committee determines, in its sole discretion, that the terms and conditions of
the Award violate or may violate Section 409A of the Code; provided, however, that (i) no such amendment or modification shall be made without the Participants written consent if such amendment or modification would violate the terms and conditions of any other agreement between the Participant and the Company and (ii) unless the Committee determines otherwise, any such amendment or modification of an Award made pursuant to this Section 15(b) shall maintain, to the maximum extent practicable, the original intent of the applicable Award provision without contravening the provisions of Section 409A of the Code. The amendment or modification of any Award pursuant to this Section 15(b) shall be at the Committees sole discretion and the Committee shall not be obligated to amend or modify any Award or the Plan, nor shall the Company be liable for any adverse tax or other consequences to a Participant resulting from such amendments or modifications or the Committees failure to make any such amendments or modifications for purposes of complying with Section 409A of the Code or for any other purpose. To the extent the Committee amends or modifies an Award pursuant to this Section 15(b), the Participant shall receive notification of any such changes to his or her Award and, unless the Committee determines otherwise, the changes described in such notification shall be deemed to amend the terms and conditions of the Award and the applicable Award A greement.
16. Transfers upon Death
Upon the death of a Participant, to the extent provided in the applicable Award Agreement, (i) any outstanding Options granted to such Participant may be exercised only by the Beneficiary and (ii) any Restricted Stock granted to such Participant may only be transferred to the Beneficiary. The Beneficiary, as a condition of such exercise or t ransfer, as the case may be, shall be bound in all respects by the provisions of the Plan and the applicable Award Agreement as if the Beneficiary were an original party thereto and by the acknowledgements made by the Participant in connection with the grant of the Award and all references in th e Plan and the applicable Award Agreement to the Participant shall be deemed to refer to such Beneficiary. Any attempt to Transfer an Award in violation of the Plan shall render such Award null and void.
17. Change in Control
Unless otherwise set forth in the Award Agreement, upon a Change in Control, each outstanding Award s hall become fully vested and exercisable, as applicable, and all restrictions thereon shall lapse . E xcept as otherwise provided in the Plan or in the applicable Award Agreement or as otherwise communicated to the Participants by the Committee in connection with the Change in Control, an Option shall lapse on the first anniversary of the Change in Control to the extent not theretofore exercised.
18. Fractional Shares
The Company shall not be required to issue any fractional Shares pursuant to the Plan. The Committee may provide for the elimination of fractions or for the settlement thereof in cash.
19. Nominal Value
If determined by the Committee, the vesting/exercise of an Award and the issue of Shares pursuant to the Award will be subject to the payment of the aggregate nominal value of the
underlying Shares by the Participant. Any cash payment to be made to a Participant pursuant to Section 10(c)(i) of the Plan in consideration of the cancellation of an Award or an award that is provided in exchange for an Award pursuant to Section 10(c)(ii) of the Plan, shall where appropriate and if determined by the Committee, take account of the nominal value of the Shares subject to the Award.
20. Section 409A Exemption
All Awards under the Plan are intended to be exempt from Section 409A of the Code and shall be construed in accordance with the foregoing.
21. Data Protection
It shall be a condition of an Award that the Participant agrees and consents to:
(a) The collection, use, processing and transfer of Participants Personal Data by the Company, any trustee or third party administrator of the Plan, the Companys registrars, or any broker through whom Shares are to be sold on behalf of a Participant.
(b) The Company, any trustee or third party administrator of the Plan, the Companys registrars, or any broker through whom Shares are to be sold on behalf of a Participant transferring the Participants Personal Data amongst themselves for the purposes of implementing, administering and managing the Plan and the grant of Awards and the acquisition of Shares pursuant to Awards, the disposal of such Shares or the making of any cash payment under the Plan.
(c) The use of Personal Data by any such person for any such purposes; and
(d) The transfer to and retention of Personal Data by third parties including any trustee or third party administrator of the Plan for or in connection with such purposes.
