METHANEX CORPORATION
(Exact name of Registrant as specified in its charter)
CANADA 2869 NOT APPLICABLE
(Province or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number, if
incorporation or organization) applicable)
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1800 WATERFRONT CENTRE, 200 BURRARD STREET, VANCOUVER, BRITISH COLUMBIA, CANADA
V6C 3M1 (604) 661-2600
(Address and telephone number of Registrant's principal executive officers)
COPIES TO:
W. JAMES EMMERTON RICHARD J. BALFOUR KENNETH R. BLACKMAN CHRISTOPHER W. MORGAN
Senior Vice President, McCARTHY TETRAULT LLP FRIED, FRANK, HARRIS, SKADDEN, ARPS, SLATE,
Corporate Development and Pacific Centre, P.O. Box 10424 SHRIVER & JACOBSON MEAGHER & FLOM LLP
General Counsel Suite 1300, One New York Plaza Royal Bank Plaza
METHANEX CORPORATION 777 Dunsmuir Street New York, New York 10004 (212) North Tower Suite 1820
1800 Waterfront Centre Vancouver, B.C., Canada 859-8000 P.O. Box 189
200 Burrard Street V7Y 1K2 Toronto, Canada M5J 2J4
Vancouver, B.C., Canada V6C (604) 643-7000 (416) 777-4700
3M1
(604) 661-2600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
PROVINCE OF BRITISH COLUMBIA, CANADA
(Principal jurisdiction regulating this offering)
It is proposed that this filing shall become effective (check appropriate box):
A. [ ] upon filing with the Commission, pursuant to Rule 467 (a) (if in
connection with an offering being made contemporaneously in the United
States and Canada).
B. [X] at some future date (check the appropriate box below):
1. [ ] pursuant to Rule 467 (b) on ( ) at ( )
(designate a time not sooner than 7 calendar days after
filing).
2. [ ] pursuant to Rule 467 (b) on ( ) at ( )
(designate a time 7 calendar days or sooner after filing)
because the securities regulatory authority in the review
jurisdiction has issued a receipt or notification of clearance
on ( ).
3. [ ] pursuant to Rule 467 (b) as soon as practicable after
notification of the Commission by the Registrant or the
Canadian securities regulatory authority of the review
jurisdiction that a receipt or notification of clearance has
been issued with respect hereto.
4. [X] after the filing of the next amendment to this Form (if
preliminary material is being filed).
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If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction's shelf prospectus offering procedures, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) PRICE(1) FEE(1)
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Senior Notes due 2012 $200,000,000 100% $200,000,000 $18,400
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PART I
INFORMATION REQUIRED TO BE
DELIVERED TO OFFEREES OR PURCHASERS
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated May 31, 2002.
$200,000,000
METHANEX CORPORATION
% Senior Notes due 2012
----------------------
Methanex Corporation will pay interest on the Notes on and
of each year. The first such payment will be made on , 2002.
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The Notes will be issued only in denominations of $1,000 and integral multiples of $1,000.
METHANEX CORPORATION IS PERMITTED TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. METHANEX CORPORATION PREPARES ITS FINANCIAL STATEMENTS IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THEY ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS. AS A RESULT, THEY MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED STATES COMPANIES.
OWNING THE NOTES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE UNITED STATES AND CANADA. THIS PROSPECTUS MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD READ THE TAX DISCUSSION UNDER "TAX CONSIDERATIONS".
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN CANADA, A MAJORITY OF OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN THIS PROSPECTUS ARE CANADIAN RESIDENTS, AND SUBSTANTIALLY ALL OF OUR ASSETS AND THE ASSETS OF THOSE OFFICERS, DIRECTORS AND EXPERTS ARE LOCATED OUTSIDE OF THE UNITED STATES.
Per Note Total
-------- -----
Initial public offering price............................... % $
Underwriting commission..................................... % $
Proceeds, before expenses, to Methanex...................... % $
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The underwriters expect to deliver the Notes in book-entry form only through the facilities of The Depository Trust Company against payment in New York, New York on , 2002.
SUMMARY
The following section summarizes more detailed information presented later in this prospectus. You should read the entire prospectus, including, in particular, the "Risk Factors" beginning on page 8 and our consolidated financial statements and the related notes included elsewhere in this prospectus. In this prospectus, except where otherwise indicated, all amounts are expressed in United States dollars, references to "$" are to United States dollars and references to "Cdn$" are to Canadian dollars. In this prospectus, except where otherwise indicated or the context otherwise requires, references to "we", "us", "our" and similar terms, as well as references to "Methanex" and the "Company", refer to Methanex Corporation and its subsidiaries.
THE COMPANY
We are the world's largest producer and marketer of methanol, a liquid commodity chemical produced primarily from natural gas. Our average sales represented approximately 25% of world methanol demand between 1997 and 2001. We believe that our low cost natural gas supply contracts and extensive distribution network provide us with competitive advantages in our industry. We have methanol production facilities located in Chile, New Zealand and North America. In a joint venture with BP, we are currently building the world's largest methanol plant in Trinidad which we expect will commence commercial operation by late 2003.
For the year ended December 31, 2001, our average realized methanol price was $172 per tonne and we generated $71 million of net income and $238 million of EBITDA on revenues of $1.15 billion. For the three months ended March 31, 2002, our average realized methanol price was $111 per tonne and we incurred a net loss of $17 million and generated $11 million of EBITDA on revenues of $182 million. Methanol prices have increased in the second quarter of 2002. For example, spot prices for methanol in the United States were in the range of $180 to $200 per tonne in the latter part of May 2002.
INDUSTRY OVERVIEW
Methanol is primarily used as a chemical feedstock in the manufacture of other products. Roughly three quarters of all methanol is used in the production of formaldehyde, acetic acid and a wide variety of other chemical derivatives. These derivatives are used in the manufacture of a wide range of products including building materials, foams, resins and plastics. Reflecting the diversity of the end-use products for methanol, growth in methanol demand is generally linked to growth in the economy.
The remainder of methanol demand comes from the fuel sector, principally as a component in the production of methyl tertiary butyl ether, or MTBE, which is blended with gasoline as a source of octane and as an oxygenate to reduce the amount of tailpipe emissions from motor vehicles. Worldwide methanol demand for use in MTBE was approximately 7.9 million tonnes in 2001 and over half of that demand was in the United States. California and other states in the United States, as well as the U.S. federal government, have initiated actions that may limit, or possibly eliminate, the use of MTBE as a gasoline component in the United States. However, in 2001, the European Union confirmed the suitability and continued use of MTBE as a fuel additive, and demand for MTBE in Western Europe has increased in recent years as clean air standards have been implemented.
Methanol is an internationally traded commodity. Methanol prices have historically been volatile and have been sensitive to overall production capacity relative to demand, the price of natural gas feedstock in North America and general economic conditions. Late in the first quarter and into the second quarter of 2002, we believe there have been a number of positive developments, including some early signs of a recovery in methanol demand. In addition, we do not anticipate that any significant new methanol facilities will start commercial production before late 2003.
OUR COMPETITIVE STRENGTHS
We believe that our business has the following competitive strengths:
- GLOBAL PRESENCE AND SCALE -- We believe that we are the only global producer and supplier of methanol. We believe this has enabled us to secure contracts with high quality global customers and to develop current views of the worldwide methanol industry, in turn enabling us to respond quickly to changing market trends in supply and demand.
- LOW COST PRODUCER -- We believe that a low cost structure is critical to maintaining a strong competitive position. We believe our access to low cost natural gas and our initiatives in reducing our distribution costs have allowed us to be a low cost producer of methanol in the markets we serve.
- OPERATIONAL EXPERTISE -- The high reliability rate of our plants is an essential factor in keeping our costs low and generating revenue and we believe it enhances our position as a secure, global provider of methanol.
OUR STRATEGY
Our primary objective is to maintain and enhance our strong competitive position. The key elements of our strategy to achieve this objective are:
- STRIVING AT ALL TIMES TO FURTHER REDUCE OUR COST STRUCTURE -- We continue to take steps to strengthen our position as a low cost global producer of methanol by constructing new low cost capacity, such as our Atlas facility currently under construction in Trinidad. We are also focused on reducing our ocean shipping and other distribution costs by maximizing the utilization of our shipping fleet and by seeking to take advantage of prevailing conditions in the shipping market.
- MAINTAINING OUR WORLD LEADERSHIP IN METHANOL MARKETING, LOGISTICS AND SALES -- We sell methanol through an extensive global marketing and distribution system, which has enabled us to become the world's largest supplier of methanol to each of the major international markets of North America, Asia Pacific and Europe, as well as Latin America. We continue to pursue opportunities which allow us to maintain this market leadership.
- FOCUSING ON OPERATING EXCELLENCE -- We believe that methanol consumers view reliability of supply as critical to the success of their businesses. By maintaining and improving our plant operating reliability, we believe we have become a preferred supplier of methanol globally.
- INVESTING IN NEW TECHNOLOGIES AND DEVELOPING NEW MARKETS FOR METHANOL -- We are continuing our efforts to develop opportunities in natural gas-based technology innovation and fuel cells where methanol is a potential fuel.
- MAINTAINING FINANCIAL DISCIPLINE -- We believe it is important to maintain financial flexibility throughout the economic cycle and we have deliberately adopted a prudent approach to our liquidity. We have similarly established a disciplined approach to capital spending.
THE OFFERING
As used in this summary of the offering, references to "we", "us", "our" and similar terms, as well as references to "Methanex", refer only to Methanex Corporation and its successors and not to any of its subsidiaries.
ISSUER..................... Methanex Corporation.
NOTES OFFERED.............. $200,000,000 principal amount of % Senior
Notes.
MATURITY................... , 2012.
ISSUE PRICE................ % plus accrued interest, if any, from
, 2002.
INTEREST................... Annual rate: %.
INTEREST PAYMENT DATES..... Semi-annually on and of each
year, commencing , 2002.
RANKING.................... The Notes will be general unsecured obligations of
Methanex and will rank equally in right of payment
with all of our other unsubordinated and unsecured
indebtedness, including our 7.40% Notes due August
15, 2002 and our 7.75% Notes due August 15, 2005.
The Notes, however, will be structurally
subordinated to any indebtedness and other
liabilities of our subsidiaries. As of March 31,
2002, we had no secured debt outstanding and our
subsidiaries had approximately $132 million of
liabilities.
ADDITIONAL AMOUNTS......... All payments with respect to the Notes made by us
will be made without withholding or deduction for
Canadian taxes unless required by law or by the
interpretation or administration thereof, in which
case, subject to certain exceptions, we will pay
such Additional Amounts as may be necessary, so
that the net amount received by the holders after
such withholding or deduction will not be less than
the amount that would have been received in the
absence of such withholding or deduction. See
"Description of the Notes -- Additional Amounts for
Canadian Withholding Taxes".
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REDEMPTION IN THE EVENT OF
CHANGES IN CANADIAN
WITHHOLDING TAXES.......... If we become obligated to pay Additional Amounts as
a result of certain changes affecting Canadian
withholding taxes, we may redeem all, but not less
than all, of the Notes at 100% of their principal
amount plus accrued and unpaid interest to the date
of redemption. See "Description of the
Notes -- Redemption for Changes in Canadian
Withholding Taxes".
MANDATORY OFFER TO
PURCHASE................... Upon the occurrence of a Change of Control
Triggering Event, we are required to offer to
purchase all outstanding Notes at 101% of their
principal amount plus accrued and unpaid interest
to the date of purchase. See "Description of the
Notes -- Certain Covenants -- Change of Control".
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BASIC COVENANTS OF THE
INDENTURE................ The Indenture under which we will issue the Notes,
which we refer to in this prospectus as the
Indenture, will, among other things, restrict our
ability and the ability of certain of our
subsidiaries to:
- incur liens;
- enter into sale/leaseback transactions;
- in the case of certain of our subsidiaries, incur indebtedness without guaranteeing the Notes;
- enter into or conduct transactions with unrestricted subsidiaries; and
- amalgamate or consolidate with, or merge with or into, or transfer all or substantially all of our assets to, any person.
These covenants are subject to important qualifications and limitations. For more details, see the section "Description of the
Notes -- Certain Covenants".
USE OF PROCEEDS............ The net proceeds from the sale of the Notes offered
hereby are estimated to be approximately $196
million. We intend to use approximately $150
million of the estimated net proceeds to repay in
full our 7.40% Notes due August 15, 2002 upon the
maturity of such notes. The balance of the net
proceeds will be used for general corporate
purposes. Pending such application, such net
proceeds will be invested in short-term money
market instruments.
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CONSENT SOLICITATION
We are soliciting consents from the holders of our existing 7.75% Notes due August 15, 2005 to amend the Indenture which, if given, would conform the terms of the 7.75% Notes to the terms of the Notes offered hereby. Such consent would remove our covenant to the holders of such notes not to make restricted payments (such as declaring or paying a dividend or making any distribution on our common shares or repurchasing or redeeming any of our common shares) in certain circumstances, and add a change of control covenant identical to that relating to the Notes offered by this prospectus. The closing of the sale of the Notes and the completion of the consent solicitation are not conditional upon each other.
RISK FACTORS
You should carefully consider all of the information in this prospectus. In particular, you should read the specific risk factors under "Risk Factors" for a discussion of certain risks involved with an investment in the Notes.
FINANCIAL STATEMENT PRESENTATION
Our consolidated financial statements are reported in United States dollars but have been prepared in accordance with accounting principles generally accepted in Canada, or Canadian GAAP. To the extent applicable to our consolidated financial statements, these principles conform in all material respects with accounting principles generally accepted in the United States, or U.S. GAAP, except as described in the supplemental information to our consolidated financial statements included elsewhere in this prospectus.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
You should read the summary historical consolidated financial data set forth below in conjunction with our consolidated financial statements and the related notes and "Management's Discussion and Analysis" included elsewhere in this prospectus. The statement of income data and the balance sheet data as at and for the three years ended December 31, 2001, have been derived from our annual consolidated financial statements, which for the two years ended December 31, 2001, are included elsewhere in this prospectus. The statement of income data for the three months ended March 31, 2001 and 2002 and the balance sheet data as at March 31, 2002 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The financial information as at and for the three months ended March 31, 2001 and 2002 includes, in the opinion of our management, all adjustments which are necessary for the fair presentation of this unaudited financial information. The interim results may not be indicative of the results for a full year.
THREE MONTHS
FISCAL YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
--------------------------- -----------------
1999 2000 2001 2001 2002
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT VOLUME AND PRICE DATA)
STATEMENT OF INCOME DATA:
Canadian GAAP
Revenue................................................... $ 695 $1,061 $1,149 $ 373 $ 182
Cost of sales and operating expenses...................... 689 756 911 250 171
Depreciation and amortization............................. 112 110 113 27 28
------ ------ ------ ------ ------
Operating income (loss) before undernoted items........... (106) 195 125 96 (17)
Interest expense.......................................... 25 32 32 8 7
Interest and other income................................. 14 16 19 4 2
Other expense(1).......................................... 69 -- 11 -- --
------ ------ ------ ------ ------
Income (loss) before income taxes......................... (186) 179 101 92 (22)
Income tax recovery (expense)(2).......................... 36 (34) (30) (23) 5
------ ------ ------ ------ ------
Net income (loss)......................................... $ (150) $ 145 $ 71 $ 69 $ (17)
====== ====== ====== ====== ======
U.S. GAAP(3)
Net income (loss)......................................... $ (128) $ 89 $ 69 N/A N/A
====== ====== ======
BALANCE SHEET DATA (END OF PERIOD):
Canadian GAAP
Cash and cash equivalents................................. $ 152 $ 226 $ 332 $ 334 $ 287
Total assets.............................................. 1,644 1,803 1,693 1,895 1,624
Total debt................................................ 399 399 399 399 399
Shareholders' equity...................................... 956 1,045 935 1,119 900
U.S. GAAP(3)
Total assets.............................................. $1,821 $1,938 $1,843 N/A N/A
Shareholders' equity...................................... 1,079 1,108 985 N/A N/A
OTHER FINANCIAL DATA:
Canadian GAAP
EBITDA(4)................................................. $ 6 $ 305 $ 238 $ 123 $ 11
Capital expenditures:
Capital maintenance, catalyst, turnarounds and
other(5).............................................. $ 66 $ 25 $ 19 $ 5 $ 3
Plants and equipment under development(6)............... 72 -- 60 -- 34
------ ------ ------ ------ ------
Total capital expenditures................................ $ 138 $ 25 $ 79 $ 5 $ 37
U.S. GAAP(3)
EBITDA(4)................................................. $ 30 $ 273 $ 258 N/A N/A
OTHER SELECTED OPERATING DATA:
Methanol production volume (thousands of tonnes):........... 5,343 6,007 5,361 1,379 1,365
Methanol sales volume (thousands of tonnes):
Produced product........................................ 5,338 5,815 5,390 1,245 1,431
Purchased product....................................... 1,255 814 1,280 405 195
Commission sales........................................ -- 142 720 221 157
------ ------ ------ ------ ------
Total methanol sales volume............................... 6,593 6,771 7,390 1,871 1,783
====== ====== ====== ====== ======
Methanex average realized methanol price (dollars per
tonne).................................................... $ 105 $ 160 $ 172 $ 225 $ 111
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(1) Other expense for 1999 consists of $55 million related to the write off of the book value of our Kitimat plant and $14 million related to a restructuring to obtain 100% ownership of the Fortier plant. Other expense for 2001 consists of $11 million for employee severance and mothball costs related to the shutdown for an indeterminate period of our Medicine Hat Plant 3.
(2) We adopted the asset and liability method of accounting for income taxes on January 1, 2000 without restatement of prior periods. As a result of this change, we recorded an increase to shareholders' equity of approximately $4 million at January 1, 2000.
(3) As a foreign private issuer under U.S. securities laws, we prepare an annual reconciliation with U.S. GAAP which is provided as supplemental information to our annual consolidated financial statements included elsewhere in this prospectus. We are not required to prepare a quarterly reconciliation with U.S. GAAP and therefore U.S. GAAP figures have not been presented for the three month periods ended March 31, 2001 and 2002.
(4) EBITDA represents net income (loss) before income taxes, interest expense, interest and other income, depreciation and amortization, and other expense, which includes asset write downs and asset restructuring charges. EBITDA should be considered in addition to, and not as a substitute for, operating income, net income (loss), cash flows and other measures of financial performance reported in accordance with generally accepted accounting principles. EBITDA differs from cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas primarily because it does not include cash flows from interest, taxes and asset restructuring charges. Our method of computing EBITDA may not be comparable to similarly titled measures reported by other companies. The following table shows a reconciliation of EBITDA to net income (loss):
THREE MONTHS
FISCAL YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------ ---------------
1999 2000 2001 2001 2002
------ ------ ------ ------ ------
(IN MILLIONS)
Net income (loss).............................. $ (150) $ 145 $ 71 $ 69 $ (17)
Add (deduct):
Income tax expense (recovery)................ (36) 34 30 23 (5)
Interest expense............................. 25 32 32 8 7
Interest and other income.................... (14) (16) (19) (4) (2)
Other expense................................ 69 -- 11 -- --
Depreciation and amortization................ 112 110 113 27 28
------ ------ ------ ------ ------
EBITDA -- Canadian GAAP........................ $ 6 $ 305 $ 238 $ 123 $ 11
U.S. GAAP adjustments(3)..................... 24 (32) 20 N/A N/A
------ ------ ------ ------ ------
EBITDA -- U.S. GAAP(3)......................... $ 30 $ 273 $ 258 N/A N/A
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(5) We schedule a shutdown and inspection of each of our plants at intervals of three or more years to perform necessary maintenance and replacement of catalysts (a process commonly known as a turnaround). The amounts shown represent cash flows in the period.
(6) Plants and equipment under development for 1999 related to the completion of our Chile III plant. Plants and equipment under development for 2001 consists of $55 million related to our 63.1% interest in the Atlas methanol facility under construction in Trinidad and $5 million related to the development of potential new methanol facilities in Chile and Australia. The amounts shown represent cash flows in the period.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. When used in this prospectus, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including the following, which are discussed in greater detail under the heading "Risk Factors":
- cyclicality of the industry in which we operate and the volatility of the price of methanol;
- decreases in global gross domestic product and changes in general economic conditions;
- uncertainty of demand for MTBE;
- competition in our industry;
- fluctuations in the cost and reductions in the availability of supply of natural gas;
- the risks attendant with methanol production and marketing, including operational disruption;
- changes in laws or regulations relating to the protection of the environment;
- risks associated with investments and operations in multiple jurisdictions;
- foreign exchange risks; and
- our inability to obtain project financing planned for our Atlas project.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. We do not intend, and do not assume any obligation, to update these forward-looking statements.
REFERENCE INFORMATION
Approximate conversions of certain units of measurement used in this prospectus into alternative units of measurement are as follows:
1 tonne = 2,205 pounds or 1,000 kilograms
1 tonne of methanol = 332.6 U.S. gallons
1 gigajoule = 0.948 million British thermal units or approximately 1,000
standard cubic feet of natural gas calculated on a higher
heating value basis
1 petajoule = 1,000,000 gigajoules
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Historical price data and supply and demand statistics for methanol contained in this prospectus are derived by us from recognized industry reports regularly published by independent consulting and data compilation organizations in the methanol industry, including Chemical Market Associates Inc., or CMAI, DeWitt & Company Incorporated and Tecnon (UK) Ltd.
Responsible Care(R) is a registered trademark of the Canadian Chemical Producers' Association and is used by us under license.
RISK FACTORS
You should carefully consider the risk factors set forth below as well as the other information contained in this prospectus before purchasing the Notes offered by this prospectus. Any of the following risks, as well as risks and uncertainties currently not known to us, could materially adversely affect our business, financial condition or results of operations. Certain statements under this caption constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements".
RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY
WE OPERATE IN A CYCLICAL COMMODITY INDUSTRY AND OUR FINANCIAL PERFORMANCE IS PRINCIPALLY DEPENDENT ON THE SELLING PRICE OF METHANOL.
The methanol business is a commodity industry, typically characterized by cycles of oversupply resulting in lower prices, idling of capacity and lower operating rates, followed by periods in which demand exceeds supply, resulting in shortages and rising prices until the increased prices lead to new plant investment or the re-start of idled capacity. Methanol prices have historically been, and are expected to continue to be, characterized by significant volatility. New methanol plants are expected to be built which will increase overall production capacity. Additional methanol supply can become available in the future by re-starting idle methanol plants, by carrying out major expansions of existing plants or by debottlenecking existing plants to increase their production capacity. Roughly three quarters of world methanol demand comes from its use in the production of formaldehyde, acetic acid and other chemical derivatives. Demand for methanol as a feedstock for these chemical derivatives is in large part dependent upon levels of global gross domestic product and changes in general economic conditions. The remainder of world methanol demand comes from its use as a feedstock for MTBE, the future demand for which is uncertain.
We are not able to predict future methanol supply/demand balances, market conditions or prices, all of which are affected by numerous factors beyond our control. As a result, we cannot assure you that demand for methanol will increase at all, or sufficiently to absorb additional production, or that the price of methanol will not decline. Since methanol is the only product we produce and market, a decline in the price of methanol could have an adverse effect on our financial performance.
THE FUTURE DEMAND FOR METHANOL IN THE PRODUCTION OF MTBE IS UNCERTAIN.
Approximately 15% of world methanol demand comes from its use as a feedstock for MTBE in the United States. Concerns have been raised in the United States regarding the use of MTBE in gasoline, principally as a result of leaking underground gasoline storage tanks and resultant detection of MTBE in drinking water. In March 1999, the Governor of California announced a ban on the use of MTBE as a gasoline component in California commencing January 1, 2003. This deadline has recently been extended to January 1, 2004. Other states in the United States have also taken actions that limit the use of MTBE as a gasoline component. Additionally, in April 2002, the U.S. Senate passed a comprehensive energy bill that includes a provision to ban MTBE in the United States within four years of its enactment. The U.S. House of Representatives has also passed an energy bill, but it does not contain a provision to ban MTBE. The Senate and the House must proceed to conference to determine whether energy legislation can be agreed upon and passed by the whole U.S. Congress. It is likely that executive and legislative actions will reduce, or possibly eliminate, the demand for methanol for MTBE in the United States, which could have an adverse effect on our results of operations and financial condition.
COMPETITION FROM OTHER METHANOL PRODUCERS IS INTENSE AND COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL PERFORMANCE.
The methanol industry is highly competitive. Methanol is a global commodity and customers base their purchasing decisions principally on the delivered price of methanol and reliability of supply. Some of our competitors are not dependent for revenues on a single product and some have greater financial resources than we do. These competitors may be better able than we are to withstand price competition and volatile market conditions.
WE ARE VULNERABLE TO REDUCTIONS IN THE AVAILABILITY OF SUPPLY AND FLUCTUATIONS IN THE COST OF NATURAL GAS.
Natural gas is the principal feedstock for methanol and accounts for a significant portion of its total production cost. Accordingly, our results from operations depend in large part on the availability and security of supply and price of natural gas. If we are unable to obtain continued access to sufficient natural gas for any of our plants on commercially acceptable terms, we could be forced to reduce production or close plants, which would have a material adverse effect on our results of operations and financial condition.
Approximately 50% of our capacity currently operating is in Chile. Natural gas for our three plants located at our Chilean facility, Chile I, Chile II and Chile III, is supplied through long-term contracts with the Chilean state-owned energy company and suppliers in Argentina. These contracts expire in 2009 for Chile I, 2016 and 2017 for Chile II and 2019 for Chile III. Although the Chilean facility is located close to other natural gas reserves in Chile and Argentina, which we believe we could access after the expiration or early termination of these natural gas supply contracts, we cannot assure you that we would be able to secure access to such natural gas under long-term contracts on commercially acceptable terms, if at all.
Approximately 40% of our capacity currently operating is in New Zealand. Approximately 85% of the contracted natural gas for our New Zealand facilities comes from the off-shore Maui field. We estimate that our current contracted natural gas entitlements are sufficient to operate our New Zealand plants at capacity for the equivalent of approximately two and one-half years. Towards the end of 2001, the owners of the Maui field announced that the Maui reserves may be materially less than previously estimated and below the aggregate of quantities that they have contracted to provide to their customers, including us. The contractual process to determine the available reserves in the Maui field is expected to be completed by the end of 2002. If the currently revised estimates are confirmed, we may have to reduce production at or close some or all of our New Zealand plants. We are pursuing additional natural gas supply for our New Zealand plants. However, we cannot assure you we will be able to secure additional natural gas on commercially acceptable terms, if at all.
Approximately 10% of our capacity currently operating is in North America. Natural gas for our North American facilities is currently purchased on a short-term basis. North American natural gas prices are set in a competitive market and can fluctuate widely. Any sustained increase in natural gas prices would adversely affect the operating margins and competitive position of our North American facilities.
OUR BUSINESS IS SUBJECT TO MANY OPERATIONAL RISKS FOR WHICH WE MAY NOT BE ADEQUATELY INSURED.
The majority of our revenues is derived from the sale of methanol produced
at our plants. Our business is subject to the risks of operating methanol
production facilities, such as unforeseen equipment breakdowns, interruptions in
the supply of natural gas, power failures, loss of port facilities or any other
event, including any event of force majeure, which could result in a prolonged
shutdown of any of our plants. A prolonged plant shutdown at any of our major
facilities could materially affect our revenues and operating income.
Additionally, disruptions in
our distribution system could adversely affect our revenues and operating income. Although we maintain insurance, including business interruption insurance, we cannot assure you that we will not incur losses beyond the limits of, or outside the coverage of, such insurance. From time to time, various types of insurance for companies in the chemical and petrochemical industries have not been available on commercially acceptable terms or, in some cases, have been unavailable. We cannot assure you that in the future we will be able to maintain existing coverage or that premiums will not increase substantially.
GOVERNMENT REGULATIONS RELATING TO THE PROTECTION OF THE ENVIRONMENT COULD INCREASE OUR COSTS OF DOING BUSINESS.
The countries in which we operate have laws and regulations to which we are subject governing the environment and the sustainable management of natural resources as well as the handling, storage, transportation and disposal of hazardous or waste materials. We are also subject to laws and regulations governing the import, export, use, discharge, storage, disposal and transportation of toxic substances. The products we use and produce are subject to regulation under various health, safety and environmental laws. Non-compliance with any of these laws and regulations may give rise to work orders, fines, injunctions, civil liability and criminal sanctions.
Laws and regulations protecting the environment have become more stringent in recent years and may, in certain circumstances, impose absolute liability rendering a person liable for environmental damage without regard to negligence or fault on the part of such person. These laws and regulations may also expose us to liability for the conduct of, or conditions caused by, others, or for our own acts which complied with applicable laws at the time such acts were performed. The operation of chemical manufacturing plants exposes us to risks in connection with compliance with such laws and we cannot assure you that we will not incur material costs or liabilities.
WE ARE SUBJECT TO RISKS INHERENT IN FOREIGN OPERATIONS.
We currently have substantial operations outside of North America, including in Chile, New Zealand, Europe and Asia. We are subject to risks inherent in foreign operations, such as: loss of revenue, property and equipment as a result of expropriation, nationalization, war, insurrection and other political risks; increases in duties, taxes and governmental royalties and renegotiation of contracts with governmental entities; as well as changes in laws and policies governing operations of foreign-based companies.
In addition, because we derive substantially all of our revenues from production and sales by subsidiaries outside of Canada, the payment of dividends or the making of other cash payments or advances by these subsidiaries to us may be subject to restrictions or exchange controls on the transfer of funds in or out of the respective countries or result in the imposition of taxes on such payments or advances. We have organized our foreign operations in part based on certain assumptions about various tax laws (including capital gains and withholding taxes), foreign currency exchange and capital repatriation laws and other relevant laws of a variety of foreign jurisdictions. While we believe that such assumptions are reasonable, we cannot assure you that foreign taxing or other authorities will reach the same conclusion. Further, if such foreign jurisdictions were to change or modify such laws, we could suffer adverse tax and financial consequences.
We source a substantial portion of the natural gas used in our Chilean facility from Argentina. The economic and political situation in Argentina has recently been unstable. Should the economic or political situation in Argentina result in a reduction of the supply of natural gas, our Chilean operations could suffer financial losses and we cannot assure you that we would be able to replace lost Argentinean supply on commercially acceptable terms, if at all.
Trade in methanol is subject to import duties in a number of jurisdictions. We currently incur an import duty of 3.5% on Chilean methanol that we sell into the European Community and an 8% duty on New Zealand and Chilean methanol that we sell into the United States. Although we do not currently pay any duties in any other major market to which we export product, we cannot assure you that such duties will not be levied in the future or, if levied, that we would be able to mitigate the impact of such duties.
WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN CURRENCIES.
Most of our revenues are denominated in U.S. dollars. A significant portion of our costs, however, are incurred in other currencies, principally the New Zealand dollar and the Canadian dollar and, to a lesser extent, the Chilean peso. We are exposed to increases in the value of these currencies in relation to the U.S. dollar which could have the effect of increasing the U.S. dollar equivalent of our cost of sales and operating expenses. We also have some revenues in Euros and British pounds. We are exposed to declines in the value of these currencies compared to the U.S. dollar which could have the effect of decreasing the U.S. dollar equivalent of our revenues.
WE CANNOT ASSURE YOU THAT WE WILL OBTAIN THE PROJECT FINANCING PLANNED FOR OUR ATLAS PROJECT.
In a joint venture with BP, we are currently building our new Atlas methanol plant in Trinidad, which we expect will commence commercial operation by late 2003. The total capital cost of Atlas, including financing costs, is expected to be approximately $400 million. Our share of this cost is estimated to be approximately $250 million which we expect to fund from a planned project financing, cash generated from operations and cash on hand. Our total equity contribution to the Atlas joint venture, assuming the project financing is arranged as planned, is expected to be approximately $100 million, of which $66 million had been funded at March 31, 2002. We cannot assure you that we will be able to obtain the planned project financing on satisfactory terms, or at all. Our inability to obtain this financing or other alternative financing would reduce our liquidity and could limit, or affect the timing of, our ability to undertake other potential new methanol projects.
RISKS RELATED TO THE NOTES AND OUR STRUCTURE
OUR STRUCTURE AS A HOLDING COMPANY COULD ADVERSELY AFFECT OUR ABILITY TO MEET OUR OBLIGATIONS UNDER THE NOTES.
We are primarily a holding company with limited material business operations, sources of income or assets of our own other than the shares of our subsidiaries. The Notes will be our obligations exclusively. Unless certain covenants in the Indenture become applicable, our subsidiaries will not guarantee the payment of principal or of interest on the Notes and the Notes will therefore be structurally subordinated to the obligations of our subsidiaries as a result of our being structured as a holding company. In the event of an insolvency, liquidation or other reorganization of any of our subsidiaries, our creditors (including the holders of the Notes) will not have any right to proceed against the assets of that subsidiary or to cause the liquidation or bankruptcy of such subsidiary under applicable bankruptcy laws. Creditors of such subsidiary would be entitled to payment in full from its assets before we would be entitled to receive any distribution from such assets. Except to the extent that we may ourselves be a creditor with recognized claims against a subsidiary, claims of creditors of that subsidiary will have priority with respect to the assets and earnings of that subsidiary over the claims of our creditors, including claims under the Notes. As of March 31, 2002, our subsidiaries had approximately $132 million of liabilities.
In addition, as a result of our holding company structure, our operating cash flow and our ability to service our debt, including the Notes, are dependent upon the operating cash flow of
our subsidiaries and the payment of funds by our subsidiaries to us in the form of dividends, loans or otherwise. Our subsidiaries are distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the Notes or to make any funds available therefor, whether by dividends, interest, loans, advances or other payments. In addition, the payment of dividends and the making of loans, advances and other payments to us by our subsidiaries may be subject to statutory or contractual restrictions, are contingent upon the earnings of our subsidiaries and are subject to various business and other considerations.
OUR DEBT SERVICE REQUIREMENTS MAY AFFECT OUR ABILITY TO FUND OUR BUSINESS.
As at March 31, 2002, after giving effect to the sale of the Notes offered by this prospectus and the application of the net proceeds thereof, we would have had total indebtedness of $450 million. The Indenture and our credit facility permit us and our subsidiaries to incur additional indebtedness, including secured indebtedness, subject to limitations. Our level of indebtedness could increase our vulnerability to general adverse economic and industry conditions, place us at a disadvantage compared to our competitors that have less debt, and limit our flexibility in planning for, or reacting to, changes in our business and industry.
Our ability to make payments on and to refinance our indebtedness, including the Notes, and to fund our operations, working capital and capital expenditures will depend on our ability to generate cash in the future. This is subject to general economic, industry, financial, competitive, legislative, regulatory and other factors that are beyond our control. In particular, global or regional economic conditions could cause the price of methanol to fall and hamper our ability to make interest payments on or repay our indebtedness, including the Notes. We may need to refinance all or a portion of our indebtedness, including the Notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including the Notes, on commercially acceptable terms, if at all.
WE MAY NOT BE ABLE TO FINANCE AN OFFER TO PURCHASE THE NOTES AND OTHER INDEBTEDNESS UPON THE OCCURRENCE OF A CHANGE OF CONTROL TRIGGERING EVENT.
Upon the occurrence of a Change of Control Triggering Event, as defined in the Indenture, we will be required to offer to purchase all outstanding Notes at a price in cash equal to 101% of the aggregate principal amount of the Notes, plus accrued and unpaid interest thereon. See "Description of the Notes -- Certain Covenants -- Change of Control". If the consent solicitation with respect to our 7.75% Notes is successful, we will also be required to offer to purchase such notes on the same basis. However, we may not have sufficient funds at the time to make the required purchase of these securities.
BECAUSE WE ARE A CANADIAN COMPANY, IT MAY BE DIFFICULT FOR YOU TO ENFORCE LIABILITIES AGAINST US BASED SOLELY UPON THE FEDERAL SECURITIES LAWS OF THE UNITED STATES.
We are organized under the laws of Canada and our principal executive office is located in Vancouver, British Columbia. The majority of our directors and officers, and the experts named in this prospectus, are residents of Canada, and a substantial portion of their assets and our assets are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon the directors, officers and experts, or to enforce judgments of United States courts based upon civil liability under the federal securities laws of the United States against them. There is doubt as to the enforceability in Canada of judgments against us or against any of our directors, officers or experts, in original actions or in actions for enforcement of judgments of United States courts, based solely upon the federal securities laws of the United States.
THERE IS CURRENTLY NO ACTIVE TRADING MARKET FOR THE NOTES. IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP FOR THE NOTES, YOU MAY NOT BE ABLE TO RESELL THEM.
No active trading market currently exists for the Notes and none may develop. We do not intend to apply for the listing of the Notes on any securities exchange or quotation system. As a result, an active trading market may not develop for the Notes. If an active trading market for the Notes does not develop, it could have an adverse effect on the market price and your ability to resell the Notes.
ONE OF OUR SIGNIFICANT SHAREHOLDERS MAY HAVE INTERESTS WHICH CONFLICT WITH THE INTERESTS OF OUR DEBTHOLDERS.
NOVA Chemicals Corporation is our largest shareholder and held approximately 37% of our outstanding common shares as of March 31, 2002. See "Principal Shareholders". As a result, NOVA has the ability to determine the outcome of certain corporate actions requiring approval of our common shareholders, including the adoption of certain amendments to our Articles of Continuance and the approval of mergers and sales of all or substantially all of our assets. Under the corporations law governing us, transactions of this type require the approval of 66 2/3% of the holders of our common shares. As with other shareholders, NOVA's interests in our business, operations and financial condition may not be aligned or may conflict with your interests.
USE OF PROCEEDS
We estimate the net proceeds from the sale of the Notes offered by this prospectus, after deducting estimated underwriting commissions and expenses, will be approximately $196 million. We intend to use approximately $150 million of the estimated net proceeds to repay in full our 7.40% Notes due August 15, 2002 upon the maturity of such notes. The balance of the net proceeds will be used for general corporate purposes. Pending such application, such net proceeds will be invested in short-term money market instruments.
CONSOLIDATED CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of March 31, 2002 (1) on an actual basis and (2) as adjusted to reflect the sale of the Notes offered by this prospectus and the application of the estimated net proceeds thereof as described in "Use of Proceeds". This table should be read in conjunction with "Management's Discussion and Analysis", "Description of Certain Indebtedness" and our unaudited interim consolidated financial statements and related notes appearing elsewhere in this prospectus.
AS OF MARCH 31, 2002
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
Cash and cash equivalents................................... $ 286,616 $ 332,616
========== ==========
Short-term debt:
7.40% Notes due August 15, 2002........................... $ 149,909 --
---------- ----------
Long-term debt:
Senior unsecured credit facility(1)....................... -- --
7.75% Notes due August 15, 2005........................... $ 249,595 $ 249,595
Notes offered by this prospectus.......................... -- 200,000
---------- ----------
Total long-term debt................................... $ 249,595 $ 449,595
---------- ----------
Total debt............................................. $ 399,504 $ 449,595
---------- ----------
Shareholders' equity:
Capital stock............................................. $ 526,555 $ 526,555
Retained earnings......................................... 373,370 373,370
---------- ----------
Total shareholders' equity............................. $ 899,925 $ 899,925
---------- ----------
Total capitalization........................................ $1,299,429 $1,349,520
========== ==========
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(1) Total availability of $291 million, expiring January 2004.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
You should read the selected historical consolidated financial data set forth below in conjunction with our consolidated financial statements and the related notes and "Management's Discussion and Analysis" included elsewhere in this prospectus. The statement of income data and the balance sheet data as at and for the five years ended December 31, 2001, have been derived from our annual consolidated financial statements, which for the two years ended December 31, 2001, are included elsewhere in this prospectus. The statement of income data for the three months ended March 31, 2001 and 2002 and the balance sheet data as at March 31, 2002, have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The financial information as at and for the three months ended March 31, 2001 and 2002 includes, in the opinion of our management, all adjustments which are necessary for the fair presentation of this unaudited financial information. The interim results may not be indicative of the results for a full year.
THREE MONTHS
ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------
1997 1998 1999 2000 2001 2001 2002
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT VOLUME AND PRICE DATA)
STATEMENT OF INCOME DATA:
Canadian GAAP
Revenue.............................. $1,299 $ 721 $ 695 $1,061 $1,149 $ 373 $ 182
Cost of sales and operating
expenses........................... 931 704 689 756 911 250 171
Depreciation and amortization........ 117 107 112 110 113 27 28
------ ------ ------ ------ ------ ------ ------
Operating income (loss) before
undernoted items................... 251 (90) (106) 195 125 96 (17)
Interest expense..................... 32 22 25 32 32 8 7
Interest and other income............ 34 26 14 16 19 4 2
Other expense(1)..................... -- -- 69 -- 11 -- --
------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes.... 253 (86) (186) 179 101 92 (22)
Income tax recovery (expense)(2)..... (51) 18 36 (34) (30) (23) 5
------ ------ ------ ------ ------ ------ ------
Net income (loss).................... $ 202 $ (68) $ (150) $ 145 $ 71 $ 69 $ (17)
====== ====== ====== ====== ====== ====== ======
U.S. GAAP(3)
Net income (loss).................... $ 187 $ (100) $ (128) $ 89 $ 69 N/A N/A
====== ====== ====== ====== ======
BALANCE SHEET DATA (END OF PERIOD):
Canadian GAAP
Cash and cash equivalents............ $ 492 $ 288 $ 152 $ 226 $ 332 $ 334 $ 287
Total assets......................... 1,973 1,799 1,644 1,803 1,693 1,895 1,624
Total debt........................... 398 399 399 399 399 399 399
Shareholders' Equity................. 1,191 1,108 956 1,045 935 1,119 900
U.S. GAAP(3)
Total assets......................... $2,203 $2,002 $1,821 $1,938 $1,843 N/A N/A
Shareholders' Equity................. 1,323 1,208 1,079 1,108 985 N/A N/A
OTHER FINANCIAL DATA:
Canadian GAAP
EBITDA(4)............................ $ 368 $ 17 $ 6 $ 305 $ 238 $ 123 $ 11
Capital expenditures:
Capital maintenance, catalyst,
turnarounds and other(5)......... $ 22 $ 49 $ 66 $ 25 $ 19 $ 5 $ 3
Plants and equipment under
development(6)................... 89 167 72 -- 60 -- 34
------ ------ ------ ------ ------ ------ ------
Total capital expenditures........... $ 111 $ 216 $ 138 $ 25 $ 79 $ 5 $ 37
====== ====== ====== ====== ====== ====== ======
U.S. GAAP(3)
EBITDA(4)............................ $ 342 $ (3) $ 30 $ 273 $ 258 N/A N/A
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THREE MONTHS
ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------
1997 1998 1999 2000 2001 2001 2002
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT VOLUME AND PRICE DATA)
OTHER SELECTED OPERATING DATA:
Methanol production volume (thousands
of tonnes):.......................... 5,092 4,690 5,343 6,007 5,361 1,379 1,365
Methanol sales volume (thousands of
tonnes):
Produced product................... 5,049 4,479 5,338 5,815 5,390 1,245 1,431
Purchased product.................. 1,854 1,532 1,255 814 1,280 405 195
Commission sales................... -- -- -- 142 720 221 157
------ ------ ------ ------ ------ ------ ------
Total methanol sales volume.......... 6,903 6,011 6,593 6,771 7,390 1,871 1,783
====== ====== ====== ====== ====== ====== ======
Methanex average realized methanol
price (dollars per tonne)............ $ 187 $ 120 $ 105 $ 160 $ 172 $ 225 $ 111
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(1) Other expense for 1999 consists of $55 million related to the write off of the book value of our Kitimat plant and $14 million related to a restructuring to obtain 100% ownership of the Fortier plant. Other expense for 2001 consists of $11 million for employee severance and mothball costs related to the shutdown for an indeterminate period of our Medicine Hat Plant 3.
(2) We adopted the asset and liability method of accounting for income taxes on January 1, 2000 without restatement of prior periods. As a result of this change, we recorded an increase to shareholders' equity of approximately $4 million at January 1, 2000.
(3) As a foreign private issuer under U.S. securities laws, we prepare an annual reconciliation with U.S. GAAP which is provided as supplemental information to our annual consolidated financial statements included elsewhere in this prospectus. We are not required to prepare a quarterly reconciliation with U.S. GAAP and therefore U.S. GAAP figures have not been presented for the three month periods ended March 31, 2001 and 2002.
(4) EBITDA represents net income (loss) before income taxes, interest expense, interest and other income, depreciation and amortization, and other expense, which includes asset write downs and asset restructuring charges. EBITDA should be considered in addition to, and not as a substitute for, operating income, net income (loss), cash flows and other measures of financial performance reported in accordance with generally accepted accounting principles. EBITDA differs from cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas primarily because it does not include cash flows from interest, taxes and asset restructuring charges. Our method of computing EBITDA may not be comparable to similarly titled measures reported by other companies. The following table shows a reconciliation of EBITDA to net income (loss):
THREE MONTHS
ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------
1997 1998 1999 2000 2001 2001 2002
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS)
Net income (loss).................. $ 202 $ (68) $ (150) $ 145 $ 71 $ 69 $ (17)
Add (deduct):
Income tax expense (recovery).... 51 (18) (36) 34 30 23 (5)
Interest expense................. 32 22 25 32 32 8 7
Interest and other income........ (34) (26) (14) (16) (19) (4) (2)
Other expense.................... -- -- 69 -- 11 -- --
Depreciation and amortization.... 117 107 112 110 113 27 28
------ ------ ------ ------ ------ ------ ------
EBITDA -- Canadian GAAP............ $ 368 $ 17 $ 6 $ 305 $ 238 $ 123 $ 11
U.S. GAAP adjustments (3)........ (26) (20) 24 (32) 20 N/A N/A
------ ------ ------ ------ ------ ------ ------
EBITDA -- U.S. GAAP (3)............ $ 342 $ (3) $ 30 $ 273 $ 258 N/A N/A
====== ====== ====== ====== ====== ====== ======
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(5) We schedule a shutdown and inspection of each of our plants at intervals of three or more years to perform necessary maintenance and replacement of catalysts (a process commonly known as a turnaround). The amounts shown represent cash flows in the period.
(6) Plants and equipment under development for 1997 consists of $29 million related to the completion of our Chile II plant and $60 million related to the construction of our Chile III plant. Plants and equipment under development for 1998 and 1999 related to the completion of our Chile III plant. Plants and equipment under development for 2001 consists of $55 million related to our 63.1% interest in the Atlas methanol facility under construction in Trinidad and $5 million related to the development of potential new methanol facilities in Chile and Australia. The amounts shown represent cash flows in the period.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this prospectus.
We prepare our financial statements in accordance with Canadian GAAP, which differs in certain respects from U.S. GAAP. For a discussion of the principal measurement differences between Canadian GAAP and U.S. GAAP as they pertain to us, refer to the supplemental information to our consolidated financial statements included elsewhere in this prospectus. The following discussion is based upon our financial statements prepared in accordance with Canadian GAAP.
OVERVIEW
Methanol is a liquid commodity chemical produced primarily from natural gas. Roughly three quarters of all methanol is used to produce formaldehyde, acetic acid and other chemical derivatives for which demand is influenced by levels of global gross domestic product. The remainder of all methanol is used to produce the gasoline additive MTBE for which demand is driven by clean air legislation in the United States and other countries as well as levels of gasoline demand.
We are the world's largest producer and marketer of methanol. We operate methanol production facilities located in Chile, New Zealand and North America and source additional methanol produced by others either on a contract basis or on the spot market in order to meet customer needs and support our marketing efforts. In a joint venture with BP, we are currently building the world's largest methanol plant in Trinidad which we expect will commence commercial operation by late 2003. Our operating results are affected by the prevailing market price for methanol, our production volumes and related costs of production and distribution and, to a lesser extent, the margins we earn on the sale of methanol produced by others.
Methanol prices are characterized by volatility and are affected by the methanol demand/ supply balance, which is influenced by global industry capacity, global industry operating rates and the strength of demand. In addition, the price of natural gas in North America affects the cash production cost of North American methanol producers. Historically, this cost has established the minimum expected methanol selling price in North America. Shutdowns of high cost capacity resulted in a tight demand/supply balance and higher methanol prices from mid-2000 to mid-2001 than those in the first part of 2000. Methanol prices declined substantially in the second half of 2001, consistent with general economic conditions, and remained low in the first part of 2002. We believe there have been a number of positive developments late in the first quarter and into the second quarter of 2002, including some early signs of a recovery in methanol demand. On the supply side, there have been a number of unplanned methanol plant outages, particularly in Asia, the Middle East and Africa. These recent developments have resulted in tighter market conditions and higher methanol prices in the second quarter of 2002. Methanol pricing, however, will ultimately depend on industry operating rates and the strength of global demand.
Our sales revenues consist primarily of revenues from the sale of methanol that we produce. We also earn revenues from the sale of methanol that we purchase and commission revenue from sales of methanol from the 850,000 tonne per year Titan Methanol Company plant in Trinidad. This commission revenue is not significant to our operating results.
For the methanol that we produce, the most significant components of our cost of sales and operating expenses are natural gas costs and distribution costs associated with delivering methanol to customers from our production facilities. Approximately 90% of our capacity currently operating is from our low-cost facilities outside of North America where we purchase natural gas
under supply contracts that provide for prices which are not directly subject to the volatile North American natural gas market. The price we pay for natural gas for our Chilean facility varies based on changes in methanol prices when they are above a certain level calculated on a trailing twelve-month basis. The price of natural gas for our New Zealand facilities is adjusted annually upward or downward based on a specified New Zealand inflation rate index. Approximately 10% of our production currently operating is in North America where we purchase natural gas on a short-term basis.
Revenues from the sale of methanol that we purchase include revenues from the sale of methanol purchased pursuant to long or short term purchase contracts and from the sale of methanol purchased on the spot market. Our cost of sales and operating expenses for methanol that we purchase consists primarily of the cost of the methanol to us. The margins that we earn on the sale of purchased methanol are relatively insignificant and generally do not vary materially with the market price of methanol. However, on the sale of methanol purchased on the spot market, we may incur losses or realize gains when the methanol price decreases or increases rapidly between the time of purchase and sale.
We believe that our results of operations are best examined by analyzing changes in the components of our operating income, other income (expense) and income taxes. Separate discussions of the revenue and cost of sales line items would be less meaningful because of the very different margin characteristics of our sales of purchased methanol compared to our sales of produced methanol. The discussion of purchased methanol and its impact on our results of operations is more meaningfully discussed on a net margin basis, because the cost of sales of purchased methanol consists principally of the cost of the methanol itself, which is directly related to the selling price of methanol at the time of purchase. The discussion of produced methanol is more meaningful if we separately analyze the individual elements that impact operating income. These elements are selling price and sales volumes, total cash cost (which is included in cost of sales and operating expenses in the income statement) and depreciation and amortization. Total cash cost include cash production and distribution costs (which we call delivered cash cost) and selling, general and administrative expenses.
Changes in our operating income from period to period are primarily affected by:
- the difference in the selling price of methanol that we produce (we quantify this change as the difference in the selling price of methanol that we produce multiplied by the sales volume of produced methanol in the current period);
- the difference in the sales volume of methanol that we produce (we quantify this change as the difference in the sales volume of methanol that we produce multiplied by the difference between the selling price and delivered cash cost per tonne for the prior period);
- the change in total cash cost (we quantify this change as the difference in delivered cash cost per tonne multiplied by the sales volume of produced methanol in the current period plus the change in selling, general and administrative expenses);
- the change in the margins earned on the sale of purchased methanol; and
- the change in depreciation and amortization.
OUR RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2001
OPERATING INCOME
We had an operating loss of $17 million for the first quarter of 2002 compared with operating income of $96 million for the first quarter of 2001. This decrease in operating income of $113 million resulted from:
($ MILLIONS)
------------
Lower realized price of produced methanol................... (168)
Higher sales volumes of produced methanol................... 23
Lower total cash cost....................................... 31
Higher margin on the sale of purchased methanol............. 2
Higher depreciation and amortization........................ (1)
Other, net.................................................. --
----
Decrease in operating income................................ (113)
====
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LOWER REALIZED PRICE OF PRODUCED METHANOL
The average realized price of $111 per tonne for produced methanol in the first quarter of 2002 was $117 per tonne, or 51%, lower than the first quarter of 2001 price of $228 per tonne. The lower average realized price for produced methanol resulted in a $168 million decrease in operating income in comparison with the first quarter of 2001. Methanol prices started to increase at the end of the first quarter of 2002 and into April 2002 with spot prices in the United States in the range of $180 to $200 per tonne in the latter part of May 2002.
HIGHER SALES VOLUMES OF PRODUCED METHANOL
Although our total sales volume of produced, purchased and commission methanol decreased by 0.09 million tonnes to 1.78 million tonnes in the first quarter of 2002 compared with 1.87 million tonnes in the first quarter of 2001, our sales volume of produced methanol over the same period increased. Our sales volume of produced methanol in the first quarter of 2002 was 1.43 million tonnes compared with 1.25 million tonnes in the first quarter of 2001, representing an increase of 15%. The increase in sales volume of produced methanol is primarily a result of lower purchases of spot methanol late in 2001 and throughout the first quarter of 2002 compared with the prior year. Increased sales volume of produced methanol resulted in a $23 million increase in operating income for the first quarter of 2002 compared with the first quarter of 2001.