22. Service of Documents
(a) Except as otherwise provided in the Plan, any written notice or document to be given by, or on behalf of, the Company or any administrator of the Plan to a Participant in accordance or in connection with the Plan may be given by hand or sent by pre-paid first class mail (airmail if overseas), facsimile transmission or email to the Participants home or work address, facsimile number or email address last known to the Company to be the Participants address, facsimile number or email address. Subject to the paragraph (d) of this Section 22 any notice or document given in accordance with this Section 22 shall be deemed to have been given: (i) upon delivery, if delivered by hand; (ii) after 24 hours, if sent by mail; after 4 hours, if sent by facsimile transmission; and (iv) at the time of transmission, if sent by email except that a notice or document shall not be duly given by email unless that person is known by the Company to have personal access during his normal business hours to information sent to him by email.
(b) Any notice or document so sent to a Participant shall be deemed to have been duly given notwithstanding that such person is then deceased (and whether or not the Company
has notice of his death) except where his personal representatives have supplied an alternative address to which documents are to be sent to the Company.
(c) Any written notice or document to be submitted or given to the Company or any administrator of the Plan in accordance or in connection with the Plan may be given by hand or sent by pre-paid first class post (airmail if overseas), facsimile transmission or email but shall not in any event be duly given unless it is actually received by the Secretary of the Company or such other individual as may from time to time be nominated by the Company and whose name and address, facsimile number or email address is notified to the Participant.
(d) For the purposes of the Plan, an email shall be treated as not having been duly sent or received if the recipient of such email notifies the sender that it has not been opened because it contains, or is accompanied by a warning or caution that it could contain or be subject to, a virus or other computer program which could alter, damage or interfere with any computer software or email.
23. Third Party Rights
Except as otherwise expressly stated to the contrary, neither the Plan nor the making of any Award shall have the effect of giving any third party any rights under the Plan pursuant to the UK Contracts (Rights of Third Parties) Act 1999 or otherwise and that Act shall not apply to the Plan or to the terms of any Award under it.
24. Governing Law
(a) This Plan and any Award shall be governed by, and construed in accordance with, English law.
(b) Any person or persons referred to in the Plan shall:
(i) submit to the exclusive jurisdiction of the English courts as regards any claim, legal action, dispute, difference or proceedings concerning an Award or any matter arising from, or in relation to, the Plan;
(ii) waive personal service of any proceedings;
(iii) agree that service on him or it of proceedings may be effected by registered mail to his or its address for service of notices under the Plan; and
(iv) waive any objection to proceedings taking place in the English courts on the grounds of venue or that proceedings have been brought in an inconvenient forum.
Exhibit 12.1
Section 302 Certificate
Form of Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
I, Brian Gordon Purves, certify that:
1. I have reviewed this annual report on Form 20-F of Luxfer Holdings PLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and
5. The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting.
Date: March 29, 2013 |
/s/ Brian Gordon Purves |
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Brian Gordon Purves |
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Chief Executive |
Exhibit 12.2
Section 302 Certificate
Form of Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
I, Andrew Michael Beaden, certify that:
1. I have reviewed this annual report on Form 20-F of Luxfer Holdings PLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and
5. The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting.
Date: March 29, 2013 |
/s/ Andrew Michael Beaden |
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Andrew Michael Beaden |
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Group Finance Director |
Exhibit 13.1
Section 906 Certificate
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Luxfer Holdings PLC, a public limited company incorporated under English law (the company), hereby certifies, to such officers knowledge, that:
The Annual Report on Form 20-F for the year ended December 31, 2012 (the Form 20-F) of the company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the company.
Date: March 29, 2013 |
/s/ Brian Gordon Purves |
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Brian Gordon Purves |
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Chief Executive |
Exhibit 13.2
Section 906 Certificate
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Luxfer Holdings PLC, a public limited company incorporated under English law (the company), does hereby certify, to such officers knowledge, that:
The Annual Report on Form 20-F for the year ended December 31, 2012 (the Form 20-F) of the company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the company.
Date: March 29, 2013 |
/s/ Andrew Michael Beaden |
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Andrew Michael Beaden |
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Group Finance Director |
EXHIBIT 15.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-184351) pertaining to the Executive Share Option Plan, Long-Term Umbrella Incentive Plan, Non-Executive Directors Equity Incentive Plan, Executive Officer IPO Stock Option Grants and Non-Executive Director IPO Stock Option Grants of Luxfer Holdings PLC of our report dated March 28, 2013, with respect to the consolidated financial statements of Luxfer Holdings PLC included in this Annual Report (Form 20-F) for the year ended December 31, 2012.
/s/ Ernst & Young LLP |
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Manchester, England |
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March 28, 2013 |
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