LOWER TOTAL CASH COST
Our total cash cost decreased by $31 million for the first quarter of 2002 compared with the first quarter of 2001. Lower natural gas costs for our North American facilities accounted for $20 million of this decrease. The remainder of the decrease relates to lower operating costs associated with idled facilities, lower freight and other logistics costs, and lower business development and strategic initiative costs.
HIGHER MARGIN ON THE SALE OF PURCHASED METHANOL
We earned a margin of $1 million on the sale of purchased methanol in the first quarter of 2002 compared with a loss of $1 million in the first quarter of 2001.
HIGHER DEPRECIATION AND AMORTIZATION
Depreciation and amortization for the first quarter ended March 31, 2002
was $28 million compared with $27 million for the first quarter ended March 31,
2001. This increase is a result of
higher sales volume of produced methanol in the first quarter of 2002, mostly offset by lower depreciation and amortization for catalyst and turnarounds in 2002 compared with 2001.
OTHER INCOME (EXPENSE)
Interest expense relates primarily to fixed-rate interest on our unsecured long-term debt. Interest expense for the first quarter of 2002 was $7 million compared with $8 million for the first quarter of 2001. The decrease relates to capitalized interest for the Atlas methanol project in the first quarter of 2002.
Interest income for the first quarter of 2002 was $2 million compared with $4 million for the first quarter of 2001. The decrease is primarily due to lower interest rates in 2002.
INCOME TAXES
The effective income tax rate for the first quarter of 2002 was 20.2% compared with 24.9% for the first quarter of 2001, due to the mix of income and effective tax rates by jurisdiction.
NET INCOME (LOSS)
For the first quarter ended March 31, 2002, we incurred a net loss of $17 million compared with net income of $69 million for the first quarter ended March 31, 2001.
FISCAL YEAR ENDED DECEMBER 31, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
2000
OPERATING INCOME
We had operating income of $125 million for 2001 compared with operating income of $195 million for 2000. The decrease in operating income of $70 million resulted from:
($ MILLIONS)
------------
Higher realized price of produced methanol.................. 60
Lower sales volumes of produced methanol.................... (33)
Higher total cash cost...................................... (76)
Lower margin on the sale of purchased methanol.............. (14)
Higher depreciation and amortization........................ (4)
Other, net.................................................. (3)
---
Decrease in operating income................................ (70)
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HIGHER REALIZED PRICE OF PRODUCED METHANOL
Our average realized price increased from $160 per tonne in 2000 to $172 per tonne in 2001. This increase of $12 per tonne, or 8%, resulted in a $60 million improvement in operating income in 2001. We entered 2001 with good demand/supply fundamentals and high North American natural gas prices and, as a consequence, prices were higher in the first half of 2001 and our average realized price was $213 per tonne. Prices, however, declined significantly in the second half of the year, we believe, due principally to lower demand caused by a slowing global economy and falling natural gas prices. In the second half of the year we realized an average price of $131 per tonne.
LOWER SALES VOLUMES OF PRODUCED METHANOL
While we increased our market position in this declining global economic environment, sales from our own production in 2001 were 5.4 million tonnes, which was approximately 7% (or 0.4 million tonnes) below the level of 5.8 million tonnes in 2000. This decrease is a result of lower production volumes at our facilities in 2001 combined with increased purchases of spot
methanol in 2001 compared with 2000. This decline resulted in a $33 million reduction in operating income in 2001 compared with 2000.
HIGHER TOTAL CASH COST
Our total cash cost increased by $76 million for the year ended December 31, 2001 compared with the year ended December 31, 2000. This increase related to higher natural gas costs, higher logistics and other costs associated with operating below capacity and higher business development and strategic initiative costs.
HIGHER NATURAL GAS COSTS. Natural gas costs were $45 million higher in 2001 than 2000. Natural gas costs were $30 million higher for our Chilean facility where the purchase price for natural gas is adjusted by a formula related to methanol prices on a twelve-month trailing average basis. Natural gas costs were $15 million higher for our North American facilities where we purchase natural gas on a short term basis. Natural gas costs in New Zealand did not change significantly.
HIGHER LOGISTICS AND OTHER COSTS ASSOCIATED WITH OPERATING BELOW CAPACITY. During 2001, we operated our facilities below capacity and as a result incurred $14 million of additional logistics and other associated costs compared with 2000. Most of these additional costs were due to ocean freight incurred to ship methanol from our production locations to customers outside of such plants' natural markets. By the fourth quarter of 2001, we had increased our plant operating rates, and our logistics costs had returned to the levels experienced in 2000.
BUSINESS DEVELOPMENT AND STRATEGIC INITIATIVES. Expenditures for business development and strategic initiatives reduced operating income by approximately $17 million for 2001 compared with 2000. At a cost of $7 million, we completed a materials demonstration unit in New Zealand which will be used to validate proprietary technology for large-scale synthesis natural gas production under a range of operating conditions. The remaining expenditures relate primarily to preliminary-stage costs for exploring opportunities to expand our methanol production capacity in Asia Pacific and costs for examining diversification opportunities that we chose not to pursue.
LOWER MARGIN ON THE SALE OF PURCHASED METHANOL
We incurred a loss of $21 million on the sale of purchased methanol in 2001 compared with a loss of $7 million in 2000. The $14 million decrease in margin on the sale of purchased methanol was primarily due to losses experienced on spot purchases when methanol prices declined rapidly during the second half of 2001. By the end of 2001 we had sold all of our high-cost inventory purchased on the spot market and we entered 2002 with minimal volumes of spot purchased product.
HIGHER DEPRECIATION AND AMORTIZATION
Depreciation and amortization for the year ended December 31, 2001 was $114 million compared with $110 million for the year ended December 31, 2000. The increase in depreciation of $4 million relates primarily to the amortization of marketing rights and other assets acquired in the second half of 2000.
OTHER INCOME (EXPENSE)
Interest expense relates primarily to fixed-rate interest on our unsecured long term debt. Interest expense was unchanged from 2001 to 2002. During 2001, we capitalized $1 million of interest to plant and equipment under development.
Interest and other income consists primarily of interest earned on cash and cash equivalents. Interest income increased by $3 million from $16 million in 2001 to $19 million in 2002 primarily due to the settlement of an income tax dispute in Canada.
In 2001, we took an $11 million asset restructuring charge related primarily to employee severance and mothball costs for the shutdown of our Medicine Hat Plant 3. This shutdown is for an indeterminate period and is expected to result in savings of annual plant fixed and capital maintenance costs of approximately $10 million.
INCOME TAXES
During 2001, we recorded income tax expense of $29 million, comprised of current income taxes of $7 million and future income taxes of $22 million. Our effective income tax rate for 2001 was 29% compared with 19% for 2000. The effective income tax rate increased primarily because of higher levels of expenditures incurred in regions where no tax benefits related to these expenditures were recorded.
The effective income tax rate of 29% is lower than the combined statutory rate in Canada primarily because a significant portion of our income was earned in foreign jurisdictions where tax rates are lower than in Canada and because of the utilization of previously unrecognized loss carryforwards and income tax deductions in New Zealand. This was partially offset by losses incurred in Canada where no income tax benefits were recorded.
We have unrecognized income tax benefits in New Zealand and Canada (see note 13 to our consolidated financial statements included elsewhere in this prospectus).
NET INCOME
For the year ended December 31, 2001, net income was $71 million or $82 million before an after-tax asset restructuring charge of $11 million related to the shutdown of our Medicine Hat facility for an indeterminate period. These results compare with net income of $145 million for 2000.
LIQUIDITY AND CAPITAL RESOURCES
THREE MONTHS ENDED MARCH 31, 2002 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2001
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas in the first quarter of 2002 was $10 million compared with $107 million for the first quarter of 2001. The decrease is primarily related to lower realized methanol prices in the first quarter of 2002, partially offset by lower natural gas costs and increased margins resulting from an increase in sales of our own methanol production.
There were no significant changes in non-cash working capital during the first quarters of 2002 and 2001.
CASH FLOWS FROM INVESTING ACTIVITIES
Plant and equipment under development includes three projects: the Atlas methanol facility under construction in Trinidad, the potential expansion of our facility in Chile and potential new methanol production capacity in Australia to serve the Asia Pacific market. During the quarter ended March 31, 2002, our cash contribution to the Atlas methanol facility was $28 million. As of March 31, 2002, our total cash contribution to the project was $66 million, excluding the $17 million payment made in the third quarter of 2001 to acquire Beacon Energy Investment Fund's interest in the Atlas project.
Capital maintenance expenditures for the first quarter of 2002 were $3 million compared with $5 million for the first quarter of 2001.
CASH FLOWS FROM FINANCING ACTIVITIES
During the quarter ended March 31, 2002 we repurchased 3.1 million shares pursuant to a normal course issuer bid for a total cost of $19 million. As of March 31, 2002, we had repurchased a total of 5.3 million shares for a total cost of $31 million under this bid.
YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas was $219 million in 2001 compared with $297 million for 2000. Although the average realized methanol price in 2001 was higher than 2000, cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas decreased by $78 million. This decrease relates primarily to lower operating income and the cash costs incurred on the shutdown of the Medicine Hat Plant 3 for an indeterminate period.
In 2001, we received a refund of $67 million from the Canada Customs and Revenue Agency representing the full amount placed on deposit plus accrued interest relating to the successful settlement of our 1991 income tax reassessment.
The reduction in other non-cash working capital for 2001 of $89 million was primarily due to a decrease in trade accounts receivable as a result of lower methanol prices and a decrease in the volume of high-cost purchased product inventory. For 2000, the increase in other non-cash working capital of $97 million was primarily related to an increase in inventory and trade accounts receivable as a result of higher methanol prices and increased business activity.
CASH FLOWS FROM INVESTING ACTIVITIES
Capital maintenance expenditures for 2001 were $19 million compared with $25 million for 2000.
In 2001, we acquired, for $17 million, Beacon Group Energy Investment Fund's right to participate in the 1.7 million tonne per year Atlas methanol facility to be constructed in Trinidad. During 2001, our 63.1% proportionate share of Atlas construction costs, excluding the $17 million payment to Beacon, was $46 million, of which we paid $38 million during the year.
In 2000, we completed the acquisitions of Saturn Methanol Company and the methanol assets of ICI Chemicals and Polymers in the United Kingdom for a combined cash cost of $32 million. We believe these transactions increased our global market share and provided us with increased flexibility in supplying the U.S. and European markets.
CASH FLOWS FROM FINANCING ACTIVITIES
During 2001, we repurchased 29.2 million common shares pursuant to a substantial issuer bid for $175 million at $6.00 per share, which was below book value. Also, during 2001 we commenced a normal course issuer bid to repurchase up to 11.5 million shares. As of December 31, 2001, we had repurchased 2.2 million shares for a total cost of $12 million under this bid.
During 2001 we paid $3 million in reduction of long term liabilities related to the acquisition of Saturn and $3 million in reduction of long term liabilities related to the 1999 Fortier asset restructuring. During 2000, we paid $11 million in reduction of long term liabilities related to the
1995 acquisition of North American marketing rights and the 1999 Fortier asset restructuring. In addition, we repaid $7 million of long term debt assumed on the acquisition of Saturn.
SUMMARY OF CONTRACTUAL OBLIGATIONS, OTHER COMMERCIAL COMMITMENTS AND CAPITAL MAINTENANCE EXPENDITURES
The following table presents a summary of our long term debt and other major contractual obligations as well as other major commercial commitments over the next five years as at December 31, 2001:
2002 2003 2004 2005 2006
------ ------ ------ ------ ------
(IN MILLIONS OF DOLLARS)
Debt repayments.............................. $ 150 $ -- $ -- $ 250 $ --
Take-or-pay contracts(1)..................... 159 142 166 161 147
Operating lease commitments(2)............... 102 89 77 76 74
Estimated capital expenditures for the Atlas
methanol facility(3)...................... 115 85 -- -- --
------ ------ ------ ------ ------
$ 526 $ 316 $ 243 $ 487 $ 221
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(1) Methanex has commitments under take-or-pay contracts to purchase annual quantities of natural gas supplies including those related to the Atlas facility and to pay for transportation capacity related to these supplies. Take-or-pay means that we are obliged to pay for the natural gas regardless of whether we take delivery of the natural gas contracted. Such commitments are typical in the methanol industry.
(2) These relate primarily to vessel charter, terminal facilities, office space and equipment.
(3) Capital expenditure commitments relate to our share of the construction costs for the Atlas methanol facility. The total cost of the Atlas methanol facility, including financing costs, is expected to be approximately $400 million. Our share of capital expenditures for this project, for the period from January 1, 2002 to December 31, 2003, is estimated to be $200 million and these expenditures are expected to be funded from a planned project financing, cash generated from operations and cash on hand. Our total equity contribution to the Atlas joint venture, assuming project financing is arranged as planned, is expected to be approximately $100 million, of which $66 million had been funded at March 31, 2002.
Planned capital maintenance expenditures directed towards major maintenance, turnarounds and catalyst changes, which are not included in the above table, are estimated to total less than $80 million through the end of 2004. We are currently considering two potential strategic projects in Chile and Australia. If we proceed with these projects, the capital expenditures involved will be incurred within the next five years.
LIQUIDITY
We maintain conservative financial policies that reflect the volatile and cyclical nature of methanol pricing. We focus on maintaining our financial strength and flexibility through prudent financial management.
As at March 31, 2002 our cash balance was $287 million. We also have an undrawn $291 million credit facility that expires in January 2004. We believe the cash and undrawn credit facility, combined with our low cost production capacity, provide us with substantial financial capacity and flexibility.
We believe we have the financial capacity to complete our capital maintenance spending program and fund our equity contribution for the construction of Atlas.
FINANCIAL RISK MANAGEMENT
The dominant currency in which we conduct business is the U.S. dollar, which is our reporting currency. A significant portion of our costs, however, are incurred in other currencies, principally the New Zealand dollar and the Canadian dollar and, to a lesser extent, the Chilean peso. We are exposed to increases in the value of these currencies that could have the effect of increasing the U.S. dollar equivalent of cost of sales and operating expenses. We also have some revenues in Euros and British pounds. We are exposed to risks of declines in the value of these currencies compared to the U.S. dollar which could have the effect of decreasing the U.S. dollar equivalent of revenue.
We have implemented a foreign exchange hedging program designed to limit our exposure to foreign exchange volatility and to contribute towards achieving strategic cost structure targets. We manage our exposure to foreign currencies through forward exchange contracts and currency options. These instruments are used solely for hedging purposes, not for speculation. Hedging activity is reviewed regularly by the Audit, Finance and Risk Committee of our Board.
The fair value of our forward exchange contracts and foreign currency options was negative $64 million at March 31, 2002. Until settled, the fair value of these financial instruments will fluctuate based on changes in foreign exchange rates. These contracts and options are not subject to rating triggers or margin calls and rank equally with all our unsecured and unsubordinated indebtedness.
CRITICAL ACCOUNTING POLICIES
We believe the following selected accounting policies and issues are critical to understanding the estimates, assumptions and uncertainties that affect the amounts reported and disclosed in our consolidated financial statements and related notes. See Note 1 to our annual consolidated financial statements included elsewhere in this prospectus for a more comprehensive discussion of our significant accounting policies.
RECOVERABILITY OF PROPERTY, PLANT AND EQUIPMENT
Our business is capital intensive and has required, and will continue to require, significant investments in property, plant and equipment. At March 31, 2002, the carrying amount of our property, plant and equipment was $1,038 million. Recoverability of property, plant and equipment is measured by comparing the carrying amount of an asset to the undiscounted future net cash flows expected to be generated from the asset over its estimated useful life. In cases where the undiscounted expected future cash flows are less than the carrying amounts, a write-down is recognized equal to the difference.
We idled our Fortier plant in 1999 and our Medicine Hat Plant 3 in 2001 for indeterminate periods as their operating costs were much higher than our facilities in New Zealand and Chile where we are endeavoring to maximize our production. Both Medicine Hat Plant 3 and Fortier are being maintained in a position to restart if conditions warrant this course of action. These two plants had a combined net book value of $187 million at March 31, 2002.
A prolonged economic downturn impacting methanol demand, or an increase in supply, could intensify competitive pricing pressure, create an imbalance of industry supply and demand, or otherwise diminish volumes or profits. In addition, sustained high North American natural gas prices could cause North American methanol facilities to become uncompetitive. Such events would impact our estimates of future net cash flows to be generated by our production facilities. Consequently, it is possible that our future operating results could be materially and adversely affected by impairment charges related to the recoverability of our property, plant and equipment.
SITE RESTORATION
As at March 31, 2002, we had accrued $56 million for obligations for future removal and site restoration costs for those sites where a reasonably definitive estimate of the costs can be made. Inherent uncertainties exist because the restoration activities will take place for the most part, many years in the future and there may be changes in governmental and environmental regulations, and changes in removal technology and costs. It is difficult to estimate the true costs of these activities which are based on today's regulations and technology. Because of uncertainties related to estimating future removal and site restoration activities, future costs related to the currently identified sites could differ from the amounts estimated.
FUTURE INCOME TAXES
Future income tax assets and liabilities are determined using enacted tax rates for the effects of net operating losses and temporary differences between the book and tax bases of assets and liabilities. We record a valuation allowance on future tax assets, when appropriate, to reflect the realization of expected future tax benefits. In determining the appropriate valuation allowance, certain judgments are made relating to level of expected future taxable income and available tax planning strategies and their impact on the utilization of existing loss carryforwards and other income tax deductions. In making this analysis, we consider historical profitability and volatility to assess whether we believe it to be more likely than not that the existing loss carryforwards and other income tax deductions will be utilized to offset future taxable income otherwise calculated. These judgments are routinely reviewed by management. At March 31, 2002, we had future income tax liabilities with a carrying value of $162 million. We have established a valuation allowance primarily for New Zealand and Canadian future income tax assets, the realization of which we do not currently consider to be more likely than not.
THE METHANOL INDUSTRY
GENERAL
Methanol is a liquid commodity chemical produced primarily from natural gas and is typically used as a chemical feedstock in the manufacture of other products. Roughly three quarters of all methanol is used in the production of formaldehyde, acetic acid and a variety of other chemicals which form the basis of a large number of chemical derivatives. These derivatives are used in the manufacture of a wide range of products including building materials, foams, resins and plastics. The remainder of methanol demand arises from the fuel sector, principally as a component in the production of MTBE, which is blended with gasoline as a source of octane and as an oxygenate to reduce the amount of tailpipe emissions from motor vehicles. Methanol is also being used on a small scale as a direct fuel for motor vehicles and is actively being considered as a preferred fuel for fuel cells.
DEMAND
We believe that global methanol consumption has grown from approximately 21 million tonnes in 1993 to approximately 30 million tonnes in 2001, representing a compound annual growth rate of approximately 4.8%, despite a decline in overall methanol demand in 2001 versus 2000 due to lower global economic activity in the second half of 2001. The following charts illustrate the breakdown of 2001 global demand by derivative type and geographic market.
2001 DEMAND BREAKDOWN
BY DERIVATIVE
[PIE CHART:
FORMALDEHYDE 32%
ACETIC ACID 10%
OTHER 32%
MTBE 26%]
2001 DEMAND BREAKDOWN
BY GEOGRAPHY
[PIE CHART:
NORTH AMERICA 33%
EUROPE 27%
ASIA PACIFIC 28%
OTHER 12%]
Source: Chemical Market Associates Inc.
CHEMICAL DERIVATIVE DEMAND
Chemical derivatives produced from methanol include formaldehyde, acetic acid and a variety of others.
FORMALDEHYDE: Methanol makes up approximately 45% of formaldehyde by weight. The largest use for formaldehyde is as a component of urea-formaldehyde and phenol-formaldehyde resins, which are used as adhesives for oriented strand board, plywood, particleboard, medium-density fibreboard and other reconstituted or engineered wood products. Formaldehyde is also used as a raw material for engineering plastics and in the manufacture of a variety of other products, including elastomers, paints, building products, foams, polyurethane and automotive products.
ACETIC ACID: Methanol makes up approximately 55% of acetic acid by weight.
Acetic acid is a chemical intermediate employed principally in the production of
vinyl acetate monomer, or VAM, acetic anhydride, purified terephthalic acid and
acetate solvents, which are used in a wide variety of products including
adhesives, paper, paints, plastics, resins, solvents, pharmaceuticals and
textiles. We believe the acetic acid industry has also benefited from increasing
demand for water-
based solvents produced with VAM for use in paints and adhesives due to environmental concerns associated with emissions of volatile organic compounds from other types of solvents.
OTHERS: As a basic chemical building block, methanol is also used in the manufacture of methylamines, methyl methacrylate and a diverse range of other chemical derivatives, which in turn are ultimately used to make such products as adhesives, coatings, plastics, textiles, paints, solvents, paint removers, polyester resins and fibres, explosives, herbicides, pesticides and poultry feed additives. Other end-uses of methanol include silicone products, as a substitute for chlorofluorocarbons in aerosol products, as a de-icer and windshield washer fluid for automobiles and as an antifreeze for pipeline dehydration.
Reflecting the diversity of its end-use products, growth in methanol demand is generally linked to growth in the economy. Since formaldehyde, acetic acid and other chemical derivatives are used in the construction industry, the cyclicality of the construction industry, which is determined by the level of housing starts, refurbishments and consumer spending, is an important factor in determining the level of chemical derivative demand for methanol. Demand is also affected by automobile production, durable goods production, industrial investment and environmental and health trends, as well as new product development in the panelboard and plastic packaging industries. Chemical derivative demand for methanol has been relatively insensitive to changes in methanol prices. We attribute this to the fact that there are few cost- effective substitutes for methanol in the production of methanol-based chemical derivatives and because methanol costs typically account for only a small portion of the cost of many of the end-use products.
MTBE AND FUEL DEMAND
Methanol makes up approximately 36% of MTBE by weight. MTBE is used primarily as a source of octane and as an oxygenate for gasoline. MTBE was developed as a source of octane when unleaded gasolines were introduced. Over the past several years environmental concerns and legislation have also increased demand for MTBE as an oxygenate in gasoline in order to reduce automobile tailpipe emissions. Worldwide methanol demand for MTBE was approximately 7.9 million tonnes in 2001. Over half (or approximately 4.6 million tonnes) of methanol demand for MTBE was in the United States and 1.3 million tonnes of this demand is for MTBE consumed in California. In the United States, MTBE's value as an oxygenate became the most significant factor in its use. As discussed in more detail below, California and other states in the United States, as well as the U.S. federal government, have initiated actions that may limit, or even eliminate, the use of MTBE as a gasoline component in the United States.
Elsewhere, MTBE continues to be used as a source of octane, but with growing usage for its clean air benefits. We believe the largest potential for MTBE growth is outside the United States. Our belief is based on the actions being taken around the world to phase out lead, benzene and other aromatics from gasoline. In December 2001, the European Union confirmed the suitability and continued use of MTBE as a fuel additive. Implementation of clean air standards is continuing in Western Europe, where the compound annual growth rate of demand for MTBE was approximately 12.5% from 1999 to 2001, as new specifications that limit lead, benzene and aromatics content in gasoline in the European Union were implemented. Demand for MTBE in Asia is also increasing as many countries work towards removing lead and aromatics from gasoline to improve air quality.
Originally, one of the most important factors in the increased demand for MTBE as an oxygenate in the United States arose from the implementation of the 1990 amendments to the United States Clean Air Act, or the Clean Air Act. The Clean Air Act requires the use of cleaner-burning oxygenated gasolines under two programs: the winter-time oxygenated fuel (oxy-fuel) program which was introduced in November 1992 and the year-round reformulated gasoline (RFG) program which was introduced in 1995. Both programs were designed to achieve a
minimum oxygen content in gasoline. Although ethanol (which is primarily produced from corn in the United States) is also one of the oxygenates approved for use under the Clean Air Act, MTBE quickly became the oxygenate of choice of the refining industry due to its cost, compatibility with the gasoline blending and distribution systems and its availability.
Gasoline containing MTBE, which is more easily detectable in water than other gasoline components, has leaked into groundwater principally from underground gasoline storage tanks and has been discharged directly into drinking water reservoirs. California and other states in the United States have reacted by initiating actions that may limit the use of MTBE as a gasoline component. In March 1999, the Governor of California announced a decision to ban MTBE as a gasoline additive in California by January 1, 2003. Also in 1999, a panel commissioned by the U.S. Environmental Protection Agency, or EPA, issued a report recommending, among other things, that the use of MTBE in gasoline be substantially reduced. The EPA report, however, also acknowledged the complexity and difficulty of maintaining current air quality benefits without MTBE. In January 2001, the Oxygenated Fuels Association, which represents the major U.S. producers and marketers of MTBE, filed a suit against the State of California claiming that the State's proposed ban of MTBE violates and is pre-empted by the requirements of the Clean Air Act. In June 2001, the EPA denied a request by California for a waiver of the requirement for the minimum oxygen content in gasoline, which effectively forces California to continue to permit the use of MTBE or to replace it with ethanol. As a result, in March 2002, the Governor of California announced a one-year delay of the ban of MTBE to January 1, 2004. In April 2002, the U.S. Senate passed a comprehensive energy bill that included a provision to ban MTBE in the United States within four years of its enactment. The U.S. House of Representatives has also passed an energy bill, but it does not contain a provision to ban MTBE. The Senate and the House must proceed to conference to determine whether energy legislation can be agreed and passed by the whole U.S. Congress. It is uncertain to what extent these and other developments will affect the demand for MTBE in the United States. We believe it is likely, however, that the demand for methanol for MTBE in the United States will be reduced, or possibly eliminated, as a result of these actions.
The Governor's Order banning MTBE in California makes no mention of health issues. Under its Proposition 65, California is required to list all substances known to the state to cause cancer or to be reproductive or developmental toxics. California studied MTBE and did not include it in this list. The U.S. National Institute of Environmental Health Sciences under its National Toxicology Program and the International Agency for Research on Cancer which was established by the World Health Organization have also studied MTBE and had similar findings.
In July 1999, we gave notice to the U.S. State Department that we were claiming damages under the provisions of the North American Free Trade Agreement, or NAFTA, relating to California's decision to ban MTBE. Our claims under the NAFTA allege that California's treatment of us is unfair and inequitable, that it is discriminatory in favour of the ethanol industry, and that it is tantamount to expropriation. A NAFTA arbitration panel has been established to hear the claim and heard argument in July 2001 on jurisdictional issues. The panel has not yet published its ruling on that issue. At present, we are uncertain as to what the final disposition of our NAFTA claim will be.
OTHER DEMAND
Over the long term, additional demand for methanol may come from the use of methanol as a direct fuel for motor vehicles. Methanol also has potential to power fuel cells, an alternative means of generating electrical energy in an environmentally friendly manner that does not use traditional combustion. Currently, a small percentage of global methanol demand is for use in the production of TAME, another fuel additive.
SUPPLY
While a significant amount of new methanol capacity came on-stream from 1998 to 2001, a large number of high-cost North American and European producers shut down plants that remain shut down. In addition, the industry has consistently operated significantly below stated capacity, even in periods of high methanol prices and margins, due primarily to shutdowns for planned and unplanned repairs and maintenance.
Newer methanol plants are generally constructed in remote coastal locations with access to low cost natural gas, although this advantage is sometimes offset by higher distribution costs due to their distance to major markets. There is typically a span of two and one-half to four years to plan and construct a new methanol plant. The only new capacity to start production in 2001 was the 850,000 tonne per year AMPCO facility in Equatorial Guinea. A 400,000 tonne facility in Argentina owned by YPF/Repsol started commercial production in April 2002 and we have entered into a contract to market all export volume from this plant for approximately two years. We expect the next increment of capacity to be our 1.7 million tonne Atlas facility in Trinidad which is expected to start commercial production in late 2003. Announcements have been made that a 1.0 million tonne facility is under construction in Iran.
Additional methanol supply can potentially become available by re-starting methanol plants whose production has been idled, by carrying out major expansions of existing plants and by debottlenecking existing plants to increase their production capacity. Typical of most cyclical commodity chemicals, extended periods of relatively high methanol prices encourage construction of new plants and major expansion projects, leading to the possibility of an oversupply in the market.
METHANOL PRICES
Methanol is an internationally traded commodity. Methanol prices have historically been volatile and have been sensitive to overall production capacity relative to demand, the price of natural gas feedstock and general economic conditions. In addition, the price of natural gas in North America impacts the cash production cost of North American methanol producers. Historically, this cost affects the minimum expected methanol selling price in North America.
The following chart shows methanol contract prices in the world's major methanol markets:
[Methanol Gas Contract Prices Graph]
Methanol prices in the United States, Europe and Asia Pacific have largely tracked each other, though often with leads or lags. In times when prices in different markets diverge, product from offshore suppliers moves into the higher priced market, bringing the prices in different markets back into alignment.
The majority of product sold in the United States is priced with reference to published contract prices to which discounts may be applied. Spot market transactions are widely reported in weekly industry newsletters. The Rotterdam contract price is the main price benchmark for
Europe. This price, to which discounts may be applied, is negotiated quarterly between the major customers and suppliers in the region. As with the U.S. market, spot transactions also occur. The third major market, Asia Pacific, has contract prices which are either based on a formula primarily related to the U.S. and European contract prices or based on regional market conditions. In Asia Pacific, discounts may be applied and spot transactions also occur.
METHANOL PRODUCTION PROCESS
The methanol manufacturing process typically involves heating natural gas, mixing it with steam and passing it over a nickel catalyst, where the mixture is converted into carbon monoxide, carbon dioxide and hydrogen. This reformed gas (also known as synthesis gas) is then cooled, compressed and passed over a copper-zinc catalyst to produce crude methanol. Crude methanol consists of approximately 80% methanol and 20% water by weight. Crude methanol is then distilled to remove water, higher alcohols and other impurities and produce chemical grade methanol.
OUR BUSINESS
OVERVIEW
We are the world's largest producer and marketer of methanol. We have methanol production facilities located in Chile, New Zealand and North America and source additional methanol produced by others throughout the world. In a joint venture with BP, we are currently building the world's largest methanol plant in Trinidad where we expect to commence commercial operations by late 2003. We sell methanol through an extensive global marketing and distribution system, which has enabled us to become the largest supplier of methanol to each of the major international markets of North America, Asia Pacific and Europe, as well as Latin America. For the year ended December 31, 2001, we generated revenues of $1.15 billion and EBITDA of $238 million. We had assets of $1.69 billion as at December 31, 2001.
OUR COMPETITIVE STRENGTHS
We believe that our business has the following competitive strengths:
GLOBAL PRESENCE AND SCALE: We believe that we are the only global producer and supplier of methanol. Our production facilities, together with our marketing contracts to sell methanol produced by others, allow us to provide our customers with methanol from sources strategically located throughout the world. We believe that this has enabled us to secure contracts with high quality global customers. We believe this global presence and depth of coverage also allows us to develop current views of the worldwide methanol industry, enabling us to respond quickly to changing market trends in supply and demand. Between 1997 and 2001, our average sales represented 25% of world demand and in 2001 we had at least a 23% market share in each of the major world markets of North America, Europe and Asia Pacific, as well as Latin America.
LOW COST PRODUCER: We believe that a low cost structure is critical to maintaining a strong competitive position. The most significant component of our cost structure is natural gas and, accordingly, access to low cost natural gas is a critical success factor for our business. In the mid-1990s we began to reduce our operating exposure to the volatile North American natural gas market by shutting down higher cost plants in North America and constructing new facilities with long-term, low cost natural gas supply contracts. We started production at new plants in Chile in 1996 and 1999, aggregating approximately 2.1 million tonnes of capacity under low cost 20 year natural gas contracts, permanently shut down higher cost plants in Canada in 1997 and 1999 and shut down higher cost plants for an indeterminate period in Louisiana in 1999 and in Canada in 2001. Initiatives such as these have reduced our North American production from 49% of total production in 1994 to 8% in 2001. Distribution costs from our plants to major markets are also a significant part of our cost structure. Over the last few years we have taken a number of steps to reduce these costs, in part by seeking to take advantage of our large production hubs. For example, in early 2000, we started using the 100,000 dead weight tonne Millenium Explorer, the world's largest chemical tanker, to transport methanol from Chile to Europe and the United States, which significantly reduced our logistics costs on these routes. In mid-2000, we completed construction of a terminal in Korea that has allowed us to more efficiently and cost-effectively service our customer base in northeast Asia. We believe our access to low cost natural gas and our initiatives in reducing our distribution costs have allowed us to be a low cost supplier in the markets we serve.
OPERATIONAL EXPERTISE: We maintain detailed operations procedures aimed at ensuring an efficient and safe work place. We also plan our scheduled maintenance to coincide with required catalyst replacements. Since 1998, we have reduced our recordable injury frequency rate (recordable injuries per 200,000 exposure hours) from 2.20 to 0.84 in 2001. The combination of these factors has led to an average plant reliability factor of 96% for the past five years. Reliability factor is calculated as operating days as a percentage of the number of days in the
period, excluding planned downtime and downtime due to business restrictions. Our high reliability rate is an essential factor in keeping costs low and generating revenue and we believe it enhances our position as a secure, global provider of methanol.
OUR STRATEGY
Our primary objective is to maintain and enhance our strong competitive position. The key elements of our strategy to achieve this objective may be summarized as follows:
STRIVING AT ALL TIMES TO FURTHER REDUCE OUR COST STRUCTURE: We continue to take steps to strengthen our position as a low cost global producer. In August 2001, our Board of Directors approved the investment in, and development of, the 1.7 million tonne per year Atlas methanol plant in Trinidad, a joint venture between Methanex and BP. This project is underpinned by a long term natural gas contract and will serve as a low cost hub to supply the North American and Western European markets. We are also considering two other potential strategic projects. The first is the expansion of our Chile facility to add approximately 840,000 tonnes of additional annual capacity and the consequential extension of all our low cost Chilean natural gas supply contracts. The second is the construction of a 2.0 million tonne per year methanol plant in Western Australia, as a supply hub for the Asia Pacific region. We expect to make a decision on whether to proceed with these projects within the next year.
We are also focused on reducing our ocean shipping and other distribution costs. We seek to use larger vessels where possible and to maximize the utilization of our shipping fleet. We also seek to take advantage of prevailing conditions in the shipping market by varying the type and length of term of our ocean shipping contracts. We are planning to increase the number of in-market terminal storage facilities, particularly in Asia, to further improve the efficiency and cost-effectiveness of servicing our customers. We also look for opportunities to enter into product exchanges to reduce duty and other distribution costs.
MAINTAINING OUR WORLD LEADERSHIP IN METHANOL MARKETING, LOGISTICS AND SALES: We sell methanol through an extensive global marketing and distribution system. We believe this has enabled us to become the largest supplier of methanol to each of the major international markets of North America, Asia Pacific and Europe, as well as Latin America. We continue to pursue opportunities which allow us to maintain this market leadership. We have played a role in the consolidation of the methanol industry. In 2000, we entered into long term arrangements with BP and Sterling Chemicals to supply BP's methanol needs and exercised our option to idle Sterling's 450,000 tonne per year methanol plant. We also acquired ICI's methanol assets located primarily in the United Kingdom, including a customer base and logistics infrastructure but excluding the 500,000 tonne per year methanol plant which ICI closed thereafter. Over the past five years, we have shut down, either permanently or for an indeterminate period, 1.5 million tonnes of our own higher-cost capacity. Other producers have also shut down plants totalling 1.5 million tonnes of production, allowing us to gain new customers. We have also launched e-commerce platforms focused on key customer connectivity in the North America and Asia Pacific and plan to provide on-line inventory management services, further integrating our distribution network with our customers.
FOCUSING ON OPERATING EXCELLENCE IN MANUFACTURING AND OTHER KEY AREAS OF OUR BUSINESS: We believe that methanol consumers view reliability of supply as critical to the success of their businesses. In order to differentiate ourselves from our competitors, we strive to be premier operators in all aspects of our business. Our goal is to build new and efficient plants on time and deliver product to our customers reliably and cost effectively. Through our Responsible Care program we have achieved an excellent overall environmental and safety record at all of our facilities. This reduces the likelihood of unscheduled shutdowns and lost time accidents. Our focus on operational excellence includes both excellence in our manufacturing process and in the leadership of our human resources. By maintaining and improving our plant operating reliability
as a result of our focus on operational excellence, we believe we have become a preferred supplier of methanol globally.
INVESTING IN NEW TECHNOLOGIES AND DEVELOPING NEW MARKETS FOR METHANOL: We believe that it is important to exhibit manufacturing and technological leadership and to play a role in developing new markets for methanol. We are continuing our efforts to develop opportunities in natural gas-based technology innovation and fuel cells where methanol is a potential fuel. With Synetix, which conducts the catalyst activities of ICI, we constructed a materials demonstration unit to validate proprietary technology for large-scale synthesis gas production. Commercial success of this technology should provide us with a competitive advantage in terms of scale and economics in methanol production. We also made an equity investment in Cellex Power Products, a developer and innovator of fuel cell product solutions for use in industrial power applications. This investment should give us an opportunity to demonstrate how methanol can be delivered and used in these fuel cell applications in a safe and cost effective manner. Through the California Fuel Cell Partnership we have sponsored the opening of a methanol fuel service station in California and have been involved in the development of a methanol fuelling mechanism.
MAINTAINING FINANCIAL DISCIPLINE: We operate in a cyclical industry. Accordingly, we believe it is important to maintain financial flexibility throughout the methanol industry cycle and we have deliberately adopted a prudent approach to our liquidity. We have similarly established a disciplined approach to capital spending and have set minimum target return criteria for methanol capacity additions and other investments. We are focused on financial discipline and value creation.
METHANOL MARKETING
We sell methanol to every major market through a worldwide marketing and distribution system with marketing offices in the United States (Dallas), Belgium (Brussels), England (Billingham), Canada (Vancouver), New Zealand (Auckland), South Korea (Seoul) and Chile (Santiago). Some of our major customers include Ashland Chemical, Borden Plastics, BP, Dow Corning, Dragon Crown, Huntsman, Lyondell, Mitsui, Mitsubishi and Samsung.
We have a three-pronged methanol marketing strategy:
- to develop and maintain a strong customer base in the major methanol markets of North America, Europe and Asia Pacific, as well as in Latin America, which are strategically located in relation to our production facilities;
- to form direct customer relationships rather than sell to methanol traders; and
- to secure and maintain long term sales contracts with our customers.
We believe our geographically dispersed, multiple production sites enhance our ability to secure major chemical and petrochemical producers as customers, for whom reliability of supply and quality of service are important. Our network of marketing offices, together with our storage and terminal facilities and worldwide shipping arrangements, also allow us to provide larger customers with multinational sourcing of product and other customized, service-enhancing arrangements.
We augment our marketing operations by identifying surplus product from other producers and buying in the U.S. and European methanol spot markets. This enables us to service a portion of the contract and spot requirements of our customers when the economics are favorable. We continually evaluate our ability to cost-effectively serve markets from our facilities and we maintain internal flexibility to quickly decide whether to produce or buy methanol. Methanol that is purchased outside of contract arrangements also provides us the opportunity to build our sales base prior to bringing on our own new capacity.
Currently, approximately 90% of our sales are covered by contracts which are typically one year or longer and which contain pricing formulas that are generally determined on the basis of posted contract or other market prices at the time of shipment. Sales contracts generally specify a minimum and maximum volume and may include a "meet or release" clause that enables the customer to temporarily suspend the contract if another supplier of methanol offers a more favorable price. None of our customers accounted for more than 10% of total revenue in 2001.
We engage in additional merchant methanol marketing through the purchase of methanol produced by others. We have a long-term contract to market the entire output of the 850,000 tonne per year Titan facility and a contract to market, until April 2004, up to approximately 300,000 tonnes annually produced from the Repsol/YPF plant in Argentina. We source additional methanol through the U.S. and European methanol spot markets. Our annual sales volume of methanol sourced from third parties for resale in 2001 was 1,999,647 tonnes compared to 955,949 tonnes in 2000.
FACILITIES
The following table sets forth a description of our existing production facilities, together with associated capacity and operating data:
OPERATING 2001 2000
CAPACITY(1) PRODUCTION PRODUCTION
YEAR BUILT (TONNES/YEAR) (TONNES) (TONNES)
---------- ------------- ---------- ----------
Punta Arenas, Chile
Chile I................................... 1988 925,000 878,437 872,601
Chile II.................................. 1996 1,010,000 840,910 1,022,120
Chile III................................. 1999 1,065,000 1,064,303 1,016,950
Waitara Valley, New Zealand................. 1983 530,000 404,901 525,031
Motunui, New Zealand
Distillation II........................... 1990 500,000 362,381 489,929
Distillation III.......................... 1994 700,000 685,212 702,144
Distillation IV........................... 1995 700,000 679,835 693,561
Kitimat, Canada(2).......................... 1982 500,000 249,530 242,714
Medicine Hat, Canada Plant 3(3)............. 1981 470,000 195,788 442,055
Fortier, United States(4)................... 1994 570,000 -- --
--------- --------- ---------
Total....................................... 6,970,000 5,361,297 6,007,105
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(1) Actual operating rates can vary.
(2) Kitimat was temporarily shut down from July 1, 2000 until June 30, 2001.
(3) Medicine Hat Plant 3 was shut down in June 2001 for an indeterminate period.
(4) Fortier was shut down in March 1999 for an indeterminate period.
We attempt to optimize the operation of our production facilities around the world by balancing our production with customer demand throughout our global supply chain and by taking advantage of this operating flexibility to switch production to the lowest cost plants to lower our overall delivered cost of methanol. We idled our Fortier plant in 1999 and our Medicine Hat Plant 3 in 2001 for indeterminate periods as their operating costs were much higher than our facilities in New Zealand and Chile where we are attempting to maximize our production. Both Medicine Hat Plant 3 and Fortier are being maintained in a position to restart if conditions warrant this course of action. Those two facilities had a combined net book value of $187 million at March 31, 2002.
Scheduled plant shutdowns are necessary to change catalysts or perform maintenance activities which cannot otherwise be completed with the plant on-line (a process commonly known as a turnaround). Turnarounds typically take between three and four weeks and occur
approximately every three or more years. Catalysts generally need to be changed every four years, although there is flexibility to extend catalyst life if market conditions warrant, at the expense of some production efficiency or capacity. Careful planning and scheduling is required to ensure that other maintenance and repairs can be carried out during turnarounds. In addition, both scheduled and unscheduled shutdowns may also occur between turnarounds. We prepare a comprehensive eight-year turnaround plan which is updated annually for all of our production facilities.
In 2001, we entered into two transactions aimed at increasing our production capacity and presence in Trinidad, which we believe is important because of its low cost natural gas supplies, and proximity to the North American and European markets. First, we acquired, for $17 million, Beacon Group Energy Investment Fund's right to participate in the Atlas methanol facility. The agreement also provides us with an option, which expires on December 31, 2003, to acquire Beacon's 75% interest in the 850,000 tonne per year Titan methanol plant located adjacent to the Atlas project. Second, we approved construction of the Atlas facility. Construction of the Atlas facility is currently underway and we expect it will commence commercial production by late 2003. In a joint venture with BP, we own 63.1% and BP owns 36.9% of the Atlas project. The total capital cost of Atlas, including financing costs, is expected to be $400 million. Our share of this cost is estimated to be approximately $250 million, which we expect to fund from a planned project financing, cash generated from operations and cash on hand. Our total equity contribution to the Atlas joint venture, assuming project financing is arranged as planned, is expected to be approximately $100 million, of which $66 million had been funded at March 31, 2002.
We are also considering two other potential strategic projects. The first is the expansion of our Chile facility to add approximately 840,000 tonnes of additional annual capacity. The second is the construction of a 2.0 million tonne per year methanol facility in Western Australia. We expect to make a decision on whether to proceed with these projects within the next year.
DISTRIBUTION AND LOGISTICS
We supply our customers from our facilities located around the world. Our plants in Chile supply customers primarily in Europe and the United States and the New Zealand plants primarily supply customers in Asia Pacific. The Kitimat plant supplies primarily the U.S. West Coast and Western Canada. The Medicine Hat facility, when operating, supplies customers in Canada and the U.S. Midwest, and the Fortier plant, when operating, supplies customers in the southeastern United States and along the Mississippi River. We are currently supplying customers historically supplied from the Fortier and Medicine Hat facilities from other sources.
Methanol from our plants in Chile, New Zealand and Kitimat is pumped by pipeline to adjacent deep-water ports for shipping. We manage a fleet of time-chartered vessels to ship methanol. In order to retain optimal flexibility in the management of the fleet, we have entered into short term and long term time-charters covering vessels with a range of capacities. We also ship methanol under contracts of affreightment and through spot arrangements. We use larger vessels as key elements in our supply chain to move product from our production facilities to key storage facilities located in major ports. We also use smaller vessels capable of entering into restricted ports to deliver methanol directly to customers. We also lease or own storage and terminal facilities in the United States, Canada, Europe and Asia. In North America and Europe, we use barge, rail and, to a lesser extent, truck transport in our delivery system.
NATURAL GAS SUPPLY
Natural gas is the principal feedstock for methanol. Part of our long term strategy has been to secure continuity of natural gas supply at favorable prices.
CHILE
Natural gas for the Chile I plant is supplied by Empresa Nacional del Petroleo de Chile, or ENAP, under a contract which expires in 2009. ENAP is a Chilean state-owned energy company which has monopoly rights over all oil and natural gas in Chile. Natural gas for the Chile II plant is supplied 70% by sellers in Argentina, including YPF/Repsol, and 30% by ENAP under contracts that expire in 2016 and 2017, respectively. Natural gas for the Chile III plant is supplied 86% by sellers in Argentina and 14% by ENAP under contracts which expire in 2019.
The contractual purchase price of natural gas for all three plants is based on a minimum U.S. dollar price adjusted by a formula related to prevailing methanol prices. Under the terms of the contracts, the sellers are obligated to supply, and we are obligated to take or pay for, a specified annual quantity of natural gas. Take-or-pay means that we are obliged to pay for the natural gas regardless of whether we take delivery of the natural gas contracted for. We also have an option to purchase up to an additional specified amount each year. Under the Chile II and III natural gas contracts, any contract quantities of natural gas paid for but not taken in any calendar quarter may be taken in any subsequent quarter within a year without further payment once the contract quantity for that quarter has been taken. For Chile I, natural gas paid for but not taken must be taken by March 2012.
We are evaluating expanding the capacity of our Chilean facility by approximately 840,000 tonnes per year. Natural gas supply for the expansion would be contracted along with an extension of all our natural gas contracts that serve the Chilean facilities.
NEW ZEALAND
Natural gas for the Waitara Valley and Motunui plants is sourced primarily from the Maui and Kapuni fields, which currently account for approximately 75% and 10%, respectively, of New Zealand's total annual production of natural gas. Approximately 85% of the natural gas contracted for our New Zealand facilities comes from the Maui field. The Maui field is an off-shore field located off the west coast of New Zealand. When operating at capacity our New Zealand facilities consume approximately 90 petajoules of natural gas per year, constituting approximately 40% of all natural gas consumed in New Zealand in a year.
We have the right to purchase natural gas from the Maui field under take-or-pay contracts with the New Zealand Government which terminate in 2003 and 2005. Any contract quantities of natural gas paid for but not taken in any year generally may be taken in any subsequent year until 2006 without further payment once the contract quantity for that year has been taken. We also have a contract with Contact Energy to purchase natural gas from the Maui field. Under this contract, any quantities of natural gas paid for but not taken in any year generally may be taken in any subsequent year until 2007 without further payment once the contract quantity for that year has been taken. The price for natural gas under these contracts is based upon a fixed New Zealand dollar price which was established in 1973, adjusted annually upward or downward by a factor which is based on, but in all cases is less than, a specified New Zealand inflation rate index for the previous year.
Our contractual supplier of natural gas from the Kapuni field purchases the natural gas from the owners of Kapuni. We are obligated to purchase, and the supplier is obligated to supply, a specified annual quantity of natural gas through 2003. We also have a contract with this supplier for the purchase of additional Kapuni natural gas until July 2004. The price for natural gas under these contracts is essentially equivalent to the purchase price under the Maui natural gas contracts, plus certain additional inflation adjusted fixed amounts.
In addition to Maui and Kapuni natural gas, we purchase natural gas sourced from the McKee and Mangahewa fields. The price for natural gas under these contracts is consistent with maintaining the New Zealand operations cost base.
Our contractual entitlements to take natural gas from the Maui field under the contracts with the New Zealand Government and Contact Energy, or the Maui Contracts, are subject to reduction if the Maui natural gas field reserves are redetermined under the head contract between the owners of the Maui field and the New Zealand Government to a level below a specified quantity (essentially representing the aggregate of quantities currently contracted with all parties). In November 2001, the owners of the Maui field, through their agent Maui Development, announced a preliminary estimate of economically recoverable natural gas reserves that stated Maui reserves may be materially below the aggregate of contracted supply quantities. In December 2001, Maui Development initiated, in accordance with the Maui Contracts, a formal redetermination of Maui reserves. In 2002, as part of the redetermination process, Maui Development provided its estimate of Maui reserves and provided us with a data package, the purpose of which is to enable us to carry out an independent reserves assessment. The redetermination process then provides the parties to the various contracts (including us) with an opportunity to agree to a new contract reserves estimate. In the absence of agreement on reserves, the matter will be referred to an independent expert for resolution. A final conclusion on reserves is expected prior to the end of 2002. In conjunction with this process, we understand that the operator of the Maui field is planning to assess the opportunity for recovery of additional quantities of natural gas from within the Maui field.
Certain of our subsidiaries in New Zealand that are parties to the Maui Contracts have initiated proceedings seeking a suspension of the current redetermination of Maui reserves by way of injunctive relief against the New Zealand Government and the Maui mining companies on the basis that those subsidiaries have not been provided with timely and adequate disclosure of information and data in respect of the Maui reserves. A hearing has taken place and a decision is pending.
Our current contracted natural gas entitlements are sufficient to operate the New Zealand plants at capacity for the equivalent of approximately two and one-half years. If the redetermination process determines that Maui reserves are less than the aggregate of current contracted quantities with all parties, then our contractual entitlements under the Maui contracts are likely to be reduced. If the redetermination process determines a level of Maui reserves at or close to the Maui Development estimate, we would immediately lose any further natural gas entitlements under two of our Maui Contracts and would have substantially reduced natural gas entitlements until 2005 under the other Maui Contracts. If that were to occur, we would be required to purchase new natural gas quantities from elsewhere to allow our plants to operate at capacity. We are reviewing a number of options for replacing any quantities that may be lost to us. For instance, the Pohokura natural gas condensate field, located adjacent to our New Zealand facilities and currently estimated to contain 1000 petajoules of natural gas, is scheduled to come onstream in 2005 and we continue to seek to secure natural gas from this field. We cannot assure you that we will be able to secure replacement natural gas from this field or other fields on commercially acceptable terms, if at all.
CANADA
We source natural gas for our Kitimat plant from the natural gas fields of northeastern British Columbia, where substantial volumes of natural gas are available and are expected to continue to be available for the foreseeable future. Natural gas for the Kitimat plant is purchased directly from producers or other marketers under firm, short-term index-priced contracts. British Columbia natural gas prices are set in a competitive market and are subject to fluctuation.
Natural gas purchased for the Kitimat plant is transported through pipeline transmission systems operated by Westcoast Energy and its affiliate, Pacific Northern Gas, or PNG. The contract to transport approximately 75% of the natural gas to the Kitimat plant expires on October 31, 2002. In March 2002 we entered into an agreement with PNG to replace that contract and two smaller contracts that expire in 2003 and 2009 with a new take-or-pay contract.
The new PNG contract, which will come into effect on November 1, 2002 and terminate in 2009, establishes fixed transportation rates for the entire term and will substantially reduce our natural gas transportation costs for the Kitimat plant. The new PNG contract remains subject to the approval of the British Columbia Utilities Commission. We have an obligation to supply hydrogen until 2011 to Pacific Ammonia for a portion of its ammonia facility that is located on the Kitimat plant site. Historically, this hydrogen has been supplied to Pacific Ammonia as a by-product of the methanol production process. Hydrogen is recycled within the production process at our other plants for use as fuel.
In June 2001 we shut down the Medicine Hat Plant 3 for an indeterminate period. Natural gas for the Medicine Hat Plant 3 is sourced from Alberta fields which offer substantial volumes of available natural gas and may be purchased from various suppliers under contracts with various pricing mechanisms. Quantities may also be purchased on the daily spot market to balance production. Alberta natural gas prices are set in a competitive market and are subject to fluctuation.
UNITED STATES
The Fortier plant, currently idle, is located near the Henry Hub, Louisiana, an area characterized by an abundant supply of natural gas and available natural gas pipeline transportation. Natural gas transportation is available from a number of pipeline operators at competitive rates. Natural gas is also readily available from a combination of marketers and producers under contracts with various pricing mechanisms. As Henry Hub is a national price reference point, the market is competitive and natural gas prices are subject to fluctuations.
FOREIGN OPERATIONS AND GOVERNMENT REGULATION
GENERAL
Our operations in Canada, the United States, Chile, New Zealand, Europe and elsewhere are affected by political developments and by federal, provincial, state and other local laws and regulations.
Trade in methanol is subject to duty in a number of jurisdictions. We currently incur a duty of 3.5% on Chilean methanol we sell into the European Community and an 8% duty on New Zealand and Chilean methanol that we sell into the United States. We do not currently pay any duties in any other major market to which we export methanol.
CHILE
Our subsidiary, Methanex Chile, through a branch registered in Chile, owns the Chile I, Chile II and Chile III plants. Chilean foreign investment regulations provide certain additional benefits and guarantees to companies which enter into a foreign investment contract, or a DL600 Contract, with the State of Chile. Methanex Chile has entered into three substantially identical DL 600 Contracts, one for each of the three existing plants.
Under the DL 600 Contracts, Methanex Chile is authorized to remit from Chile in U.S. dollars or any other freely convertible currency, all or part of its profits and, subject to certain conditions, its equity. Methanex Chile also has the right under the DL 600 Contracts to pay income taxes at an overall fixed rate of 42% for twenty years. Alternatively, Methanex Chile can make an irrevocable election to pay income tax at the generally applicable rates. The Chile branch of Methanex Chile has not made this election.
The DL 600 Contracts provide that they cannot be amended or terminated without the consent of Methanex Chile.
NEW ZEALAND
We are not currently subject to any exchange control or other governmental restrictions relating to the movement of money into or out of New Zealand.
The New Zealand Government imposes a levy on the producers of natural gas in New Zealand in respect of gas produced as a result of a discovery prior to January 1, 1986. This levy applies to almost all natural gas from the Maui field and all natural gas from the Kapuni field at the fixed rate of NZ$0.45 (approximately $0.21 based on the noon buying rate set by the Federal Reserve Bank of New York on May 30, 2002) per gigajoule. In line with current natural gas industry practice, our New Zealand natural gas supply contracts specify that we must reimburse the suppliers for the levy they pay. Accordingly, if the government were to change the amount of the levy, this would have a direct effect on our natural gas costs.
The New Zealand Government also has the power to impose constraints on the manufacturing, export and distribution of petroleum products (including methanol). These powers give the government the ability to deal with a petroleum supply shortage or strategic need in a manner similar to how many governments dealt with the oil shortages of the 1970s and early 1980s.
The New Zealand government also enacted legislation in 1986 to safeguard claims by Maori tribes (the indigenous people of New Zealand) against lands previously owned by state-owned enterprises and subsequently privatized. The land on which certain parts of the infrastructure for the Waitara Valley and Motunui plants are located (for example, a tank farm and various pipelines and pipeline valve and mixing stations) are subject to this legislation. There is a possibility that the tribunal which deals with Maori land claims could recommend the return of such land to Maori ownership. The New Zealand Government would be required to comply with such a recommendation, subject to payment of compensation to the affected owner. We believe that, subject to receiving adequate compensation, such a forced divestment would not likely have a material adverse effect on our operations or financial condition. The land upon which the Waitara Valley and Motunui plants are located and the surrounding buffer zones of farmland owned by us are not subject to such forced divestment procedures.
ENVIRONMENTAL MATTERS
Canada, the United States, Chile and New Zealand all have laws governing the environment and the sustainable management of natural resources as well as the handling, storage, transportation and disposal of hazardous or waste materials. We are also subject to laws governing the import, export, use, discharge, storage, disposal and transportation of toxic substances. The substances we use and produce are subject to regulation under various health, safety and environmental laws. Non-compliance with these laws and regulations may give rise to work orders, fines, injunctions, civil liability and criminal sanctions.
As a result of periodic external and internal audits, we believe that we are currently in compliance in all material respects with all existing environmental, health and safety laws and regulations to which our operations are subject. Laws and regulations protecting the environment have become more stringent in recent years and may, in certain circumstances, impose absolute liability rendering a person liable for environmental damage without regard to negligence or fault on the part of such person. Such laws and regulations may expose us to liability for the conduct of, or conditions caused by others, or for our own acts which complied with law at the time such acts were performed. To date, environmental laws and regulations have not had a material adverse effect on us.
As a member of the Canadian Chemical Producers' Association in Canada, the American Chemistry Council in the United States, ASIQUIM (Asociacion de Industriales Quimicos de Chile) in Chile and the Chemical Industry Council in New Zealand, we are committed to the ethics and
principles of Responsible Care. Accordingly, we have established policies, systems and procedures to promote and encourage the responsible development, introduction, manufacture, transportation, storage, handling, distribution, use and ultimate disposal of chemicals and chemical products so as to minimize adverse effects on human health and well-being, the environment and the communities in which we operate.
COMPETITION
The methanol industry is highly competitive. Competition is based primarily on price and reliability of supply. The relative cost and availability of natural gas and the efficiency of production facilities are also important competitive factors. Because of our ability to service our customers globally, the reliability and cost-effectiveness of our distribution system and the enhanced service we provide our customers, we believe we are well positioned to compete in each of the major international methanol markets. Some of our major competitors are Celanese, Methanol Holdings Trinidad, QAFAC, Sabic and Statoil.
EMPLOYEES
As of December 31, 2001, we had 792 employees. Other than 36 of the maintenance workers at our New Zealand facilities, none of our employees is unionized. We believe that relations with our employees are good.
Of the 51 maintenance workers at our New Zealand facilities, 36 are unionized and have been since the mid-1980s. The current collective agreement with the union expires in August 2003. At the expiry of the previous collective agreement in September 2001, the union staged a three-day strike. Operations at the facility were not materially affected as a result of the strike.
LEGAL PROCEEDINGS
From time to time, we are involved in legal proceedings relating to claims arising out of our operations in the ordinary course of business. We do not believe there are any material proceedings pending or threatened against us or any of our properties.
CORPORATE INFORMATION
We were incorporated under the laws of Alberta on March 11, 1968 and continued under the Canada Business Corporations Act on March 5, 1992. Our head office is located at 1800 Waterfront Centre, 200 Burrard Street, Vancouver, British Columbia V6C 3M1 (telephone: (604) 661-2600).
The following chart includes our principal operating subsidiaries and partnerships as of March 31, 2002 and, for each subsidiary or partnership, its place of organization and our percentage of voting interests beneficially owned or over which control or direction is exercised. The chart also shows our principal production facilities and their locations.
(1) The Atlas plant is currently under construction.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names of our directors and executive officers and their respective positions.
NAME POSITION
---- --------
Pierre Choquette............................. President, Chief Executive Officer and Director
Robert B. Findlay(2)(3)...................... Director
Brian D. Gregson(1)(3)....................... Director
R.J. (Jack) Lawrence(1)(2)................... Director
Jeffrey M. Lipton(2)(4)...................... Chairman of the Board and Director
David Morton(2)(4)........................... Director
Christopher D. Pappas(3)..................... Director
A. Terence Poole(1).......................... Director
Graham D. Sweeney(1)(3)...................... Director
Anne L. Wexler(2)(4)......................... Director
Bruce Aitken................................. Senior Vice President, Asia Pacific
Ronald W. Britton............................ Senior Vice President, Emerging Energy Applications
Allan S. Cole................................ Senior Vice President, Finance and
Chief Financial Officer
Gerry F. Duffy............................... Senior Vice President, Global Marketing and Logistics
W. James Emmerton............................ Senior Vice President, Corporate Development and
General Counsel
John K. Gordon............................... Senior Vice President, Corporate Resources
Rodolfo L. Krause............................ Senior Vice President, Latin America and
Global Manufacturing
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(1) Member of the Audit, Finance and Risk Committee.
(2) Member of the Human Resources and Corporate Governance Committee.
(3) Member of the Responsible Care Committee.
(4) Member of the Public Policy Committee.
PIERRE CHOQUETTE, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr.
Choquette has been our President and Chief Executive Officer since 1994. From
1988 to 1994, he held senior positions with NOVA Corporation. Prior thereto, he
had been with Polysar Ltd. since 1966 with international roles in Canada, the
United States, Belgium and Switzerland until his appointment as President of
Polysar Polymers in 1988, heading up a $1.5 billion global business. Mr.
Choquette graduated from Laval University with a BA and a Master's Degree in
Chemical Engineering. Mr. Choquette serves on the Board of Directors of Telus
Corporation, Stelco Inc., BC Gas Inc. and Gennum Corporation, and is a member of
the Canadian Counsel of Chief Executives.
ROBERT B. FINDLAY, DIRECTOR. Mr. Findlay has been a director since 1994. He is a corporate director. From 1990 to 1997, he was President and Chief Executive Officer of MacMillan Bloedel Limited, a Canadian forest products company.
BRIAN D. GREGSON, DIRECTOR. Mr. Gregson has been a director since 1994. He is a corporate director. From 1991 to 1995, he was Chairman of Barbican Properties Inc., a Canadian real estate development company. Prior thereto, he was Senior Executive Vice President of the Royal Bank of Canada.
R.J. (JACK) LAWRENCE, DIRECTOR. Mr. Lawrence has been a director since 1995. He has been Chairman of Lawrence & Company Inc., a Canadian private advisory firm, since 1995. Prior thereto, he was Vice-Chairman of Nesbitt Burns Inc.
JEFFREY M. LIPTON, DIRECTOR. Mr. Lipton has been a director since 1994 and he was appointed Chairman of the Board in 1998. He has been the President and Chief Executive Officer of NOVA Chemicals Corporation, a commodity chemical company with operating headquarters in the United States, since 1998. Prior thereto, he was President of NOVA.
DAVID MORTON, DIRECTOR. Mr. Morton has been a director since 1995. He is a corporate director. From 1993 to 1995, he was Chairman of Alcan Aluminium Limited, a Canadian aluminium producer. Prior thereto, he was Chairman and Chief Executive Officer of Alcan.
CHRISTOPHER D. PAPPAS, DIRECTOR. Mr. Pappas has been a director since March 2002. He has been the Senior Vice President and President, Styrenics of NOVA since July 2000. From March 2000 to July 2000, he was President and Chief Executive Officer of Paint and Coatings.com. From 1998 to March 2000, he was Commercial Vice President, Ethylene Elastomers and Vice-President Americas of DuPont Dow Elastomers Inc. Prior thereto, he was Vice-President Ethylene Elastomers, DuPont Dow Elastomers Inc.
A. TERENCE POOLE, DIRECTOR. Mr. Poole has been a director since 1994. He has been the Executive Vice President, Corporate Strategy and Development of NOVA since 2000. Prior thereto, he held the positions of Executive Vice President, Finance and Strategy of NOVA and Senior Vice President and Chief Financial Officer of NOVA.
GRAHAM D. SWEENEY, DIRECTOR. Mr. Sweeney has been a director since 1994. He is a corporate director. Prior to 1994, he was President and Chief Executive Officer of Dow Chemical Canada Inc.
ANNE L. WEXLER, DIRECTOR. Ms. Wexler has been a director since 2001. She has been Chairman of the Executive Committee of Wexler & Walker Public Policy Associates (formerly The Wexler Group) since 2000. From 1981 to 2000, Ms. Wexler was Chairman and Chief Executive Officer of The Wexler Group.
BRUCE AITKEN, SENIOR VICE PRESIDENT, ASIA PACIFIC. Mr. Aitken has been our
Senior Vice President, Asia Pacific since 1997. Mr. Aitken spent two years in
Chile as an Executive Director of Cape Horn Methanol and three years in
Vancouver as our Vice President, Corporate Development. He returned to New
Zealand in 1995 as Director of Marketing for Asia Pacific. Prior to that, he was
with Fletcher Challenge Methanol. Mr. Aitken graduated from Auckland University
with a BComm. He spent five years with Coopers & Lybrand before joining Fletcher
Challenge Ltd. in 1979.
RONALD W. BRITTON, SENIOR VICE PRESIDENT, EMERGING ENERGY
APPLICATIONS. Mr. Britton has been our Senior Vice President, Emerging Energy Applications since 1999. From 1998 to 1999, he was our Vice President, North America and Global Technology. From 1995 to 1998, he was our Vice President, North America. Prior thereto, he spent 15 years with Polysar Ltd. in Sarnia, Ontario and five years with Bayer AG, where he held a variety of management positions in their synthetic rubber business. Mr. Britton graduated from the University of British Columbia with a Ph.D. in Organic Chemistry.
ALLAN S. COLE, SENIOR VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER. Mr. Cole has been our Senior Vice President, Finance and Chief Financial Officer since 1997. Prior to joining us, Mr. Cole was the Senior Vice President and Chief Financial Officer of St. Mary's Cement Corporation. Previously, he spent more than 15 years at Union Carbide Canada Limited in a number of senior operating, marketing and corporate positions including that of Chief Financial Officer. Mr. Cole has a BA in economics and an MBA from McMaster University.
GERRY F. DUFFY, SENIOR VICE PRESIDENT, GLOBAL MARKETING AND LOGISTICS. Mr.
Duffy has been our Senior Vice President, Global Marketing and Logistics since
2000. From 1999 to 2000, he was our Vice President, Global Marketing. From 1998
to 1999, he was our Marketing Director, Asia Pacific in Auckland, New Zealand.
From 1997 to 1998, he was our Manager, Supply Chain.
He is also responsible for leading our e-commerce initiatives. Prior to joining us, he was Division Vice President for Industrial Chemicals of Canadian Occidental Petroleum Ltd. Mr. Duffy has worked for over 25 years on the commercial side of the North American chemical industry, including a number of management positions at Union Carbide, Monsanto and Exxon Chemical. Mr. Duffy has a B.E. (Chemical Engineering) from University College, Dublin and an MBA from York University.
W. JAMES EMMERTON, SENIOR VICE PRESIDENT, CORPORATE DEVELOPMENT AND GENERAL COUNSEL. Mr. Emmerton has been our Senior Vice President, Corporate Development and General Counsel since 2000. From 1997 to 2000, he was our Senior Vice President, General Counsel and Corporate Secretary. From 1995 to 1997, he was a partner of Just Solutions Mediation and Arbitration. From 1990 to 1995, he was Vice President and General Counsel of John Labatt Limited. Mr. Emmerton obtained his BA (Honours) at the University of Guelph and his LLB at the University of Western Ontario. He was called to the Bar in Ontario in 1975.
JOHN K. GORDON, SENIOR VICE PRESIDENT, CORPORATE RESOURCES. Mr. Gordon has
been our Senior Vice President, Corporate Resources since 1998. From 1996 to
1998, he was our Vice President, Human Resources and Corporate Affairs. Prior to
joining us, the majority of his experience was gained in a variety of
industries, with multinational companies such as Suncor Inc., Reed Ltd., Lac
Minerals Ltd. and Bramalea Inc. Mr. Gordon graduated from the University of
Nevada with a BSc degree in Business Administration and an MBA. He has over 25
years of human resource and business management experience.
RODOLFO L. KRAUSE, SENIOR VICE PRESIDENT, LATIN AMERICA AND GLOBAL
MANUFACTURING. Mr. Krause has been our Senior Vice President, Latin America and
Global Manufacturing since 1998. From 1993 to 1998, he was our Vice President,
Latin America. From 1987 to 1993, he was Vice President, Operations, Methanex
Chile (formerly Cape Horn Methanol Ltd.). In 1974, Mr. Krause joined Dow
Chemical Company. He was appointed General Manager of Dow's San Lorenzo
Industrial Complex in Argentina in 1984 and became General Manager of their
Guarajua Industrial Complex in Brazil in 1987. Mr. Krause graduated from the
University of Concepcion as a Chemical Engineer.
PRINCIPAL SHAREHOLDERS
The following table sets out information with respect to the ownership of our common shares, as of March 31, 2002, for each person who, to our knowledge, beneficially owns or exercises control or direction over 5% or more of our outstanding common shares.
NAME NUMBER OF SHARES PERCENTAGE OF ISSUED SHARES ---- ---------------- --------------------------- NOVA Chemicals Corporation......................... 46,946,876 37% |
As at March 31, 2002, our directors and executive officers owned, directly or indirectly, or exercised control or direction over, less than 1% of our outstanding common shares.
DESCRIPTION OF CERTAIN INDEBTEDNESS
EXISTING NOTES AND CONSENT SOLICITATION
In 1995, we issued under the Indenture $150 million of 7.40% Notes due August 15, 2002 and $250 million of 7.75% Notes due August 15, 2005. These existing notes pay interest semi-annually on February 15 and August 15 of each year and rank equally in right of payment with all other senior indebtedness, including the Notes offered by this prospectus. We intend to repay in full our 7.40% Notes upon maturity of such notes with a portion of the net proceeds from the sale of the Notes offered by this prospectus.
We are soliciting consents from the holders of our existing 7.75% Notes to amend the Indenture which, if given, would conform the terms of the 7.75% Notes to the terms of the Notes offered hereby. Such consent would remove our covenant to the holders of such notes not to make restricted payments (such as declaring or paying a dividend or making any distribution on our common shares or repurchasing or redeeming any of our common shares) in certain circumstances, and add a change of control covenant identical to that relating to the Notes offered hereby. The closing of the sale of the Notes and the completion of the consent solicitation are not conditional upon each other.
BANK INDEBTEDNESS
We have an unsecured credit facility. The credit facility, which is currently undrawn, provides for up to $291 million in revolving loans and letters of credit, ranks equally in right of payment with all of our other unsubordinated and unsecured indebtedness, including the Notes offered by this prospectus, and expires in January 2004. Prior to expiration, funds available under the credit facility may be borrowed, repaid and reborrowed without premium or penalty. Borrowings under the facility bear interest at a floating rate, which can be either a base rate or, at our option, a LIBOR rate, plus an applicable margin in either case. Under the credit facility, we are required to pay a commitment fee on the difference between the amounts actually borrowed and the committed amounts. The credit facility requires us to comply with a debt to capitalization ratio and a current ratio. We are currently in compliance with both ratios. The credit facility contains customary affirmative and negative covenants, representations, warranties and events of default, including but not limited to payment defaults, breaches of representations and warranties, covenant defaults, cross defaults and certain events of bankruptcy and insolvency.
DESCRIPTION OF THE NOTES
The Notes will be issued under an indenture, dated as of July 20, 1995, as the same will be supplemented in connection with this offering, between us and The Bank of New York (formerly United States Trust Company of New York), as Trustee (the "Indenture"). The statements under this caption relating to the Notes and the Indenture are summaries and do not purport to be complete, and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indenture, including the definitions of certain terms therein. The Indenture is by its terms subject to and governed by the U.S. Trust Indenture Act of 1939, as amended. Where reference is made to particular provisions of the Indenture or to defined terms not otherwise defined herein, such provisions or defined terms are incorporated herein by reference.
In this description, "we", "us", "our" and similar terms, as well as references to "Methanex", refer only to Methanex Corporation and its successors and not to any of its subsidiaries.
GENERAL
The Notes will be our general unsecured obligations and will mature on , 2012. The Notes will be initially issued in a total principal amount of $200 million. We may issue additional notes of the same series under the Indenture from time to time after this offering, without the consent of the holders of the Notes. The Notes and any additional notes of this series subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.
The Notes will bear interest at the rate per annum of % from , 2002, or from the most recent date to which interest has been paid or provided for, payable semi-annually to holders of record at the close of business on the or immediately preceding the interest payment date on and of each year, commencing , 2002. The Notes will provide for us to pay interest on overdue principal and, to the extent lawful, on overdue installments of interest at the above rate per annum, plus 1%. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve - 30 day months. The yearly rate of interest that is equivalent to the rate payable under the Notes is the rate payable multiplied by the actual number of days in the year and divided by 360 and is disclosed herein solely for the purpose of providing the disclosure required by the Interest Act (Canada).
Principal of, and premium, if any, and interest on, the Notes will be payable, and the Notes may be presented for registration of transfer and exchange, at the office or agency maintained by us for that purpose in the Borough of Manhattan, the City of New York, provided, however, that at our option, payment of interest may be made by check mailed to the address of the person entitled thereto at such address as shall appear in the register of Notes, and at the option of the registered holder of the Notes, by wire transfer to an account designated by the registered holder. The Trustee will initially act as registrar.
The Notes will not be redeemable by us prior to maturity, other than in the event of certain changes affecting Canadian withholding taxes, as described under "-- Redemption for Changes in Canadian Withholding Taxes".
There will be no mandatory sinking fund payments for the Notes.
The Notes will rank equally in right of payment with all other of our unsubordinated and unsecured indebtedness. The Notes, however, will be structurally subordinated to the liabilities of our subsidiaries. See "Risk factors -- Risks Related to the Notes and Our Structure".
ADDITIONAL AMOUNTS FOR CANADIAN WITHHOLDING TAXES
All payments made by us under or with respect to the Notes must be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge imposed or levied by or on behalf of the Government of Canada or of any province or territory thereof or by any authority or agency therein or thereof having power to tax (hereinafter "Taxes"), unless we are required to withhold or deduct Taxes by law or by the interpretation or administration thereof. If we are so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Notes, we will pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each holder of the Notes (including Additional Amounts) after such withholding or deduction will not be less than the amount the holder of the Notes would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts will be payable with respect to a payment made to a holder of the Notes (an "Excluded Holder") (1) with which we do not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment or (2) which is subject to such Taxes by reason of its being connected with Canada or any province or territory thereof otherwise than by the mere holding of Notes or the receipt of payments thereunder. We will also make such withholding or deduction and remit the full amount deducted or withheld to the relevant authority in accordance with applicable law.
We will furnish to holders of the Notes, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by us. We will indemnify and hold harmless each holder of Notes (other than an Excluded Holder) and upon written request reimburse such holder of Notes for the amount of (1) any Taxes so levied or imposed and paid by such holder as a result of payments made under or with respect to the Notes, (2) any liability(including penalties, interest and expenses) arising therefrom or with respect thereto, and (3) any Taxes imposed with respect to any reimbursement under (1) or (2), but excluding any such Taxes on such holder's net income.
At least 30 days prior to each date on which any payment under or with respect to the Notes is due and payable, if we are obligated to pay Additional Amounts with respect to such payment, we will deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable, the amount so payable and will set forth other information necessary to enable the Trustee to pay such Additional Amounts to holders of the Notes on the payment date. Whenever in the Indenture or in this Description of Notes there is mentioned, in any context, the payment of principal, and premium (if any), redemption price, interest or any other amount payable under or with respect to any Note, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in the context, Additional Amounts are, were or would be payable in respect thereof.
REDEMPTION FOR CHANGES IN CANADIAN WITHHOLDING TAXES
The Notes may be redeemed, at our option, at any time in whole but not in part, on not less than 30 nor more than 60 days' notice, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), in the event we have become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, any Additional Amounts as a result of a change in or an amendment to the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the date of this prospectus.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture:
CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event, we will be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes. A "Change of Control Triggering Event" will occur only if a Change of Control and a Rating Decline both occur. In the Change of Control Offer, we will offer to purchase Notes for a purchase price in cash equal to 101% of the aggregate principal amount of the Notes repurchased plus accrued and unpaid interest, if any, on the Notes repurchased, to the date of purchase; provided, however, that interest payable on or prior to the date of purchase will be payable to the Holders of the Notes repurchased registered as such on the regular record date for such interest.
Within 30 days following a Change of Control Triggering Event, we are required to mail a notice to each Holder of Notes describing the transaction or transactions that constitute the Change of Control Triggering Event and offering to repurchase Notes on the Change of Control Payment Date specified in the notice, which date shall be between 30 and 60 days of the mailing of the notice, pursuant to the procedures required by the Indenture and described in such notice. We will comply with the requirements of Section 14(e) of and Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations under the Change of Control provisions of the Indenture by virtue of such conflict.
On the Change of Control Payment Date, we will (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the paying agent an amount equal to the purchase price in respect of all Notes or portions thereof so tendered, and (3) deliver or cause to be delivered to the Trustee the Notes so accepted, together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by us.
The paying agent will promptly mail to each Holder who properly tendered Notes, the purchase price for such Notes and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each such Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of US$1,000 or an integral multiple thereof.
The provisions described above that require us to make a Change of Control Offer following a Change of Control Triggering Event will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control Triggering Event, the Indenture does not contain provisions that permit the Holders of the Notes to require that we repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.
We will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with, the requirements set forth in the Indenture applicable to a Change of Control Offer made by us, and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of us and our Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase the Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of us and our Subsidiaries taken as a whole to another Person or group may be uncertain.
LIMITATION ON LIENS
We shall not, and shall not permit any Restricted Subsidiary to, Incur or to permit to exist any Lien of any nature whatsoever (other than Permitted Liens) on any of our or its property or assets now owned or hereafter acquired by us or it (including any Capital Stock or evidence of Indebtedness and including any of our Capital Stock or Indebtedness held by us or any Subsidiary) securing any Indebtedness, without contemporaneously therewith effectively securing the Notes equally and ratably with (or prior to) such Indebtedness for so long as such Indebtedness is so secured, unless, after giving effect to such Lien, the aggregate amount of all Indebtedness secured by such Liens (other than Permitted Liens) on our property or assets or that of our Restricted Subsidiaries, plus all of our Attributable Indebtedness and that of our Restricted Subsidiaries with respect to Sale/Leaseback Transactions permitted as described below under "-- Limitation on Sale/Leaseback Transactions", does not exceed 10% of Consolidated Net Worth.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS
We shall not, and shall not permit any Restricted Subsidiary to, enter into
a Sale/Leaseback Transaction, unless, after giving effect thereto, the aggregate
amount of all Attributable Indebtedness with respect to all such Sale/Leaseback
Transactions, plus all Indebtedness secured by Liens to which the covenant
described above under "-- Limitations on Liens" is applicable, does not exceed
10% of Consolidated Net Worth. However, the provisions described in this
"Limitation on Sale/Leaseback Transactions" shall not apply to, and there shall
be excluded from Attributable Indebtedness in any computation described in this
covenant and in the covenant described above under "-- Limitation on Liens",
Attributable Indebtedness with respect to a Sale/Leaseback Transaction if: (1)
the lease in such Sale/Leaseback Transaction is for a period, including renewal
rights, of three years or less; (2) we or a Restricted Subsidiary, within one
year (or, in the event the net proceeds of the sale of the property leased
pursuant to such Sale/Leaseback Transaction exceeds $75 million, within two
years) after such Sale/Leaseback Transaction, apply an amount not less than the
greater of the net proceeds of the sale of the property leased pursuant to such
Sale/Leaseback Transaction or the fair market value of such property (as
determined in good faith by the Board of Directors) to either the retirement of
our or a Restricted Subsidiary's Funded Indebtedness or the purchase by us or a
Restricted Subsidiary of other property having a fair market value (as
determined in good faith by the Board of Directors) at least equal to the fair
market value of the property so leased in such Sale/Leaseback Transaction; or
(3) such Sale/Leaseback Transaction is entered into between us and a Restricted
Subsidiary or between Restricted Subsidiaries.
ADDITIONAL GUARANTEES
We shall not permit any Restricted Subsidiary to Incur any Indebtedness unless, at the time of such Incurrence such Restricted Subsidiary has Guaranteed all our obligations with respect to the Notes pursuant to the terms of the Indenture, such Guarantee to be in the form provided for in the Indenture. The foregoing shall not apply to: (1) any Indebtedness Incurred by a Restricted Subsidiary to finance its working capital requirements; provided, however, that the aggregate
amount of such Indebtedness Incurred by all Restricted Subsidiaries and
outstanding at any time shall not exceed $25 million; (2) any Indebtedness
secured by (a) Permitted Liens or (b) Liens to which the exception in the
covenant described above under "-- Limitation on Liens" is applicable; provided,
however, that the aggregate amount of all such Indebtedness and all our
Indebtedness secured by such Liens (other than Permitted Liens), plus all of our
and our Restricted Subsidiaries' Attributable Indebtedness with respect to
Sale/Leaseback Transactions permitted as described above under "-- Limitation on
Sale/Leaseback Transactions", does not exceed 10% of Consolidated Net Worth; (3)
any Attributable Indebtedness (a) with respect to a Sale/Leaseback Transaction
which is permitted under the covenant described above under "-- Limitation on
Sale/ Leaseback Transactions" or (b) to which the provisions described above
under "-- Limitation on Sale/Leaseback Transactions" are not applicable; and (4)
any Indebtedness owed to and held by us or another Restricted Subsidiary;
provided, however, that any subsequent transfer of any such Indebtedness or any
subsequent transfer of any Capital Stock of such Restricted Subsidiary, or any
other event, that results in such Restricted Subsidiary ceasing to be a
Restricted Subsidiary shall be deemed to constitute the Incurrence of such
Indebtedness at such time. Except if we have exercised either of the defeasance
options described under "-- Defeasance" below, no Guarantor shall be released
from its Guarantee provided pursuant to this covenant or clause (1) in the
second paragraph of "-- Successor Company and Guarantors" below unless (1) such
Guarantor ceases to be a Restricted Subsidiary or (2) such Guarantor has been
discharged from all its obligations with respect to all Indebtedness Incurred by
such Guarantor (other than such Guarantee and Indebtedness described in clause
(4) in the immediately preceding sentence) and such Guarantor has not had any
Indebtedness (other than such Guarantee and Indebtedness described in clause (4)
in the immediately preceding sentence) outstanding for a period of 91 days.
LIMITATIONS WITH RESPECT TO UNRESTRICTED SUBSIDIARIES
(a) We shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Unrestricted Subsidiary (an "Unrestricted Subsidiary Transaction") on terms (1) that are less favorable in sum to us or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a person other than an Unrestricted Subsidiary or (2) that, in the event such Unrestricted Subsidiary Transaction involves an aggregate amount in excess of $25 million, are not in writing and have not been approved by a majority of the members of the Board of Directors. The foregoing shall not prohibit any Investment by us or any Restricted Subsidiary in any Unrestricted Subsidiary.
(b) We shall not permit any Unrestricted Subsidiary to Incur any Indebtedness other than Non-Recourse Indebtedness; provided, however, that in the event any such Indebtedness ceases for any reason to constitute Non-Recourse Indebtedness, such Subsidiary shall be deemed to have Incurred such Indebtedness at such time.
(c) We shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, transfer to any Unrestricted Subsidiary any property or
assets owned by us or any Restricted Subsidiary on the date of the Indenture (1)
on terms that are less favorable in sum to us or such Restricted Subsidiary, as
the case may be, than those that could be obtained at the time of such transfer
in arm's-length dealings with a person other than an Unrestricted Subsidiary or
(2) unless the aggregate price for such property or assets under such transfer,
plus the aggregate prices for any other such property or assets under any other
such transfers completed during the twelve-month period immediately preceding
such transfer, does not exceed $25 million.
SUCCESSOR COMPANY AND GUARANTORS
We may not amalgamate or consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all our assets to, any person, unless: (1) the resulting, surviving or transferee person (if not us) is organized and existing under the federal laws of Canada or the laws of any province thereof or the laws of the United States of America, any State thereof or the District of Columbia and such person expressly assumes by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of our obligations under the Indenture and the Notes; (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and (3) we deliver to the Trustee an Officers' Certificate and an Opinion of Counsel (who may rely on such Officers' Certificate as to matters of fact), each stating that such amalgamation, consolidation, merger, conveyance, transfer or lease and such supplemental indenture (if any) comply with the Indenture. The resulting, surviving or transferee person will be the successor company under the Indenture and the Notes.
We will not permit any Restricted Subsidiary that is a Guarantor to amalgamate or consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to, any person unless: (1) the resulting, surviving or transferee person (if not such Guarantor) is organized and existing under the laws of the jurisdiction under which such Guarantor or its parent corporation was organized or under the federal laws of Canada or the laws of any province thereof or the laws of the United States of America, or any State thereof or the District of Columbia and such person expressly assumes by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Guarantor under its Guarantee unless such resulting, surviving or transferee person has been released from such Guarantee in accordance with the terms of the Indenture; (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and (3) we deliver to the Trustee an Officers' Certificate and an Opinion of Counsel (who may rely on such Officers' Certificate as to matters of fact), each stating that such amalgamation, consolidation, merger, conveyance, transfer or lease and such supplemental indenture (if any) comply with the Indenture.
DEFAULTS
An Event of Default with respect to the Notes is defined in the Indenture
as (1) a default by us in the payment of interest on the Notes (including any
Additional Amount) when due and payable, continued for 30 days, (2) a default by
us in the payment of principal with respect to the Notes when due and payable at
Stated Maturity, upon redemption, upon declaration or otherwise, (3) the failure
by us or a Guarantor to comply with the obligations described under "-- Certain
Covenants -- Change of Control" or "-- Successor Company and Guarantors" above,
(4) the failure by us or any Restricted Subsidiary for 60 days after notice to
comply with any of the obligations described under "-- Certain Covenants" above,
(5) the failure by us or any Restricted Subsidiary for 60 days after notice to
comply with the agreements contained in the Indenture or the Notes (other than a
failure described in (1), (2), (3) or (4) above or a failure to comply with any
of our or its obligations under the covenants or agreements that are
specifically for the benefit of one or more series of debt securities issued
pursuant to the Indenture other than the Notes), (6) Indebtedness of us or any
Restricted Subsidiary is not paid within any applicable grace period and is
accelerated by the holders thereof, or is accelerated by the holders thereof
because of a default, and the total amount of such Indebtedness unpaid, or due
and payable, and accelerated exceeds $10 million (the "cross acceleration
provision"), (7) certain events of bankruptcy, insolvency or reorganization of
us or a Significant Subsidiary (the "bankruptcy default provision"), or (8) any
Guarantee of the Notes by any Guarantor at any time ceases to be in full force
and effect for any reason (other than as a result of a release of such Guarantee
in accordance with the terms of the Indenture) (the "guarantee default
provision"). A default under clause (4) or (5) will not constitute an Event of Default until the Trustee or the holders of at least 25% in principal amount of the outstanding Notes notify us of the default and we do not cure such default within the time specified after receipt of such notice.
If an Event of Default (other than a bankruptcy default with respect to us) occurs and is continuing with respect to the Notes, the Trustee by notice to us, or the holders of at least 25% in principal amount of the Notes then outstanding by notice to us and the Trustee, may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If a bankruptcy default with respect to us occurs and is not cured within the time period permitted, the principal of and interest on all the debt securities issued pursuant to the Indenture, including the Notes, will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holders of debt securities issued pursuant to the Indenture. Under certain circumstances, the holders of a majority in principal amount of the Notes may rescind any such acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the Notes then outstanding unless such holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no holder of Notes may pursue any remedy with respect to the Indenture or the Notes unless (1) such holder has previously given the Trustee notice that an Event of Default is continuing, (2) holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy, (3) such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity, and (5) the holders of a majority in principal amount of the Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the holders of a majority in principal amount of the outstanding Notes will be given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Notes or of exercising any trust or power conferred on the Trustee with respect to the Notes. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other holder of the Notes or that would involve the Trustee in personal liability.
Under the Indenture, if a Default occurs with respect to the Notes and is continuing and is known to the Trustee, the Trustee must mail to each holder of the Notes notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of, premium (if any) or interest on the Notes, the Trustee may withhold notice if and so long as a committee of its trust officers determines in good faith that withholding notice is in the interest of the holders of Notes. In addition, we are required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. We are also required to deliver to the Trustee, within 30 days after we learn of the existence thereof, written notice of any event which would constitute certain Defaults, their status and what action we are taking or propose to take in respect thereof.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be represented by one or more fully registered global notes without coupons (the "Global Notes") and will be deposited upon issuance with the Trustee as custodian for The
Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee. Except as set forth below, the Global Notes may be transferred in whole and not in part only to DTC or another nominee of DTC.
So long as DTC or its nominee is the registered owner thereof, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by the Global Notes for all purposes under the Indenture. Except as provided below, owners of beneficial interests in the Global Notes will not be entitled to have the Notes represented by the Global Notes registered in their names, will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered the owners or holders thereof under the Indenture.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changed in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants ("Direct Participants") include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to DTC's system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participant"). The rules applicable to DTC and its Participants are on file with the Commission.
Purchases of the Notes under DTC's system must be made by or through Direct Participants, which will receive a credit for such Notes on DTC's records. The ownership interest of each actual purchaser of each Note represented by a Global Note ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which such Beneficial Owner entered into the transaction. Transfers of ownership interests in the Global Notes representing the Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners of the Global Notes representing the Notes will not receive the Notes in definitive form representing their ownership interests therein, except in the event that use of the book-entry system for the Notes is discontinued or upon the occurrence of certain other events described herein.
To facilitate subsequent transfers, all Global Notes representing the Notes which are deposited with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of Global Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Global Notes representing the Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants or Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Global Notes representing the book-entry Notes. Under its usual procedures, DTC mails an omnibus proxy (an "Omnibus Proxy") to us as soon as possible after the applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Notes are credited on the applicable record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Global Notes representing the Notes will be made to DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds, on the applicable payment date in accordance with the respective holdings of the Direct Participants shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the account of customers in bearer form or registered in "street name", and will be the responsibility of such Participant and not of DTC, the Trustee or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is our responsibility or that of the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. Neither we nor the Trustee will have any responsibility or liability for the disbursements of payments in respect of ownership interests in the Notes by DTC or the Direct or Indirect Participants or for maintaining or reviewing any records of DTC or the Direct or Indirect Participants relating to ownership interests in the Notes or the disbursements of payments in respect thereof.
DTC may discontinue providing its services as securities depository with respect to the Notes at any time by giving reasonable notice to us or the Trustee. We may decide to discontinue use of the system of book-entry transfers through DTC or a successor securities depository. Under such circumstances, and in the event that a successor securities depository is not obtained, Notes in definitive form are required to be printed and delivered.
The information in this section concerning DTC and DTC's system has been obtained from sources that we believe to be reliable, but is subject to any changes to the arrangements between us and DTC and any changes to such procedures that may be instituted unilaterally by DTC.
ENFORCEABILITY OF JUDGMENTS
Since a substantial portion of our assets and those of our Subsidiaries are outside the United States, any judgment obtained in the United States against us or any of our Subsidiaries, including judgments with respect to the payment of principal, interest, Additional Amounts or redemption price with respect to the Notes, may not be collectible within the United States.
We have been informed by our Canadian counsel, McCarthy Tetrault LLP, that the laws of the Province of British Columbia and the federal laws of Canada applicable therein permit an action to be brought in a court of competent jurisdiction in the Province of British Columbia (a "British Columbia Court") on any final and conclusive judgment in personam (i.e., against the person) of a Federal or state court sitting in the State of New York ("New York Court") against us that is subsisting and unsatisfied respecting the enforcement of the Notes or the Indenture, that is not impeachable as void or voidable under the laws of the State of New York and that is for a sum certain if (1) the New York Court that rendered such judgment had jurisdiction over the judgment debtor, as recognized by a British Columbia Court (and submission by us in the
Notes or the Indenture to the jurisdiction of the New York Court will be deemed sufficient for this purpose); (2) such judgment was not obtained by fraud or in a manner contrary to natural justice, and the enforcement thereof would not be either inconsistent with public policy, as the term is defined by a British Columbia Court, or contrary to any order made by the Attorney General of Canada under the Foreign Extraterritorial Measures Act (Canada); (3) the enforcement of such judgment in British Columbia does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriatory or penal laws; (4) in an action to enforce a default judgment, the judgment does not contain a manifest error on its face; and (5) the action to enforce such judgment is commenced within six years of the date of such judgment; provided that a British Columbia Court may stay an action to enforce a foreign judgment if an appeal of the judgment is pending or the time for appeal has not expired; and provided further that under the Currency Act (Canada), a British Columbia Court may only give judgment in Canadian dollars.
CONSENT TO JURISDICTION AND SERVICE
The Indenture provides that we will irrevocably designate and appoint CT Corporation System (and any successor entity), as our agent for service of process in any suit or proceeding arising out of or relating to the Indenture or the Notes for actions brought in any federal or state court located in the Borough of Manhattan in the City of New York and will submit to such jurisdiction.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with respect to the Notes with the consent of the holders of not less than a majority in principal amount of the Notes and any past default or compliance with any provisions may be waived with such a consent of the holders of a majority in principal amount of the outstanding Notes. However, without the consent of each holder of outstanding Notes, no amendment may, among other things, (1) reduce the amount of the Notes whose holders must consent to an amendment, (2) reduce the rate of or extend the time for payment of interest on any Notes, (3) reduce the principal of or extend the Stated Maturity of any Notes, (4) reduce the premium payable upon the redemption of any Notes or change the time at which any Notes may or shall be redeemed, (5) make any Notes payable in currency other than that stated in the Notes, (6) make any change to the provisions of the Indenture described under "-- Additional Amounts for Canadian Withholding Taxes" above that adversely affects the rights of any holder of the Notes, (7) impair the rights of any holder of the Notes to receive payment of principal of and interest on such holder's Notes (including any Additional Amount) on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder's Notes, (8) make any change in the Guarantee of the Notes by any Guarantor that would adversely affect any holder of the Notes or (9) make any change in the amendment provisions which require each holder's consent or in the provisions which limit suits by holders.
Without the consent of any holder of the Notes, we and the Trustee may amend the Indenture to cure any ambiguity, defect or inconsistency, to provide for the assumption by a successor corporation of our obligations or those of a Guarantor under the Indenture to add Guarantees with respect to the Notes, to secure all or any of the Notes, to add to our covenants or to add Events of Default for the benefit of the holders of the Notes or to surrender any right or power conferred upon us, to make any change that does not adversely affect the rights of any holder of the Notes in any material respect, to establish the form or terms of the Notes, to supplement any of the provisions of the Indenture to the extent necessary to permit or facilitate the defeasance or discharge of the Notes that does not adversely affect the rights of any holders of the Notes in any material respect, to change or eliminate any provision of the Indenture that
becomes effective only when there is not outstanding any debt security of any series issued under the Indenture which is entitled to the benefit of such provision or to comply with any requirement of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act.
The consent of the holders of the Notes is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are required to mail to holders of the Notes a notice briefly describing such amendment. However, the failure to give such notice to all holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment.
DEFEASANCE
We at any time may terminate all our and each Guarantor's obligations under the Notes and our obligations and those of each such Guarantor under the Indenture with respect to the Notes ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. We at any time may terminate our and each Guarantor's obligations with respect to the Notes under the covenants described above under "Certain Covenants", the operation of the cross acceleration provision, the bankruptcy default provision with respect to Significant Subsidiaries, the guarantee default provision and the limitations contained in clause (2) in the first paragraph and the limitations contained in the second paragraph of "Successor Company and Guarantors" above ("covenant defeasance").
We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our legal defeasance option with respect to the Notes, payment of the Notes may not be accelerated because of an Event of Default with respect thereto and each Guarantor will be released from its Guarantee with respect to the Notes. If we exercise our covenant defeasance option with respect to the Notes, payment of the Notes may not be accelerated because of an Event of Default specified in clause (3) (with respect to Guarantors only), (4), (5), (6), (7) (with respect to Significant Subsidiaries only), or (8) of the first paragraph under "Defaults" above or because of our failure to comply with clause (2) in the first paragraph of "Successor Company and Guarantors" above and each Guarantor will be released from its Guarantee with respect to the Notes.
In order to exercise either defeasance option with respect to the Notes, we
must irrevocably deposit in trust (the "defeasance trust") with the Trustee
money or U.S. Government Obligations for the full payment of principal, premium
(if any) and interest on the Notes to redemption or maturity, as the case may
be, and must comply with certain other conditions, including delivering to the
Trustee: (1) an Opinion of Counsel in the United States to the effect that
holders of the Notes will not recognize income, gain or loss for United States
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to United States Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such deposit and
defeasance had not occurred (and, in the case of legal defeasance only, such
Opinion of Counsel must be based on a ruling of the United States Internal
Revenue Service or other change in applicable United States Federal income tax
law); (2) an Opinion of Counsel in Canada to the effect that (A) holders of the
Notes will not recognize income, gain or loss for Canadian federal or provincial
income tax or other tax purposes as a result of such legal defeasance or
covenant defeasance, as applicable, and will be subject to Canadian federal and
provincial income tax and other tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance, as applicable,
had not occurred, and (B) payments out of the defeasance trust will be free and exempt from any and all withholding and other income taxes of whatever nature of Canada or any province thereof or political subdivision thereof or therein having the power to tax, except in the case of a payment made to a holder of the Notes (a) with which we do not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of the making of such payment or (b) which is subject to such taxes by reason of its being connected with Canada or any province or territory thereof otherwise than by the mere holding of the Notes or the receipt of payments thereunder; (3) a certificate from a nationally recognized firm of independent accountants opining that the payments of principal and interest when due and without investment on the U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay the principal, premium (if any) and interest when due on all the Notes to maturity or redemption, as the case may be; and (4) an opinion of counsel stating that the defeasance trust does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended. In addition, we can only exercise either type of defeasance if (1) during the 91 days that follow the establishment of the defeasance trust, no Default under the bankruptcy default provision occurs to us and is continuing at the end of the period, (2) no Default has occurred and is continuing on the date the defeasance trust is established after giving effect to the establishment of the defeasance trust, and (3) depositing funds into the defeasance trust does not constitute a default under any other of our binding agreements.
THE TRUSTEE
The Bank of New York is the Trustee under the Indenture and has been appointed by us as registrar and paying agent with respect to the Notes.
GOVERNING LAW
The Indenture is, and the Notes will be, governed by the laws of the State of New York.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the Indenture, as they would be applicable to the Notes. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. Except as otherwise indicated, all accounting terms not otherwise defined in the Indenture will have the meanings assigned to them in accordance with GAAP (as defined below) and all accounting determinations and computations based on GAAP contained in the Indenture shall be determined and computed in conformity with GAAP.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a Sale/Leaseback Transaction means, as of the date of determination, the lesser of (1) the fair market value of the property subject to such Sale/Leaseback Transaction (as determined in good faith by our Board of Directors) or (2) the present value (discounted at a rate per annum equal to the coupon on the Notes, compounded annually) of the total obligations of the lessee for rental payments (excluding amounts required to be paid on account of operating costs, maintenance and repairs, insurance, taxes, assessments, utility rates and similar charges) during the remaining term of such lease (including any period for which such lease has been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of the number of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness multiplied by the amount of such payment by (2) the sum of all such payments.
"BOARD OF DIRECTORS" means our Board of Directors or any committee thereof duly authorized to act on behalf of such Board of Directors, except that for purposes of the definitions of "Change of Control" and "Continuing Directors," the term "Board of Directors" shall mean our Board of Directors and not any committee thereof.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL LEASE OBLIGATIONS" of a person means any obligation which is required to be classified and accounted for as a capital lease on the face of a balance sheet of such person prepared in accordance with GAAP; the amount of such obligation shall be the capitalized amount thereof, determined in accordance with GAAP; except that the Stated Maturity thereof shall be deemed to be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.
"CAPITAL STOCK" of any person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such person, including any Preferred Stock, but excluding any debt securities convertible into or exchangeable for such equity.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of amalgamation, merger or consolidation), in one or a series of related transactions, of all or substantially all of our properties or assets and those of our Restricted Subsidiaries, taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to our liquidation or dissolution;
(3) the consummation of any transaction (including, without limitation, any amalgamation, merger or consolidation) the result of which is that any "person" (as defined in clause (1) of this definition), becomes the beneficial owner, directly or indirectly, of more than 50% of our Voting Stock, measured by voting power rather than number of shares;
(4) the first day on which a majority of the members of our Board of Directors are not Continuing Directors; or
(5) we amalgamate or consolidate with, or merge with or into, any person, or any person amalgamates or consolidates with, or merges with or into, us, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of us or such other person is converted into or exchanged for cash, securities or other property, other than any such transaction where our Voting Stock outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee person constituting a majority of the Voting Stock of such surviving or transferee person, measured by voting power rather than number of shares, immediately after giving effect to such issuance.
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"CONSOLIDATED NET WORTH" at any date of determination means the following amount, as shown on our and our Subsidiaries' most recent consolidated balance sheet, determined on a consolidated basis in accordance with GAAP, as of the end of our most recent fiscal quarter ending at least 45 days prior to the date of determination: (1) the consolidated shareholders' equity of our common stockholders plus (2) the respective amounts reported with respect to any class or series of our Preferred Stock (other than Exchangeable Stock and Redeemable Stock) but only to the extent of any cash received by us upon issuance of such Preferred Stock, less all
write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by us or any of our Subsidiaries.
"CONTINUING DIRECTORS" means as of any date of determination, any member of our Board of Directors who:
(1) was a member of such Board of Directors on May 31, 2002; or
(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.
"DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature.
"EXCHANGEABLE STOCK" means any Capital Stock which is exchangeable or convertible into another security (other than Capital Stock which is neither Exchangeable Stock nor Redeemable Stock).
"FUNDED INDEBTEDNESS" of a person means all Indebtedness of such person which matures more than one year after the time of determination thereof or which is extendible or renewable at the option of such person to a time more than one year after the time of determination thereof (whether or not renewed or extended).
"GAAP" means generally accepted accounting principles in Canada as in effect as of the date of the Indenture.
"GRADATION" means a gradation within a Rating Category or a change to another Rating Category, which shall include "+" and "- ," in the case of S&P's current Rating Categories (e.g., a decline from BB+ to BB would constitute a decrease of one gradation); "1," "2" and "3," in the case of Moody's current Rating Categories (e.g., a decline from B1 to B2 would constitute a decrease of one gradation); or the equivalent in respect of successor Rating Categories of S&P or Moody's or Rating Categories used by Rating Agencies other than S&P or Moody's.
"GUARANTEE" means any obligation, contingent or otherwise, of any person directly or indirectly guaranteeing any Indebtedness of any other person and any obligation, direct or indirect, contingent or otherwise, of such person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a correlative meaning.
"GUARANTOR" means any person that becomes a guarantor of the Notes pursuant to the terms of the Indenture, and its respective successors.
"INCUR" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) or is designated as a Restricted Subsidiary or an Unrestricted Subsidiary shall be deemed to be Incurred by such Subsidiary at such time. The term "Incurrence" when used as a noun shall have a correlative meaning.
"INDEBTEDNESS" of any person means, without duplication, (1) the principal
of, premium (if any) in respect of and interest on (A) indebtedness of such
person for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments related to or for money borrowed for the
payment of which such person is responsible or liable; (2) all Capital Lease
Obligations of such person and all Attributable Indebtedness in respect of Sale/
Leaseback Transactions entered into by such person; (3) all obligations of such
person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such person and all obligations of such person
under any title retention agreement (but excluding in each case trade accounts
payable or accrued liabilities arising in the ordinary course of business); (4)
all obligations of such person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (1) through (3) above) entered into in the ordinary
course of business of such person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such person of a demand
for reimbursement following payment on the letter of credit); (5) all
obligations of such person with respect to the redemption, repayment or other
repurchase of, in the case of a Subsidiary, any Preferred Stock and, in the case
of any other person, any Redeemable Stock (but excluding any accumulated
dividends); (6) all obligations of the type referred to in clauses (1) through
(5) of other persons for the payment of which such person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including
any Guarantees of such obligations; and (7) all obligations of the type referred
to in clauses (1) through (6) of other persons secured by any Lien on any
property or asset of such person (whether or not such obligation is assumed by
such person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured. The
amount of Indebtedness of any person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"INVESTMENT" in any person means any direct or indirect advance, loan (other than advances to customers, employees or suppliers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such person) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by, such person.
"LEGAL HOLIDAY" means each day that is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York or the City of Vancouver, Canada.
"LIEN" means any mortgage, pledge, security interest, conditional sale or other title retention agreement or other similar lien.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any person, any non-convertible Capital Stock of such person and any Capital Stock of such person convertible solely into non-
convertible common stock of such person; provided, however, that Non-Convertible Capital Stock shall not include Redeemable Stock or Exchangeable Stock.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness (1) as to which neither we nor any of our Restricted Subsidiaries (A) provide credit support (including any undertaking, agreement or instrument which would constitute Indebtedness) or (B) is directly or indirectly liable and (2) no default with respect to which (including any rights which the holders thereof may have to take enforcement action) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of ours or that of any of our Restricted Subsidiaries to declare a default on such other Indebtedness or cause a payment thereof to be accelerated or payable prior to its Stated Maturity.
"PERMITTED LIENS" means, with respect to any person, (1) pledges or
deposits by such person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such person is a party, or deposits to secure public or statutory
obligations of such person or deposits of cash or government bonds to secure
surety or appeal bonds to which such person is a party, or deposits as security
for contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business; (2) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, and maritime liens on cargo for
freight not yet due, in each case for sums not yet due or being contested in
good faith by appropriate proceedings, other Liens arising out of judgments or
awards against such person with respect to which such person shall then be
proceeding with an appeal or other proceedings for review, and any right of
setoff, refund or charge-back available to any bank or other financial
institution, (3) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings; (4) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such person in the
ordinary course of its business; provided, however, that such letters of credit
do not constitute Indebtedness; (5) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights of way,
sewers, pipelines, railways, cables and conduits, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real properties or Liens incidental to the conduct of the business
of such person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of such properties or materially impair their use in
the operation of the business of such person; (6) Liens securing Indebtedness or
other obligations in the ordinary course of business of a Restricted Subsidiary
or us owing to and held by us or another Restricted Subsidiary; (7) Liens
existing on the date of the Indenture; (8) Liens on property or shares of stock
of a person at the time that such person becomes a Restricted Subsidiary;
provided, however, that such Liens may not extend to any other property or
assets owned by us or a Restricted Subsidiary; provided further, however, that
such Liens are not created, Incurred or assumed in connection with, or in
contemplation of, or to provide credit support in connection with, such person
becoming a Restricted Subsidiary; (9) Liens on property or assets at the time we
or a Restricted Subsidiary acquires such property or assets, including any
acquisition by means of an amalgamation, merger or consolidation with or into us
or a Restricted Subsidiary; provided, however, that such Liens may not extend to
any other property or assets owned by us or a Restricted Subsidiary; provided
further, however, that such Liens are not created, Incurred or assumed in
connection with, or in contemplation of, or to provide credit support in
connection with, such acquisition; (10) Liens on any property or assets securing
any Indebtedness created or assumed as all or any part of the purchase price or
cost of construction or improvement of real or tangible personal property or
assets, whether or not secured, which Indebtedness was created prior to, at the
time of or within 120 days after the later of the acquisition, completion of
construction or commencement of full operation of such property or assets; (11)
Liens on cash or marketable securities of us or any Restricted Subsidiary
granted in
the ordinary course of business in connection with (A) any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate insurance and other similar agreements or arrangements; (B) any interest rate swap agreements, forward rate agreements, interest rate cap or collar agreements or other similar financial agreements or arrangements; or (C) any agreements or arrangements entered into for the purpose of hedging product prices; and (12) Liens to secure any refinancing, extension, renewal or replacement ("refinancing") as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (7), (8), (9) and (10) ; provided, however, that (A) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (B) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (a) the outstanding principal amount of the Indebtedness being refinanced and (b) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing.
"PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"PRINCIPAL" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or, to the extent permitted by law, is to become due at the relevant time.
"RATING AGENCIES" means (a) S&P and Moody's or (b) if S&P and Moody's or both of them are not making ratings of the Notes publicly available, a nationally recognized U.S. rating agency or agencies, as the case may be, selected by us, which will be substituted for S&P or Moody's or both, as the case may be.
"RATING CATEGORIES" means (1) with respect to S&P, any of the following
categories (any of which may include a "+" or -"): AAA, AA, A, BBB, BB, B, CCC,
C and D (or equivalent successor categories); (2) with respect to Moody's, any
of the following categories (any of which may include a "1," "2" or "3"): Aaa,
Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and
(3) the equivalent of any such categories of S&P or Moody's used by another
Rating Agency, if applicable.
"RATING DECLINE" means the occurrence of a decrease in the rating of the Notes by any Rating Agency by one or more Gradations at any time within 90 days (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for a possible downgrade by any Rating Agency) after the date of public notice of a Change of Control, or the intention of us or any person to effect a Change of Control.
"REDEEMABLE STOCK" means any Capital Stock that by its terms or otherwise is required to be redeemed prior to the first anniversary of the Stated Maturity of the applicable Notes or is redeemable at the option of the holder thereof at any time prior to such first anniversary.
"RESTRICTED SUBSIDIARY" means each of our Subsidiaries other than our Unrestricted Subsidiaries.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., and its successors.
"SALE/LEASEBACK TRANSACTION" means an arrangement with any person other than us or a Restricted Subsidiary providing for the leasing by us or any Restricted Subsidiary of any real or tangible personal property, which property has been or is to be sold or transferred by us or such
Restricted Subsidiary to such person in contemplation of such leasing; provided, however, that any subsequent transfer of any such arrangement between us and a Restricted Subsidiary or between Restricted Subsidiaries, whereby we or a Restricted Subsidiary ceases to be the lessor under such arrangement, shall be deemed to constitute a Sale/ Leaseback Transaction at such time.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a "Significant Subsidiary" of us within the meaning of Rule 1-02 under Regulation S-X promulgated by the United States Securities and Exchange Commission.
"STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).
"SUBSIDIARY" means, in respect of any person, any corporation, limited
liability company, association, partnership or other business entity of which
more than 50% of the total voting power of shares of Capital Stock or other
interests (including partnership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
(1) such person, (2) such person and one or more Subsidiaries of such person or
(3) one or more Subsidiaries of such person.
"UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary of ours that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (2) each Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any newly acquired or newly formed Subsidiary of ours (other than a Restricted Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, ours or any other Subsidiary that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that, immediately after giving effect to such designation no Default shall have occurred and be continuing. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option.
"VOTING STOCK" of any person as of any date means the Capital Stock of such person that is at the time entitled to vote in the election of the board of directors of such person.
CREDIT RATINGS
The Notes have been assigned a rating of by Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc., a rating of by
Moody's Investors Service, Inc. and a rating of by Fitch, Inc. S&P rates
debt instruments by rating categories from a high of AAA to a low of D, with a
"+" or "-" indicating relative strength within the rating category. Moody's
rates debt instruments by rating category from a high of Aaa to a low of D, with
a "1", "2" or "3" indicating relative strength within the rating category. Fitch
rates debt instruments by rating category from a high of AAA to a low of D, with
a "+" or "-" indicating
relative strength within the rating category. Prospective purchasers of Notes should consult with the rating agencies with respect to the interpretation of the foregoing ratings and the implication of those ratings. The credit ratings accorded to the Notes are not recommendations to buy, sell or hold the Notes and may be subject to revision or withdrawal by S&P, Moody's and Fitch at any time.
PRO FORMA INTEREST COVERAGE
The interest coverage set forth below has been prepared and included in this prospectus in accordance with the disclosure requirements of applicable Canadian securities laws and has been calculated on a pro forma basis after giving effect to the issuance of the Notes and the repayment of our 7.40% Notes from the proceeds of this offering.
The annual interest requirements on our long term debt (using applicable interest and exchange rates) for the twelve months ended December 31, 2001, and for the twelve months ended March 31, 2002, were $ million and $ million, respectively. Our earnings before deduction of interest on long term debt and income taxes for the twelve months ended December 31, 2001, and for the twelve months ended March 31, 2002, amounted to $ million and $ million, respectively. For the twelve months ended December 31, 2001, these amounts are times annual interest requirements. For the twelve months ended March 31, 2002, the dollar amount of earnings coverage deficiency was $ .
Our earnings before deduction of depreciation and amortization, interest on long term debt and income taxes for the twelve months ended December 31, 2001, and for the twelve months ended March 31, 2002, amounted to $ million and $ million, respectively. For the twelve months ended December 31, 2001 and March 31, 2002, these amounts are and times the annual interest requirements.
TAX CONSIDERATIONS
Purchasers of the Notes should consult their own tax advisor's with respect to their particular circumstances and with respect to the effects of state, local or foreign (including Canadian) tax laws to which they may be subject.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of certain anticipated U.S.
federal income tax consequences of the purchase, ownership and disposition of
Notes and deals only with Notes held as capital assets (within the meaning of
Section 1221 of the Code, by U.S. Holders who purchase Notes in the offering at
the offering price. As used herein, a U.S. Holder means a beneficial owner of
the Notes that is, for U.S. federal income tax purposes:
- an individual who is a citizen or resident of the United States;
- a corporation created or organized in or under the laws of the United States or of any political subdivision of the United States;
- an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
- a trust, in general, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust.
This discussion is general and does not consider the U.S. federal income tax consequences of special classes of holders, including but not limited to dealers in securities or currencies,
banks, tax-exempt organizations, life insurance companies, financial institutions, broker-dealers, U.S. Holders holding the Notes as part of a straddle, hedge, conversion transaction, synthetic security or other integrated transaction, or U.S. Holders whose functional currency is not the U.S. dollar. This discussion also does not consider the U.S. Federal income tax consequences of any holder who owns Notes through a partnership or other pass through entity. U.S. Holders who purchase Notes at a price other than the offering price should consult their tax advisors as to the possible applicability to them of the amortizable bond premium or market discount rules. This summary does not address the effect of any U.S. state, local, or federal estate and gift tax on a U.S. Holder of the Notes. The summary is based on the Code, its legislative history, existing and proposed regulations, and published rulings and court decisions, all as currently in effect and all subject to change at any time, possibly with retroactive effect.
Prospective purchasers of the Notes should consult their own tax advisors concerning the consequences, in their particular circumstances, under U.S. federal income tax laws and the laws of any relevant state, local or other foreign tax jurisdiction of purchase, ownership and disposition of the Notes.
PAYMENTS OF INTEREST
The gross amount of interest paid on the Notes (including any Additional Amounts and any Canadian tax attributed therefrom) will be includible in the gross income of a U.S. Holder as ordinary interest income at the time it is received or accrued, depending on whether the holder uses the cash or accrual method of accounting for U.S. federal income tax purposes. Interest paid by Methanex on the Notes will constitute foreign-source income and will generally be classified as "passive income" or, in the case of certain U.S. Holders, "financial services income" for purposes of determining the U.S. foreign tax credit limitation. The rules relating to foreign tax credits are extremely complex and the availability of a foreign tax credit depends on numerous factors. Prospective purchasers of the Notes should consult their own tax advisers concerning the application of the United States foreign tax credit rules to their particular situation.
SALE, REDEMPTION AND OTHER DISPOSITION OF THE NOTES
Upon the sale, exchange or retirement of a Note, a U.S. Holder will generally recognize taxable gain or loss equal to the difference between the amount realized (not including any amounts received that are attributable to accrued and unpaid interest, which are taxable as ordinary interest income in accordance with the holder's method of accounting) and the U.S. Holder's tax basis in the Note. A U.S. Holders tax basis in a Note will generally be its cost. Such gain or loss recognized on the sale or retirement of a Note will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder held the Note for more than one year at the time of the disposition. The deductibility of capital losses is subject to limitations. Gain recognized by a U.S. Holder generally will be treated as United States source income. U.S. Holders should consult their tax advisors regarding the source of loss recognized on the sale, exchange or retirement of a Note.
INFORMATION AND BACKUP WITHHOLDING
Payments of principal and interest on the Notes held by certain non-corporate holders and the proceeds of a disposition of such Notes may be subject to U.S. information reporting requirements. Such payments also may be subject to United States backup withholding if the holder does not provide a taxpayer identification number or otherwise establish an exemption. The holder may credit the amounts withheld against its United States federal income tax liability and claim a refund for amounts withheld in excess of its tax liability. U.S. Holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal Canadian federal income tax consequences generally applicable to a holder of Notes acquired at original issuance who at all relevant times, for the purposes of the Income Tax Act (Canada) (the "Act"), is not resident in Canada, deals with us at arm's length, holds the Notes as capital property and does not use or hold and is not deemed to use or hold the Notes in carrying on a business in Canada (a "Holder"). For the purposes of the Act, related persons (as therein defined) are deemed not to deal at arm's length. It is a question of fact whether persons not related to each other deal at arm's length. This summary does not address the special tax consequences which may apply to a Holder of Notes who is an insurer carrying on business in Canada or elsewhere for the purposes of the Act.
This summary is based on the current provisions of the Act and the regulations thereunder, our understanding of the current published administrative and assessing practices of Canada Customs and Revenue Agency, and all specific proposals to amend the Act and the regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof. This summary is not exhaustive of all possible Canadian federal income tax considerations and does not otherwise take into account or anticipate changes in the law, whether by judicial, governmental or legislative decisions or action, nor does it take into account tax legislation or considerations of any province or territory of Canada or any jurisdiction other than Canada.
The payment of interest, principal or premium, if any, to a Holder of the Notes will be exempt from Canadian withholding tax. No other tax on income or capital gains will be payable under the Act in respect of the holding, redemption or disposition of the Notes by a Holder. This summary is of a general nature only and does not constitute legal or tax advice to any particular holder of Notes. No representation is made with respect to the tax consequences to any particular holder. Consequently, holders of Notes should consult their own tax advisors with respect to their particular circumstances.
UNDERWRITING
The Company and the underwriters for the offering named below have entered into an underwriting agreement with respect to the Notes. Subject to certain conditions, each underwriter has severally agreed to purchase the principal amount of Notes indicated in the following table.
Underwriters Principal Amount of Notes
------------ -------------------------
Goldman, Sachs & Co......................................... $
CIBC World Markets Corp.....................................
RBC Dominion Securities Corporation.........................
------------
Total.................................................. $200,000,000
============
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Notes sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this Prospectus. Any Notes sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price of up to % of the principal amount of Notes. Any such securities dealers may resell any Notes purchased from the underwriters to certain other brokers or dealers at a discount from the initial public offering price of up to % of the principal amount of Notes. If all the Notes are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms.
This offering is being made in the United States pursuant to the multijurisdictional disclosure system implemented by the securities regulatory authorities in the United States and Canada. This prospectus was filed with the British Columbia Securities Commission, and forms part of a registration statement on Form F-9 filed with the United States Securities and Exchange Commission, to register the Notes under the United States Securities Act of 1933, or the Securities Act, as amended, and to qualify under the securities laws of the Province of British Columbia the distribution of the Notes being offered and sold in the United States and elsewhere outside of Canada. This prospectus does not qualify the distribution of any Notes which may be offered and sold in any province of Canada, including the Province of British Columbia. The Notes may only be offered or sold, directly or indirectly, in Canada, or to or for the benefit of any resident of Canada, pursuant to exemptions from the prospectus requirements of Canadian securities laws, and only by securities dealers registered in the applicable province or pursuant to exemptions from the registered dealer requirements. Subject to applicable law, the Notes may also be offered outside of the United States and Canada.
The Notes are a new issue of securities with no established trading market. The Company has been advised by the underwriters that the underwriters intend to make a market in the Notes but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes.
In connection with the offering of the Notes, the underwriters may purchase and sell Notes in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of Notes than they are required to purchase in the offering of the Notes. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting commission received by it because the representatives have repurchased Notes sold by or for the account of such underwriter in stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the Notes. As a result, the price of the Notes may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by
the underwriters at any time. These transactions may be effected in the over-the-counter market or otherwise.
Each underwriter has represented, warranted and agreed that: (1) it has not offered or sold and, prior to the expiry of a period of six months from the closing of the offering of the Notes, will not offer or sell any Notes to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1955; (2) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and (3) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
From time to time, the underwriters and certain of their affiliates may have engaged, and may in the future engage, in transactions with, including investment banking and commercial banking transactions, and perform services, for the Company and its affiliates, in the ordinary course of business.
CIBC World Markets Corp. and RBC Dominion Securities Corporation are affiliates of Canadian chartered banks which are lenders to the Company under its unsecured revolving credit facility. Consequently, the Company may be considered to be a connected issuer of such underwriters under applicable Canadian securities legislation. The credit facility is currently undrawn. The Company is in compliance with the terms of the agreement governing the credit facility. None of such underwriters nor the Canadian chartered banks affiliated with them was involved in the Company's decision to distribute the Notes offered hereby. Such underwriters, together with Goldman, Sachs & Co., negotiated the public offering price of the Notes with the Company.
The Company estimates that its share of the total expenses of the offering of the Notes, excluding the underwriters' commission, will be approximately $1 million.
The Company has agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on the web sites maintained by one or more of the lead managers of this offering and may also be made available on web sites maintained by other underwriters. The underwriters may agree to allocate a number of Notes to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the lead managers to underwriters that may make Internet distributions on the same basis as other allocations.
LEGAL MATTERS
The validity of the Notes will be passed upon for us by McCarthy Tetrault LLP, with respect to matters of Canadian law, and by Fried, Frank, Harris, Shriver & Jacobson, a partnership including professional corporations, with respect to matters of United States law. Certain legal matters in connection with the offering of the Notes will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, with respect to matters of United States law, and by Osler, Hoskin & Harcourt LLP, with respect to matters of Canadian law.
EXPERTS
The consolidated financial statements and supplemental information -- U.S. GAAP reconciliation at December 31, 2001 and 2000 and for the two years then ended have been incorporated by reference and included in this prospectus and in the registration statement of which this prospectus forms a part in reliance upon the report of KPMG LLP, independent auditors, as stated in their reports also incorporated by reference and appearing elsewhere in this prospectus, and upon the authority of said firm as experts in accounting and auditing. The auditors' report on the supplemental information -- reconciliation with United States generally accepted accounting principles includes additional comments for U.S. readers on changes in accounting principles.
DOCUMENTS INCORPORATED BY REFERENCE
We file annual and quarterly financial information, material change reports and other information with the securities commission or similar authority in each of the provinces of Canada, or the Commissions. The Commissions allow us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. Information that is incorporated by reference is an important part of this prospectus. We incorporate by reference the documents listed below, which were filed with the Commissions under the various securities legislation:
- Our Annual Information Form dated March 1, 2002.
- Our Information Circular dated March 15, 2002 relating to the Annual General Meeting of shareholders held on May 23, 2002 (excluding the sections entitled "Report on Executive Compensation" and "Total Shareholder Return Comparison").
- Our audited annual consolidated financial statements as at and for the years ended December 31, 2001 and 2000, together with the notes thereto and the auditors' report thereon.
- Our unaudited interim consolidated financial statements as at and for the three months ended March 31, 2002 and 2001 and the notes thereto.
- Management's discussion and analysis for the year ended December 31, 2001.
- Management's discussion and analysis for the three months ended March 31, 2002 contained in our Interim Report.
Any document of the types referred to in the preceding paragraph (including material change reports other than confidential material change reports) filed by us with the Commissions after the date of this prospectus and prior to the termination of this distribution shall be deemed to be incorporated by reference into this prospectus. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded, for purposes of this prospectus, to the extent that a statement contained in this prospectus or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement is not to be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not, except as so modified or superseded, be deemed to constitute a part of this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form F-9 with the Securities and Exchange Commission, or the Commission with respect to the Notes offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement or the exhibits that are a part of such registration statement. For further information about us and the Notes we are offering, you should review the entire registration statement, including the exhibits that were filed as part of the registration statement. The registration statement, including the exhibits, may be inspected, without charge, at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of all or any part of the registration statement may be obtained from this office after payment at prescribed rates. You will also be able to obtain a free copy of the registration statement, including the exhibits, from the Commission's website at www.sec.gov.
We are subject to certain of the informational requirements of the Exchange
Act, as amended, and in accordance therewith, file reports and other information
with the Commission. Under a multijurisdictional disclosure system, or MJDS,
adopted by the United States, some reports and other information may be prepared
in accordance with the disclosure requirements of Canada, which requirements are
different from those of the United States. Under MJDS, we are exempt from the
rules under the Exchange Act prescribing the furnishing and content of proxy
statements, and our officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. Our Exchange Act reports and other information
filed with the Commission may be inspected and copied at the public reference
facility maintained by the Commission at its location referred to above.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been or will be filed with the Commission as part of the registration statement of which this prospectus forms a part: our Annual Information Form dated March 1, 2002; our Information Circular dated March 15, 2002 distributed in connection with our annual general meeting held on May 23, 2002 (excluding the sections entitled "Report on Executive Compensation" and "Total Shareholder Return Comparison"); our audited annual consolidated financial statements as at and for the years ended December 31, 2001 and 2000; our unaudited interim consolidated financial statements as at and for the three months ended March 31, 2002 and 2001; Management's discussion and analysis for the year ended December 31, 2001; Management's discussion and analysis for the three months ended March 31, 2002; earnings coverage calculations as at and for the twelve months ended December 31, 2001 and March 31, 2002; consent of KPMG LLP; consent of McCarthy Tetrault LLP; powers of attorney; the Indenture; our officers' certificate in respect of the Notes; Statement of Eligibility on Form T-1 of the Trustee for the Indenture; and a written irrevocable consent and power of attorney of Methanex on Form F-X.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
Auditors' Report............................................ F-2
Consolidated Balance Sheets as at December 31, 2001 and
2000...................................................... F-3
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 2001 and 2000............ F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2001 and 2000................................ F-5
Notes to Consolidated Financial Statements for the years
ended December 31, 2001 and 2000.......................... F-6
SUPPLEMENTAL INFORMATION -- U.S. GAAP RECONCILIATION
Auditors' Report............................................ F-18
Supplemental Information -- Reconciliation with U.S. GAAP... F-19
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as at March 31, 2002 and
December 31, 2001......................................... F-25
Consolidated Statements of Income and Retained Earnings for
the three months ended March 31, 2002 and 2001............ F-26
Consolidated Statements of Cash Flows for the three months
ended March 31, 2002 and 2001............................. F-27
Notes to Consolidated Financial Statements for the three
months ended March 31, 2002............................... F-28
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AUDITORS' REPORT TO SHAREHOLDERS
We have audited the consolidated balance sheets of Methanex Corporation as at December 31, 2001 and 2000 and the consolidated statements of income and retained earnings and cash flows for the years then ended. 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 Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2001 and 2000, the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.
Vancouver, Canada (signed) KPMG LLP March 1, 2002 Chartered Accountants
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
------------------------
2001 2000
---------- ----------
(THOUSANDS OF DOLLARS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 332,129 $ 225,942
Receivables (note 3)...................................... 135,219 286,756
Inventories............................................... 99,908 140,175
Prepaid expenses.......................................... 8,685 10,816
---------- ----------
575,941 663,689
Property, plant and equipment (note 4)...................... 1,031,716 1,045,899
Other assets (note 6)....................................... 85,693 94,124
---------- ----------
$1,693,350 $1,803,712
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 110,281 $ 131,999
Current maturities on long-term debt and other long-term
liabilities............................................ 154,693 5,313
---------- ----------
264,974 137,312
Long-term debt (note 7)..................................... 249,535 399,204
Other long-term liabilities (note 8)........................ 78,911 79,654
Future income taxes (note 13)............................... 164,469 142,307
Shareholders' equity:
Capital stock (note 9).................................... 538,151 660,403
Retained earnings......................................... 397,310 384,832
---------- ----------
935,461 1,045,235
---------- ----------
$1,693,350 $1,803,712
========== ==========
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Approved by the Board:
(signed) BRIAN D. GREGSON (signed) PIERRE CHOQUETTE
Director Director
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See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31,
----------------------------
2001 2000
------------ ------------
(THOUSANDS OF DOLLARS)
Revenue..................................................... $ 1,148,965 $ 1,061,271
Cost of sales and operating expenses........................ 910,601 756,248
Depreciation and amortization............................... 113,719 109,971
------------ ------------
Operating income before undernoted items.................... 124,645 195,052
Interest expense............................................ (31,848) (32,472)
Interest and other income................................... 19,028 16,389
Asset restructuring charge (note 11)........................ (11,060) --
------------ ------------
Income before income taxes.................................. 100,765 178,969
Income tax expense (note 13)................................ 29,347 34,108
------------ ------------
Net income.................................................. 71,418 144,861
Retained earnings, beginning of year........................ 384,832 249,553
Excess of repurchase price over assigned value of common
shares (note 9)........................................... (58,940) (9,582)
------------ ------------
Retained earnings, end of year.............................. $ 397,310 $ 384,832
============ ============
Weighted average number of common shares outstanding........ 154,355,808 170,303,780
Basic and diluted net income per common share............... $ 0.46 $ 0.85
The number of common shares outstanding at December 31, 2001
was 131,167,942 (December 31, 2000 -- 160,793,216)
|
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
-------------------------
2001 2000
----------- ----------
(THOUSANDS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 71,418 $144,861
Add:
Depreciation and amortization............................. 113,719 109,971
Future income taxes....................................... 22,162 26,407
Other..................................................... 12,130 15,354
--------- --------
Cash flows from operating activities before undernoted
changes................................................... 219,429 296,593
Refund of income tax deposit (note 3)....................... 66,866 --
Receivables and accounts payable and accrued liabilities.... 47,958 (31,061)
Inventories and prepaid expenses............................ 41,158 (65,495)
Utilization of prepaid natural gas.......................... 1,045 15,767
--------- --------
376,456 215,804
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of other long-term liabilities.................... (6,359) (10,692)
Repayment of long-term debt assumed on the acquisition of
Saturn Methanol Company, LLC.............................. -- (7,480)
Issue of shares on exercise of incentive stock options...... 6,428 663
Shares repurchased.......................................... (187,620) (60,987)
--------- --------
(187,551) (78,496)
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant and equipment under development....................... (68,460) --
Property, plant and equipment............................... (22,882) (19,355)
Accounts payable and accrued liabilities related to capital
expenditures.............................................. 12,137 (5,820)
Other assets................................................ (3,513) (6,407)
Acquisition of Saturn Methanol Company, LLC, net of cash
acquired (note 2)......................................... -- (16,902)
Acquisition of ICI's methanol assets (note 2)............... -- (14,831)
--------- --------
(82,718) (63,315)
--------- --------
Increase in cash and cash equivalents....................... 106,187 73,993
Cash and cash equivalents, beginning of year................ 225,942 151,949
--------- --------
Cash and cash equivalents, end of year...................... $ 332,129 $225,942
========= ========
Supplementary cash flow information:
Interest paid, net of capitalized interest................ $ 29,919 $ 31,044
Income taxes received, net of amounts paid................ $ 244 $ 11,943
|
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS ARE SHOWN IN THOUSANDS
OF DOLLARS, EXCEPT WHERE NOTED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
1. SIGNIFICANT ACCOUNTING POLICIES:
(A) BASIS OF PRESENTATION:
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada and include the accounts of Methanex Corporation, its subsidiaries and its proportionate share of joint venture revenues, expenses, assets and liabilities. Investments in which the Company does not exercise significant influence are accounted for using the cost method and are included in other assets. All intercompany transactions and balances have been eliminated. Preparation of these consolidated financial statements requires estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Policies requiring significant estimates are described below. Actual results could differ from those estimates.
(B) REPORTING CURRENCY:
The majority of the Company's business is transacted in U.S. dollars and, accordingly, the consolidated financial statements have been measured and expressed in that currency.
(C) CASH EQUIVALENTS:
Cash equivalents include securities with maturities of three months or less when purchased.
(D) RECEIVABLES:
The Company provides credit to its customers in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. Credit losses have been minimal and within the range of management's expectations.
(E) INVENTORIES:
Inventories are valued at the lower of cost, determined on a first-in first-out basis, and estimated net realizable value.
(F) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Financing costs incurred during construction are capitalized to the cost of the asset. Depreciation is provided on a straight-line basis, and, in the case of the New Zealand assets, on a unit-of-natural-gas consumption basis, from the commencement of commercial operations to amortize the cost of the assets over their estimated useful lives.
The Company reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, a write-down is recognized equal to the difference.
Production from the Company's New Zealand operations is dependent on the supply of natural gas from the Maui field. The current contractual natural gas entitlements are sufficient to operate the New Zealand plants at capacity for the equivalent of approximately three years.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
During 2001, the owners of the Maui field announced that the Maui reserves may be materially less than previously estimated and below the aggregate of contract quantities. This could potentially reduce the amount of contracted natural gas available to Methanex. The process to determine the available reserves in the Maui field is expected to be completed by the end of 2002. The Company is continuing to pursue acquisitions of additional natural gas to supply its New Zealand plants. However, there can be no assurance that it will be able to secure additional natural gas in New Zealand at commercially acceptable terms.
Routine repairs and maintenance costs are charged against current operations. At intervals of three or more years, the Company conducts a shutdown and inspection (turnaround) at its plants to perform necessary repairs and replacements of catalyst. Costs associated with these shutdowns are amortized over the period until the next planned turnaround.
Obligations for future removal and site restoration costs are provided for on a straight-line basis, and, in the case of the New Zealand assets, on a unit-of-natural-gas consumption basis over the estimated useful lives of the assets when a reasonably definitive estimate of the costs can be made.
(G) OTHER ASSETS:
Other assets are recorded at cost. Amortization is provided for other assets, except long-term investments, on an appropriate basis to charge the cost of the assets against earnings as used.
(H) EMPLOYEE FUTURE BENEFITS:
Accrued pension benefit obligations and related expenses for defined benefit pension plans are determined using current market bond yields to measure the accrued pension benefit obligation. Adjustments arising from plan amendments, experience gains and losses and changes in assumptions are amortized on a straight-line basis over the estimated average remaining service lifetime of the employee group. Gains or losses arising from plan curtailments and settlements are recognized in the year in which they occur.
The cost for defined contribution benefit plans is expensed as earned by the employees.
(I) NET INCOME PER SHARE:
Effective January 1, 2001, the Company has adopted the new Canadian Institute of Chartered Accountants recommendations relating to the calculation and disclosure of net income per share. The new recommendations have been applied retroactively and the comparative consolidated financial statements have been restated to reflect this change. Under the revised policy, the calculation of basic net income per share has not been impacted. Under the new recommendations the treasury stock method is used for the calculation of diluted net income per share instead of the imputed net income approach used previously. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted net income per share assumes that the proceeds to be received on the exercise of stock options are applied to repurchase common shares at the average market price for the period. The impact of the retroactive application of the new policy on disclosed net income per share was to increase diluted net income per share for 2000 by $0.02. Stock options to purchase common shares are dilutive only when the average market price of the common shares during the period exceeds the exercise price of the options.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
A reconciliation of the weighted average number of common shares is as follows:
2001 2000
----------- -----------
Denominator for basic net income per share.................. 154,355,808 170,303,780
Effect of dilutive stock options............................ 1,609,485 747,813
----------- -----------
Denominator for diluted net income per share................ 155,965,293 171,051,593
=========== ===========
|
(J) STOCK OPTION PLAN:
The Company has a stock option plan that is described in note 10. No compensation expense is recognized when stock options are granted because the Company grants stock options with an exercise price based on the market price at the date of the grant. Any consideration paid on the exercise of stock options is credited to share capital.
(K) DEFERRED SHARE UNITS:
Directors and executive officers of the Company may elect to receive some elements of their compensation in the form of notional grants of Deferred Share Units (Units). The number of Units allotted is determined by the amount of compensation elected to be invested in the Units divided by the market value of the Company's common shares at the time the compensation is earned. These Units are redeemable for cash based on the market value of the Company's common shares at the time the Unit holder ceases to be a director or executive officer of the Company. The amounts invested in the Units and changes in the fair value of the Units are included in earnings.
(L) REVENUE RECOGNITION:
Revenue is generally recognized as risk and title to the product transfers to the customer, which usually occurs at the time shipment is made.
(M) FOREIGN CURRENCY TRANSLATION:
The Company translates foreign currency denominated monetary items at the rates of exchange prevailing at the balance sheet dates and revenues and expenditures at average rates of exchange during the year. Foreign exchange gains or losses are included in earnings.
(N) FINANCIAL INSTRUMENTS:
The Company uses various derivative financial instruments to hedge its operating exposures to fluctuations in foreign exchange rates and natural gas costs. The gains and losses on these financial instruments are included in the measurement of the related hedged transaction when realized.
Premiums paid or received with respect to financial instruments are deferred and amortized to income over the effective period of the contracts.
(O) INCOME TAXES:
Future income taxes are accounted for using the asset and liability method. The asset and liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases. Future income tax assets and liabilities are determined for each temporary difference based on
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
the tax rates which are expected to be in effect when the underlying items of income and expense are expected to be realized. The effect of a change in tax rates is recognized in the period of substantive enactment. Future tax benefits, such as non-capital loss carryforwards, are recognized to the extent that realization of such benefits is considered more likely than not.
The Company does not accrue for taxes that will be incurred upon distributions from its subsidiaries unless it is probable that the earnings will be repatriated.
2. BUSINESS COMBINATIONS:
(A) ACQUISITION OF SATURN METHANOL COMPANY:
On September 22, 2000, the Company acquired 100 percent of Saturn Methanol Company, LLC. The acquisition has been accounted for under the purchase method of accounting with its results of operations consolidated from the date of acquisition. The Company's interest in the net assets acquired at fair values was as follows:
Net assets acquired:
Marketing rights............................................ $25,533
10% interest in Titan methanol facility..................... 9,500
Long-term debt.............................................. (7,480)
Cash........................................................ 947
Working capital and other................................... (653)
-------
Net assets acquired......................................... $27,847
=======
Consideration, including costs on acquisition:
Cash........................................................ $17,849
Other long-term liabilities................................. 9,998
-------
$27,847
=======
|
(B) ACQUISITION OF ICI METHANOL ASSETS:
On December 31, 2000, the Company acquired certain methanol assets from ICI Chemicals and Polymers Limited (ICI). The assets are located primarily in the United Kingdom and include marketing rights, a loading terminal, terminal leases and pipelines to customers. ICI retained ownership of its 500,000 tonne per year methanol plant and closed the plant at the end of April 2001.
The cost of the fixed and intangible assets acquired was $14.8 million.
The Company also purchased ICI's methanol inventory for approximately $7 million.
3. RECEIVABLES:
2001 2000
-------- --------
Trade....................................................... $101,653 $185,966
Income taxes receivable (a)................................. 6,129 66,551
Other....................................................... 27,437 34,239
-------- --------
$135,219 $286,756
======== ========
|
(a) During 2001, the Company received a refund of $67 million from the Canada Customs and Revenue Agency representing the full amount placed on deposit plus accrued interest relating to the successful settlement of the 1991 income tax reassessment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT:
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
---------- ------------ ----------
2001
Plants............................................. $2,121,525 $1,179,372 $ 942,153
Plant and equipment under development.............. 68,460 -- 68,460
Other.............................................. 37,581 16,478 21,103
---------- ---------- ----------
$2,227,566 $1,195,850 $1,031,716
========== ========== ==========
2000
Plants............................................. $2,114,503 $1,089,215 $1,025,288
Other.............................................. 32,950 12,339 20,611
---------- ---------- ----------
$2,147,453 $1,101,554 $1,045,899
========== ========== ==========
|
During 2001, $1.0 million of interest was capitalized to plant and equipment under development.
5. INTEREST IN JOINT VENTURE:
The Company has a 63.1 percent joint venture interest in Atlas Methanol Company ("Atlas"). The joint venture is constructing a 1.7 million tonne per year methanol plant in Trinidad. Construction is expected to be completed by the end of 2003.
The consolidated financial statements as at December 31, 2001 include the following amounts representing the Company's interest in the Atlas joint venture:
Consolidated Balance Sheet Current assets............................................ $ 1,955 Property, plant and equipment............................. 63,131 Current liabilities....................................... 7,690 Consolidated Statement of Cash Flows Cash outflows from investing activities................... 55,441 |
For 2001, the joint venture has no revenue and all expenditures were capitalized to plant and equipment under development.
6. OTHER ASSETS:
2001 2000
------- -------
Marketing rights:
North America............................................. $ 9,922 $13,209
Caribbean................................................. 22,638 25,949
Europe.................................................... 9,341 10,331
------- -------
41,901 49,489
------- -------
Natural gas prepayments..................................... 12,498 13,543
Investment in Titan Methanol Company, at cost (note 2(a))... 9,500 9,500
Investment in Cellex Power Products, at cost................ 3,842 --
Foreign currency options.................................... 3,806 7,625
Other....................................................... 14,146 13,967
------- -------
$85,693 $94,124
======= =======
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT:
2001 2000
--------- --------
7.40% unsecured notes due August 15, 2002 (effective yield
7.49%).................................................... $ 149,909 $149,831
7.75% unsecured notes due August 15, 2005 (effective yield
7.83%).................................................... 249,535 249,373
--------- --------
399,444 399,204
Less current maturities..................................... (149,909) --
--------- --------
$ 249,535 $399,204
========= ========
|
The Company has available an unsecured revolving bank facility of $291 million. This facility ranks pari passu with the unsecured notes.
8. OTHER LONG-TERM LIABILITIES:
2001 2000
------- -------
Site restoration (a)........................................ $55,851 $51,782
Fortier asset restructuring (b)............................. 7,455 10,145
Saturn acquisition (c)...................................... 7,329 9,998
Other....................................................... 13,060 13,042
------- -------
83,695 84,967
Less current maturities..................................... (4,784) (5,313)
------- -------
$78,911 $79,654
======= =======
|
(A) SITE RESTORATION:
The Company has accrued $55.9 million for obligations for future removal and site restoration costs for those sites where a reasonably definitive estimate of the costs can be made. There were no cash expenditures in 2001 or 2000 relating to site restoration costs and there are approximately $3 million of cash expenditures expected for 2002. Because of uncertainties related to estimating future removal and site restoration activities, future costs related to the currently identified sites could differ from the amounts estimated. In the event that the costs are in excess of amounts estimated, management does not anticipate that they will have a material adverse effect on the consolidated financial position of the Company.
(B) FORTIER ASSET RESTRUCTURING:
The amounts are payable over a three-year period to February 2004 and relate to the 1999 Fortier restructuring.
(C) SATURN ACQUISITION:
During 2000, the Company acquired Saturn Methanol Company, LLC (note 2(a)). A portion of the consideration for the acquisition is payable over a three-year period to September 2004.
9. CAPITAL STOCK:
(a) The authorized share capital of the Company is comprised as follows:
25,000,000 preferred shares without nominal or par value; and
Unlimited number of common shares without nominal or par value.
(b) Under covenants set out in certain debt instruments, the Company can pay cash dividends or make other shareholder distributions to the extent that shareholders' equity is equal to or greater than $850 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. CAPITAL STOCK (CONTINUED):
(c) Changes in the capital stock of the Company during the period January 1, 2000 to December 31, 2001 were as follows:
NUMBER OF
COMMON SHARES CONSIDERATION
------------- -------------
Balance, December 31, 1999................................. 173,136,748 $ 711,145
Issued on exercise of incentive stock options.............. 172,000 663
Shares repurchased......................................... (12,515,532) (51,405)
----------- ---------
Balance, December 31, 2000................................. 160,793,216 660,403
Issued on exercise of incentive stock options.............. 1,739,675 6,428
Shares repurchased......................................... (31,364,949) (128,680)
----------- ---------
Balance, December 31, 2001................................. 131,167,942 $ 538,151
=========== =========
|
During 2000 and 2001, the Company repurchased for cancellation, common shares at prices in excess of their assigned value. The cost to acquire the shares in the amount of $187.6 million (2000 -- $61.0 million) is allocated $128.7 million (2000 -- $51.4 million) to capital stock and $58.9 million (2000 -- $9.6 million) to retained earnings.
10. STOCK OPTION PLAN:
There are two types of options granted under the plan: incentive stock options and performance stock options. At December 31, 2001, the Company had 4.3 million common shares reserved for future stock option grants to its directors and employees under the Company's stock option plan.
(A) INCENTIVE STOCK OPTIONS:
The exercise price of each incentive stock option is equal to the quoted market price of the Company's common shares at the date of the grant. An option's maximum term is ten years; one-half of the options vest one year after the date of the grant, with a further vesting of one-quarter of the options per year over the subsequent two years. Common shares reserved for incentive stock options at December 31, 2001 and 2000 are as follows (exercise price per share in Canadian dollars):
WEIGHTED
NUMBER OF AVERAGE
STOCK OPTIONS EXERCISE PRICE
------------- --------------
Outstanding at December 31, 1999............................ 6,673,625 $11.08
Granted..................................................... 1,945,000 3.31
Exercised................................................... (172,000) 5.73
Cancelled................................................... (398,100) 7.05
---------- ------
Outstanding at December 31, 2000............................ 8,048,525 9.52
Granted..................................................... 2,963,900 9.56
Exercised................................................... (1,739,675) 5.72
Cancelled................................................... (582,000) 12.48
---------- ------
Outstanding at December 31, 2001............................ 8,690,750 $10.09
========== ======
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. STOCK OPTION PLAN (CONTINUED):
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
AT DECEMBER 31, 2001 AT DECEMBER 31, 2001
---------------------------- -----------------------------------
WEIGHTED
AVERAGE WEIGHTED NUMBER WEIGHTED
NUMBER OF REMAINING AVERAGE OF STOCK AVERAGE
STOCK OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------------------------ ------------- ----------- -------- ----------- --------
$ 2.93 to 5.30................. 1,047,100 8.2 $ 3.34 532,050 $ 3.35
$ 5.85 to 8.75................. 504,225 6.0 6.29 403,519 6.40
$ 9.56 to 14.63................ 6,939,425 6.1 10.99 3,996,525 12.05
$23.75......................... 200,000 2.8 23.75 200,000 23.75
--------- --- ------ --------- ------
8,690,750 6.3 $10.09 5,132,094 $11.16
========= === ====== ========= ======
|
As of December 31, 2000, 5,534,900 stock options were exercisable at a weighted average exercise price of $11.77.
(B) PERFORMANCE STOCK OPTIONS:
During 1999, the Company granted 2,600,000 performance stock options to certain key employees. The exercise price of the options is Canadian $4.47 per common share which was the quoted market value at the date of the grant. The options cannot be exercised prior to October 1, 2002. The vesting of the options is tied to the market value of the Company's common shares subsequent to the date of the grant. One-third of the options vest after September 30, 2002 if the common shares have traded at or above Canadian $10 per share subsequent to the date of the grant; a further one-third vest if the common shares have traded at or above Canadian $15 per share subsequent to the date of the grant and the options are fully vested if the common shares have traded at or above Canadian $20 per share subsequent to the date of the grant. These options expire September 9, 2009.
During 2001, 75,000 (2000 -- 400,000) of these options were cancelled and at December 31, 2001, 2,125,000 (2000 -- 2,200,000) of these options remain outstanding. As at December 31, 2001, 699,000 (2000 -- nil) of the outstanding performance stock options will vest and be exercisable after September 30, 2002.
11. ASSET RESTRUCTURING CHARGE:
During 2001, the Company recorded an asset restructuring charge of $11 million primarily for employee severance and mothball costs relating to the shutdown of the Medicine Hat, Alberta facility for an indeterminate period.
12. SEGMENTED INFORMATION:
The Company's operations consist of the production and sale of methanol, which constitutes a single operating segment.
Revenues attributed to geographic regions, based on location of customers, are as follows:
UNITED OTHER LATIN
CANADA STATES JAPAN ASIA EUROPE AMERICA TOTAL
------- -------- -------- -------- -------- ------- ----------
Revenue
2001.......................... $70,855 $375,061 $139,405 $219,722 $261,677 $82,245 $1,148,965
2000.......................... 59,684 328,399 161,412 224,613 196,233 90,930 1,061,271
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SEGMENTED INFORMATION (CONTINUED):
Net book value of property, plant and equipment by country is as follows:
UNITED NEW TRINIDAD
CANADA STATES ZEALAND CHILE & TOBAGO OTHER TOTAL
------- -------- -------- -------- ---------- ------ ----------
Property, plant and equipment
2001.......................... $79,531 $115,516 $136,931 $629,765 $63,131 $6,842 $1,031,716
2000.......................... 91,368 124,867 171,861 652,889 -- 4,914 1,045,899
|
13. INCOME AND OTHER TAXES:
(a) Income tax expense differs from the amounts that would be obtained by applying the Canadian statutory income tax rate to the respective year's income before taxes. These differences are as follows:
2001 2000
-------- --------
Canadian statutory tax rate................................. 45% 45%
Computed "expected" tax expense............................. $ 45,344 $ 80,206
Increase (decrease) in tax resulting from:
Income taxed in foreign jurisdictions..................... (59,090) (54,456)
Losses not tax-effected................................... 50,285 34,672
Benefits of previously unrecognized loss carryforwards and
temporary differences.................................. (12,020) (35,489)
Non-deductible costs...................................... 4,328 8,670
Large corporation tax..................................... 500 505
-------- --------
Total income tax expense.................................... $ 29,347 $ 34,108
======== ========
Income tax expense is represented by:
Current income tax........................................ $ 7,185 $ 7,701
Future income tax......................................... 22,162 26,407
-------- --------
$ 29,347 $ 34,108
======== ========
|
(b) The tax effect of temporary differences that give rise to significant portions of the future tax assets and future tax liabilities are presented below:
2001 2000
--------- ---------
Future tax liabilities
Property, plant and equipment............................. $ 204,729 $ 205,086
Other..................................................... 22,420 27,488
--------- ---------
227,149 232,574
Future tax assets
Non-capital loss carryforwards............................ 141,967 126,936
Property, plant and equipment............................. 14,262 13,737
Other..................................................... 28,485 53,311
--------- ---------
184,714 193,984
Future tax asset valuation allowance........................ (122,034) (103,717)
--------- ---------
62,680 90,267
--------- ---------
Net future income tax liability............................. $ 164,469 $ 142,307
========= =========
|
(c) At December 31, 2001, the Company had non-capital loss carryforwards available for tax purposes of $312 million in Canada and the United States and $69 million in New Zealand. In Canada and the United States these loss carryforwards expire between 2006 and 2021. In New Zealand the loss carryforwards do not have an expiry date.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. DERIVATIVES:
(A) FOREIGN EXCHANGE RISK MANAGEMENT:
A substantial portion of the Company's business is transacted in its reporting currency, the U.S. dollar. At the Company's Canadian, New Zealand and Chilean production facilities, certain of the underlying operating costs and capital expenditures are incurred in local currencies. The Company uses derivative financial instruments to reduce its foreign exchange exposure on certain committed and anticipated costs related to these operations. In addition, certain revenues in Europe are realized in the Euro and the Great Britain pound. The Company has hedged certain of these exposures by entering into forward exchange contracts and currency options to contribute to achieving cost structure and revenue targets. The following table summarizes the Company's forward exchange contracts and currency options in Euro (EUR), Great Britain pound (GBP), New Zealand dollars (NZD), Canadian dollars (CAD), Australian dollars (AUD) and Chilean pesos (CLP) at December 31, 2001:
AVERAGE
NOTIONAL EXCHANGE
AMOUNT RATE MATURITY
----------------- -------- ---------
1. Purchase Contracts:
Average rate forward exchange contracts.......... NZD 108 million $0.6579 2002
Synthetic forward exchange contracts(1).......... NZD 93 million $0.5817 2002
Average rate forward exchange contracts.......... NZD 370 million $0.4956 2003-2004
Average rate forward exchange contracts.......... CAD 80 million $0.7428 2002
Average rate forward exchange contracts.......... CAD 100 million $0.6714 2003
Average rate option cap arrangements............. CAD 21 million $0.7299 2002
Average rate forward exchange contracts.......... AUD 2 million $0.5045 2002
Inflation-linked forward exchange contracts...... CLP 8 billion $0.0014 2002
2. Sales Contracts:
Forward exchange contracts....................... EUR 28 million $0.8890 2002
Forward exchange contracts....................... GBP 2 million $1.4521 2002
|
(1) The synthetic forward exchange contract represents a series of NZD put and call options having identical strike prices and expiry dates.
(B) NATURAL GAS RISK MANAGEMENT:
From time to time the Company uses natural gas financial instruments to fix the price of a portion of its natural gas exposures. Natural gas financial instruments mature on various dates to December 2002. The fair value at December 31, 2001 was $3.9 million (2000 -- negative $16.1 million).
15. FAIR VALUE DISCLOSURES:
The carrying value and fair value of the financial instruments are as follows:
2001 2000
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
Long-term debt.......................... $(399,444) $(392,000) $(399,204) $(395,000)
Derivative financial instruments:
Forward exchange contracts.............. $ -- $ (84,453) $ -- $(100,055)
Foreign currency options................ $ 3,806 $ -- $ 7,625 $ 108
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. FAIR VALUE DISCLOSURES (CONTINUED):
Included in the fair value of the derivative financial instruments referred to in the table above were unrealized losses of $42.7 million (2000 -- $39.3 million) related to forward exchange contracts and foreign exchange options that hedge anticipated Canadian, New Zealand and Chilean operating costs for which there is not a contractual agreement in place.
The fair value of the Company's long-term debt is estimated by reference to current market prices for other debt securities with similar terms and characteristics. The fair value of the Company's forward exchange contracts, currency options and natural gas financial instruments is determined based on quoted market prices received from counterparties. Until settled, the fair value of the derivative financial instruments will fluctuate based on changes in foreign exchange rates. The gains and losses on these financial instruments are deferred and included in the measurement of the related hedged transaction (see note 14).
The carrying values of cash and cash equivalents, trade receivables, accounts payable and accrued liabilities, and other long-term liabilities meeting the definition of a financial instrument approximate their fair value.
The Company is exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments but does not expect any counterparties to fail to meet their obligations. The Company deals with only highly rated counterparties, normally major financial institutions. The Company is exposed to credit risk when there is a positive fair value of derivative financial instruments at a reporting date. The maximum amount that would be at risk if the counterparties failed completely to perform under the contracts was $4.8 million at December 31, 2001 (2000 -- $1.2 million).
16. RETIREMENT PLANS:
The Company has non-contributory defined benefit pension plans covering certain employees. At December 31, 2001, the estimated present value of accrued pension benefits was $16.0 million (2000 -- $14.7 million) and the market value of the plan's assets was $13.5 million (2000 -- $15.4 million). The Company also has defined contribution pension plans.
Total pension costs charged to operations during the year were $6.0 million (2000 -- $6.2 million).
17. COMMITMENTS:
(a) The Company has commitments under take-or-pay contracts to purchase annual quantities of feedstock supplies including those related to the Atlas facility and to pay for transportation capacity related to these supplies. The minimum estimated commitment under these contracts for the next five years is as follows:
2002........................................................ $158,978 2003........................................................ $142,492 2004........................................................ $165,927 2005........................................................ $161,011 2006........................................................ $146,613 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. COMMITMENTS (CONTINUED):
(b) The Company has future minimum lease payments under operating leases relating primarily to vessel charter, terminal facilities, office space and equipment for the next five years as follows:
2002........................................................ $101,997 2003........................................................ $ 88,860 2004........................................................ $ 76,980 2005........................................................ $ 76,291 2006........................................................ $ 73,579 |
(c) The Company has commitments to market, for a fee, methanol produced by another methanol producer and the Atlas joint venture through to 2009 and 2018, respectively.
(d) The Company estimates that its share of capital expenditures to complete the construction of the Atlas methanol facility in Trinidad will be $200 million and will be incurred over the next two years. The Company expects that these expenditures will be funded from project financing, cash generated from operations and cash and cash equivalents. The Company's total equity contribution to the joint venture is expected to be approximately $100 million. At December 31, 2001, the Company estimates its future cash equity contribution to the project will be approximately $60 million.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Methanex Corporation
Under date of March 1, 2002, we reported on the consolidated balance sheets of Methanex Corporation (the "Company") as of December 31, 2001 and 2000, and the related consolidated statements of income and retained earnings and cash flows for the years then ended, which are included elsewhere in this prospectus. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related supplemental information entitled "Reconciliation With United States Generally Accepted Accounting Principles". This supplemental information is the responsibility of the Company's management. Our responsibility is to express an opinion on this supplementary information based on our audits.
In our opinion, such supplemental information, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
Vancouver, Canada (signed) KPMG LLP March 1, 2002 Chartered Accountants
COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA - U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of the Company's consolidated financial statements, such as the changes described in note 1 to the consolidated financial statements and note (d) of the supplemental information "Reconciliation with United States Generally Accepted Accounting Principles". Our reports to the board of directors and shareholders each dated March 1, 2002 are expressed in accordance with Canadian reporting standards which do not require a reference to such changes in accounting principles in the auditors' report when the changes are properly accounted for and adequately disclosed in the financial statements.
Vancouver, Canada (signed) KPMG LLP March 1, 2002 Chartered Accountants
SUPPLEMENTAL INFORMATION
RECONCILIATION WITH UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
Methanex Corporation (the "Company") follows generally accepted accounting principles in Canada ("Canadian GAAP") which are different in some respects from those applicable in the United States and from practices prescribed by the United States Securities and Exchange Commission ("U.S. GAAP"). The significant differences between Canadian GAAP and U.S. GAAP with respect to the Company's consolidated financial statements are as follows:
(A) INCOME TAX ACCOUNTING:
The income tax differences identified in note (h) include the income tax effect of other differences between Canadian GAAP and U.S. GAAP described below.
(B) BUSINESS COMBINATION:
Effective January 1, 1993, the Company combined its business with a methanol business located in New Zealand and Chile. Under Canadian GAAP, the business combination was accounted for using the pooling-of-interest method. Under U.S. GAAP, the business combination would have been accounted for as a purchase with the Company identified as the acquirer.
For U.S. GAAP purposes, property, plant and equipment would increase by $110.4 million for the year ended December 31, 2001 (2000 -- $133.8 million), which represents the adjustments, net of depreciation, to the reported net book values to record the business combination described above as a purchase.
(C) INTEREST IN JOINT VENTURE:
U.S. GAAP requires interests in joint ventures to be accounted for using the equity method, whereas Canadian GAAP requires proportionate consolidation of interests in joint ventures. The impact of applying the equity method of accounting does not result in any change to net income or shareholders' equity and as such the Company has not made an adjustment in this reconciliation for this difference in accounting principles. This departure from U.S. GAAP is acceptable for foreign private issuers under the practices prescribed by the United States Securities and Exchange Commission. A summary balance sheet and cash flow statement for the interest in the joint venture is provided in note 5 to the Company's consolidated financial statements.
(D) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
On January 1, 2001, the Company adopted FAS 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by FAS 137 and FAS 138, (collectively referred to as FAS 133) for U.S. GAAP and accordingly applied the standard prospectively. FAS 133 provides comprehensive and consistent standards for the recognition and measurement of derivatives and hedging activities. Prior to the adoption of FAS 133, for U.S. GAAP purposes unrealized gains or losses on foreign currency forward and option contracts to hedge anticipated transactions were recognized in earnings and unrealized gains or losses on foreign currency forward and option contracts to hedge firmly committed transactions were included in the measurement of the related transaction when realized.
FAS 133 requires all derivatives to be recorded on the balance sheet at
fair value and establishes new accounting requirements for different types
of hedging activities; fair value or cash flow. Cash flow hedges are hedges
of the variability of cash flows and fair value hedges are hedges of
changes in fair value. For cash flow hedges, the effective portion of the
gain or loss on the derivative instrument is reported initially as a
component of other
SUPPLEMENTAL INFORMATION
RECONCILIATION WITH UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES -- (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(D) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED):
comprehensive income and subsequently reclassified into earnings when the forecasted transaction occurs. For fair value hedges, at each balance sheet date the effective portion of the gain or loss on the derivative instrument is recognized in net income together with the corresponding gain or loss on the hedged item attributable to the risk being hedged. Any amounts excluded from the assessment of hedge effectiveness as well as any ineffective portion of a derivative's change in fair value are immediately recognized in net income.
Upon adoption, the Company identified and documented all outstanding
derivative instruments as either fair value or cash flow hedges under FAS
133. As indicated above, certain of these instruments had previously been
accounted for as hedges and others, related to anticipated transactions,
had been marked-to-market through income. Upon adoption of FAS 133, all
derivative instruments were recorded on the balance sheet at fair value.
The difference between a derivative's carrying amount prior to the adoption
of FAS 133 and its fair value at the date of adoption is reported as a
cumulative effect of accounting change either in net income or other
comprehensive income. For instruments previously identified as fair value
hedges, the cumulative effect of accounting change is reported through net
income. For instruments previously accounted for as cash flow hedges, the
cumulative effect of accounting change is reported through other
comprehensive income.
Upon adoption of FAS 133 on January 1, 2001, the Company recorded a loss of $1.0 million in net income and a loss of $16.1 million, net of related income tax of $6.4 million, in other comprehensive loss representing the cumulative effect of the accounting change.
For the year ended December 31, 2001, the Company recorded a net adjustment to increase income before taxes by $18.9 million (2000 -- decrease by $32.2 million), which represents the difference between Canadian and U.S. GAAP for accounting for derivative instruments.
(E) STOCK COMPENSATION:
For U.S. GAAP purposes, the Company has elected under Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" to continue to apply the provisions of Accounting Principles Board Opinion 25 to its accounting for stock compensation to employees. Under APB 25, compensation is measured based on the intrinsic value method. Under the intrinsic value method, compensation expense is recorded for the excess on the measurement date of the market price of the stock over the exercise price of the stock option. The measurement date is the first date on which both the number of shares the employee is entitled to receive and the exercise price are known. If the measurement date is later than the date of grant then the plan is termed a variable plan and compensation expense is measured as the amount by which the quoted market price of the Company's common shares exceeds the exercise price of the stock option at each reporting date until the measurement date. Compensation expense is recognized ratably over the vesting period.
(i) Incentive stock options -- The Company grants incentive stock options which have exercise prices based on the market price at the date of grant and, accordingly, no stock compensation expense is required to be recorded. During 2001, the Company granted 946,000 stock options that are accounted for under U.S. GAAP as variable plan options because the exercise price of the stock options is denominated in a currency other than the Company's functional currency or the currency in which the optionee is normally compensated. At December 31, 2001, the market price for the Company's common shares was lower than the exercise price of the stock options and therefore no compensation expense is required to be recorded for these variable plan options.
SUPPLEMENTAL INFORMATION
RECONCILIATION WITH UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES -- (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(E) STOCK COMPENSATION (CONTINUED):
(ii) Performance stock options -- The Company has also granted performance stock options for which the measurement date is not known until certain performance criteria are achieved. During the year ended December 31, 2001 the Company recorded $1.9 million in compensation expense related to the performance stock options.
(F) SHIPPING AND HANDLING COSTS:
Certain shipping and handling costs are netted against revenue for the Company's Canadian GAAP consolidated financial statements. U.S. GAAP requires the presentation of revenue without deductions for shipping and handling costs. For U.S. GAAP purposes, revenue and cost of sales would increase by $43.3 million for the year ended December 31, 2001 (2000 -- $39.2 million).
(G) IMPACT OF RECENTLY ISSUED U.S. ACCOUNTING PRONOUNCEMENTS:
(i) Statement of Financial Accounting Standards No. 141, "Business Combinations" -- FAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. The Company does not believe this statement will have a material effect on its financial statements.
(ii) Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" -- FAS 142 requires that goodwill as well as indefinite life intangible assets not be amortized but be tested annually for impairment. The statement is effective for fiscal years beginning after December 15, 2001. The Company does not believe this statement will have a material effect on its consolidated financial statements.
(iii) Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" -- FAS 143 requires that obligations associated with the retirement of tangible long-lived assets and associated retirement costs be recognized at fair value in the period in which the obligation is incurred with a corresponding increase in the carrying amount of the related long-lived asset. The statement is effective for fiscal years beginning after June 15, 2002. The Company is evaluating the impact of adopting this statement.
(iv) Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" -- FAS 144 supersedes FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and related literature. FAS 144 establishes a single accounting model, based on the framework of FAS 121, for long-lived assets to be disposed of by sale. The statement retains most of the requirements in FAS 121 related to the recognition of impairment of long-lived assets to be held and used. The statement is effective for fiscal years beginning after December 15, 2001. The Company does not believe this statement will have a material effect on its consolidated financial statements.
SUPPLEMENTAL INFORMATION
RECONCILIATION WITH UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES -- (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(H) IMPACT OF U.S. GAAP DIFFERENCES:
(i) Condensed consolidated balance sheets:
DECEMBER 31,
DECEMBER 31, 2001 2000
------------------------------------- ------------
CANADIAN U.S. U.S.
GAAP ADJUSTMENTS GAAP GAAP
---------- ----------- ---------- ------------
ASSETS
Current assets..................... $ 575,941 $ -- $ 575,941 $ 663,689
Property, plant and equipment
(b).............................. 1,031,716 110,378 1,142,094 1,179,750
Other assets (d)................... 85,693 39,705 125,398 94,124
---------- --------- ---------- ----------
$1,693,350 $ 150,083 $1,843,433 $1,937,563
========== ========= ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities................ $ 264,974 $ -- $ 264,974 $ 137,312
Long-term debt..................... 249,535 -- 249,535 399,204
Other long-term liabilities (d).... 78,911 80,864 159,775 130,627
Future income taxes (a)............ 164,469 20,137 184,606 162,692
Shareholders' equity:
Capital stock (b)................ 538,151 393,948 932,099 1,054,351
Additional paid-in capital (e)... -- 2,555 2,555 --
Deferred stock compensation
(e)........................... -- (624) (624) --
Retained earnings................ 397,310 (333,909) 63,401 53,377
Accumulated other comprehensive
loss (d)...................... -- (12,888) (12,888) --
---------- --------- ---------- ----------
935,461 49,082 984,543 1,107,728
---------- --------- ---------- ----------
$1,693,350 $ 150,083 $1,843,433 $1,937,563
========== ========= ========== ==========
|
SUPPLEMENTAL INFORMATION
RECONCILIATION WITH UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES -- (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(H) IMPACT OF U.S. GAAP DIFFERENCES (CONTINUED):
(ii) Condensed consolidated statements of income and retained earnings:
DECEMBER 31,
DECEMBER 31, 2001 2000
------------------------------------- ------------
CANADIAN U.S. U.S.
GAAP ADJUSTMENTS GAAP GAAP
---------- ----------- ---------- ------------
Revenue (d)(f)..................... $1,148,965 $ 46,515 $1,195,480 $1,058,025
Cost of sales and operating
expenses (d)(f).................. 910,601 26,357 936,958 785,224
Depreciation and amortization
(b).............................. 113,719 23,473 137,192 135,760
---------- --------- ---------- ----------
Operating income before undernoted
items............................ 124,645 (3,315) 121,330 137,041
Interest expense................... (31,848) -- (31,848) (32,472)
Interest and other income.......... 19,028 -- 19,028 16,389
Asset restructuring charge......... (11,060) -- (11,060) --
---------- --------- ---------- ----------
Income before income taxes and
undernoted items................. 100,765 (3,315) 97,450 120,958
Income tax expense (a)............. (29,347) 1,820 (27,527) (31,747)
---------- --------- ---------- ----------
Net income before undernoted
item............................. 71,418 (1,495) 69,923 89,211
Cumulative effect of accounting
change (d)....................... -- (959) (959) --
---------- --------- ---------- ----------
Net income......................... 71,418 (2,454) 68,964 89,211
Retained earnings (deficit),
beginning of year................ 384,832 (331,455) 53,377 (26,252)
Excess of purchase price over
assigned value of common shares.. (58,940) -- (58,940) (9,582)
---------- --------- ---------- ----------
Retained earnings, end of year..... $ 397,310 $(333,909) $ 63,401 $ 53,377
========== ========= ========== ==========
Basic net income per share before
cumulative effect of accounting
change........................... $ 0.46 $ (0.01) $ 0.45 $ 0.52
---------- --------- ---------- ----------
Basic net income per share......... $ 0.46 $ (0.01) $ 0.45 $ 0.52
---------- --------- ---------- ----------
Diluted net income per share....... $ 0.46 $ (0.02) $ 0.44 $ 0.52
========== ========= ========== ==========
|
SUPPLEMENTAL INFORMATION
RECONCILIATION WITH UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES -- (CONTINUED)
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(H) IMPACT OF U.S. GAAP DIFFERENCES (CONTINUED):
(iii) Statement of comprehensive income and accumulated other comprehensive income:
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
U.S. U.S.
GAAP GAAP
----------------- -----------------
Net income...................................... $ 68,964 $89,211
Other comprehensive loss, net of income tax:
Cumulative effect of accounting change (d).... (9,652) --
Change in fair value of cash flow hedging
instruments (d)............................ (3,236) --
-------- -------
Other comprehensive loss........................ (12,888) --
-------- -------
Comprehensive income............................ $ 56,076 $89,211
======== =======
Accumulated other comprehensive income,
beginning of year............................. $ -- $ --
Comprehensive loss.............................. (12,888) --
-------- -------
Accumulated other comprehensive loss, end of
year.......................................... $(12,888) $ --
======== =======
|
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2002 2001
------------ ------------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 286,616 $ 332,129
Receivables............................................... 117,107 135,219
Inventories............................................... 91,222 99,908
Prepaid expenses.......................................... 7,879 8,685
---------- ----------
502,824 575,941
Property, plant and equipment............................... 1,038,350 1,031,716
Other assets................................................ 82,841 85,693
---------- ----------
$1,624,015 $1,693,350
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 78,699 $ 110,281
Current maturities on long-term debt and other long-term
liabilities............................................ 154,682 154,693
---------- ----------
233,381 264,974
Long-term debt.............................................. 249,595 249,535
Other long-term liabilities................................. 79,347 78,911
Future income taxes......................................... 161,767 164,469
Shareholders' equity
Capital stock............................................. 526,555 538,151
Retained earnings......................................... 373,370 397,310
---------- ----------
899,925 935,461
---------- ----------
$1,624,015 $1,693,350
========== ==========
|
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
2002 2001
------------ ------------
(UNAUDITED)
(THOUSANDS OF DOLLARS,
EXCEPT NUMBER OF SHARES AND
PER SHARE AMOUNTS)
Revenue..................................................... $ 181,727 $ 372,942
Cost of sales and operating expenses........................ 171,155 250,036
Depreciation and amortization............................... 28,053 27,460
------------ ------------
Operating income (loss) before undernoted items............. (17,481) 95,446
Interest expense............................................ (6,651) (8,141)
Interest and other income................................... 2,365 4,285
------------ ------------
Income (loss) before income taxes........................... (21,767) 91,590
Income tax recovery (expense)............................... 4,390 (22,812)
------------ ------------
Net income (loss)........................................... (17,377) 68,778
Retained earnings, beginning of period...................... 397,310 384,832
Excess of repurchase price over assigned value of common
shares.................................................... (6,563) --
------------ ------------
Retained earnings, end of period............................ $ 373,370 $ 453,610
============ ============
Weighted average number of common shares outstanding*....... 129,633,320 161,168,474
Basic and diluted net income (loss) per common share........ $ (0.13) $ 0.43
|
* number of common shares outstanding at March 31, 2002: 128,329,942 (March 31, 2001: 162,178,791)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
2002 2001
------------- -------------
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT
PER SHARE AMOUNTS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)........................................... $(17,377) $ 68,778
Add:
Depreciation and amortization............................. 28,053 27,460
Future income taxes....................................... (2,702) 8,312
Other..................................................... 2,071 2,047
-------- --------
Cash flows from operating activities before undernoted
changes................................................... 10,045 106,597
Receivables and accounts payable and accrued liabilities.... (8,796) 5,933
Inventories and prepaid expenses............................ 9,079 (968)
Utilization of prepaid natural gas.......................... (210) (196)
-------- --------
10,118 111,366
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of other long-term liabilities.................... (524) (965)
Payment for shares repurchased.............................. (19,304) --
Issue of shares on exercise of incentive stock options...... 1,145 4,516
-------- --------
(18,683) 3,551
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant and equipment under development....................... (30,855) --
Property, plant and equipment............................... (1,396) (5,142)
Accounts payable and accrued liabilities related to capital
expenditures.............................................. (4,674) (228)
Other assets................................................ (23) (1,635)
-------- --------
(36,948) (7,005)
-------- --------
Increase (decrease) in cash and cash equivalents............ (45,513) 107,912
Cash and cash equivalents, beginning of period.............. 332,129 225,942
-------- --------
Cash and cash equivalents, end of period.................... $286,616 $333,854
======== ========
SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid, net of capitalized interest.................. $ 13,846 $ 15,346
Income taxes paid........................................... $ 377 $ 2,657
Basic and diluted cash flows from operating activities per
common share*............................................. $ 0.08 $ 0.66
|
* before changes in non-cash working capital and utilization of prepaid natural gas
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2002
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada. The consolidated financial statements have been prepared from the books and records without audit, however, in the opinion of management, all adjustments which are necessary to the fair presentation of the results of the interim period have been made.
These consolidated financial statements should be read in conjunction with the consolidated financial statements included elsewhere in this prospectus. Except with respect to the change in accounting policies described below, the accounting policies applied in these interim consolidated financial statements are consistent with those applied in the audited consolidated financial statements included elsewhere in this prospectus.
1. INTEREST IN JOINT VENTURE
The Company has a 63.1% joint venture interest in Atlas Methanol Company ("Atlas"). The joint venture is constructing a 1.7 million tonne per year methanol plant in Trinidad. Construction is expected to be completed by the end of 2003.
The consolidated financial statements include the following amounts representing the Company's interest in the Atlas joint venture:
MARCH 31, 2002 DECEMBER 31, 2001
-------------- -----------------
($ THOUSANDS)
CONSOLIDATED BALANCE SHEET
Current assets.................................... $11,133 $ 1,955
Property, plant and equipment..................... 86,906 63,131
Current liabilities............................... 2,400 7,690
|
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2002 MARCH 31, 2001
-------------- --------------
($ THOUSANDS)
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash outflows from investing activities.............. $29,065 $ --
|
During the three months ended March 31, 2002, $1.5 million (March 31, 2001 -- $ nil) of interest was capitalized to plant and equipment under development.
To March 31, 2002, the joint venture had no revenue and all expenditures were capitalized to plant and equipment under development.
The Company estimates that its share of capital expenditures to complete the construction of Atlas will be $178 million and will be incurred over the period to December 31, 2003. The Company expects that these expenditures will be funded from project financing, cash generated from operations and cash and cash equivalents. The Company's total equity contribution to the joint venture is expected to be approximately $100 million. At March 31, 2002, the Company estimates its future cash equity contribution to the project will be approximately $34 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. CAPITAL STOCK AND SHARE REPURCHASE
Changes in the capital stock of the Company during the period December 31, 2001 to March 31, 2002 were as follows:
NUMBER OF
COMMON SHARES CONSIDERATION
------------- -------------
($ THOUSANDS)
Balance, December 31, 2001............................. 131,167,942 $538,151
Issued on exercise of incentive stock options.......... 270,000 1,145
Shares repurchased..................................... (3,108,000) (12,741)
----------- --------
Balance, March 31, 2002................................ 128,329,942 $526,555
=========== ========
|
During the three months ended March 31, 2002, the Company repurchased for cancellation 3.1 million common shares. The cost to acquire the shares in the amount of $19.3 million was allocated $12.7 million to capital stock and $6.6 million to retained earnings.
3. NET INCOME PER SHARE
A reconciliation of the weighted average number of common shares is as follows:
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
------------------ ------------------
Denominator for basic net income per share..... 129,633,320 161,168,474
Effect of dilutive stock options............... -- 206,604
----------- -----------
Denominator for diluted net income per share... 129,633,320 161,375,078
=========== ===========
|
4. STOCK OPTIONS
(a) Common shares reserved for incentive stock options at March 31, 2002 were as follows:
OPTIONS DENOMINATED OPTIONS DENOMINATED
IN CAD$ IN US$
-------------------------- --------------------------
NUMBER OF WEIGHTED NUMBER OF WEIGHTED
STOCK AVERAGE STOCK AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
--------- -------------- --------- --------------
Outstanding at December 31, 2001..... 8,690,750 $10.09 -- $ --
Granted.............................. -- -- 2,449,000 6.45
Exercised............................ (270,000) 6.73 -- --
Cancelled............................ (4,750) 7.35 -- --
--------- ------ --------- -----
Outstanding at March 31, 2002........ 8,416,000 $10.20 2,449,000 $6.45
========= ====== ========= =====
|
As of March 31, 2002, 6,515,050 incentive stock options were exercisable at an average price of Cdn.$10.81.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. STOCK OPTIONS (CONTINUED):
(b) Effective January 1, 2002, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants with respect to the accounting for stock-based compensation and other stock-based payments. The new recommendations require equity instruments awarded to employees and the cost of the service received as consideration to be measured and recognized based on the fair value of the equity instruments issued. Compensation expense is recognized over the period of related employee service, usually the vesting period of the equity instrument awarded. Alternatively, the new recommendations permit the measurement of compensation expense for stock option grants to employees and directors that are not direct awards of stock, stock appreciation rights or otherwise call for settlement in cash or other assets by an alternative method and to provide pro forma disclosure of the financial results using the fair value method. The Company has elected to follow an alternative method and continue with the former accounting policy of recognizing no compensation expense when stock options are granted because the Company grants stock options with an exercise price based on the market price at the date of the grant. Had compensation expense been determined based on the fair value method, the Company's net loss and net loss per share for the three months ended March 31, 2002, would have been adjusted to the pro forma amounts indicated below:
THREE MONTHS ENDED
MARCH 31, 2002
-------------------------
($ THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
Net loss -- as reported........................... $(17,377)
Net loss -- pro forma............................. (17,718)
--------
Net loss per share -- as reported................. $ (0.13)
Net loss per share -- pro forma................... (0.14)
========
|
The pro forma amounts exclude the effect of stock options granted prior to January 1, 2002. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 5%, dividend yield of 0%, expected life of 5 years, and volatility of 35%.
The weighted average fair value of stock options granted during the three months ended March 31, 2002 was $2.46 per share.
5. NATURAL GAS
Production from the Company's New Zealand operations is dependent on the supply of natural gas from the Maui field. The current contractual natural gas entitlements are sufficient to operate the New Zealand plants at capacity for the equivalent of approximately three years. During 2001, the owners of the Maui field announced that the Maui reserves may be materially less than previously estimated and below the aggregate of contract quantities. This could potentially reduce the amount of contracted natural gas available to Methanex. The process to determine the available reserves in the Maui field is expected to be completed by the end of 2002. The Company is continuing to pursue acquisitions of additional natural gas to supply our New Zealand plants. However, there can be no assurance that we will be able to secure additional natural gas in New Zealand at commercially acceptable terms.
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the Notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
Page
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Summary.................................. 1
Special Note Regarding Forward-Looking
Statements............................. 7
Reference Information.................... 7
Risk Factors............................. 8
Use of Proceeds.......................... 14
Consolidated Capitalization.............. 14
Selected Historical Consolidated
Financial and Operating Data........... 15
Management's Discussion and Analysis..... 18
The Methanol Industry.................... 28
Our Business............................. 33
Management............................... 44
Principal Shareholders................... 46
Description of Certain Indebtedness...... 46
Description of the Notes................. 48
Credit Ratings........................... 65
Pro Forma Interest Coverage.............. 66
Tax Considerations....................... 66
Underwriting............................. 69
Legal Matters............................ 70
Experts.................................. 71
Documents Incorporated by Reference...... 71
Where you can find More Information...... 72
Documents Filed as Part of the
Registration Statement................. 72
Index to Consolidated Financial
Statements............................. F-1
|
$200,000,000
METHANEX CORPORATION
PART II
INFORMATION NOT REQUIRED TO BE
DELIVERED TO OFFEREES OR PURCHASERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Canada Business Corporations Act ("CBCA"), which governs Methanex Corporation (the "Registrant"), except in respect of an action by or on behalf of the Registrant to procure a judgment in its favour, the Registrant may indemnify a director or officer of the Registrant, a former director or officer of the Registrant or a person who acts or acted at the Registrant's request as a director or officer, or an individual acting in a similar capacity, of another entity and his or her heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal, administrative, investigative or other proceeding in which he or she is involved because of that association with the Registrant or other entity and provided that he or she acted honestly and in good faith with a view to the best interests of the Registrant or, as the case may be, to the best interests of the other entity for which he or she acted as a director or officer or in a similar capacity at the Registrant's request, and in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he or she had reasonable grounds for believing that his or her conduct was lawful. Such indemnification may be made in connection with a derivative action only with court approval. A director or officer (or other individual as described above) is entitled to indemnification from the Registrant as a matter of right in respect of all costs, charges and expenses reasonably incurred by him or her in connection with the defense of any civil, criminal, administrative, investigative or other proceeding to which he or she is made a party because of their association with the Registrant or other entity if such individual is not judged by the court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done and has fulfilled the conditions set forth above.
In accordance with and subject to the CBCA, the by-laws of the Registrant provide that except in respect of any action by or on behalf of the Registrant to procure a judgment in its favor, the Registrant may indemnify a director or officer of the Registrant, a former director or officer of the Registrant, or a person who acts or acted at the Registrant's request as a director or officer of a body corporate, or an individual acting in a similar capacity, of another entity against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been a director or office of the Registrant or such body corporate, if the director or officer (a) acted honestly and in good faith with a view of the best interests of the Registrant, and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or her conduct was lawful. The Registrant has also entered into indemnity agreements with its directors and officers which provide substantially the same rights as provided for in the CBCA.
The Registrant maintains directors' and officers' liability insurance which insures the directors and officers of the Registrant and its subsidiaries against certain losses resulting from any wrongful act committed in their official capacities for which they become obligated to pay to the extent permitted by applicable law.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act") may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission (the "Commission") such indemnification is against public policy as expressed in such Act and is therefore unenforceable.
II-1
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Annual Information Form of the Registrant dated March 1,
2002 (incorporated by reference to the Registrant's Form
40-F for the year ended December 31, 2001, SEC file number
0-20115 (the "2001 Form 40-F"))
4.2 Information Circular dated as of March 15, 2002 issued in
connection with the Registrant's annual meeting of
shareholders held on May 23, 2002, excluding the sections
entitled "Report on Executive Compensation" and "Total
Shareholder Return Comparison," (incorporated by reference
to the Registrant's Form 6-K dated April 24, 2002, SEC file
number 0-20115 (the "First Quarter 6-K"))
4.3 Annual Consolidated Financial Statements and Auditors'
Report for the years ended December 31, 2001 and 2000,
contained in the Registrant's 2001 Annual Report
(incorporated by reference to the 2001 40-F)
4.4 Interim consolidated financial statements (unaudited) of the
Registrant for the three months ended March 31, 2002 and
2001 (incorporated by reference to the First Quarter 6-K)
4.5 Management's Discussion and Analysis for the year ended
December 31, 2001 contained in the Registrant's 2001 Annual
Report (incorporated by reference to the 2001 Form 40-F)
4.6 Management's Discussion and Analysis for the three months
ended March 31, 2002 (incorporated by reference to the First
Quarter 6-K)
4.7 Earnings coverage calculation as at and for the twelve
months ended March 31, 2002 and December 31, 2001
5.1 Consent of KPMG LLP
5.2 Consent of McCarthy Tetrault LLP
6.1 Powers of Attorney (included on signature pages)
7.1 Trust Indenture dated as of July 20, 1995 between Methanex
Corporation and United States Trust Company of New York, as
Trustee
7.2* Officers' Certificate of Methanex Corporation, to be dated
, 2002
7.3 Statement of Eligibility of the Trustee on Form T-1
(separately bound)
7.4* Form of Supplemental Indenture between Methanex Corporation
and The Bank of New York, as Trustee
99.1 Form F-X of the Registrant, dated May 29, 2002
|
* to be filed by amendment
II-2
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
ITEM 1. UNDERTAKING
The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form F-9 or to transactions in said securities.
ITEM 2. CONSENT TO SERVICE OF PROCESS
(a) Concurrently with the filing of this Registration Statement on Form F-9, the Registrant is filing with the Commission a written irrevocable consent and power of attorney on Form F-X.
(b) Any change to the name or address of the agent for service of the Registrant will be communicated promptly to the Commission by amendment to Form F-X referencing the file number of this Registration Statement.
III-1
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-9 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, Province of British Columbia, Canada, on the 31st day of May, 2002.
METHANEX CORPORATION
/s/ ALLAN S. COLE
By:
--------------------------------------
Name: Allan S. Cole
Title: Senior Vice President,
Finance and Chief Financial
Officer
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Pierre Choquette and Allan S. Cole, and each of them, his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, including post-effective amendments, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratifies and confirms all his or her said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.
This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ PIERRE CHOQUETTE President, Chief Executive Officer May 31, 2002
--------------------------------------------- and Director (Principal Executive
Pierre Choquette Officer)
/s/ ALLAN S. COLE Senior Vice President, Finance and May 31, 2002
--------------------------------------------- Chief Financial Officer (Principal
Allan S. Cole Financial Officer and Accounting
Officer)
/s/ ROBERT B. FINDLAY Director May 31, 2002
---------------------------------------------
Robert B. Findlay
/s/ BRIAN D. GREGSON Director May 31, 2002
---------------------------------------------
Brian D. Gregson
|
III-2
SIGNATURE TITLE DATE
--------- ----- ----
/s/ R.J. (JACK) LAWRENCE Director May 31, 2002
---------------------------------------------
R.J. (Jack) Lawrence
/s/ JEFFREY M. LIPTON Director May 31, 2002
---------------------------------------------
Jeffrey M. Lipton
/s/ CHRISTOPHER D. PAPPAS Director May 31, 2002
---------------------------------------------
Christopher D. Pappas
/s/ DAVID MORTON Director May 31, 2002
---------------------------------------------
David Morton
/s/ A. TERENCE POOLE Director May 31, 2002
---------------------------------------------
A. Terence Poole
/s/ GRAHAM D. SWEENEY Director May 31, 2002
---------------------------------------------
Graham D. Sweeney
/s/ ANNE L. WEXLER Director May 31, 2002
---------------------------------------------
Anne L. Wexler
|
III-3
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the undersigned has signed this Registration Statement, solely in the capacity of the duly authorized representative in the United States of Methanex Corporation, in the City of Dallas, Texas on May 31, 2002.
METHANEX GULF COAST INC.
/s/ JOHN FLOREN
By:
--------------------------------------
Name: John Floren
Title: Vice President
|
III-4
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Annual Information Form of the Registrant dated March 1,
2002 (incorporated by reference to the Registrant's Form
40-F for the year ended December 31, 2001, SEC file number
0-20115 (the "2001 Form 40-F"))
4.2 Information Circular dated as of March 15, 2002 issued in
connection with the Registrant's annual meeting of
shareholders held on May 23, 2002, excluding the sections
entitled "Report on Executive Compensation" and "Total
Shareholder Return Comparison," (incorporated by reference
to the Registrant's Form 6-K dated April 24, 2002, SEC file
number 0-20115 (the "First Quarter 6-K"))
4.3 Annual Consolidated Financial Statements and Auditors'
Report for the years ended December 31, 2001 and 2000,
contained in the Registrant's 2001 Annual Report
(incorporated by reference to 2001 40-F)
4.4 Interim consolidated financial statements (unaudited) of the
Registrant for the three months ended March 31, 2002 and
2001 (incorporated by reference to the First Quarter 6-K)
4.5 Management's Discussion and Analysis for the year ended
December 31, 2001 contained in the Registrant's 2001 Annual
Report (incorporated by reference to the 2001 Form 40-F)
4.6 Management's Discussion and Analysis for the three months
ended March 31, 2002 (incorporated by reference to the First
Quarter 6-K)
4.7 Earnings coverage calculation as at and for the twelve
months ended March 31, 2002 and December 31, 2001
5.1 Consent of KPMG LLP
5.2 Consent of McCarthy Tetrault LLP
6.1 Powers of Attorney (included on signature pages)
7.1 Trust Indenture dated as of July 20, 1995 between Methanex
Corporation and United States Trust Company of New York, as
Trustee
7.2* Officers' Certificate of Methanex Corporation, to be dated
, 2002
7.3 Statement of Eligibility of the Trustee on Form T-1
(separately bound)
7.4* Form of Supplemental Indenture between Methanex Corporation
and The Bank of New York, as Trustee
99.1 Form F-X of the Registrant, dated May 29, 2002
|
* to be filed by amendment
EXHIBIT 4.7
METHANEX CORPORATION
PRO FORMA EARNINGS COVERAGE RATIOS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001 AND MARCH 31, 2002
TWELVE TWELVE
MONTHS MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
2001 2002
------------ ------------
(THOUSANDS OF DOLLARS)
INTEREST REQUIREMENTS:
Interest expense per financial statements................... $ 31,849 $ 30,358
Add: capitalized interest................................... 1,038 2,538
-------- --------
Interest including capitalized interest..................... 32,887 32,896
Deduct:
Interest on US$150 million unsecured long-term debt to be
repaid from proceeds (7.4%)............................ (11,100) (11,100)
Amortization of deferred financing........................ (271) (271)
Amortization of discount.................................. (104) (104)
Add:
Interest on US$200 million unsecured long-term debt
(9%)(1)................................................ 18,000 18,000
Amortization of commission(1)............................. 300 300
Amortization of servicing costs(1)........................ 100 100
-------- --------
Pro forma interest expense.................................. $ 39,812 $ 39,821
======== ========
EARNINGS:
Net income.................................................. $ 71,418 $(14,737)
Add:
Income tax expense........................................ 29,347 2,145
Interest expense.......................................... 31,848 30,358
-------- --------
Earnings before interest on long-term debt and income
taxes..................................................... $132,613 $ 17,766
======== ========
Earnings coverage ratio..................................... 3.33 --
======== ========
Earnings coverage deficiency................................ -- $ 22,055
SUPPLEMENTARY CALCULATION:
Earnings before interest on long-term debt and income taxes
(above)................................................... $132,613 $ 17,766
Depreciation and amortization............................... 113,719 114,312
-------- --------
Earnings before depreciation, amortization, interest on
long-term debt and income taxes........................... $246,332 $132,078
======== ========
Supplementary earnings coverage ratio....................... 6.19 3.32
======== ========
|
Exhibit 5.1
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Methanex Corporation
We consent to the use of our audit report dated March 1, 2002, on the consolidated balance sheets of Methanex Corporation as at December 31, 2001 and 2000, and the consolidated statements of income and retained earnings and cash flows for the years then ended, and our audit report dated March 1, 2002 on the supplemental information (reconciliation with United States Generally Accepted Accounting Principles) for the years ended December 31, 2001 and 2000, which are incorporated by reference and included herein, and to the reference to our firm under the heading "Experts" in the prospectus contained in the Registration Statement on Form F-9.
The auditors' report on the supplemental information - reconciliation with United States generally accepted accounting principles includes additional comments for U.S. readers on changes in accounting principles.
(signed) KPMG LLP
Vancouver, Canada
May 31, 2002
EXHIBIT 5.2
Barristers & Solicitors MCCARTHY TETRAULT LLP
Patent & Trade-mark Agents P.O. Box 10424, Pacific Centre
Suite 1300, 777 Dunsmuir Street
Vancouver BC V7Y 1K2
Canada
MCCARTHY TETRAULT Telephone: 604 643-7100
Facsimile: 604 643-7900
www.mccarthy.ca
|
May 31, 2002
We refer to the Registration Statement on Form F-9 and related Prospectus of Methanex Corporation (the "Corporation") dated as of May 31, 2002 for the registration of Senior Notes of the Corporation.
We hereby consent to the use of our firm name under the heading "Legal Matters" and the reference to our advice under the heading "Description of the Notes -- Enforceability of Judgements" in such prospectus.
Yours truly,
/s/ McCarthy Tetrault LLP |
Vancouver, Calgary, London, Toronto, Ottawa, Montreal, Quebec, New York and
London, England
An Ontario Limited Liability Partnership
Exhibit 7.1
EXECUTION COPY
METHANEX CORPORATION
and
\
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
Indenture
Dated as of July 20, 1995
Debt Securities
CROSS-REFERENCE TABLE
TIA Section Indenture Section
----------- -----------------
310 (a)(1) ....................................... 7.10
(a)(2) ....................................... 7.10
(a)(3) ....................................... N.A.
(a)(4) ....................................... N.A.
(a)(5) ....................................... 7.10
(b) ....................................... 7.08, 7.10
(c) ....................................... N.A.
311 (a) ....................................... 7.11
(b) ....................................... 7.11
(c) ....................................... N.A.
312 (a) ....................................... 5.01
(b) ....................................... 5.02
(c) ....................................... 5.02
313 (a) ....................................... 5.04
(b)(1) ....................................... 5.04
(b)(2) ....................................... 5.04
(c) ....................................... 5.04
(d) ....................................... 5.04
314 (a) ....................................... 4.05
(b) ....................................... N.A.
(c)(1) ....................................... 13.05
(c)(2) ....................................... 13.05
(c)(3) ....................................... N.A.
(d) ....................................... N.A.
(e) ....................................... 13.05
(f) ....................................... N.A.
315 (a) ....................................... 7.01
(b) ....................................... N.A.
(c) ....................................... 7.01
(d) ....................................... 7.01
(e) ....................................... 6.11
316 (a)(last sentence)....................................... 1.01
(a)(1)(A) ....................................... 6.05
(a)(1)(B) ....................................... 6.04
(a)(2) ....................................... N.A.
(b) ....................................... 6.07
(c) ....................................... 8.04
|
TIA Section Indenture Section
----------- -----------------
317 (a)(1) ....................................... 6.08
(a)(2) ....................................... 6.09
(b) ....................................... 4.04
318 (a) ....................................... 13.07
|
TABLE OF CONTENTS*/
Page
----
RECITALS OF THE COMPANY ......................................................... 1
ARTICLE I
Definitions
-----------
SECTION 1.01. Certain Terms Defined ........................................ 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act ............ 17
SECTION 1.03. Rules of Construction ........................................ 17
ARTICLE II
Debt Securities
---------------
SECTION 2.01. Forms Generally .............................................. 18
SECTION 2.02. Form of Trustee's Certificate of Authentication .............. 19
SECTION 2.03. Principal Amount; Issuable in Series ......................... 19
SECTION 2.04. Execution of Debt Securities ................................. 23
SECTION 2.05. Authentication and Delivery of Debt Securities ............... 24
SECTION 2.06. Denomination of Debt Securities .............................. 26
SECTION 2.07. Registration of Transfer and Exchange ........................ 26
SECTION 2.08. Temporary Debt Securities .................................... 28
SECTION 2.09. Mutilated, Destroyed, Lost or Stolen Debt Securities ......... 30
SECTION 2.10. Cancellation of Surrendered Debt Securities .................. 31
SECTION 2.11. Provisions of the Indenture and Debt Securities for
the Sole Benefit of the Parties and the Holders ............ 31
SECTION 2.12. Payment of Interest; Interest Rights Preserved ............... 33
SECTION 2.13. Securities Denominated in Foreign Currencies ................. 33
SECTION 2.14. Wire Transfers ............................................... 34
|
*/ The Table of Contents is not part of the Indenture.
Contents, p.2
SECTION 2.15. Securities Issuable in the Form of a Global Security ......... 34
SECTION 2.16. Medium Term Securities ....................................... 37
SECTION 2.17. Defaulted Interest ........................................... 38
SECTION 2.18. Judgments .................................................... 40
SECTION 2.19. CUSIP Numbers ................................................ 40
ARTICLE III
Redemption of Debt Securities
-----------------------------
SECTION 3.01. Applicability of Article ..................................... 41
SECTION 3.02. Tax Redemption; Special Tax Redemption ....................... 41
SECTION 3.03. Notice of Redemption; Selection of Debt Securities ........... 43
SECTION 3.04. Payment of Debt Securities Called for Redemption ............. 45
SECTION 3.05. Mandatory and Optional Sinking Funds ......................... 47
SECTION 3.06. Redemption of Debt Securities for Sinking Fund ............... 47
ARTICLE IV
Particular Covenants of the Company
-----------------------------------
SECTION 4.01. Payment of Principal of, and Premium, if any, and
Interest on, Debt Securities ............................... 49
SECTION 4.02. Maintenance of Offices or Agencies for Registration
of Transfer, Exchange and Payment of Debt
Securities.................................................. 50
SECTION 4.03. Appointment to Fill a Vacancy in the Office of
Trustee .................................................... 51
SECTION 4.04. Duties of Paying Agents, etc. ................................ 51
SECTION 4.05. Statement by Officers as to Default .......................... 52
SECTION 4.06. Payment of Additional Interest ............................... 52
SECTION 4.07. Payment of Additional Amounts ................................ 55
SECTION 4.08. Limitation on Liens .......................................... 56
SECTION 4.09. Limitation on Sale/LeaseBack Transactions .................... 56
SECTION 4.10. Limitation on Restricted Payments ............................ 57
SECTION 4.11. Additional Guarantees ........................................ 58
SECTION 4.12. Limitations with Respect to Unrestricted Subsidiaries ........ 59
SECTION 4.13. Waiver of Certain Covenants .................................. 60
SECTION 4.14. Calculation of Original Issue Discount ....................... 60
SECTION 4.15. Further Instruments and Acts ................................. 60
|
Contents, p.3
ARTICLE V
Holders' Lists and Reports by the Company and the Trustee
---------------------------------------------------------
SECTION 5.01. Company to Furnish Trustee Information as to Names
and Addresses of Holders; Preservation of
Information ................................................ 61
SECTION 5.02. Communications to Holders .................................... 61
SECTION 5.03. Reports by Company ........................................... 62
SECTION 5.04. Reports by Trustee ........................................... 62
ARTICLE VI
Remedies of the Trustee and Holders in Event of Default
-------------------------------------------------------
SECTION 6.01. Events of Default ............................................ 63
SECTION 6.02. Acceleration ................................................. 66
SECTION 6.03. Other Remedies ............................................... 67
SECTION 6.04. Waiver of Past Defaults ...................................... 67
SECTION 6.05. Control by Majority .......................................... 67
SECTION 6.06. Limitation on Suits .......................................... 68
SECTION 6.07. Rights of Holders to Receive Payments ........................ 68
SECTION 6.08. Collection Suit by Trustee ................................... 68
SECTION 6.09. Trustee Must File Proofs of Claim ............................ 68
SECTION 6.10. Priorities ................................................... 69
SECTION 6.11. Undertaking for Costs ........................................ 69
SECTION 6.12. Waiver of Stay or Extension Laws ............................. 70
ARTICLE VII
Concerning the Trustee
----------------------
SECTION 7.01. Certain Duties and Responsibilities .......................... 70
SECTION 7.02. Certain Rights of Trustee .................................... 71
SECTION 7.03. Trustee Not Liable for Recitals in Indenture or in
Debt Securities ............................................ 73
SECTION 7.04. Trustee, Paying Agent or Registrar May Own Debt
Securities ................................................. 73
SECTION 7.05. Moneys Received by Trustee to be Held in Trust ............... 73
SECTION 7.06. Compensation and Reimbursement ............................... 74
|
Contents, p.4
SECTION 7.07. Right of Trustee to Rely on an Officers' Certificate
Where No Other Evidence Specifically Prescribed ............ 74
SECTION 7.08. Separate Trustee; Replacement of Trustee ..................... 75
SECTION 7.09. Successor Trustee by Merger .................................. 76
SECTION 7.10. Eligibility; Disqualification ................................ 77
SECTION 7.11. Preferential Collection of Claims Against Company ............ 77
SECTION 7.12. Compliance with Tax Laws ..................................... 77
ARTICLE VIII
Concerning the Holders
----------------------
SECTION 8.01. Evidence of Action by Holders ................................ 77
SECTION 8.02. Proof of Execution of Instruments and of Holding of
Debt Securities ............................................ 78
SECTION 8.03. Who May Be Deemed Owner of Debt Securities ................... 78
SECTION 8.04. Instruments Executed by Holders Bind Future
Holders; Record Dates ...................................... 79
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Purposes for Which Supplemental Indenture May Be
Entered into Without Consent of Holders .................... 80
SECTION 9.02. Modification of Indenture with Consent of Holders of
Debt Securities ............................................ 83
SECTION 9.03. Effect of Supplemental Indentures ............................ 85
SECTION 9.04. Debt Securities May Bear Notation of Changes by
Supplemental Indentures .................................... 85
ARTICLE X
Successor Companies and Subsidiaries
------------------------------------
SECTION 10.01. When Company May Merge or Transfer Assets .................... 86
SECTION 10.02. When Restricted Subsidiaries That are Guarantors
May Merge or Transfer Assets ............................... 86
|
Contents, p.5
ARTICLE XI
Satisfaction and Discharge of Indenture:
----------------------------------------
Defeasance: Unclaimed Moneys
----------------------------
SECTION 11.01. Applicability of Article ..................................... 87
SECTION 11.02. Satisfaction and Discharge of Indenture ...................... 87
SECTION 11.03. Conditions to Defeasance ..................................... 89
SECTION 11.04. Application of Trust Money ................................... 91
SECTION 11.05. Repayment to Company ......................................... 91
SECTION 11.06. Indemnity for Government Obligations ......................... 91
SECTION 11.07. Reinstatement ................................................ 91
ARTICLE XII
Subordination of Debt Securities
--------------------------------
SECTION 12.01. Applicability of Article; Agreement to Subordinate ........... 92
SECTION 12.02. Liquidation, Dissolution, Bankruptcy ......................... 92
SECTION 12.03. Default on Senior Indebtedness ............................... 93
SECTION 12.04. Acceleration of Payment of Debt Securities ................... 93
SECTION 12.05. When Distribution Must Be Paid Over .......................... 94
SECTION 12.06. Subrogation .................................................. 94
SECTION 12.07. Relative Rights .............................................. 94
SECTION 12.08. Subordination May Not Be Impaired by Company ................. 94
SECTION 12.09. Rights of Trustee and Paying Agent ........................... 94
SECTION 12.10. Distribution or Notice to Representative ..................... 95
SECTION 12.11. Article XII Not to Prevent Defaults or Limit Right to
Accelerate ................................................. 95
SECTION 12.12. Trust Moneys Not Subordinated ................................ 95
SECTION 12.13. Trustee Entitled to Rely ..................................... 96
SECTION 12.14. Trustee to Effectuate Subordination .......................... 96
SECTION 12.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness ............................................... 96
SECTION 12.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions ................................... 96
|
Contents, p.6
ARTICLE XIII
Miscellaneous Provisions
------------------------
SECTION 13.01. Successors and Assigns of Company Bound by
Indenture .................................................. 97
SECTION 13.02. Acts of Board, Committee or Officer of Successor
Company Valid .............................................. 97
SECTION 13.03. Required Notices or Demands .................................. 97
SECTION 13.04. Indenture and Debt Securities to Be Construed in
Accordance with the Laws of the State of
New York ................................................... 98
SECTION 13.05. Officers' Certificate and Opinion of Counsel to Be
Furnished upon Application or Demand by the
Company .................................................... 98
SECTION 13.06. Payments Due on Legal Holidays ............................... 99
SECTION 13.07. Provisions Required by Trust Indenture Act to
Control .................................................... 99
SECTION 13.08. Computation of Interest on Debt Securities ................... 99
SECTION 13.09. Rules by Trustee, Paying Agent and Registrar ................. 100
SECTION 13.10. Agent for Service; Submission to Jurisdiction ................ 100
SECTION 13.11. No Recourse Against Others ................................... 100
SECTION 13.12. Severability ................................................. 101
SECTION 13.13. Effect of Headings ........................................... 101
SECTION 13.14. Indenture May Be Executed in Counterparts .................... 101
SIGNATURES .............................................................. 101
EXHIBIT A Form of Debt Security
EXHIBIT B Form of Guarantee Agreement
|
INDENTURE dated as of July 20, 1995, between METHANEX CORPORATION, a Canadian corporation (the "Company") and UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation authorized to conduct a banking business (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its debentures, notes, bonds or other evidences of indebtedness to be issued in one or more series unlimited as to principal amount (herein called the "Debt Securities"), as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH
That in order to declare the terms and conditions upon which the Debt Securities are issued, executed, authenticated and delivered, and in consideration of the premises, and of the purchase and acceptance of the Debt Securities by the holders thereof, the Company and the Trustee covenant and agree with each other, for the benefit of the respective Holders from time to time of the Debt Securities, as follows:
ARTICLE I
Definitions
SECTION 1.01. Certain Terms Defined. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any Indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture which are defined in the Trust Indenture Act or which are by reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force as of the date of original execution of this Indenture.
"Additional Amounts" has the meaning specified in Section 4.07.
"Affiliate" of any specified person means any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction means, as of the date of determination, the lesser of (i) the fair market value of the property subject to such Sale/Leaseback Transaction (as determined in good faith by the Board of Directors) or (ii) the present value (discounted at a rate per annum equal to the coupon on the applicable Debt Securities compounded annually) of the total obligations of the lessee for rental payments (excluding amounts required to be paid on account of operating costs, maintenance and repairs, insurance, taxes, assessments, utility rates and similar charges) during the remaining term of such lease (including any period for which such lease has been extended).
"Authorized Newspaper" means a newspaper in an official language of the country of publication customarily published at least once a day, and customarily published for at least five days in each calendar week, and of general circulation in such city or cities specified as a Place of Payment pursuant to Section 2.03 with respect to the Debt Securities of any series. Where successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different newspapers in the same city meeting the foregoing requirements and in each case on any Business Day in such city.
"Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable by the Company under or with respect to (i) the Credit Agreement (Unsecured Syndicated Term Credit Facility), dated June 30, 1995, among the Company, Royal Bank of Canada as agent bank, and the lenders party thereto, and (ii) the Credit Agreement (Letter of Credit Facility), dated June 30, 1995, among the Company as borrower and Royal Bank of Canada as lender, each as amended or modified from time to time.
"Bankruptcy Law" has the meaning set forth in Section 6.01.
"Bearer Holder" means, with respect to any Bearer Security or Coupon, the Bearer thereof.
"Bearer Security" means any Debt Security (with or without Coupons), title to which passes by delivery only, but does not include any Coupons.
"Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a person means any obligation which is required to be classified and accounted for as a capital lease on the face of a balance sheet of such person prepared in accordance with GAAP; the amount of such obligation shall be the capitalized amount thereof, determined in accordance with GAAP; except that the Stated Maturity thereof shall be deemed to be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such person, including any Preferred Stock, but excluding any debt securities convertible into or exchangeable for such equity.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Common Stock" means the common shares without nominal or par value in the capital of the Company, which shares are currently listed on The Montreal Exchange, The Toronto Stock Exchange and the Nasdaq National Market, and any other classes of common shares of the Company hereinafter created.
"Company" means Methanex Corporation, a Canadian corporation, and, subject to the provisions of Article X, shall also include its successors and assigns.
"Company Order" means a written order of the Company, signed by its Chairman of the Board, any Vice Chairman, President or any Vice President (or any other officer performing similar functions) and by its Chief Financial Officer, Treasurer, Secretary, any Assistant Treasurer or any Assistant Secretary (or any other officer performing similar functions).
"Consolidated Net Worth" at any date of determination means the following amount, as shown on the most recent consolidated balance sheet of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recent fiscal quarter of the Company ending at least 45 days prior to the date of determination: (i) the consolidated shareholders' equity of the common stockholders of the Company plus (ii) the respective amounts reported with respect to any class or series of Preferred Stock of the Company (other than Exchangeable Stock and Redeemable Stock) but only to the extent of any cash received by the Company upon issuance of such Preferred Stock, less all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of this Indenture in the book value of any asset owned by the Company or any of its Subsidiaries.
"Conversion Event" has the meaning set forth in Section 6.01.
"Corporate Trust Office of the Trustee" or other similar term means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered in the United States of America, expect that with respect to the presentation of Debt Securities for payment or for registration of transfer and exchange, such term shall also mean the office of the Trustee or the Trustee's agent in the Borough of Manhattan, the city and state of New York, at which at any particular time its corporate agency business shall be conducted.
"Coupon" means any interest coupon appertaining to any Bearer Security.
"Coupon Security" means any Bearer Security authenticated and delivered with one or more Coupons appertaining thereto.
"covenant defeasance option" has the meaning set forth in Section 11.02(b).
"Currency" means Dollars or Foreign Currency.
"CUSIP" has the meaning set forth in Section 2.19.
"Custodian" has the meaning set forth in Section 6.01.
"Debt Security" or "Debt Securities" has the meaning stated in the first recital of this Indenture and more particularly means any debt security or debt
securities, as the case may be, of any series authenticated and delivered under this Indenture.
"Debt Security Register" has the meaning set forth in Section 2.07(a).
"Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.17(a).
"Depositary" means, unless otherwise specified by the Company pursuant to either Section 2.03 or 2.15, with respect to Registered Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, The Depository Trust Company, New York, New York, or any successor thereto registered as a clearing agency under the Exchange Act or other applicable statute or regulations.
"Designated Currency" has the meaning set forth in Section 2.18.
"Designated Senior Indebtedness" means any Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof, are committed to lend up to, at least $100 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture and has been designated as "Designated Senior Indebtedness" for purposes of this Indenture in an Officers' Certificate received by the Trustee.
"Determination Notice" has the meaning set forth in Section 3.02(b).
"Dollar" or "$" means such currency of the United States as at the time of payment is legal tender for the payment of public and private debts.
"Dollar Equivalent" means, with respect to any monetary amount in a Foreign Currency, at any time for the determination thereof, the amount of Dollars obtained by converting such Foreign Currency involved in such computation into Dollars at the spot rate for the purchase of Dollars with the applicable Foreign Currency as quoted by Citibank, N.A. (unless another comparable financial institution is designated by the Company) in New York, New York at approximately 11:00 a.m. (New York time) on the date two Business Days prior to such determination.
"European Community" means the European Economic Community.
"European Currency Units" has the meaning assigned to it from time to time by the Council of the European Community.
"Event of Default" has the meaning specified in Section 6.01.
"Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock which is exchangeable or convertible into another security (other than Capital Stock which is neither Exchangeable Stock nor Redeemable Stock).
"Excluded Holder" has the meaning specified in Section 4.07.
"Foreign Currency" means a currency issued by the government of any country other than the United States or a composite currency (including European Currency Units) the value of which is determined by reference to the values of the currencies of any group of countries.
"Funded Indebtedness" of a person means all Indebtedness of such person which matures more than one year after the time of determination thereof or which is extendible or renewable at the option of such person to a time more than one year after the time of determination thereof (whether or not renewed or extended).
"GAAP" means generally accepted accounting principles in Canada as in effect as of the date of this Indenture.
"Global Security" means, with respect to any series of Debt Securities issued hereunder, a Debt Security, substantially in the form of Exhibit A to this Indenture, which is executed by the Company and authenticated and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with this Indenture and any Indentures supplemental hereto, or resolution of the Board of Directors and set forth in an Officers' Certificate, which shall be registered in the name of the Depositary or its nominee and which shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, all the Outstanding Debt Securities of such series or any portion thereof, in either case having the same terms, including, without limitation, the same original issue date, date or dates on which principal is due and interest rate or method of determining interest.
"Guarantee" means any obligation, contingent or otherwise, of any person directly or indirectly guaranteeing any Indebtedness of any other person and
any obligation, direct or indirect, contingent or otherwise, of such person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a correlative meaning.
"Guarantor" means any person that becomes a guarantor of the Debt Securities pursuant to the terms of Section 4.11 of this Indenture, and its respective successors.
"Holder," "Holder of Debt Securities" or other similar terms means, with respect to a Registered Security, the Registered Holder and, with respect to a Bearer Security or a Coupon, the Bearer Holder.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) or is designated as a Restricted Subsidiary or an Unrestricted Subsidiary shall be deemed to be Incurred by such Subsidiary at such time. The term "Incurrence" when used as a noun shall have a correlative meaning.
"Indebtedness" of any person means, without duplication,
(i) the principal of, premium (if any) in respect of and interest on (A) indebtedness of such person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments related to or for money borrowed for the payment of which such person is responsible or liable;
(ii) all Capital Lease Obligations of such person and all Attributable Indebtedness in respect of Sale/Leaseback Transactions entered into by such person;
(iii) all obligations of such person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such person and all obligations of such person under any title retention agreement (but
excluding in each case trade accounts payable or accrued liabilities arising in the ordinary course of business);
(iv) all obligations of such person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of such person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such person of a demand for reimbursement following payment on the letter of credit);
(v) all obligations of such person with respect to the redemption, repayment or other repurchase of, in the case of a Subsidiary, any Preferred Stock and, in the case of any other person, any Redeemable Stock (but excluding any accumulated dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other persons for the payment of which such person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise,
including any Guarantees of such obligations; and
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
The amount of Indebtedness of any person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented from time to time.
"Interest" includes, when used with respect to a Bearer Security, any additional interest payable on such Bearer Security pursuant to Section 3.02 or 4.06.
"Investment" in any person means any direct or indirect advance, loan (other than advances to customers, employees or suppliers in the ordinary course of business that are recorded as accounts receivable On the balance sheet of such person)
or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such person.
"legal defeasance option" has the meaning specified in Section 11.02(b).
"Legal Holiday" means each day that is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York or the City of Vancouver.
"Lien" means any mortgage, pledge, security interest, conditional sale or other title retention agreement or other similar lien.
"mandatory sinking fund payment" has the meaning specified in Section 3.05.
"Non-Convertible Capital Stock" means, with respect to any person, any non-convertible Capital Stock of such person and any Capital Stock of such person convertible solely into non-convertible common stock of such person; provided, however, that Non-Convertible Capital Stock shall not include Redeemable Stock or Exchangeable Stock.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither the Company nor any of the Restricted Subsidiaries (A) provide credit support (including any undertaking, agreement or instrument which would constitute Indebtedness) or (B) is directly or indirectly liable and (ii) no default with respect to which (including any rights which the holders thereof may have to take enforcement action) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of the Restricted Subsidiaries to declare a default on such other Indebtedness or cause a payment thereof to be accelerated or payable prior to its Stated Maturity.
"Notice of Default" has the meaning set forth in Section 6.01.
"Officers' Certificate" means a certificate signed by the Chairman of the Board, any Vice Chairman, the President or any Vice President of the Company (or other officer performing similar functions) and by the Chief Financial Officer, the Treasurer, the Secretary or any Assistant Treasurer or Assistant Secretary of the
Company (or other officer performing similar functions). Each such certificate shall include the statements provided for in Section 13.05, if applicable.
"Opinion of Counsel" means an opinion in writing signed by legal counsel for the Company (which counsel may be an employee of the Company) or outside counsel for the Company. Each such opinion shall include the statements provided for in Section 13.05, if applicable.
"optional sinking fund payment" has the meaning specified in Section 3.05.
"Original Issue Discount Debt Security" means any Debt Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof pursuant to
Section 6.01.
"Outstanding", when used with respect to any series of Debt Securities, means, as of the date of determination, all Debt Securities of that series theretofore authenticated and delivered under this Indenture, except:
(i) Debt Securities of that series theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Debt Securities of that series for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any paying agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own paying agent) for the Holders of such Debt Securities; provided, however, that, if such Debt Securities have not yet matured, notice of the redemption of such Debt Securities has been duly given pursuant to this Indenture; and
(iii) Debt Securities of that series which have been paid pursuant to
Section 2.09 or in exchange for or in lieu of which other Debt Securities
have been authenticated and delivered pursuant to this Indenture, other
than any such Debt Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Debt Securities
are held by a bona fide purchaser in whose hands such Debt Securities are
valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Debt Securities of any series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Debt Securities
owned by the Company or any other obligor upon the Debt Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Debt Securities which the Trustee actually knows to be so owned shall be so disregarded. Debt Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debt Securities and that the pledgee is not the Company or any other obligor upon the Debt Securities or an Affiliate of the Company or of such other obligor. In determining whether the Holders of the requisite principal amount of Outstanding Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Debt Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 6.01. In determining whether the Holders of the requisite principal amount of the Outstanding Debt Securities of any series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of a Debt Security denominated in one or more Foreign Currencies that shall be deemed to be Outstanding for such purposes shall be the Dollar Equivalent, determined in the manner provided as contemplated by Section 2.03 on the date of original issuance of such Debt Security, of the principal amount (or, in the case of any Original Issue Discount Debt Security, the Dollar Equivalent on the date of original issuance of such Security of the amount determined as provided in the preceding sentence above) of such Debt Security.
"Payment Blockage Period" has the meaning specified in Section 12.03.
"Permitted Liens" means, with respect to any person, (i) pledges or deposits by such person under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such person is a party, or deposits to secure public or statutory obligations of such person or deposits of cash or government bonds to secure surety or appeal bonds to which such person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens, and maritime liens on cargo for freight not yet due, in each case for sums not yet due or being contested in good faith by appropriate proceedings, other Liens arising out of judgments or awards against such person with respect to which such person shall then be proceeding with an appeal or other proceedings for
review, and any right of setoff, refund or charge-back available to any bank or other financial institution; (iii) Liens for property taxes not yet subject to penalties for nonpayment or which are being contested in good faith and by appropriate proceedings; (iv) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such person in the ordinary course of its business; provided, however, that such letters of credit do not constitute Indebtedness; (v) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, pipelines, railways, cables and conduits, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of such properties or materially impair their use in the operation of the business of such person; (vi) Liens securing Indebtedness or other obligations in the ordinary course of business of a Restricted Subsidiary or the Company owing to and held by the Company or another Restricted Subsidiary; (vii) Liens existing on the date of the Indenture other than Liens to secure the First Restated and Amended Credit Agreement, dated January 1, 1995, among the Company and Methanex Fortier, Inc. as borrowers, Royal Bank of Canada, as agent bank, and the lenders party thereto; (viii) Liens on property or shares of stock of a person at the time that such person becomes a Restricted Subsidiary; provided, however, that such Liens may not extend to any other property or assets owned by the Company or a Restricted Subsidiary; provided further, however, that such Liens are not created, Incurred or assumed in connection with, or in contemplation of, or to provide credit support in connection with, such person becoming a Restricted Subsidiary; (ix) Liens on property or assets at the time the Company or a Restricted Subsidiary acquires such property or assets, including any acquisition by means of an amalgamation, merger or consolidation with or into the Company or a Restricted Subsidiary; provided, however, that such Liens may not extend to any other property or assets owned by the Company or a Restricted Subsidiary; provided further, however, that such Liens are not created, Incurred or assumed in connection with, or in contemplation of, or to provide credit support in connection with, such acquisition; (x) Liens on any property or assets securing any Indebtedness created or assumed as all or any part of the purchase price or cost of construction or improvement of real or tangible personal property or assets, whether or not secured, which Indebtedness was created prior to, at the time of or within 120 days after the later of the acquisition, completion of construction or commencement of full operation of such property or assets; (xi) Liens on cash or marketable securities of the Company or any Restricted Subsidiary granted in the ordinary course of business in connection with (A) any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate insurance and other similar agreements or arrangements; (B) any interest rate swap agreements, forward rate agreements,
interest rate cap or collar agreements or other similar financial agreements or
arrangements; or (C) any agreements or arrangements entered into for the purpose
of hedging product prices; and (xii) Liens to secure any refinancing, extension,
renewal or replacement ("refinancing") as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (vii),
(viii), (ix) and (x) (other than any Lien to secure the Senior Secured First
Priority Notes of Methanex New Zealand Limited); provided, however, that (A)
such new Lien shall be limited to all or part of the same property that secured
the original Lien (plus improvements on such property) and (B) the Indebtedness
secured by such Lien at such time is not increased to any amount greater than
the sum of (a) the outstanding principal amount of the Indebtedness being
refinanced and (b) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing.
"person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Place of Payment" means, when used with respect to the Debt Securities of any series, the place or places where the principal of, and premium, if any, and interest on, the Debt Securities of that series are payable as specified pursuant to Section 2.03.
"Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"principal" of a Debt Security means the principal of the Debt Security plus the premium, if any, payable on the Debt Security which is due or overdue or, to the extent permitted by law, is to become due at the relevant time.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise is required to be redeemed prior to the first anniversary of the Stated Maturity of the applicable Debt Securities or is redeemable at the option of the holder thereof at any time prior to such first anniversary.
"Registered Holder" means the person in whose name a Registered Security is registered in the Debt Security Register.
"Registered Security" means any Debt Security registered as to principal and interest in the Debt Security Register.
"Registrar" has the meaning set forth in Section 2.07(a).
"Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness.
"Responsible Officer", when used with respect to the Trustee, means any officer within the corporate trust department of the Trustee, including any Vice President, any Assistant Vice President, any trust officer or any other officer of the Trustee performing functions similar to those performed by the persons who at the time shall be such officers, and any other officer of the Trustee to whom corporate trust matters are referred because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" has the meaning specified in Section 4.10.
"Restricted Subsidiary" means each Subsidiary of the Company other than the Unrestricted Subsidiaries.
"Sale/Leaseback Transaction" means an arrangement with any person other than the Company or a Restricted Subsidiary providing for the leasing by the Company or any Restricted Subsidiary of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such person in contemplation of such leasing; provided, however, that any subsequent transfer of any such arrangement between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, whereby the Company or a Restricted Subsidiary ceases to be the lessor under such arrangement, shall be deemed to constitute a Sale/Leaseback Transaction at such time.
"Securities Act" means the United States Securities Act of 1933, as amended.
"Senior Indebtedness" means, as to any series of Debt Securities subordinated pursuant to the provisions of Article XII, (a) the Bank Indebtedness (b) any and all amounts payable by the Company under or with respect to (i) the 8-7/8% Senior Secured Second Priority Notes due 2001 of the Company, (ii) the guarantee obligations of the Company relating to the Senior Secured First Priority Notes of Methanex New Zealand Limited and (iii) Indebtedness pursuant to Bonds C-1 and C-2 issued to Credit Suisse, Singapore Branch and Bank of New Zealand, respectively, pursuant to the Master Trust Indenture, dated November 15, 1993,
between the Company and Montreal Trust Company as trustee and (c) any other Indebtedness of the Company identified as Senior Indebtedness in the resolution of the Board of Directors and accompanying Officers' Certificate or supplemental Indenture setting forth the terms, including as to subordination, of such series.
"Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the United States Securities and Exchange Commission.
"Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).
"Subordinated Debt Securities" has the meaning specified in Section 12.01.
"Subordinated Obligations" means any Indebtedness of the Company (whether outstanding on the date of this Indenture or thereafter Incurred) which is subordinate or junior in right of payment to the applicable Debt Securities pursuant to a written agreement.
"Subsidiary" means, in respect of any person, any corporation, limited liability company, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such person, (ii) such person and one or more Subsidiaries of such person or (iii) one or more Subsidiaries of such person.
"Taxes" has the meaning specified in Section 4.07.
"Trustee" initially means United States Trust Company of New York and any other person or persons appointed as such from time to time pursuant to Section 7.08, and, subject to the provisions of Article VII, includes its or their successors and assigns. If at any time there is more than one such person, "Trustee" as used with respect to the Debt Securities of any series shall mean the Trustee with respect to the Debt Securities of that series.
"Trust Indenture Act" means the United States Trust Indenture Act of 1939, as in force at the date of this Indenture as originally executed and, to the extent required by law, as amended.
"United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
"United States Alien" means any person who, for United States Federal income tax purposes, is a foreign corporation, a nonresident alien individual, a nonresident alien fiduciary of a foreign estate or trust, or a foreign partnership one or more members of which is, for United States Federal income tax purposes, a foreign corporation, a nonresident alien individual or a nonresident alien fiduciary of a foreign estate or trust.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) each Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any newly acquired or newly formed Subsidiary of the Company (other than a Restricted Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that immediately after giving effect to such designation no Default shall have occurred and be continuing. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions.
"Unrestricted Subsidiary Transaction" has the meaning specified in Section 4.12(a).
"U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the Trust Indenture Act which are incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms have the following meanings:
"indenture securities" means the Debt Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other obligor on the Debt Securities.
All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, reference to another statute or defined by rules of the United States Securities and Exchange Commission have the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP and all accounting determinations and computations based on GAAP shall be determined and computed in conformity with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural include the singular; and
(6) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP.
ARTICLE II
Debt Securities
SECTION 2.01. Forms Generally. The Debt Securities and Coupons, if any, of each series shall be in substantially the form established without the approval of any Holder by or pursuant to a resolution of the Board of Directors or in one or more Indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as the Company may deem appropriate (and, if not contained in a supplemental Indenture entered into in accordance with Article IX, as are not prohibited by the provisions of this Indenture) or as may be required or appropriate to comply with any law or with any rules made pursuant thereto or with any rules of any securities exchange on which such series of Debt Securities may be listed, or to conform to general usage, or as may, consistently herewith, be determined by the officers executing such Debt Securities and Coupons, as evidenced by their execution of the Debt Securities and Coupons.
The definitive Debt Securities of each series and Coupons, if any, shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debt Securities and Coupons, as evidenced by their execution of such Debt Securities and Coupons.
Each Bearer Security and each Coupon shall bear a legend substantially to the following effect: "Any United States Person who holds this obligation will be subject to limitations under the United States Federal income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code."
SECTION 2.02. Form of Trustee's Certificate of Authentication. The Trustee's Certificate of Authentication on all Debt Securities authenticated by the Trustee shall be in substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities of the series designated therein referred to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW YORK,
As Trustee
By _______________________________
Authorized Signatory
SECTION 2.03. Principal Amount; Issuable in Series. The aggregate principal amount of Debt Securities which may be issued, executed, authenticated, delivered and outstanding under this Indenture is unlimited.
The Debt Securities may be issued in one or more series. There shall be established, without the approval of any Holders, in or pursuant to a resolution of the Board of Directors and set forth in an Officers' Certificate, or established in one or more Indentures supplemental hereto, prior to the issuance of Debt Securities of any series any or all of the following:
(1) the title of the Debt Securities of the series (which shall distinguish the Debt Securities of the series from all other Debt Securities);
(2) any limit upon the aggregate principal amount of the Debt Securities of the series that may be authenticated and delivered under this Indenture (except for Debt Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debt Securities of the series pursuant to this Article II);
(3) the date or dates on which the principal and premium, if any, of the Debt Securities of the series are payable;
(4) the rate or rates (which may be fixed or variable) at which the Debt Securities of the series shall bear interest, if any, or the method of determining
such rate or rates, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable, or the method by which such date or dates will de determined, in the case of Registered Securities, the record dates for the determination of Holders thereof to whom such interest is payable, and the basis upon which interest will be calculated if other than that of a 360-day year of twelve thirty-day months;
(5) the place or places, if any, in addition to or instead of the Corporate Trust Office of the Trustee--(in the case of Registered Securities) or the principal London office of the Trustee (in the case of Bearer Securities), where the principal of, and premium, if any, and interest on, Debt Securities of the series shall be payable;
(6) the price or prices at which, the period or periods within which and the terms and conditions upon which Debt Securities of the series may be redeemed, in whole or in part, at the option of the Company or otherwise;
(7) whether Debt Securities of the series are to be issued as Registered Securities or Bearer Securities or both and, if Bearer Securities are to be issued, whether Coupons will be attached thereto, whether Bearer Securities of the series may be exchanged for Registered Securities of the series and the circumstances under which and the places at which any such exchanges, if permitted, may be made;
(8) if any Debt Securities of the series are to be issued as Bearer Securities or as one or more Global Securities representing individual Bearer Securities of the series, (x) whether the provisions of Section 3.02 and 4.06 or other provisions for payment of additional interest or tax redemptions shall apply and, if other provisions shall apply, such other provisions; (y) whether interest in respect of any portion of a temporary Bearer Security of the series (delivered pursuant to Section 2.08) payable in respect of any interest payment date prior to the exchange of such temporary Bearer Security for definitive Bearer Securities of the series shall be paid to any clearing organization with respect to the portion of such temporary Bearer Security held for its account and, in such event, the terms and conditions (including any certification requirements) upon which any such interest payment received by a clearing organization will be credited to the persons entitled to interest payable on such interest payment date; and (z) the terms upon which a temporary Bearer Security may be exchanged for one or more definitive Bearer Securities of the series;
(9) the obligation, if any, of the Company to redeem, purchase or repay Debt Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, and the price or prices at which and the period or periods within which and the terms and conditions upon which Debt Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligations;
(10) the terms, if any, upon which the Debt Securities of the series may be convertible into or exchanged for Common Stock, Preferred Stock (which may be represented by depositary shares), other Debt Securities or warrants for Common Stock, Preferred Stock or indebtedness or other securities of any kind of the Company or any other issuer or obligor and the terms and conditions upon which such conversion or exchange shall be effected, including the initial conversion or exchange price or rate, the conversion or exchange period and any other provision in addition to or in lieu of those described herein;
(11) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Debt Securities of the series shall be issuable;
(12) if the amount of principal of or any premium or interest on Debt Securities of the series may be determined with reference to an index or pursuant to a formula, the manner in which such amounts will be determined;
(13) if the principal amount payable at the Stated Maturity of Debt Securities of the series will not be determinable as of any one or more dates prior to such Stated Maturity, the amount which will be deemed to be such principal amount as of any such date for any purpose, including the principal amount thereof which will be due and payable upon any maturity other than the Stated Maturity or which will be deemed to be Outstanding as of any such date (or, in any such case, the manner in which such deemed principal amount is to be determined); and, if necessary, the manner of determining the equivalent thereof in the currency of the United States for purposes of the definition of Dollar Equivalent;
(14) any changes or additions to Article XI, including the addition of additional covenants that may be subject to the covenant defeasance option pursuant to Section 11.02(b)(ii);
(15) if other than such coin or Currency of the United States as at the time of payment is legal tender for payment of public and private debts, the
coin or Currency or currencies or units of two or more Currencies in which payment of the principal of, and premium, if any, and interest on, Debt Securities of the series shall be payable;
(16) if other than the principal amount thereof, the portion of the
principal amount of Debt Securities of the series which shall be payable
upon declaration of acceleration of the maturity thereof pursuant to
Section 6.01 or provable in bankruptcy pursuant to Section 6.02;
(17) the terms, if any, of the transfer, mortgage, pledge or assignment as security for the Debt Securities of the series of any properties, assets, moneys, proceeds, securities or other collateral, including whether certain provisions of the Trust Indenture Act are applicable and any corresponding changes to provisions of this Indenture as then in effect;
(18) any addition to or change in the Events of Default with respect to the Debt Securities of the series and any change in the right of the Trustee or the Holders to declare the principal of, and premium, if any, and interest on, such Debt Securities due and payable;
(19) if the Debt Securities of the series shall be issued in whole or in part in the form of a Global Security or Securities, the terms and conditions, if any, upon which such Global Security or Securities may be exchanged in whole or in part for other individual Debt Securities in definitive registered form; and the Depositary for such Global Security or Securities and the form of any legend or legends to be borne by any such Global Security or Securities in addition to or in lieu of the legend referred to in Section 2.15;
(20) any trustee other than the Trustee and, if other than the Trustee, any authenticating or paying agents, transfer agents or registrars;
(21) the applicability of, and any addition to or change in, the covenants and definitions then set forth in this Indenture or in the terms then set forth in Article IV, relating to limitations on Liens, Sale/Leaseback Transactions and Restricted Payments, Guarantees by Restricted Subsidiaries and limitations with respect to Unrestricted Subsidiaries;
(22) the applicability of, and any addition to or change in the covenants and definitions then set forth in this Indenture or in the terms then set forth in Article X, including conditioning any merger, conveyance, transfer or lease permitted by Article X upon the satisfaction of an indebtedness coverage standard by the Company and any resulting, surviving or transferee person;
(23) the terms, if any, of any guarantee of the payment of principal of, and premium, if any, and interest on, Debt Securities of the series and any corresponding changes to the provisions of this Indenture as currently in effect;
(24) the subordination, if any, of the Debt Securities of the series pursuant to Article XII and any changes or additions to Article XII;
(25) with regard to Debt Securities of the series that do not bear interest, the dates for certain required reports to the Trustee; and
(26) any other terms of the Debt Securities of the series (which terms shall not be prohibited by the provisions of this Indenture).
All Debt Securities of any one series and the Coupons, if any, appertaining thereto shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such resolution of the Board of Directors and as set forth in such Officers' Certificate or in any such Indenture supplemental hereto.
SECTION 2.04 Execution of Debt Securities. The Debt Securities and the Coupons, if any, shall be signed on behalf of the Company by its Chairman of the Board, a Vice Chairman, its President or a Vice President (or any other officer performing similar functions) and by its Secretary, an Assistant Secretary, a Treasurer or an Assistant Treasurer (or any other officer performing similar functions). Such signatures upon the Debt Securities and Coupons may be the manual or facsimile signatures of the present or any future such authorized officers and may be imprinted or otherwise reproduced on the Debt Securities and Coupons. The seal of the Company, if any, may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Debt Securities and Coupons.
Only such Debt Securities and Coupons as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, signed manually by the Trustee, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee upon any Debt Security or Coupon executed by the Company shall be conclusive evidence that the Debt Security or Coupon so authenticated has been duly authenticated and delivered hereunder.
In case any officer of the Company who shall have signed any of the Debt Securities or Coupons shall cease to be such officer before the Debt Securities or Coupons so signed shall have been authenticated and made available for delivery
by the Trustee, or disposed of by the Company, such Debt Securities or Coupons nevertheless may be authenticated and delivered or disposed of as though the person who signed such Debt Securities or Coupons had not ceased to be such officer of the Company; and any Debt Security or Coupon may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Debt Security or Coupon, shall be the proper officers of the Company, although at the date of such Debt Security or Coupon or of the execution of this Indenture any such person was not such officer.
SECTION 2.05. Authentication and Delivery of Debt Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Debt Securities, with appropriate Coupons, if any, of any series executed by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debt Securities and Coupons to the Company upon a Company Order. In authenticating such Debt Securities and Coupons, and accepting the additional responsibilities under this Indenture in relation to such Debt Securities and Coupons, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon:
(1) a copy of any resolution or resolutions of the Board of Directors, certified by the Secretary or Assistant Secretary of the Company, authorizing the terms of issuance of any series of Debt Securities and Coupons;
(2) an executed supplemental Indenture, if any;
(3) an Officers' Certificate; and
(4) an Opinion of Counsel prepared in accordance with Section 13.05 which shall also state:
(a) that the form of such Debt Securities and Coupons has been
established by or pursuant to a duly authorized resolution of the
Board of Directors or by a supplemental Indenture as permitted by
Section 2.01 in conformity with the provisions of this Indenture;
(b) that the terms of such Debt Securities and Coupons have been
established by or pursuant to a duly authorized resolution of the
Board of Directors or by a supplemental Indenture as permitted by
Section 2.03 in conformity with the provisions of this Indenture;
(c) that such Debt Securities and Coupons, when authenticated and made available for delivery by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability;
(d) that the Company has the corporate power to issue and execute such Debt Securities and Coupons and has duly taken all necessary corporate action with respect to such issuance and execution;
(e) that the issuance of such Debt Securities and Coupons will not contravene the charter or by-laws of the Company; and
(f) that authentication and delivery of such Debt Securities and Coupons and the execution and delivery of any supplemental Indenture will not violate the terms of this Indenture.
Such Opinion of Counsel need express no opinion as to whether a court in the United States would render a money judgment in a currency other than that of the United States.
The Trustee shall have the right to decline to authenticate and deliver any Debt Securities or Coupons under this Section 2.05 if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith by its board of directors or trustees, executive committee or a trust committee of directors, trustees or vice presidents, and being advised by counsel, shall determine that such action would expose the Trustee to personal liability to existing Holders.
The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Debt Securities and Coupons, if any, of any series. Unless limited by the terms of such appointment, an authenticating agent may authenticate Debt Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, paying agent or agent for service of notices and demands.
Unless otherwise provided in the form of Debt Security for any series, each Debt Security shall be dated the date of its authentication.
SECTION 2.06. Denomination of Debt Securities. Unless otherwise provided in the form of Debt Security for any series, the Debt Security of each series shall be issuable only as Registered Securities in such denominations as shall be specified or contemplated by Section 2.03. In the absence of any such specification with respect to the Debt Securities of any series, the Debt Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 2.07. Registration of Transfer and Exchange. (a) The Company shall keep or cause to be kept a register for each series of Registered Securities issued hereunder (hereinafter collectively referred to as the "Debt Security Register"), in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and the transfer of Registered Securities as in this Article II provided. At all reasonable times, the Debt Security Register shall be open for inspection by the Trustee. Subject to Section 2.15, upon due presentment for registration of transfer of any Registered Security at any office or agency to be maintained by the Company in accordance with the provisions of Section 4.02, the Company shall execute and the Trustee shall authenticate and make available for delivery in the name of the transferee or transferees a new Registered Security or Registered Securities of authorized denominations for a like aggregate principal amount. In no event may Registered Securities, including Registered Securities received in exchange for Bearer Securities, be exchanged for Bearer Securities.
Unless and until otherwise determined by the Company by resolution of the Board of Directors, the Debt Security Register shall be kept at the Corporate Trust Office of the Trustee and, for this purpose, the Trustee shall be designated "Registrar."
Registered Securities of any series (other than a Global Security, except as set forth below) may be exchanged for a like aggregate principal amount of Registered Securities of the same series of other authorized denominations. Subject to Section 2.15, Registered Securities to be exchanged shall be surrendered at the office or agency to be maintained by the Company as provided in Section 4.02, and the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor the Registered Security or Registered Securities which the Holder making the exchange shall be entitled to receive.
At the option of the Holder of Bearer Securities of any series, except as otherwise specified as contemplated by Section 2.03(8) or 2.03(9) with respect to a
Global Security representing Bearer Securities, Bearer Securities of such series may be exchange for Registered Securities (if the Debt Securities of such series are issuable as Registered Securities) or Bearer Securities of the same series, of any authorized denomination or denominations, of like tenor and aggregate principal amount, upon surrender of the Bearer Securities to be exchanged at the office or agency of the Company maintained for such purpose, with all unmatured Coupons and all matured Coupons in Default thereto appertaining; provided, however, that delivery of a Bearer Security shall occur only outside the United States. If such Holder is unable to produce any such unmatured Coupon or Coupons or matured Coupon or Coupons in Default, such exchange may be effected if such Holder's Bearer Securities are accompanied by payment in funds acceptable to the Company and the Trustee in an amount equal to the face amount of such missing Coupon or Coupons, or the surrender of such missing Coupon or Coupons may be waived by the Company and the Trustee if there shall be furnished to them such security or indemnity as they may require to save each of them and any paying agent harmless. If thereafter such Holder shall surrender to any paying agent any such missing Coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment; provided, however, that, except as otherwise provided in Section 2.12, interest represented by Coupons shall be payable only upon presentation and surrender of those Coupons at an office or agency located outside the United States.
Whenever any Debt Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Debt Securities that the Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, the exchange of Bearer Securities for Registered Securities will be subject to the provisions of United States income tax laws and regulations applicable to Debt Securities in effect at the time of such exchange.
(b) All Registered Securities presented or surrendered for registration of transfer, exchange or payment shall (if so required by the Company, the Trustee or the Registrar) be duly endorsed or be accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company, the Trustee and the Registrar, duly executed by the Registered Holder or his attorney duly authorized in writing.
All Debt Securities issued in exchange for or upon transfer of Debt Securities shall be the valid obligations of the Company, evidencing the same debt,
and (except as expressly provided otherwise herein) entitled to the same benefits under this Indenture as the Debt Securities surrendered for such exchange or transfer.
No service charge shall be made for any exchange or registration of transfer of Debt Securities (except as provided by Section 2.09), but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, other than those expressly provided in this Indenture to be made at the Company's own expense or without expense or without charge to the Holders.
The Company shall not be required (a) to issue, register the transfer of
or exchange any Debt Securities for a period of 15 days before the day of any
mailing of notice of redemption of Debt Securities of the same series or (b) to
register the transfer of or exchange any Debt Securities selected, called or
being called for redemption; provided, however, that, if specified pursuant to
Section 2.03, any Bearer Securities of any series that are exchangeable for
Registered Securities and that are called for redemption pursuant to Section
3.02 may, to the extent permitted by applicable law, be exchanged for one or
more Registered Securities of such series during the period preceding the
redemption date therefor.
In addition, the Company shall not be required to issue, register the transfer of or exchange any Debt Securities for a period of 15 days before any interest payment date.
Prior to the due presentation for registration of transfer of any Debt Security, the Company, the Trustee, any paying agent or any Registrar may deem and treat the person in whose name a Debt Security is registered as the absolute owner of such Debt Security for the purpose of receiving payment of principal of, and premium, if any, and interest on, such Debt Security and for all other purposes whatsoever, whether or not such Debt Security is overdue, and none of the Company, the Trustee, any paying agent or Registrar shall be affected by notice to the contrary.
None of the Company, the Trustee, any agent of the Trustee, any paying agent or any Registrar will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
SECTION 2.08. Temporary Debt Securities. Pending the preparation of definitive Debt Securities of any series, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debt Securities (printed, lithographed, photocopied, typewritten or otherwise produced) of any authorized
denomination, and substantially in the form of the definitive Debt Securities in lieu of which they are issued, in registered form or, if authorized, in bearer form with one or more Coupons or without Coupons, and with such omissions, insertions and variations as may be appropriate for temporary Debt Securities and Coupons, all as may be determined by the Company with the concurrence of the Trustee. Temporary Debt Securities and Coupons may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Debt Security shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Debt Securities.
If temporary Debt Securities of any series are issued, the Company will cause definitive Debt Securities of such series to be prepared without unreasonable delay. Except as otherwise specified as contemplated by Section 2.03(8)(z) with respect to a series of Debt Securities issuable as Bearer Securities or as one or more Global Securities representing individual Bearer Securities of the series, (a) after the preparation of definitive Debt Securities of such series, the temporary Debt Securities of such series shall be exchangeable for definitive Debt Securities of such series upon surrender of the temporary Debt Securities of such series at the office or agency of the Company at a Place of Payment for such series, without charge to the Holder thereof, except as provided in Section 2.07 in connection with a transfer and except that a person receiving definitive Bearer Securities shall bear the cost of insurance, postage, transportation and the like unless otherwise specified pursuant to Section 2.03, and (b) upon surrender for cancellation of any one or more temporary Debt Securities of any series (accompanied by any unmatured Coupons appertaining thereto), the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Debt Securities of the same series of authorized denominations and of like tenor; provided, however, that no definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided, further, however, that delivery of a Global Security representing individual Bearer Securities or a Bearer Security shall occur only outside the United States. Until so exchange, temporary Debt Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Debt Securities of such series, except as otherwise specified as contemplated by Section 2.03(8)(y) with respect to the payment of interest on Global Securities in temporary form.
Unless otherwise specified pursuant to Section 2.03, the Company will execute and deliver each definitive Global Security representing individual Bearer Securities and each Bearer Security to the Trustee as its principal office in London or such other place outside the United States specified pursuant to Section 2.03.
Upon any exchange of a portion of a temporary Global Security for a definitive Global Security or for the individual Debt Securities represented thereby pursuant to Section 2.07 or this Section 2.08, the temporary Global Security shall be endorsed by the Trustee to reflect the reduction of the principal amount evidenced thereby, whereupon the principal amount of such temporary Global Security shall be reduced for all purposes by the amount so exchanged and endorsed.
SECTION 2.09. Mutilated, Destroyed, Lost or Stolen Debt Securities, If (i) any mutilated Debt Security or any mutilated Coupon with the Coupon Security to which it appertains (and all unmatured Coupons attached thereto) is surrendered to the Trustee at the Corporate Trust Office of the Trustee (in the case of Registered Securities) or at its principal London office (in the case of Bearer Securities) or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Debt Security or any Coupon, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them and any paying agent harmless, and neither the Company nor the Trustee receives notice that such Debt Security or Coupon has been acquired by a bona fide purchaser, then the Company shall execute and, upon a Company Order, the Trustee shall authenticate and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Debt Security or in exchange for such mutilated, destroyed, lost or stolen Coupon and the Coupon Security (together with all unmatured Coupons attached thereto) to which such Coupon appertained, a new Debt Security of the same series of like tenor, form, terms and principal amount, bearing a number not contemporaneously Outstanding, and, in the case of a Coupon Security, with such Coupons attached thereto that neither gain nor loss in interest shall result from such exchange or substitution. Upon the issuance of any substituted Debt Security, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debt Security or Coupon which has matured or is about to mature or which has been called for redemption shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substituted Debt Security or Coupon, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debt Security or Coupon) if the applicant for such payment shall furnish the Company and the Trustee with such security or indemnity as either may require to save it harmless from all risk, however remote, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Debt Security or Coupon and of the ownership thereof; provided, however, that payment of principal of, and premium, if any, and interest on, Bearer Securities or Coupons shall, except as otherwise provided in Section 2.12, be payable only at an office or agency located outside the United States.
Every substituted Debt Security of any series, with its Coupons, if any, issued pursuant to the provisions of this Section 2.09 by virtue of the fact that any Debt Security or Coupon is destroyed, lost or stolen shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debt Security or Coupon shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debt Securities of that series and Coupons, if any, duly issued hereunder. All Debt Securities and Coupons, if any, shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debt Securities or Coupons, and shall preclude any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.
SECTION 2.10. Cancellation of Surrendered Debt Securities. All Debt Securities surrendered for payment, redemption, registration of transfer or exchange and all Coupons surrendered for payment or exchange shall, if surrendered to the Company or any paying agent or a Registrar, be delivered to the Trustee for cancellation by it, or if surrendered to the Trustee, shall be canceled by it, and no Debt Securities or Coupons shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All canceled Debt Securities and Coupons held by the Trustee shall be destroyed (subject to the record retention requirements of the Exchange Act) and certification of their destruction delivered to the Company, unless otherwise directed. On request of the Company, the Trustee shall deliver to the Company canceled Debt Securities and Coupons held by the Trustee. If the Company shall acquire any of the Debt Securities or Coupons, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented thereby unless and until the same are delivered or surrendered to the Trustee for cancellation. The Company may not issue new Debt Securities or Coupons to replace Debt Securities or Coupons it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11 Provisions of the Indenture and Debt Securities for the Sole Benefit of the Parties and the Holders. Nothing in this Indenture or in the Debt Securities or Coupons, expressed or implied, shall give or be construed to give to any person, other than the parties hereto, the Holders or any Registrar or paying agent, any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all its covenants, conditions and provisions being for the sole benefit of the parties hereto, the Holders and Registrar and paying agents.
SECTION 2.12. Payment of Interest; Interest Rights Preserved. (a) Interest
on any Registered Security that is payable and is punctually paid or duly
provided for on any interest payment date shall be paid to the person in whose
name such Registered Security is registered at the close of business on the
regular record date for such interest notwithstanding the cancellation of such
Registered Security upon any transfer or exchange subsequent to the regular
record date. In case a Coupon Security of any series is surrendered in exchange
for a Registered Security of such series after the close of business (at an
office or agency in a Place of Payment for such series) on any regular record
date and before the opening of business (at such office or agency) on the next
succeeding interest payment date, such Coupon Security shall be surrendered
without the coupon relating to such interest payment date and interest will not
be payable on such interest payment date in respect of the Registered Security
issued in exchange for such coupon Security, but will be payable only to the
Holder of such coupon when due in accordance with the provisions of this
Indenture. Payment of interest on Registered Securities shall be made at the
Corporate Trust Office of the Trustee (except as otherwise specified pursuant to
Section 2.03) or, at the option of the Company, by check mailed to the address
of the person entitled thereto as such address shall appear in the Debt Security
Register or, if provided pursuant to Section 2.03 and in accordance with
arrangements satisfactory to the Trustee, at the option of the Registered Holder
by wire transfer to an account designated by the Registered Holder.
(b) No interest shall be payable with respect to a Bearer Security or
Coupon unless such certification requirements as are specified pursuant to
Section 2.03(8)(y) are satisfied with respect to such Bearer Security or Coupon.
Interest on any Coupon Security that is payable and is punctually paid or duly
provided for on any interest payment date shall be paid to the Holder of the
Coupon that has matured on such interest payment date upon surrender of such
Coupon on or after such interest payment date at the principal London office of
the Trustee or at such other Place of Payment outside the United States
specified pursuant to Section 2.03.
Interest on any Bearer Security (other than a Coupon Security) that is payable and is punctually paid or duly provided for on any interest payment date shall be paid to the Holder of the Bearer Security upon presentation of such Bearer Security and notation thereon on or after such interest payment date at the principal London office of the Trustee or at such other Place of Payment outside the United States specified pursuant to Section 2.03.
Unless otherwise specified pursuant to Section 2.03, at the direction of the Holder of any Bearer Security or Coupon payable in Dollars, and subject to applicable laws and regulations, payments in respect of such Bearer Security or
Coupon will be made by check drawn on a bank in New York, New York or, in accordance with arrangements satisfactory to the Trustee, by wire transfer to a Dollar account maintained by such Holder with a bank outside the United States. If such payment at the offices of all paying agents outside the United States becomes illegal or is effectively precluded because of the imposition of exchange controls or similar restrictions on the full payment or receipt of such amounts in Dollars, then, to the extent permitted by United States tax law, the Company will appoint an office or agent in the United States at which such payment may be made. Unless otherwise specified pursuant to Section 2.03, at the direction of the Holder of any Bearer Security or Coupon payable in a Foreign Currency, payment on such Bearer Security or Coupon will be made by a check drawn on a bank outside the United States or, in accordance with arrangements satisfactory to the Trustee, by wire transfer to an appropriate account maintained by such Holder outside the United States. Except as provided in this paragraph, no payment on any Bearer Security or Coupon will be made by mail to an address in the United States or by transfer to an account in the United States.
(c) Subject to the provisions of this Section 2.12 and Section 2.17, each Debt Security of a particular series delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any Debt Security of the same series shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debt Security.
SECTION 2.13. Securities Denominated in Foreign Currencies. (a) Except as otherwise specified pursuant to Section 2.03 for Bearer Securities of any series, payment of the principal of, and premium, if any, and interest on, Bearer Securities of such series denominated in any Currency will be made in such Currency.
(b) Except as otherwise specified pursuant to Section 2.03 for Registered Securities of any series, payment of the principal of, and premium, if any, and interest on, Registered Securities of such series will be made in Dollars.
(c) For the purposes of calculating the principal amount of Debt Securities of any series denominated in a Foreign Currency for any purpose under this Indenture, the principal amount of such Debt Securities at any time Outstanding shall be deemed to be the Dollar Equivalent of such principal amount as of the date of any such calculation.
In the event any Foreign Currency in which any payment with respect to any series of Debt Securities may be made ceases to be a freely convertible Currency on United States currency markets, for any date thereafter on which payment of principal of, or premium, if any, or interest on, the Debt Securities of a
series is due, the Company shall select the Currency of payment for use on such date, all as provided in the Debt Securities of such series. In such event, the Company shall, as provided in the Debt Securities of such series, notify the Trustee in writing of the Currency which it has selected to constitute the funds necessary to meet the Company's obligations on such payment date and of the amount of such Currency to be paid. Such amount shall be determined as provided in the Debt Securities of such series. The payments to the Trustee with respect to such payment date shall be made by the Company solely in the Currency so selected.
SECTION 2.14. Wire Transfers. Notwithstanding any other provision to the contrary in this Indenture, the Company may make any payments of monies required to be deposited with the Trustee on account of principal of, or premium, if any, or interest on, the Debt Securities (whether pursuant to optional or mandatory redemption payments, interest payments or otherwise) by wire transfer in immediately available funds to an account designated by the Trustee before the date such moneys are to be paid to the Holders of the Debt Securities in accordance with the terms hereof.
SECTION 2.15. Securities Issuable in the Form of a Global Security. (a) If the Company shall establish pursuant to Sections 2.01 and 2.03 that the Debt Securities of a particular series are to be issued in whole or in part in the form of one or more Global Securities, then the Company shall execute and the Trustee or its agent shall, in accordance with Section 2.05, authenticate and make available for delivery, such Global Security or Securities, which (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, the Outstanding Debt Securities of such series to be represented by such Global Security or Securities, or such portion thereof as the Company shall specify in an Officers' Certificate, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or its nominee, (iii) shall be delivered by the Trustee or its agent to the Depositary or pursuant to the Depositary's instruction and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for the individual Debt Securities represented hereby, this Global Security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary," or such other legend as may then be required by the Depositary for such Global Security or Securities.
(b) Notwithstanding any other provision of this Section 2.15 or of Section 2.07 to the contrary, and subject to the provisions of paragraph (c) below, unless the terms of a Global Security expressly permit such Global Security to be exchanged in whole or in part for definitive Debt Securities in registered form, a
Global Security may be transferred, in whole but not in part and in the manner provided in Section 2.07, only by the Depositary to a nominee of the Depositary for such Global Security, or by a nominee of the Depositary to the Depositary or another nominee of the Depositary, or by the Depositary or a nominee of the Depositary to a successor Depositary for such Global Security selected or approved by the Company, or to a nominee of such successor Depositary.
(c) (i) If at any time the Depositary for a Global Security or Securities notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or Securities or if at any time the Depositary for the Debt Securities for such series shall no longer be eligible or in good standing under the Exchange Act or other applicable statute, rule or regulation, the Company shall appoint a successor Depositary with respect to such Global Security or Securities. If a successor Depositary for such Global Security or Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company shall execute, and the Trustee or its agent, upon receipt of a Company Order for the authentication and delivery of such individual Debt Securities of such series in exchange for such Global Security or Securities, will authenticate and make available for delivery, individual Debt Securities of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Security or Securities, and make available for delivery such individual Debt Securities in exchange for such Global Security or Securities.
(ii) The Company may at any time and in its sole discretion determine that the Debt Securities of any series or portion thereof issued or issuable in the form of one or more Global Securities shall no longer be represented by such Global Security or Securities. In such event the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Debt Securities of such series in exchange in whole or in part for such Global Security or Securities, will authenticate and make available for delivery individual Debt Securities of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the aggregate principal amount of such series or portion thereof of such Global Security or Securities, and make available for delivery such individual Debt Securities in exchange for such Global Security or Securities.
(iii) If specified by the Company pursuant to Sections 2.01 and 2.03 with respect to Debt Securities issued or issuable in the form of a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for individual Debt Securities of such series of like tenor and terms in definitive form on such terms as are acceptable to the Company, the Trustee and such Depositary. Thereupon the Company shall execute, and the Trustee or its
agent upon receipt of a Company Order for the authentication and delivery of definitive Debt Securities of such series shall authenticate and make available for delivery, without service change, (1) to each person specified by such Depositary a new Debt Security or Securities of the same series of like tenor and terms and of any authorized denomination as requested by such person in aggregate principal amount equal to and in exchange for such person's beneficial interest in the Global Security; and (2) to such Depositary a new Global Security of like tenor and terms and in an authorized denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Debt Securities delivered to Holders thereof.
(iv) In any exchange provided for in any of the preceding three paragraphs, the Company will execute and the Trustee or its agent will authenticate and make available for delivery individual Debt Securities. In case a Coupon Security of any series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in a Place of Payment for such series) on any special record date and before the opening of business (at such office or agency) on the related proposed date of payment of Defaulted Interest, such Coupon Security shall be surrendered without the Coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Coupon Security, but will be payable only to the Holder of such Coupon when due in accordance with the provisions of this Indenture. Upon the exchange of the entire principal amount of a Global Security for Individual Debt Securities, such Global Security shall be canceled by the Trustee or its agent. Except as provided in the preceding paragraph, Registered Securities issued in exchange for a Global Security pursuant to this Section 2.15 shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or the Registrar. The Trustee or the Registrar shall make available for delivery such Registered Securities to the persons in whose names such Registered Securities are so registered.
(v) Payments in respect of the principal of an interest on any Debt Securities registered in the mane of the Depositary or its nominee will be payable to the Depositary or such nominee in its capacity as the registered owner of such Global Security. The Company and the Trustee may treat the person in whose names the Debt Securities, including the Global Security, are registered as the owner thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. None of the Company, the Trustee, any Registrar, the paying agent or any agent of the Company or the Trustee will have any responsibility or liability for (a) any aspect of the records relating to or payments made on account of the beneficial ownership interests of the Global Security by the Depositary or its nominee
or any of the Depositary's direct or indirect participants, or for maintaining, supervising or reviewing any records of the Depositary, its nominee or any of its direct or indirect participants relating to the beneficial ownership interests of the Global Security, (b) the payments to the beneficial owners of the Global Security of amounts paid to the Depositary or its nominee, or (c) any other matter relating to the actions and practices of the Depositary, its nominee or any of its direct or indirect participants. None of the Company, the Trustee or any such agent will be liable for any delay by the Depositary, its nominee, or any of its direct or indirect participants in identifying the beneficial owners of the Debt Securities, and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Depositary or its nominee for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Debt Securities to be issued).
The Trustee shall make available for delivery individual Bearer Securities issued in exchange for a Global Security pursuant to this Section 2.15 to the persons and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee; provided, however, that individual Bearer Securities shall be delivered in exchange for a Global Security only in accordance with the procedures as may be specified pursuant to Section 2.03.
Notwithstanding the foregoing, the exchange of Bearer Securities for Registered Securities will be subject to the provisions of United States income tax laws and regulations applicable to debt securities in effect at the time of such exchange.
SECTION 2.16. Medium Term Securities. Notwithstanding any contrary provision herein, if all Debt Securities of a series are not to be originally issued at one time, it shall not be necessary for the Company to deliver to the Trustee an Officers' Certificate, resolutions of the Board of Directors, supplemental Indenture, Opinion of Counsel or written order or any other document otherwise required pursuant to Section 2.01, 2.03, 2.05 or 13.05 at or prior to the time of authentication of each Debt Security of such series if such documents are delivered to the Trustee or its agent at or prior to the authentication upon original issuance of the first such Debt Security of such series to be issued; provided, however, that any subsequent request by the Company to the Trustee to authenticate Debt Securities of such series upon original issuance shall constitute a representation and warranty by the Company that, as of the date of such request, the statements made in the Officers' Certificate delivered pursuant to Section 2.05 or 13.05 shall be true and correct as if made on such date; provided further, however, that, with respect to Debt Securities of a series which are not to be issued at one time, the Trustee shall be entitled to receive
such Opinion of Counsel only once at or prior to the time of the first authentication of Debt Securities of such series and the Opinion of Counsel described above shall state:
(a) that, when the terms of such Debt Securities shall have been established pursuant to a written order of the Company or pursuant to such procedures as may be specified from time to time by a written order of the Company, all as contemplated by and in accordance with a resolution of the Board of Directors or an Officers' Certificate pursuant to a resolution of the Board of Directors or indenture supplemental hereto, as the case may be, such terms will have been established in conformity with the provisions of this Indenture; and
(b) that such Debt Securities, when (i) executed by the Company, (ii) completed, authenticated and made available for delivery by the Trustee in accordance with this Indenture, (iii) issued and delivered by the Company and (iv) paid for, all as contemplated by and in accordance with the aforesaid written order of the Company or specified procedures, as the case may be, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability.
A Company Order delivered by the Company to the Trustee in the circumstances set forth in the preceding paragraph, may provide that Debt Securities which are the subject thereof will be authenticated and made available for delivery by the Trustee or its agent on original issue from time to time upon the telephonic or written order of persons designated in such written order (any such telephonic instructions to be promptly confirmed in writing by such person) and that such persons are authorized to determine, consistent with the Officers' Certificate, supplemental Indenture or resolution of the Board of Directors relating to such written order, such terms and conditions of such Debt Securities as are specified in such Officers' Certificate, supplemental Indenture or such resolution.
SECTION 2.17. Defaulted Interest. (a) Any interest on any Debt Security of a particular series which is payable, but is not punctually paid or duly provided for, on the dated and in the manner provided in the Debt Securities of such series and in this Indenture (herein called "Defaulted Interest") shall, if such Debt Security is a Registered Security, forthwith cease to be payable to the Registered Holder thereof on the relevant record date by virtue of having been such Registered
Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause(i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Registered Securities of such series are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Registered Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage pre-paid, to each Holder thereof at his address as it appears in the Debt Security Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been so mailed, such Defaulted Interest shall be paid to the persons in whose names the Registered Securities of such series are registered at the close of business on such special record date. In case a Coupon Security of any such series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in Place of Payment for such series) on any special record date and before the opening of business (at such office or agency) on the related proposed date of payment of Defaulted Interest, such Coupon Security shall be surrendered without the Coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Coupon Security, but will be payable only to the Holder of such Coupon when due in accordance with the provisions of this Indenture.
(ii) The Company may make payment of any Defaulted Interest on the Registered Securities of such series in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Registered
Securities of such series may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.
(b) Any Defaulted Interest payable in respect of Bearer Securities of any series shall be payable pursuant to such procedures as may be satisfactory to the Trustee in such manner that there is no discrimination between the Holders of Registered Securities (if any) and Bearer Securities of such series, and notice of the payment date therefor shall be given by the Trustee, in the name and at the expense of the Company, in the manner provided in Section 13.03 not more than 25 days and not less than 20 days prior to the date of the proposed payment.
SECTION 2.18. Judgments. The Company may provide pursuant to Section 2.03 for Debt Securities of any series that (a) the obligation, if any, of the Company to pay the principal of, and premium, if any, and interest on, the Debt Securities of any series in a Foreign Currency or Dollars (the "Designated Currency") as may be specified pursuant to Section 2.03 is of the essence and agrees that, to the fullest extent possible under applicable law, judgments in respect of Debt Securities of such series shall be given in the Designated Currency; (b) the obligation of the Company to make payments in the Designated Currency of the principal of, and premium, if any, and interest on, such Debt Securities shall, notwithstanding any payment in any other Currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the Designated Currency that the Holder receiving such payment may, in accordance with normal banking procedures, purchase with the sum paid in such other Currency (after any premium and cost of exchange) on the Business Day in the country of issue of the Designated Currency or in the international banking community (in the case of a composite currency) immediately following the day on which such Holder receives such payment; (c) if the amount in the Designated Currency that may be so purchased for any reason falls short of the amount originally due, the Company shall pay such additional amounts as may be necessary to compensate for such shortfall; and (d) any obligation of the Company not discharged by such payment shall be due as a separate and independent obligation and, until discharged as provided herein, shall continue in full force and effect.
SECTION 2.19. CUSIP Numbers. The Company in issuing the Debt Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debt Securities or as contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Debt Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE III
Redemption of Debt Securities
SECTION 3.01. Applicability of Article. The provisions of this Article shall be applicable to the Debt Securities of any series which are redeemable except as otherwise specified as contemplated by Section 2.03 for Debt Securities of such series.
SECTION 3.02. Tax Redemption; Special Tax Redemption. (a) Unless otherwise
specified pursuant to Section 2.03, Bearer Securities of any series may be
redeemed at the option of the Company in whole, but not in part, at any time,
on giving not less than 30 or more than 60 days' notice in accordance with
Section 3.03 (which notice shall be irrevocable), at the redemption price
thereof (calculated without premium), if the Company has or will become
obligated to pay additional interest on such Bearer Securities pursuant to
Section 4.06 as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or any change in
the application or official interpretation of such laws, regulations or
rulings, which change or amendment becomes effective on or after the date on
which any person (including any person acting as underwriter, broker or dealer)
agrees to purchase any of such Bearer Securities pursuant to their original
issuance, and such obligation cannot be avoided by the Company taking
reasonable measures available to it; provided, however, that no such notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which the Company would be obligated to pay such additional interest were a
payment in respect of the Bearer Securities of that series then due. Prior to
the publication of any notice of redemption pursuant to this Section 3.02(a),
the Company shall deliver to the Trustee (i) an Officers' Certificate stating
that the Company is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions precedent to the right of the
Company so to redeem have occurred and (ii) an Opinion of Counsel to the effect
that the Company has or will become obligated to pay such additional interest
as a result of such change or amendment.
(b) Unless otherwise specified pursuant to Section 2.03, if the Company shall determine that any payment made outside the United States by the Company or any of its paying agents in respect of any Bearer Security or Coupon would, under any present or future laws or regulations of the United States, be
subject to any certification, documentation, information or other reporting
requirement of any kind, the effect of which requirement is the disclosure to
the Company, any paying agent or any governmental authority of the nationality,
residence or identity of a beneficial owner of such Bearer Security or Coupon
that is a United States Alien (other than such a requirement (i) that would not
be applicable to a payment made by the Company or any one of its paying agents
(A) directly to the beneficial owner or (B) to a custodian, nominee or other
agent of the beneficial owner, or (ii) that can be satisfied by such custodian,
nominee or other agent certifying to the effect that the beneficial owner is a
United States Alien; provided, however, that, in any case referred to in clause
(i)(B) or (ii), payment by the custodian, nominee or agent to the beneficial
owner is not otherwise subject to any such requirement), then the Company shall
elect either (x) to redeem such Bearer Security or Coupon in whole, but not in
part, at the redemption price thereof (calculated without premium) or (y) if the
conditions of the next succeeding paragraph are satisfied, to pay the additional
interest specified in such paragraph. The Company shall make such determination
as soon as practicable and publish prompt notice thereof (the "Determination
Notice"), stating the effective date of such certification, documentation,
information or other reporting requirement, whether the Company elects to redeem
the Bearer Security or Coupon or to pay the additional interest specified in the
next succeeding paragraph and (if applicable) the last date by which the
redemption of the Bearer Security or Coupon must take place, as provided in the
next succeeding sentence. If any Bearer Security or Coupon is to be redeemed
pursuant to this paragraph, the redemption shall take place on such date, not
later than one year after the publication of the Determination Notice, as the
Company shall specify by notice given to the Trustee at least 60 days before the
redemption date. Notice of such redemption shall be given by the Company to the
Holders of the Bearer Security or Coupon not more than 60 days or less than 30
days prior to the redemption date. Notwithstanding the foregoing, the Company
shall not so redeem the Bearer Security or Coupon if the Company shall
subsequently determine, not less than 30 days prior to the redemption date, that
subsequent payments on the Bearer Security or Coupon would not be subject to any
such certification, documentation, information or other reporting requirement,
in which case the Company shall publish prompt notice of such subsequent
determination, and any earlier redemption notice given pursuant to this
paragraph shall be revoked and of no further effect. Prior to the publication of
any Determination Notice pursuant to this paragraph, the Company shall deliver
to the Trustee (i) an Officers' Certificate stating that the Company is entitled
to make such determination and setting forth a statement of facts showing that
the conditions precedent to the obligation of the Company to redeem the Bearer
Security or Coupon or to pay the additional interest specified in the next
succeeding paragraph have occurred and (ii) an Opinion of Counsel to the effect
that such conditions have occurred.
If and so long as the certification, documentation, information or other reporting requirement referred to in the preceding paragraph would be fully satisfied by payment of a backup withholding tax or similar charge, the Company may elect to pay as additional interest such amounts as may be necessary so that every net payment made outside the United States following the effective date of such requirement by the Company or any of its paying agents in respect of any Bearer Security or Coupon of which the beneficial owner is a United States Alien (but without any requirement that the nationality, residence or identity of such beneficial owner be disclosed to the Company, any paying agent or any governmental authority), after deduction or withholding for or on account of such backup withholding tax or similar charge that (i) would not be applicable in the circumstances referred to in the parenthetical clause of the first sentence of the preceding paragraph or (ii) is imposed as a result of presentation of any such Bearer Security or Coupon for payment more than 15 days after the date on which such payment became due and payable or on which payment thereof was duly provided for, whichever occurred later), will not be less than the amount provided in any such Bearer Security or Coupon to be then due and payable. If the Company elects to pay additional interest pursuant to this paragraph, the Company shall have the right to redeem the Bearer Security or Coupon at any time in whole, but not in part, at the redemption price thereof (calculated without premium), subject to the provisions of the last three sentences of the immediately preceding paragraph. If the Company elects to pay additional interest pursuant to this paragraph and the condition specified in the first sentence of this paragraph should no longer be satisfied, then the Company shall redeem the Bearer Security or Coupon in whole, but not in part, at the redemption price thereof (calculated without premium), subject to the provisions of the last three sentences of the immediately preceding paragraph. Any redemption payments made by the Company pursuant to the two immediately preceding sentences shall be subject to the continuing obligation of the Company to pay additional interest pursuant to this paragraph. If the Company elects to, or is required to, redeem the Bearer Security or Coupon pursuant to this paragraph, it shall publish prompt notice thereof. If the Bearer Security or Coupon is to be redeemed pursuant to this paragraph, the redemption shall take place on such date, not later than one year after publication of the notice of redemption, as the Company shall specify by notice to the Trustee at least 60 days prior to the redemption date.
SECTION 3.03. Notice of Redemption; Selection of Debt Securities. In case the Company shall desire to exercise the right to redeem all or, as the case may be, any part of the Debt Securities of any series in accordance with their terms, the Company shall fix a date for redemption and shall, in the manner provided in Section 13.03, give notice of such redemption at least 30 and not more than 60 days prior to the date fixed for redemption to the Holders of Debt Securities of such series so to be redeemed as a whole or in part. The notice if given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the
Holder receives such notice. In any case, failure to give such notice or any defect in the notice to the Holder of any Debt Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debt Security of such series.
Each such notice of redemption shall specify (i) the date fixed for
redemption; (ii) the redemption price at which Debt Securities of such series
are to be redeemed; (iii) the Place or Places of Payment that payment will be
made upon presentation and surrender of such Debt Securities; (iv) that any
interest accrued to the date fixed for redemption will be paid as specified in
said notice; (v) that the redemption is for a sinking fund payment (if
applicable); (vi) that, unless otherwise specified in such notice, Coupon
Securities of any series, if any, surrendered for redemption must be
accompanied by all Coupons maturing subsequent to the date fixed for
redemption, failing which the amount of any such missing Coupon or Coupons will
be deducted from the redemption price; (vii) if the Bearer Securities of any
series are to be redeemed and any Registered Securities of such series are not
to be redeemed, and if such Bearer Securities may be exchanged for Registered
Securities not subject to redemption on the applicable redemption date pursuant
to Section 2.15(c) or otherwise, the last date on which such exchanges may be
made; (viii) that, unless the Company defaults in making such redemption
payment or unless the Debt Securities of that series are subordinated pursuant
to the terms of Article XII and the paying agent is prohibited from making such
payment pursuant to the terms of this Indenture, that on and after said date
any interest thereon or on the portions thereof to be redeemed will cease to
accrue and, in the case of Original Issue Discount Securities, original issue
discount will cease to accrue; (ix) the terms of the Debt Securities of that
series pursuant to which the Debt Securities of that series are being redeemed;
(x) the CUSIP number or numbers, if any, printed on the Debt Securities of that
Series; and (xi) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice and printed on the
Debt Securities of that series. In case any Debt Security of a series is to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
date fixed for redemption, upon surrender of such Debt Security, a new Debt
Security or Debt Securities of that series in principal amount equal to the
unredeemed portion thereof, and in the case of a Bearer Security with
appropriate Coupons, if any, will be issued.
At least 60 days before the redemption date (unless the Trustee consents to a shorter period), the Company shall give notice to the Trustee in writing of the redemption date, the principal amount of Debt Securities to be redeemed and the series and terms of the Debt Securities pursuant to which such redemption will occur. Such notice shall be accompanied by an Officers' Certificate and an Opinion
of Counsel from the Company to the effect that such redemption will comply with the conditions herein.
Prior to the redemption date for any Registered Securities, the Company shall deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) an amount of money in the Currency in which such Debt Securities are denominated (except as provided pursuant to Section 2.03) sufficient to pay the redemption price of such Registered Securities or any portions thereof that are to be redeemed on that date. In the case of any redemption pertaining to Bearer Securities or Coupon Securities, the Company shall, no later than such redemption date, deposit with the Trustee or with a paying agent (other than the Company) an amount of money in the Currency in which such Debt Securities are denominated (except as provided pursuant to Section 2.03) sufficient to pay the redemption price of such Bearer or Coupon Securities or any portion thereof that are to be redeemed on the redemption date.
If fewer than all the Debt Securities of a series are to be redeemed, the Trustee shall select the Debt Securities of that series or portions thereof (in multiples of $1,000 or the minimum authorized denomination for the Debt Securities of that series, whichever is greater) to be redeemed by lot or by such other method as the Trustee considers fair and appropriate (and in such manner as complies with applicable requirements of any securities exchange on which the Debt Securities of such series are listed). In any case where more than one Registered Security of such series is registered in the same name, the Trustee in its discretion may treat the aggregate principal amount so registered as if it were represented by one Registered Security of such series. The Trustee shall promptly notify the Company in writing of the Debt Securities selected for redemption and, in the case of any Debt Securities selected for partial redemption, the principal amount thereof to be redeemed. If any Debt Security called for redemption shall not be so paid upon surrender thereof on such redemption date, the principal of, premium, if any, and interest on such Debt Securities shall bear interest until paid from the redemption date at the rate borne by the Debt Securities of that series. Provisions of this Indenture that apply to Debt Securities called for redemption also apply to portions of Debt Securities called for redemption.
SECTION 3.04. Payment of Debt Securities Called for Redemption. If notice of redemption has been given as provided in Section 3.03, the Debt Securities or portions of Debt Securities of the series with respect to which such notice has been given shall become due and payable on the date and at the Place or Places of Payment stated in such notice at the applicable redemption price, together with any interest accrued to the date fixed for redemption, and on and after said date (unless the Company shall default in the payment of such Debt Securities at the
applicable redemption price, together with any interest accrued to said date) any interest on such Debt Securities or portions of such Debt Securities so called for redemption shall cease to accrue, any original issue discount in the case of Original Issue Discount Securities shall cease to accrue and any Coupons for such interest appertaining to any Coupon Securities to be redeemed, except to the extent described below, shall be void. On presentation and surrender of such Debt Securities at the Place or Places of Payment in said notice specified, the said Debt Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price, together with any interest accrued thereon to the date fixed for redemption.
If any Coupon Security surrendered for redemption shall not be accompanied by all Coupons appertaining thereto maturing on or after the applicable redemption date, the redemption price for such Coupon Security may be reduced by an amount equal to the face amount of all such missing Coupons. If thereafter the Holder of such Coupon shall surrender to any paying agent outside the United States any such missing Coupon in respect of which a deduction shall have been made from the redemption price, such Holder shall be entitled to receive the amount so deducted. The surrender of such missing Coupon or Coupons may be waived by the Company and the Trustee, if there be furnished to them such security or indemnity as they may require to save each of them and any paying agent harmless.
Any Debt Security that is to be redeemed only in part shall be surrendered at the Corporate Trust Office of the Trustee or such other office or agency of the Company as is specified pursuant to Section 2.03 (in the case of Registered Securities) and at the principal London office of the Trustee or such other office or agency of the Company outside the United States as is specified pursuant to Section 2.03 (in the case of Bearer Securities) with, if the Company, the Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Registrar and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing, and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Debt Security without service charge, a new Debt Security or Debt Securities of the same series, of like tenor and form, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Debt Security so surrendered, and, in the case of a Coupon Security, with appropriate Coupons attached; except that if a Global Security is so surrendered, the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Depositary for such Global Security, without service charge, a new Global Security in a denomination equal to and in exchange for the unredeemed portion of the principal of the Global Security so surrendered. In the case of a Debt Security providing appropriate space for such
notation, at the option of the Holder thereof, the Trustee, in lieu of delivering a new Debt Security or Debt Securities as aforesaid, may make a notation on such Debt Security of the payment of the redeemed portion thereof.
SECTION 3.05. Mandatory and Optional Sinking Funds. The minimum amount of any sinking fund payment provided for by the terms of Debt Securities of any series, resolution of the Board of Directors or a supplemental Indenture is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Debt Securities of any series, resolution of the Board of Directors or a supplemental Indenture is herein referred to as an "optional sinking fund payment."
In lieu of making all or any part of any mandatory sinking fund payment with respect to any Debt Securities of a series in cash, the Company may at its option (a) deliver to the Trustee Debt Securities of that series (together with the unmatured Coupons, if any, appertaining thereto) theretofore purchased or otherwise acquired by the Company or (b) receive credit for the principal amount of Debt Securities of that series which have been redeemed either at the election of the Company pursuant to the terms of such Debt Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Debt Securities, resolution or supplemental Indenture; provided, however, that such Debt Securities have not been previously so credited. Such Debt Securities shall be received and credited for such purpose by the Trustee at the redemption price specified in such Debt Securities, resolution or supplemental Indenture for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly.
SECTION 3.06. Redemption of Debt Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for any series of Debt Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, any resolution or supplemental Indenture, the portion thereof, if any, which is to be satisfied by payment of cash in the Currency in which the Debt Securities of such series are denominated (except as provided pursuant to Section 2.03) and the portion thereof, if any, which is to be satisfied by delivering and crediting Debt Securities of that series pursuant to this Section 3.06 (which Debt Securities, if not previously redeemed, will accompany such certificate) and whether the Company intends to exercise its right to make any permitted optional sinking fund payment with respect to such series. Such certificate shall also state that no Event of Default has occurred and is continuing with respect to such series. Such certificate shall be irrevocable and upon its delivery the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next
succeeding sinking fund payment date. Failure of the Company to deliver such certificate (or to deliver the Debt Securities and Coupons, if any, specified in this paragraph) shall not constitute a Default, but such failure shall require that the sinking fund payment due on the next succeeding sinking fund payment date for that series shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Debt Securities subject to a mandatory sinking fund payment without the option to deliver or credit Debt Securities as provided in this Section 3.06 and without the right to make any optional sinking fund payment, if any, with respect to such series.
Any sinking fund payment or payments (mandatory or optional) made in cash plus any unused balance or any preceding sinking fund payments made in cash which shall equal or exceed $100,000 (or a lesser sum if the Company shall so request) with respect to the Debt Securities of any particular series shall be applied by the Trustee on the sinking fund payment date on which such payment is made (or, if such payment is made before a sinking fund payment date, on the sinking fund payment date following the date of such payment) to the redemption of such Debt Securities at the Redemption Price specified in such Debt Securities, resolution or supplemental Indenture for operation of the sinking fund together with any accrued interest to the date fixed for redemption. Any sinking fund moneys not so applied or allocated by the Trustee to the redemption of Debt Securities shall be added to the next cash sinking fund payment received by the Trustee for such series and, together with such payment, shall be applied in accordance with the provisions of this Section 3.06. Any and all sinking fund moneys with respect to the Debt Securities of any particular series held by the Trustee on the last sinking fund payment date with respect to Debt Securities of such series and not held for the payment or redemption of particular Debt Securities shall be applied by the Trustee, together with other moneys, if necessary, to be deposited sufficient for the purpose, to the payment of the principal of the Debt Securities of that series at its Stated Maturity.
The Trustee shall select the Debt Securities to be redeemed upon such
sinking fund payment date in the manner specified in the last paragraph of
Section 3.03 and the Company shall cause notice of the redemption thereof to be
given in the manner provided in Section 3.03 except that the notice of
redemption shall also state that the Debt Securities are being redeemed by
operation of the sinking fund. Such notice having been duly given, the
redemption of such Debt Securities shall be made upon the terms and in the
manner stated in Section 3.04.
At least one Business Day before such sinking Fund payment date, the Company shall pay to the Trustee (or, if the Company is acting as it own paying agent, the Company shall segregate and hold in trust) in cash a sum in the Currency in which the Debt Securities of such series are denominated (except as provided pursuant to Section 2.03) equal to any interest accrued to the date fixed for
redemption of Debt Securities or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section 3.06.
The Trustee shall not redeem any Debt Securities of a series with sinking fund moneys or mail any notice of redemption of such Debt Securities by operation of the sinking fund for such series during the continuance of a Default in payment of interest on such Debt Securities or of any Event of Default (other than an Event of Default occurring as a consequence of this paragraph) with respect to such Debt Securities, except that if the notice of redemption of any such Debt Securities shall theretofore have been mailed in accordance with the provisions hereof, the Trustee shall redeem such Debt Securities if cash sufficient for that purpose shall be deposited with the Trustee for that purpose in accordance with the terms of this Article III. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such Default or Event of Default shall occur and any moneys thereafter paid into such sinking fund shall, during the continuance of such Default or Event of Default, be held as security for the payment of such Debt Securities; provided, however, that in case such Event of Default or Default shall have been cured or waived as provided herein, such moneys shall thereafter be applied on the next sinking fund payment date for such Debt Securities on which such moneys may be applied pursuant to the provisions of this Section 3.06.
ARTICLE IV
Particular Covenants of the Company
SECTION 4.01. Payment of Principal of, and Premium, if any, and Interest on, Debt Securities. The Company, for the benefit of each series of Debt Securities, will duly and punctually pay or cause to be paid the principal of, and premium, if any, and interest on, each of the Debt Securities and pay any Coupons at the place, at the respective times and in the manner provided herein, in the Debt Securities and in the Coupons. Each installment of interest on the Debt Securities may at the Company's option be paid by mailing checks for such interest payable to the person entitled thereto pursuant to Section 2.07(a) to the address of such person as it appears on the Debt Security Register. Any interest due on Coupon Securities on or before the Stated Maturity of the related Debt Security, other than additional interest, if any, payable as provided in Section 4.06 in respect of principal of, or premium, if any, on such a Debt Security, shall be payable only upon presentation and surrender of the several Coupons for such interest installments as are evidenced thereby as they severally mature.
Principal of, and premium, if any, and interest on Debt Securities of any series shall be considered paid on the date due if on such date the Trustee or any paying agent holds in accordance with this Indenture money sufficient to pay in the Currency in which the Debt Securities of such series are denominated (except as provided pursuant to Section 2.03) all principal, premium and interest then due and, in the case of Debt Securities subordinated pursuant to the terms of Article XII, the Trustee or such paying agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate specified therefor in the Debt Securities and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.
SECTION 4.02. Maintenance of Offices or Agencies for Registration of
Transfer, Exchange and Payment of Debt Securities. The Company will maintain in
each Place of Payment for any series of Debt Securities and Coupons, if any, an
office or agency where Debt Securities and Coupons of such series (but, except
as otherwise provided in Section 2.12, unless such Place of Payment is located
outside the United States, not Bearer Securities or Coupons) may be presented
or surrendered for payment, where Debt Securities of such series may be
surrendered for transfer or exchange and where notices and demands to or upon
the Company in respect of the Debt Securities and Coupons of such series and
this Indenture may be served. So long as any Bearer Securities of any series
remain outstanding, the Company will maintain for such purposes one or more
offices or agencies outside the United States in such city or cities specified
pursuant to Section 2.03 and, if any Bearer Securities are listed on a
securities exchange that requires an office or agency for the payment of
principal of, and premium, if any, or interest on, such Bearer Securities in a
location other than the location of an office or agency specified pursuant to
Section 2.03, the Company will maintain for such purposes an office or agency
in such location so long as any Bearer Securities are listed on such securities
exchange and such exchange so requires. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee (in the case of Registered
Securities) and at the principal London office of the Trustee (in the case of
Bearer Securities), and the Company hereby appoints the Trustee as its agent to
receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate different or additional offices or agencies to be maintained for such purposes (in or outside of
such Place of Payment), and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligations described in the preceding paragraph. The Company will give prompt written notice to the Trustee of any such additional designation or rescission of designation and any change in the location of any such different or additional office or agency.
SECTION 4.03. Appointment to Fill a Vacancy in the Office of Trustee. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.08, a Trustee, so that there shall at all times be a Trustee hereunder with respect to each series of Debt Securities.
SECTION 4.04. Duties of Paying Agents, etc. (a) The Company shall cause each paying agent, if any, other than the Trustee, to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 4.04.
(i) that it will hold all sums held by it as such agent for the payment of the principal of, and premium, if any, or interest on, the Debt Securities of any series and the payment of any related Coupons (whether such sums have been paid to it by the Company or by any other obligor on the Debt Securities or Coupons of such series) in trust for the benefit of the Holders of the Debt Securities and Coupons of such series;
(ii) that it will give the Trustee written notice of any failure by the Company (or by any other obligor on the Debt Securities or Coupons of such series) to make any payment of the principal of, and premium, if any, or interest on, the Debt Securities of such series or any payment on any related Coupons when the same shall be due and payable; and
(iii) that it will at any time during the continuance of an Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held by it as such agent.
(b) If the Company shall act as its own paying agent with respect to any series of Debt Securities, it will, on or before each due date of the principal of, and premium, if any, or interest on, the Debt Securities and Coupons, if any, of such series, set aside, segregate and hold in trust for the benefit of the Holders of the Debt Securities and Coupons of such series a sum sufficient to pay such principal, premium, if any, or interest so becoming due. The Company will promptly notify the Trustee in writing of any failure by the Company to take such action or the failure by
any other obligor on such Debt Securities or Coupons to make any payment of the principal of, and premium, if any, or interest on, such Debt Securities or Coupons when the same shall be due and payable.
(c) Anything in this Section 4.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it or any paying agent, as required by this Section 4.04, such sums to be held by the Trustee upon the same trusts as those upon which such sums where held by the Company or such paying agent; and, upon such payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money.
(d) Whenever the Company shall have one or more paying agents with respect to any series of Debt Securities and Coupons, it will, on the Business Day prior to each due date of the principal of, and premium, if any, or interest on, any Debt Securities of such series, deposit with any such paying agent a sum sufficient to pay the principal, premium or interest so becoming due, such sum to be held in trust for the benefit of the persons entitled thereto, and (unless any such paying agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.
(e) Anything in this Section 4.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 4.04 is subject to the provisions of Section 11.05.
SECTION 4.05. Statement by Officers as to Default. The Company will deliver to the Trustee, on or before a date not more than 120 days after the end of each fiscal year of the Company (currently on a calendar year basis) ending after the date hereof, an Officers' Certificate (which need not comply with the requirements of Section 13.05) stating, as to each officer signing such certificate (one of which officers shall be the principal executive officer, principal financial officer or principal accounting officer of the Company), that (i) in the course of his performance of his duties as an officer of the Company he would normally have knowledge of any Default, (ii) whether or not to the best of his knowledge any Default occurred during such year and (iii) if to the best of his knowledge the Company is in Default, specifying all such Defaults and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with Section 314(a)(4) of the Trust Indenture Act.
SECTION 4.06. Payment of Additional Interest. Unless otherwise provided pursuant to Section 2.03, the provisions of this Section 4.06 shall be applicable to Bearer Securities of any series.
The Company will, subject to the exceptions and limitations set forth below, pay as additional interest to the Holder of any Bearer Security or Coupon that is a United States Alien such amounts as may be necessary so that every net payment on such Bearer Security or Coupon, after deduction or withholding for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by the United States (or any political subdivision or taxing authority thereof or therein), will not be less than the amount provided in such Bearer Security or Coupon to be then due and payable. However, the Company will not be required to make any such payment of additional interest for or on account of:
(a) any tax, assessment or other governmental charge that would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor or beneficiary of, or a person holding a power over, such Holder, if such Holder is an estate or a trust, or a member or shareholder of such Holder, if such Holder is a partnership or corporation) and the United States, including such Holder (or such fiduciary, settlor, beneficiary, person holding a power, member or shareholder) being or having been a citizen or resident thereof or being or having been engaged in trade or business or present therein or having or having had a permanent establishment therein or (ii) such Holder's past or present status for United States Federal income tax purposes as a personal holding company, foreign personal holding company or private foundation or other tax-exempt organization with respect to the United States or as a corporation that accumulates earnings to avoid United States Federal income tax;
(b) any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge that would not have been imposed but for the presentation by the Holder of a Bearer Security or Coupon for payment more than 15 days after the date on which such payment became due and payable or on which payment thereof was duly provided for, whichever occurs later;
(d) any tax, assessment or other governmental charge that is payable otherwise than by deduction or withholding from a payment on a Bearer Security or Coupon;
(e) any tax, assessment or other governmental charge that would not have been imposed but for a failure to comply with applicable certification, documentation, information or other reporting requirement concerning the nationality, residence, identity or connection with the United States of the Holder or beneficial owner of a Bearer Security or Coupon if, without regard to any tax treaty, such compliance is required by statute or regulation of the United States as a precondition to relief or exemption from such tax, assessment or other governmental charge; or
(f) any tax, assessment or other governmental charge imposed on a Holder that actually or constructively owns ten percent or more of the combined voting power of all classes of stock of the Company or that is a controlled foreign corporation related to the Company through stock ownership;
nor shall additional interest be paid with respect to a payment on a Bearer Security or Coupon to a Holder that is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner would not have been entitled to the additional interest had such beneficiary, settlor, member or beneficial owner been the Holder of such Bearer Security or Coupon.
Wherever in this Indenture there is mentioned, in any context, the payment of the principal of, or premium, if any, or interest on, any Debt Security or payment with respect to any Coupon of any series, such mention shall be deemed to include mention of the payment of additional interest provided for in the terms of such Debt Securities and this Section 4.06 to the extent that, in such context, additional interest is, was or would be payable in respect thereof pursuant to the provisions of this Section 4.06 and express mention of the payment of additional interest (if applicable) in any provisions hereof shall not be construed as excluding additional interest in those provisions hereof where such express mention is not made.
If the payment of additional interest becomes required in respect of the Debt Securities or Coupons of a series, at least ten days prior to the first interest payment date with respect to which such additional interest will be payable (or if the Debt Securities of that series will not bear interest prior to its Stated Maturity, the first day on which a payment of principal, and premium, if any, is made and on which such additional interest will be payable), and at least ten days prior to each date of payment of principal, and premium, if any, or interest if there has been any change with respect to the matters set forth in the below-mentioned Officers' Certificate, the Company will furnish the Trustee and each paying agent with an Officers' Certificate that shall specify by country the amount, if any, required to be withheld on such
payments to Holders of Debt Securities or Coupons that are United States Aliens,
and the Company will pay to the Trustee or such paying agent the additional
interest, if any, required by the terms of such Debt Securities and this Section
4.06. The Company covenants to indemnify the Trustee and any paying agent for,
and to hold them harmless against, any loss, liability or expense reasonably
incurred without negligence or bad faith on their part arising out of or in
connection with actions taken or omitted by any of them in reliance on any
Officers' Certificate furnished pursuant to this Section 4.06.
SECTION 4.07. Payment of Additional Amounts. (a) All payments made by the
Company under or with respect to the Debt Securities of each series will be made
free and clear of and without withholding or deduction for or on account of any
present or future tax, duty, levy, impost, assessment or other governmental
charge imposed or levied by or on behalf of the Government of Canada or of any
province or territory thereof or by any authority or agency therein or thereof
having power to tax (hereinafter "Taxes"), unless the Company is required to
withhold or deduct Taxes by law or by the interpretation or administration
thereof. If the Company is so required to withhold or deduct any amount for or
on account of Taxes from any payment made under or with respect to the Debt
Securities of any series, the Company will pay such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
each Holder of the Debt Securities of such series (including Additional Amounts)
after such withholding or deduction will not be less than the amount the Holder
of the Debt Securities of such series would have received if such Taxes had not
been withheld or deducted; provided, however, that no Additional Amounts will be
payable with respect to a payment made to a Holder of the Debt Securities of
such series (an "Excluded Holder") (i) with which the Company does not deal at
arm's length (within the meaning of the Income Tax Act (Canada)) at the time of
making such payment or (ii) which is subject to such Taxes by reason of its
being connected with Canada or any province or territory thereof otherwise than
by the mere holding of Debt Securities of such series or the receipt of payments
thereunder. The Company will also (i) make such withholding or deduction and
(ii) remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law. The Company will furnish to the Holders of the
Debt Securities of such series, within 30 days after the date the payment of any
Taxes is due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by the Company. The Company will indemnify and hold
harmless each Holder of the Debt Securities of such series (other than an
Excluded Holder) and upon written request reimburse each such Holder of the Debt
Securities of such series for the amount of (i) any Taxes so levied or imposed
and paid by such Holder of the Debt Securities of such series as a result of
payments made under or with respect to the Debt Securities of such series, (ii)
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, and (iii) any Taxes imposed with
respect to any reimbursement under (i) or (ii), but excluding any such Taxes on such Holder's net income.
(b) At least 30 days prior to each date on which any payment under or with respect to the Debt Securities of any series is due and payable, if the Company will be obligated to pay Additional Amounts with respect to such payment, the Company will deliver to the Trustee and Officers' Certificate stating the fact that such Additional Amounts will be payable, the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to Holders of the Debt Securities of such series on the payment date. Whenever in this Indenture there is mentioned, in any context, the payment of principal (and premium, if any), redemption price, interest or any other amount payable under or with respect to any Debt Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section to the extent that, in such context. Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable).
(c) The obligations of the Company under this Section shall survive the termination of the Indenture and the payment of all amounts with respect to the Debt Securities of each series.
SECTION 4.08. Limitation on Liens. The Company shall not, and shall not permit any Restricted Subsidiary to, Incur or to permit to exist any Lien of any nature whatsoever (other than Permitted Liens) on any of its property or assets now owned or hereafter acquired by it (including any Capital Stock or evidence of Indebtedness and including any Capital Stock or Indebtedness of the Company held by the Company or any Subsidiary) securing any Indebtedness, without contemporaneously therewith effectively securing the relevant Debt Securities equally and ratably with (or prior to) such Indebtedness for so long as such Indebtedness is so secured, unless, after giving effect to such Lien, the aggregate amount of all Indebtedness secured by such Liens (other than Permitted Liens) on property or assets of the Company and the Restricted Subsidiaries, plus all Attributable Indebtedness of the Company and the Restricted Subsidiaries with respect to Sale/Leaseback Transactions permitted as described in Section 4.09 of this Indenture, does not exceed 10% of Consolidated Net Worth.
SECTION 4.09. Limitation on Sale/Leaseback Transaction. The Company shall not, and shall not permit any Restricted Subsidiary to, enter into a Sale/Leaseback Transaction, unless, after giving effect thereto, the aggregate amount
of all Attributable Indebtedness with respect to all such Sale/Leaseback
Transactions, plus all Indebtedness secured by Liens to which Section 4.08 is
applicable, does not exceed 10% of Consolidated Net Worth. However, the
provisions in this Section 4.09 shall not apply to, and there shall be excluded
from Attributable Indebtedness in any computation in this Section 4.09 and in
Section 4.08, Attributable Indebtedness with respect to a Sale/Leaseback
Transaction if: (1) the lease in such Sale/Leaseback Transaction is for a
period, including renewal rights, of three years or less; (2) the Company or a
Restricted Subsidiary, within one year (or, in the event the net proceeds of the
sale of the property leased pursuant to such Sale/Leaseback Transaction exceeds
$75 million, within two years) after such Sale/Leaseback Transaction, applies an
amount not less than the greater of the net proceeds of the sale of the property
leased pursuant to such Sale/Leaseback Transaction or the fair market value of
such property (as determined in good faith by the Board of Directors) to either
the retirement of Funded Indebtedness of the Company or a Restricted Subsidiary
or the purchase by the Company or a Restricted Subsidiary of other property
having a fair market value (as determined in good faith by the Board of
Directors) at least equal to the fair market value of the property so leased in
such Sale/Leaseback Transaction; or (3) such Sale/Leaseback Transaction is
entered into between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries.
SECTION 4.10. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation) or to the direct or indirect holders of its Capital Stock (except dividends or distributions payable solely in its Non-Convertible Capital Stock or in options, warrants or other rights to purchase its Non-Convertible Capital Stock and except dividends or distributions payable to the Company or a Restricted Subsidiary and, if a Restricted Subsidiary is not wholly owned, to the other shareholders on a pro rata basis), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or of any direct or indirect parent of the Company or (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition or retirement being herein referred to as a
"Restricted Payment"), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result therefrom); or
(2) after giving effect to such Restricted Payment, Consolidated Net Worth would be less than $850,000,000.
(b) The provisions of Section 4.10(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or Exchangeable Stock and other than Capital Stock issued or sold to a Restricted Subsidiary or an employee stock ownership plan or other trust established by the Company or any of the Subsidiaries for the benefit of their employees except to the extent that such employees make cash contributions with respect to the purchase of such Capital Stock);
(ii) any purchase or redemption of Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations of the Company; provided, however, that (1) the principal amount of the Subordinated Obligations so issued shall not exceed the principal amount of the Subordinated Obligations so purchased or redeemed, (2) the Subordinated Obligations so issued (a) shall not mature prior to the Stated Maturity of the Subordinated Obligations so purchased or redeemed and (b) shall have an Average Life equal to or greater than the remaining Average Life of the Subordinated Obligations so purchased or redeemed and (3) the Subordinated Obligations so issued shall be subordinated to the Debt Securities to at least the same extent as the Subordinated Obligations so purchased or redeemed; and
(iii) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this Section; provided, however, that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or result therefrom).
SECTION 4.11. Additional Guarantees. The Company shall not permit any Restricted Subsidiary to Incur any Indebtedness unless, at the time of such Incurrence such Restricted Subsidiary has Guaranteed all the obligations of the Company with respect to the Debt Securities pursuant to the terms of the Indenture,
such Guarantee to be in the form provided for in Exhibit B to this Indenture.
The foregoing shall not apply to (1) any Indebtedness Incurred by a Restricted
Subsidiary to finance its working capital requirements; provided, however, that
the aggregate amount of such Indebtedness Incurred by all Restricted
Subsidiaries and outstanding at any time shall not exceed $25,000,000; (2) any
Indebtedness secured by (a) Permitted Liens or (b) Liens to which the exception
in section 4.08 is applicable; provided, however, that the aggregate amount of
all such Indebtedness and all Indebtedness of the Company secured by such Liens
(other than Permitted Liens), plus all Attributable Indebtedness of the Company
and the Restricted Subsidiaries with respect to Sale/Leaseback Transactions
permitted under Section 4.09, does not exceed 10% of Consolidated Net Worth; (3)
any Attributable Indebtedness (a) with respect to a Sale/Leaseback Transaction
which is permitted under Section 4.09 or (b) to which the provisions under
Section 4.09 are not applicable; and (4) any Indebtedness owed to and held by
the Company or another Restricted Subsidiary; provided, however, that any
subsequent transfer of any such Indebtedness or any subsequent transfer of any
Capital Stock of such Restricted Subsidiary, or any other event, that results in
such Restricted Subsidiary ceasing to be a Restricted Subsidiary shall be deemed
to constitute the Incurrence of such Indebtedness at such time. Subject to
Section 11.02(b), no Guarantor shall be released from its Guarantee provided
pursuant to this Section or Section 10.02(a) unless (i) such Guarantor ceases to
be a Restricted Subsidiary or (ii) such Guarantor has been discharged from all
its obligations with respect to all Indebtedness Incurred by such Guarantor
(other than such Guarantee and Indebtedness described in clause (4) in the
immediately preceding sentence) and such Guarantor has not had any Indebtedness
(other than such Guarantee and Indebtedness described in clause (4) in the
immediately preceding sentence) outstanding for a period of 91 days.
SECTION 4.12. Limitations with Respect to Unrestricted Subsidiaries. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Unrestricted Subsidiary (an "Unrestricted Subsidiary Transaction") on terms (i) that are less favorable in sum to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a person other than an Unrestricted Subsidiary or (ii) that, in the event such Unrestricted Subsidiary Transaction involves an aggregate amount in excess of $25,000,000, are not in writing and have not been approved by a majority of the members of the Board of Directors. The foregoing shall not prohibit any Investment by the Company or any Restricted Subsidiary in any Unrestricted Subsidiary.
(b) The Company shall not permit any Unrestricted Subsidiary to Incur any Indebtedness other than Non-Recourse Indebtedness; provided, however, that in the event any such Indebtedness ceases for any reason to constitute Non-Recourse Indebtedness, such Subsidiary shall be deemed to have Incurred such Indebtedness at such time.
(c) The Company shall not, and shall not permit any Restricted Subsidiary to, directly, or indirectly transfer to any Unrestricted Subsidiary, any property or assets owned by the Company or any Restricted Subsidiary on the date of this Indenture (i) on terms that are less favorable in sum to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transfer in arm's-length dealings with a person other than an Unrestricted Subsidiary or (ii) unless the aggregate price for such property or assets under such transfer, plus the aggregate prices for any other such property or assets under any other such transfers completed during the twelve-month period immediately preceding such transfer, does not exceed $25,000,000.
SECTION 4.13. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 4.08, 4.09, 4.10, 4.11 and 4.12, with respect to the Debt Securities of any series if before the time for such compliance the Holders of at least a majority in principal amount of the outstanding Debt Securities of such series shall either waive in writing such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.
SECTION 4.14. Calculation of Original Issue Discount. In the event that there has accrued with respect to any Outstanding Original Issue Discount Debt Securities any original issue discount, the Company shall file with the Trustee before the end of each calendar year a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on Outstanding Original Issue Discount Debt Securities as of the end of such year.
SECTION 4.15. Further Instruments and Acts. The Company will upon request of the Trustee, execute and deliver such further instruments and do such further acts as may reasonably be necessary or proper to carry out the purposes of this Indenture.
ARTICLE V
Holders' Lists and Reports
by the Company and the Trustee
SECTION 5.01. Company to Furnish Trustee Information as to Names and Addresses of Holders; Preservation of Information. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee with respect to the Registered Securities of each series:
(a) not more than 15 days after each record date with respect to the payment of interest, if any, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Registered Holders as of such record date, and
(b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and contents as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee shall be Registrar, such lists shall not be required to be furnished.
The Company shall also be required to furnish to the Trustee at all such times set forth above all information in the possession or control of the Company or any of its paying agents other than the Trustee as to the names and addresses of the Bearer Holders of all series; provided, however, that neither the Company nor the Trustee shall have any obligation to investigate any matter relating to any Bearer Holders.
The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders (1) contained in the most recent list furnished to it as provided in this Section 5.01 or (2) received by it in the capacity of paying agent or Registrar (if so acting) hereunder.
The Trustee may destroy any list furnished to it as provided in this
Section 5.01 upon receipt of a new list so furnished.
SECTION 5.02. Communications to Holders. Holders may communicate pursuant to Section 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this Indenture or the Debt Securities. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
Section 312(c) of the Trust Indenture Act.
SECTION 5.03 Reports by Company, (a) The Company covenants and agrees to file with the Trustee, within 15 days after the Company is required to file the same with the United States Securities and Exchange Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as said Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with said Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then to file with the Trustee and said Commission, in accordance with rules and regulations prescribed from time to time by said Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act with respect to a Canadian issuer in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the United States Securities and Exchange Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents, and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations.
(c) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 5.04. Reports by Trustee. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Holder a brief report dated as of such May 15 that complies with Section 313(a) of the Trust Indenture Act. The Trustee also shall comply with Section 313(b) of the Trust Indenture Act.
Reports pursuant to this Section 5.04 shall be transmitted by mail:
(1) to all Registered Holders, as the names and addresses of such Holders appear in the Debt Security Register;
(2) to such Bearer Holders of any series as have, within two years preceding such transmission, filed their names and addresses with the Trustee for such series for that purpose; and
(3) except in the case of reports under Section 313(b)(2) of the Trust Indenture Act, to each Holder of a Debt Security of any series whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 5.01.
A copy of each report at the time of its mailing to Holders shall be filed with the United States Securities and Exchange Commission and each securities exchange (if any) on which the Debt Securities of any series are listed. The Company agrees to notify promptly the Trustee whenever the Debt Securities of any series become listed on any securities exchange and of any delisting thereof.
ARTICLE VI
Remedies of the Trustee and Holders in Event of Default
SECTION 6.01. Events of Default. An "Event Of Default" with respect to each series of Debt Securities occurs if:
(a) the Company defaults in any payment of interest on any Debt Securities of that series (including any Additional Amount) when the same becomes due and payable, and such default continues for a period of 30 days;
(b) the Company defaults in the payment of the principal of the Debt Securities of that series when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration or otherwise;
(c) the Company or a Guarantor fails to comply with Section 10.01 or 10.02;
(d) the Company or any Restricted Subsidiary fails to comply with
Section 4.08, 4.09, 4.10, 4.11 or 4.12, in each case if applicable to that
series of
Debt Securities, and such failure continues for 60 days after the notice specified below;
(e) the Company or any Restricted Subsidiary fails to comply with any of its agreements in the Debt Securities of that series or this Indenture (other than those referred to in (a), (b), (c) or (d) above or (j) below or a failure to comply with any of its obligations under its covenants or agreements that are specifically for the benefit of one or more series of Debt Securities other than that series of Debt Securities) and such failure continues for 60 days after the notice specified below;
(f) Indebtedness of the Company or any Restricted Subsidiary is not paid within any applicable grace period and is accelerated by the holders thereof, or is accelerated by the holders thereof because of a default, and the total amount of such Indebtedness unpaid, or due and payable, and accelerated exceeds $10,000,000;
(g) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law;
(1) commences a voluntary case;
(2) consents to the entry of an order for relief against it in an involuntary case;
(3) consents to the appointment of a Custodian of it or for any substantial part of its property; or
(4) makes a general assignment for the benefit to insolvency;
or takes any comparable action under any foreign laws relating to insolvency;
(h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(1) is for relief against the Company or any Significant Subsidiary in an involuntary case;
(2) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or
(3) orders the winding up or liquidation of the Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days;
(i) any Guarantee of the Debt Securities by any Guarantor shall, at any time, cease to be in full force and effect for any reason other than the satisfaction in full of all obligations hereunder and discharge of this Indenture and other than as a result of the release of such Guarantee in accordance with the terms of such Guarantee or this Indenture or shall be declared invalid or unenforceable by a court of competent jurisdiction or governmental authority; or if the Company or any Restricted Subsidiary shall assert, in any pleading in a court of competent jurisdiction, that any Guarantee of the Debt Securities is invalid or unenforceable; or
(j) any other Event of Default provided with respect to the Debt Securities of that series.
The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.
A Default under clause (d) or (e) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the applicable Debt Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of such Notice. Such Notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (d) or (e), its status and what action the Company is taking or proposes to take with respect thereto.
The Trustee shall be under no obligation to ascertain whether an Event of Default has occurred (other than an Event of Default under clause (a) or (b)) and shall not be deemed to have knowledge of any such Event of Default unless the Trustee receives written notice thereof pursuant to the preceding paragraph or from any other source. The Trustee may conclusively assume, in the absence of such written notice to be contrary, that no Event of Default has occurred (other than an Event of Default under clause (a) or (b)).
Notwithstanding the foregoing provision of this Section 6.01, if the principal of, premium, if any, or interest on any Debt Security is payable in a Foreign Currency and such Foreign Currency is not available to the Company for making payment thereof due to the imposition of exchange controls or other circumstances beyond the control of the Company (a "Conversion Event"), the Company will be entitled to satisfy its obligations to Holders of the Debt Securities by making such payment in Dollars in an amount equal to the Dollar Equivalent of the amount payable in such Foreign Currency. Notwithstanding the foregoing provisions of this Section 6.01, any payment made under such circumstances in Dollars where the required payment is in a Foreign Currency will not constitute an Event of Default under this Indenture.
Promptly after the occurrence of a Conversion Event, the Company shall
give written notice thereof to the Trustee; and the Trustee, promptly after
receipt of such notice, shall give notice thereof in the manner provided in
Section 13.03 to the Holders. Promptly after the making of any payment in
Dollars as a result of a Conversion Event, the Company shall give notice in the
manner provided in Section 13.03 to the Holders, setting forth the applicable
Dollar Equivalent and describing the calculation of such payments.
SECTION 6.02. Acceleration. If an Event of Default with respect to a
series of Securities (other than an Event of Default specified in Section
6.01(g) (with respect to the Company) or (h) (with respect to the Company))
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least 25% in principal amount of the Outstanding Debt Securities of such
series by notice to the Company and the Trustee, may declare the principal of
and accrued but unpaid interest on all the Debt Securities of such series to be
due and payable. Upon such a declaration, such principal and interest shall be
due and payable immediately. If an Event of Default specified in Section
6.01(g) (with respect to the Company) or (h) (with respect to the Company)
occurs, and is not cured within the time period permitted, the principal of and
interest on all the Debt Securities shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holders. The Holders of a majority in principal
amount of the Outstanding Debt Securities of a series by notice to the Trustee may rescind an acceleration with respect to such series of Debt Securities and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default with respect to a series of Debt Securities occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Debt Securities of such series or to enforce the performance of any provision of the Debt Securities of such series or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Debt Securities of such series or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Debt Security of such series in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Outstanding Debt Securities of a series by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on the Debt Securities of such series or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Debt Securityholder of such series affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in principal
amount of the Outstanding Debt Securities of a series may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee with
respect to the Debt Securities of such series. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture or, subject to
Section 7.01, that the Trustee determines is unduly prejudicial to the rights of
other Debt Securityholders or would involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses, liability and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Holder of a Debt Security or Coupon may not pursue any remedy with respect to this Indenture or the Debt Securities of a series unless:
(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Outstanding Debt Securities of such series make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Outstanding Debt Securities of such series do not give the Trustee a direction inconsistent with the request during such 60-day period.
A Holder of a Debt Security or Coupon may not use this Indenture to prejudice the rights of another Holder of a Debt Security or Coupon or to obtain a preference or priority over another Holder of a Debt Security or Coupon.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal and interest on the Debt Securities of a series held by such Holder, on or after the respective due dates expressed in the Debt Securities of such series, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of interest or principal specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid (together with interest on such unpaid interest to the extent lawful) and the amounts provided for in Section 7.06.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders of Debt
Securities allowed in any judicial proceedings relating to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.06.
SECTION 6.10 Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.06;
SECOND: to Holders of Debt Securities of a series for amounts due and unpaid on the Debt Securities of such series for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Debt Securities of such series for principal and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to Holders of Debt Securities of such series pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Holder of a Debt Security of such series and the Trustee a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Outstanding Debt Securities of a series.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE VII
Concerning the Trustee
SECTION 7.01. Certain Duties and Responsibilities. The Trustee, prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be constructed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that:
(a) this subsection shall not be constructed to limit the effect of the first paragraph of this Section 7.01;
(b) prior to the occurrence of an Event of Default with respect to the Debt Securities of a series and after the curing or waiving of all Events of Default with respect to such series which may have occurred:
(1) the duties and obligations of the Trustee with respect to Debt Securities and Coupons, if any, of any series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to such series as are specifically set forth in this Indenture, and no implied covenants or obligations with respect to such series shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; but the Trustee shall not examine the evidence furnished to it pursuant to Section 5.03 to determine whether or not such evidence conforms to the requirement of this Indenture;
(c) the Trustee shall not be liable for an error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and
(d) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it with respect to Debt Securities of any series in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of that series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to Debt Securities of such series.
None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any personal financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such finds or adequate indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.
SECTION 7.02. Certain Rights of Trustee. Except as otherwise provided in
Section 7.01:
(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by a Company Order (unless other evidence in respect thereof be herein specifically prescribed), and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection, and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders of Debt Securities or Coupons of any series pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval or other paper or document, unless requested in writing to do so by the Holders of a majority in aggregate principal amount of the then Outstanding Debt Securities of a series affected by such matter; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is not, in the opinion of the Trustee, reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so proceeding. The reasonable expense of every such investigation shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care hereunder; and
(h) if any property other than cash shall at any time be subject to a Lien in favor of the Holders, the Trustee, if and to the extent authorized by a receivership or bankruptcy court of competent jurisdiction or by the supplemental instrument subjecting such property to such Lien, shall be entitled, but not required, to make advances for the purpose of preserving such property or of discharging tax Liens or other prior Liens or encumbrances thereon.
SECTION 7.03. Trustee Not Liable for Recitals in Indenture or in Debt Securities. The recitals contained herein, in the Debt Securities (except the Trustee's certificate of authentication) and in any Coupons shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debt Securities or Coupons, if any, of any series, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Debt Securities and perform its obligations hereunder and that the statements made by it or to be made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate. The Trustee shall not be accountable for the use or application by the Company of any of the Debt Securities or of the proceeds thereof.
SECTION 7.04. Trustee, Paying Agent or Registrar May Own Debt Securities. The Trustee or any paying agent or Registrar, in its individual or any other capacity, may become the owner or pledgee of Debt Securities or Coupons and subject to the provisions of the Trust Indenture Act relating to conflicts of interest and preferential claims may otherwise deal with the Company with the same rights it would have if it were not Trustee, paying agent or Registrar.
SECTION 7.05. Moneys Received by Trustee to Be Held in Trust. Subject to the provisions of Section 11.05, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time to the Company upon a Company Order.
SECTION 7.06 Compensation and Reimbursement. The Company covenants and
agrees to pay in Dollars to the Trustee such compensation as the Company and the
Trustee shall form time to time agree in writing for all services rendered by it
hereunder (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and except as otherwise
expressly provided herein, the Company will pay or reimburse in Dollars the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents, attorneys and counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advances as
may arise form its negligence, wilful misconduct or bad faith. The Company also
covenants to indemnify in Dollars each of the Trustee or any predecessor Trustee
for, and to hold it harmless against, any loss, damage, claim, liability or
expense, including taxes (other that taxes based upon, measured by or determined
by the income of the Trustee) incurred without negligence, wilful misconduct or
bad faith on the part of the Trustee, arising out of or in connection with the
acceptance or administration of this trust or trusts hereunder, including the
reasonable costs and expenses of enforcing this Indenture against the Company
defending itself against any claim of liability (whether asserted by a Holder or
the Company) or liability in connection with the exercise or performance of any
of its powers or duties hereunder. The obligations of the Company under this
Section 7.06 to compensate and indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture. The Company and the Holders agree that such additional indebtedness
shall be secured by a Lien prior to that of the Debt Securities and Coupons, if
any, upon all properly and funds held or collected by the Trustee, as such,
except funds held in trust for the payment of principal of, and premium, if any,
or interest on, particular Debt Securities and Coupons. The Trustee's right to
receive payment of any amounts due under this Section 7.06 shall not be
subordinated and any other indebtedness or liability of the Company (even though
the Debt Securities may be so subordinated).
When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency, reorganization or other similar law.
SECTION 7.07 Right of Trustee to Rely on an Officers' Certificate Where No Other Evidence Specifically Prescribed. Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established
prior to taking or suffering or omitting any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officers' Certificate
delivered to the Trustee, and such certificate, in the absence of negligence or
bad faith on the part of the Trustee, shall be full warrant to the Trustee for
any action taken, suffered or omitted by it under the provisions of this
Indenture upon the faith thereof.
SECTION 7.08. Separate Trustee; Replacement of Trustee. The Company may, but need not, appoint a separate Trustee for any one or more series of Debt Securities. The Trustee may resign with respect to one or more or all series of Debt Securities at any time by giving notice to the Company. The Holders of a majority in principal amount of the Debt Securities of a particular series may remove the Trustee for such series and only such series by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Debt Securities of a particular series and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. No resignation or removal of the Trustee and no appointment of a successor Trustee shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section 7.08.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of Debt Securities of each applicable series. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided for in Section 7.06.
If a successor Trustee does not take office within 60 days after the retiring Trustee gives notice of resignation or is removed, the retiring Trustee or the Holders of 25% in principal amount of the Outstanding Debt Securities of any applicable series may petition any court of competent jurisdiction for the appointment of a successor Trustee for the Debt Securities of such series.
If the Trustee fails to comply with Section 7.10, any Holder of Debt Securities of any applicable series may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee for the Debt Securities of such series.
Notwithstanding the replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.06 shall continue for the benefit of the retiring Trustee.
In the case of the appointment hereunder of a separate or successor trustee with respect to the Debt Securities of one or more series, the Company, any retiring Trustee and each successor or separate Trustee with respect to the Debt Securities of any applicable series shall execute and deliver an Indenture supplemental hereto (1) which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of any retiring Trustee with respect to Debt Securities of any series as to which any such retiring Trustee is not retiring shall continue to be vested in such retiring Trustee and (2) that shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental Indenture shall constitute such Trustees co-trustees of the same trust and that each such separate, retiring or successor Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Debt Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee and deliver such Debt Securities so authenticated; and in case a that time any
of the Debt Securities shall not have been authenticated, any successor to the Trustee may authenticate such Debt Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debt Securities or in this Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of Section 310(a) of the Trust Indenture Act. The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. No obligor upon the Debt Securities or Coupons, if any, of a particular series or person directly or indirectly controlling, controlled by or under common control with such obligor shall serve as Trustee upon the Debt Securities and Coupons of such series. The Trustee shall comply with Section 310(b) of the Trust Indenture Act; provided, however, that there shall be excluded from the operation of Section 310(b)(1) of the Trust Indenture Act this Indenture or any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the Trust Indenture Act are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated therein.
SECTION 7.12. Compliance with Tax Laws. The Trustee hereby agrees to comply with all United States Federal income tax information reporting and withholding requirements applicable to it with respect to payments of premium (if any) and interest on the Debt Securities, whether acting as Trustee, Registrar, paying agent or otherwise with respect to the Debt Securities.
ARTICLE VIII
Concerning the Holders
SECTION 8.01. Evidence of Action by Holders. Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Debt Securities of any or all series may take action (including the making of any demand or request, the giving of any direction, notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such
action the Holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by Holders in person or by agent or proxy appointed in writing, (b) by the record of the Holders voting in favor thereof at any meeting of Holders duly called and held in accordance with the provisions of Section 5.02 or (c) by a combination of such instrument or instruments and any such record of such a meeting of Holders.
SECTION 8.02. Proof of Execution of Instruments and of Holding of Debt Securities. Subject to the provisions of Sections 7.01, 7.02 and 13.11, proof of the execution of any instrument by a Holder or his agent or proxy shall be sufficient if made in accordance with the provisions of this Article VIII.
The ownership of Registered Securities of any series shall be proved by the Debt Security Register or by a certificate of the Registrar for such series.
The ownership of Bearer Securities shall be proved by production of such Bearer Securities or by a certificate executed by any bank or trust company, which certificate shall be dated and shall state on the date thereof a Bearer Security bearing a specified identifying number or other mark was deposited with or exhibited to the person executing such certificate by the person named in such certificate, or by any other proof of possession reasonably satisfactory to the Trustee. The holding by the person named in any such certificate of any Bearer Security specified therein shall be presumed to continue for a period of one year unless at the time of determination of such holding (1) another certificate bearing a later date issued in respect of the same Bearer Security shall be produced, (2) such Bearer Security shall be produced by some other person, (3) such Bearer Security shall have been registered on the Debt Security Register, if, pursuant to Section 2.03, such Bearer Security can be so registered or (4) such Bearer Security shall have been canceled or paid.
The Trustee may require such additional proof of any matter referred to in this Section 8.02 as it shall deem necessary.
SECTION 8.03. Who May Be Deemed Owner of Debt Securities. Prior to due presentment for registration of transfer of any Registered Security, the Company, the Trustee, any paying agent and any Registrar may deem and treat the person in whose name any Registered Security shall be registered upon the books of the Company as the absolute owner of such Registered Security (whether or not such Registered Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and premium, if any, and (subject to Section 2.03) interest on such Registered Security and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Registrar shall be affected by any notice to the
contrary; and all such payments so made to any such Holder for the time being, or upon his order, shall be valid and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Registered Security.
The Company, the Trustee and any paying agent may deem and treat the Holder of any Bearer Security or Coupon as the absolute owner of such Bearer Security or Coupon (whether or not such Debt Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and premium, if any, and (subject to Section 2.03) interest on such Bearer Security or Coupon and for all other purposes, and neither the Company nor the Trustee nor any paying agent shall be affected by any notice to the contrary; and all such payments so made to any such Holder for the time being, or upon his order, shall be valid and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Bearer Security or Coupon.
None of the Company, the Trustee, any paying agent or the Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
SECTION 8.04 Instruments Executed by Holders Bind Future Holders; Record Dates. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Debt Securities of any series specified in this Indenture in connection with such action and subject to the following paragraph, any Holder of a Debt Security which is shown by the evidence to be included in the Debt Securities the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Debt Security. Except as aforesaid any such action taken by the Holder of any Debt Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Debt Security and all past, present and future Holders of Coupons, if any, appertaining thereto, and of any Debt Security issued upon transfer thereof or in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon such Debt Security or such other Debt Securities or Coupons. Any action taken by the Holders of the percentage in aggregate principal amount of the Debt Securities of any series specified in this Indenture in connection with such action shall be conclusively binding upon the
Company, the Trustee and the Holders of all the Debt Securities and Coupons of such series.
The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders of Registered Securities of any series entitled to give their consent or take any other action required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those persons who were Holders of Registered Securities at the close of business on such record date (or their duly designated proxies), and only those persons, (i) shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such persons continue to be Holders of Registered Securities after such record date and (ii) shall be taken into account for the purpose of determining whether Holders of the requisite proportion of Debt Securities of such series Outstanding have authorized or agreed or consented to such action, and for that purpose the Debt Securities of such series Outstanding shall be computed as of such record date. No such consent shall be valid or effective for more than 120 days after such record date unless the consent of the Holders of the percentage in aggregate principal amount of the Debt Securities of such series specified in this Indenture shall have been received within such 120-day period.
ARTICLE IX
Supplemental Indentures
SECTION 9.01 Purposes for Which Supplemental Indenture May Be Entered into Without Consent of Holders. The Company, when authorized by a resolution of the Board of Directors, and the Trustee may from time to time and at any time, without the consent of Holders, enter into an Indenture or Indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof) for one or more of the following purposes:
(a) to evidence the succession pursuant to Article X of another person to the Company or a Guarantor, or successive successions, and the assumption by the Successor Company or the successor Guarantor, as the case may be, of the covenants, agreements and obligations of the Company or such Guarantor in this Indenture and in the Debt Securities, in the case of the Company, or Guarantee Agreement, in the case of the Guarantor;
(b) to surrender any right or power herein conferred upon the Company, to add to the covenants of the Company such further covenants, restrictions, conditions or provisions for the protection of the Holders of all or any series of Debt Securities and the Coupons, if any, appertaining thereto (and if such covenants are to be for the benefit of less than all series of Debt Securities, stating that such covenants are expressly being included solely for the benefit of such series) as the Board of Directors shall consider to be for the protection of the Holders of such Debt Securities, and to make the occurrence, or the occurrence and continuance, of a Default in any of such additional covenants, restrictions, conditions or provisions a Default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental Indenture may provide for a particular period of grace after Default (which period may be shorter or longer than that allowed in the case of other Defaults) or may provide for an immediate enforcement upon such Default or may limit the remedies available to the Trustee upon such Default or may limit the right of the Holders of a majority in aggregate principal amount of any or all series of Outstanding Debt Securities to waive such default;
(c) to cure any ambiguity or to correct or supplement any provision contained herein, in any supplemental Indenture or in any Debt Securities of any series that may be defective or inconsistent with any other provision contained herein, in any supplemental Indenture or in the Debt Securities of such series;
(d) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee, or to make such other provisions in regard to matters or questions arising under this Indenture as shall not adversely affect the interests of any Holders of Debt Securities of any series in any material respect;
(e) to modify or amend this Indenture in such a manner as to permit the qualification of this Indenture or any Indenture supplemental hereto under the Trust Indenture Act as then in effect, except that nothing herein contained shall permit or authorize the inclusion in any Indenture supplemental hereto of the provisions referred to in Section 316(a)(2) of the Trust Indenture Act;
(f) to add to or change any of the provisions of this Indenture to provide that Bearer Securities may be registerable as to principal, to change or eliminate any restrictions on the payment of principal of, or premium, if any, on, Registered Securities or of principal of, or premium, if any, or interest on, Bearer Securities or to permit Registered Securities to be exchanged for Bearer
Securities; provided, however, that any such action shall not adversely affect the interests of the Holders of Debt Securities or any Coupons of any series in any material respect;
(g) in the case of any series of Debt Securities and Coupons, if any, appertaining thereto subordinated pursuant to Article XII, to make any change in Article XII that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article XII;
(h) to add Guarantees with respect to all or any series of the Debt Securities or to secure all or any series of the Debt Securities;
(i) to make any change that does not adversely affect the rights of any Holder in any material respect;
(j) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Debt Securities; provided, however, that any such addition, change or elimination not otherwise permitted under this Section 9.01 shall (i) neither (A) apply to any Debt Security of any series created prior to the execution of such supplemental Indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Debt Security with respect to such provision or (ii) become effective only when there is no such Debt Security Outstanding;
(k) to supplement any of the provisions of this Indenture to the extent necessary to permit or facilitate the defeasance or discharge of any series of the Debt Securities that does not adversely affect the rights of any of the Holders of the Debt Securities in any material respect;
(l) to evidence and provide for the acceptance of appointment hereunder by a successor or separate Trustee with respect to the Debt Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; and
(m) to establish the form or term of Debt Securities and Coupons, if any, of any series as permitted by Sections 2.01 and 2.03.
The Trustee is hereby authorized to join with the Company in the execution of any such supplemental Indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but
the Trustee shall not be obligated to enter into any such supplemental Indenture which materially adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental Indenture authorized by the provisions of this Section 9.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Debt Securities or Coupons, if any, appertaining thereto at the time Outstanding, notwithstanding any of the provisions of Section 9.02.
In the case of Debt Securities or Coupons, if any, appertaining thereto subordinated pursuant to Article XII, an amendment under this Section 9.01 may not make any change in Article XII or the defined terms used therein that adversely affects the rights under Article XII of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or Representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section 9.01 becomes effective, the Company shall mail to Holders of Debt Securities of each series affected thereby a notice briefly describing such amendment. The failure to give such notice to all such Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.01.
SECTION 9.02. Modification of Indenture with Consent of Holders of Debt
Securities. Without notice to any Holder but with the consent (evidenced as
provided in Section 8.01) of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such supplemental Indenture, the Company, when authorized by a
resolution of the Board of Directors, and the Trustee may from time to time and
at any time enter into an Indenture or Indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in force at the
date of execution thereof) for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of any supplemental Indenture or of modifying in any manner the rights of
the Holders of the Debt Securities of such series; provided, however, that no
such supplemental Indenture, without the consent of the Holders of each
Outstanding Debt Security of a series so affected, shall (i) reduce the
percentage in principal amount of Debt Securities of such series whose Holders
must consent to an amendment; (ii) reduce the rate of or extend the time for
payment of interest on any Debt Security or Coupon of such series or reduce the
amount of any payment to be made with respect to any Coupon of such series;
(iii) reduce the principal of or extend the Stated Maturity of any Debt
Security of such series; (iv) reduce the premium payable upon the redemption of
any Debt Security or change the time at which any Debt Security of such series
may or shall be redeemed in accordance with
Article III; (v) make any Debt Security or Coupon of such series payable in
Currency other than that stated in the Debt Security of such series; (vi) in
the case of any Debt Security or Coupons of such series, if any, appertaining
thereto subordinated pursuant to Article XII, make any change in Article XII
or the defined terms used therein that adversely affects the rights of any
Holder under Article XII; (vii) release any security that may have been granted
in respect of the Debt Securities of such series; (viii) make any change in
Section 6.06 or this Section 9.02; (ix) limit the obligation of the Company to
pay additional interest pursuant to Section 4.06; (x) make any change to the
provisions of Section 4.07 that adversely affects the rights of any Holder of
the Debt Securities of such series, (xi) impair the rights of any Holder of the
Debt Securities of such series to receive payment of principal of and interest
on such Holder's Debt Securities of such series (including any Additional
Amount) on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Debt Securities
of such series, (xii) make any change in the Guarantee of the Debt Securities
of such series by any Guarantor that would adversely affect any Holder of the
Debt Securities of such series or (xiii) limit the obligation of the Company to
maintain a paying agency outside the United States for payment on Bearer
Securities as provided in Section 4.02 or limit the obligation of the Company
to redeem a Bearer Security as provided in Section 3.02(b).
A supplemental Indenture which changes or eliminates any covenant or other provision of this Indenture which has been expressly included solely for the benefit of one or more particular series of Debt Securities and Coupons, if any, or which modifies the rights of the Holders of Debt Securities and Coupons of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Debt Securities and Coupons, if any, of any other series.
Upon the request of the Company, accompanied by a copy of a resolution of the Board of Directors authorizing the execution of any such supplemental Indenture, and upon the filing with the Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental Indenture unless such supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental Indenture.
It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof.
In the case of any Debt Securities or Coupons, if any, appertaining thereto, subordinated pursuant to Article XII, an amendment under this Section 9.02 may not make any change in Article XII or the defined terms used therein that adversely affects the rights under Article XII of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or Representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section 9.02 becomes effective, the Company shall mail to Holders of Debt Securities of each series affected thereby a notice briefly describing such amendment. The failure to give such notice to all such Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.02.
SECTION 9.03. Effect of Supplemental Indentures. Upon the execution of any supplemental Indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental Indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
The Trustee, subject to the provisions of Sections 7.01 and 7.02, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental Indenture complies with the provisions of this Article IX.
SECTION 9.04. Debt Securities May Bear Notation of Changes by Supplemental Indentures. Debt Securities and Coupons, if any, of any series authenticated and delivered after the execution of any supplemental Indenture pursuant to the provisions of this Article IX may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental Indenture. New Debt Securities and Coupons of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental Indenture may be prepared and executed by the Company, authenticated by the Trustee and made available for delivery in exchange for the Debt Securities and Coupons of such series then Outstanding. Failure to make the appropriate notation or to issue a new Debt Security or Coupon of such series shall not affect the validity of such amendment.
ARTICLE X
Successor Company and Subsidiaries
SECTION 10.01. When Company May Merge or Transfer Assets. The Company shall not amalgamate or consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to any person, unless:
(a) the resulting, surviving or transferee person (if not the Company) shall be a person organized and existing under the federal laws of Canada or the laws of any province thereof or the laws of the United States of America, any State thereof or the District of Columbia and such person shall expressly assume by a supplemental Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under this Indenture and the Debt Securities;
(b) immediately after giving effect to such transaction or transactions, no Default shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (who may rely on such Officers' Certificate as to matters of fact), each stating that such amalgamation, consolidation, merger, conveyance, transfer or lease and such supplemental Indenture (if any) comply with this Indenture.
The resulting, surviving or transferee person shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture relating to the Debt Securities, but the predecessor Company, in the case of a conveyance, transfer or lease, shall not be released from the obligation to pay the principal of and interest on the Debt Securities.
SECTION 10.02. When Restricted Subsidiaries That are Guarantors May Merge or Transfer Assets. The Company shall not permit any Restricted Subsidiary that is a Guarantor to amalgamate or consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any person unless:
(a) the resulting, surviving or transferee person (if not such Guarantor) shall be a person organized and existing under the laws of the jurisdiction under which such Guarantor or its parent corporation was organized or under
the federal laws of Canada or the laws of any province thereof or the laws of the United States of America, or any State thereof or the District of Columbia and such person shall expressly assume by a supplemental Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Guarantor under its Guarantee unless such resulting surviving or transferee person has been released from such Guarantee in accordance with the terms of this Indenture or of such Guarantee as set forth in Exhibit B to this Indenture;
(b) immediately after giving effect to such transaction or transactions, no Default shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (who may rely on such Officers' Certificate as to matters of fact), each stating that such amalgamation, consolidation, merger, conveyance, transfer or lease and such supplemental Indenture (if any) comply with this Indenture.
ARTICLE XI
Satisfaction and Discharge of Indenture; Defeasance; Unclaimed Moneys
SECTION 11.01. Applicability of Article. If, pursuant to Section 2.03, provision is made for the defeasance of Debt Securities of a series and if the Debt Securities of such series are Registered Securities and denominated and payable only in Dollars (except as provided pursuant to Section 2.03), then the provisions of this Article XI relating to defeasance of Debt Securities shall be applicable except as otherwise specified pursuant to Section 2.03 for Debt Securities of such series. Defeasance provisions, if any, for Debt Securities denominated in a Foreign Currency or for Bearer Securities may be specified pursuant to Section 2.03.
SECTION 11.02 Satisfaction and Discharge of Indenture; Defeasance. (a) If at any time (i) the Company shall have delivered to the Trustee for cancellation all Debt Securities of any series theretofore authenticated and delivered (other than (1) Coupons appertaining to Bearer Securities of such series called for redemption and maturing after the relevant redemption date, surrender of which has been waived, (2) any Debt Securities and Coupons of such series which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.09 and (3) Debt Securities and Coupons for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company as provided in Section 11.5)
or (ii) all Debt Securities and the Coupons, if any, of such series not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within 45 days or are to be called for redemption within 45 days under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee as trust funds the entire amount in the Currency in which such Debt Securities are denominated (except as otherwise provided pursuant to Section 2.03) sufficient to pay at maturity or upon redemption all Debt Securities of such series not theretofore delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due on such date of maturity or redemption date, as the case may be, and if in either case the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of such Debt Securities herein expressly provided for and rights to receive payments of principle of, and premium, if any, and interest on, such Debt Securities) with respect to the Debt Securities of such series, and the Trustee, on demand of the Company accompanied by the Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture.
(b) Subject to Sections 11.02(c), 11.03 and 11.07, the Company at any time
may terminate, with respect to Debt Securities of a particular series, (i) all
its obligations under the Debt Securities of such series and this Indenture with
respect to the Debt Securities of such series ("legal defeasance option") or
(ii) its obligations with respect to the Debt Securities of such series under
Section 4.08, 4.09, 4.10, 4.11 and 4.12, the operation of Sections 6.01(e),
(f), (g) (with respect to Significant Subsidiaries only), (h) (with respect to
Significant Subsidiaries only), (i) and (j) and the limitations in Sections
10.01(b) and 10.02 ("covenant defeasance option"). The Company may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Company exercises its legal defeasance option, payment of the Debt Securities of the defeased series may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Debt Securities of the defeased series may not be accelerated because of an Event of Default specified in Sections 6.01(c) (with respect to Guarantors only), (d), (e), (f), (g) (with respect to Significant Subsidiaries only), (h) (with respect to Significant Subsidiaries only), (i) and (j) or because of the failure of the Company to comply with Section 10.01(b) or Section 10.02 (except to the extent covenants or agreements referenced in such Sections remain applicable).
Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates and, in the event of the exercise by the Company of either its legal defeasance option or its covenant defeasance option, the Trustee shall release each Guarantor from its Guarantee with respect to the Debt Securities of the defeased series.
(c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.07, 2.09, 4.02, 4.04, 5.01, 7.06, 7.10, 11.05, 11.06 and 11.07 shall survive until the Debt Securities of the defeased series have been paid in full. Thereafter, the Company's obligations in Sections 7.06, 11.05 and 11.06 shall survive.
SECTION 11.03. Conditions of Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option with respect to Debt Securities of a particular series only if:
(1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the full payment of principal of, and premium, if any, and interest on, the Debt Securities of such series to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such time and in such amounts as will be sufficient to pay the principal, premium (if any) and interest when due on all the Debt Securities of such series to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit is made and during the 91-day period no Default specified in Section 6.01(g) or (h) with respect to the Company occurs which is continuing at the end of the period;
(4) no Default has occurred and is continuing on the date of such deposit and after giving effect thereto;
(5) the deposit does not constitute a default under any other agreement binding on the Company and, if the Debt Securities of such series are subordinated pursuant to Article XII, is not prohibited by Article XII;
(6) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the United States Investment Company Act of 1940, as amended;
(7) in the event of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable United States Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of Debt Securities of such series will not recognize income, gain or loss for United States Federal income tax purposes as a result of such deposit and defeasance and will be subject to United States Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred;
(8) in the event of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of Debt Securities of such series will not recognize income, gain or loss for United States Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to United States Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred; and
(9) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Debt Securities of such series as contemplated by this Article XI have been complied with.
(10) the Company shall have delivered to the Trustee an Opinion of Counsel in Canada to the effect that (A) the Holders of the Debt Securities of such series will not recognize income, gain or loss for Canadian federal or provincial income tax or other tax purposes as result of such legal defeasance or covenant defeasance, as applicable, and will be subject to Canadian federal and provincial income tax and other tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance, as applicable, had not occurred, and (B) payments out of the trust fund described in (1) will be free and exempt from any and all withholding and other income taxes of whatever nature of Canada or any province thereof or political subdivision thereof or therein having power to tax
(other than any municipality or similar political subdivision), except in the case of a payment made to a Holder of the Debt Securities of such series (i) with which the Company does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of the making of such payment or (ii) which is subject to such taxes by reason of its being connected with Canada or any province or territory thereof otherwise than by the mere holding of Debt Securities of such series or the receipt of payments thereunder.
Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Debt Securities of such series at a future date in accordance with Article III.
SECTION 11.04. Application of Trust Money. Subject to the provisions of
Section 7.05, the Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to this Article XI. It shall apply the
deposited money and the money from U.S. Government Obligations through any
paying agent and in accordance with this Indenture to the payment of principal
of, and premium, if any, and interest on, the Debt Securities and Coupons, if
any, of the defeased series. In the event the Debt Securities and Coupons, if
any, of the defeased series are subordinated pursuant to Article XII, money and
securities so held in trust are not subject to Article XII.
SECTION 11.05. Repayment to Company. Trustee and any paying agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and any paying agent shall pay to the Company upon request any money held by them for the payment of principal, premium (if any) or interest that remains unclaimed for two years, and, thereafter, Holders entitled to such money must look to the Company for payment as general creditors.
SECTION 11.06. Indemnity for U.S. Government Obligations. The Company shall pay and shall indemnify the Trustee and the Holders against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations.
SECTION 11.07. Reinstatement. If the Trustee or any paying agent is unable to apply any money or U.S. Government Obligations in accordance with this Article XI by reason of any legal proceeding or by reason of any order or judgment of any court or government authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Debt Securities of the defeased series shall be revived and reinstated as though no deposit had occurred pursuant to this Article XI until such time as the Trustee or any paying agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article; provided, however, that, if the Company has made any payment of interest on or principal of the Debt Securities of a defeased series because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Debt Securities of such series to receive such payment from the money or U.S. Government Obligations held by the Trustee or any paying agent.
ARTICLE XII
SUBORDINATION OF DEBT SECURITIES
SECTION 12.01. Applicability of Article; Agreement To Subordinate. The provisions of this Article XII shall be applicable to the Debt Securities of any series (Debt Securities of such series referred to in this Article XII as "Subordinated Debt Securities") designated, pursuant to Section 2.03, as subordinated to Senior Indebtedness. Each Holder by accepting a Subordinated Debt Security agrees that the Indebtedness evidenced by such Subordinated Debt Security is subordinated in right of payment, to the extent and in the manner provided in this Article XII, to the prior payment of all Senior Indebtedness and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness. All provisions of this Article XII shall be subject to Section 12.12.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive payment in full in cash of the Senior Indebtedness (including interest (if any), accruing on or after the commencement of a proceeding in bankruptcy, whether or not allowed as a claim against the Company in such bankruptcy proceeding) before Holders of Subordinated Debt Securities shall be entitled to receive any payment of principal of, or premium, if any, or interest on, the Subordinated Debt Securities; and
(2) until the Senior Indebtedness is paid in full, any distribution to which Holders of Subordinated Debt Securities would be entitled but for
this
Article XII shall be made to holders of Senior Indebtedness as their interests may appear, except that such Holders may receive shares of stock and any debt securities that are subordinated to Senior Indebtedness to at least the same extent as the Subordinated Debt Securities.
SECTION 12.03. Default on Senior Indebtedness. The Company may not pay the principal of, or premium, if any, or interest on, the Subordinated Debt Securities or make any deposit pursuant to Article XI and may not repurchase, redeem or otherwise retire (except, in the case of Subordinated Debt Securities that provide for a mandatory sinking fund pursuant to Section 3.05, by the delivery of Subordinated Debt Securities by the Company to the Trustee pursuant to the first paragraph of Section 3.06) any Debt Securities (collectively, "pay the Subordinated Debt Securities") if (i) any principal, premium (if any) or interest in respect of Senior Indebtedness is not paid within any applicable grace period (including at maturity) or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been pain in full in cash. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Subordinated Debt Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice of such default from the Representative of any Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period (a "Blockage Notice") and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the person or persons who gave such Blockage Notice, (ii) by repayment in full in cash of such Designated Senior Indebtedness or (iii) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section 12.03), unless the holders of such Designed Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Subordinated Debt Securities after such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to any number of issues of Senior Indebtedness during such period.
SECTION 12.04. Acceleration of Payment of Debt Securities. If payment of the Subordinated Debt Securities is accelerated because of an Event of
Default, the Company or the Trustee, at the direction of the Company, shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of the acceleration.
SECTION 12.05. When Distribution Must Be Paid Over. If a distribution is made to Holders of Subordinated Debt Securities that because of this Article XII should not have been made to them, the Holders who receive such distribution shall hold it in trust for holders of Senior Indebtedness and pay it over to them as their interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness is paid in full and until the Subordinated Debt Securities are paid in full, Holders thereof shall be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article XII to holders of Senior Indebtedness which otherwise would have been made to Holders of Subordinated Debt Securities is not, as between the Company and such Holders, a payment by the Company on Senior Indebtedness.
SECTION 12.07. Relative Rights. This Article XII defines the relative rights of Holders of Subordinated Debt Securities and holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of either Subordinated Debt Securities or other Debt Securities, the obligation of the Company, which is absolute and unconditional, to pay principal of, and premium, if any, and interest on, the Subordinated Debt Securities and the Debt Securities in accordance with their terms; or
(2) prevent the Trustee or any Holder of either Subordinated Debt Securities or other Debt Securities from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Holders of Subordinated Debt Securities.
SECTION 12.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Subordinated Debt Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Debt Securities. Failure to give such notice shall not affect the subordination of
the Securities to Senior Indebtedness. Notwithstanding the provisions of this Article XII or any other provision of this Indenture, the Trustee or any paying agent may continue to make payments on Subordinated Debt Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Responsible Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article XII. The Company, the Registrar, any paying agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and any paying agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article XII with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.06.
SECTION 12.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative (if any).
SECTION 12.11. Article XII Not to Prevent Defaults or Limit Right to Accelerate. The failure to make a payment pursuant to the Subordinated Debt Securities by reason of any provision in this Article XII shall not be construed as preventing the occurrence of a Default. Nothing in this Article XII shall have any effect on the right of the Holders or the Trustee to accelerate the maturity of either the Subordinated Debt Securities or the other Debt Securities, as the case may be.
SECTION 12.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article XI by the Trustee for the payment of principal of, and premium, if any , and interest on, the Subordinated Debt Securities or the other Debt Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article XII, and none of the Holders thereof shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company.
SECTION 12.13 Trustee Entitled to Rely. Upon any payment or distribution
pursuant to this Article XII, the Trustee and the Holders shall be entitled to
rely (i) upon any order or decree of a court of competent jurisdiction in which
any proceedings of the nature referred to in Section 12.02 are pending, (ii)
upon a certificate of the liquidating trustee or agent or other person making
such payment or distribution to the Trustee or to such Holders or (iii) upon the
Representatives for the holders of Senior Indebtedness for the purpose of
ascertaining the persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XII. In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article XII, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and other facts pertinent to the rights of such
person under this Article XII, and, if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment. The provisions of Sections
7.01 and 7.02 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article XII.
SECTION 12.14. Trustee to Effectuate Subordination. Each Holder by accepting a Subordinated Debt Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders of Subordinated Debt Securities and the holders of Senior Indebtedness as provided in this Article XII and appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders of Subordinated Debt Securities or the Company or any other person, money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article XII or otherwise. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article XII and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Trustee.
SECTION 12.16 Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Holder by accepting a Subordinated Debt Security
acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Subordinated Debt Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.01. Successors and Assigns of Company Bound by Indenture. All the covenants, stipulations, promises and agreements in this Indenture contained by or in behalf of the Company or the Trustee shall bind their respective successors and assigns, whether so expressed or not.
SECTION 13.02. Acts of Board, Committee or Officer of Successor Company Valid. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any successor company.
SECTION 13.03. Required Notices or Demands. Except as otherwise expressly
provided in this Indenture, any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the Holders to or on the Company may be given or served by being deposited
postage prepaid in a post office letter box in the United States addressed
(until another address is filed by the Company with the Trustee) as follows:
Methanex Corporation, 1800 Waterfront Centre, 200 Burrard Street, Vancouver,
British Columbia, Canada V6C 3M1, Attention: Vice President Finance. Except as
otherwise expressly provided in this Indenture, any notice, direction, request
or demand by the Company or by any Holder to or upon the Trustee may be given
or made, for all purposes, by being deposited postage prepaid in a post office
letter box in the United States addressed to the Corporate Trust Office of the
Trustee initially at United States Trust Company of New York, 114 West 47th
Street, 15th Floor, New York, NY 10036, Attention: Indenture, dated as of July
20, 1995--Methanex Corporation. The Company or the Trustee by notice to the
other may designate additional or different addresses for subsequent notices or
communications.
Any notice required or permitted to a Registered Holder by the Company or the Trustee pursuant to the provisions of this Indenture shall be deemed to be properly mailed by being deposited postage prepaid in a post office letter box in the United States addressed to such Holder at the address of such Holder as shown on the Debt Security Register. Any report pursuant to Section 313 of the Trust Indenture Act shall be transmitted in compliance with subsection (c) therein.
Any notice required or permitted to a Bearer Holder by the Company or the Trustee pursuant to this Indenture shall be deemed to be properly given if published on two separate Business Days in an Authorized Newspaper or Newspapers in such Place or Places of Payment specified pursuant to Section 2.03, the first such publication to be not earlier than the earliest date and not later than two Business Days prior to the latest date prescribed for the giving of such notice. Notwithstanding the foregoing, any notice to Holders of Debt Securities with a floating rate of interest regarding the determination of such periodic rate of interest, if such notice is required pursuant to Section 2.03, shall be sufficiently given if given in the manner specified pursuant to Section 2.03.
In the event of suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice by mail, then such notification as shall be given with the approval of the Trustee shall constitute sufficient notice for every purpose hereunder.
In the event of suspension of publication of any Authorized Newspaper or by reason of any other cause it shall be impracticable to give notice by publication, then such notification as shall be given with the approval of the Trustee shall constitute sufficient notice for every purpose hereunder.
Failure to mail a notice or communication to a Holder or any defect in it or any defect in any notice by publication as to a Holder shall not affect the sufficiency of such notice with respect to other Holders. If a notice or communication is mailed or published in the manner provided above, it is conclusively presume duly given.
SECTION 13.04. Indenture and Debt Securities to Be Construed in Accordance
with the Laws of the State of New York. THIS INDENTURE, EACH DEBT SECURITY AND
EACH COUPON SHALL BE DEEMED TO BE NEW YORK CONTRACTS, AND FOR ALL PURPOSES SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE (WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAW).
SECTION 13.05. Officers' Certificate and Opinion of Counsel to Be Furnished upon Application or Demand by the Company. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions
of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such document is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall included (1) a statement that the person making such certificate or opinion has read such covenant or condition, (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.
SECTION 13.06. Payments Due on Legal Holidays. In any case where the date of maturity of interest on or principal of and premium, if any, on the Debt Securities of a series or the date fixed for redemption or repayment of any Debt Security or the making of any sinking fund payment shall not be a Business Day at any Place of Payment for the Debt Securities of such series, then payment of interest or principal and premium, if any, or the making of such sinking fund payment need not be made on such date at such Place of Payment, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. If a record date is not a Business Day, the record date shall not be affected.
SECTION 13.07. Provisions Required by Trust Indenture Act to Control. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included in this Indenture by any of Sections 310 to 318, inclusive, of the Trust Indenture Act, such required provision shall control.
SECTION 13.08. Computation of Interest on Debt Securities. Interest, if any, on the Debt Securities shall be computed on the basis of a 360-day year of twelve 30-day months, except as may otherwise be provided pursuant to Section 2.03.
SECTION 13.09. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar and any paying agent may make reasonable rules for their functions.
SECTION 13.10. Agent for Service; Submission to Jurisdiction; Waiver of Immunities. By the execution and delivery of this Indenture, the Company (i) acknowledges that it has, by separate written instrument, irrevocably designated and appointed CT Corporation System (and any successor entity), as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Indenture or the Debt Securities that may be instituted in any federal or state court in the State of New York, Borough of Manhattan or brought by the Trustee (whether in its individual capacity or in its capacity as Trustee hereunder), and acknowledges that CT Corporation System has accepted such designation, (ii) submits to the jurisdiction of any such court in any such suit or proceeding, and (iii) agrees that service of process upon CT Corporation System and written notice of said service to the Company, shall be deemed in every respect effective service of process upon the Company, in any such suit or proceeding. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of CT Corporation System in full force and effect so long as this Indenture shall be in full force and effect.
The Company hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Indenture or the Debt Securities in any federal or state court in the State of New York, Borough of Manhattan. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
To the extent that the Company has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of its obligations under the above-referred documents, to the extent permitted by law.
SECTION 13.11. No Recourse Against Others. An incorporator or any past, present or future director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Debt Securities, the Coupons or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Debt Security or Coupon, each Holder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Debt Securities and Coupons.
SECTION 13.12. Severability. In case any provision in this Indenture, the Debt Securities or the Coupons shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.13. Effect of Headings. The article and section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 13.14. Indenture May Be Executed in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.
The Trustee hereby accepts the trusts in this Indenture upon the terms and conditions herein set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of this 15th day of August, 1995.
METHANEX CORPORATION
by /s/ Terence W. Duncan
---------------------------------
Name: Terence W. Duncan
Title: Vice President Finance and
Chief Financial Officer
|
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee,
by /s/ Christine C. Collins --------------------------------- Name: Christine C. Collins Title: Assistant Vice President |
EXHIBIT A
[FORM OF FACE DEBT SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEWS YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
Number [ o ] U.S.$ [ o ]
[ o ] % Debt Security Due 200 [ o ]
METHANEX CORPORATION, a Canadian corporation, promises to pay to [ o ] or registered assigns, the principal sum of [ o ] Dollars on [ o ], 200 [ o ].
CUSIP [ o ]
SEE REVERSE FOR
CERTAIN DEFINITIONS
Interest Payment Dates: [ o ] and [ o ].
Record Dates: [ o ] and [ o ].
Additional provisions of this Debt Security are set forth on the other side of this Debt Security.
Dated:
METHANEX CORPORATION,
by
Vice President Finance
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee, certifies [Seal]
that this is one of
the Debt Securities referred
to in the Indenture.
By:
______________________________________
Authorized Signatory
|
3
|
[FORM OF REVERSE SIDE OF DEBT SECURITY]
METHANEX CORPORATION
[ o ]% Debt Security Due 200[ o ]
1. Interest
Methanex Corporation, a Canadian corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Debt Security at the rate per annum shown above. The Company will pay interest semiannually on [ o ] and [ o ] of each year. Interest on the Debt Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from [ o ], 1995. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Debt Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Debt Securities (except defaulted interest) to the persons who are registered holders of Debt Securities at the close of business on the February 1 or August 1 next preceding the interest payment date even if Debt Securities are cancelled after the record date and on or before such interest payment date. Holders must surrender Debt Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Debt Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the account of The Depository Trust Company as specified by The Depository Trust Company. The Company will make all payments in respect of the Definitive Securities (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof.
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York corporation authorized to do a banking business ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated wholly owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Debt Securities under an Indenture dated as of July 20, 1995 ("Indenture"), between the Company and the Trustee. The terms of the Debt Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. secs. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Debt Securities are subject to all such terms, and Debt Securityholders are referred to the Indenture and the Act for a statement of those terms.
The Debt Securities are general unsecured obligations of the Company unlimited in amount (subject to Section 2.07 of the Indenture). The Indenture imposes certain limitations on the creation of Liens by the Company and the Subsidiaries, sale and leaseback transactions, the payment of dividends and other distributions and acquisitions or retirements of the Company's Capital Stock and Subordinated Obligations, transactions with respect to Unrestricted Subsidiaries, and the ability of the Company or a Restricted Subsidiary that is a Guarantor to merge with or into another entity. The limitations are subject to a number of important qualifications and exceptions.
5. Optional Redemption
The Debt Securities may not be redeemed prior to maturity at the option of the Company.
6. Special Tax Redemption
If, as a result of any change in, or amendment to, the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any change in, or amendment to, any official position regarding the application or interpretation of such laws or regulations, which
change or amendment is announced or becomes effective on or after [o], 1995 the Company has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Debt Securities, any Additional Amounts in accordance with Section 4.07 of the Indenture, then the Company may, at its option, redeem the Debt Securities, as a whole but not in part, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest (if any) to the redemption date; provided that the Company shall have determined, in its business judgment, that the obligation to pay such Additional Amounts cannot be avoided by the use of reasonable measures available to the Company, not including substitution of the obligor under the Debt Securities.
7. Notice of Redemption.
Notice of redemption will be mailed not less than 30 days but not more than 60 days before the redemption date to each Holder of Debt Securities to be redeemed at his registered address. Debt Securities in denominations larger than U.S.$1,000 may be redeemed in part but only in whole multiples of U.S.$1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest (if any) on all Debt Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Debt Securities (or such portions thereof) called for redemption.
8. Denominations; Transfer; Exchange.
The Debt Securities are in registered form without coupons in denominations of U.S.$1,000 and whole multiples of U.S.$1,000. A Holder may transfer or exchange Debt Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Debt Securities selected for redemption (except, in the case of a Debt Security to be redeemed in part, the portion of the Debt Security not to be redeemed) or any Debt Securities for a period of 15 days before a selection of Debt Securities to be redeemed or 15 days before an interest payment date.
9. Persons Deemed Owners.
The registered holder of this Debt Security may be treated as the owner of it for all purposes.
10. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.
11. Defeasance.
Subject to certain conditions, the Company at any time may terminate some or all of its and each Guarantor's obligations under the Debt Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Debt Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Debt Securities may be amended with respect to the Debt Securities of a series with the consent of the Holders of at least a majority in principal amount outstanding of the Debt Securities of such series and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Debt Securities of such series. Subject to certain exceptions set forth in the Indenture, without the consent of any Debt Securityholder, the Company and the Trustee may amend the Indenture or the Debt Securities of a series to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 10 of the Indenture, or to provide for uncertificated Debt Securities of such series in addition to or in place of certificated Debt Securities of such series, or to add guarantees with respect to the Debt Securities of such series or to secure the Debt Securities of such series, or to add additional covenants or to surrender rights and powers conferred on the Company or the Subsidiaries, or to comply with any requirement of the United States Securities and Exchange Commission in connection with the qualification of the Indenture under the Trust Indenture Act, or to make any change that does not adversely affect the rights of any Debt Securityholder of such series in any material respect.
13. Defaults and Remedies.
Under the Indenture, Events of Default with respect to a series of Debt Securities include (i) default for 30 days in payment of interest on the Debt Securities
of such series (including any Additional Amounts when due); (ii) default in
payment of principal on the Debt Securities of such series at maturity, upon
redemption, upon declaration or otherwise, or failure by the Company to redeem
or purchase Debt Securities of such series when required pursuant to the
Indenture or the Debt Securities of such series; (iii) failure by the Company
or a Restricted Subsidiary to comply with other agreements in the Indenture or
the Debt Securities of such series, in certain cases subject to notice and
lapse of time; (iv) certain accelerations (including failure to pay within any
grace period after final maturity) of other Debt of the Company or a Restricted
Subsidiary if the amount accelerated (or so unpaid) exceeds U.S.$10,000,000;
(v) certain events of bankruptcy or insolvency with respect to the Company or a
Significant Subsidiary; and (vi) except as otherwise provided in the Indenture,
any Guarantee ceasing to be in full force and effect, or being declared by a
court of competent jurisdiction or governmental authority to be invalid or
unenforceable. If an Event of Default with respect to a series of Debt
Securities occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount of the Outstanding Debt Securities of such series may
declare all the Debt Securities of such series to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
that will result in the Debt Securities of a series being due and payable
immediately upon the occurrence of such Events of Default.
Debt Securityholders may not enforce the Indenture or the Debt Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Debt Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Outstanding Debt Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Debt Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest.
14. Trustee Dealings with the Company.
Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Debt Securities and may otherwise deal with and collect obligations owed to it by the Company or its affiliates and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee.
15. Guarantees.
The Company has covenanted pursuant to the Indenture, subject to certain exceptions, to cause any Restricted Subsidiary that Incurs Indebtedness to execute and deliver to the Trustee a Guarantee Agreement pursuant to which such Restricted Subsidiary will guarantee this Debt Security on the same terms and conditions as those set forth in Exhibit B to the Indenture.
16. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company or the Trustee shall not have any liability for any obligations of the Company under the Debt Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Debt Security, each Holder of a Debt Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Debt Securities.
17. Authentication.
This Debt Security shall not be valid under an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Debt Security.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder of a Debt Security or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gifts to Minors Act).
19. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Debt Securities and has directed the Trustee to use CUSIP number in notices of redemption as a convenience to Debt Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Debt Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
20. Governing Law.
EACH DEBT SECURITY AND EACH COUPON SHALL BE DEEMED TO BE NEW YORK CONTRACTS, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE (WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW).
The Company will furnish to any Holder of a Debt Security upon written request and without charge to the Holder of a Debt Security a copy of the Indenture which as in it the text of this Debt Security in larger type. Requests may be made to:
Methanex Corporation
1800 Waterfront Centre,
200 Burrard Street
Vancouver, B.C. V6C 3M1
ASSIGNMENT FORM
To assign this Debt Security, fill in the form below:
I or we assign and transfer this Debt Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Debt Security on the books of the Company. The agent may substitute another to act for him.
Date: Your Signature:
----------------- -------------------------
(Sign exactly as you name
appears on the other side
of this Debt Security)
|
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been made:
Amount of decrease in Amount of increase in Principal Amount of this Signature
Date of Principal Amount of this Principal Amount of this Global Security following of authorized
Exchange Global Security Global Security such decrease or increase officer of Trustee
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EXHIBIT B
TO INDENTURE
FORM OF GUARANTEE AGREEMENT
GUARANTEE AGREEMENT, dated as of , , made by (the "Guarantor"), the undersigned subsidiary of Methanex Corporation, in favor of the Holders and the Trustee (as defined in the Indenture referred to below).
Reference is made to the Indenture dated as of July 20, 1995 (as amended, restated, supplemented, modified or waived from time to time, the "Indenture"), between Methanex Corporation (the "Company") and United States Trust Company of New York, as trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS the Company is a party to the Indenture;
WHEREAS the Company owns directly all of or a majority interest in the Guarantor;
WHEREAS the Guarantor will derive substantial direct and indirect benefit from the transactions contemplated by the Indenture;
NOW, THEREFORE, in consideration of the promises thereby, the Guarantor hereby agrees with and for the benefit of the Holders as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Guarantee, terms defined in the Indenture or in the preamble or recitals hereto are used herein as therein defined, except that the term "Holders" in this guarantee shall refer to the term "Holders" as defined in the Indenture and the Trustee acting on behalf or for the benefit of such holders.
ARTICLE II
Representations and Warranties of the Guarantor
SECTION 2.01. Representations and Warranties. The Guarantor hereby represents and warrants to the Holders as follows:
(a) Due Existence; Compliance. The Guarantor is a corporation or partnership duly organized, validly existing and in good standing, where applicable, under the laws of the jurisdiction in which it was incorporated or organized and has all requisite power and authority under such laws to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and to execute, deliver and perform its obligations under this Guarantee. The Guarantor is duly qualified or licensed to do business as a foreign corporation or entity and is in good standing, where applicable, in all jurisdictions in which it owns or leases property, or proposes to own or lease property, or in which the conduct of its business requires it to so qualify or be licensed, except to the extent that the failure to so qualify or be in good standing would have no material adverse effect on the business, operations, properties, prospects or condition (financial or otherwise) of the Guarantor. The Guarantor is in compliance in all material respects with all applicable law, rules, regulations and orders.
(b) Corporate Authorities; No Conflicts. The execution, delivery and performance by the Guarantor of this Guarantee is within its corporate or partnership powers and has been duly authorized by all necessary corporate and stockholder approvals or partnership approvals and (i) does not contravene its organizational documents or any law, rule, regulation, judgment, order or decree applicable to or binding on the Guarantor and (ii) does not contravene, and will not result in the creation of any lien under, any provision of any contract, indenture, mortgage or agreement to which the Guarantor is a party, or by which it or any of its properties are bound.
(c) Government Approvals and Authorizations. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by or enforcement against the Guarantor of this Guarantee (except such governmental approvals or authorizations as have been duly obtained or made and remain in full force and effect).
(d) Legal, Valid and Binding. This Guarantee is the legal valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms.
(e) Litigation. There is no pending or threatened action or proceeding affecting the Guarantor by or before any court, governmental agency or arbitrator, which may materially adversely affect the condition, operations, business, prospects, properties or assets of the Guarantor, or prohibit, limit in any way or materially adversely affect the ability of the Guarantor to perform its obligations under this Guarantee.
(f) Immunities. Neither the Guarantor nor its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under applicable law.
(g) No Filing. To ensure the legality, validity, enforceability or admissibility in evidence of this Guarantee in each of the jurisdictions in which the Guarantor is incorporated or organized or any other jurisdictions in which the Guarantor conducts business, it is not necessary that this Guarantee be filed or recorded with any court or other authority in such jurisdiction, or that any stamp or similar tax be paid on or with respect to this Guarantee.
(h) No Defaults. There does not exist any event of default, or any event that with notice or lapse of time or both would constitute an event of default, under any agreement to which the Guarantor is a party or by which it may be bound, or to which any of its properties or assets may be subject which default would have a material adverse effect on the Guarantor, or would materially adversely affect the Guarantor's ability to perform its obligations under this Guarantee.
(i) Solvency. The Guarantor is on the date hereof, and at all times will be, solvent.
ARTICLE III
Guarantee
SECTION 3.01. Guarantee. The Guarantor hereby unconditionally and irrevocably guaranties to each Holder of the Debt Securities (a) the full and punctual payment of principal of and interest on the Debt Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under the Indenture and the Debt Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under the Indenture and the Debt Securities (all the foregoing being hereinafter collectively called the "Obligations"). The Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it will remain bound under this Article III notwithstanding any extension or renewal of any Obligation.
The Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. The Guarantor waives notice of any default under the Debt Securities or the Obligations. The obligations of the Guarantor hereunder shall not be affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Company or any other person under the Indenture, the Debt Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of the Indenture, the Debt Securities or any other agreement; or (d) the failure of any Holder to exercise any right or remedy against any other Guarantor of the Obligations.
The Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder to any security held for payment of the Obligations.
Except as otherwise provided herein, the obligations of the Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder to assert any claim or demand or to enforce any remedy under the Indenture, the Debt Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantor or would otherwise operate as a discharge of the Guarantor as a matter of law or equity.
The Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other right which any Holder has at law or in equity against the Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, the Guarantor hereby promises to and will, upon receipt of written demand by the Trustee or the Holders of a majority of the Outstanding Debt Securities (the "Majority Securityholders"), forthwith pay, or cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders.
The Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations. The Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated for the purposes of such Guarantor's Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section.
The Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by any Holder in enforcing any rights under this Section.
SECTION 3.02. Limitation on Liability. (a) Any term or provision of this Guarantee to the contrary notwithstanding, the maximum aggregate amount of the Obligations guaranteed hereunder by the Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Guarantee, as it relates to such Guarantor, voidable under applicable corporate law or applicable law relating to fraudulent conveyance or fraudulent transfer.
(b) Subject to the provisions of the Indenture, the Guarantor providing this Guarantee shall not be released herefrom unless (i) the Guarantor ceases to be a Restricted Subsidiary or (ii) the Guarantor has been discharged from all its obligations with respect to all Indebtedness Incurred by it (other than this Guarantee and certain Indebtedness described in Section 4.11 of the Indenture) and the Guarantor has not had any Indebtedness (other than this Guarantee and certain Indebtedness described in Section 4.11 of the Indenture) outstanding for a period of 91 days.
SECTION 3.03. Successors and Assigns. Subject to Section 3.02(b) hereof, this Article III shall be binding upon the Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Holders and, in the event of any transfer or assignment of rights by any Holder, the rights and privileges conferred upon that party in this Guarantee and in the Debt Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Guarantee.
SECTION 3.04. No Waiver, etc. Neither a failure nor a delay on the part of the Holders or the Trustee in exercising any right, power or privilege under this Article III shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Holders and the Trustee herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article III at law, in equity, by statute or otherwise.
SECTION 3.05. Modification, etc. No modification, amendment or waiver of any provision of this Article, nor the consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Securityholders, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given. No notice to or demand on the Guarantor in any case shall entitle such Guarantor or any other guarantor to any other or further notice or demand in the same, similar or other circumstances.
ARTICLE IV
Miscellaneous
SECTION 4.01. Notices. All notices and other communications pertaining to this Guarantee or any Debt Security shall be in writing and shall be deemed to have been duly given upon the receipt thereof. Such notices shall be
delivered by hand, or mailed, certified or registered mail with postage prepaid
(a) if to the Guarantor, at its address set forth below, and (b) if to the
Holders or the Trustee, as provided in the Indenture.
SECTION 4.02. Parties. Nothing expressed or mentioned in this Guarantee is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Guarantee or any provision herein contained.
SECTION 4.03. GOVERNING LAW. THIS AGREEMENT, THE INDENTURE, EACH SECURITY AND EACH COUPON SHALL BE DEEMED TO BE NEW YORK CONTRACTS, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE (WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW).
SECTION 4.04. Severability Clause. In case any provision in this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.
SECTION 4.05. Waivers, Amendments and Remedies. The failure to insist in any one or more instances upon strict performance of any of the provisions of this Guarantee or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights, but the same shall continue and remain in full force and effect. Except as otherwise expressly limited in this Guarantee, all remedies under this Guarantee shall be cumulative and in addition to every other remedy provided for herein or by law.
SECTION 4.06. Entire Agreement. This Guarantee is intended by the parties to be a final expression of their agreement in respect of the subject matter contained herein and supersedes all prior agreements and understandings between the parties with respect to such subject matter.
SECTION 4.07. Headings. The headings of the Articles and the sections in this Guarantee are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.
IN WITNESS WHEREOF, the Guarantor has duly executed this Guarantee as of the date first above written.
[NAME OF GUARANTOR],
Title:
Address:
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
(Exact name of trustee as specified in its charter)
NEW YORK 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
ONE WALL STREET, NEW YORK, NY 10286
(Address of principal executive offices) (Zip code)
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METHANEX CORPORATION
(Exact name of obligor as specified in its charter)
PROVINCE OF BRITISH COLUMBIA, CANADA NOT APPLICABLE
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1800 WATERFRONT CENTRE V6C 3M1
200 BURRARD STREET (Zip code)
VANCOUVER, BRITISH COLOMBIA, CANADA
(Address of principal executive offices)
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DEBT SECURITIES
(Title of the indenture securities)
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
NAME ADDRESS
---- -------
Superintendent of Banks of the State of New
York...................................... 2 Rector Street, New York, N.Y. 10006,
and Albany, N.Y. 12203
Federal Reserve Bank of New York............ 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation....... Washington, D.C. 20429
New York Clearing House Association......... New York, New York 10005
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(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York and State of New York, on the 28th day of May, 2002.
THE BANK OF NEW YORK
By: /s/ VANESSA MACK
------------------------------------
Name: Vanessa Mack
Title: Assistant Vice President
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EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31, 2001, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
--------------
IN THOUSANDS
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........ $ 3,163,218
Interest-bearing balances................................. 5,923,554
Securities:
Held-to-maturity securities............................... 1,210,537
Available-for-sale securities............................. 9,596,941
Federal funds sold and Securities purchased under agreements
to resell................................................. 4,723,579
Loans and lease financing receivables:
Loans and leases held for sale............................ 1,104,560
Loans and leases, net of unearned income.................. 36,204,516
LESS: Allowance for loan and lease losses................. 608,227
Loans and leases, net of unearned income and allowance.... 35,596,289
Trading Assets.............................................. 8,039,857
Premises and fixed assets (including capitalized leases).... 836,786
Other real estate owned..................................... 1,292
Investments in unconsolidated subsidiaries and associated
companies................................................. 207,616
Customers' liability to this bank on acceptances
outstanding............................................... 292,295
Intangible assets...........................................
Goodwill.................................................. 1,579,965
Other intangible assets................................... 18,971
Other assets................................................ 5,723,285
-----------
Total assets................................................ $78,018,745
===========
LIABILITIES
Deposits:
In domestic offices....................................... $28,786,182
Noninterest-bearing....................................... 12,264,352
Interest-bearing.......................................... 16,521,830
In foreign offices, Edge and Agreement subsidiaries, and
IBFs................................................... 27,024,257
Noninterest-bearing....................................... 407,933
Interest-bearing.......................................... 26,616,325
Federal funds purchased and securities sold under agreements
to repurchase............................................. 1,872,762
Trading liabilities......................................... 2,181,529
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DOLLAR AMOUNTS
--------------
IN THOUSANDS
Other borrowed money:
(includes mortgage indebtedness and obligations under
capitalized leases).................................... 1,692,630
Bank's liability on acceptances executed and outstanding.... 336,900
Subordinated notes and debentures........................... 1,940,000
Other liabilities........................................... 7,217,748
-----------
Total liabilities........................................... $71,052,008
===========
EQUITY CAPITAL
Common stock................................................ 1,135,284
Surplus..................................................... 1,050,729
Retained earnings........................................... 4,266,676
Accumulated other comprehensive income...................... 13,733
Other equity capital components............................. 0
-----------
Total equity capital........................................ 6,466,422
-----------
Total liabilities and equity capital........................ $78,015,745
===========
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I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Thomas J. Mastro, Senior Vice President and Comptroller
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
Thomas A. Renyi Gerald L. Hassell Directors Alan R. Griffith |
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM F-X
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS AND UNDERTAKING
A. Name of issuer or person filing ("Filer"): METHANEX CORPORATION
B. This is [check one]
[X] an original filing for the Filer
[ ] an amended filing for the Filer
C. Identify the filing in conjunction with which this Form is being filed:
Name of registrant METHANEX CORPORATION
Form type FORM F-9
File Number (if known)
Filed by METHANEX CORPORATION
Dated Filed (if filed concurrently, so indicate) FILED
CONCURRENTLY
D. The Filer is incorporated or organized under the laws of Ontario, Canada and has its principal place of business at
1800 Waterfront Centre 200 Burrard Street Vancouver, British Columbia V6C 3M1 Canada
E. The Filer designates and appoints CT Corporation System ("Agent") located at
111 8th Avenue, 13th Floor, New York, New York 10011
as the agent of the Filer upon whom may be served any process, pleadings, subpoenas, or other papers in
(a) any investigation or administrative proceeding conducted by the Commission; and
(b) any civil suit or action brought against the Filer or to which the
Filer has been joined as defendant or respondent, in any appropriate court in
any place subject to the jurisdiction of any state or of the United States or of
any of its territories or possessions or of the District of Columbia, where the
investigation, proceeding or cause of action arises out of or relates to or
concerns (i) any offering made or purported to be made in connection with the
securities registered or qualified by the Filer on Form F-9 filed concurrently
or any purchases or sales of any security in connection therewith; (ii) the
securities in relation to which the obligation to file an annual report on Form
40-F arises, or any purchases or sales of such securities; (iii) any tender
offer for the securities of a Canadian issuer with respect to which filings are
made by the Filer with the Commission on Schedule 13E-4F, 14D-1F or 14D-9F; or
(iv) the securities in relation to which the Filer acts as trustee pursuant to
Rule 10a-5 under the Trust Indenture Act of 1939. The Filer stipulates and
agrees that any such civil suit or action or administrative proceeding may be
commenced by the service of process upon, and that service of an administrative
subpoena shall be effected by service upon such agent for service of process,
and that service as aforesaid shall be taken and held in all courts and
administrative tribunals to be valid and binding as if personal service thereof
had been made.
F. Each person filing this Form in connection with:
(a) the use of Form F-9, F-10, 40-F, or SB-2 or Schedule 13E-4F, 14D-1F or 14D-9F stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed from the date the issuer of the securities to which such Forms and Schedules relate has ceased reporting under the Exchange Act;
(b) the use of Form F-8, Form F-80 or Form CB stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed following the effective date of the latest amendment to such Form F-8, Form F-80 or Form CB.
(c) its status as trustee with respect to securities registered on Form F-7, F-8, F-9, F-10, F-80, or SB-2 stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time during which any of the securities subject to the indenture remain outstanding; and
(d) the use of Form 1-A or other Commission form for an offering pursuant to Regulation A stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed from the date of the last sale of securities in reliance upon the Regulation A exemption.
Each Filer further undertakes to advise the Commission promptly of any change to the Agent's name or address during the applicable period by amendment of this Form, referencing the file number of the relevant form in conjunction with which the amendment is being filed.
G. Each person filing this Form, other than a trustee filing in accordance
with General Instruction I.(e) of this Form, undertakes to make available, in
person or by telephone, representatives to respond to inquiries made by the
Commission staff, and to furnish promptly, when requested to do so by the
Commission staff, information relating to: the Forms, Schedules and offering
statements described in General Instructions I.(a), I.(b), I.(c), I.(d) and
I.(f) of this Form, as applicable; the securities to which such Forms, Schedules
and offering statements relate; and the transactions in such securities.
The Filer certifies that it has duly caused this power of attorney, consent, stipulation and agreement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, Canada this 29th day of May, 2002.
METHANEX CORPORATION
By: /s/ Allan S. Cole
-------------------------------------
Name: Allan S. Cole
Title: Senior Vice President,
Finance
and Chief Financial Officer
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This statement has been signed by the following person in the capacities and on the date indicated:
CT CORPORATION SYSTEM
By: /s/ Patrick A. Nolan
-----------------------------------------------
Patrick A. Nolan
Assistant Secretary
Date: May 29, 2002
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